MISSION STATEMENT. PCI aims to be a leading global high technology custom user interface and electronics manufacturing services company.

Transcription

1 Limited Annual Report 2002

2 MISSION STATEMENT PCI aims to be a leading global high technology custom user interface and electronics manufacturing services company. PCI delivers high quality, high value, low cost, and timely supply chain solutions. PCI s strategy is to extend core competence through management of a network of subsidiaries, technology partners, and suppliers to create optimal solutions. CONTENTS Group Financial Highlights 1 Financial Calendar Five-Year Group Financial Statistics 2 Board of Directors 3 Corporate Data Chairman s Message 4 Corporate Profile 6

3 GROUP FINANCIAL HIGHLIGHTS Increase/ (Decrease) S$ 000 S$ 000 % Turnover 163, ,783 (24.01) Profit (Loss) Before Taxation 6,616 (23,140) N/M Profit (Loss) After Taxation 3,599 (27,034) N/M Paid up Share Capital 48,161 48, Ordinary Share Capital 48,161 48, Share Capital and Reserves 58,133 54, Net Tangible Assets Per Share (cents) Minority Interest Earnings (Losses) Per Share (cents) 1.92 (14.04) N/M Note: N/M - not meaningful FINANCIAL CALENDAR Financial Year End 30 June 2002 Announcement of Interim Results 28 February 2002 Announcement of Full-Year Results 3 September 2002 Despatch of Annual Report to Shareholders 8 November 2002 Annual General Meeting 25 November 2002 Book Closure to Register Members for Dividend Payment 11 December 2002 Proposed Payment of First and Final Dividend 23 December 2002 and its Subsidiaries 1

4 FIVE-YEAR GROUP FINANCIAL STATISTICS INCOME STATEMENT S$ 000 S$ 000 S$ 000 S$ 000 S$ 000 Turnover 163, , , ,789 90,747 Profit (Loss) before taxation 6,616 (23,140) 19,102 10,269 5,570 Profit (Loss) after taxation 3,599 (27,034) 14,086 10,109 5,691 Profit (Loss) attributable to shareholders 3,699 (27,006) 14,327 10,118 5,702 Dividends proposed (final) 1,503-1, BALANCE SHEET Property, plant and equipment 18,093 45,315 68,068 20,927 22,080 Other assets 2, Goodwill on acquisition , Net Current assets (liabilities) 39,167 10,300 25,459 27,866 17,826 Deferred expenditure ,640 57,068 97,646 49,430 40,701 Shareholders equity 58,133 54,726 81,091 49,113 40,470 Minority interests Other liabilities , Long term liabilities , Deferred taxation 1,435 2,219 2, ,640 57,068 97,646 49,430 40,701 PER SHARE DATA Earnings (Losses) per share (cents) 1.9 (14.0) Dividend per share (%) Net tangible assets per share (cents) Issued and paid-up capital ($ 000) 48,161 48,135 47,935 43,067 43,067 2

5 CORPORATE DATA Board of Directors Mr Peh Kwee Chim (Executive Chairman) Mr Peh Kwee Chim (Executive Chairman) Mr Teo Teck Chuan (Chief Operating Officer) Dr Tan Cheng Bock Mr Loh Kee Kong Mr Lim Kwee Siah Mr Goh Sin Tub Audit Committee Mr Goh Sin Tub (Chairman) Dr Tan Cheng Bock Mr Loh Kee Kong Mr Teo Teck Chuan ( Chief Operating Officer) Company Secretary Mr Lee Keng Poh Registered Office Dr Tan Cheng Bock 322 Jalan Ahmad Ibrahim Singapore Telephone : Facsimile : Website : kp.lee@pciltd.com.sg Share Registrar Mr Loh Kee Kong Barbinder & Co Pte Ltd 8 Cross Street #11-00 PWC Building Singapore Auditors Mr Lim Kwee Siah Deloitte & Touche 6 Shenton Way #32-00 DBS Building Tower Two Singapore Partner-in-Charge: Mr Alan R. Nisbet 3 Mr Goh Sin Tub

