Expanding. Our. Vision

Transcription

1 Expanding Our Vision ANNUAL REPORT 2008

2 Contents 01 Profile 02 Chairman s Statement 04 Board of Directors 06 Financial Highlights 07 Corporate Information 09 Directors Report 15 Statement By Directors 16 Independent Auditors Report 18 Corporate Governance Report 24 Balance Sheets 25 Consolidated Income Statement 26 Consolidated Statement of Changes in Equity 28 Consolidated Cash Flow Statement Statistics of Shareholdings 75 Notice of Annual General Meeting Proxy Form

3 BROADWAY INDUSTRIAL GROUP LIMITED Annual Report 2008 Profile 01 Broadway Industrial Group Limited is a leader in the manufacture of precision-machined components in contamination-free and ultra high purity environment. Its Compart group of subsidiaries is one of the top three producers of actuator arms and related assembled parts for the global hard disk drive industry. Compart also manufactures precision-machined components for semiconductor, automotive and industrial applications. Broadway is also a leading manufacturer of expandable foam plastics used mainly for customised protective packaging of consumer electronics, household appliances, telecommunication and IT products. Broadway s foam plastic products are also used as insulation material for industrial and general construction applications. Other applications for the Group s foam plastics include automotive components, light-weight pallets and others. The Group s leading position in both product groups is achieved through its emphasis on quality, reliability and technical advancement. The Group s main manufacturing facilities are in China - strategically located in the major economic zones of the Pearl and Yangtze River Deltas. These regions have the necessary infrastructure for the Group to establish cost competitive production facilities. At the same time, the Group is strategically located to capitalize on the rapidly growing markets in China. The Group also has manufacturing facilities in Thailand and USA. The commitment to a high level of quality products and reliable services has enabled the Group to support many multinational customers.

4 02 BROADWAY INDUSTRIAL GROUP LIMITED Annual Report 2008 Chairman s Statement The global financial crisis in the second half of FY2008 has had a considerable impact on the Group s business. The Group s revenue of $617.8 million for FY2008 grew by 1.9% or $11.7 million compared to that of $606.1 million in FY2007. Profit before income tax and minority interests decreased from $41.2 million in FY2007 to $26.3 million in FY2008 and profit attributable to shareholders decreased from $27.6 million in FY2007 to $22.4 million in FY2008. The continuing pricing pressure from our customers, higher cost of operations in China, global financial crisis and the melt down of the semiconductor industry in the second half of FY2008 have significantly impacted our components business. Revenue from the components business decreased by 3.3% to $502.6 million in FY2008 as compared to $519.8 million in FY2007. Correspondingly, results from operating activities attributable to the components business decreased from $37.2 million in FY2007 to $23.5 million in FY2008 representing a decrease of 36.8%. Notwithstanding the impact from the financial crisis, our foam plastics business continued to improve with increased orders from existing customers and demand from new customers. Revenue from the foam plastics business increased by 33.3% from $86.4 million in the previous year to $115.2 million in FY2008. In line with the increased turnover, the results from operating activities attributable to the foam plastics business also increased from $9.1 million to $11.0 million, representing an increase of 20.9%. LOOKING FORWARD With the global financial crisis still unresolved and the uncertainty of the current recession, the Group is facing one of the most challenging times ahead of us. We have taken strong measures to reduce costs and improve market share. With the completion of our new factory in Longgang (Shenzhen) late last year, we will be able to streamline our machining operations and improve productivity. With the

5 BROADWAY INDUSTRIAL GROUP LIMITED Annual Report Chairman s Statement Notwithstanding the impact from the financial crisis, our foam plastics business continued to improve with increased orders from existing customers and demand from new customers. Revenue from the foam plastics business increased by 33.3% from $86.4 million in the previous year to $115.2 million in FY2008. expected slowdown in the demand from our customers due to the global economic crisis, we should be able to make use of our current production capacities to support our customers without incurring any substantial capital investment. The cost control measures and reduction in capital investment will result in a better operational cash flow for the Group. We will also put in effort to prepare the Group in readiness to capture new opportunities when the economy recovers. loyalty, commitment and support during the year. Last but not least, we would like to thank Mr Philip Henry DeFord, who has resigned as Independent Director with effect from 27 February 2009, and Mr Huang Yuan Chiang, who has decided not to seek re-election at the forthcoming Annual General Meeting, for all their contributions and support to the Group. Barring unforeseen circumstances, the Group expects to remain profitable in FY2009. ACKNOWLEDGEMENT On behalf of the Board of Directors, I would like to thank all our shareholders, customers and business associates for their continued support to the Broadway Industrial Group. The Directors and I would also like to acknowledge the contributions from the staff teams and thank them for their WONG SHEUNG SZE Executive Chairman Broadway Industrial Group Limited Singapore 3 April 2009

