Page 1

Harnessing

today’s strengths for tomorrow’s successes Armstrong Industrial Corporation Limited Annual Report 2004


Financial Highlights For the year ended 31 December

(S$’000)

2000

2001

2002

2003

2004

67,062

64,954

83,482

94,026

113,255

(3,643 ) (132 )

(1,714 ) (721 )

2,421 (581 )

6,202 (1,240 )

9,949 (1,457)

(3,775 ) 306

(2,435 ) 60

1,840 (429 )

4,962 (754 )

8,492 (2,594)

(3,469 ) 0

(2,375 ) 0

1,411 0

4,208 0

5,898 0

(3,469 ) (1.30 )

(2,375 ) (0.89 )

1,411 0.42

4,208 0.91

5,898 1.19

Fixed Assets Investment in Associated Companies Other Investments Goodwill on Consolidation Pre-operating Expenses Intangible Assets Loan to a Joint-venture Company Loan to an Affiliated Company, Non-current Portion Current Assets Current Liabilities Net-current Assets Non-current Liabilities

37,677 4,824 1,694 214 0 136 10,794 0 31,223 (38,802 ) (7,579 ) (7,587 )

36,251 5,847 1,026 132 0 121 11,053 0 26,280 (35,085 ) (8,805 ) (6,966 )

34,324 4,709 774 73 0 106 11,053 0 33,073 (29,207 ) 3,866 (5,460 )

39,479 2,029 1,180 14 0 91 11,055 600 41,006 (31,256 ) 9,750 (10,323 )

39,555 1,730 879 150 0 76 11,053 0 47,604 (29,494) 18,110 (7,608)

Represented by: Shareholders’ Equity Minority Interests

38,961 1,212

37,447 1,212

47,773 1,672

51,493 2,382

60,261 3,684

NTA per Share (Cents) Net Gearing

14.50 0.42

13.97 0.48

10.27 0.18

11.01 0.19

11.75 0.02

1.5%

0%

1.0%

2.0%

8.0%

Turnover Profit (Loss) Before Taxation, Minority Interests & Extraordinary Items Taxation Profit (Loss) After Taxation but Before Minority Interests & Extraordinary Items Minority Interests Profit (Loss) After Taxation & Minority Interests but Before Extraordinary Items Extraordinary Items Net Profit (Loss) Attributable to Members of Company Earnings (Loss) per Share (Cents) Financial Position

Dividends (% of Par Value)


Armstrong Industrial Corporation is a leading precision engineering company specialising in the design, marketing and manufacturing of parts and components providing innovative solutions for dampening, insulation, sealing, cushioning (DISC) and other related applications for diverse industries.

Vision To be a global enterprise providing world-class products and services.

ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

ARMSTRONG INDUSTRIAL CORPORATION LIMITED

1

Mission We will exceed customers’ expectations by: I

Institutionalising Quality

m

Managing Innovation

a

Advocating Teamwor k

g

Grooming People

e

Engineering for Growth

CONTENTS Vision and Mission 01 Milestones 02 Chairman’s Statement 04 Board of Directors 06 Operational and Financial Review 08 Corporate Information 10 Corporate Governance 11 Financial Reports 17


Milestones Through 30 Years 1978 1977

1974

BUILDING THE FOUNDATION

Armstrong began operations as a contract supplier of foam and rubber parts for the marine industrial sector.

Expanded into manufacturing of custom-made die-cut foam and rubber products.

Diversified its range of products and services to include that for the construction industry.

2

REGIONAL EXPANSION 1992 Armstrong expanded its regional expansion with its entry into Thailand with the establishment of Rubber & Chemical Products together with Bridgestone Corporation of Japan.

1993 Together with regional presence comes along the need to develop systems and processes that were on par with global standards. That year, Armstrong Singapore achieved the ISO9002 certification, the first of a string of certifications which benchmark Armstrong’s systems and processes around the region with worldclass best practices that include ISO14001 environmental standards and QS9000 standards for the automotive sector.

1995 Armstrong became a public listed company with its successful listing on the Singapore Stock Exchange Mainboard. Its initial public offering (IPO) raised

net proceeds of S$9.8 million that was used to upgrade existing facilities and finance the Group’s regional business expansion and drew strong interest from both retail and institutional investors; the IPO was fully subscribed. That same year, Armstrong began operations in Indonesia through PT Armstrong located in Jakarta. The following year, Armstrong Wuxi plant was established to tap into China’s growing market.

