HUAN HSIN HOLDINGS LTD SUSTAINABLE GROWTH THROUGH INNOVATION ANNUAL REPORT 2002

Transcription

1 HUAN HSIN HOLDINGS LTD ANNUAL REPORT 2002 Registered Office: 6 Shenton Way #28-09 DBS Building Tower 2 Singapore SUSTAINABLE GROWTH THROUGH INNOVATION

2 CONTENTS 1 2 Corporate President s 3 5 Corporate 6 Corporate Profile Mission Message Information Profile of Directors 15 8 Group 10 Operations 12 Financial Financial Addresses Review Highlights Contents Designed & Produced by press Media Pte Ltd tel: (65)

3 CORPORATE PROFILE Established in 1980, mainboard listed Huan Hsin Group ("Huan Hsin") is an integrated contract manufacturer of telecommunications, IT-related and electronic products and components to Original Equipment Manufacturers and Original Design Manufacturers around the world. Today, our operations include plastic injection, metal stamping, wire and cable and finished product assembly. With plants strategically located in the People s Republic of China and Malaysia, as well as marketing offices in Taiwan and USA, Huan Hsin has successfully diversified into higher value-added and higher technology businesses such as notebook casings and LCD monitor casings to capitalise on the long term dynamics of the IT industry Huan Hsin Holdings Ltd

4 CORPORATE MISSION We aim to achieve sustainable growth for the Group and to enhance shareholder value by providing quality products and services. We will constantly upgrade and adapt our business to anticipate and meet evolving customer needs in an increasingly challenging business environment. Our growing business, ISO9001 and ISO14001 certifications are clear testimonies to our focus on quality products and customer satisfaction. AS WE CONTINUE TO EXTEND OUR REACH INTO GLOBAL MARKETS, WE INTEND TO SHARPEN OUR COMPETITIVE EDGE THROUGH A MULTI-PRONGED STRATEGY THAT ENCOMPASSES THE FOLLOWING: Vertical integration of our manufacturing operations to deliver finished products at the most competitive prices; Maintaining high quality standards and minimising costs at all times; Strengthening relationships with our customers, staff and business associates; Further development of synergistic investments. 2 Huan Hsin Holdings Ltd

5 PRESIDENT S MESSAGE Ever since Huan Hsin diversified from its wire and cable business into electronics contract manufacturing business in 1997, the Group has made tremendous progress in expanding its product range, its customer base as well as its manufacturing base in China. Our diversification strategy is now beginning to contribute strongly to the Group s profit and has taken over the wire and cable business as the largest contributor to the Group s turnover and profit. Today, Huan Hsin has evolved into an integrated contract manufacturer of electronic products. Specifically, Huan Hsin is one of the leading notebook casing manufacturers in China. We will continue to build on the foundations of our growth to enhance shareholder value. FINANCIAL REVIEW Despite challenging market conditions in 2002, Huan Hsin benefited much from the strategic tie-ups with market leaders and the outsourcing trend to China-based contract manufacturers. Group turnover rose 50% to reach an all-time high of S$171.3 million in 2002 compared with S$114.4 million in The rise in Group turnover was driven mainly by the sterling performance of the mould, moulded plastic products and finished product assembly segment which was fuelled by strong orders for products such as notebook casings, LCD monitor casings and paper shredders Group profit after tax improved to S$21.6 million in 2002 from S$21.3 million the year before. The 1% growth does not fully reflect the overall operating improvement due to the impact of tax rebate and foreign exchange fluctuations. In 2001, Group profit after tax included a foreign exchange gain of S$5.2 million and a tax rebate of S$2.0 million. In 2002, there was a foreign exchange loss of S$205,000 and no tax rebate. Eliminating the impact of foreign exchange fluctuations and tax rebate, Group profit after tax would have jumped 55% to S$21.8 million from S$14.1 million. Net Tangible Asset per share rose to cents from cents. DIVIDENDS The Directors are recommending a final dividend of 6% tax-exempt per ordinary share of S$0.20 each. Subject to shareholders approval, the final dividend is payable on June 20, This, together with the interim dividend of 4% tax-exempt per share already paid, will make a total distribution for the year of 10% tax-exempt per share, which is unchanged from year 2001, on an enlarged share capital after the one-for-five bonus issue. SHARE CAPITAL A bonus issue of one-for-five was made in 2002, thereby raising the issued share capital to 300,000,000 shares of $0.20 each. SUBSEQUENT EVENT-PRIVATE PLACEMENT In February 2003, Huan Hsin successfully placed 35,000,000 new shares at the price of S$0.91 each to fund its expansion plans, thereby raising the issued share capital to 335,000,000 shares of S$0.20 each. The net proceeds raised, amounting to approximately S$31.2 million will mainly be used to expand Huan Hsin s notebook casing production capacity and spray-painting facilities Huan Hsin Holdings Ltd

6 PRESIDENT S MESSAGE OUTLOOK Global PC shipments may not see a strong rebound in 2003, but the Group is optimistic that with its strategically located plants in China and established customer base, it will continue to benefit from the outsourcing trend. Current projections indicate that Taiwanese manufacturers are expected to produce about two thirds of the world s notebooks in Towards the end of 2002, major Taiwanese notebook manufacturers have accelerated the pace of expansion near the Group s manufacturing base in Shanghai. As such, orders for notebook casings are likely to remain strong and the Group expects to further improve its market position in Our expansion plans in 2003 include constructing three new plants in Shanghai. Two of the new plants will boost the Group s notebook casing production and spray painting capacities to about 820,000 units per month. The third new plant will be leased to the joint venture company formed by Huan Hsin and Minebea Co., Ltd. to manufacture computer keyboards. Barring unforeseen circumstances, the directors are optimistic of the Group s performance in ACKNOWLEDGEMENTS Once again, our success in 2002 is attributable to the hard work of our management and employees at all levels. On behalf of the Board, I thank them for their contributions. We also appreciate the loyal support of our customers and business partners. To you, our shareholders, we value your investment in the Company and remain resolute in our objective to maximise your returns. HSU HUNG CHUN President 4 Huan Hsin Holdings Ltd