6 04 BROADWAY INDUSTRIAL GROUP LIMITED Annual Report 2008 Board of Directors MR WONG SHEUNG SZE 59, is the Executive Chairman of the Company and has been with the Group since He has been involved in the day-to-day operations of the Group since and is responsible for formulating business expansion plans for the Broadway Industrial Group. Currently, he oversees the general management of the Group and is involved in the overall business development and strategic planning. Mr Wong was last re-elected on 27 April MR LEE CHOW SOON 69, is an Independent Director of the Company. He holds a Degree in Law from the University of London and an Honours Degree in Law from the University of Singapore. He has been practising as an Advocate and Solicitor and is currently a senior partner of Messrs Tan, Lee and Partners, a firm of advocates and solicitors. Mr Lee was last re-elected on 28 April MR HUANG YUAN CHIANG 49, is an Independent Director of the Company. He is a lawyer by training. He has degrees in Economics and Law. After an initial career in law, he switched to investment banking in the mid-eighties. Mr Huang sits on the boards of other listed companies in Singapore, Malaysia and elsewhere. Mr Huang was last re-elected as a director of the Company on 28 April 2006.

7 BROADWAY INDUSTRIAL GROUP LIMITED Annual Report Board of Directors MR RICHARD EU YEE MING 61, an Independent Director of the Company, is the Group CEO of Eu Yan Sang International Ltd, a company listed on the SGX. He graduated with a law degree from London University. Mr Eu is also Chairman of the Singapore Institute of Management and sits on the boards of various arts and charity organisations. Mr Eu was last re-elected on 28 April MR LEE PO LEE KHONG KEE MR NG AH HOY 58, is an Executive Director of the Company. He graduated from the University of Singapore with a Bachelor of Engineering Degree in Mechanical Engineering. Prior to joining the Group, he was working with several multinational corporations in the management of manufacturing operations. He joined the Group in 1990 as the General Manager of one of the subsidiaries and is currently overseeing the Group s foam plastics operations in China. He was last re-elected on 27 April , is an Executive Director of the Company. He was a Colombo Plan Scholar and graduated from the University of Auckland, New Zealand with an Honours Degree in Mechanical Engineering. He also holds a Master Degree in Industrial Engineering and a Master Degree in Business Administration from the National University of Singapore. He is a registered professional engineer with the Singapore Professional Engineer Board. Mr Lee joined the Group in 1979 and is currently responsible for the Group s business development in China. He was last re-elected on 28 April 2008.

8 06 BROADWAY INDUSTRIAL GROUP LIMITED Annual Report 2008 Financial Highlights Turnover S$ , , ,795 Profit before income tax and minority interests S$ ,407 41,188 26,257 Basic earnings per share (EPS) Cents Earnings before interest, taxes, depreciation S$ ,112 75,393 68,973 and amortisation (EBITDA) Turnover S$ 000 Profit before income tax and minority interests S$ , , ,795 37,407 41,188 26, Basic earnings per share (EPS) Cents Earnings before interest, taxes, depreciation and amortisation (EBITDA) S$ ,112 75,393 68,

9 BROADWAY INDUSTRIAL GROUP LIMITED Annual Report Corporate Information BOARD OF DIRECTORS Wong Sheung Sze (Executive Chairman) Lee Chow Soon Huang Yuan Chiang Philip Henry DeFord (Resigned on 27 February 2009) Richard Eu Yee Ming Lee Po Lee Khong Kee Ng Ah Hoy AUDIT COMMITTEE Lee Chow Soon (Chairman) Huang Yuan Chiang Philip Henry DeFord (Resigned on 27 February 2009) Richard Eu Yee Ming REMUNERATION COMMITTEE Huang Yuan Chiang (Chairman) Lee Chow Soon Philip Henry DeFord (Resigned on 27 February 2009) SECRETARY Ng Lai Ying BUSINESS OFFICE 65 Chulia Street #48-03/04 OCBC Centre Singapore Tel: Fax: REGISTERED OFFICE 3 Church Street #08-01 Samsung Hub Singapore Tel: Fax: SHARE REGISTRAR Boardroom Corporate & Advisory Services Pte Ltd 3 Church Street #08-01 Samsung Hub Singapore Tel: Fax: AUDITORS KPMG LLP 16 Raffles Quay #22-00 Hong Leong Building Singapore Tel: Audit Partner-in-charge: Mr Phuoc Tran Appointed since FY2006

10 Financial Contents 09 Directors Report 15 Statement By Directors 16 Independent Auditors Report 18 Corporate Governance Report 24 Balance Sheets 25 Consolidated Income Statement 26 Consolidated Statement of Changes in Equity 28 Consolidated Cash Flow Statement Statistics of Shareholdings 75 Notice of Annual General Meeting Proxy Form