1997 Armstrong moved into its new 167,605 square feet flagship building in Singapore’s Bukit Batok Industrial Park. Housing both corporate offices and production facilities, the complex continues to be the company’s Technology Innovation and Research & Development Centre.


1983

1980 Armstrong became a private limited company in Singapore.

Consolidated all its operations under one roof in Gul Street and upgraded its manufacturing facilities to streamline production processes and enhance efficiency.

1987 Expanded its range of products and services to cater to growing demand from the Telecommunications, Consumer Electronics / Office Automation and Computer Peripheral industries. Established its first overseas subsidiary, Foamline Industries Sdn Bhd in Kuala Lumpur, Malaysia. Established Armstrong Rubber Manufacturing in Singapore to cater to growing demand for moulded rubber.

1988 Set up Hardyflex Industries Sdn Bhd in Malaysia.

Formed joint venture with Bridgestone Corporation of Japan to meet the needs of Japanese MNCs in Singapore and Malaysia.

ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

THE EARLY GROWTH YEARS

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1998 Armstrong heralded its expansion into the automotive sector with the establishment of a joint venture with German company Odenwald Chemie Gmbh and its manufacturing plant in Changchun, China to meet the demand for heat press and vacuum formed products for European car and car component makers.

2001 Armstrong’s subsidiary, Foamline Industries Sdn Bhd, strengthened its Malaysian presence with the establishment of its Penang plant, its third, in addition to that in Johor Bahru and Kuala Lumpur. Armstrong now has five factories in Malaysia supplying to automotive and consumer electronics customers.

2003 Armstrong made further inroads into China with the setting up of Armstrong Technology Dalian to cater to the escalating needs of Japanese MNCs in Dalian. Armstrong now has four plants in China, in Shanghai, Wuxi, Dalian and Changchun. Plans are underway to set up manufacturing plants in Suzhou and Guangzhou.

2004 Armstrong’s automotive segment received a significant boost with the attainment of the TS16949 certification, a global requisite for auto parts suppliers. It also expanded its Thailand capacity to leverage on Thailand’s fast expanding auto and electronics sectors.


Chairman’s Statement

The year 2004 is a special year for Armstrong Industrial Corporation as it celebrates the 30th Anniversary of its founding after three decades of challenges and rewards.

4

A

s we look back, we have certainly come a long way from our early days as a small start-up, supplying rubber and foam products to marine industries to becoming

one of the leading precision engineering specialists supplying and servicing more than 300 multi-national companies in the manufacturing industry. The Group now has 15 manufacturing facilities in South East Asia and China employing approximately 2,000 staff. In addition to regional presence, our systems, processes and infrastructure are now aligned with global quality and environmental standards including the ISO9000 standards for quality system, ISO14000 for environmental system as well as QS9000 and TS16949 for the automotive sector. These achievements would not have been possible were it not for the tireless efforts, innovative vision, sheer resolve and determination of our management and staff, and the continued support of our customers, suppliers and business associates including our bankers. This never-say-die attitude that has continued until today has been the cornerstone of our progress. When the Company was formed, its mission was simple: to develop new business and to deliver quality and timely deliveries using the methods we know best at that time. In essence, maximise efďŹ ciency and optimise resource utilisation. This approach is still relevant today. The only difference is we are now increasingly competing on the world stage, which means the competition is keener and the issues to be dealt with more complex. Thankfully, our management and staff have never rested on their laurels. In fact, they are even more vigilant in seeking out new opportunities to grow new markets, develop new products and engage in new customers.


