multi-chem a new phase of growth limited • ar03 · 3 corporate profile 5 corporate data 6 board...

A New Phase of GrowthMulti-Chem

Limited • AR03

Contents

1 Definitions3 Corporate Profile5 Corporate Data6 Board of Directors10 Management Team12 Chairman’s Statement18 Operations Review23 Prospects and Future Plans24 Significant Events26 Group Structure

27 Financial Highlights33 Financial Review35 Balance Sheet Review36 Investor Relations37 Value Added Statement38 Information on Employees39 Corporate Governance Report47 Corporate Directory49 Financial Contents

Definitions

In this Annual Report, the following definitions apply throughout where the context soadmits:-

“Group” : The Company and its subsidiaries“Multi-Chem” or “Company” : Multi-Chem Limited

Subsidiaries“M-Precision” : M-Precision Tech Sdn. Bhd.“M.Tech Indochina” : M-Security Technology Indochina Pte. Ltd.“M.Tech Malaysia” : M-Security Technology Sdn. Bhd.“M.Tech Singapore” : M.Tech Products Pte Ltd“M.Tech Thailand” : M-Solutions Technology (Thailand) Co., Ltd."M.Tech Training Centre" : M.Tech Training Centre Pte Ltd“Multi-Chem Laser Tech” : Multi-Chem Laser Technology (Suzhou) Co., Ltd.“Multi-Chem Suzhou” : Multi-Chem (Suzhou) Co., Ltd.“Multi-Chem Wuxi” : Multi-Chem Electronics (Wuxi) Co., Ltd“SecureOneAsia” : SecureOneAsia Pte. Ltd.

Associates“HPTec HK” : Hawera Precision Tec (HK) Limited“HPTec Singapore” : Hawera Precision Tec Pte Ltd“HP Thailand” : Hawera Precision (Thailand) Co., Ltd.“Multi-Chem Philippines” : Multi-Chem Electronics Philippines Corporation

Others“HPTec” : HPTec GmbH“HPTec Suzhou” : Hawera Precision Tec (Suzhou) Co., Ltd

Other Terms“AC” : Audit Committee“Board” : Board of Directors“NC” : Nominating Committee“RC” : Remuneration Committee

“IT” : Information technology“PCB” : Printed circuit board

“FY” : Financial year“PAT” : Profit after tax“PBT” : Profit before tax“B” : Billion“M” : Million

01

A New Phase of Growth02

Following the downturn of the electronics business, whichlasted close to three years, there are now signs that bettertimes are returning. Reports of positive outlook are now thenorm. Capacity is now being filled and demand for theproducts and services of the Group is increasing onceagain. The penned up demand for electronic products nowbeing translated into actual orders, coupled with the trendof outsourcing in production, augurs well for us atMulti-Chem.

We have kept ourselves ready for this new phase of growth.With new customers and new businesses in China, theexperience gained from our operations in Suzhou and Wuxi,together with the same commitment to improving our qualityand service levels, we are well positioned to ride on theupturn in the electronics business.

A New Phase of GrowthMulti-Chem

Limited • AR03

Corporate Profile 03

Multi-Chem is a drilling and routing service specialist anda major distributor of specialty chemicals and materials toPCB manufacturers. Incorporated in 1985, Multi-Chem waslisted on SESDAQ in January 2000 and upgraded to theMain Board of the Singapore Exchange in November 2000.

Already established in South East Asia, we expanded toSuzhou, China in March 2002 and since then, we have beenfocusing on expanding our drilling services business there.We expanded to Wuxi, China in April 2003. In May 2003,we commenced the provision of routing services to ourcustomers.

We are currently the leading PCB drilling and routingspecialist, in terms of both capacity and technology, in theHuadong area (Eastern China, in particular the Shanghai,Suzhou, Kunshan and Wuxi regions) in China.

While we are traditionally in the PCB-related industry, inMay 2002, we diversified to the business of IT securitydistribution. In this area, we aim to be a market leader anda preferred provider of best-of-breed solutions in Asia.Through Multi-Chem’s subsidiaries under the M.Techumbrella, our IT security business now spans Singapore,Malaysia, Thailand and Vietnam. We currently carry productsfrom eight industry leading principals, namely, Nokia, CheckPoint, RSA Security, Allot, Internet Security Systems, FoundryNetworks, Zone Labs and Tripwire.

Board of DirectorsFoo Suan Sai (Chairman)Han Juat HoonToshiaki SuzukiChew Thiam KengWong Meng YengEu Yee Kui, Alexander Jr @ Eu Sandy

Company SecretariesHo Boon Chuan WilsonLow Mei Mei Maureen

Audit CommitteeWong Meng Yeng (Chairman)Chew Thiam KengEu Yee Kui, Alexander Jr @ Eu Sandy

Nominating CommitteeChew Thiam Keng (Chairman)Foo Suan SaiEu Yee Kui, Alexander Jr @ Eu Sandy

Remuneration CommitteeWong Meng Yeng (Chairman)Chew Thiam KengToshiaki Suzuki

Registered Office11 Tuas Ave 5Singapore 639337Tel: (65) 6863 1318Fax: (65) 6863 1618

Share RegistrarM&C Services Private Limited138 Robinson Road#17-00 The Corporate OfficeSingapore 068906

Independent AuditorsDeloitte & ToucheCertified Public Accountants6 Shenton Way #32-00DBS Building Tower TwoSingapore 068809Audit partner: William Lim Choon Hock

Internal AuditorsC.C.Yang & Co.10 Anson Road #13-16International PlazaSingapore 079903

Principal BankersDBS Bank Ltd6 Shenton WayDBS Building Tower OneSingapore 068809

KBC Bank N.V.Singapore Branch30 Cecil Street #12-00Prudential TowerSingapore 049717

United Overseas Bank Ltd80 Raffles PlaceUOB PlazaSingapore 048624

Share ListingThe Company’s shares are listed on the MainBoard of the Singapore Exchange SecuritiesTrading Limited since November 2000.

GeneralFor further information about Multi-Chem,please contact the secretariat at the registeredoffice

[email protected]@mtechpro.com

Websiteshttp://www.multichem.com.sghttp://www.mtechpro.com

Chinese websitehttp://ir.zaobao.com/multichem/multichem.html

Corporate Data 05

Board of Directors06

From left to right : Mr Foo Suan Sai • Mdm Han Juat Hoon • Mr Toshiaki SuzukiMr Chew Thiam Keng • Mr Wong Meng Yeng • Mr Eu Yee Kui, Alexander Jr @ Eu Sandy

Board of Directors 07

Board of Directors

Foo Suan Sai,Chairman and Chief Executive OfficerMember of NC

Mr Foo, one of the founding shareholders of Multi-Chem,has more than 20 years of experience in the PCB industry,of which the last 15 years were spent building up theCompany. Mr Foo is responsible for the overall directionand development of the Group. He holds a Diploma inChemical Process Technology from the SingaporePolytechnic and a Diploma in Management Studies fromthe Singapore Institute of Management.

Han Juat Hoon,Chief Operating Officer

Mdm Han is a founding shareholder of Multi-Chem. Shehas been a Director of the Company since 1987 andcommenced working in an executive capacity with theCompany in 1992. Mdm Han is well versed in factoryoperations, having held the appointment of factory managerwith a chemical company for 12 years from 1980 to 1992.Mdm Han is responsible for the overall operations of theGroup. She holds a Diploma in Chemical ProcessTechnology from the Singapore Polytechnic and a Diplomain Management Studies from the Singapore Institute ofManagement.

08

Toshiaki Suzuki,Executive DirectorMember of RC

Mr Suzuki was appointed as a Director of the Company inJanuary 2000. He is largely responsible for the Group’smarketing efforts, particularly to Japanese customers. MrSuzuki graduated from Sophia University of Tokyo in 1958and has over 37 years of experience in the PCB industry.

Wong Meng YengIndependent DirectorChairman of ACChairman of RC

Mr Wong has been on the Board since January 2000. Hehas been an advocate and solicitor in Singapore for 20years, with the past 14 years spent as a corporate lawyer.He holds a Bachelor of Law (Hons) degree from the NationalUniversity of Singapore. He is currently a director in AllianceLLC, a law corporation he co-founded.

Board of Directors 09

Chew Thiam KengIndependent DirectorChairman of NCMember of ACMember of RC

Mr Chew was appointed as a Director of the Company inJanuary 2000. Currently, he is the managing director of KSTech Ltd. Before he joined KS Tech Ltd, Mr Chew was anexecutive director of another public listed company betweenJanuary 1996 and November 2001. Prior to January 1996,Mr Chew worked for nine years with DBS Bank Ltd in areassuch as corporate finance and retail banking. He holds aMasters in Business Administration from the University ofHull and a Bachelor of Engineering (Honours) degree inMechanical Engineering from the National University ofSingapore. He is also a director and an audit committeemember of several other listed companies.

Eu Yee Kui, Alexander Jr @ Eu SandyIndependent DirectorMember of ACMember of NC

Mr Eu was appointed as a Director of the Company inNovember 2002. For the last three years, he has been astrategy and business consultant for banks, insurancecompanies, corporations and individuals, with clients suchas KPMG Consulting, AXA Insurance and OCBC. Between1996 and 2000, he was managing director for DBS VickersSecurities (Singapore) Pte Ltd and managing director, headof private banking, DBS Bank Ltd. Before 1996, Mr Eu wasa group general manager and executive director in thepublicly listed company Eu Yang Seng (HK) Limited for oneyear, and worked in Wall Street firms for 13 years incompanies such as Lehman Brothers as country head,managing director. Mr Eu holds a Master of Commercedegree from the University of NSW and is also a fellowmember of the Institute of Chartered Accountants.

Management Team10

Ho Boon Chuan WilsonChief Financial Officer

Mr Ho has been with the Company since March 2000. Before joining Multi-Chem, heworked for six years in DBS Bank Ltd, specialising in the area of corporate finance. Acertified public accountant and a chartered financial analyst, he is responsible for theGroup’s finance, taxation, investments and investor relations. Since May 2002, he hasbeen responsible for the development of the Group’s IT security business. Mr Ho isalso currently Multi-Chem’s Company Secretary.

Management Team 11

Pui Boon Tiong EugeneOperations Manager

Mr Pui worked as an engineer with PCB manufacturers Motorola Electronics Pte Ltdand WUS Printed Circuits Pte Ltd prior to joining the Company in December 1999.He worked his way up in Multi-Chem from Assistant Production Manager and EquipmentManager before being named Operations Manager in February 2002. Mr Pui currentlyoversees operations in the Manufacturing Services Division, which include production,maintenance and quality assurance. He holds a Diploma in Engineering (Electronics& Computers) from Ngee Ann Polytechnic.

Koh HenryQA & Process Manager

Mr Koh joined the Company as Service Engineer in May 2000 after completing hisuniversity education. He was promoted to QA & Process Manager on 1 January 2003.In his present role, he is responsible for all quality assurance matters and processimprovements in the Group's Manufacturing Services Division. From 1996 to 1997,Mr Koh worked as an assistant engineer in Hitachi Chemical Asia Pacific Pte Ltd. Heleft the job to further his studies, adding a Bachelor's degree in Mechanical & ProductionEngineering from the Nanyang Technological University to the Diploma in MechanicalEngineering from Ngee Ann Polytechnic he already held.

Chairman’s Statement12

Dear Shareholders

The Group had two difficult years in 2001 and 2002 andagain operated under very challenging market conditionsfor the most part of 2003, given the war in Iraq and theoutbreak of SARS during the year. However, from late August2003, business started to improve as the electronics sectorbecame busy and demand for PCBs increased. As thedemand for capacity was sustained for the remainder of2003, many believed that it was a signal for an upturn inthe electronics cycle. This had a positive impact on theGroup, particularly in the fourth quarter of 2003. Thefinancial results of the Group were reflective of the weakfirst three quarters of 2003 and a significantly strongerfourth quarter. The positive outlook for 2004 was a refreshingchange from the gloom of the past 2 to 3 years. Hopefully,it is the start of a long upward cycle for the PCB industry.

The Group

China is well known to be the fastest growing area in termsof PCB production volume, particularly in the Huadongarea. Since March 2002, the Group had been graduallyrelocating its PCB drilling services operations to China.This has proved to be the right move for the Group, as itexpanded its customer base to include many of the top PCBmanufacturers in the world operating in China, includingWUS Printed Circuits, Chin Poon, Global-Flex (part of theVertex Group), AT&S and Gold Circuits.

The Company’s two subsidiaries in China, Multi-ChemSuzhou and Multi-Chem Wuxi had, in total, 70 CNC drillingmachines in operations as at 31 December 2003. Twelvemachines have been brought there since then to bring thenumber of drilling machines in China to 82. Due tocustomers’ requests, the Group also commenced providingrouting services to them in May 2003. The routing processis a milling process in which a router bit is used to cut theprofile of the desired board contour. As at 31 December2003, the Group had 20 routing machines in operations.The Group will continue to focus on building its Chinaoperations, given the growing demand for drilling androuting services there.

The Group has also announced, in March 2004, its purchaseof eight laser drilling machines, which, when operational,will further enhance the Group’s drilling capabilities.

Despite the Group’s expansion in China, Multi-Chemcontinues to be the Group’s headquarters and has the mostadvanced CNC drilling machines and inspection equipmentto service the high end PCB manufacturers based inSingapore. As at 31 December 2003, the Company had 41Hitachi CNC drilling machines, including 2x6MB, one ofthe most advanced CNC drilling machines from Hitachi.

In 2002, the Group, through the M.Tech companies,diversified into the area of IT security in Singapore andMalaysia. M.Tech’s strategy is to carry the best-of-breed

Chairman’s Statement 13

Chairman’s Statement

IT security products. Commencing with Nokia IT securityproducts, M.Tech has since added to its product suite andit now carries products from eight industry leading vendors,namely Nokia, Checkpoint, RSA Security, Allot, ISS, FoundryNetworks, Zone Labs and Tripwire. During the year, itincreased its geographical coverage to include Thailandand Vietnam.

Financial Performance

The Group registered an increase in turnover of some 28%,from $26.7M in 2002 to $34.0M in 2003. Comparing thefourth quarter of 2002 to the fourth quarter of 2003, turnovergrew by 74%, from $6.4M to $11.1M.

The better turnover performance was mainly due to theimprovement in the electronics outlook in the fourth quarterof 2003, with contribution from Multi-Chem Suzhou andMulti-Chem Wuxi. Sales in the fourth quarter of 2003 madeup 33% of Group turnover for the full year. Geographically,while the Group’s operations in China accounted for 11%of the Group’s turnover in 2002, China’s contribution grewto 27% in 2003. Turnover from the Manufacturing ServicesDivision made up 54% of total Group turnover, up from50% in 2002. Additionally, the M.Tech companiescontributed $8.1M to Group turnover. The increase was,however, offset by the poorer performance from the PCBdistribution business as demand from PCB manufacturers

in South East Asia was generally lower, with many suchcustomers diverting orders to their China facilities.

PBT increased from $2.0M in 2002 to $2.9M in 2003, anincrease of 48%. This was due to better gross profit, duemainly to economies of scale from higher utilisationparticularly in the fourth quarter of 2003. The Group achieveda PBT of $2.1M in the fourth quarter of 2003 against a lossof $671,000 in the corresponding period of 2002. The profitimprovement is achieved notwithstanding the losses ofMulti-Chem’s associated company HPTec Singapore, andMulti-Chem Philippines, equity accounted for, which inaggregate, amounted to $504,000. The results also includedthe full provision for diminution for Multi-Chem Philippinesof $1.1M.

Financial Position

The Group has kept its balance sheet strong and maintaineda healthy financial position. As at 31 December 2003, thenet working capital of the Group stood at $13.1M whilegearing stood at 28%. Included in net current assets of$13.1M were cash and fixed deposits of $8.6M.Shareholders’ funds stood at $40.9M despite the share buy-backs carried out during the year. The Company also maderepayment of the principal sum of the transferable loanfacility of $7.8M during 2003. Cash flow from operationsduring the year was a net inflow of $6.6M.

14

Chairman’s Statement 15

Share Buy-back

The Company continued its share buy-back during thefirst half of 2003 where 3,780,000 shares were purchasedat an average price of $0.1633. To-date, the Company haspurchased 16,514,000 shares at an average price of$0.1775.

Dividends

The Directors are pleased to recommend a first and finaldividend of 0.42 cents per ordinary share less tax and 0.95cents per ordinary share tax exempt which collectivelyamounted to a dividend rate of 27.4%, a dividend yield of4.9% (based on the share price of $0.28 as at 31 December2003) and a net dividend payout of 1.9 times.

Business Outlook

There is much optimism in the electronics outlook thesedays. PCB prices have generally stabilised and it was evenreported that prices for handset PCBs in Taiwan trendedupwards by 5-20%. PCB makers reported operations to beat full production capacity during the Chinese New Yearperiod, with strong orders coming from handset, PDA, anddigital camera manufacturers, among others.

China is also expected to overtake the US in the number 3

spot in PCB output in 2003. PCB output in China is expectedto top US$5.5B in China against US$5.1B in the US for2003. PCB output in China is expected to reach US$6.7Bin 2004 and US$8.0B in 2005. In particular, microviaproduction is on the rise in China for cameras and phones.Taiwanese mobile-phone PCB makers have been expandingproduction volume in China. Among those companies areChin Poon (ACP Electronics, a JV with Finland-basedAspocomp), Compeq, Gold Circuits, Unimicron, Unitech,and WUS Printed Circuits.