11 BROADWAY INDUSTRIAL GROUP LIMITED Annual Report Directors Report We are pleased to submit this annual report to the members of the Company together with the audited financial statements for the financial year ended 31 December Directors The directors in office at the date of this report are as follows: Wong Sheung Sze Executive Chairman Lee Chow Soon Huang Yuan Chiang Philip Henry DeFord (Resigned on 27 February 2009) Richard Eu Yee Ming Lee Po Lee Khong Kee Ng Ah Hoy Directors interests According to the register kept by the Company for the purposes of Section 164 of the Singapore Companies Act, Chapter 50 (the Act), particulars of interests of directors who held office at the end of the financial year (including those held by their spouses and infant children) in shares, debentures, warrants and share options in the Company and in related corporations (other than wholly-owned subsidiaries) are as follows: Name of director and corporation in which interests are held Holdings at beginning of the year Holdings at end of the year The Company Wong Sheung Sze - ordinary shares - interests held 47,815,290 35,959,387 - deemed interests 27,115,000 39,115,000 Lee Po Lee Khong Kee - ordinary shares - interests held 911, ,954 - deemed interests 70,000 70,000 - options to subscribe for ordinary shares at: - $0.45 between 17/01/2006 and 17/01/ , ,000 - $0.60 between 08/03/2008 and 08/03/ ,000 75,000 - $0.66 between 26/03/2009 and 26/03/ ,000

12 10 BROADWAY INDUSTRIAL GROUP LIMITED Annual Report 2008 Directors Report Name of director and corporation in which interests are held Holdings at beginning of the year Holdings at end of the year The Company Ng Ah Hoy - ordinary shares - interests held 170, ,000 - deemed interests 60,000 60,000 - options to subscribe for ordinary shares at: - $0.60 between 08/03/2008 and 08/03/ ,000 75,000 - $0.66 between 26/03/2009 and 26/03/ ,000 Lee Chow Soon - options to subscribe for ordinary shares at: - $0.45 between 17/01/2006 and 17/01/ , ,000 - $0.58 between 17/03/2007 and 17/03/ ,000 50,000 - $0.60 between 08/03/2008 and 08/03/ ,000 50,000 - $0.66 between 26/03/2009 and 26/03/ ,000 Huang Yuan Chiang - options to subscribe for ordinary shares at: - $0.45 between 17/01/2006 and 17/01/ , ,000 - $0.58 between 17/03/2007 and 17/03/ ,000 50,000 - $0.60 between 08/03/2008 and 08/03/ ,000 50,000 - $0.66 between 26/03/2009 and 26/03/ ,000 Philip Henry DeFord - options to subscribe for ordinary shares at: - $0.45 between 17/01/2006 and 17/01/ , ,000 - $0.58 between 17/03/2007 and 17/03/ ,000 50,000 - $0.60 between 08/03/2008 and 08/03/ ,000 50,000 - $0.66 between 26/03/2009 and 26/03/ ,000 Richard Eu Yee Ming - options to subscribe for ordinary shares at: - $0.58 between 17/03/2007 and 17/03/ ,000 15,000 - $0.60 between 08/03/2008 and 08/03/ ,000 50,000 - $0.66 between 26/03/2009 and 26/03/ ,000

13 BROADWAY INDUSTRIAL GROUP LIMITED Annual Report Directors Report By virtue of Section 7 of the Act, Wong Sheung Sze is deemed to have interests in the other subsidiaries of Broadway Industrial Group Limited, at the beginning and at the end of the financial year. Except as disclosed in this report, no director who held office at the end of the financial year had interests in shares, debentures, warrants or share options of the Company, or of related corporations, either at the beginning or at the end of the financial year. There were no changes in any of the above mentioned interests in the Company between the end of the financial year and 21 January Except as disclosed under the Share Options section of this report, neither at the end of, nor at any time during the financial year, was the Company a party to any arrangement whose objects are, or one of whose objects is, to enable the directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate. Except for salaries, bonuses and fees and those benefits that are disclosed in this report and in note 30 to the financial statements, since the end of the last financial year, no director has received or become entitled to receive, a benefit 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. Share options The BIGL Share Option Scheme 2001 (the Scheme) of the Company was approved and adopted by its members at an Extraordinary General Meeting held on 8 November During the year, the Scheme was administered by the Company s Remuneration Committee, comprising three directors, Huang Yuan Chiang, Lee Chow Soon and Philip Henry DeFord. On 27 February 2009, Philip Henry Deford resigned as director of the Company. Other information regarding the Scheme is set out below: The options can be exercised 1 year after the grant for market price options. A further vesting period for the exercise of the options may be set. All options are settled by physical delivery of shares. The options granted expire after 5 years for non-executive directors and 10 years for employees of the Company.

14 12 BROADWAY INDUSTRIAL GROUP LIMITED Annual Report 2008 Directors Report At the end of the financial year, details of the options granted under the Scheme on the unissued ordinary shares of the Company, are as follows: Date of grant of options Exercise price per share Options outstanding at 1 January 2008 Options granted Number Options outstanding at of option holders at 31 December 31 December Exercise period $ 17/01/ , , /01/2006 to 17/01/ /01/ , , /01/2006 to 17/01/ /03/ , , /03/2007 to 17/03/ /03/ , , /03/2008 to 08/03/ /03/ , , /03/2008 to 08/03/ /03/ , , /03/2009 to 26/03/ /03/ , , /03/2009 to 26/03/2013 1,083, ,000 1,536,000 Except as disclosed above, there were no unissued shares of the Company or its subsidiaries under options granted by the Company or its subsidiaries as at the end of the financial year. Details of options granted to directors and employee of the Company under the Scheme are as follows: Name of director Options granted for financial year ended 31 December 2008 Aggregate options granted since commencement of Scheme to 31 December 2008 Aggregate options exercised since commencement of Scheme to 31 December 2008 Aggregate options outstanding as at 31 December 2008 Lee Chow Soon 50, , ,000 Huang Yuan Chiang 50, , ,000 Philip Henry DeFord 50, , ,000 Richard Eu Yee Ming 50, , ,000 Lee Po Lee Khong Kee 75, ,000 (500,000) 250,000 Ng Ah Hoy 75, ,000 (650,000) 150,000 Name of employee Casey Wong Kwai Ching 20, ,000 (100,000) 90,000 Since the commencement of the Scheme, except for the above directors and employee, no options have been granted to the controlling shareholders of the Company or their associates and no participant under the Scheme has been granted 5% or more of the total options available under the Scheme.