7 BOARD OF DIRECTORS Hsu Hung Chun Hsu Cheng Chien Lim Hock Beng Lau Ping Sum, Pearce Lim Kee Nam Hsu Ming Hung Chang Shih Hsing AUDIT COMMITTEE CORPORATE INFORMATION President Managing Director Independent Director Independent Director Independent Director Executive Director Executive Director Lim Hock Beng Chairman Lau Ping Sum, Pearce Lim Kee Nam (appointed on November 1, 2002) Hsu Cheng Chien (resigned on November 1, 2002) AUDITORS Deloitte & Touche Certified Public Accountants Singapore Partner-in-charge: Mr. Aric Loh Siang Khee (appointed since 1998) REGISTERED OFFICE 6 Shenton Way #28-09 DBS Building Tower 2 Singapore Tel: (65) Fax: (65) REGISTRAR NOMINATING COMMITTEE Lim Hock Beng Chairman Lau Ping Sum, Pearce Lim Kee Nam Hsu Hung Chun REMUNERATION COMMITTEE Compact Administrative Services Pte Ltd 6 Shenton Way #28-09 DBS Building Tower 2 Singapore Tel: (65) Fax: (65) Lau Ping Sum, Pearce Lim Hock Beng Lim Kee Nam Hsu Cheng Chien Chairman PRINCIPAL BANKERS Bumiputra-Commerce Bank Berhad Kedah, Malaysia COMPANY SECRETARY Tan Cheng Nur Farah Tan Oversea-Chinese Banking Corporation Limited Singapore Huan Hsin Holdings Ltd

8 PROFILE OF DIRECTORS HSU HUNG CHUN President Mr. Hsu Hung Chun, aged 48, has been the Director and Chairman of the Board since December 26,1995. He is a non-independent executive director and serves as a member of the Nominating Committee. Mr. Hsu Hung Chun is also the President and founder of the Group. He is responsible for business development and all the marketing activities of the Group. He is also in charge of the Group s investment policy, banking and financial issues. He graduated in 1973 from the Tai Pei High School, Taiwan and previously worked as a sales manager in a manufacturing company and a trading company. He is a member of the Singapore Institute of Directors. He is a substantial shareholder of the Company and has interest in certain transactions with the Group, which are disclosed in the Report of the Directors. He attended all the six (6) Board Meetings held in the financial year. He is the brother of Mr. Hsu Cheng Chien and was last re-elected on May 21, HSU CHENG CHIEN Managing Director Mr. Hsu Cheng Chien, aged 45, was appointed to the Board on December 26, 1995 and subsequently was appointed Managing Director on May 28, He is a non-independent executive director and serves as a member of the Remuneration Committee. As the Managing Director of the Group, he is in charge of the overall operations and production of the Group, setting and implementing long-term business objectives and strategic planning of the Group. He graduated in 1974 from Yu Da Business School, Taiwan. Prior to joining the Group in 1980, he was head of the material control and purchasing department in a manufacturing company. He is also a member of the Singapore Institute of Directors. He is a substantial shareholder of the Company and has interest in certain transactions with the Group, which are disclosed in the Report of the Directors. He attended all the six (6) Board Meetings held in the financial year. He is the brother of Mr. Hsu Hung Chun. LIM HOCK BENG Independent Director Mr. Lim Hock Beng, aged 63, was appointed to the Board on May 16, 1997 and is an independent non-executive director. He serves as the Chairman of the Audit and Nominating Committees and a member of the Remuneration Committee. He was the founder and the managing director of Lim Associates Pte Ltd, which provided corporate secretarial services to private and public listed companies, for 27 years until his retirement in year Currently, he is the managing director of a private investment holding company. He holds a Diploma in Management Accounting & Finance and is a member of the Singapore Institute of Directors. Current directorships in public companies listed on SGX-ST include GP Industries Ltd, Colex Holdings Ltd, King Wan Corporation Ltd and Vicplas International Ltd. He does not hold any share but hold share options for 120,000 shares in the Company. He attended all the six (6) Board Meetings held in the financial year. He has no family relationship with any Director and/or substantial shareholder of the Company, nor any personal interest in any business involving the Company. He was last re-elected on May 20, Huan Hsin Holdings Ltd