The Group’s net earnings continued its growth trend in the year under review, rising by 40% from S$4.2 million to S$5.9 million. Turnover which grew by 20%, surpassed the hundred million-dollar mark to S$113.3 million, from S$94.0 million previously. Earnings per share climbed from 0.91 cents to 1.19 cents, from 11.01 cents in the previous year. Since FY2000, Armstrong’s performance has been steadily improving year after year, from operating loss to increasing profit. For this FY2004, we achieved record sales and operating profit, the highest in our corporate history. This achievement is timely and carries extra meaning as it coincided with our company’s 30th Anniversary since founding and the 10th Anniversary of our public listing. To mark this achievement and to reward our shareholders for their continued support, I am pleased to announce that the Board of Directors has proposed record dividends of 8% per ordinary share – 2% being the company’s usual payout rate and 6% being this year’s special bonus component – equivalent to 0.8 cents per share. In all, the Company would be paying dividends totaling 68% of after-tax profit; four times that of last year’s payout. All business segments were profitable. Office Automation posted the highest rate of growth of 29% accounting for 27% or S$30.5 million of Group sales. Consumer Electronics was the biggest revenue earner with 34% of revenue contribution followed by Office Automation, Automotive and Data Storage. During the year under review, the Group spent approximately S$5 million, mainly on plant and machinery in China and Thailand. This year the Group expects to spend an estimated total of S$5 million – S$3 million in setting up two plants in Suzhou and Guangzhou and another S$2 million for expanding and upgrading existing plant and machinery in China and Thailand. For the coming year, we will focus on developing higher technology content products and look at possible acquisitions and joint ventures to enhance our core businesses. As we look forward to the next thirty years and beyond, it is only apt that we pay tribute to the early pioneers of the Company whose enduring resilience and foresight now give Armstrong its identity and spirit. I would like to take this opportunity to express my heartfelt gratitude to our Board of Directors, management and staff – both past and present – for their dedication and inspiring efforts and to our shareholders, customers, suppliers and business partners and associates. Without their support we would not have been able to be where we are today.

Gilbert Ong CHAIRMAN AND CHIEF EXECUTIVE OFFICER

Armstrong Industrial Corporation Limited

ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

cents. Net asset value per share rose to 11.75

5


Board of Directors GILBERT ONG PENG KOON Chairman & Chief Executive Officer Mr Gilbert Ong is the founder of the Company. With close to 30 years of industry experience, Mr Ong has played a pivotal role in engineering Armstrong’s transformation into a leading precision engineering component supplier with regional presence. Mr Ong still leads in the mapping out and execution of the Company’s growth blueprint and is actively involved in seeking out and establishing new markets and businesses. He is a member of the Company’s Nominating Committee and holds various directorship in the Group’s subsidiaries and associated companies.

6

STEVEN KOH GIM HOE Executive Director Mr Steven Koh joined the Company in 1998 and was appointed to the board in 2000. He is a member of the Company’s Remuneration Committee. Mr Koh has held several management positions in major banks. He was the Chairman of the Singapore Club in South Korea and an associate member of the UK Association of Computer Professionals. Mr Koh has been instrumental in providing critical directions in key functions including corporate strategy, finance and operations, in particular, in guiding the Company in its current phase of regional expansion and attaining sustainable profitability. He holds various Diplomas in Banking, Accountancy and Management from renowned overseas and local institutions. Mr Koh holds various directorship in the Group’s subsidiaries and associated companies.

LEFT TO RIGHT:

Gilbert Ong Peng Koon, Steven Koh Gim Hoe and Patricia Chow Goon Chau

PATRICIA CHOW GOON CHAU Executive Director Ms Patricia Chow is an Executive Director of the Group since its inception. She is the wife of Mr Gilbert Ong Peng Koon, the Chairman and Chief Executive Officer. Ms Chow is the Director – Human Resource and Admin of the Company and is also actively involved in the management and operations of the Group. She holds a Diploma in Business Administration.


PETER CHAN PEE TECK Independent Non-Executive Director

ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

Mr Peter Chan holds a Bachelor of Accountancy (Honours) from National University of Singapore and is Fellow member of both the Institutes of Certified Public Accountants in Singapore and Australia. He was appointed as an Independent non-Executive Director on 19 November 1993. He has served as the Chairman of the Audit Committee since 2 July 1998, and as member of the Nominating and Remuneration Committees since 16 September 2002. Mr Chan is presently the Managing Partner of BCEA Management Pte Ltd, managing a specialised telecommunications and media equity fund covering Asia.

YEO LAI HUAT Non-Executive Director Mr Yeo Lai Huat is a non-Executive Director of the Company since 5 December 2000. He was appointed Managing Director for Indonesia plant in August 1995. He holds a Bachelor of Science (Honours) in Engineering from King’s College of the University of London.