While China is currently experiencing the PCB upturn, therecovery is not just confined there. In the US, and NorthAmerican PCB industry book-to-bill ratio remained rosyfor December 2003, at 1.11. A ratio of more than 1.00suggests that current demand is ahead of supply, whichindicates probable near-term growth.

Given the robust outlook for the PCB manufacturers inChina, the Group will continue to focus on its expansionin China and it aims to maintain its position as the leaderboth in terms of capacity and technology in the area of PCBdrilling and routing services. As there have been repeatedrequests from customers for the Group to support them inlaser drilling, Multi-Chem has already placed order for eightlaser drilling machines to move into that area. Laser drillingwill complement its existing business and provide furthervalue added services to customers. The Group currently

Chairman’s Statement16

serves most of the major PCB manufacturers in the Huadongarea and it is one of the largest drilling and routing servicesproviders in that region. We are well positioned to increaseour business as more PCB manufacturers there start upproduction or increase volume of production.

Furthermore, the trend towards outsourcing in the precisiondrilling of PCBs is expected to continue as PCBmanufacturers increasingly recognise the benefits ofoutsourcing. Being a leader in drilling and routing services,the Group is poised to benefit from the additional capacityrequirements. As our customers produce more, there willalso be additional demand for the products under ourDistribution Division, including the specialty chemicals thatwe distribute.

The Group has also fully written down Multi-ChemPhilippines and disposed of HPTec Suzhou as at 31December 2003. This would mean that the negative impactof these two companies on the profit & loss statement andbalance sheet would not recur in 2004.

In the IT security business, the Group intends to continueto focus on the distribution of only the top names in ITsecurity products, and will continue to look for suitableproducts to add to its product suite. The Group’s presencein the ASEAN region has been further enhanced withoperations in Hanoi and Bangkok commencing in 2003.

With the experience gained in the initial phase of operations,these overseas offices are expected to contribute to theGroup’s performance in 2004. IT is a key component ofdoing business and awareness of IT has been growing. Aseconomies and companies mature, a higher amount of theIT budget is expected to be incurred for IT security and thatcan only augur well for the Group. In this business area,the Group also plans to move into providing security training,and M.Tech Training Centre has been incorporated for thispurpose.

Appreciation

On behalf of the Board of Directors, I wish to thank ourmanagement and staff for their commitment and contributionduring the past year. I would also like to express my sincereappreciation to our suppliers, customers and businesspartners for their valued support.

We will continue to work towards improving the businessand look forward to better performances in the years ahead.

Foo Suan SaiGroup Chairman & Chief Executive Officer

PCB-related Business

The poor business climate for our PCB-related operations

lasted for the most part of 2003. The war in Iraq and the

outbreak of SARS affected the business, particularly, the

business in the South East Asia region. However, there

was a significant turnaround in the business commencing

from late August 2003 as orders started to pick up, lasting

through to the end of the year.

Manufacturing Services Division

After a quiet first three quarters in 2003, there was a significant

improvement in the business under this Division during

the fourth quarter. The war in Iraq and outbreak of SARS in

the first half of 2003 affected sentiments negatively. These

events, however, had a mixed impact on the Group. While

the business in Singapore and the South East Asia region

slowed down, PCB manufacturers began to divert orders to

production in China, particularly to the Huadong area.

The Huadong area was affected by SARS to a far lesser

degree as compared to the Guangzhou area and orders

continued to flow into factories in that region. As such,

SARS did not have any material adverse impact on Multi-

Chem’s operations in Suzhou and Wuxi.

Nevertheless, the negative business sentiment in South

East Asia caused the cessation of operations of a major

customer, Cambridge Electronics Corporation, in the

Philippines in July 2003. This had an adverse impact on

the Group as it forced Multi-Chem Philippines, a joint

venture between the Company and Cambridge Electronics

Corporation to cease operations as well. Consequently,

provisions for doubtful debts and for diminution of

investment were made in the Company’s accounts.

Multi-Chem Suzhou had a full year operations in 2003 while

Multi-Chem Wuxi commenced operations in April 2003.

In May 2003, Multi-Chem Suzhou started a second factory

in Loufeng. A custom-made factory is being built by the

local authorities in Loufeng for lease to Multi-Chem Suzhou.

At the request of customers, the Group commenced the

provision of routing services in May 2003. The routing

process is a milling process in which a router bit is used

to cut the profile of the desired board contour.

In October 2003, due to the increasing capacity needs for

its China operations, the Group shipped the existing

machines from Malaysia to China, and ceased its Malaysian

operations. Requirements for drilling services from

customers in Malaysia would be serviced from Singapore.

Operations Review18

Operations Review 19

In December 2003, due to the space limitations, Multi-

Chem Wuxi started a second factory in Wuxi by way of rental

to support customers’ increasing demand for drilling services.

During the year, the Group further increased its customer

base by adding Gold Circuits, WUS Printed Circuits, Unitech

and M-Flex as its customers. As at 31 December 2003, the

Group had a total of 111 drilling machines and 20 routing

machines.

Distribution Division

PCB

The Group supplies a range of PCB specialty chemicals for

the wet processes in PCB manufacturing as well as other

PCB-related products, including dry film, cleaning brushes,

clean room products and entry and back-up materials to

our customers.

During the year, the Group ’s focus was mainly to

maintain its existing business. As demand for the Group’s

products could only increase with the increase in demand

for PCBs, which would require more materials in

production, the business did not improve for most part

of 2003. Outlook for the PCB industry did not improve

until towards the later part of the year and accordingly,

there were some signs of improvement as sales for

4Q2003 showed an improvement over 3Q2003 in this

business.

Overall, as PCB manufacturers continue to shift their

production to China, this business is expected to

continue to experience reduction in volumes, since its

operation is generally confined to South East Asia.

However, the impact of such reduction would be less

significant when volumes of the Group ’s existing

customers remain high.

HPTec Suzhou, a wholly-owned subsidiary of HPTec

Singapore (which is a 35% associated company of Multi-

Chem) was disposed to HPTec on 31 December 2003.

HPTec Suzhou is a distributor of the HPTec drills and router

bits in the Huadong region in China.

IT Security

The Group diversified into IT security distribution in

May 2002 when M.Tech Singapore commenced as

distributor for Nokia for its IT security products covering

the territories of Singapore and Vietnam. M.Tech Malaysia

was appointed as authorized distributor for Nokia IT

security products for the territory of Malaysia in December

2002.

Operations Review20

Operations Review 21

Operations Review22

IT Security

The Group diversified into IT security distribution in

May 2002 when M.Tech Singapore commenced as

distributor for Nokia for its IT security products covering

the territories of Singapore and Vietnam. The Group

expanded its geographical reach when M.Tech Malaysia

was appointed as authorised distributor for Nokia IT

security products for the territory of Malaysia in December

2002.

During 2003, the Group expanded this business to Thailand

and Vietnam with offices in Bangkok and Hanoi set up in

April 2003 and July 2003 respectively.

M.Tech also added more industry leading products to its

product suite when it was appointed regional distributor of

RSA Security and Allot. RSA Security’s securID product is

widely recognised to be the leading authentication solution

while Allot is a leader in bandwidth management products.

During the year, Check Point, a global leader in firewall and

VPNs solutions, appointed M.Tech to be distributor for

Singapore and Thailand. Nokia appointed M.Tech as

distributor for Thailand in July 2003, adding to the regions

of Singapore, Malaysia and Vietnam wherein it is already

a distributor. In early 2004, Zone Labs, a leading creator of

proven endpoint security solutions, appointed M.Tech as

distributor for the regions of Singapore, Thailand and

Vietnam.

The Group also set up M.Tech Training Centre in 2004 to

expand into the area of IT training, focusing on IT security.

M.Tech now carries eight industry leading IT security

products and is represented in the four countries of

Singapore, Malaysia, Thailand and Vietnam.

Prospects and Future Plans 23

There have been signs of a new phase of growth in the

electronics industry. PCB manufacturers in China are busy

and the drilling and routing requirements that they cannot

managed are outsourced, with the Group being a prime

beneficiary. Prices have also stabilised. Since August 2003,

the Group has been trying to cope with the increase in

demand.

The Group continues to focus on its expansion in China

and currently serves most of the leading PCB manufacturers

in the Shanghai, Suzhou and Wuxi regions. It is currently

the leading PCB drilling and routing service provider in

terms of capacity and technology. As at 31 December 2003,

it has 70 CNC drilling machines and 20 routing machines

in China, and 41 CNC drilling machines in Singapore, a

total of 111 drilling machines and 20 routing machines.

The number of CNC drilling machines has since increased

to 118.

The Group plans to add to the capacity in China either

through the purchase of new drilling machines or shifting

more machines from Singapore if required. It also intends

to increase the capacity of its routing services business, as

this business is still relatively new in China, with few

competitors and many potential customers. The Group also

intends to move into laser drilling for microvia and it expects

the first laser drilling machine to be in by April 2004.

The performance of the Group’s PCB-related distribution

business is tied to the demands of its existing customers

in South East Asia. In a growing PCB market, this business

is expected to continue to generate sales. However, growth

is expected to be limited to the volumes of those

customers. The Group only serves one customer in China

currently.

For the IT distribution business, the Group, through the

M.Tech companies, will continue to focus on the best-of-

breed security products. Besides Nokia, the Group also

carries security products from leading names such as Check

Point, ISS, RSA Security, Allot, Foundry Networks, Zone

Labs and Tripwire. It has expanded its reach by obtaining

the distributorship of these products in more than one

region. The Group plans to move into IT security training

in 2004.

Based on the current buoyant outlook for the economy in

general and the electronics sector in particular, the Directors

expect the Group’s performance for the current financial year

to be better than FY2003.

Significant Events

CORPORATE CALENDAR

March 2003◆ M.Tech Malaysia was appointed as distributor for Nokia

for its internet security and virtual networking productsin Malaysia.

May 2003◆ The Company entered into a Subscription Agreement

with Sageway Holdings Limited, Innoasset HoldingsLimited and Messrs Foo Suan Sai and Han Juat Hoonin respect of the exchangeable and convertible notesissued by the Company.

◆ Multi-Chem Suzhou entered into a memorandum ofunderstanding with Suzhou Industrial Park LoufengHightech Development Group Co., Ltd to construct astandard factory in the Suzhou Industrial Park LoufengHightech Development North Zone.

◆ The Company increased its investment amount andregistered capital in Multi-Chem Suzhou to US$12.5Mand US$5.0M respectively.

June 2003◆ The Company was ranked 15th out of 285 companies

in the Business Times Corporate Transparency Index.

◆ The Company received in-principle approval from theSingapore Exchange Securities Trading Limited for theCompany’s application for the listing and quotation of18.5M new ordinary shares of $0.05 each in the sharecapital of the Company pursuant to the conversion ofthe exchangeable and convertible notes due in the year2006.

◆ The Company increased its investment amount andregistered capital in Multi-Chem Suzhou to US$60Mand US$20.0M respectively.

July 2003◆ M.Tech Thailand was appointed as distributor for Nokia

for its internet security and virtual private networkingproducts in Thailand.

December 2003◆ HPTec Suzhou, a wholly-owned subsidiary of HPTec

Singapore (which is a 35% associated company ofMulti-Chem) was disposed to HPTec.

24

Significant Events 25

January 2004◆ The Company transferred 100,000 ordinary shares of

$1.00 each in M.Tech Singapore at par to a key employeefor cash. Following the transfer, the Company nowholds 80% of the issued and paid-up capital of M.TechSingapore.

February 2004◆ The Company was ranked 3rd out of 21 companies that

released their full year results for FY2003 during Januaryand the beginning of February 2004 in the BusinessTimes Corporate Transparency Index.

March 2004◆ M.Tech Singapore acquired 70% of the issued and

paid-up share capital of M.Tech Training Centre.

◆ The Company incorporated Multi-Chem Laser Techand invested approximately $5.7M in 8 laser drillingmachines to provide laser drilling services to its keycustomers in China.

FINANCIAL CALENDAR

30 July 2003◆ Announcement of 2003 half-year results

30 October 2003◆ Announcement of 2003 3rd quarter results

29 January 2004◆ Announcement of 2003 full-year results

30 April 2004◆ Annual General Meeting

30 April 2004◆ Announcement of 2004 1st quarter results

10 May 2004◆ Books closure date

19 May 2004◆ Payment date of 2003 final dividend on

ordinary shares

July 2004◆ Announcement of 2004 half-year results

October 2004◆ Announcement of 2004 3rd quarter results

January 2005◆ Announcement of 2004 full-year results

Group Structure26

(1) As at 31 December 2003, M.Tech Singapore was 90%-owned by Multi-Chem. This interest was reducedto 80% in January 2004.

(2) HPTec Suzhou was disposed to HPTec on 31 December 2003. HPTec is a PCB tool manufacturer andholds 65% of HPTec Singapore.

Manufacturing services, distributionof PCB materials & equipment

Dormant Companies

Under Multi-Chem: Under HPTec Singapore:◆ SecureOneAsia (100%) ◆ HP Thailand (49%)◆ M-Precision (100%) ◆ HPTec HK (100%)◆ Multi-Chem Philippines (50%)

(100%) Multi-Chem Suzhou

M.Tech Singapore (80%)(1)

(100%) Multi-Chem Wuxi

M.Tech Malaysia (100%)

(100%) Multi-Chem Laser Tech

M.Tech Thailand (100%)

(35%) HPTec Singapore

M.Tech Indochina (100%)

M.Tech Training Centre (70%)(100%) HPTec Suzhou(2)

Manufacturing services

IT Security

Distributor of PCB tools

Financial Highlights 27

GROUP BALANCE SHEETYear Ended ($’000)

1999 2000 2001 2002 2003Cash and cash equivalents 1,431 28,496 13,468 15,972 8,611Trade receivebles 6,380 6,298 5,687 8,063 12,752Other investments and receivables 720 1,235 4,903 1,501 529Inventories 1,548 1,849 1,363 1,710 2,218Total current assets 10,079 37,878 25,421 27,246 24,110

Other receivables and prepayments - 618 348 32 -Investment in associate 2,017 2,995 4,129 2,711 1,835Investment in joint venture - - 1,203 1,182 -Other investments - 495 461 351 351Property, plant and equipment 12,690 34,956 30,823 26,898 33,059Total non-current assets 14,707 39,064 36,964 31,174 35,245

Short-term borrowings 4,235 4,000 1,189 - -Trade payables 1,819 2,398 827 2,083 3,534Bills payables - - - - 4,892Other payables 716 1,523 692 729 1,041Current portion of long-term borrowings - 6,866 6,867 7,478 339Current portion of finance leases - - - 27 123Income tax payable 286 9 - 1,284 1,078Total current liabilities 7,056 14,796 9,575 11,601 11,007

Long-term borrowings - 13,994 7,128 3,151 2,715Convertible notes - - - - 3,183Other payables - - 769 440 100Finance leases - - - 23 117Deferred tax 862 2,590 2,630 1,530 1,130Total non-current liabilities 862 16,584 10,527 5,144 7,245

16,868 45,562 42,283 41,675 41,103Minority interests - - - (119) (168)

16,868 45,562 42,283 41,556 40,935

Issued capital 1,338 16,500 16,500 15,863 15,674Reserves 15,530 29,062 25,783 25,693 25,261Total equity 16,868 45,562 42,283 41,556 40,935

Financial Highlights28

GROUP PROFIT & LOSSYear End ($’000)

1999 2000 2001 2002 2003Turnover 21,594 30,031 23,047 26,698 34,041Gross profit 9,487 10,343 3,179 6,413 10,144Other income including interest income 698 2,849 761 893 879Earnings before interest, tax, depreciation & amortisation, foreign exchange gain 9,170 13,687 8,160 8,213 10,002Depreciation & amortisation (1,699) (4,706) (7,337) (6,480) (5,665)Interest expense (24) (153) (752) (762) (771)Foreign currency exchange adjustment (net) 58 792 634 110 (140)Profit from operations 7,505 9,620 705 1,081 3,426Share of profit from associated company/joint venture 1,478 1,817 1,585 906 (504)Profit before taxation 8,983 11,437 2,290 1,987 2,922Taxation (1,102) (2,261) (448) (373) (734)Profit after taxation 7,881 9,176 1,842 1,614 2,188Minority interest - - - (9) (49)Net profit attributable to shareholders 7,881 9,176 1,842 1,605 2,139

ANALYSIS1999 2000 2001 2002 2003

Turnover growth (%) 30.5 39.1 (23.3) 15.8 27.5Operating profit growth (%) 152.5 28.2 (92.7) 53.3 216.9Net profit growth (%) 153.5 16.4 (79.9) (12.9) 33.3

PER SHARE DATA(cents, unless otherwise stated)

1999 2000 2001 2002 2003Net earnings (basic) (1) 4.28 2.82 0.56 0.50 0.68Net earnings (fully diluted) (2) 4.28 2.60 0.55 0.49 0.66Gross dividend 0.95 1.84 0.40 0.81 1.37Gross dividend yield (%) (4) 1.67 9.44 3.20 5.79 4.89Net dividend 0.70 1.37 0.30 0.63 1.29Net dividend payout (times) (3) 0.16 0.49 0.54 1.26 1.90Net assets value (3) 9.17 13.81 12.81 13.10 13.06

Notes:(1) Number of shares used in the computation 184.0M 325.5M 330.0M 324.0M 314.9M(2) Number of shares used in the computation 184.0M 353.0M 335.2M 326.7M 323.2M(3) Number of shares used in the computation 184.0M 330.0M 330.0M 317.3M 313.5M(4) Based on the share price as at 31 December.