15 BROADWAY INDUSTRIAL GROUP LIMITED Annual Report Directors Report Since the commencement of the Scheme, no options have been granted to employees of the Company or its related corporations under the Scheme, except for eight employees of the Company, of which two employees are also the directors of the Company, who were granted options to subscribe for a total of 2,081,000 ordinary shares in the Company. These were no options granted at a discount. The options granted by the Company do not entitle the holders of the options, by virtue of such holding, to any rights to participate in any share issue of any other company. Audit Committee The members of the Audit Committee during the year and at the date of this report are: Lee Chow Soon (Chairman), non-executive director Huang Yuan Chiang, non-executive director Philip Henry DeFord, non-executive director (Resigned on 27 February 2009) Richard Eu Yee Ming, non-executive director The Audit Committee performs the functions specified in Section 201B of the Act, the SGX Listing Manual and the Code of Corporate Governance. The Audit Committee has held four meetings since the last directors report. In performing its functions, the Audit Committee met with the Company s external auditors and internal auditors to discuss the scope of their work, the results of their examination and evaluation of the Company s internal accounting control system. The Audit Committee also reviewed the following: assistance provided by the Company s officers to the internal auditors and external auditors; quarterly financial information and annual financial statements of the Group and the Company prior to their submission to the directors of the Company for adoption; and interested person transactions (as defined in Chapter 9 of the SGX Listing Manual). The Audit Committee has full access to management and is given the resources required for it to discharge its functions. It has full authority and the discretion to invite any director or executive officer to attend its meetings. The Audit Committee also recommends the appointment of the external auditors and reviews the level of audit and non-audit fees. The Audit Committee is satisfied with the independence and objectivity of the external auditors and has recommended to the Board of Directors that the external auditors, KPMG LLP, be nominated for reappointment as auditors at the forthcoming Annual General Meeting of the Company.

16 14 BROADWAY INDUSTRIAL GROUP LIMITED Annual Report 2008 Directors Report Auditors The auditors, KPMG LLP, have indicated their willingness to accept re-appointment. On behalf of the Board of Directors Wong Sheung Sze Director Lee Chow Soon Director 3 April 2009

17 BROADWAY INDUSTRIAL GROUP LIMITED Annual Report Statement By Directors In our opinion: (a) (b) the financial statements set out on pages 24 to 73 are drawn up so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2008 and the results, changes in equity and cash flows of the Group for the year ended on that date in accordance with the provisions of the Singapore Companies Act, Chapter 50 and Singapore Financial Reporting Standards; and at the date of this statement, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due. The Board of Directors has, on the date of this statement, authorised these financial statements for issue. On behalf of the Board of Directors Wong Sheung Sze Director Lee Chow Soon Director 3 April 2009

18 16 BROADWAY INDUSTRIAL GROUP LIMITED Annual Report 2008 Independent Auditors Report Members of the Company We have audited the financial statements of Broadway Industrial Group Limited (the Company) and its subsidiaries (the Group), which comprise the balance sheets of the Group and the Company as at 31 December 2008, the income statement, statement of changes in equity and cash flow statement of the Group for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 24 to 73. Management s responsibility for the financial statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with the provisions of the Singapore Companies Act, Cap. 50 (the Act ) and Singapore Financial Reporting Standards. This responsibility includes: (a) (b) (c) devising and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair profit and loss accounts and balance sheets and to maintain accountability of assets; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditors responsibility 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 comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

19 BROADWAY INDUSTRIAL GROUP LIMITED Annual Report Independent Auditors Report Members of the Company Opinion In our opinion: (a) (b) the consolidated financial statements of the Group and the balance sheet of the Company are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2008 and the results, changes in equity and cash flows of the Group for the year ended on that date; and the accounting and other records required by the Act to be kept by the Company and by those subsidiaries incorporated in Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act. KPMG LLP Public Accountants and Certified Public Accountants Singapore 3 April 2009