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ANTHONY ANG MENG HUAT Independent Non-Executive Director Mr Anthony Ang is an Independent non-Executive Director of the Company. He was previously an Executive Director and Group General Manager of the Group. He joined the Company in 1993 and was responsible for the Group’s business development and marketing activities. He resigned from his executive position on 31 March 2000 and had remained as a non-Executive Director. Mr Ang is a member of the Audit Committee since 26 March 1997. He is also a member of the Remuneration Committee from 16 September 2002. He is presently an Executive Director of Majulah Connection Limited, an NGO focused on building a global business network for Singapore. Mr Ang holds a Master of Business Administration from INSEAD, France and a First Class Honours Degree in Mechanical Engineering from the Imperial College of London University, United Kingdom.

Yeo Lai Huat, Peter Chan Pee Teck, Tan Peng Chin and Anthony Ang Meng Huat

LEFT TO RIGHT:

TAN PENG CHIN Independent Non-Executive Director Mr Tan Peng Chin was appointed as an Independent nonExecutive Director of the Company on 6 November 1995. He is a member of the Audit Committee since 6 November 1995. Mr Tan has also been appointed as Chairman of the Nominating Committee and Remuneration Committee on 16 September 2002. Mr Tan is an Advocate and Solicitor specialising in corporate, commercial and banking laws. He is presently the Managing Director of Tan Peng Chin LLC. Mr Tan holds a Degree in Law from the National University of Singapore. He is also a Notary Public and a Commissioner for Oaths.


Operational and Financial Review As we celebrate our 30th Anniversary, it is only apt for us to look back at our performance track record. From its listing on the Main Board of the Singapore Stock Exchange in 1995 right through to 1997, Armstrong had recorded profits for each of the years. The year 1998 was a watershed year as the company took the executive decision to re-map its strategic direction, both on the operational and financial management fronts. The effects of these efforts could be seen when the company rebounded to profitability in 2002 and it has not looked back ever since, turning in profit growth year after year.

8

TURNOVER BY MARKET

The Group’s net profit attributable to shareholders continued its growth trend during the year under review, increasing by 40% to S$5.90 million, from S$4.21 million in the previous year, on the back of revenue growth of 20%, from S$94.03 million to S$113.25 million.

9% 12%

Financial Review

29% 23%

Group profit before tax rose by 60.4% to S$9.95 million. Had it not been for the operating loss (S$1.78 million) and provision (S$1 million) for the metal stamping business of S$2.78 million, Group profit before tax would have registered a stronger performance. This, however, did not prevent gross margin from strengthening from 21.6% to 23.9% as a result of effective cost control, higher productivity and capacity utilisation, better material management and improved technical capability.

27%

Singapore Malaysia Thailand Indonesia China

TURNOVER BY INDUSTRY 34%

27%

3%

19%

17%

Data Storage Consumer Electronics Office Automation

Weighted average earnings per share climbed from 0.91 cents to 1.19 cents while net asset value per ordinary share rose from 11.01 to 11.75 cents. Return on Assets (ROA) improved to 13.3% from 9.2% while Return on Equity (ROE) rose to 10.6% from 8.5% despite an enlarged capital base due to warrants exercised before the expiry date in May 2004. The Group invested approximately S$5 million to set up new manufacturing plants and purchased new machinery to expand our production capacity and capability. We undertook more Research & Development activities to strengthen process technology, product development and material research. In line with the Group’s investment policy, all investments were carefully planned to minimise risk exposure and funded by internal cash reserves. At year-end, cash and cash equivalents stood at S$10.25 million while working capital strengthened further to S$18.11 million, from S$9.75 million. Net gearing reduced from 19% to 2% with net borrowing standing at only S$1.87 million at 31 December 2004.

Automotive Others

• Full year net earnings increased by 40% to S$5.9 million

• Achieved record sales turnover of S$113.25 million representing 20% growth

• Office Automation and Consumer Electronics sector key drivers for Group revenue growth in FY2004

• Increasing investment in China and Thailand


Operating Review

Office Automation posted the highest rate of growth of 29% among the business segments, supported by growth of 50% and 44% in Thailand and Singapore respectively. Consumer Electronics, the biggest revenue earner among the business segments, grew by 26% while Automotive recorded 19% increase in sales, fueled by Thailand’s growth of 31% and despite a slowdown in the China market in the second half of FY2004. For FY2005, we expect the different industry segments to register growth, including Automotive in China which is undergoing market adjustment. The growth of this industry in Thailand, however, remains robust as the Kingdom develops itself rapidly as a regional automotive hub.