FINANCIAL RATIOS1999 2000 2001 2002 2003

Current ratio (times) 1.43 2.56 2.65 2.35 2.19Return on shareholders’ funds (%) 46.72 20.14 4.36 3.86 5.23Return on assets employed (%) 31.80 11.93 2.95 2.75 3.60Debt equity ratio (5) 0.25 0.55 0.36 0.26 0.28Debt interest cover (6) 2.51 1.48 1.18 1.12 1.53

(5) Yr 2003 includes convertible notes. Debt equity ratio exclusive of convertible notes would be 0.20.(6) Company fully repaid its transferable loan facility in October 2003.

GROUP CASH FLOW STATEMENTYear Ended ($'000) 1999 2000 2001 2002 2003

Cash flows from operating activities 3,160 11,354 (1,134) 9,014 6,553Cash flows from investing activities (9,446) (25,419) (3,449) 804 (6,291)Cash flows from financing activities 4,184 41,133 (10,440) (7,622) (7,462)Net effect of exchange rate changes in consolidating foregn subsidiary - (3) (5) 308 (161)Net increase/ (decrease) in cash (2,102) 27,065 (15,028) 2,504 (7,361)Cash at beginning of year 3,533 1,431 28,496 13,468 15,972Cash at end of year 1,431 28,496 13,468 15,972 8,611


QUARTERLY RESULTS

Year Ended ($'000) 2002 2003 % change

TurnoverFirst Quarter 5,084 7,085 39Second Quarter 7,106 7,276 2Third Quarter 8,144 8,622 6Fourth Quarter 6,364 11,058 74

26,698 34,041 28

Profit before taxationFirst Quarter 417 600 44Second Quarter 1,661 (643) (139)Third Quarter 580 843 45Fourth Quarter (671) 2,122 416

1,987 2,922 47

Profit after taxationFirst Quarter 417 368 (12)Second Quarter 1,629 (667) (141)Third Quarter 322 682 112Fourth Quarter (754) 1,805 339

1,614 2,188 36

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SEGMENT REPORTINGRESULTS OF THE GROUP ($'000)

First Half Year Manufacturing Services Distribution Consolidated1H2002 1H2003 1H2002 1H2003 1H2002 1H2003

Sales 6,595 6,797 5,595 7,564 12,190 14,361Segment results 1,191 1,212 1,644 2,006 2,835 3,228Unallocated other income 720 20Unallocated corporate expenses and finance costs (2,031) (2,963)Operating profit 1,524 285Profit equity accounted for 554 (328)Profit before tax 2,078 (43)Profit after tax 2,046 (268)Minority interest - (31)

2,046 (299)

Second Half Year Manufacturing Services Distribution Consolidated2H2002 2H2003 2H2002 2H2003 2H2002 2H2003

Sales 6,816 11,710 7,692 7,970 14,508 19,680Segment results 1,486 4,688 2,092 2,218 3,578 6,916Unallocated other income 173 859Unallocated corporate expenses and finance costs (4,194) (4,634)Operating profit (443) 3,141Profit equity accounted for 352 (176)Profit before tax (91) 2,965Profit after tax (432) 2,456Minority interest (9) (18)

(441) 2,438

Full Year Manufacturing Services Distribution Consolidated2002 2003 2002 2003 2002 2003

Sales 13,411 18,507 13,287 15,534 26,698 34,041Segment results 2,677 5,903 3,736 4,241 6,413 10,144Unallocated other income 893 879Unallocated corporate expenses and finance costs (6,225) (7,597)Operating profit 1,081 3,426Profit equity accounted for 906 (504)Profit before tax 1,987 2,922Profit after tax 1,614 2,188Minority interest (9) (49)

1,605 2,139


DEBT FINANCING STRUCTURE AS AT 31 DECEMBER 2003Banker's Letters of Total

Loans Guarantees Credit FacilitiesIn dollar terms ($'000)Amount available for drawdown 14,154 20 4,892 19,066Amount utilised (3,054) (15) (4,892) (7,961)Balance unutilised 11,100 5 - 11,105

In percentage terms (%)Amount available for drawdown 74 - 26 100Amount utilised 22 75 100 42Average effective cost of debt during the year 2003 (1) 9.00

Interest coverage ratioNet profit before interest and tax ($'000) 3,693Interest expenses ($'000) 771Interest coverage ratio (times) 4.79

(1) Includes transferable loan facility which was fully repaid in October 2003. Effective cost of debt exclusive of transferableloan facility would be 3%.

2003 TURNOVER BY GEOGRAPHICAL REGIONSingapore - 55% ASEAN - 18% China - 27%

2003 TURNOVER BY ACTIVITY

Manufacturing - 54% Distribution - 46%

SEGMENTAL RESULTSYear Ended ($'000) 2002 2003

Turnover Operating profit Turnover Operating profitBy ActivityManufacturing services 13,411 (562) 18,507 3,105Distribution 13,287 1,643 15,534 321Total 26,698 1,081 34,041 3,426

By Geographical RegionSingapore 18,590 477 18,885 753ASEAN 5,246 391 6,050 1,067China 2,862 213 9,106 1,606Total 26,698 1,081 34,041 3,426

Financial Review 33

TURNOVER

The Group achieved a turnover of $34.0M in FY2003, anincrease of 27.5% or $7.3M compared to the turnover of$26.7M in FY2002.

Manufacturing Service Division

Turnover in this Division increased by 38.0% or $5.0M from$13.4M in FY2002 to $18.5M in FY2003.

While the first half of 2003 was slow, the electronicsbusiness improved in mid 3Q2003 and there has been nosign of any slowdown since. As a result, the Group’smachine utilisation has also picked up significantly. For4Q2003, this Division recorded a turnover of $7.1Mcompared to $2.8M in 4Q2002, an increase of 151.6% or$4.3M. With many of the top PCB players already in China,the Group’s operations in China have also yielded positiveresults as the Group broadened its customer base.Commencing in March 2002, the Group’s operations inChina already accounted for approximately 46% of itsmanufacturing services operations in FY2003.

Due to customers’ request, the Group also commencedproviding routing services in Suzhou, China. The routingprocess is a milling process in which a router bit is used tocut the profile of the desired board contour. The Groupcommenced the provision of PCB routing service to itsChina-based customers in May 2003 and had invested in

20 routing machines since. Routing services contributedapproximately 3% of the turnover of this Division in FY2003,as the bulk of the routing machines arrived in 4Q2003.

Distribution Division

Turnover in this Division grew by 16.9% or $2.2M from$13.3m in FY2002 to $15.5M in FY2003.

The better turnover performance in FY2003 was mainly dueto the contribution from the IT distribution business of theGroup. For FY2003, IT distribution business achieved aturnover of $8.1M, accounting for approximately 52% ofthe turnover in this Division. This was mainly due to thefull year operation of its Singapore office compared to sevenmonths in 2002. Additionally, offices in Kuala Lumpur setup in December 2002, and Bangkok and Hanoi set up inmid 2003, also contributed to the turnover in FY2003. TheGroup also added new IT security products to its productportfolio for distribution in FY2003.

The remaining 48% or $7.4M of turnover contribution tothis Division came from the distribution of PCB specialtychemicals, materials and other related products. ComparingFY2003 to FY2002, turnover from the Group’s PCB-relateddistribution business decreased by 29.4% or $3.1M from$10.5M to $7.4M. This was largely due to low volumesduring 1H2003 (where demand for PCB was still weak) aswell as two of the Group’s customers in Philippines ceasingoperations in June 2003.

Financial Review

34

PROFIT BEFORE TAX

The Group reported a PBT of $2.9M for FY2003, an increaseof 48.0% over the PBT of $2.0M reported in FY2002.

PBT improved partly due to the higher turnover. Theperformance of the Group in 2H2003, particularly in 4Q2003,was the main reason for the Group’s marked improvement inprofits for the full year. Comparing 4Q2003 to 4Q2002, theGroup reversed a loss of $671,000 to a profit of $2.1M. Dueto high operating leverage, the higher turnover in theManufacturing Services Division led to a better utilisation ofmachines and economies of scale. This translated into bettergross margin for the Group for both FY2003 and 4Q2003over the corresponding periods in 2002. Gross margin grewby 5.8 percentage points from 24.0% in FY2002 to 29.8% inFY2003, and by 20.2 percentage points from 20.7% in4Q2002 to 40.9% in 4Q2003.

Additionally, the increase in PBT in FY2003 was due to thefollowing reasons:-

(1) A write-off of machinery amounting to $1.1M inFY2002, which did not recur in FY2003;

(2) Profit on disposal of fixed assets amounting to$123,000 in FY2003 compared to loss of disposal of$298,000 in FY2002; and

(3) Reduction in depreciation expenses amounting to$806,000 due to the write-off of machinery in FY2002,

and the use of a 10-year useful life to depreciate themachines in China, compared to a 5-year useful lifein Singapore.

The improvement in PBT for FY2003 was achievednotwithstanding the following:-

(1) Provision for doubtful debts amounting to $357,000(FY2002: $227,000) on the accounts receivablesfrom two of the Group’s customers in Philippines;

(2) Provision for diminution in value of investment in ajoint venture company amounting to $1.1M, of which$883,000 was provided for in 4Q2003 (FY2002: Nil);

(3) An exchange loss of $140,000 in FY2003 comparedto an exchange gain of $110,000 in FY2002; and

(4) Share of loss of associate and joint venture of $504,000(FY2002: share of profit of $906,000).

PROFIT AFTER TAX

The Group achieved a PAT of $2.2M in FY2003, an increaseof 38.0% or $574,000 over the PAT of $1.6M reported inFY2002. This increase is largely in line with the increasein PBT. Provision for tax for FY2003 comprised mainly ofincome tax of the Company and its subsidiaries, share oftaxes of its associated company and reversal of deferredtax. The Company’s two subsidiaries in China are currentlyenjoying tax-free status on profits.

Financial Review

Financial Review 35Balance Sheet Review

BALANCE SHEET REVIEW

Cash and cash equivalents of the Group stood at $8.6Mas at 31 December 2003, down from $16.0M as at 31December 2002. The decreased was due to the payment ofa transferable loan amounting to $7.8M in FY2003, sharebuyback and dividend payout, offset by the cash inflow fromoperations and the proceeds from the issue of US$2.0M inconvertible notes.

Trade receivables increased at the Group level in line withthe higher turnover, particularly due to the expansion of theGroup’s China operations. At the Company level, tradereceivables increased from $5.3M to $5.6M due to the higherturnover of the Company, but offset by provision for doubtfuldebts for amounts due from two Philippines customers.

Inventories held by the Company, particularly specialtychemicals, were reduced due to the loss of a customer as itceased business in June 2003 and the deliberate policy ofthe Company to carry less inventories. However, at theGroup level, despite the reduction at Company level,inventories increased because of the increase in IT stock,from $316,000 as at 31 December 2002 to $1.1M as at 31December 2003, due to the expansion of the IT distributionbusiness.

Investment in associate decreased from $2.7M to$1.8M due to the loss of the Company’s associated company

being equity accounted for, as well as the payment ofdividends by the associated company.

Investment in joint venture was fully written down tozero on 31 December 2003 from $1.2M as at 31 December2002 due to a provision in diminution in investment of$1.1M made, and the loss of $98,000 equity accountedfor.

Property, plant and equipment decreased from $16.9Mto $11.4M at the Company level due to the shifting of CNCdrilling machines to China in FY2003. At the Group level,property, plant and equipment increased from $26.9M to$33.1M as new machines were added to the Group’soperations.

Bills payable of $4.9M comprise the amount payable tosuppliers by the Company for the purchase of machineries.Such bills payable are in the form of letters of credit. TheGroup did not have any bills payable in FY2002.

Long term borrowings comprise the transferable loanof the principal amount of $23M, which had been fully repaidin October 2003, and the long term loan taken by theCompany’s Suzhou subsidiary.

Convertible notes refer to the exchangeable andconvertible notes in the aggregate amount of US$2.0Missued by the Company in June 2003.

36 Investor Relations

The Company has been keeping shareholders and the

investing community updated on the key developments of

the Group through regular announcements on MASNET.

These announcements can also be found in Chinese under

http://ir.zaobao.com/multichem in the Zaobao.com website.

Multi-Chem has always made efforts to announce its results

early. To facilitate a better understanding of the Group’s

results, plans and prospects, we held an analysts cum press

meeting on 29 January 2004 to announce our full-year

results for 2003. A webcast was also made available for

investors. Our quarterly results announcement are well

within the mandatory period.

In June 2003, Multi-Chem was ranked 15th out of 285

companies in the Business Times Corporate Transparency

Index for companies announcing results for the year ended

31 December 2002, the third year running that the Company

was ranked among the top 20 and an improvement from

the 17th place in 2001.

During the year, Multi-Chem updated its website

www.multichem.com.sg with the new development of the

company while its IT security arm has its own website

www.mtechpro.com to provide information on its products

and services.

In order to reach out to our existing and potential investor,

the Company participated in the SGX-MAS Research

Incentive Scheme in which two research firms are assigned

to furnish two results reports and two update reports for

us. These reports are posted on the SGX website

www.sgx.com/research for easy and free access by

investor. The Company also participated in The Lianhe

Zaobao Investors’ Guide that will be published on 13 April

2004.

We will continue to place emphasis on good investor

relations and make efforts on improving the information

flow so that awareness about Multi-Chem and its

subsidiaries can be build.

Financial Review 37Value Added Statement

Group Value Added Statement ($’000)

1999 2000 2001 2002 2003

Turnover 21,594 30,031 23,047 26,698 34,041Purchase of goods & services (10,789) (15,459) (13,064) (16,951) (18,676)

Value added from operations 10,805 14,572 9,983 9,747 15,365Non production income/(costs) 2,237 5,298 3,379 2,362 (1,300)

13,042 19,870 13,362 12,109 14,065Distribution

To EmployeesSalary & other staff related cost 2,383 3,506 2,877 2,890 4,551

To GovernmentIncome & other taxes 1,135 2,329 533 476 872

To Providers of capitalFinance costs 49 161 897 769 772Dividends 1,290 4,535 994 2,004 4,030

Retained in the businessDepreciation 1,699 4,698 7,213 6,360 5,682Minority interests - - - 9 49Retained profits 6,486 4,641 848 (399) (1,891)

13,042 19,870 13,362 12,109 14,065

Productivity DataSales per employees ($’000) 745 448 334 187 107Value added per employee ($’000) 373 217 145 68 48Value added per $ employment cost 4.53 4.16 3.47 3.37 3.38Value added per $ net sales 0.50 0.49 0.43 0.37 0.45

Average numbers of employees 29 67 69 143 317

38 Information on Employees

The Group believes that our employees are key resources and we aim to recognise and reward dedicated staff. In terms ofremuneration, such employees are not affected in the across-the-board pay freeze. Rewards are linked directly to employee’sperformance, contribution to the company and responsibility level. Promising employees are given the opportunity to workfor a period in our overseas subsidiaries to further enhance their experience.

The Group conducts yearly appraisal to evaluate the performance of staff and provides staff with a sense of self-awarenessto undertake training that will improve their skills and abilities.

The Manufacturing Services Division is in a business which is capital intensive and that further requires our employees tohave the necessary knowledge in operating the machinery and equipment. Selected employees are sent for training conductedby machine manufacturers to learn about the operations, capability and maintenance of the equipment. In the DistributionDivision, selected employees are sent for training by our principals, as well as attached to our customers’ production linesin the region for on-the-job training. The amount spent on employees providing them with on-the-job training, in-houseand external training amounted to approximately $50,000.

During the year, M.Tech Singapore participated in the internship programme of a local polytechnic to give students a stint witha local corporate before they step into the working world, providing 8 weeks of training for this purpose.

BREAKDOWN BYJOB GROUP

Managerial 9 %

Sales 1 %

Engineering 6 %

Administrative 26 %

Technical & Others 58 %

BREAKDOWN BYYEARS OF SERVICE

10 yrs or more 1%

6 to 9+ yrs 2%

3 to 5+ yrs 11%

Less than 3 yrs 86%

BREAKDOWN BYEDUCATIONAL QUALIFICATION

Degree & above 13%

Diploma & equivalent 15%

‘O’ & ‘A’ level & equivalent 43%

Trade certificate & equivalent 7%

Secondary level & lower 22%

Financial Review 39Corporate Governance Report

Name Board AC NC RC

Foo Suan Sai 6 6 - - - ✓ 2 2 - - -

Han Juat Hoon 6 6 - - - - - - - - -

Toshiaki Suzuki 6 6 - - - - - - ✓ 4 4

Wong Meng Yeng 6 6 ✓ 7 7 - - - ✓ 4 4

Chew Thiam Keng 6 6 ✓ 7 7 ✓ 2 2 ✓ 4 4

Eu Yee Kui, Alexander Jr 6 6 ✓ 7 6 ✓ 2 2 - - -@ Eu Sandy

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Corporate governance refers to the processes and structure by which the business and affairs of the Company are directedand managed. The Board recognises that sound corporate governance is an essential part of good business practices andcorporate accountability. Accordingly, the Company has adopted measures and practices set out in the Best PracticesGuide and the Code of Corporate Governance issued by the Singapore Exchange.

BOARD OF DIRECTORS

The Board’s Conduct of its Affairs

The Board meets regularly on a quarterly basis and is responsible for the Group’s overall business direction, managementand internal control, approval of major projects and significant financing matters, and approval of the release of the quarterlyreports. When circumstances require, the Board will arrange for telephonic and videoconference meeting.