6 CHAIRMAN S MESSAGE FINANCIAL REVIEW Group turnover decreased by 24% over the previous year from $216 million to $164 million. The cessation of the PCB manufacturing and Precision Mechanics Manufacturing businesses led to a decline in turnover of $29.5 million, and the challenging downturn in the global electronics market accounted for a further $22.4 million. to $147.7 million over the previous year. During this time we focused on two significant priorities. We concentrated on managing our cost structure to meet the uncertain economic conditions. This was achieved, with stringent financial control balanced with the need to keep intact core assets and competencies. 4 Operating profit before income tax, minority interests, extraordinary items, interest on borrowings, depreciation and amortisation, foreign exchange gain/(loss) and exceptional items declined by 37% over the previous year to $11.8 million. The change reflects the increased pressure on Electronics Manufacturing Services (EMS) industry margins due to a large global excess capacity and a highly competitive market place. With the cessation of the loss making Polymicro s activities and management s focus on efficacy of costs in the core EMS business, a profit of $6.6 million was returned against a loss of $23.1 million in the previous financial year. is well placed financially with cash and principal protected short-term investments of $66.7 million and no borrowings. POSITIONED FOR GROWTH The financial year was one that saw major turmoil in the global electronics market. Revenues at major OEMs declined, with many searching for survival solutions. EMS players saw demand decrease and associated increase in pressure on margins and profitability. The turnover of our EMS business decreased by 13% We also completed the re-structuring of PCI s activities to be totally focused on electronics manufacturing supply chain services. This represents the completion of a significant transition of PCI s business over the last years. During the year, a number of new customers were added. The selection of PCI for these new projects underlined our growing market reputation of our ability to provide complete support for our customer s outsourcing requirements, from design services through to end product delivery. OUTLOOK FOR THE NEW FINANCIAL YEAR The economic outlook continues to be uncertain. The threat of a war in the Middle East, continued turmoil in financial markets, the meltdown of a number of major industrial and telecommunications players, and uncertain consumer demand cast a sombre shadow over the global electronics market. The company is well positioned however to take advantage of any improvement in the business climate, and ongoing marketing activities will continue to target new outsourced opportunities. In the new financial year a new subsidiary will start operations in Shanghai, China. Although the investment will be rolled out gradually,

7 the move will enhance our resources and capabilities, and reinforce our ability to compete aggressively in the EMS market. ACKNOWLEDGEMENTS On behalf of the Board, I express our sincere appreciation to the management and staff for their firm commitment and hard work in a very challenging and uncertain environment. The Board also expresses its thanks to our customers, suppliers, business partners, and shareholders for their continued support. Control Panel Mr Peh Kwee Chim Executive Chairman 17 October 2002 Control Panel 5 Multiple handset Cordless Phone Control Panel

8 CORPORATE PROFILE Harnessing state-of-the-art technology, PCI is well equipped to deliver integrated solutions that cater to a global customer base. Our aim is to offer services at all points in the manufacturing outsourcing cycle, so as to add value at each step of the supply chain. Artist s impression of new building. ELECTRONICS MANUFACTURING SERVICES SOLUTIONS Idea/Concept Design 6 delivers manufacturing services to a global customer base. Our business is to create competitive advantage for our customers through helping them bring products to market in the quickest possible time, at the right price and performance point, and with the highest quality. Everyday PCI provides complete manufacturing supply chain services to leading global technology companies. Whether we are helping to facilitate the launch of new products, or enhancing the competitiveness of existing projects, PCI offers services at all points in the manufacturing outsourcing cycle. These include design, manufacturing engineering, material sourcing and procurement, assembly, test, and logistics. PCI s aim is to add value at each step in the supply chain. Marketing Customer User Sales Channel Outsourcing Wheel Material EMS Manufacture Logistics The outsourcing cycle.

9 THE OUTSOURCING CYCLE. The manufacturing we are engaged in encompasses printed circuit board assembly, custom user interface design and manufacture, and full turnkey electronics manufacturing. Examples of projects are networking and wireless communications products, mobile digital appliances, liquid crystal modules for mobile communications products, control panels for computer peripherals, and a broad range of medical, industrial, and automotive products. Our design team provides product manufacturability and test solutions at any stage between initial design concepts, through to helping facilitate the final touches to a new product. Design engineers interact closely with customer counterparts on all technical aspects of projects with a constant exchange of information and design suggestions. Design activities are based in a fully equipped design center in Singapore. Our experience includes radio frequency, global positioning system, liquid crystal module, control panel, printed circuit board, and mechanical design. Manufacturing capabilities consist of a range of high volume, or medium volume surface mount technology (SMT) assembly lines, and 50 wire bonding machines, with up to date demonstrated competencies for 0201, chip scale package (CSP), chip on board, chip on flex, and chip on glass component assembly. Automatic insert capabilities are available for axial components, radial components and jumpers. PCI has significant manual assembly (conveyor belt system) capacity to complete medium to high volume module level, or full box build assembly. PCI provides rapid development of test protocol, and automated test stations for many functional test applications including telecommunications, networking and RF technologies. Particular strength is in the design and assembly of jigs and fixtures for product test requirements. PCI s base in Batam provides the benefits of a low cost manufacturing hub with GSP tax benefits. The location is close to Singapore and benefits from a highly efficient communications and transportation infrastructure to meet tight project schedules. SUPPLY CHAIN MANAGEMENT PCI S COMPETENCIES PCI s primary strength is the dedication of our employees, and their knowledge of all aspects of electronics manufacturing. Combined with a network of technology and supply chain partners we deliver a high quality service. With more than thirty years experience in providing manufacturing solutions, we have a clear understanding of customer s technology and supply chain needs. CAPABILITITES Headquartered in Singapore, PCI has 115,700 sqft of electronics manufacturing production floor space in Singapore, and Batam. During late 2002 a new facility will be opened in Shanghai, China. The company is also constructing a new 49,600 sqft headquarters building and manufacturing facility in Singapore. The new building will open in the first half of We have the flexibility and capacity to meet the most demanding requirements from low volume to very high volume projects, including high value and high product mix needs. PCI s materials operations takes care of our customer s total material requirements, encompassing global procurement, purchasing, and material management. PCI s purchasing leverage helps to secure complete bill of materials in time to meet our customers product launches and shipment deadlines. Our procurement team works globally, and frequently visits suppliers to evaluate quality, technology, and deliverability capabilities. The development of long-term relationships with suppliers allows us to provide customers the support they need to source and procure electronic components and mechanical parts at highly competitive prices. Materials management takes care of the planning and purchasing needs for on time delivery, and at the same time controls carefully the customer s material procurement commitment, and logistics. When supply problems surface, we will pro-actively offer alternative solutions, including product redesign to replace end of life, costly, or scarce components. 7