Thailand Thailand achieved the highest growth rate of 32% amongst the Group’s geographical markets, with turnover increasing from S$24.8 million to S$32.8 million, contributing 29% to Group turnover and becoming the top revenue grosser. In addition to QS9000, our Thailand’s die-cut operations obtained the TS16949, a vital quality system for the world’s automotive suppliers. We have injected new investments into our third plant in Ayuthaya, North Bangkok to double the capacity of its diecut component fabrication. Following negotiations during the year under review, the Company, in January 2005, had disposed of the majority of the assets in its metal stamping plant in Thailand, which incurred an operating loss of S$1.78 million in FY2004. This is in line with the objective of the Group to focus on its core businesses.

Malaysia Malaysia’s sales recorded 14% growth as compared to 4% a year ago as a result of significant growth in Automotive and Consumer Electronics, which accounted for over 86% of our Malaysian total business. As the political and business situation improves, we expect our Malaysian operations to continue its steady top and bottom line growth. During the year, our Malaysian operations achieved the ISO14001 certification and received the Green Partners Award from one of its customers.

Indonesia Indonesia posted a higher rate of growth of 26% in FY2004 as compared to 20% in the previous year. We supplied mainly to multi-national corporations in the office automation, consumer electronics and automotive sectors. Office Automation accounted for more than half of our Indonesia revenue.

China With newly established plants in Dalian and Shanghai, the Group now has four manufacturing facilities in China, including Wuxi and Changchun. Despite the slowdown in China’s automotive business, our China operations still recorded a good growth rate of 25%.

During the year, the Group has also acquired the remaining 17.5% stake from our China partner in Changchun through our 80%-owned subsidiary, Armstrong Odenwald Asia Pte Ltd. During the year our Changchun and Wuxi plants have obtained TS16949 and ISO14001 certifications respectively, heralding critical steps towards ensuring high product quality and environmental control. Both plants expanded its production space and invested in new machinery to boost its capacity and capability to meet the needs of automotive and electronic customers.

Singapore Sales in Singapore increased by 7%, recovering from the negative growth of 9% a year ago. The major contributor to the increase was the Consumer Electronics and Office Automation which grew by more than 40%. The Data Storage sector suffered a fall in revenue of 5% because of slow down in market demand, but still account for 57% of the Singapore business. Singapore will continue to play a pivotal role as the Group’s operational headquarter to provide support for its regional expansion, technology innovation activities and financial and operational process management. Singapore has also implemented the 6-sigma initiatives.

Higher Degree of Corporate Transparency Over the last three years, the company has been actively engaging in regular and effective communications with the investing public to allow better corporate transparency. These include our par ticipation in shareinvestor.com portal, the engagement of an investor relations consultant to manage both our investor and media programmes, holding analyst and media briefings every half-yearly, and going on investor road shows as well as ensuring suitable media coverage of its businesses. These activities were recognised, and during the year in review, Armstrong was ranked 28th among companies listed on the Singapore Exchange by the Business Times Corporate Transparency Index, a vast improvement from its ranking of 152 in FY2002.

ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

All our geographical markets and business segments experienced growth with the exception of Data Storage which contracted marginally, by 2%, due to a weaker market. Overseas revenue accounted for 73% of Group turnover, an increase of 4%, from 69% a year earlier, as a result of aggressive marketing and positive economic sentiments in some of the markets we operated in.

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Corporate Information

ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

10

Registered Office

Audit Committee

531 Bukit Batok Street 23 Singapore 659547 Tel: 6665 8588 Fax: 6665 8665 Email: aicl@armstrong.com.sg Company Registration Number: 198003808K

CHAIRMAN

Mr Peter Chan Pee Teck MEMBER

Mr Tan Peng Chin Mr Anthony Ang Meng Huat

Auditors Board of Directors CHAIRMAN

Mr Gilbert Ong Peng Koon

Ernst & Young 10 Collyer Quay, #21-01 Ocean Building Singapore 049315

EXECUTIVE DIRECTOR

PARTNER-IN-CHARGE:

Mr Steven Koh Gim Hoe Ms Patricia Chow Goon Chau

Mr Max Loh Khum Whai (Since financial year ended 31 December 2004)