Commencing 2004, there will be at least one meeting of board members without the presence of the Chief Executive Officer.The number of board meetings held during the year and the attendance of every board member at the Board and committeesmeetings are disclosed as follows:

The Board has adopted a set of internal controls which sets out that the Board approval has to be sought for transactions notin the ordinary course of business if such transaction exceeds $2.0M in value. To facilitate operational efficiency, the Boardapproval would not be required for day-to-day decisions and matters that are operational in nature, even though suchsingle transaction may exceed $2.0M in value.

40 Corporate Governance Report

The Company works closely with the professional corporatesecretarial firm, FMG Corporate Services Pte Ltd, to providethe Board with regular updates of the latest governance andlisting policies. The Board is also updated regularlyconcerning any changes in company policies, relevant newlaws, regulations and changing commercial risks.

Newly appointed Directors are given briefings on thebusiness activities of the Group, its strategic directionsand governance practices. There will generally be notraining for the newly appointed directors as they areexpected to have the relevant experience prior to theirappointment.

Board Composition and Balance

The Board consists of six members out of which three arenon-executive and independent Directors. Theindependence of each Director is reviewed annually by theNC which was formed on 2 December 2002. An independentDirector shall notify the Company Secretary immediatelyof any change in circumstances that may result in him notbeing able to meet the criteria for independence. The Boardmay, after considering the change in circumstances, requirethe resignation of the Director.

The NC is of the view that the non-executive Directors of theCompany are independent as at the date of this Annual Reportand their experience in finance, business and law experienceenable them to exercise objective judgement on corporateaffairs independently. No individual or small group ofindividuals dominate the Board’s decision making process.

The Board is of the view that its size is appropriate foreffective decision making taking into account the scope andthe nature of the operations of the Company.

Role of Chairman and Chief Executive Officer

Mr Foo Suan Sai is both the Chairman and Chief ExecutiveOfficer. He is also an executive Director.

The Board is of the opinion that currently, there is no needto separate the role of the Chairman and Chief ExecutiveOfficer taking into account the size, scope and the nature ofthe operations of the Company. As a principle of goodcorporate governance, the Board has set the condition thatthe Company should have separate persons as Chairmanand Chief Executive Officer when the Company’s turnoverexceeded S$100M.

The role of the Chairman pertaining to Board proceedingsincludes:

✦ Scheduling of meetings that enables the Board toperform its duties while not interfering with the flowof the Company’s operations;

✦ Preparing meeting agenda;

✦ Exercising control over quality, quantity and timelinessof the flow of information between management andthe Board; and

✦ Assisting in ensuring compliance with the Company’sguidelines on corporate governance.

Access to Information

In order to ensure that the Board is able to fulfil itsresponsibilities, the Company circulates the reports relatingto operational and financial performance of the Group andCompany prior to the Board meetings held quarterly. Thereports are also available upon request. Where a physicalmeeting is not possible, timely communication with


members of the Board is effected through electronic meanswhich include electronic mail and teleconferencing.

The Directors have also been provided with the phonenumbers and email particulars of the Company Secretaryfor separate and independent access.

The Board will refer issues to the AC for opinion on whetherany independent advice is necessary. Should anyindependent advice be required, the cost of suchprofessional advice will be borne by the Company.

The role of the Company Secretary was clearly defined andreported to the Board on 6 January 2003. It includesresponsibility for ensuring Board procedures are followedand that applicable rules and regulations are complied with.The Company Secretary shall attend all Board Meetings.

BOARD COMMITTEES

Board Membership

The NC comprises Mr Chew Thiam Keng as Chairman, and

Mr Foo Suan Sai and Mr Eu Yee Kui, Alexander Jr @ EuSandy as members. A majority of the NC is independent.

The NC has a written terms of reference that describe itsresponsibilities, which include maintaining an effective Boardand ensuring that only competent individuals capable ofcontributing to the success of the Company are appointed.Where new appointments are required, the NC will considerrecommendations for new Directors, review theirqualifications and meet with such candidates before a decisionis made on a selection. The NC also promotes transparencyin the selection and appointment of new Board members aswell as their subsequent re-nomination/re-election.

A member who wishes to retire or resign should providesufficient notice to the Company so that a replacement maybe appointed before he leaves. In the event of any vacancyin the NC, the Company shall endeavour to fill the vacancywithin two months, but in any case not later than threemonths.

In reviewing for re-nomination/re-election, NC has toconsider criteria such as the Director’s contribution and

Name Age PositionDate of initial Date of lastappointment re-election

Foo Suan Sai 50 Chairman 30 Aug 1988 -

Han Juat Hoon 47 Executive Director 16 May 1987 16 May 2002

Toshiaki Suzuki 70 Executive Director 5 Jan 2000 19 May 2003

Wong Meng Yeng 45 Independent Director 5 Jan 2000 2 May 2001

Chew Thiam Keng 42 Independent Director 5 Jan 2000 19 May 2003

Eu Yee Kui, Alexander Jr 53 Independent Director 28 Nov 2002 19 May 2003@ Eu Sandy

As at 31 December 2003, the Directors of the Company are as follows:


Present Directorships Past Directorships inOther major

Name in other listed other listed companiesappointments

companies over last 3 years

Foo Suan Sai Nil Nil Managing Director,HPTec Singapore

Deputy Chairman,Multi-Chem Philippines

Han Juat Hoon Nil Nil Director,Multi-Chem Philippines

Toshiaki Suzuki Nil Nil Nil

Wong Meng Yeng KS Tech Ltd Nil Nil

Novena Holdings Limited

Chew Thiam Keng Ban Joo & Company Kian Ann Engineering NilLimited Limited

Showy International Flaris TechnologyLimited Corporation Limited

KS Tech Ltd

Sim Siang Choon Ltd

TSM Resources Ltd

Eu Yee Kui, Nil Nil NilAlexander Jr@ Eu Sandy

Key information regarding the Directors are disclosed as follows:

performance, attendance, preparedness, participation and candour and if applicable, assessment of the Director’sindependence. The Committee should also decide whether the Director under review has been adequately carrying out his/her duties as Director of the Company.

All Directors have to submit themselves for re-nomination/ re-election at regular intervals or at least every three years inaccordance with the Company’s Articles of Association.


Board Performance

The Board performance’s is ultimately reflected in theperformance of the Group. The Board shall, at all times, acthonestly and use reasonable diligence and care in thedischarge of the duties of their office. They have to carrytheir duties in the best interests of the Company and itsshareholders. Board members must attend at least 75% ofall Board Meetings. Performance of Board members is alsoevaluated according to their contribution during meetingsand also their input to the Company e.g. corporategovernance, legal or accounting, based on their individualexpertise.

The NC is working on the performance evaluation criteriaand will consider the Company’s share price performanceover a reasonable period vis-a-vis the Straits Times Indexand a benchmark index of the Company’s industry peersand expects to finalise this performance evaluation criteriain 2004.

AUDIT COMMITTEE

Audit Committee

The AC comprises three members all of whom areindependent Directors. Two of them, Mr Eu Yee Kui,Alexander Jr @ Eu Sandy and Mr Chew Thiam Keng havefinancial management expertise and experience. The AC ischaired by Mr Wong Meng Yeng, an independent non-executive Director.

The AC has a set of terms of reference defining its scope ofauthority which includes:

✦ To review the external auditors’ independence andobjectivity annually;

✦ To review the scope and results of the audit, whether itis cost effective and the independence and objectivityof the external auditors;

✦ To review with the external auditors on their auditreport, management letter and management’sresponse;

✦ To review the quarterly, half-yearly and annual financialstatements before submission to the Board;

✦ To review the assistance given by the management tothe auditors;

✦ To review the scope and results of the internal auditprocedures;

✦ To review interested party transactions periodically.

The Company replaced Messrs Chio Lim & Associates withMessrs Deloitte & Touche as auditors for FY2003 so thatthe auditors do not derive non-audit income from theCompany. The accounting, tax and corporate secretarialarms of Messrs Chio Lim & Associates provide non auditservices to companies within the Group.

The AC meets at least four times a year and, in addition tothe members of the AC, such meetings are also attendedby external auditors and appropriate members of theexecutive management by invitation. In FY2003, the AC hascarried out the activities as set out above.

Other information pertaining to the AC is disclosed on page39 of the annual report.


Internal Controls

The Board is responsible for ensuring that the Companymaintains a sound system of internal controls to safeguardshareholders’ interest and Company’s assets. The Boardalso oversees matters relating to management of risks.

The effectiveness of the Company’s material internalcontrols is conducted annually. The Board is of theopinion that the Company has adequate internal controlsto safeguard shareholders’ investment and Company’sassets. In terms of risk management, the Board seeks toidentify areas of significant risks and apply appropriatemeasures to control and mitigate these risks. It alsomonitors the implementation of such measures.

Internal Audit

The internal audit function is outsourced to a publicaccounting firm, CC Yang & Co. They conduct review ofthe effectiveness of the Company’s material internalcontrols, including financial, operational and compliancecontrols, and risk management annually.

The internal auditors meet with the Board and AC at leasttwice a year, to present their audit plans initially and toreport their audit findings subsequently. Managementhas to respond to the audit findings and take action,where necessary, to improve any internal controlweaknesses.

The internal auditors’ primary reporting line is to theChairman of the AC. Material non-compliance and internalcontrol weaknesses noted during the audit are reported tothe AC.

In FY2003, the scope of the internal audit was mainlyconfined to the Group’s Singapore operations. The scope

will be extended to the Group’s China operations inFY2004.

It is the responsibility of the AC to ensure the adequacy ofthe internal audit.

REMUNERATION COMMITTEE

Remuneration Matters

The RC comprises three members, two of whom areindependent Directors. The RC is chaired by Mr Wong MengYeng, an independent non-executive Director. The RC meetsonce a year and is responsible for reviewing the performanceof the Chief Executive Officer, the Chief Operating Officerand senior management, as well as reviewing and approvingexecutive remuneration including but not limited toDirector’s fees, salaries, allowances, bonuses and benefits-in-kind.

Level and Mix of Remuneration

The executive Directors, Mr Foo Suan Sai and Mdm HanJuat Hoon are also the substantial shareholders of theCompany. Their interests are therefore in line with theCompany’s interest. Remuneration of these executiveDirectors is in accordance with their service contracts.

Remuneration of non-executive Directors takes into theaccount the effort and time spent including theresponsibilities of each Director. Non-executives are paidDirectors’ fees, subject to approval at the AGM.

The Company currently does not have any share optionscheme in place.


Base Variable Benefits-FY2003 Salary Bonus in-kind Fees Total

% % % % %

Director

$500,000 and above

Foo Suan Sai 99 - 1 - 100

Han Juat Hoon 97 - 3 - 100

$0 to $249,999

Toshiaki Suzuki - - - 100 100

Wong Meng Yeng - - - 100 100

Chew Thiam Keng - - - 100 100

Eu Yee Kui, Alexander Jr- - - 100 100@ Eu Sandy

Executive Officers

$0 to $249,999

Ho Boon Chuan Wilson 94 - 6 - 100

Pui Boon Tiong Eugene 80 19 1 - 100

Koh Henry 76 20 4 - 100

Disclosure on Remuneration

Remuneration is fixed in accordance with the experience of the person in question, the role performed, market comparison,the contribution of the individual and/or the performance of the Company.

Remuneration of Mr Foo Suan Sai and Mdm Han Juat Hoon is in accordance with their respective service contract with theCompany, which is reviewed annually. For the other Directors and key Executives, remuneration is based on the above factorsas well as negotiation between the parties concerned.

The annual remuneration bands of the Directors and the Executive Officers are set out below:

The total remuneration of employees who are related to the substantial shareholders is subject to the annual review andmajority approval of the AC. For FY2003, the total remuneration paid to these employees amounted to $195,836 (2002:$174,210).

None of the employees who are immediate family members of a Director or the Chief Executive Officer received more than$150,000 in remuneration during the year.


COMMUNICATION WITH SHAREHOLDERS

Accountability and Audit

The Company has adopted quarterly results reporting sincethe third quarter of 2002. For its financial reporting, theCompany will continue to provide a balanced andunderstandable assessment of the Company’s performance,position and prospects on a quarterly basis.

The Board currently has access to quarterly accounts andregular updates from the Company via emails, ad hocinformal meetings and through the telephone. Monthlyaccounts are available upon request.

Communication with Shareholders

The Company aims to engage in regular, effective and faircommunication with shareholders, and be as descriptive,detailed and forthcoming as possible.

Its financial results are disclosed on a quarterly basisthrough MASNET within the mandatory period and theinformation is also available on the Company’s website,and investor relations sites Zaobao.com andShareinvestor.com. Information on the Company’s newinitiatives or key developments are first disseminated viaMASNET and also made available on-line to shareholders.Price sensitive information is announced through MASNET

Shareholder Participation

All shareholders of the Company receive the annual reportand notice of AGM. The notice is also advertised in the pressand made available on the website. At AGMs, the Companyencourages shareholder participation and shareholders aregiven the opportunity to air their views and ask Directors ormanagement questions regarding the Company.

The Company’s Articles of Associations allow a member ofthe Company to appoint one or two proxies to attend andvote instead of the member.

At every general meeting, the chairpersons of the AC, NC

and RC are present and available to address questions. Theexternal auditors are also present to assist the Directors inaddressing any relevant queries by shareholders.

DEALINGS IN SECURITIES

The Company has adopted the Best Practices Guide relatingto dealing in securities. Share trading guidelines, inparticular, that officers should not deal in the Company’ssecurities

(a) when in possession of unpublished material pricesensitive information;

(b) on short term considerations; and

(c) during the period commencing 2 weeks before theannouncement of the Company’s first three quarterresults and one month before the announcement ofthe Company’s annual results and ending on the dateof the particular announcement,

have been disseminated to Directors and key employees(including employees with access to price sensitiveinformation in relation to the Company’s shares). Inaddition, the guidelines require key employees to disclosein writing to the executive Directors on their dealings in theCompany’s securities.

INTERESTED PERSON TRANSACTIONS POLICY

For FY2003, there was no interested person transaction.

INTEREST IN MATERIAL CONTRACTS

There was no material contract of the Company and itssubsidiaries involving the interests of the Chief ExecutiveOfficer, each Director or controlling shareholder stillsubsisting at the end of FY2003 or if not then subsisting,entered into since the end of FY2002.

Foo Suan SaiGroup Chairman & Chief Executive Officer

Financial Review 47Corporate Directory

OVERSEAS SUBSIDIARIES

Multi-Chem (Suzhou) Co., LtdNo. 28 Su Tong Road, Suzhou Industrial ParkJiangsu Province, PRC 215021Tel : (86 512) 6252 9822Fax : (86 512) 6252 9809

Multi-Chem Electronics (Wuxi) Co., LtdXishan Economic Development Zone,214101, Jiangsu Province, PRCTel : (86 510) 8260 498Fax : (86 510) 8260 428

Multi-Chem Laser Technology (Suzhou) Co., LtdNo. 5 Xing Han Street, Block F-Unit 02,Suzhou Industrial Park,Jiangsu Province, PRC 215021Tel : (86 512) 6252 9822Fax : (86 512) 6252 9809

M-Precision Tech Sdn BhdPTD37441 Jalan Perindustrian 3,Kawasan Perindustrian Fasa 2,81400 Senai, Johor, MalaysiaTel : (65) 6863 1318Fax : (65) 6863 1618

CHAIRMAN & CHIEF EXECUTIVE OFFICERFoo Suan Sai

CHIEF OPERATING OFFICERHan Juat Hoon

EXECUTIVE DIRECTORToshiaki Suzuki

FINANCE, HR & ADMINISTRATIONHo Boon Chuan WilsonKoh Hang Leng DickyLim San SanLim Kok Soon RaysonSiow Mee LinChua Kar Lin Catherine

DISTRIBUTION DIVISIONFoo Fang Song MaxYap Yen Ling Candy

PURCHASING & LOGISTICSFoo Suan Ooi

MANUFACTURING SERVICES DIVISIONPui Boon Tiong EugeneKoh Henry

48 Corporate Directory

OVERSEAS JOINT VENTURE

Multi-Chem Precision Philippines CorporationSEPZ, First Cavite Industrial EstateBRGY, Langkaan, DasmarinasCavite 4114, PhilippinesTel : (63 46) 4020 361Fax : (63 46) 4020 362

ASSOCIATED COMPANY

Hawera Precision Tec Pte Ltd11 Tuas Avenue 5Singapore 639337Tel : (65) 6863 1318Fax : (65) 6863 1618

M.TECH OFFICES

M.Tech Products Pte LtdPhase Z.Ro, Technopreneur Park151 North Buona Vista Road#02-02 The ConnectionSingapore 139347Tel : (65) 6311 9696Fax : (65) 6311 9699

M.Tech Training Centre Pte Ltd11 Tuas Avenue 5Singapore 639337Tel : (65) 6863 1318Fax : (65) 6863 1618

M-Security Technology Sdn. Bhd.Level 26 Menara IMCNo.8 Jalan Sultan Ismail50250 Kuala Lumper, MalaysiaTel : (60 3) 2039 4783Fax : (60 3) 2039 4784

M-Security Technology IndoChina Pte. Ltd.Hanoi Representative Office2/F, Unit 5, 63 Ly Thai To StreetHoan Kiem DistrictHanoi, VietnamTel : (84 4) 9349 273Fax : (84 4) 9344 301

M-Solutions Technology (Thailand) Co., Ltd.5th Floor, Unit 3, M.Thai Tower,All Seasons Place, 87 Wireless RoadPhatumwan, Bangkok 10330, ThailandTel : (66 2) 654 1181Fax : (66 2) 654 1184

49

50 Report of the Directors54 Auditors’ Report55 Balance Sheets57 Consolidated Profit and Loss Statement58 Statements of Changes in Equity59 Consolidated Cash Flow Statement61 Notes to the Financial Statements

93 Statement of Directors94 Additional Information for Shareholders95 Analysis of Shareholders97 Analysis of Warrantholders98 Notice of Annual General Meeting101 Letter to Shareholders

Proxy Form

Financial Contents

50

The directors present their report together with the audited financial statements of the company and the consolidatedfinancial statements of the group for the financial year ended December 31, 2003.