9 LAU PING SUM, PEARCE Independent Director Mr. Lau Ping Sum, Pearce, aged 62, was appointed to the Board on May 28, He is an independent non-executive director and serves as the Chairman of the Remuneration Committee and a member of the Audit and Nominating Committees. Currently, he is an Executive Director of PAP HQ and PAP Community Foundation HQ. Prior to joining the Board, he had held management positions as head of IT in two financial institutions and a statutory board. He was a Member of Parliament between 1980 and 1996, Political Secretary to the Minister of Health between 1981 and 1985 and Chairman of Ang Mo Kio/Yishun Town Council between 1995 and Current directorships in public companies listed on SGX-ST include KLW Holdings Ltd, Nera Telecommunications Ltd, New Wave Technologies Ltd and Cortina Holdings Ltd. He does not hold any share but hold share options for 120,000 shares in the Company. He attended all the six (6) Board Meetings held in the financial year. He has no family relationship with any Director and/or substantial shareholder of the Company, nor any personal interest in any business involving the Company. He was last re-elected on June 12, LIM KEE NAM Independent Director Mr. Lim Kee Nam, aged 55, joined the Board on November 1, He is an independent nonexecutive director and serves as a member of the Audit, Nominating and Remuneration Committees. He started work in 1968 in Johnson Shoes Bhd, a shoe manufacturing company as Production Supervisor and was promoted to Production Manager in He joined American International Assurance Co. Ltd. in 1976 and is currently the District Agency Manager He was an independent non-executive director of Uchi Technologies Berhad, a public company listed on the Main Board of KLSE, from February 1998 to August He was also a member of the Audit Committee of Uchi Technologies Berhad from July 2000 to August He does not hold any share or share options in the Company. He attended two (2) Board Meetings held in the financial year. He has no family relationship with any Director and/or substantial shareholder of the Company, nor any personal interest in any business involving the Company. HSU MING HUNG Executive Director Mr. Hsu Ming Hung, aged 42, was appointed to the Board on May 28, He is a non-independent executive director. He is the Deputy General Manager of Huan Hsin Co. (M) Sdn Bhd. He is responsible for the management of the Malaysian operations and assists the Managing Director in implementing, reviewing and verifying the overall corporate strategy and policies of the Group. He graduated from Nan Ya Industrial Training School, Taiwan in 1983 and has been with the Group for more than 15 years. He holds 750,000 shares and share options for 180,000 shares in the Company and has interest in certain related person transaction with the Group, which is disclosed in the Report of the Directors. He attended all the six (6) Board Meetings held in the financial year. He is the nephew of Messrs Hsu Hung Chun and Hsu Cheng Chien. He was last re-elected on May 21, CHANG SHIH HSING Executive Director Mr. Chang Shih Hsing, aged 41, was appointed to the Board on May 28, He is a non-independent executive director. He is the plant manager of Shanghai Huan Hsin Electronics Co., Ltd. As the head of the production division, he is responsible for the technical aspects of the operations, quality management and research and development. He also oversees employee training programs and human resource development and management. He has a general diploma and has been with the Group since He holds directly 2,090,066 shares and share options for 180,000 shares in the Company. He attended four (4) of the six (6) Board Meetings held in the financial year. He is the brother-in-law of Mr. Hsu Hung Chun. He was last re-elected on May 20, Huan Hsin Holdings Ltd

10 GROUP ADDRESSES Registered Office: Huan Hsin Holdings Ltd 6 Shenton Way, #28-09 DBS Building Tower 2, Singapore Tel: Fax: Malaysia Factory: Huan Hsin Co. (M) Sdn. Bhd. (Company No: x) Plot 3, Bakar Arang Industrial Estate, Sungai Petani, Kedah, Malaysia Tel: (5 lines) Fax: , Shanghai Factory: Shanghai Huan Hsin Electronics Co., Ltd. Shanghai Qing Pu County Fengxi China Tel: Fax: , Shanghai Yi Hsin Industry Co., Ltd. Shanghai Zhan Hsin Industry Co., Ltd. No. 2666, Zhong Chun Road, Zhuan Qiao Town, Ming Hang Industry Area Shanghai China Tel: Fax: , Huan Hsin (BVI) Limited Taipei Branch 6F, No. 815, Chung Hsiao E. Road, Sec. 5, Taipei Taiwan 115 Tel: Fax: Shanghai Yao Shin Industry Co., Ltd. No. 2666, Zhong Chun Road, Zhuan Qiao Town, Ming Hang Industry Area Shanghai China Tel: Fax: Zhan Yun (Shanghai) Electronics Co., Ltd. No. 8-1 Rong Jiang Road Songjiang Export Processing Zone Shanghai China Tel : Fax : Huan Hsin Holdings Ltd

11 Huan Hsin Holdings Ltd

12 OPERATIONS REVIEW In terms of contribution to Group turnover, the mould, moulded plastic products and finished product assembly ( moulded plastic & assembly ) segment is the largest contributor at 73%, followed by the wire, cable and related components ( wire ) segment at 23% and the pressed metal products ( metal ) segment at 4%. Huan Hsin s growth in 2002 was driven by the strong performance of the moulded plastic & assembly segment. Being the largest contributor to Group turnover and Group profit before tax, its sterling performance in 2002 has outweighed the slowdown of the wire segment and metal segment. The moulded plastic & assembly segment is expected to remain the main growth driver for the Group in MOULD, MOULDED PLASTIC PRODUCTS AND FINISHED PRODUCT ASSEMBLY As a result of increased outsourcing to China-based manufacturers and major customers expanding near the Group s manufacturing base in Shanghai, this segment enjoyed significant growth in orders for various electronic products including notebook casings, LCD monitor casings and paper shredders in Turnover jumped 107% to S$125 million and profit before tax surged 111% to S$16.7 million. Notebook casing was the fastest growing product in Unit shipments grew about 81% to 1.3 million compared with 720,000 in As Taiwanese manufacturers produced more than half of the world s notebooks in 2002, the Group was pleased to announce in May 2002 that it had secured new orders for notebook casings from another leading manufacturer from Taiwan. During the last two months of 2002, the Group received higher orders for notebook casings from all its customers as they accelerated the pace of expansion in China. With a healthy track record and an established manufacturing base in Shanghai, orders for notebook casings in 2003 are expected to remain strong. In addition, increasing demand for notebooks with colourful casings have presented the Group with new opportunities to provide value-added services such as spray-painting of notebook casings. As a result, the Group announced plans in February 2003 to expand both its notebook casing production capacity and spray-painting facilities. 10 Huan Hsin Holdings Ltd