10 The material management organisation, and IT resource is centralised in Singapore. All our factories have on-line access to this system through dedicated satellite based leased line communications linked to our headquarters. QUALITY Being a cost leader in manufacturing does not compromise our commitment to the highest quality. The company received ISO 9002 certification for both Singapore and Batam in early The certification obtained from both the British Standards Institute and the Singapore PSB, attest to PCI s uncompromising long term commitment to meeting the exacting quality demands of our customers. Certification was enhanced in 1999 for our design and development services, with ISO 9001 certification by the Singapore PSB. Heatsealing machine. The Quality Assurance team serves a vital link between customers and our manufacturing locations. They play an extremely active role during project introduction and subsequent quality improvement. PCI heavily utilizes a comprehensively equipped Accelerated Life Test (ALT) laboratory based in our Singapore facility, to qualify new products, and to provide prediction and diagnosis of failures. A DEDICATED PARTNER Backend Assembly Line. PCI is a secure and dependable long-term partner. Our experience supplying manufacturing solutions to the most demanding global customers is assurance that PCI can get the job done. Customers frequently compliment us on providing a responsive and individual service regardless of the size of the project, and PCI has been conferred numerous awards by happy customers. It s easy to work with PCI, customers have ready access to key individuals in Singapore, and support from local marketing personnel. Communications advances and our regular experience of working late into the night, help eliminate time zone differences. Once a program starts, a dedicated program manager will ensure a smooth transition from initiation through to manufacturing. We have a can-do attitude, and are pro-active in working towards the best solution for our customers. PCI has been listed on the Singapore Exchange Securities Trading Limited since 11 May Backend-Heatseal Operation 8 ACF Bonding Machine

11 CONTENTS Report of the Directors 10 Auditors Report 16 Balance Sheets 17 Profit and Loss Statements 18 Statement of Changes in Equity 19 Consolidated Cash Flow Statement 20 Notes to the Financial Statements 22 Statement of Directors 46 Corporate Governance Statement 47 Statistics of Shareholdings 48 9 Notice of Annual General Meeting49 Proxy Form

12 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 June 30, DIRECTORS The directors of the company in office at the date of this report are: Mr Peh Kwee Chim Mr Teo Teck Chuan Dr Tan Cheng Bock Mr Loh Kee Kong Mr Lim Kwee Siah Mr Goh Sin Tub Mr Loh Kee Kong retires in accordance with Article 110 and, being eligible, offers himself for re-election. In accordance with Section 153(6) of the Singapore Companies Act, Cap. 50, Mr Goh Sin Tub, who is over the age of seventy, retires and offers himself for re-election and to hold such office until the next Annual General Meeting of the company. 2 PRINCIPAL ACTIVITIES The principal activities of the company are the manufacture and sale of printed circuit boards, modules and cordless telephones as well as investment holding. The principal activities of the subsidiaries are disclosed in Note 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) The group incorporated the following subsidiary during the financial year: Group s share of net tangible assets Effective interest Name of subsidiary Consideration acquired held by group $ 000 $ 000 % PCI China Pte Ltd b) The following subsidiary was liquidated during the financial year: 10 Group s share of net tangible Effective interest Name of subsidiary Consideration liabilities disposed held by group $ 000 $ 000 % Polymicro Precision Technology - (27,935) 100 Pte Ltd