1 DIRECTORS

The directors of the company in office at the date of this report are:

Foo Suan SaiHan Juat HoonToshiaki SuzukiWong Meng YengChew Thiam KengEu Yee Kui, Alexander Jr @ Eu Sandy

2 ARRANGEMENTS TO ENABLE DIRECTORS TO ACQUIRE BENEFITSBY 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 arrangementwhose object is to enable the directors to acquire benefits by means of the acquisition of shares or debentures inthe company or any other body corporate.

3 DIRECTORS’ INTERESTS IN SHARES AND DEBENTURES

The directors of the company holding office at the end of the financial year had no interests in the share capitaland debentures of the company and related corporations as recorded in the register of directors’ shareholdingskept by the company under Section 164 of the Singapore Companies Act except as follows:

Shareholdings registeredin name of director

Name of directors and company At beginning At endin which interests are held of year of year

The Company Ordinary shares of $0.05 each

Foo Suan Sai 117,906,500 118,202,500Han Juat Hoon 86,104,500 86,104,500Toshiaki Suzuki 500,000 500,000Wong Meng Yeng 30,000 30,000Chew Thiam Keng 30,000 30,000

Report of the Directors

51

3 DIRECTORS’ INTERESTS IN SHARES AND DEBENTURES (Continued)

Warrants registeredin name of director

Name of directors and company At beginning At endin which interests are held of year of year

The Company Warrants of $0.05 each

Foo Suan Sai 13,540,000 14,415,000Han Juat Hoon 11,481,000 11,481,000Wong Meng Yeng 4,000 4,000Chew Thiam Keng 4,000 4,000

Mr Foo Suan Sai and Mdm Han Juat Hoon are husband and wife and they are each deemed to be interested in theshares held by the other.

The directors’ interests as at January 21, 2004 were the same as those at the end of the year.

By virtue of Section 7 of the Singapore Companies Act, Mr Foo Suan Sai and Mdm Han Juat Hoon are deemedto have an interest in the company and in all related corporations of the company.

4 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 whichis required to be disclosed under Section 201(8) of the Singapore Companies Act, by reason of a contract madeby the company or a related corporation with the director or with a firm of which he is a member, or with acompany in which he has a substantial financial interest except as disclosed in the financial statements.

5 OPTIONS TO TAKE UP UNISSUED SHARES

During the financial year, no option to take up unissued shares of the company or any corporation in the groupwas granted.

6 OPTIONS EXERCISED

During the financial year, there were no shares of the company or any corporation in the group issued by virtueof the exercise of an option to take up unissued shares.

Report of the Directors

52 Report of the Directors

7 UNISSUED SHARES UNDER OPTION

At the end of the financial year, there were no unissued shares of the company or any corporation in the groupunder option except for 43,998,500 warrants to subscribe for ordinary shares of the company. Each warrantentitles its registered owner at anytime from the date of issue on November 20, 2000 to the date immediatelypreceding the fifth anniversary of the date of issue to subscribe for one new ordinary share of the company at anexercise price as determined by the abridged prospectus dated November 1, 2000.

8 AUDIT COMMITTEE

The Audit Committee of the Company is chaired by Wong Meng Yeng, an independent director, and includesChew Thiam Keng, and Eu Yee Kui, Alexander Jr @ Eu Sandy, both of whom are independent directors. TheAudit Committee has met 4 times since the last Annual General Meeting (“AGM”) and has reviewed the following,where relevant, with the executive directors, the external auditors and internal auditors of the company:

a) the audit plans and results of the external auditors’ examination and evaluation of the group’s systems ofinternal accounting controls;

b) the group’s financial and operating results and accounting policies;

c) the financial statements of the company and the consolidated financial statements of the group before theirsubmission to the directors of the company and the external auditors’ report on those financial statements;

d) the quarterly, half-yearly and annual announcements as well as the related press releases on the results andfinancial position of the company and the group;

e) the co-operation and assistance given by the management to the group’s external auditors; and

f) the re-appointment of the external auditors of the group.

53Report of the Directors

8 AUDIT COMMITTEE (Continued)

The Audit Committee has full access to and co-operation of the management and has been given the resourcesrequired for it to discharge its function properly. It also has full discretion to invite any director and executiveofficer to attend its meetings. The external auditors have unrestricted access to the Audit Committee.

ON BEHALF OF THE DIRECTORS

Foo Suan Sai Han Juat Hoon

54Auditors’ Report to the Members ofMulti-Chem Limited

We have audited the financial statements of Multi-Chem Limited as set out on pages 55 to 92 for the year ended December31, 2003. These financial statements are the responsibility of the company’s directors. Our responsibility is to express anopinion on these financial statements based on our audit. The financial statements for the financial year ended December31, 2002 were reported by auditors other than Deloitte & Touche, whose report dated April 4, 2003 expressed an unqualifiedopinion on those financial statements.

We conducted our audit in accordance with Singapore Standards on Auditing. Those Standards require that we plan andperform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. Anaudit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Anaudit also includes assessing the accounting principles used and significant estimates made by the directors, as well asevaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion:

a) the consolidated financial statements of the group and the balance sheet and the statement of changes in equityof the company are properly drawn up in accordance with the provisions of the Companies Act, Cap. 50 (the“Act”) and Singapore Financial Reporting Standards (“FRS”) so as to give a true and fair view of the state ofaffairs of the group and of the company as at December 31, 2003 and the results, changes in equity and cashflows of the group and changes in equity of the company for the year then ended on that date;

b) the accounting and other records required by the Act to be kept by the company and by those subsidiariesincorporated in Singapore of which we are the auditors have been properly kept in accordance with the provisionsof the Act.

We have considered the financial statements and auditors’ reports of all the subsidiaries of which we have not acted asauditors and also considered the financial statements of those subsidiaries which are not required by the laws of theircountries of incorporation to be audited, being financial statements that have been included in the consolidated financialstatements of the group. The names of these subsidiaries are stated in Note 11 to the financial statements.

We are satisfied that the financial statements of the subsidiaries that have been consolidated with the financial statementsof the company are in form and content appropriate and proper for the purposes of the preparation of the consolidatedfinancial 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 ofthe subsidiaries incorporated in Singapore, did not include any comment made under Section 207(3) of the Act.

DELOITTE & TOUCHECertified Public Accountants

William Lim Choon Hock(Appointed since October 8, 2003)

SingaporeMarch 8, 2004

55

Group CompanyNote 2003 2002 2003 2002

$’000 $’000 $’000 $’000ASSETS

Current assets:Cash and cash equivalents 5 8,611 15,972 7,604 14,126Trade receivables 6 12,752 8,063 5,589 5,325Other receivables and prepayments 7 529 1,501 8,441 10,194Inventories 8 2,218 1,710 949 1,362

Total current assets 24,110 27,246 22,583 31,007

Non-current assets:Other receivables and prepayments 7 - 32 - 32Investment in associate 9 1,835 2,711 1,835 2,711Investments in joint venture 10 - 1,182 - 1,182Investments in subsidiaries 11 - - 17,117 3,036Other investments 12 351 351 351 351Property, plant and equipment 13 33,059 26,898 11,385 16,929

Total non-current assets 35,245 31,174 30,688 24,241

Total assets 59,355 58,420 53,271 55,248

LIABILITIES AND EQUITY

Current liabilities:Trade payables 14 3,534 2,083 1,528 1,095Bills payables 15 4,892 - 4,892 -Other payables 16 1,041 729 3,165 2,451Current portion of long-term borrowings 17 339 7,478 - 7,128Current portion of finance leases 18 123 27 100 -Income tax payable 1,078 1,284 937 1,257

Total current liabilities 11,007 11,601 10,622 11,931

See accompanying notes to financial statements.

Balance Sheetsas at December 31, 2003

56

Group CompanyNote 2003 2002 2003 2002

$’000 $’000 $’000 $’000Non-current liabilities:

Long-term borrowings 17 2,715 3,151 - -Convertible notes 19 3,183 - 3,183 -Other payables 16 100 440 100 440Finance leases 18 117 23 117 -Deferred tax 20 1,130 1,530 1,100 1,530

Total non-current liabilities 7,245 5,144 4,500 1,970

Minority interests 168 119 - -

Capital and reserves:Issued capital 21 15,674 15,863 15,674 15,863Reserves 22 14,187 14,157 14,607 14,188Accumulated profits 11,074 11,536 7,868 11,296

Total equity 40,935 41,556 38,149 41,347

Total liabilities and equity 59,355 58,420 53,271 55,248


Balance Sheetsas at December 31, 2003

57

GroupNote 2003 2002

$’000 $’000

REVENUE 23 34,041 26,698

Cost of sales (23,897) (20,285)

GROSS PROFIT 10,144 6,413

Other operating income 24 879 893Distribution expenses (619) (716)Administration expenses (4,662) (3,110)Other operating expenses 25 (1,545) (1,637)

PROFIT FROM OPERATIONS 26 4,197 1,843

Finance costs 27 (771) (762)Loss from joint venture (98) (21)(Loss) Income from associate (406) 927

PROFIT BEFORE INCOME TAX 2,922 1,987

Income tax expense 28 (734) (373)

PROFIT AFTER TAXATION 2,188 1,614

Minority interests (49) (9)

NET PROFIT ATTRIBUTABLE TO SHAREHOLDERS 2,139 1,605

Basic earnings per share (cents) 35 0.68 0.50

Fully diluted earnings per share (cents) 35 0.66 0.49


Consolidated Profit and Loss StatementYear ended December 31, 2003

58

ConvertibleCapital notes -

Issued Share redemption Capital Translation equity Accumulatedcapital premium reserve reserve reserve portion profits Total$’000 $’000 $’000 $’000 $’000 $.000 $’000 $’000

Group

Balance at December 31, 2001 16,500 11,351 - 2,200 (5) - 12,237 42,283Net profit for the year - - - - - - 1,605 1,605Share buy back (637) - 637 - - - (2,306) (2,306)Foreign currency translation

differences - - - - (26) - - (26)

Balance at December 31, 2002 15,863 11,351 637 2,200 (31) - 11,536 41,556Net profit for the year - - - - - - 2,139 2,139Share buy back (Note 21) (189) - 189 - - - (617) (617)Dividends paid (Note 29) - - - - - - (1,984) (1,984)Issued during the year - - - - - 230 - 230Foreign currency translation

differences - - - - (389) - - (389)

Balance at December 31, 2003 15,674 11,351 826 2,200 (420) 230 11,074 40,935

ConvertibleCapital notes -

Issued Share redemption Capital equity Accumulatedcapital premium reserve reserve portion profits Total$’000 $’000 $’000 $’000 $’000 $’000 $’000

Company

Balance at December 31, 2001 16,500 11,351 - 2,200 - 12,557 42,608Net profit for the year - - - - - 1,045 1,045Share buy back (637) - 637 - - (2,306) (2,306)

Balance at December 31, 2002 15,863 11,351 637 2,200 - 11,296 41,347Net loss for the year - - - - (827) (827)Share buy back (Note 21) (189) - 189 - - (617) (617)Dividend paid (Note 29) - - - - - (1,984) (1,984)Issued during the year - - - - 230 - 230

Balance at December 31, 2003 15,674 11,351 826 2,200 230 7,868 38,149


Statements of Changes in EquityYear ended December 31, 2003

59Consolidated Cash Flow StatementYear ended December 31, 2003

2003 2002$’000 $’000

CASH FLOWS FROM OPERATING ACTIVITIES:Profit before income tax 2,922 1,987Adjustments for:

(Gain) Loss on disposal of plant and equipment (123) 1,398Depreciation expense 5,554 6,360Interest expense 99 29Interest income (293) (420)Amortisation of warrant issue expenses 111 120Amortisation of discount on transferable loan facility 672 733Allowance for impairment in value of investments 1,084 110Loss on disposal of interest in subsidiary - 12Loss (Income) from associate 406 (927)Loss from joint venture 98 21

Operating profit before working capital changes 10,530 9,423

Trade receivables (4,689) (1,417)Other receivables 893 2Inventories (508) (347)Trade and other payables and accrued liabilities 1,423 963

Cash generated from operations 7,649 8,624

Interest received 293 420Income tax paid (1,290) (1)Interest paid (99) (29)

Net cash from operating activities 6,553 9,014


60 Consolidated Cash Flow StatementYear ended December 31, 2003

2003 2002$’000 $’000

CASH FLOWS FROM INVESTING ACTIVITIES:Decrease in short-term investment - 2,616Purchase of property, plant and equipment (7,469) (6,618)Dividend from associate 420 2,175Proceeds from disposal of plant and equipment 758 2,543Proceeds from disposal of interest in subsidiary - 88

Net cash (used in) from investing activities (6,291) 804

CASH FLOWS FROM FINANCING ACTIVITIES:Decrease in finance leases (27) (28)Decrease in short-term borrowings - (839)Proceeds from issuance of convertible notes 3,413 -Dividend payout (1,984) -Repayment of long-term borrowings (8,247) (4,449)Share buy back (617) (2,306)

Net cash used in financing activities (7,462) (7,622)

NET EFFECT OF EXCHANGE RATE CHANGES IN CONSOLIDATING FOREIGN SUBSIDIARIES (161) 308

Net (decrease) increase in cash and cash equivalents (7,361) 2,504Cash and cash equivalent at beginning of year (Note 5) 15,972 13,468

CASH AND CASH EQUIVALENT AT END OF YEAR (NOTE 5) 8,611 15,972

During 2003, the group acquired property, plant and equipment with an aggregate cost of $12,578,000 (2002 : $6,696,000)of which $217,000 (2002 : $78,000) and $4,892,000 (2002 : Nil) were acquired by means of finance leases and billspayables respectively.


61Notes to the Financial StatementsDecember 31, 2003

1 GENERAL

The company is incorporated in the Republic of Singapore with its registered office and principal place of businessat 11 Tuas Avenue 5, Singapore 639337. The financial statements are expressed in Singapore dollars.

The principal activities of the company are the provision of value added printed circuit board (“PCB”) manufacturingservices, mainly in precision drilling, to PCB fabricators and the distribution of specialty chemicals and otherPCB related products and equipment to PCB fabricators.

The principal activities of the subsidiaries are disclosed in Note 11 to the financial statements.

The financial statements of the company and of the group for the year ended December 31, 2003 were authorisedfor issue by the Board of Directors on March 8, 2004.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF ACCOUNTING – The financial statements are prepared in accordance with the historical cost conventionand are drawn up in accordance with the provisions of the Singapore Companies Act and Singapore FinancialReporting Standards (“FRS”) and Interpretations of Financial Reporting Standards (“INT FRS”).

The company and group have adopted all the applicable new/revised FRS and INT FRS which became effectiveduring the year. The adoption of the new/revised FRS and INT FRS does not affect the results of the company andof the group for the current or prior periods.

BASIS OF CONSOLIDATION – The consolidated financial statements incorporate the financial statements of thecompany and enterprises controlled by the company (its subsidiaries) made up to December 31 each year.Control is achieved when the company has the power to govern the financial and operating policies of an investeeenterprise so as to obtain benefits from its activities. On acquisition, the assets and liabilities of the relevantsubsidiaries are measured at their fair values at the date of acquisition. The interest of minority shareholders isstated at the minority’s proportion of the fair values of the assets and liabilities recognised. The results ofsubsidiaries acquired or disposed of during the year are included in the consolidated profit and loss statementfrom the effective date of acquisition or 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 linewith those used by other members of the group. All significant intercompany transactions and balances betweengroup enterprises are eliminated fully on consolidation.

Associates are entities over which the group exercises significant influence, through participation in the financialand operating policy decisions of the investee. The equity method of accounting is used in both the consolidatedfinancial statements and separate financial statements of the company.

Joint ventures are those entities whose activities the group has joint control over by contractual agreement. Theequity method is used.

62 Notes to the Financial StatementsDecember 31, 2003

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

In the company’s financial statements, investment in subsidiaries is carried at cost less any impairment in netrecoverable value that has been recognised in the profit and loss statement.

FINANCIAL ASSETS – The company’s and group’s principal financial assets are cash and balances, trade andother receivables. Trade and other receivables are stated at their nominal value as reduced by appropriateallowances for estimated irrecoverable amounts.

Long-term investments, where the company and the group are not in a position to exercise control or significantinfluence, are stated at cost less impairment losses recognised when the investment’s carrying amount exceedsits estimated recoverable amount.

FINANCIAL LIABILITIES AND EQUITY – Financial liabilities and equity instruments are classified according tothe substance of the contractual arrangements entered into. Debt instruments issued which carry a right toconvert to equity that are dependent on the outcome of uncertainties beyond the control of both the Group andthe holder, are classified as liabilities except where the possibility of non-conversion is remote.

Significant financial liabilities include finance lease obligations, interest-bearing bank loans and overdrafts,convertible loan notes and trade and other payables.