13 OPERATIONS REVIEW WIRE, CABLE AND RELATED COMPONENTS The main products within the wire segment are telephone lines and cords for electrical and electronic products. Turnover eased 13% to S$39.2 million in 2002 from S$44.8 million a year ago because orders for telephone related cords were affected by the slowdown of the telecommunications industry globally. Orders for other cords and cables remained stable in With lower turnover, profit before tax fell to S$10.4 million from S$12 million a year ago. Although this segment is not the main growth driver for the Group, it will continue to contribute positively to Group performance in With its established customer base and generation of stable cash flow, this segment will support the growth of the moulded plastic & assembly segment PRESSED METAL PRODUCTS As a result of lower orders for DVD and VCD casings, turnover for the metal segment fell to S$6.9 million in 2002 from S$8.8 million in With lower orders and fixed operating costs, this segment incurred a loss of S$2.1 million compared with a loss of S$0.98 million a year ago. Apart from DVD and VCD casings, the metal segment includes products such as metal parts for notebooks. To improve its utilisation rate in 2003, management is working towards securing more orders for metal parts for notebooks Huan Hsin Holdings Ltd

14 FINANCIAL HIGHLIGHTS As at December 31 REVENUE ($ 000) 171,304 PROFIT BEFORE TAX ($ 000) 23,562 22,343 20, , ,434 14,391 13,513 74,256 79, PROFIT AFTER TAX BEFORE MINORITY INTEREST($ 000) EARNINGS PER SHARE (cents) ,004 21,142 19, ,484 12, NET TANGIBLE ASSET PER ORDINARY SHARE (cents) SHAREHOLDERS FUNDS ($ 000) , , , , , Huan Hsin Holdings Ltd

15 Operating Results Of The Group Revenue Profit before taxation Taxation Profit after taxation Minority interest Profit attributable to shareholders FINANCIAL HIGHLIGHTS As at December S$ ,256 14,391 (1,907) 12, , S$ ,675 13,513 (939) 12,574 1,935 14,509 Financial year ended 2000 S$ ,737 23,562 (2,558) 21,004 1,111 22, S$ ,434 20, , , S$ ,304 22,343 (2,413) 19,930 1,676 21, Basis earnings per ordinary share (cents) (i) Based on the number of ordinary shares in issue (note 1) (ii) On a fully diluted basis (note 2) NA NA NA NA 7.20 Dividend per share - Gross (cents) Dividend per share - Net (cents) Huan Hsin Holdings Ltd

16 FINANCIAL HIGHLIGHTS As at December 31 Financial Position Of The Group As at 1998 S$ S$ S$ S$ S$ 000 Fixed assets 48,154 54,572 59,634 62,597 80,505 Deferred tax liabilities (126) Investment 5,247 5,185 5,252 12,710 36,891 Current assets 65,144 76,728 89, , ,475 Current liabilities (note 3) (11,915) (19,184) (20,040) (26,432) (59,898) Net current assets 53,229 57,544 69,552 87,375 67,577 Non-current liabilities (8,599) (1,696) - (7,404) (13,892) 97, , , , ,081 Represented by : Shareholders funds (note 3) 96, , , , ,909 Minority interest 961 6,743 5,746 5,912 13,172 97, , , , ,081 Net tangible asset backing per ordinary share (cents) (note 1) Notes : (1) The earnings per ordinary share ( EPS ) and net tangible asset ( NTA ) backing per ordinary share are calculated on the issued share capital of 300,000,000 shares. The EPS and NTA for 1998 to 2000 have been restated to take into account the bonus issue of 50,000,000 ordinary shares issued in 2001 and 2002 respectively. The EPS and NTA for 2001 have been restated to take into account the bonus issue of 50,000,000 ordinary shares issued in The NTA for 1998 to 2000 have also been restated for the reclassification of proposed dividend to equity. (2) Fully diluted EPS for 2002 is calculated on 300,057,303 ordinary shares assuming all the full exercise of employees share option outstanding during the year and adjusting the number of ordinary shares in issue to reflect the effect of all potentially dilutive ordinary shares. In December 1998, 1999, 2000 and 2001, there were no outstanding employees share options. (3) The 1998 to 2000 comparative figures have been restated due to the adoption of Singapore Statement of Accounting Standards (SAS) 10 : Events after the balance sheet date which resulted in an increase in the shareholders equity as proposed dividends have been reclassified as part of shareholders equity 14 Huan Hsin Holdings Ltd

17 FINANCIAL CONTENTS Report of the Directors Auditors Report Balance Sheets Profit and Loss Statements Consolidated Cash Flow Statement Statements of Changes in Equity Notes to Financial Statements Statement of Directors Corporate Governance Report Statistics of Shareholdings Notice of Annual General Meeting Proxy Form 15 Huan Hsin Holdings Ltd