13 4 RESULTS FOR THE FINANCIAL YEAR Group Company $ 000 $ 000 Profit after income tax 3,599 9,248 Minority interests Profit attributable to shareholders 3,699 9,248 Accumulated losses at beginning of year (18,198) (16,449) Accumulated losses at end of year (14,499) (7,201) 5 MATERIAL TRANSFERS TO/FROM RESERVES AND PROVISIONS During the financial year, there were no material transfers to or from reserves and provisions other than those disclosed in the attached financial statements. 6 ISSUE OF SHARES AND DEBENTURES a) During the financial year, the following shares were issued by the company: Description of shares issued Purpose 105,000 ordinary shares of $0.25 each at the exercise price Employees share option of $0.53 for cash b) During the financial year, a new subsidiary, PCI China Pte Ltd was incorporated and issued 300,000 ordinary shares of $1 each at par for cash for working capital. c) No debentures were issued by the company and 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 except for the Company s Employees Share Option Scheme as detailed in paragraph DIRECTORS INTERESTS IN SHARES 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 registered Shareholdings in which directors in the name of directors are deemed to have an interest (1) At beginning At end At beginning At end of year of year of year of year 11 Ordinary shares of $0.25 each Mr Peh Kwee Chim ,000,000 63,000,000

14 REPORT OF THE DIRECTORS (cont d) 8 DIRECTORS INTERESTS IN SHARES (cont d) Shareholdings registered Shareholdings in which directors in the name of directors are deemed to have an interest (1) At beginning At end At beginning At end of year of year of year of year Options to subscribe for shares of $0.25 each at an exercise price of $0.25 each Mr Teo Teck Chuan 100, , Options to subscribe for shares of $0.25 each at an exercise price of $0.71 each Mr Teo Teck Chuan 80,000 80, Options to subscribe for shares of $0.25 each at an exercise price of $1.09 each Mr Teo Teck Chuan 120, , Options to subscribe for shares of $0.25 each at an exercise price of $0.53 each Mr Teo Teck Chuan 300, , There has been no changes in the above directors interest as at July 21, (1) By virtue of Section 7 of the Singapore Companies Act, these directors are deemed to have an interest in the company and in all the related corporations of the company. 9 DIVIDENDS Dividends paid or declared since the end of the company s last financial year were as follows: 12 The directors of the company proposed that a final dividend of 4% or $0.01 per ordinary share less tax at 22% totalling $1,502,623 be paid in respect of the financial year just ended. 10 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, if any, of the company have been written off and that where necessary adequate provision has been made for doubtful debts. 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.

15 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 except for those disclosed in the notes to the financial statements. 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 except as disclosed in the notes to the financial statements. 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 SHARE OPTIONS a) The PCI Employees Share Option Scheme (the Scheme ) was approved by the shareholders of the company at an Extraordinary General Meeting held on October 30, 1992 and amendments to the Scheme were approved by the Shareholders of the company at an Extraordinary General Meeting held on November 10, 2000.

16 REPORT OF THE DIRECTORS (cont d) 18 SHARE OPTIONS (cont d) b) Under the Scheme, share options granted, exercised and cancelled during the financial year and outstanding as at June 30, 2002 were as follows: No. of Share Options Balance at Balance July 1, 2001 at Date ofor date of June 30, Subscription grant grant if later Exercised Cancelled 2002 price Expiry date Oct 20, , ,000 $0.25 Oct 19, 2003 Sep 16, ,000-20, ,000 $0.71 Sep 15, 2004 Dec 5, ,513,000-91,000 1,422,000 $1.09 Dec 4, 2010 Apr 18, ,600, , ,000 3,265,000 $0.53 Apr 17, ,513, , ,000 5,067,000 c) During the financial year, no options in respect of unissued ordinary shares in the company were granted under the Scheme. d) Under the Scheme, the details of share options granted to directors of the company are as follows: Aggregate options Options Aggregate Aggregate outstanding as granted options options at end of during granted since exercised since financial financial year commencement commencement year Name under review of scheme of scheme under review Mr Teo Teck Chuan - 600, ,000 e) Statutory information regarding the options granted in 1998, 1999, 2000 and 2001 under the Scheme have been set out in the Reports of the Directors for the years ended June 30, 1999, 2000 and f) The Committee administering the Scheme comprises Mr Peh Kwee Chim, an executive director, Mr Loh Kee Kong, a non-executive director and Mr Lim Kwee Siah, a non-executive director. g) Non-executive directors, controlling shareholders or their associates are not eligible to participate in the Scheme. h) No options have been granted to eligible participants which, in aggregate, represent 5% or more of the total number of new shares available under the Scheme and the Performance Share Plan, as detailed under the Performance Share Plan ( PSP ) collectively. i) No options were granted under the Scheme during the financial year under review at a discount. j) During the financial year, no options to take up unissued shares of any subsidiary company were granted and there were no shares of any subsidiary company issued by virtue of the exercise of an option to take up unissued shares. k) At the end of the financial year, there were no unissued shares of any subsidiary company under option. 19 PERFORMANCE SHARE PLAN ( PSP ) 14 The PSP was approved and adopted by the shareholders at the Extraordinary General Meeting on November 10, Under the PSP, awards, which represent the right to receive the company s ordinary shares free of charge upon the achievement of certain prescribed performance targets, will be given to those participants eligible to participate in the PSP. The aggregate number of ordinary shares to be issued pursuant to the PCI Employees Share Option Scheme and those to be awarded under the PSP, shall not exceed 15% of the issued share capital of the company on the day preceding the relevant grant date. The PSP shall be administered by the Compensation Committee ( Committee ). The PSP shall continue to be in force at the discretion of the Committee subject to a maximum period of 10 years commencing November 10, Further details of the PSP are set out in the company s Circular dated October 25, No awards have been granted under the PSP since its commencement.