The accounting policy adopted for finance lease obligations is outlined below.

Interest-bearing bank loans and overdrafts and convertible loan notes are recorded at the proceeds received, netof direct issue costs. Finance charges, including premiums payable on settlement or redemption, are accountedfor on an accrual basis and are added to the carrying amount of the instrument to the extent that they are notsettled in the period in which they arise.

Trade and other payables are stated at their nominal value.

Equity instruments are recorded at the fair value of the consideration received, net of direct issue costs.

CONVERTIBLE BONDS – Convertible bonds are regarded as compound instruments, consisting of a liabilitycomponent and an equity component. At the date of issue, the fair value of the liability component is estimatedusing the prevailing market interest rate for similar non-convertible debt. The difference between the proceeds ofissue of the convertible bonds and the fair value assigned to the liability component, representing the embeddedoption to convert the liability into equity of the group, is included in equity.

The interest expense on the liability component is calculated by applying the prevailing market interest rate forsimilar non-convertible debt to the instrument. The difference between this amount and the interest paid isadded to the carrying value of the convertible bonds.

63Notes to the Financial StatementsDecember 31, 2003


MINORITY INTEREST – Minority interest is stated at the appropriate proportion of the post-acquisition carryingamounts of the net assets of the subsidiary.

OTHER INVESTMENTS – Investments held for long-term are stated at cost less any impairment in net recoverablevalue and investments held for short-term are stated at the lower of cost or market value determined on a portfolio basis.

INVENTORIES – Inventories are measured at the lower of cost (FIFO, weighted average method) and net realisablevalue. Cost includes all costs of purchase, costs of conversion and other costs incurred in bringing the inventoriesto their present location and condition. Net realisable value represents the estimated selling price less all estimatedcosts to completion and costs to be incurred in marketing, selling and distribution.

PROPERTY, PLANT AND EQUIPMENT – Property, plant and equipment are carried at, less accumulateddepreciation and any impairment loss where the recoverable amount of the asset is estimated to be lower than itscarrying amount.

Depreciation is charged so as to write off the cost of assets, other than freehold, over their estimated useful lives,using the straight-line method, on the following bases:

Freehold building - 2%Leasehold properties - over terms of lease which are from 3% to 4%Factory plant and machinery - 10% to 20%Office plant and equipment - 7% to 20%

The useful lives for drilling machines ranged from 5 years to 15 years. During the years 2002 and 2003, thegroup changed its estimated useful lives of certain drilling machines transferred to China subsidiaries, from 5years to 10 to 15 years. The effects of these changes in estimated useful lives of drilling machines are thereduction of depreciation charges, and hence increase of profit before taxation, of the group by approximately$2.4 million (2002 : $2.3 million).

Depreciation is not provided on freehold land.

Fully depreciated assets still in use are retained in the financial statements.

Assets held under finance lease arrangements are depreciated over their expected useful lives on the same basisas owned assets or, where shorter, the term of the relevant leases.



GOODWILL – Goodwill arising on consolidation represents the excess of the cost of acquisition over the group’sinterest in the fair value of the identifiable assets and liabilities of a subsidiary, associate or jointly controlledentity at the date of acquisition. Goodwill is recognised as an asset and amortised on a straight-line basis overits estimated useful life.

Goodwill arising from an acquisition of an associate is included within the carrying amount of the associate.Goodwill arising on the acquisition of subsidiaries and jointly controlled entities is presented separately in thebalance sheet.

On disposal of a subsidiary, associate or jointly controlled entity, the attributable amount of unamortised goodwillis included in the determination of the profit or loss on disposal.

IMPAIRMENT OF ASSETS – At each balance sheet date, the company and the group reviews the carrying amountsof their tangible and intangible assets to determine whether there is any indication that those assets have sufferedan impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order todetermine the extent of the impairment loss (if any). When it is not possible to estimate the recoverable amountof an individual asset, the group estimates the recoverable amount of the cash-generating unit to which the assetbelongs. If the recoverable amount of an asset/cash-generating unit is estimated to be less than its carryingamount, the carrying amount of the asset/cash-generating unit is reduced to its recoverable amount. Impairmentlosses are recognised as an expense immediately, unless the relevant asset is land or buildings at a revaluedamount, 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 increasedto the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does notexceed 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.

PROVISIONS – Provisions are recognised when the group has a present obligation as a result of a past eventwhere it is probable that the obligation will result in an outflow of economic benefits that can be reasonablyestimated.

LEASES – Leases are classified as finance leases whenever the terms of the lease transfer substantially all therisks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Assets held under finance leases are recognised as assets of the group at their fair value at the date of acquisition.The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation. Financecosts, which represent the difference between the total leasing commitments and the fair value of the assets acquired,are charged to the income statement over the term of the relevant lease using the effective interest rate method.

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Rentals payable under operating leases are charged to income on a straight-line basis over the term of therelevant lease.

REVENUE RECOGNITION – Revenue from the sale of goods is recognised when significant risks and rewards ofownership are transferred to the buyer and the amount of revenue and the costs of the transaction can be measuredreliably. Revenue from the rendering of services that are of a short duration is recognised when the services arecompleted.

Interest income is accrued on a time proportionate basis, by reference to the principal outstanding and at theinterest rate applicable, on an effective yield basis.

Dividend income from investments is recognised when the right to receive payment has been established.

RETIREMENT BENEFIT COSTS – Payments to defined contribution retirement benefit plans (including state-managed retirement benefit schemes, such as the Singapore Central Provident Fund) are charged as an expensewhen incurred.

INCOME TAX – Tax expense is determined on the basis of tax effect accounting, using the liability method, andit is applied to all significant temporary differences arising between the carrying amount of assets and liabilitiesin the financial statements and the corresponding tax bases used in the computation of taxable profit.

Deferred tax is charged or credited to the profit and loss statement, except when it relates to items charged orcredited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets andliabilities are offset when they relate to income taxes levied by the same tax authority.

FOREIGN CURRENCY TRANSACTIONS AND TRANSLATION – Transactions in foreign currencies are recordedusing the rates ruling on the dates of the transactions. At each balance sheet date, recorded monetary balancesand balances carried at fair value that are denominated in foreign currencies are reported at the rates ruling at thebalance sheet date. All realised and unrealised exchange adjustment profits and losses are dealt with in the profitand loss statement.

For inclusion in the consolidated financial statements, assets and liabilities of the foreign entities are translatedat the rates of exchange approximating those ruling at the balance sheet date. The profit and loss statements aretranslated at the average rates of exchange for the year, and the opening net investment in the foreign entities istranslated at the historical rates. The resulting currency translation differences are taken to the currency translationreserve. On disposal of a foreign entity, the accumulated currency translation differences are recognised in theprofit and loss statement as part of the profit or loss on disposal.

Notes to the Financial StatementsDecember 31, 2003



CASH – Cash for the cash flow statement includes cash and bank balances and fixed deposits which haveoriginal maturity of 3 months or less.

WARRANTS – The proceeds from the issue of warrants are credited to a capital reserve. As and when thewarrants are exercised, the subscription price for the warrants exercised will be transferred from the capitalreserve to the share premium account. Upon the expiry of the warrants, the balance of the capital reserverepresents the subscription price for the warrants not exercised and will be available for distribution to shareholderson the expiry date.

TRANSFERABLE LOAN FACILITY (“TLF”) – The portion of the proceeds of the issue allocated to the warrants iscredited to a capital reserve. The balance of the proceeds of the issue is allocated to the TLF, thus resulting in therecording of the TLF at a discount. This discount is amortised and charged to the income statement over the lifeof the TLF. The carrying amount of the TLF in the balance sheet therefore increases by a corresponding amountas and when the TLF discount is amortised.

REPURCHASE OF SHARE CAPITAL – Where share capital recognised as equity is repurchased, the issued sharecapital is reduced by the par value of the shares repurchased and transferred to a capital redemption reserve. Thecosts associated with the repurchase are set off against accumulated profits.

3 FINANCIAL RISKS AND MANAGEMENT

The group’s overall risk management programme seeks to minimise potential adverse effects on the financialperformance of the group.

(i) Credit risk

The group has no significant concentration of credit risk. The group has policies in place to ensure that thesales of products and services are made to customers with an appropriate credit history. Cash and fixeddeposits are held with creditworthy financial institutions.

(ii) Interest rate risk

The group’s policy is to maintain cash equivalent and borrowings in fixed rate instruments.

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3 FINANCIAL RISKS AND MANAGEMENT (Continued)

(iii) Foreign currency risk

The group transacts business in various foreign currencies and therefore is exposed to foreign exchangerisk. These risks are managed through natural hedges whenever possible.

(iv) Liquidity risk

The group maintains sufficient cash and cash equivalents, and has sufficient internally generated cashflows to finance its activities.

(v) Fair values of financial assets and financial liabilities

The carrying amounts of financial assets and financial liabilities reported in the balance sheet approximatethe fair values of those assets and liabilities.

4 RELATED COMPANY TRANSACTIONS

Related parties are entities with common direct or indirect shareholders and or directors or management. Partiesare considered to be related if one party has the ability to control the other party or exercise significant influenceover the other party in making financial and operating decisions. They include an associate and a joint venture.

Some of the group’s transactions and arrangements are with related parties and the effect of these on the basisdetermined between the parties are reflected in these financial statements.

Significant related party transactions:Group

2003 2002$’000 $’000

ASSOCIATEPurchases of goods 1,289 1,256Purchase of plant and equipment 27 5Sales of plant and equipment (18) (434)Sales of goods and service income (623) (623)Rental of plant and equipment (166) (130)Interest income (13) (19)


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4 RELATED COMPANY TRANSACTIONS (Continued)Group and Company2003 2002$’000 $’000

JOINT VENTURESales of goods - (95)Sales of plant and equipment (402) (70)Other expenses 31 -

5 CASH AND CASH EQUIVALENTSGroup Company

2003 2002 2003 2002$’000 $’000 $’000 $’000

Fixed deposits 3,421 9,202 3,421 9,202Cash and bank balances 5,190 6,770 4,183 4,924

Cash and cash equivalents at end of year 8,611 15,972 7,604 14,126

6 TRADE RECEIVABLESGroup Company

2003 2002 2003 2002$’000 $’000 $’000 $’000

Outside parties 12,862 8,101 5,407 5,334Less: Allowances for doubtful debts (158) (211) (120) (211)

12,704 7,890 5,287 5,123Subsidiaries (Note 11) - - 255 29Associate (Note 9) 48 10 47 10Joint venture (Note 10) - 163 - 163

12,752 8,063 5,589 5,325

The amounts due from subsidiaries, the associate and joint venture are unsecured, interest-free and repayableon demand.


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7 OTHER RECEIVABLES AND PREPAYMENTSGroup Company

2003 2002 2003 2002$’000 $’000 $’000 $’000

Other receivables 112 193 31 193Less: Allowance for doubtful debts (31) (16) (31) (16)

81 177 - 177

Subsidiaries (Note 11) - - 8,392 8,760Less: Allowance for doubtful debts - - (200) -

- - 8,192 8,760

Associate (Note 9) 39 447 26 419Deferred expenditure - 111 - 111Prepayments 141 44 29 11Deposits for services 268 189 194 183Joint venture (Note 10) - 533 - 533

529 1,501 8,441 10,194

Non-current portion:Other receivable - 32 - 32

- 32 - 32

The amounts due from subsidiaries, associate and the joint venture are unsecured, interest-free and repayableon demand.

The non-trade other receivable is repayable in equal monthly instalments over 36 months from March 2001.


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8 INVENTORIESGroup Company

2003 2002 2003 2002$’000 $’000 $’000 $’000

Trading inventories:At costs 2,156 1,710 949 1,362At net realisable value 62 - - -

2,218 1,710 949 1,362

9 INVESTMENT IN ASSOCIATEGroup and Company2003 2002$’000 $’000

Unquoted equity shares, at cost 1,050 1,050Add: Share of post-acquisition reserves 1,205 3,836Less: Dividends (420) (2,175)

Net 1,835 2,711

The significant associate of the group is set out below:

Principal activities/ Percentage of equityName of company Country of incorporation held by the company

2003 2002% %

Hawera Precision Tec Supply of precision drills and 35 35Pte Ltd (1) provision of regrinding services (Singapore)

(1) Audited by Deloitte & Touche, Singapore.


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10 INVESTMENT IN JOINT VENTUREGroup and Company2003 2002$’000 $’000

Unquoted equity shares, at cost 1,161 1,161Add: Share of accumulated (losses) profits and reserves (77) 21Less: Impairment loss (1,084) -

- 1,182

Details of the joint venture are as follows:

Principal activities/ Percentage of equityName of company Country of incorporate held by the Company

2003 2002% %

Multi-Chem Precision In the process of liquidation 50 50Philippines Corporation (1)

(1) Audited by another firm of auditors, SyCip Gorves Velayo & Co.

The share of results, assets and liabilities is as follows:

Group and Company2003 2002$’000 $’000

Current assets - 401Non-current assets - 1,210Current liabilities - 608Net loss after tax 98 21


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11 INVESTMENT IN SUBSIDIARIESCompany

2003 2002$’000 $’000

Unquoted equity shares, at cost 17,335 3,036Less: Impairment loss (238) -

17,117 3,036

Principal activities/ Percentage of equity Company’s costName of company Country of incorporation held by the Company of investment

2003 2002 2003 2002% % $’000 $’000

Multi-Chem (Suzhou) Provision of printed circuit 100 100 13,257 1,851Co., Ltd.(2) (4) board designing, manufacturing,

processing services and thedistribution of related products(People’s Republic of China)

Multi-Chem Electronics Provision of printed circuit 100 100 2,603 -(Wuxi) Co., Ltd.(2) (4) board manufacturing services

and the distribution ofrelated products(People’s Republic of China)

M.Tech Products Distribution of hardware 90 90 900 900Pte. Ltd.(1) and software relating to

internet and network products,and provision of maintenanceservices for such products(Singapore)

M-Solutions Technology Distribution of hardware and 49 - 310 -(Thailand) Co. Ltd.(5) (7) software relating to internet

and net work products, andprovision of maintenanceservices of such products(Thailand)


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11 INVESTMENT IN SUBSIDIARIES (Continued)

Principal activities/ Percentage of equity Company’s costName of company Country of incorporation held by the Company of investment

2003 2002 2003 2002% % $’000 $’000

M-Security Technology Distribution of information 100 100 47 47Sdn. Bhd.(3) technology products and

related services(Malaysia)

SecureOneAsia Pte. Provision of internet security 100 100 - (6) - (6)

Ltd.(1) services and the operation andprovision of internet andtelecommunication services(Singapore)

M. Security Technology Distribution of hardware and 100 - - (6) -Indochina Pte Ltd (1) software relating to internet(formerly known as and net work products, and M. Security Indochina provision of maintenance Pte Ltd) services of such products

(Singapore)

M-Precision Tech Sdn. Provision of value added 100 100 238 238Bhd.(3) printed circuit board (“PCB”)

manufacturing services, mainlyin precision drilling, to PCBfabricators(Malaysia)

17,355 3,036

(1) Audited by Deloitte & Touche, Singapore.(2) Audited by overseas member firms of Deloitte Touche Tohmatsu for consolidation purposes.(3) Audited by another firm of auditors, Horwath Wong & Co. in Malaysia.(4) Audited by another firm of auditors, Jiangsu Huaxing Certified Public Accountants Co., Ltd in People’s Republic

of China.(5) Audited by Sum Hak-Ngan A.M.C. Co. Ltd in Thailand.(6) Cost of investment is less than $1,000.(7) The company controls the voting rights and the financial and operating policies of M-Solutions Technology

(Thailand) Co. Ltd.. Accordingly, this company is accounted for as a subsidiary.


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11 INVESTMENT IN SUBSIDIARIES (Continued)

During the year 2003, the company increased the registered capital of its subsidiary, Multi-Chem (Suzhou) Co.,Ltd from US$2,800,000 to US$20,000,000. The company contributed US$7,605,000 (S$13,257,000) towardsthe registered capital as at December 31, 2003. The registered capital is to be fully contributed by June 2006.

During the year 2003, the company contributed US$1,490,000 (S$2,603,000) towards the registered capital ofits subsidiary, Multi-Chem Electronics (Wuxi) Co., Ltd. of US$5,000,000. The registered capital is to be fullycontributed by October 2005.

The company incorporated a wholly-owned subsidiary in Thailand known as M-Solutions Technology (Thailand)Co., Ltd on April 18, 2003. The paid-up capital of this subsidiary is $310,000.

The company incorporated a wholly-owned subsidiary in Singapore known as M-Security Technology IndochinaPte Ltd on February 8, 2003. The paid-up capital of this subsidiary is $2.

12 OTHER INVESTMENTSGroup and Company2003 2002$’000 $’000

Cost:Club membership 281 281Quoted unit trust fund 500 500

781 781Less: Impairment loss in value of unit trust fund (430) (430)

351 351

Market value:Quoted unit trust fund 85 70


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13 PROPERTY, PLANT AND EQUIPMENT

Office FactoryFreehold Freehold Leasehold plant and plant and

land building properties machinery machinery Total$’000 $’000 $’000 $’000 $’000 $’000

Group

Cost:At beginning of year 426 1,184 4,292 1,459 37,448 44,809Exchange differences (10) (27) - (1) (213) (251)Additions - - - 1,486 11,092 12,578Disposals - - - (541) (8,218) (8,759)

At end of year 416 1,157 4,292 2,403 40,109 48,377

Accumulated depreciation:At beginning of year - 37 452 838 16,584 17,911Exchange differences - (1) - - (22) (23)Depreciation for the year - 23 174 485 4,872 5,554Disposals - - - (372) (7,752) (8,124)

At end of year - 59 626 951 13,682 15,318

Depreciation for last year - 24 229 239 5,868 6,360

Net book value:At beginning of year 426 1,147 3,840 621 20,864 26,898

At end of year 416 1,098 3,666 1,452 26,427 33,059


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13 PROPERTY, PLANT AND EQUIPMENT (Continued)

The freehold land and building of the group have been pledged as security for borrowing facilities granted to asubsidiary. These facilities have not been utilised at the balance sheet date.