INDEPENDENT NON-EXECUTIVE DIRECTOR

Mr Peter Chan Pee Teck Mr Tan Peng Chin Mr Anthony Ang Meng Huat NON-EXECUTIVE DIRECTOR

Mr Yeo Lai Huat

Nominating Committee CHAIRMAN

Mr Tan Peng Chin MEMBER

Mr Peter Chan Pee Teck Mr Gilbert Ong Peng Koon

Registrar Lim Associates (Pte) Ltd 10 Collyer Quay, #19-08 Ocean Building Singapore 049315

Company Secretary Ms Chuang Sheue Ling Ms Lo Swee Oi

Principal Banker United Overseas Bank Ltd DBS Bank Ltd

Remuneration Committee CHAIRMAN

ABN AMRO Bank N.V.

Mr Tan Peng Chin MEMBER

Mr Peter Chan Pee Teck Mr Anthony Ang Meng Huat Mr Steven Koh Gim Hoe

Legal Adviser Tan Peng Chin LLC Advocates & Solicitors 9 Battery Road, #18-08 Straits Trading Building Singapore 049910


BOARD OF DIRECTORS Principle 1:

Board’s Conduct of its Affairs

Principle 2:

Board’s Composition

The Board comprises of seven Directors, three of whom are Independent Directors. The Board provides direction, establishes strategic objectives for the Group and monitors the financial performance of the Group and is responsible for the corporate governance of the Company. The Board meets regularly to oversee the business affairs of the Group, approves the financial objectives and standards of performance. In between Board meetings, more routine operational matters are discussed in person or on the telephone and are put to the Board for its decision by way of circulating resolutions in writing, together with supporting detailed information to enable the Directors to make informed decisions. Additionally, the Board delegates certain of its functions to the Audit, Nominating and Remuneration Committees. The attendance of the Directors at meetings of the Board and Board Committee during the year is as follows: AICL Board

Audit Committee

Nominating Committee

Remuneration Committee

No. of Meetings Held

No. of Meetings Attended

No. of Meetings Held

No. of Meetings Attended

No. of Meetings Held

No. of Meetings Attended

No. of Meetings Held

No. of Meetings Attended

Mr Gilbert Ong Peng Koon

4

4

1

1

Ms Patricia Chow Goon Chau

4

4

Mr Steven Koh Gim Hoe

4

4

1

1

Mr Peter Chan Pee Teck

4

4

4

4

1

1

1

1

Mr Yeo Lai Huat

4

4

Mr Anthony Ang Meng Huat

4

3

4

3

1

1

Mr Tan Peng Chin

4

4

4

4

1

1

1

1

The composition of the Board and independence of each Director are reviewed annually by the Nominating Committee. The Board of Directors comprises members with varied expertise and experience. An orientation program for new Directors is in place and with respect to major new projects, for existing Directors. Principle 3:

Role of Chairman and Chief Executive Officer

Mr Gilbert Ong Peng Koon is currently the Chairman of the Board (“the Chairman”) and the Chief Executive Officer of the Company (the “Chief Executive Officer”). The Board has not adopted the recommendation of the Code to have separate Directors appointed as the Chairman and the Chief Executive Officer. This is because the Board is of the view that there is already a sufficiently strong independent element on the Board to enable independent exercise of objective judgment on corporate affairs of the Group by members of the Board, taking into account factors such as the number of non-Executive and Independent Directors on the Board, as well as the current size and scope of the affairs and operations of the Group. However, the Board keeps this situation under regular review and will make suitable recommendations should the circumstances change. As the Chairman, Mr Ong is responsible for, among others, exercising control over the quality, quantity and timeliness of the flow of information between the management of the Company and the Board, and assisting in ensuring compliance with the Company’s guidelines on corporate governance.

ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

Corporate Governance

11


Corporate Governance

ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

BOARD COMMITTEE (1)

Nominating Committee Principle 4:

Board Membership

Principle 5:

Board Performance

The Nominating Committee has been set up since 16 September 2002 and comprises the following Directors: Mr Tan Peng Chin – Chairman

Independent non-Executive Director

Mr Peter Chan Pee Teck

Independent non-Executive Director

Mr Gilbert Ong Peng Koon

Executive Director

The Nominating Committee’s role is to establish an objective and transparent process for:

12

(a)

The appointment or re-appointment of members of the Board and of the various Board committees.