18 REPORT OF THE DIRECTORS The directors present their report together with the audited financial statements of the company and of the group for the financial year ended December 31, DIRECTORS The directors of the company in office at the date of this report are: Mr Hsu Hung Chun Mr Hsu Cheng Chien Mr Hsu Ming Hung Mr Chang Shih Hsing Mr Lim Hock Beng Mr Lau Ping Sum, Pearce Mr Lim Kee Nam(Appointed on November 1, 2002) 2 PRINCIPAL ACTIVITIES The principal activities of the company are investment holding and the provision of services to its subsidiaries. The principal activities of the associates and subsidiaries are stated in Notes 9 and 10 to the financial statements. There have been no significant changes in the nature of these activities during the financial year. 3 ACQUISITIONS AND DISPOSALS OF SUBSIDIARIES a) During the financial year, the company acquired/incorporated the following subsidiaries: Group s share of net Group s Name of subsidiary Consideration tangible assets effective interest $ 000 $ 000 % AMTEK System Co., Ltd * * 100 Shanghai Huan Yi 1,917 1, Technology Co., Ltd Zhan Yun (Shanghai) 9,366 9, Electronics Co., Ltd * Shares held by another subsidiary. b) During the financial year, the following subsidiary was disposed: Group s share of net Group s Name of subsidiary Consideration tangible assets effective interest $ 000 $ 000 % Cai Hui Technology Co., Ltd Huan Hsin Holdings Ltd

19 REPORT OF THE DIRECTORS 4 RESULTS FOR THE FINANCIAL YEAR Group Company $ 000 $ 000 Profit after income tax 19,930 6,673 Minority interests 1,676 - Profit attributable to shareholders 21,606 6,673 5 MATERIAL TRANSFERS TO/FROM RESERVES AND PROVISIONS There were no material transfers to or from reserves and provisions during the financial year other than those disclosed in the attached financial statements. 6 ISSUE OF SHARES AND DEBENTURES a) During the financial year, the company issued bonus shares of 50,000,000 new ordinary shares of $0.20 each on the basis of 1 new ordinary share credited as fully paid for every 5 existing shares of $0.20 each held in the company, by way of capitalisation of the share premium account. These bonus shares ranked pari passu in all respects with the existing issued shares of the company. b) During the financial year, the subsidiaries issued shares as follows: i) Bao-Ji Development Co., Ltd, issued 10,000,000 ordinary shares of NT$10 each at par totalling NT$100,000,000 (equivalent to $5,291,000) for cash for working capital purposes; ii) Infospeed Pte Ltd issued 3,701,980 ordinary shares of $1 each at par for cash of $2,036,089 for working capital purposes and $1,665,891 in consideration for plant and machinery amounting to US$899,996 which are injected into a subsidiary, Shanghai Ju Hsin Electronic Co. Ltd; iii) Shanghai Ju Hsin Electronics Co., Ltd increased its paid-up capital by US$1,150,000 (equivalent to $2,128,650) for plant and machinery injected; iv) Shanghai Zhan Hsin Industry Co., Ltd increased its paid-up capital by US$1,533,000 (equivalent to $2,704,000) for cash for working capital purposes; v) AMTEK System Co., Ltd issued 10,000,000 shares of NT$10 each at par for cash on incorporation; vi) Shanghai Huan Yi Technology Co., Ltd registered paid up capital of US$1,050,000 (equivalent to $1,917,000) on incorporation; and vii) Zhan Yun (Shanghai) Electronics Co., Ltd registered paid up capital of US$10,000,000 (equivalent to $18,365,000) on incorporation. c) No debentures were issued by the company or its subsidiaries during the financial year. 7 ARRANGEMENTS TO ENABLE DIRECTORS TO ACQUIRE BENEFITS BY MEANS OF THE ACQUISITION OF SHARES AND DEBENTURES Neither at the end of the financial year nor at any time during the financial year did there subsist any arrangement whose object is to enable the directors of the company to acquire benefits by means of the acquisition of shares or debentures in the company or any other body corporate. 17 Huan Hsin Holdings Ltd

20 REPORT OF THE DIRECTORS 8 DIRECTORS INTERESTS IN SHARES AND DEBENTURES The directors of the company holding office at the end of the financial year had no interests in the share capital of the company and related corporations as recorded in the Register of Directors Shareholdings kept by the company under Section 164 of the Singapore Companies Act except as follows: Shareholdings in which Shareholdings registered directors are deemed in the names of directors to have an interest At beginning At end of At beginning At end of of financial year financial year of financial year financial year The Company Ordinary shares of $0.20 each Mr Hsu Hung Chun 81,006,470 97,207,764 2,251,337 2,701,604 Mr Hsu Cheng Chien 38,873,328 46,747,995 3,972,587 4,767,104 Mr Hsu Ming Hung 625, , Mr Chang Shih Hsing 1,741,722 2,090, , ,000 The Subsidiary Huan Hsin Co. (M) Sdn Bhd Ordinary shares of RM1 each Mr Hsu Ming Hung ,200 - Employees share option granted to subscriber for ordinary shares of $0.20 each Mr Lim Hock Beng - 120, Mr Lau Ping Sum, Pearce - 120, Mr Hsu Ming Hung - 180, Mr Chang Shih Hsing - 180,000-60,000 By virtue of Section 7 of the Singapore Companies Act, Messrs Hsu Hung Chun and Hsu Cheng Chien are deemed to have an interest in all the related corporations of the company. The directors interests as at January 21, 2003 were the same as those at the end of the year. 9 DIVIDENDS Dividends paid or declared since the end of the company s last financial year were as follows: A final tax-exempt dividend at $0.012 per ordinary share totalling $3,000,000 on 250,000,000 ordinary shares of $0.20 each proposed in the Director s report for the year ended December 31, 2001 was paid in An interim tax-exempt dividend of $0.008 per ordinary share totalling $2,400,000 on 300,000,000 ordinary shares of $0.20 each in respect of the financial year just ended. The directors of the company now recommend that a final tax-exempt dividend be paid at $0.012 per ordinary share totalling $3,600,000 in respect of the financial year just ended December 31, DIRECTORS ACTIONS RELATING TO BAD AND DOUBTFUL DEBTS Before the profit and loss statement and the balance sheet were made out, the directors of the company took reasonable steps to ascertain that proper action had been taken in relation to the writing off and providing for bad and doubtful debts of the company and have satisfied themselves that all known bad debts of the company have been written off and that adequate provision has been made for doubtful debts. 18 Huan Hsin Holdings Ltd