17 20 AUDIT COMMITTEE The members of the audit committee are: Mr Goh Sin Tub (Chairman) Dr Tan Cheng Bock Mr Loh Kee Kong The independent members of the Audit Committee are Mr Goh Sin Tub (Chairman) and Dr Tan Cheng Bock. The Audit Committee held three meetings during the financial year. The Audit Committee performed functions specified in the Singapore Companies Act, Cap. 50 and has adopted principles of corporate governance with regards to the audit committee as outlined in the Best Practices Guide formulated by the SGX-ST. In performing its functions, the Audit Committee reviewed: (a) the overall scope of external audits and the assistance given by the Company s officers to the Group s external auditors ( Auditors ). It met the Auditors to discuss the audit plans, the results of their examinations and their evaluation of the Company s system of internal accounting controls; (b) the financial statements of the Company and the consolidated financial statements of the Group for the year ended June 30, 2002 as well as the auditors report thereon; and (c) any interested person transactions between the Group and interested persons. The committee recommended to the Board of Directors the nomination 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 Teo Teck Chuan Peh Kwee Chim October 4,

18 AUDITORS REPORT TO THE MEMBERS OF PCI LIMITED We have audited the financial statements of and the consolidated financial statements of the group for the financial year ended June 30, 2002 set out on pages 17 to 45. 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 statements 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 June 30, 2002 and of the results, equity changes of the company and of the group and cash flows of the group for the year ended on that date; 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 Singapore Companies 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. 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 stated in Note 10 to the financial statements. We are satisfied that the financial statements of the subsidiaries that have been 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 subsidiaries incorporated in Singapore did not include any comment made under Section 207(3) of the Singapore Companies Act except for the following subsidiary whose auditors report on the financial statements was qualified as follows: The auditors in their report on the financial statements of Polymicro Precision Technology (Thailand) Co. Ltd ( PT ) dated July 8, 2002, disclaimed an opinion as PT s equity shows a deficit balance of THB94,792,657 (equivalent to $3,981,212) [2001 : THB20,761,313 (equivalent to $835,269)]. PT discontinued its business activities on May 18, 2002 as a related company of PT, which provides financial support to PT, is in liquidation. These circumstances raise substantial doubt as to whether PT will be able to continue as a going concern and whether it will realise its assets and extinguish its liabilities in the normal course of business. The financial statements of PT do not include any adjustments that might result from the outcome of these uncertainties. Prior to the discontinuance of business, PT s equipment and materials were substantially imported with an exemption of import duty under the investment promotion privilege. As a consequence of the business discontinuance, certain disposals and distribution of these imported equipment and materials were eventually not eligible for the import duty exemption privilege and thus have to be subject to the import duty claims which have yet to be finalised with the Board of Investment. Based on an overview estimation, a provision of THB25,821,092 (equivalent to $1,084,464) has been made by PT in the financial statements as at June 30, Owing to the lack of accounting records, the auditors of PT were unable to estimate the potential claims amount and thus were unable to review whether the provision made by PT was adequate. 16 Deloitte & Touche Certified Public Accountants Alan R Nisbet Partner Singapore October 4, 2002