Office FactoryLeasehold plant and plant andproperties machinery machinery Total

$ $ $ $

Company

Cost:At beginning of year 4,291 1,325 22,056 27,672Additions - 652 2,395 3,047Disposals - (519) (6,913) (7,432)

At end of year 4,291 1,458 17,538 23,287

Accumulated depreciation:At beginning of year 451 820 9,472 10,743Depreciation for the year 174 320 3,759 4,253Disposals - (361) (2,733) (3,094)

At end of year 625 779 10,498 11,902

Depreciation for last year 229 224 5,229 5,682

Net book value:At beginning of year 3,840 505 12,584 16,929

At end of year 3,666 679 7,040 11,385


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13 PROPERTY, PLANT AND EQUIPMENT (Continued)

Description of properties held by the group and the company are as follows:

Location Description Tenure Net book value2003 2002$’000 $’000

11 Tuas Avenue 5 Factory building 26 years with effect 3,666 3,840Singapore 639337 May 1, 2000

PTD37441, Jalan Freehold land Freehold 1,514 1,573Perindustrian 3, and buildingKawasan PerindustrianSenai 2, 81400Senai, Johor,Malaysia

14 TRADE PAYABLES

Group Company2003 2002 2003 2002$’000 $’000 $’000 $’000

Outside parties 2,306 1,106 848 578Subsidiaries (Note 11) - - - 58Associate (Note 9) 488 401 281 179Joint venture (Note 10) 4 - 4 -Accrued liabilities 736 576 395 280

3,534 2,083 1,528 1,095


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15 BILLS PAYABLES

Bills payables are unsecured, interest-free and repayable in 180 days.

16 OTHER PAYABLESGroup Company

2003 2002 2003 2002$’000 $’000 $’000 $’000

Outside parties 367 636 367 554Director 69 70 - -Subsidiaries (Note 11) - - 2,679 1,881Associate (Note 9) 52 23 52 16Joint venture (Note 10) 4 - 4 -Others 549 - 63 -

1,041 729 3,165 2,451

Outside parties - non-current 100 440 100 440

The non-current other payable to outside parties is unsecured, interest free and repayable in equal monthlyinstalments over 32 months from October 2001.

The advances from the director are unsecured, interest free and without fixed repayment terms.

The amounts due to subsidiaries, associates and joint venture are unsecured, interest free and repayable ondemand.


79

17 LONG-TERM BORROWINGSGroup Company

2003 2002 2003 2002$’000 $’000 $’000 $’000

Transferable loan facility (“TLF”) - 7,800 - 7,800Less: Discount on TLF - (1,405) - (1,405)Add: Discount accrued during the year –

charged to income statement - 733 - 733

Net - 7,128 - 7,128Bank loans (secured) 3,054 3,501 - -

3,054 10,629 - 7,128

Current portion – TLF - 7,128 - 7,128– Bank loans 339 350 - -

339 7,478 - 7,128Non-current portion – Bank loans 2,715 3,151 - -

3,054 10,629 - 7,128

The bank loans of the subsidiary are covered by a corporate guarantee from Multi-Chem Limited. The bankloans are repayable by way of 20 quarterly instalments over 5 years. The average interest rates are 3.39% perannum.

In 2000, the company issued 44,000,000 warrants in conjunction with a transferable loan facility (“TLF”). TheTLF is repayable in 6 semi-annual instalments comprising 5 equal principal instalments of $3.8 million each anda final instalment of $4 million. The first instalment commenced on May 1, 2001. The interest rate payable onthe TLF is 1.4% per annum above the 6-month swap offer rate (which was 2.9375%) during the year and ispayable semi-annually in arrears.

As at December 31, 2003, TLF has been fully repaid.


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18 OBLIGATIONS UNDER FINANCE LEASESPresent value

Minimum of minimumlease payments lease payments

2003 2002 2003 2002$’000 $’000 $’000 $’000

GROUPAmounts payable under finance leasesWithin one year 130 28 123 27In the second to fifth years inclusive 126 24 117 23

256 52 240 50Less: Future finance charges (16) (2)

Present value of lease obligations 240 50Less: Amount due for settlement within 12 months (123) (27)

Amount due for settlement after 12 months 117 23

Net book value of motor vehicles under finance leases 534 75

Present valueMinimum of minimum

lease payments lease payments2003 2002 2003 2002$’000 $’000 $’000 $’000

COMPANYAmounts payable under finance leasesWithin one year 107 - 100 -In the second to fifth years inclusive 125 - 117 -

232 - 217 -Less: Future finance charges (15) -

Present value of lease obligations 217 -Less: Amount due for settlement within 12 months (100) -

117 -

Net book value of motor vehicles under finance leases 474 -

The effective interest rates were 4.4% to 4.5% (2002 : 3.9%) per annum for the group and the company.


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19 CONVERTIBLE NOTES

In December 2002, the company entered into a non-binding agreement with an independent third party fundmanager for the issue of convertible notes of US$2 million to a fund managed by the said fund manager.

20 DEFERRED TAXGroup Company

2003 2002 2003 2002$’000 $’000 $’000 $’000

Deferred tax liabilities 1,130 1,714 1,100 1,714Deferred tax assets - (184) - (184)

Net position 1,130 1,530 1,100 1,530

The movement for the year in deferredtax position was as follows:

At beginning of year 1,530 2,630 1,530 2,630Reversal to income for the year (400) (1,100) (430) (1,100)

At end of year 1,130 1,530 1,100 1,530

The movement in deferred tax liabilities arises mainly from accelerated tax depreciation.


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21 ISSUED CAPITALGroup and Company

2003 2002 2003 2002Number of ordinary $ $shares of $0.05 each

Authorised 600,000,000 600,000,000 30,000 30,000

Issued and fully paid:At beginning of year 317,267,500 330,000,500 15,863 16,500Share buy back (3,780,000) (12,734,000) (189) (637)Shares issued - 1,000 - -*

At end of year 313,487,500 317,267,500 15,674 15,863

*less than $1,000

At the end of the financial year, there were 43,998,500 (2002 : 43,998,500) warrants to subscribe for ordinaryshares of the company. Each warrant entitles its registered owner at anytime from the date of issue on November20, 2000 to the date immediately preceding the fifth anniversary of the date of issue to subscribe for one newordinary share of the company at an exercise price as determined by the abridged prospectus dated November 1,2000.

Pursuant to the share buy back mandate approved by shareholders, the company repurchased 3,780,000 ordinaryshares of $0.05 each during the year at an average price of $0.163 per share, amounting to a total cost, includingbrokerage, of $0.617 million. The repurchase transactions were financed by internally generated funds. Theamounts were adjusted against the company’s share capital and accumulated profits. The share buy back mandateshall continue in force until the next annual general meeting of the company.


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22 RESERVESGroup Company

2003 2002 2003 2002$’000 $’000 $’000 $’000

Share premium account (1):At beginning and end of year 11,351 11,351 11,351 11,351

Capital reserve:At beginning and end of year 2,200 2,200 2,200 2,200

Capital redemption reserve (1):At beginning of year 637 - 637 -Share buy back (Note 19) 189 637 189 637

At end of year 826 637 826 637

Convertible notes – equity portion 230 - 230 -

Foreign currency translation reserve (1):At beginning of year (31) (5) - -Currency translation differences (389) (26) - -

At end of year (420) (31) - -

Total reserves 14,187 14,157 14,607 14,188

In 2000, the company issued 44,000,000 warrants at $0.05 each for cash to its existing shareholders on thebasis of one warrant for every five ordinary shares of $0.05 each held as at November 20, 2000 to the dateimmediately preceding the fifth anniversary of the date of issue to subscribe for one new ordinary share of thecompany at an exercise price as determined by the abridged prospectus dated November 1, 2000. As and whenthe warrants are exercised, the subscription price for the warrants exercised will be transferred from the capitalreserve to the share premium account. Upon the expiry of the warrants, the balance of the capital reserverepresents the subscription price for the warrants not exercised and will be available for distribution to shareholderson the expiry date.

The application of the share premium account is governed by Section 69-69F of the Companies Act.

The foreign currency translation reserve comprises all foreign exchange differences arising from the translationof the financial statements of foreign operations that are not integral to the operations of the company.

(1) The share premium account, capital reserve, capital redemption reserve and foreign currency translation reserveare not available for distribution as cash dividends.


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23 REVENUEGroup

2003 2002$’000 $’000

Drilling manufacturing services 18,507 13,411Sales of goods 15,534 13,287

34,041 26,698

24 OTHER OPERATING INCOMEGroup

2003 2002$’000 $’000

Commission 75 23Interest income – third parties 280 401Interest income – associate 13 19Rental of equipment 120 135Others 391 315

879 893

25 OTHER OPERATING EXPENSESGroup

2003 2002$’000 $’000

Allowance for diminution in value of investments (1,084) (110)Allowance for doubtful debts (412) (227)Allowance for stock obsolescene (87) -Bad debts recovered – trade 55 -Gain (Loss) on disposal of plant and equipment 123 (1,398)Loss on disposal of interest in subsidiary - (12)Foreign currency exchange adjustment (net) (140) 110

(1,545) (1,637)


85

26 PROFIT FROM OPERATIONS2003 2002

Number of employees at end of year (excluding directors) 538 138

Group2003 2002$’000 $’000

Staff costs excluding directors’ remuneration 2,668 1,605Contribution to defined contributions plan 279 161Non-audit fees paid to auditors of the company - 17Directors’ remuneration 1,248 1,191Directors’ fees 100 82

27 FINANCE COSTSGroup

2003 2002$’000 $’000

Amortisation of discount on transferable loan facility 672 733Interest expense – third parties 99 29

771 762


86

28 INCOME TAXGroup

2003 2002$’000 $’000

Current tax 1,084 1,304Deferred tax (400) (1,100)

684 204Share of associate tax 50 169

Total income tax expense 734 373

The income tax expense varied from the amount of income tax expense determine by applying the Singaporeincome tax rate of 22% to profit before income tax as a result of the following differences:

Group2003 2002$’000 $’000

Income tax expense at statutory rate 643 437Non-allowable expense items 988 1,667Capital investment allowances (232) (1,790)Tax-exempt income (Singapore) (23) (12)Tax-exempt income (PRC) (652) (116)Share of associate tax 50 169Other items (40) 18

734 373

Pursuant to the Chinese income tax regulations, the subsidiaries in the People’s Republic of China (“PRC”) areentitled to exemptions from PRC income tax for the first two years commencing from their first profit making yearfollowed by 50% reduction in their income tax for the next three years. A profit-making year is defined as the firstyear for which an enterprise would need to pay income tax after absorption of any loss carried forward.


87

29 DIVIDENDSGroup and Company2003 2002$’000 $’000

Dividends paid during the year:2002 final dividend of $0.081 per share less 22% tax 1,984 -

Subsequent to December 31, 2003, the directors of the company recommended that a final tax exempt dividendbe paid at $0.0095 per ordinary share and a final dividend be paid at $0.0042 per ordinary share less tax for thefinancial year just ended on the ordinary shares of the company. The proposed dividends are not accrued as aliability for the current financial year in accordance with FRS 10 – Events After The Balance Sheet Date.

30 OPERATING LEASE COMMITMENTS

At the balance sheet date, the commitments in respect of operating leases with a term of more than one year wereas follows:

Group Company2003 2002 2003 2002$’000 $’000 $’000 $’000

Within one year 445 306 101 125Within two to five years 844 666 405 501After five years - 2,118 - 2,118

Rental expense for the year 255 234 101 132

Operating lease payments represent rentals payable for the group’s leasehold properties and for the rented premisesof a subsidiary.


88

31 CAPITAL EXPENDITURE COMMITMENTS

Estimated amounts committed for future capital expenditure but not provided for in the financial statements:

Group and Company2003 2002$’000 $’000

Purchase of plant and equipment 3,209 1,815

At the balance sheet date, the company had outstanding capital investment commitment amounting toapproximately $27,078,000 (US$15,905,000) [2002 : $11,750,000 (US$6,755,000)] in respect of commitmentsto inject registered capital into its foreign subsidiaries (Note 11).

32 CONTINGENT LIABILITIESGroup and Company2003 2002$’000 $’000

Guarantees 15 20

33 OFF-BALANCE SHEET FINANCIAL INSTRUMENTS

In the ordinary course of business, the group and the company have entered into forward exchange contracts topurchase currencies for its purchase of goods.

At the balance sheet date, the group and the company have the following outstanding forward foreign exchangecontracts for hedging purposes:

Group and Company2003 2002

Sold JPY contracts - $3,287,000

- (JPY2,250,000)

The valuation of financial instruments not recognised in the balance sheet reflects amounts which the groupexpects to pay or receive to terminate the contracts or replace the contracts on their current market rates as at thebalance sheet date. The net fair value is insignificant.


89

34 DIRECTORS’ REMUNERATION AND FEES

The number of directors of the company whose remuneration and fees fall within the following ranges are as follows:Group

2003 2002$’000 $’000

Below $250,000 4 4$250,000 – $499,999 - -$500,000 and above 2 2

Total 6 6

35 EARNINGS PER SHARE

The basic earnings per share is calculated based on the group’s profit after income tax of $2,139,000(2002 : $1,605,000) and the weighted average number of ordinary shares in issue during the year of 314,919,000(2002 : 324,018,000).

The fully diluted earning per share is calculated based on the group profit after income tax of $2,139,000 (2002 :$1,605,000) and the weighted average number of ordinary shares of 323,245,000 (2002 : 326,666,000) assumingall the 43,998,500 (2002 : 43,998,500) warrants are fully converted into ordinary shares.

36 SEGMENT REPORTING

Business Segments : For management purposes, the group is organised into two operating divisions – drillingmanufacturing services and trade distribution. The divisions are the basis on which the group reports its primarysegment information. The drilling manufacturing services segment provides precision drilling services to PCBfabricators. The trade distribution segment relates to the distribution of specialty chemicals and other PCB –related products and equipment to PCB fabricators, as well as, distribution of hardware and software relating tointernet and network products and the provision of maintenance services for such products.

Segment results, assets, and liabilities includes items directly attributable to a segment as well as those that canbe allocated on a reasonable basis. Segment assets consists principally of receivables, inventories and property,plant and equipment. Segment liabilities include trade payables and accrued liabilities and short-term borrowings.Unallocated items mainly comprise cash and cash equivalents, investments, long-term borrowings and deferredtax. Segment capital expenditure is the total cost incurred during the year to acquire property, plant and equipmentdirectly attributable to each segment.

Geographical segments : The group’s two divisions operate in three principal geographical areas, Singapore, itshome country, China and in countries in the ASEAN region mainly Thailand, Malaysia and Philippines.

In presenting information on the basis of geographical segments, segment revenue is based on the countrieswhere the customers are located. Segment assets are based on the geographical location of the assets.


90

36 SEGMENT REPORTING (Continued)

Business Segments2003Group revenue and expenses

Drillingmanufacturing Trade

services distribution Consolidated$’000 $’000 $’000

Total revenue from external customers 18,507 15,534 34,041

Segment results 5,903 4,241 10,144Unallocated other income 879Unallocated corporate expenses (6,826)

Profit from operations 4,197Unallocated finance costs (771)Loss from associate (406)Loss from joint venture (98)

Profit before income tax 2,922Income tax expense (734)

Net profit after taxation 2,188

Group assets and liabilities

Segment assets 39,849 8,537 48,386Investment in associate 1,835Other investments 351Unallocated corporate assets 8,783

Total assets 59,355

Segment liabilities 10,552 2,038 12,590Unallocated corporate liabilities 5,642

Total liabilities 18,232

Other information

Capital expenditure 12,169 409 12,578Depreciation expense 5,305 249 5,554Non-cash expense other than depreciation 1,007 1,047 2,054


91


2002Group revenue and expenses

Drillingmanufacturing Trade

services distribution Consolidated$’000 $’000 $’000

Total revenue from external customers 13,411 13,287 26,698

Segment results 2,677 3,736 6,413

Unallocated other income 893Unallocated corporate expenses (5,463)

Profit from operations 1,843Unallocated finance costs (762)Income from associate 927Income from joint venture (21)

Profit before income tax 1,987Income tax expense (373)

Net profit after taxation 1,614

Group assets and liabilities

Segment assets 32,875 5,508 38,383Investment in associate 2,711Investment in joint venture 1,182Other investments 351Unallocated corporate assets 15,793

Total assets 58,420

Segment liabilities 10,993 1,239 12,232Unallocated corporate liabilities 4,513

Total liabilities 16,745

Other information

Capital expenditure 6,371 325 6,696Depreciation expense 6,182 178 6,360Non-cash expense (income) other than depreciation 1,136 (60) 1,076


92


Geographical segments

Revenue bygeographical market2003 2002$’000 $’000

Singapore 18,885 18,590ASEAN 6,050 5,246China 9,106 2,862

Total 34,041 26,698

Carrying amount Additions to property,of segment assets plant and equipment

2003 2002 2003 2002$’000 $’000 $’000 $’000

Singapore 19,476 25,129 2,657 6,452ASEAN 2,796 3,023 62 17China 26,114 10,231 9,859 227

Total 48,386 38,383 12,578 6,696


93Statement of Directors

In the opinion of the directors, the accompanying financial statements of the company and consolidated financial statementsof the group are drawn up so as to give a true and fair view of the state of affairs of the company and of the group as atDecember 31, 2003, and of the results of the group, changes in equity of the company and the group and cash flows of thegroup for the financial year then ended and at the date of this statement there are reasonable grounds to believe that thecompany will be able to pay its debts as and when they fall due.