21 REPORT OF THE DIRECTORS 10 DIRECTORS ACTIONS RELATING TO BAD AND DOUBTFUL DEBTS (cont d) At the date of this report, the directors of the company are not aware of any circumstances which would render any amounts written off or provided for bad and doubtful debts for the group of companies in the consolidated financial statements of the company inadequate to any substantial extent. 11 DIRECTORS ACTIONS RELATING TO CURRENT ASSETS Before the profit and loss statement and the balance sheet were made out, the directors of the company took reasonable steps to ascertain that any current assets of the company which were unlikely to realise their book values, in the ordinary course of business, have been written down to their estimated realisable values or were adequately provided for. At the date of this report, the directors of the company are not aware of any circumstances which would render the values attributable to current assets in the consolidated financial statements misleading. 12 CHARGES ON ASSETS AND EXISTENCE OF CONTINGENT LIABILITIES AFTER YEAR END DATE At the date of this report: a) there does not exist any charge on the assets of the company or any corporation in the group which has arisen since the end of the financial year which secures the liability of any other person; and b) there does not exist any contingent liability of the company or any corporation in the group which has arisen since the end of the financial year. 13 ABILITY TO MEET OBLIGATIONS No contingent or other liability of the company or any corporation in the group has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the directors of the company, will or may substantially affect the ability of the company and of the group to meet their obligations as and when they fall due. 14 OTHER CIRCUMSTANCES AFFECTING FINANCIAL STATEMENTS At the date of this report, the directors of the company are not aware of any circumstances not otherwise dealt with in the report or consolidated financial statements which would render any amount stated in the financial statements of the company and the consolidated financial statements misleading. 15 UNUSUAL ITEMS In the opinion of the directors of the company, the results of the operations of the company and of the group have not been substantially affected by any item, transaction or event of a material and unusual nature during the financial year. 16 UNUSUAL ITEMS AFTER YEAR END DATE In the opinion of the directors of the company, no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial year and the date of the report which would affect substantially the results of the operations of the company and of the group for the financial year in which this report is made. 19 Huan Hsin Holdings Ltd

22 REPORT OF THE DIRECTORS 17 DIRECTORS RECEIPT AND ENTITLEMENT TO CONTRACTUAL BENEFITS Since the beginning of the financial year, no director has received or become entitled to receive a benefit which is required to be disclosed under Section 201(8) of the Singapore Companies Act, by reason of a contract made by the company or a related corporation with the director or with a firm of which he is a member, or with a company in which he has a substantial financial interest except as disclosed in the financial statements and except that certain directors have received remuneration from related corporations in their capacity as directors and or executives of those related corporations. 18 OPTIONS TO TAKE UP UNISSUED SHARES a) The Huan Hsin Share Option Scheme ( Share Option Scheme ) was approved by the shareholders at the Extraordinary Meeting held on May 21, The Share Option Scheme is administered by a committee of directors comprising Messrs Lim Hock Beng, Lau Ping Sum, Pearce, Hsu Hung Chun and Hsu Cheng Chien. Under the Share Option Scheme, an option entitles the option holder to subscribe for a specific number of new ordinary shares of $0.20 each in the company comprised in the option at a subscription price per share determined with reference to the market price of the shares at the time of grant of the option. The Share Option Committee may at its discretion, fix that subscription price at a discount up to 20% off market price but not lower than the par value of the shares. The consideration for the grant of an option is $1.00. Options granted with the subscription price set at the market price shall only be exercised after the first anniversary but before the fifth anniversary of the date of grant of that option. Options granted with the market price set at a discount to the market price shall only be exercised after the second anniversary but before the fifth anniversary of the date of grant of that option. The shares under option may be exercised in whole or in part on the payment of the relevant subscription price. Options granted will lapse when the option holder ceases to be a full-time employee of the company or any company of the group subject to certain exceptions at the discretion of the Share Option Committee. On November 21, 2002, on the dissolution of the Share Option Committee, the Remuneration Committee took over the function of administering the Share Option Scheme. The Remuneration Committee is made up of three independent non-executive directors comprising Messrs Lim Hock Beng, Lau Ping Sum, Pearce, Lim Kee Nam and an executive director, Mr Hsu Cheng Chien. Under the Share Option Scheme, share options granted and exercised during the financial year and outstanding as at December 31, 2002 were as follows: Balance At date Expired/ as at Subscription Date of grant of grant Exercised Cancelled price Exercise period $ April 18, ,930, ,930, April 19, 2004 to April 18, 2007 December 17, December 18, 2004 to , , December 17, ,230, ,230, Huan Hsin Holdings Ltd