20 18 BROADWAY INDUSTRIAL GROUP LIMITED Annual Report 2008 Corporate Governance Report Broadway Industrial Group Limited (the Company) continues to uphold a high standard of Corporate Governance within the Group. In its support of the Code of Corporate Governance 2005 ( the Code ), as annexed to the Listing Manual of the Singapore Exchange Securities Trading Limited ( SGX-ST ), the Board of Directors ( the Board ) has established various self-regulating and monitoring mechanisms to ensure that effective corporate governance is practiced. This report outlines the Group s corporate governance processes and practices in compliance with the principles and guidelines set out in the Code. Board of Directors The Board supervises the management of the business and affairs of the Group. Key functions of the Board include the setting of the Group s strategic plans, key operational initiatives, major investments and funding decisions. The Board also identifies principal risks of the Group s business, ensures the implementation of appropriate systems to manage these risks and reviews the financial performance of the Group. For the financial year ended 31 December 2008, the Board comprised seven directors, four of whom are independent. They have extensive corporate experience and are respected members of the business community. The Board adopts the Code s definition of what constitutes an Independent Director. The composition of the Board and Board Committees are tabled as follows: Name of director Status* Board Audit committee Remuneration committee Executive Wong Sheung Sze N Chairman Lee Po Lee Khong Kee N Member Ng Ah Hoy N Member Non-executive Lee Chow Soon I Member Chairman Member Huang Yuan Chiang I Member Member Chairman Philip Henry DeFord ** I Member Member Member Richard Eu Yee Ming I Member Member * N : Non-independent and Executive Director I : Independent Director ** Mr. Philip Henry DeFord resigned as member of the Board, Audit Committee and Remuneration Committee on 27 February 2009.

21 BROADWAY INDUSTRIAL GROUP LIMITED Annual Report Corporate Governance Report The Board meets at least four times a year. Ad hoc meetings are convened if there are matters requiring the Board s decision at the relevant times. Board approval is specifically sought for major financial and investment proposals. In the course of the year under review, the number of meetings held and attended by each member of the Board is disclosed at the end of this report. The Board is regularly updated on new laws that may affect the Group s business and changes in regulatory requirements and financial reporting standards. All directors have separate and independent access to the Company s senior management and the Company Secretary. The Company Secretary attends Board and Board Committee meetings and is responsible for ensuring that Board procedures are followed. In accordance with Article 109 of the Company s Articles of Association, one-third of the Directors (other than the Managing Director) will have to retire from office. The Board has recommended the re-election of Mr Richard Eu Yee Ming and Mr Huang Yuan Chiang, who are retiring at the forthcoming Annual General Meeting pursuant to Article 109. Mr Huang has informed the Board that he will not be seeking re-election at the Annual General Meeting. The Group s Executive Chairman, Mr Wong Sheung Sze, is responsible for the overall management, strategic planning and business development of the Group. The role of the Executive Chairman is not separate from that of a Group CEO as the Board is of the view that it is in the interest of the Group to adopt a single leadership structure so as to ensure that decision-making process of the Group would not be unnecessarily hindered. The Board also does not consider it necessary to have a lead independent director as the process of decision-making is based on collective decisions without any individual exercising any considerable concentration of power or influence. Audit Committee The Audit Committee (AC) comprises the independent directors and all of whom have the requisite qualifications to discharge their responsibilities: Lee Chow Soon (Chairman) Huang Yuan Chiang Philip Henry DeFord (Resigned on 27 February 2009) Richard Eu Yee Ming The AC is authorised by the Board to investigate any activity within its terms of reference, having unrestricted access to information relating to the Group, to both internal and external auditors, and to the Management and staff. It has full discretion to invite any director or executive officer to attend its meetings. It has adequate resources to enable it to discharge its functions properly. The AC meets at least four times a year. Ad hoc meetings are convened when circumstances require. The attendances at AC meetings are disclosed at the end of this report. The AC performs the following key functions: (a) recommends the nomination or re-nomination of the independent auditors and approves the compensation for the auditing services;

22 20 BROADWAY INDUSTRIAL GROUP LIMITED Annual Report 2008 Corporate Governance Report (b) (c) (d) (e) (f) (g) reviews the plan, scope and findings of the independent auditors; reviews all non-audit services provided by the auditors and confirms that these non-audit services would not affect the independence of the auditors; reviews the quarterly, half-year and full year results announcements and financial statements of the Company and the consolidated financial statements of the Group before submission to the Board for approval for the release of the results announcements to the SGX-ST; evaluates, with the other committees, management and the independent auditors, significant risks or exposures that exist and assess the steps management has taken to minimise such risk to the Group; recommends the appointment of internal auditors and reviews the plan, scope and findings of the internal audit; reviews with the management annually: i. Significant internal audit observations during the year and management s responses; ii. iii. The effectiveness of the Group s internal controls over management, business and technology systems and practices; and Any changes required in the planned scope of the audit plan and difficulties encountered in the course of their audits; (h) (i) (j) (k) reviews financial and regulatory matters that may have a material impact on the financial statements, related exchange compliance policies and programmes and reports received from regulators; reports actions and minutes of the AC to the Board of Directors with such recommendations as the AC considers appropriate; reviews interested person transactions to ensure that the established review procedures to monitor interested party transactions have been complied with; and reviews arrangements by which staff of the Company may in confidence raise concerns about possible improprieties in matters of financial reporting or other matters. To allow staff to raise concerns about improprieties, the Group has put in place a whistle blowing policy to provide a channel of communication. Remuneration Committee The Remuneration Committee (RC) performs critical roles in support of sound Corporate Governance principle in the areas of Board compensation and executive reward management.