ON BEHALF OF THE DIRECTORS

Foo Suan Sai Han Juat Hoon

March 8, 2004

94 Additional Information for Shareholders

Share Information Share Price Chart

Warrant Information Warrant Price Chart

In 2003 Highest Lowest Average As at 26/3/2004

Share Price (S$) 0.280 0.100 0.185 0.340

Share Volume 4,061,000 1,000* 426,492 269,000

In 2003 Highest Lowest Average As at 26/3/2004

Warrant Price (S$) 0.16 0.035 0.093 0.185

Warrant Volume 1,082,000 1,000* 197,527 220,000

Warrant exercise price : $0.150 Warrant expiry date : 26 November 2005 Outstanding balance : 43,998,000

* Lowest share and warrant volume do not take into account market days where no transaction is carried out.

95

Authorised Share Capital – S$30,000,000Issued & fully paid-up capital – S$15,674,400Class of Shares – Ordinary shares of $0.05 each fully paidVoting Rights – On show of hands : 1 vote for each member

On a poll : 1 vote for each ordinary share

DISTRIBUTION OF SHAREHOLDINGS

Range of Shareholdings Number of Shareholders Percentage No. of Shares Percentage

1 – 999 162 2.10 74,596 0.021,000 – 10,000 6,658 86.34 18,351,134 5.85

10,001 – 1,000,000 882 11.44 38,927,271 12.421,000,001 a n d a b o v e 9 0.12 256,134,999 81.71

TOTAL 7,711 100.00 313,488,000 100.00

SHAREHOLDING HELD IN THE HANDS OF PUBLIC

As at 26 March 2004, 22.60% of the issued ordinary shares of the Company is held by the public and therefore, Rule 723of the Listing Manual issued by SGX-ST is complied with.

Analysis of Shareholdersas at March 26, 2004

96 Analysis of Shareholdersas at March 26, 2004

MAJOR SHAREHOLDERS AS AT 26 MARCH 2004

No Name of Shareholder Number of Shares Held Percentage

1 Foo Suan Sai 116,980,000 37.322 Han Juat Hoon 85,174,500 27.173 Yaowalak Phoowarachai 37,425,000 11.944 United Overseas Bank Nominees Pte Ltd 7,197,000 2.305 Goh Kok Kian 3,105,000 0.996 Citibank Nominees Singapore Pte Ltd 2,026,000 0.657 DBS Nominees Pte Ltd 1,763,999 0.568 Kim Eng Securities Pte Ltd 1,291,000 0.419 Lee Eng Tian 1,172,500 0.3710 Raffles Nominees Pte Ltd 750,000 0.2411 DBS Vickers Securities (S) Pte Ltd 700,500 0.2212 Phillip Securities Pte Ltd 674,900 0.2213 G K Goh Stockbrokers Pte Ltd 641,121 0.2114 Tok Kim Cheng 600,000 0.1915 Ho Foon Phin 599,000 0.1916 Phua Soo Hong 538,500 0.1717 Oversea-Chinese Bank Nominees Pte Ltd 535,750 0.1718 UOB Kay Hian Pte Ltd 514,500 0.1619 Tay Lai Huat 508,000 0.1620 Suzuki Toshiaki 500,000 0.16

TOTAL 262,697,270 83.80

SUBSTANTIAL SHAREHOLDERS

Number of Ordinary Shares of $0.05 each fully paid (as at 26 March 2004)

Name of Substantial Shareholder Direct Interest Deemed Interest Total %

Foo Suan Sai 118,202,500 86,104,500 204,307,000 65.17Han Juat Hoon 86,104,500 118,202,500 204,307,000 65.17Yaowalak Phoowarachi 37,425,000 N.A. 37,425,000 11.94

Mr Foo Suan Sai and Mdm Han Juat Hoon are husband and wife and they are each deemed to be interested in the sharesheld by the other.

97Analysis of Warrantholdersas at March 26, 2004

DISTRIBUTION OF WARRANTHOLDINGS

Range of Warrantholdings Number of Warrantholders Percentage No. of Warrants Percentage

1 – 999 162 9.23 69,400 0.161,000 – 10,000 1,480 84.33 2,899,350 6.59

10,001 – 1,000,000 110 6.27 9,886,250 22.471,000,001 a n d a b o v e 3 0.17 31,143,000 70.78

TOTAL 1,755 100.00 43,998,000 100.00

MAJOR WARRANTHOLDERS AS AT 26 MARCH 2004

No Name of Warrantholder Number of Warrants Held Percentage

1 Foo Suan Sai 14,415,000 32.762 Han Juat Hoon 11,481,000 26.093 Yaowalak Phoowarachai 5,247,000 11.934 Chua Kim Fatt Paul 990,000 2.255 G K Goh Stockbrokers Pte Ltd 738,400 1.686 Neo Mok Choon 542,000 1.237 Herman Halim 532,000 1.218 Lee Eng Tian 491,000 1.129 OCBC Securities Private Limited 466,000 1.0610 Raffles Nominees Pte Ltd 410,000 0.9311 Phillip Securities Pte Ltd 383,000 0.8712 Rin Nan Yoong 250,000 0.5713 Chia William 206,000 0.4714 Neo Hock Chin 198,000 0.4515 Wong Yin Soon Andy 182,800 0.4216 Sjahnan Ayu 180,000 0.4117 Liew Chee Kong 138,000 0.3118 Chua Lian Chye 130,000 0.3019 Teo Su Ming Celine 125,000 0.2820 Ang Yong Sai 120,000 0.27

37,225,200 84.61

98

Resolution 1

Resolution 2

Resolution 3

Resolution 4

Resolution 5Resolution 6

Resolution 7

Resolution 8

Notice of Annual General Meeting

ORDINARY BUSINESS :

1. To receive and consider the Directors’ Report and Audited Accounts for the financial yearended 31 December 2003 and the Auditors’ Report thereon.

2. To approve the payment of Directors’ fees of S$100,000 for the financial year ended 31December 2003.

3. To declare a first and final dividend of 0.42 cents per ordinary share less income tax for thefinancial year ended 31 December 2003.

4. To declare a tax exempt net dividend of 0.95 cents per ordinary share for the financial yearended 31 December 2003.

5. To re-elect the following Directors, each of whom will retire by rotation pursuant to theArticles of Association of the Company and who, being eligible, will offer themselves forre-election:

(a) Mdm Han Juat Hoon (Article 106)(b) Mr Wong Meng Yeng (Article 106)

Mr Wong Meng Yeng will, upon re-election as a Director of the Company, remain as Chairmanof the Audit Committee and will be considered independent for the purposes of Rule 704(8)of the Listing Manual of the Singapore Exchange Securities Trading Limited (“SGX-ST”).

6. To consider, and if thought fit, to pass the following resolution:-

That pursuant to Section 153(6) of the Companies Act, Cap. 50, Mr Toshiaki Suzuki bere-appointed as a Director of the Company to hold office until the next Annual GeneralMeeting.

7. To appoint Messrs PricewaterhouseCoopers as Auditors of the Company, in place of theretiring Auditors, Messrs Deloitte & Touche and to authorise the Directors to fix theirremuneration.

NOTICE IS HEREBY GIVEN that the Annual General Meeting of the shareholders of the Company will be held at 11 TuasAvenue 5, Singapore 639337 on Friday, 30 April 2004 at 11:00 a.m. to transact the following businesses:

99

SPECIAL BUSINESS :

To consider and, if thought fit, to pass with or without any modifications, the followingresolution as Ordinary Resolution:

8. Ordinary Resolution : Authority to allot and issue shares up to 50% of the Company’s issuedshare capital

“That pursuant to Section 161 of the Companies Act, Cap. 50 and the listing rules of theSingapore Exchange Securities Trading Limited, authority be and is hereby given to theDirectors of the Company to allot and issue shares and convertible securities in the Company(whether by way of rights, bonus or otherwise) at any time and from time to time thereafter tosuch persons and upon such terms and conditions and for such purposes as the Directorsmay in their absolute discretion deem fit provided always that the aggregate number ofshares and convertible securities to be issued pursuant to this Resolution, does not exceed50% of the issued share capital of the Company, of which the aggregate number of sharesand convertible securities to be issued other than on a pro-rata basis to existing shareholdersof the Company does not exceed 20% of the issued share capital of the Company and for thepurpose of this Resolution, the issued share capital shall be the Company’s issued sharecapital at the time this Resolution is passed (after adjusting for new shares arising from theconversion or exercise of any convertible securities or share options or vesting of shareawards which are outstanding or subsisting at the time this Resolution is passed and anysubsequent consolidation or sub-division of the Company’s shares) and unless revoked orvaried by the Company in general meeting, such authority shall continue in force until theconclusion of the next Annual General Meeting of the Company or the date by which the nextAnnual General Meeting of the Company is required by law to be held, whichever is theearlier.” (See Explanatory Note ( i ))

9. To transact any other business which may be properly transacted at an Annual General Meeting.

Explanatory Notes:

(i) Resolution 9, if passed, will empower the Directors from the date of the above Meeting untilthe date of the next Annual General Meeting, to allot and issue shares and convertible securitiesin the Company. The number of shares and convertible securities which the Directors mayallot and issue under this Resolution would not exceed 50 per cent of the issued sharecapital of the Company at the time this Resolution is passed. For allotment and issue ofshares and convertible securities other than on a pro-rata basis to all shareholders, theaggregate number of shares and convertible securities to be allotted and issued shall notexceed 20 per cent of the total issued share capital of the Company at the time this Resolutionis passed.

Resolution 9


100

NOTICE OF BOOKS CLOSURE

NOTICE IS HEREBY GIVEN that the Share Transfer Books and Register of Members of the Company will be closed on 10May 2004, for the purpose of determining members’ entitlements to the final dividend and tax exempt dividend to beproposed at the Annual General Meeting of the Company to be held on 30 April 2004.

Duly completed registrable transfers in respect of the shares in the Company received up to the close of business at5:00 p.m. on 7 May 2004 by the Company’s Share Registrar, M&C Services Private Limited, 138 Robinson Road, #17-00The Corporate Office, Singapore 068906 will be registered to determine members’ entitlements to the final dividend and taxexempt dividend. Members whose Securities Accounts with The Central Depository (Pte) Ltd are credited with shares in theCompany as at 5:00 p.m.on 7 May 2004 will be entitled to such proposed final dividend and tax exempt dividend.

The proposed final dividend and tax exempt dividend, if approved at the Annual General Meeting will be paid on 19 May2004.

BY ORDER OF THE BOARD

Ho Boon Chuan WilsonLow Mei Mei MaureenCompany Secretaries

Singapore: April 8, 2004

Note :

a) A member entitled to attend and vote at this meeting is entitled to appoint a proxy to attend and vote in his stead. Aproxy need not be a member of the Company.

b) If a proxy is to be appointed, the form must be deposited at the registered office of the Company at 11 Tuas Avenue 5,Singapore 639337 not less than 48 hours before the meeting.

c) The form of proxy must be signed by the appointor or his attorney duly authorised in writing.

d) In the case of joint shareholders, all holders must sign the form of proxy.


101

NOTICE OF NOMINATION OF NEW AUDITORS

Pursuant to Section 205(12) of the Companies Act, Cap. 50, please find re-produced below a copy of Notice of Nominationof New Auditors from Madam Han Juat Hoon.

Yours faithfullyFor and on behalf of the Board

Ho Boon Chuan WilsonLow Mei Mei MaureenCompany Secretaries

Date: April 8, 2004

March 31, 2004

Han Juat Hoon584 Yio Chu Kang Road#03-04 Thomson GroveSingapore 787070

The Board of DirectorsMulti-Chem Limited11 Tuas Avenue 5Singapore 639337

Dear Sirs

Pursuant to Section 205 of the Companies Act, Cap. 50, I, Han Juat Hoon of 584 Yio Chu Kang Road, #03-04 ThomsonGrove, Singapore 787070 being a member of the Company hereby nominate Messrs PricewaterhouseCoopers, CertifiedPublic Accountants, Singapore of 8 Cross Street #17-00 PWC Building Singapore 048424 for appointment as auditors ofthe Company in place of the retiring auditors, Messrs Deloitte & Touche at the forthcoming Annual General Meeting.

Yours faithfully

Han Juat Hoon

Letter to Shareholders

This page is intentionally left blank.

I/We__________________________________________________________________________________

of ___________________________________________________________________________________

being a member/members of Multi-Chem Limited (the “Company”) hereby appoint

Name Address NRIC/Passport Proportion ofNumber Shareholdings (%)

and/or (delete as appropriate)

Name Address NRIC/Passport Proportion ofNumber Shareholdings (%)

as my/our proxy/proxies to attend and to vote for me/us on my/our behalf and, if necessary, to demand a poll at the AnnualGeneral Meeting of the Company to be held at 11 Tuas Avenue 5, Singapore 639337 on Friday, 30 April 2004 at 11:00 a.m.and at any adjournment thereof.

(Please indicate with an “X” in the spaces provided whether you wish your vote(s) to be cast for or against the resolutionsas set out in the Notice of Annual General Meeting. In the absence of specific directions, the proxy/proxies will vote orabstain as he/they may think fit, as he/they will on any other matter arising at the Annual General Meeting.)

No. Resolutions For Against

ORDINARY BUSINESS1 To receive and consider Directors and Auditors’ Reports and Audited Accounts2 To approve payment of Directors’ fees of S$100,0003 To approve payment of first and final dividend4 To approve payment of tax exempt dividend5 To re-elect Director – Mdm Han Juat Hoon6 To re-elect Director – Mr Wong Meng Yeng7 That pursuant to Section 153(6) of the Companies Act, Cap. 50, Mr Toshiaki Suzuki

be re-appointed as a Director of the Company to hold office until the nextAnnual General Meeting.

8 To appoint Messrs PricewaterhouseCoopers as Auditors of the Company in place ofthe retiring Auditors, Messrs Deloitte & Touche and to authorise the Directors to fixtheir remuneration.SPECIAL BUSINESS

9 To authorise Directors to allot and issue shares and convertible securities pursuant toSection 161 of the Companies Act, Cap 50.

Dated this _________ day of ______________ 2004

Total number of Shares held

__________________________________________Signature(s) of member(s) or common seal

IMPORTANT: PLEASE READ NOTES OVERLEAF

PROXY FORM

IMPORTANT

1. For investors who have used their CPF monies to buy the Company’s shares, this Annual Reportis forwarded to them at the request of their CPF Approved Nominees and is sent solely FORINFORMATION ONLY.

2. This Proxy Form is not valid for use by CPF investors and shall be ineffective for all intents andpurposes if used or purported to be used by them.

NOTES :

1. Please insert the total number of shares held by you. If you have shares entered against your name in theDepository Register (as defined in Section 130A of the Companies Act, Chapter 50), you should insert thatnumber of shares. If you have shares registered in your name in the Register of Members, you should insert thatnumber of shares. If you have shares entered against your name in the Depository Register and shares registeredin your name in the Register of Members, you should insert the aggregate number of shares. If no number isinserted, this form of proxy will be deemed to relate to all the shares held by you.

2. A member of the Company entitled to attend and vote at a meeting of the Company is entitled to appoint not morethan two proxies to attend and vote on his behalf. A proxy need not be a member of the Company.

3. Where a member appoints more than one proxy, he shall specify the proportion of his shareholding to berepresented by each proxy.

4. The instrument appointing a proxy or proxies must be under the hand of the appointor or his attorney dulyauthorised in writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it mustbe executed either under its common seal or under the hand of its attorney or duly authorised officer.

5. A corporation which is a member of the Company may authorise by resolution of its directors or other governingbody such person as it thinks fit to act as its representative at the Annual General Meeting, in accordance with itsArticles of Association and Section 179 of the Companies Act, Chapter 50.

6. The instrument appointing a proxy or proxies, together with the power of attorney or other authority (if any) underwhich it is signed, or notarially certified copy thereof, must be deposited at the registered office of the Companyat 11 Tuas Avenue 5, Singapore 639337 not later than 48 hours before the time set for the Annual GeneralMeeting.

7. The Company shall be entitled to reject the instrument appointing a proxy or proxies if it is incomplete, improperlycompleted or illegible or where the true intentions of the appointor are not ascertainable from the instructions ofthe appointor specified in the instrument appointing a proxy or proxies. In addition, in the case of members of theCompany whose shares are entered against their names in the Depository Register, the Company may reject anyinstrument appointing a proxy or proxies lodged if such members are not shown to have shares entered againsttheir names in the Depository Register at least 48 hours before the time appointed for holding the Annual GeneralMeeting as certified by The Central Depository (Pte) Limited to the Company.

Multi-Chem Limited 11 Tuas Avenue 5 Singapore 639337Tel: (65) 6863 1318 Fax: (65) 6863 1618Webs i te : www.mul t i chem.com.sg

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