23 REPORT OF THE DIRECTORS 18 OPTIONS TO TAKE UP UNISSUED SHARES (cont d) Aggregate options granted to directors/controlling shareholders of the company under the Share Option Scheme since the commencement of the Scheme are as follows: Options outstanding as at Directors Granted Exercised Expired Expiry date Mr Hsu Ming Hung 180, ,000 April 18, 2007 Mr Chang Shih Hsing 180, ,000 December 17, 2007 Mr Lim Hock Beng 120, ,000 April 18, 2007 Mr Lau Ping Sum, Pearce 120, ,000 April 18, 2007 Associates of controlling shareholders Ms Hsu Bao Hwa 60, ,000 December 17, 2007 Mr Yang Chao Shun 60, ,000 December 17, 2007 b) The number and proportion of options granted during the financial year at: i) a discount of 10% or less off market price - nil ii) a discount of more than 10% off market price - 4,230,000 c) During the financial year, no employee received 5% or more of the total number of options, available under the Share Option Scheme and no shares were issued at a discount to market price. d) During the financial year, no options to take up unissued shares of any subsidiary were granted and there were no shares of any subsidiary issued by virtue of the exercise of an option to take up unissued shares. e) These options do not entitle the holder to participate by virtue of the options, in any share issue of any other corporations. f) At the end of the financial year, there were no unissued shares of any subsidiary under option. 19 INTERESTED PERSON TRANSACTIONS Interested person is a director, chief executive officer or controlling shareholder of the issuer. Transactions with interested person during the financial year: Group Nature of transaction Interested person $ 000 $ 000 Rental expense Hsu Hung Chun/Hsu Cheng Chien Rental expense Hsu Cheng Chien 2 1 Licence fee Hsu Hung Chun/Hsu Cheng Chien Acquisition of 4.76% share capital Hsu Ming Hung in Huan Hsin Co. (M) Sdn Bhd Sales Hsu Cheng Chien (12) (2) Rental income Hsu Hung Chun/Hsu Cheng Chien (1) (1) 21 Huan Hsin Holdings Ltd

24 REPORT OF THE DIRECTORS 20 AUDIT COMMITTEE The members of the Audit Committee in office at the date of this report are as follows: Mr Lim Hock Beng (Chairman) Mr Lau Ping Sum, Pearce Mr Lim Kee Nam (Appointed on November 1, 2002) Mr Hsu Cheng Chien (Resigned on November 1, 2002) The Audit Committee performed the functions specified in the Singapore Companies Act. In performing its functions, the Committee reviewed the overall scope of the external audits and the assistance given by the company officers to the auditors. It met with the company s external auditors to discuss the results of their examinations. The Committee also reviewed the financial statements of the company and the consolidated financial statements of the group for the financial year ended December 31, 2002 as well as the auditors report thereon. The Committee also met with the company s internal auditors to review the overall scope of the internal audit and to discuss the results of the internal audit. The Audit Committee recommended to the Board of Directors the reappointment of Deloitte & Touche as external auditors at the forthcoming annual general meeting of the company. 21 AUDITORS The auditors, Deloitte & Touche, have expressed their willingness to accept re-appointment. ON BEHALF OF THE DIRECTORS Hsu Hung Chun Hsu Cheng Chien April 28, Huan Hsin Holdings Ltd

25 AUDITORS REPORT TO THE MEMBERS OF HUAN HSIN HOLDINGS LTD We have audited the accompanying financial statements of Huan Hsin Holdings Ltd and the consolidated financial statements of the group as at December 31, 2002 set out on pages 24 to 47. These financial statements are the responsibility of the company s directors. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the directors, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion: a) the accompanying financial statements of the company and consolidated financial statements of the group are properly drawn up in accordance with the provisions of the Singapore Companies Act ( Act ) and Singapore Statements of Accounting Standard and so as to give a true and fair view of: i) the state of affairs of the company and of the group as at December 31, 2002 and of the results, changes in equity of the company and of the group and cash flows of the group for the financial year then ended; and ii) the other matters required by Section 201 of the Act to be dealt with in the financial statements of the company and consolidated financial statements of the group; b) the accounting and other records and the registers required by the Act to be kept by the company and those subsidiaries incorporated in Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act. We have considered the financial statements and auditors reports of all the subsidiaries of which we have not acted as auditors, being financial statements included in the consolidated financial statements. The names of these subsidiaries are indicated in Note 10 to the financial statements. We are satisfied that the financial statements of the subsidiaries that are consolidated with the financial statements of the company are in form and content appropriate and proper for the purposes of the preparation of the consolidated financial statements, and we have received satisfactory information and explanations as required by us for those purposes. The auditors reports on the financial statements of the subsidiaries were not subject to any qualification and in respect of the subsidiaries incorporated in Singapore did not include any comment under Section 207(3) of the Act. DELOITTE & TOUCHE Certified Public Accountants Aric Loh Siang Khee Partner Singapore April 28, Huan Hsin Holdings Ltd

26 BALANCE SHEETS DECEMBER 31, 2002 Group Company Notes $ 000 $ 000 $ 000 $ 000 ASSETS Current assets: Cash 21,537 31, ,089 Short-term investments Trade receivables 6 68,802 35, Other receivables and prepaid expenses 7 7,917 25,465 23,799 87,957 Inventories 8 29,218 21, Total current assets 127, ,807 24,308 89,046 Non-current assets: Investment in associates 9 25,089 1,343 27,345 4,115 Investment in subsidiaries ,976 47,047 Long-term receivables ,410 - Other long-term investments 12 11,802 11,367 6,282 6,282 Property, plant and equipment 13 80,505 62,597 1,684 1,711 Total non-current assets 117,396 75, ,697 59,155 Total assets 244, , , ,201 LIABILITIES AND EQUITY Current liabilities: Trade payables 41,032 16, Other payables 14 6,873 7,032 2,966 2,840 Short-term bank loan 15 3, Current portion of long-term bank loans 16 6,946 1,851 6,946 1,851 Income tax payable 1, Total current liabilities 59,898 26,432 9,912 4,691 Non-current liabilities: Long-term bank loans 16 13,892 7,404 13,892 7,404 Minority interests 13,172 5, Capital and reserves: Share capital 17 60,000 50,000 60,000 50,000 Share premium 4,515 14,528 4,515 14,528 Capital reserve on consolidation Foreign currency translation reserve (206) 7,464 (2,165) - Legal reserves 5,298 5, Proposed dividend 3,600 3,000 3,600 3,000 Accumulated profits 83,746 68,333 69,251 68,578 Total equity 157, , , ,106 Total liabilities and equity 244, , , ,201 See accompanying notes to financial statements. 24 Huan Hsin Holdings Ltd