19 BALANCE SHEETS June 30, 2002 Notes $ 000 $ 000 $ 000 $ 000 ASSETS Current assets: Cash and bank balances 27,813 44,051 24,779 36,453 Short-term investments 5 38,907 1,640 38,907 1,640 Trade receivables 6 12,798 21,854 12,026 10,600 Other receivables and prepayments 7 2,077 1, Due from subsidiaries ,227 4,540 Inventories 9 7,058 17,780 7,058 15,956 Total current assets 88,653 86,427 86,308 69,532 Non-current assets: Investments in subsidiaries ,229 14,129 Investments in associates Property, plant and equipment 12 18,093 45,315 9,377 18,095 Long-term investments 13 2, , Goodwill Total non-current assets 20,473 46,768 25,050 33,726 Total assets 109, , , ,258 LIABILITIES AND EQUITY Current liabilities: Bank loans and overdraft 15-12, Trade and other payables 46,233 54,383 35,990 36,364 Due to subsidiaries ,346 4,669 Current portion of finance leases 16-5, Income tax payable 3,253 3,834 3,018 3,726 Total current liabilities 49,486 76,127 44,354 44,809 Non-current liabilities: Finance leases Deferred income tax 17 1,435 2,219 1,310 2,000 Total non-current liabilities 1,435 2,277 1,310 2,058 Minority interests Capital and reserves: Issued capital 18 48,161 48,135 48,161 48,135 Share premium 24,705 24,676 24,734 24,705 Currency translation reserve (234) Accumulated losses (14,499) (18,198) (7,201) (16,449) Total equity 58,133 54,726 65,694 56, Total liabilities and equity 109, , , ,258 See accompanying notes to financial statements.

20 PROFIT AND LOSS STATEMENTS Year ended June 30, 2002 Notes $ 000 $ 000 $ 000 $ 000 Revenue , , , ,509 Cost of sales (138,071) (189,721) (112,081) (112,288) Gross profit 25,911 26,062 22,890 34,221 Other operating income 20 1,106 1,250 2,749 2,707 Distribution costs (1,009) (3,849) (1,314) (4,019) Administrative expenses (7,024) (10,771) (6,459) (6,747) Other operating expenses (13,435) (8,245) (9,385) (6,178) Profit from operations 5,549 4,447 8,481 19,984 Exceptional items 21 1,216 (25,861) 3,794 (39,291) Finance cost (149) (1,726) (117) (36) Profit (Loss) before share of results of associates 6,616 (23,140) 12,158 (19,343) Share of results of associates - (1) - - Profit (Loss) before income tax 22 6,616 (23,141) 12,158 (19,343) Income tax 23 (3,017) (3,893) (2,910) (3,831) Profit (Loss) after income tax 3,599 (27,034) 9,248 (23,174) Minority interests Profit (Loss) attributable to shareholders 3,699 (27,006) 9,248 (23,174) Basic and fully diluted earnings (loss) per share (cents) (14.04) 18 See accompanying notes to financial statements.

21 STATEMENT OF CHANGES IN EQUITY Year ended June 30, 2002 Currency Issued Share translation Accumulated capital premium reserve profits (losses) Total $ 000 $ 000 $ 000 $ 000 $ 000 Group Balance at June 30, ,935 24, ,811 81,091 Currency translation differences Loss attributable to shareholders (27,006) (27,006) Additional final dividend of (3) (3) Shares issued Balance at June 30, ,135 24, (18,198) 54,726 Currency translation differences - - (347) - (347) Profit attributable to shareholders ,699 3,699 Shares issued (Note 18) Balance at June 30, ,161 24,705 (234) (14,499) 58,133 Company Balance at June 30, ,935 24,341-6,728 79,004 Loss attributable to shareholders (23,174) (23,174) Additional final dividend of (3) (3) Shares issued Balance at June 30, ,135 24,705 - (16,449) 56,391 Profit attributable to shareholders ,248 9,248 Shares issued (Note 18) Balance at June 30, ,161 24,734 - (7,201) 65, See accompanying notes to financial statements.

22 CONSOLIDATED CASH FLOW STATEMENT Year ended June 30, $ 000 $ 000 Cash flows from operating activities: Profit (Loss) before share of results of associates 6,616 (23,140) Adjustments for: Depreciation expense 6,770 15,288 Loss on impairment of plant and equipment 1,843 18,268 Loss on write off of property, plant and equipment 1,408 - Interest expense 4 1,643 Amortisation of goodwill on business acquisition Write off of goodwill on business acquisition Write off of goodwill on consolidation - 2,208 Allowance for diminution in value of long-term investments Loss on disposal of property, plant and equipment 1,569 1,357 Loss (Gain) on disposal of subsidiary 742 (282) Interest income (1,030) (1,376) Operating profit before working capital changes 18,986 14,734 Trade receivables 7,945 15,635 Other receivables and prepaid expenses (1,599) 1,191 Inventories 10,621 3,400 Trade and other payables 21,835 (4,354) Cash generated from operations 57,788 30,606 Interest paid (4) (1,643) Interest received 1,030 1,376 Income tax paid (4,382) (3,586) Net cash from operating activities 54,432 26,753 Cash flows from investing activities: Proceeds on disposal of property, plant and equipment 422 2,289 Purchase of property, plant and equipment (723) (14,630) Disposal of subsidiary (Note B) (30,607) - Increase in investment in subsidiary - (200) Divestment in associate - 32 Acquisition of short-term investments (37,267) 14,188 Acquisition of long-term investments (1,991) (381) Net cash (used in) from investing activities (70,166) 1, Cash flows from financing activities: Repayment of hire-purchase creditors (109) (1,353) Repayment of long-term loan - (3,257) Dividend paid - (1,789) Issue of new shares Net cash used in financing activities (54) (5,835) Net effect of exchange rate changes in consolidating subsidiaries (445) 102