23 BROADWAY INDUSTRIAL GROUP LIMITED Annual Report Corporate Governance Report For the year ended 31 December 2008, the RC comprised the following independent directors: Huang Yuan Chiang (Chairman) Lee Chow Soon Philip Henry DeFord (Resigned on 27 February 2009) The RC s function is in attracting, retaining and rewarding well-qualified persons to serve the Group by pegging remuneration and benefits at competitive market rates. Directors fees and the base salaries of staff are reviewed to ensure they are at sufficiently competitive levels. A compensation system is in place to reward staff based on their merit and performance through annual merit service increments and profit sharing. The Company s share option scheme for directors, senior management and executives serves as a long-term incentive plan. The RC has access to expert and independent professional advice in the field of executive compensation where required, at the Company s expense. No director fixes his own remuneration. Directors fees are paid only after approval by shareholders at the Company s Annual General Meeting. Disclosure on remuneration of directors Remuneration band and name of directors Directors profit sharing Salary Bonus Directors fees Consultancy services Benefitsin-kind % % % % % % % Share Option (a) S$1,250,000 to S$1,499,999 Wong Sheung Sze S$250,000 to S$499,000 Ng Ah Hoy Lee Khong Kee S$0 to S$249,999 Lee Chow Soon Huang Yuan Chiang Philip Henry DeFord Richard Eu (a) Refer to options granted under the BIGL Share Option Scheme 2001 to directors during the financial year. The fair value of stock options granted is estimated using Trinomial Option Pricing model. The details of the BIGL Share Option Scheme 2001 were provided in the directors report for the financial year ended 31 December Disclosure on remuneration of the top five key executives (who are not directors) Information on executive remuneration is sensitive and can be useful to our competitors. For competitive reasons, the Board is of the view that such disclosure will not benefit the Company. There is no employee who is related to a Director.

24 22 BROADWAY INDUSTRIAL GROUP LIMITED Annual Report 2008 Corporate Governance Report Nominating Committee With a small number of Board members, the Board is of the view that it was not necessary to have a Nominating Committee to undertake the function of this committee. The Board assumes this function. Internal Controls The Board believes that, in the absence of any evidence to the contrary, the system of internal controls maintained by the Group s management that was in place throughout the year and up to and as of the date of this report, is adequate to meet the needs of the Group in its current business environment. The system of internal controls provide reasonable, but not absolute, assurance that the Group will not be adversely affected by any event that could be reasonably foreseen as it strives to achieve its business objectives. However, the Board notes that no system of internal control could provide absolute assurance in this regard, or absolute assurance against the occurrence of material errors, poor judgment in decisionmaking, human error, losses, fraud or other irregularities. Any material internal control matters noted by the external auditors in the course of their statutory audit have been discussed with the AC. Internal Audit The Group outsourced its internal audit function to an independent third party accounting firm (IA). The IA is not related to the external auditors and reports directly to the AC. The AC reviews and approves the IA s internal audit plan, reviews with the IA and reports to the Board the findings and results of internal audit work. Risk Management Policies and Processes The main risks arising from the Group s financial operations are liquidity risk, foreign currency risk, credit risk and interest rate risk. The Board reviews and agrees on policies for managing each of these risks. In the management of liquidity risk, the Group monitors and maintains a level of cash and cash equivalents deemed adequate by the directors to finance the Group s operations and mitigate the effects of fluctuations in cash flow. The Group s major currency exposures are in United States Dollar, Thailand Baht and Chinese Renminbi. The Group uses a combination of natural hedges of matching assets and liabilities to manage its exposure to fluctuating foreign currency values. As for credit risk, the Group places its cash and cash equivalents with creditworthy institutions. The Group performs ongoing credit evaluation of its customers financial conditions. Various measures are implemented to manage Group s operational risks. These include safety and security, internal control procedures and appropriate insurance coverage.

25 BROADWAY INDUSTRIAL GROUP LIMITED Annual Report Corporate Governance Report Communication with Shareholders The Board is mindful of the obligation to provide timely and fair disclosure of material information to the Company s shareholders and does not practise selective disclosure. Results and information on the Company s new initiatives are released through SGXNET. Price sensitive information is publicly released and results and annual reports are announced or issued within the mandatory period. All shareholders of the Company receive the annual report and notice of Annual General Meeting. At the Annual General Meetings, shareholders are given opportunities to voice their views and ask directors or management questions regarding the Company. Securities Transactions The Company has clear policies on trading of its shares by directors and employees. The Company has devised and adopted its own internal Code of Best Practices on Securities Transactions ( the Internal Code ) which is modeled after the Best Practices Guide issued by the SGX-ST with some modifications. The Internal Code provides guidance to the directors and key employees of the Group with regard to dealing in the Company s securities. It emphasises that the law on insider dealings is applicable at all times notwithstanding certain window periods provided in the Internal Code for them to deal in the securities. The Internal Code also enables the Company to monitor such securities transactions by requiring key employees to report to the Company whenever they deal in the Company s securities. Interested Party Transactions During the financial year ended 31 December 2008, there were no interested party transactions ( IPT ) entered with the Group that amounted to more than $100,000. The Company has also put in place an internal procedure to track IPTs of the Group. Material Contracts There were no material contracts of the Company or its subsidiaries involving the interests of directors or controlling shareholders. Directors Attendances at Board, Audit and Remuneration Committee Meetings Meetings of: Board Audit Remuneration Total held in FY ended 31 December Wong Sheung Sze 5 N.A. N.A. Lee Chow Soon Huang Yuan Chiang Philip Henry DeFord Richard Eu Yee Ming 5 4 N.A. Lee Po Lee Khong Kee 5 N.A. N.A. Ng Ah Hoy 4 N.A. N.A. 3 April 2009