27 PROFIT AND LOSS STATEMENTS YEAR ENDED DECEMBER 31, 2002 Group Company Notes $ 000 $ 000 $ 000 $ 000 Revenue , ,434 8,778 17,212 Other operating income 19 2,473 5,664-4,856 Changes in inventories of finished goods and work-in-progress 2, Raw material and consumables used (97,304) (57,034) - - Staff costs 20 (18,974) (16,795) (489) (454) Depreciation (8,543) (7,749) (27) (27) Other operating expenses (29,378) (16,775) (1,154) (374) Profit from operations 22,106 22,741 7,108 21,213 Finance costs (550) (128) (429) (121) Profit before share of results of associates 21 21,556 22,613 6,679 21,092 Share of results of associates 787 (1,830) - - Profit before income tax 22,343 20,783 6,679 21,092 Income tax 22 (2,413) 359 (6) 22 Profit after income tax 19,930 21,142 6,673 21,114 Minority interests 1, Profit attributable to shareholders 21,606 21,322 6,673 21,114 Earnings per share (cents) 23 - Basic Fully diluted 7.20 N/A See accompanying notes to financial statements. 25 Huan Hsin Holdings Ltd

28 CONSOLIDATED CASH FLOW STATEMENT YEAR ENDED DECEMBER 31, $ 000 $ 000 Cash flows from operating activities: Profit before share of results of associates 21,556 22,613 Adjustments for: Depreciation expense 8,543 7,749 Gain on disposal of investment (23) - Loss on disposal of plant and equipment Plant and equipment written off - 48 Interest expense Interest income (228) (289) Operating profit before working capital changes 30,422 30,517 Trade receivables (33,438) (5,381) Other receivables and prepaid expenses 17,548 (2,599) Inventories (7,256) (1,285) Trade payables 24,565 5,813 Other payables (159) 319 Cash generated from operations 31,682 27,384 Dividends paid (5,400) (4,400) Income tax refunded (paid) (2,105) 493 Interest paid (550) (128) Interest received Net cash from operating activities 23,855 23,638 Cash flows from investing activities: Additions to property, plant and equipment (30,699) (7,469) Proceeds from disposal of plant and equipment Investment in associates (23,230) (1,412) Other long-term investments (435) (7,701) Proceeds from disposal of short-term investment 23 - Net cash used in investing activities (53,589) (16,222) Cash flows from financing activities: Share issue expenses (13) (27) Increase in long-term bank loans 11,583 7,522 Short-term bank loan 3,657 8 Contributions from minority shareholders 10, Net cash from financing activities 25,387 7,763 Net effect of exchange rate changes in consolidating subsidiaries (5,131) (229) (Decrease) Increase in cash (9,478) 14,950 Cash at beginning of financial year 31,015 16,065 Cash at end of financial year 21,537 31,015 See accompanying notes to financial statements. 26 Huan Hsin Holdings Ltd

29 STATEMENTS OF CHANGES IN EQUITY YEAR ENDED DECEMBER 31, 2002 Capital Share Share reserve on Translation Legal Proposed Accumulated Notes capital premium consolidation reserve reserves dividend profits Total $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 GROUP Balance at December 31, ,000 24, ,709 5,086 2,400 52, ,692 Currency translation differences , ,779 Net profit after income tax ,322 21,322 Dividends paid (2,400) (2,000) (4,400) Proposed dividend ,000 (3,000) - Bonus share issue 10,000 (10,000) Share issue expenses - (27) (27) Balance at December 31, ,000 14, ,464 5,110 3,000 68, ,366 Currency translation differences (7,670) (5) - - (7,675) Arising in current year Net profit after income tax ,606 21,606 Transfer to legal reserve (193) - Dividends paid (3,000) (2,400) (5,400) Proposed dividend ,600 (3,600) - Bonus share issue 10,000 (10,000) Share issue expenses - (13) (13) Balance at December 31, ,000 4, (206) 5,298 3,600 83, ,909 Share Share Translation Proposed Accumulated Notes capital premium reserve dividend profits Total $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 COMPANY Balance at December 31, ,000 24,555-2,400 52, ,419 Net profit after income tax ,114 21,114 Dividends paid (2,400) (2,000) (4,400) Proposed dividend ,000 (3,000) - Bonus share issue 10,000 (10,000) Share issue expenses - (27) (27) Balance at December 31, ,000 14,528-3,000 68, ,106 Currency translation differences - - (2,165) - - (2,165) Net profit after income tax ,673 6,673 Dividends paid (3,000) (2,400) (5,400) Proposed dividend ,600 (3,600) - Bonus share issue 10,000 (10,000) Share issue expenses - (13) (13) Balance at December 31, ,000 4,515 (2,165) 3,600 69, ,201 See accompanying notes to financial statements. 27 Huan Hsin Holdings Ltd