23 CONSOLIDATED CASH FLOW STATEMENT (cont d) $ 000 $ 000 Net (decrease) increase in cash (16,233) 22,318 Cash and cash equivalents at beginning of year (Note A) 44,046 21,728 Cash and cash equivalents at end of year (Note A) 27,813 44,046 Notes to the consolidated cash flow statement A. Cash and cash equivalents $ 000 $ 000 Cash 27,813 44,051 Bank overdraft (Note 15) - (5) 27,813 44,046 B. Summary of the effects of disposal of subsidiary $ 000 $ 000 Cash 1,930 - Other current assets 1, Current liabilities (47,839) (714) Net current liabilities (44,073) (461) Non-current assets 16, (27,935) (282) (Loss) Gain on disposal of subsidiary (742) 282 Cash outflow on disposal of subsidiary (28,677) - Cash of disposed subsidiary (1,930) - Net cash outflow on disposal of subsidiary (30,607) - 21 See accompanying notes to financial statements.

24 NOTES TO FINANCIAL STATEMENTS June 30, GENERAL The company is incorporated in the Republic of Singapore with its registered office at 322 Jalan Ahmad Ibrahim, Singapore Its principal place of business is at 56 Serangoon North Avenue 4, Singapore The financial statements are expressed in Singapore dollars. The principal activities of the company are the manufacture and sale of printed circuit boards, modules and cordless telephones as well as investment holding. The principal activities of the subsidiaries are disclosed in Note 10 to the financial statements. There have been no significant changes in the nature of these activities during the financial year. The financial statements of the company and of the group for the year ended June 30, 2002 were authorised for issue by the Board of Directors on October 4, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF ACCOUNTING - The financial statements have been prepared in accordance with the historical cost convention, modified to include the revaluation of certain plant and equipment and have been prepared in accordance with the provisions of the Singapore Companies Act and Singapore Statements of Accounting Standard ( SAS ). The company has adopted all the applicable new/revised SAS which becomes effective during the financial year. The adoption of the new/revised SAS does not affect the results of current or prior periods. BASIS OF CONSOLIDATION - The consolidated financial statements incorporate the financial statements of the company and enterprises controlled by the company (its subsidiaries) made up to June 30 each year. Control is achieved when the company has the power to govern the financial and operating policies of an investee enterprise so as to obtain benefits from its activities. On acquisition, the assets and liabilities of the relevant subsidiaries are measured at their fair values at the date of acquisition. The interest of minority shareholders is stated at the minority s proportion of the fair values of the assets and liabilities recognised. The results of subsidiaries acquired or disposed of during the year are included in the consolidated profit and loss statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used in line with those used by other members of the group. All significant intercompany transactions and balances between group enterprises are eliminated on consolidation. FINANCIAL ASSETS Financial assets include cash and bank balances, trade and other receivables. Trade and other receivables are stated at their nominal value as reduced by appropriate allowances for estimated irrecoverable amounts. The company s principal financial assets are cash and bank balances, trade receivables, other receivables and equity investments. Trade receivables are stated at their nominal value as reduced by appropriate allowances for estimated irrecoverable amounts. In the company s financial statements, investments in subsidiaries are stated at cost less provision for any permanent impairment in value. The accounting policy for other investments is outlined below. 22 FINANCIAL LIABILITIES AND EQUITY Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. Financial liabilities include trade payables, bank loans and overdraft and finance lease obligations. Trade payables are stated at their nominal value. Bank loans and overdraft are recorded at the proceeds received, net of transaction costs. Finance costs are accounted for on an accrual basis (effective yield method) and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise. Equity instruments are recorded at the fair value of the consideration received, net of direct issue costs. The accounting policy for finance lease obligations is outlined below.