26 24 BROADWAY INDUSTRIAL GROUP LIMITED Annual Report 2008 Balance Sheets As at 31 December 2008 Group Company Note $ 000 $ 000 $ 000 $ 000 Non-current assets Property, plant and equipment 3 130, , ,879 Goodwill 4 70,953 70,953 Investment properties 6 3,677 2,414 Subsidiaries 7 138, ,694 Associates Loans to subsidiaries 9 3,696 3,049 Other investments Deferred tax assets 11 2,403 1, , , , ,092 Current assets Inventories 12 71,604 54,857 Trade and other receivables , ,380 4,757 4,308 Cash and cash equivalents 14 24,652 27, , ,513 4,899 4,734 Total assets 419, , , ,826 Equity attributable to equity holders of the Company Share capital , , , ,002 Reserves 16 (1,825) (3,190) Accumulated profits/(losses) 71,064 52,803 (13,476) (21,060) 171, ,615 88,905 81,214 Minority interests 2,145 1,896 Total equity 173, ,511 88,905 81,214 Non-current liabilities Financial liabilities 18 29,249 83,448 4,819 57,412 Deferred tax liabilities ,549 83,787 4,819 57,412 Current liabilities Trade and other payables , ,396 1,950 1,093 Financial liabilities 18 92,812* 48,494 54,370* 8,641 Current tax payable 14,511 11, , ,297 56,883 10,200 Total liabilities 245, ,084 61,702 67,612 Total equity and liabilities 419, , , ,826 * The loan amount of $53,141,000 has been subsequently refinanced and will be reclassified into current and non-current accordingly. Details of repayments are set out in note 18 to the financial statements. The accompanying notes form an integral part of these financial statements.

27 BROADWAY INDUSTRIAL GROUP LIMITED Annual Report Consolidated Income Statement Year ended 31 December 2008 Note $ 000 $ 000 Revenue , ,130 Cost of sales (557,022) (541,880) Gross profit 60,773 64,250 Other (expenses)/income (168) 3,005 Distribution expenses (8,199) (6,364) Administrative expenses (8,916) (7,984) Sales and marketing expenses (10,424) (7,813) Results from operating activities 33,066 45,094 Finance income Finance expenses (7,144) (4,253) Net finance expenses 21 (6,748) (3,935) Share of (loss)/profit of associates, net of tax (61) 29 Profit before income tax 22 26,257 41,188 Income tax expense 23 (3,542) (4,584) Profit for the year 22,715 36,604 Attributable to: Equity holders of the Company 22,385 27,621 Minority interests 330 8,983 Profit for the year 22,715 36,604 Earnings per share Basic earnings per share (cents) Diluted earnings per share (cents) The accompanying notes form an integral part of these financial statements.

28 26 BROADWAY INDUSTRIAL GROUP LIMITED Annual Report 2008 Consolidated Statement of Changes in Equity Year ended 31 December 2008 Note Share capital Capital reserve Share option reserve Asset revaluation reserve Foreign currency translation reserve Accumulated profits Total attributable to equity holders of the Company Minority interests Group $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Total equity At 1 January ,943 2, (2,328) 27,606 72,355 43, ,953 Translation differences relating to financial statements of foreign subsidiaries and associates (4,928) (4,928) (1,363) (6,291) Net losses recognised directly in equity (4,928) (4,928) (1,363) (6,291) Profit for the year 27,621 27,621 8,983 36,604 Total recognised income and expenses for the year (4,928) 27,621 22,693 7,620 30,313 Issue of new shares 15 58,508 58,508 58,508 Issue of shares under share option scheme (193) Value of employee services received for issue of share options Final dividend paid of 0.60 cent per share less 18% tax in respect of year 2006 (734) (734) (734) Interim dividend paid of 1.00 cent per share less 18% tax in respect of year 2007 (1,690) (1,690) (1,690) Dividend paid to minority shareholders (2,007) (2,007) Acquisitions of minority interests 26 (47,315) (47,315) At 31 December ,002 2, (7,256) 52, ,615 1, ,511 The accompanying notes form an integral part of these financial statements.

29 BROADWAY INDUSTRIAL GROUP LIMITED Annual Report Consolidated Statement of Changes in Equity Year ended 31 December 2008 Note Share capital Capital reserve Share option reserve Asset revaluation reserve Foreign currency translation reserve Accumulated profits Total attributable to equity holders of the Company Minority interests Group $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Total equity At 1 January ,002 2, (7,256) 52, ,615 1, ,511 Translation differences relating to financial statements of foreign subsidiaries and associates 1,258 1, ,338 Net gains recognised directly in equity 1,258 1, ,338 Profit for the year 22,385 22, ,715 Total recognised income for the year 1,258 22,385 23, ,053 Value of employee services received for issue of share options Final tax-exempt dividend paid of 1.00 cent per share in respect of year 2007 (2,062) (2,062) (2,062) Interim tax-exempt dividend paid of 1.00 cent per share in respect of year 2008 (2,062) (2,062) (2,062) Acquisitions of minority interests 26 (161) (161) At 31 December ,002 2, (5,998) 71, ,241 2, ,386 Included in the Group s accumulated profits is an amount of $8,077,000 (2007: $5,790,000) relating to statutory surplus reserve and $431,000 (2007: $Nil) relating to legal reserve. According to the relevant People s Republic of China ( PRC ) regulations, the subsidiaries in the PRC are required to transfer 10% of profit after taxation, as determined under Generally Accepted Accounting Principles of the PRC, to the statutory surplus reserve until the reserve balance reaches 50% of the company s registered capital. The transfer to this reserve must be made before the distribution of dividends to equity owners. The statutory surplus reserve can be used to make good previous years losses, if any, and may be converted into paid-in capital in proportion to the existing interests of equity owners. According to Thailand s Civil and Commercial Code, the subsidiary in Thailand is required to allocate not less than 5% of its net profit to the legal reserve upon each dividend distribution, until the reserve balance reaches an amount not less than 10% of the subsidiary s registered share capital. The accompanying notes form an integral part of these financial statements.

30 28 BROADWAY INDUSTRIAL GROUP LIMITED Annual Report 2008 Consolidated Cash Flow Statement Year ended 31 December 2008 Note $ 000 $ 000 Operating activities Profit before income tax 26,257 41,188 Adjustments for: Depreciation on property, plant and equipment 3 35,937 30,270 Depreciation on investment properties 6 31 Gain on disposal of property, plant and equipment 22 (30) (96) Property, plant and equipment written off Goodwill written off Equity-settled share-based payment transactions Interest income 21 (396) (318) Interest expense 21 7,144 4,253 Share of loss/(profit) of associates 61 (29) 69,205 75,803 Changes in working capital: Inventories (16,747) (12,951) Trade and other receivables 42,216 (32,942) Trade and other payables (33,653) 18,107 Cash generated from operations 61,021 48,017 Income taxes paid (1,169) (1,773) Cash flows from operating activities 59,852 46,244 Investing activities Interest received Purchase of property, plant and equipment (39,732) (63,770) Proceeds from sale of property, plant and equipment Acquisitions of minority interests 26 (192) (60,131) Acquisition of shares in an associate (118) (103) Cash flows from investing activities (39,554) (123,334) Financing activities Interest paid (7,144) (4,253) Dividends paid to shareholders (4,124) (2,424) Dividends paid to minority shareholders (2,007) Proceeds from borrowings 60, ,265 Repayments of borrowings (73,249) (32,825) Payment of finance lease liabilities (235) (87) Fixed deposits pledged withdrawn from financial institutions 215 Proceeds from issue of share under share option scheme 358 Cash flows from financing activities (24,045) 80,242 Net (decrease)/increase in cash and cash equivalents (3,747) 3,152 Cash and cash equivalents at beginning of year 27,271 27,633 Effect of exchange rate fluctuations 1,123 (3,514) Cash and cash equivalents at end of year 14 24,647 27,271 The accompanying notes form an integral part of these financial statements.

31 BROADWAY INDUSTRIAL GROUP LIMITED Annual Report These notes form an integral part of the financial statements. The financial statements were authorised for issue by the Board of Directors on 3 April Domicile and activities Broadway Industrial Group Limited (the Company) is incorporated in the Republic of Singapore and has its registered office at 3 Church Street, #08-01 Samsung Hub, Singapore The Company s principal place of business is 65 Chulia Street, #48-03/04 OCBC Centre, Singapore The principal activity of the Company is that of an investment holding company. The principal activities of significant subsidiaries are those relating to the manufacture of foam plastics and packaging products, expanded polystyrene related products and precision machined components and the sub-assembly of actuator arms. The consolidated financial statements relate to the Company and its subsidiaries (together referred to as the Group) and the Group s interests in associates. 2 Summary of significant accounting policies 2.1 Basis of preparation The financial statements have been prepared in accordance with Singapore Financial Reporting Standards (FRS). The financial statements have been prepared on the historical cost basis except for leasehold land and buildings and certain financial assets and financial liabilities, which are measured at fair value. The financial statements are presented in Singapore dollars which is the Company s functional currency. Other entities within the Group have United States dollars and Chinese Renminbi as functional currencies. All financial information presented in Singapore dollars has been rounded to the nearest thousand, unless otherwise stated. The preparation of financial statements in conformity with FRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.