25 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont d) INVENTORIES Inventories are measured at the lower of cost (weighted average method) and net realisable value. Cost includes an appropriate proportion of production overheads. Net realisable value represents the estimated selling price less all estimated costs to completion and costs to be incurred in marketing, selling and distribution. In arriving at net realisable values, provision is made where necessary for obsolete, slow-moving and defective stocks. INVESTMENTS - Investments include held-for-trading, held to maturity, available-for-sale and other unquoted investments. Held-for-trading, held-to-maturity and available-for-sale investments are recognised on a trade date basis and are initially measured at cost. At subsequent reporting dates, such investments are re-measured at fair value. Unrealised gains and losses, if any, from available-for-sale investments are recognised directly in equity, until the investment is disposed of or determined to be impaired, at which time the cumulative gain or loss previously recognised in equity is included in the net profit or loss for the period. Unrealised gains and losses from held-for-trading and held-to-maturity investments are included in the net profit or loss for the period. Other unquoted investments are stated at cost. Allowances are made for any impairment in value which is other than temporary. ASSOCIATES - The group regards as associates those companies in which a long-term equity interest of between 20% and 50% is held and where there is significant influence over the financial and operating policies of the investee. The share of profits less losses of associates are included in the profit and loss statement of the group, and the share of post-acquisition retained profits and reserves of associates are added to the carrying value of investments in the balance sheet of the group. These amounts are taken from the latest audited financial statement of the company made up to the end of the financial year of the group or to dates not more than 6 months prior to the end of the financial year of the group, and where appropriate, from management accounts of the associates made up to the end of the financial year of the group. The difference between the cost of the company s investment over the company s share of the fair values of the identifiable assets and liabilities of the associates is amortised over a period of 10 years and is reflected in the carrying value of the investments in the balance sheet of the group. In the company s financial statements, investment in associate is stated at cost less provision for any permanent impairment in value. PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are carried at cost or valuation, less accumulated depreciation and any impairment loss where the recoverable amount of the asset is estimated to be lower than its carrying amount. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to its present working condition and location for its intended use. Recoverable amount is the amount which the company expects to recover from the future use of an asset, including its residual value on disposal. In determining the recoverable amount of an asset, the expected future cash flows have been discounted to its present value. Depreciation is provided on gross carrying amounts in equal annual instalments over the estimated lives of the assets. The annual rates of depreciation are as follows: Leasehold land, buildings and improvement - 2% to 20% Plant and equipment - 10% to 33 1 / 3 % Fully depreciated assets still in use are retained in the financial statements. 23

26 NOTES TO FINANCIAL STATEMENTS (cont d) 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont d) GOODWILL ON BUSINESS ACQUISITION - Goodwill on business acquisition represents the excess of the cost of the investment over the fair values of the identifiable assets and liabilities of the business acquired. Amortisation is provided on gross carrying amounts in equal annual instalments over the estimated useful life of goodwill. Goodwill on business acquisition is amortised over a period of 5 years. GOODWILL ON CONSOLIDATION - Goodwill arising on consolidation represents the excess of the cost of the holding company s investment over the holding company s share of the fair values of the identifiable assets and liabilities of the subsidiaries acquired. Amortisation is provided on gross carrying amounts in equal annual instalments over the estimated useful life of goodwill. Goodwill on consolidation is amortised over a period of 10 years. When goodwill is impaired, the carrying value of the goodwill is reduced to its recoverable amount and the impairment loss is recognised as an expense in the profit and loss statement. IMPAIRMENT OF ASSETS - At each balance sheet date, the company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). When it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. Impairment losses are recognised as an expense immediately, unless the relevant asset is land or buildings at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. When an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. PROVISIONS Provisions are recognised when the company has a present obligation as a result of a past event where it is probable that it will result in an outflow of economic benefits that can be reasonably estimated. LEASES Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. A finance lease is recognised as an asset and as a liability in the balance sheet at amounts equal at the inception of the lease to the fair value of the leased asset or, if lower, at the present value of the lease payments based on the interest rate implicit in the lease. The excess of the lease payments over the recorded lease obligations is treated as finance charges which are allocated to each lease term so as to produce a constant rate of charge on the remaining balance of the obligations. The assets are depreciated as owned depreciable assets. 24 FOREIGN CURRENCY TRANSACTIONS AND TRANSLATION - Transactions in foreign currencies are recorded using the rate ruling on the date of the transaction. At each balance sheet date, recorded monetary balances and balances carried at fair value that are denominated in foreign currencies are reported at the rates ruling at the balance sheet date. All realised and unrealised exchange adjustment gains and losses are dealt with in the profit and loss statement. For inclusion in the group financial statements, the profit and loss statements of foreign subsidiaries have been translated at average exchange rates for the year. All assets and liabilities of foreign subsidiaries are translated at the exchange rates ruling at the year-end. Exchange differences arising from translation are taken to the currency translation reserve. On disposal of the foreign subsidiaries, the accumulated currency translation differences are recognised in the profit and loss statement as part of the profit or loss on disposal.