(b)

Evaluating and assessing the effectiveness of the Board as a whole, and the contribution by each individual Director to the effectiveness of the Board. The Nominating Committee has considered a number of factors, including those set out in the Code of Corporate Governance, for the purpose of such evaluation and assessment.

(c)

Determining the independence of Directors.

The Nominating Committee is of the view that the current board size of seven Directors is appropriate taking into account the nature and scope of the Group’s operations, and the depth and breadth of knowledge, expertise and business experiences of the Directors to govern and manage the Group’s affairs. The Nominating Committee considered the conduct of meeting, the decision-making process, attendance and participation of each board member to be satisfactory.

(2)

Remuneration Committee Principle 7:

Procedures for Developing Remuneration Policies

Principle 8:

Level and Mix of Remuneration

Principle 9:

Disclosure on Remuneration

The Remuneration Committee has been set up since 16 September 2002 and comprises the following Directors: Mr Tan Peng Chin – Chairman

Independent non-Executive Director

Mr Peter Chan Pee Teck

Independent non-Executive Director

Mr Anthony Ang Meng Huat

Independent non-Executive Director

Mr Steven Koh Gim Hoe

Executive Director

The Remuneration Committee’s principal responsibilities are to: (a)

Review and recommend to the Board a framework of remuneration and associated matters of the Key and Senior Executives.

(b)

Review and determine the remuneration package and associated matters for each Executive Director.

(c)

Review and recommend to the Board of the Company the remuneration and associated matters of the nonExecutive Directors of the Company.

(d)

Oversee the administration of the Share Option Scheme.


Directors’ Fee Directors’ fees payable to Independent non-Executive Directors are set in accordance with a remuneration framework. Based on the framework adopted by the Company, the Directors’ fees payable to the Independent non-Executive Directors for FY2004 was $89,025 (FY2003: $64,500). Executive Directors do not receive Directors’ fees. Directors’ fees are subject to shareholders’ approval at the AGM.

Remuneration of the Executive Directors and Key Management Staff The Remuneration policy for staff adopted by the Group comprises a fixed component and a variable component. The variable component is tied to the Company’s and individual’s performance. (See table below) The remuneration of Directors and Key Executives FY2004 are: Directors of the Company Directors

Fee

Fixed Salary

Variable Salary & Bonus

Allowance & Benefits

Total

i) Above S$500,001

Mr Gilbert Ong Peng Koon

0%

46%

54%

0%

100%

ii) S$250,001 to S$500,000

Mr Steven Koh Gim Hoe

0%

44%

56%

0%

100%

iii) Below S$250,000

Mr Peter Chan Pee Teck Mr Tan Peng Chin Mr Anthony Ang Meng Huat Mr Yeo Lai Huat Ms Patricia Chow Goon Chau

100% 100% 100% 0% 0%

0% 0% 0% 92% 78%

0% 0% 0% 8% 22%

0% 0% 0% 0% 0%

100% 100% 100% 100% 100%

Key Executives of the Group Executives i) Below S$250,000

Mr Ron Awe Ying Fatt Mr Richard Yap Long Wen Mr Glenn Wee Kim Teck Mr Koo Tin Fook Ms Miao Ying Mei Mr Gunahin Rita

Fee

Fixed Salary

Variable Salary & Bonus

Allowance & Benefits

Total

0% 0% 0% 0% 0% 0%

57% 73% 56% 69% 64% 49%

25% 23% 24% 31% 24% 37%

18% 4% 20% 0% 12% 14%

100% 100% 100% 100% 100% 100%

The above does not include benefits attached to share options granted to Directors and employees, which have not been valued. There are no employees whose remuneration exceeds $150,000 during the year who are related to Directors/Chief Executive Officer or substantial shareholders. The Company adopts a remuneration policy for staff comprising a fixed component and a variable component. The fixed component is in the form of a base salary. The variable component is in the form of variable wages and bonus that are linked to the Company’s and individual’s performance. Another element of the variable component is the grant of share options to staff under the Armstrong Employee Share Option Scheme (ESOS). This seeks to align the interests of staff with that of the shareholders. Staff appraisals are conducted yearly.

Key Management Staff – Executive Profile Ron Awe Ying Fatt Mr Ron Awe joined the Company in December 2000 as General Manager – Corporate Sales & Marketing. He holds a MBA from Leicester University and a Bachelor’s Degree from Charles Sturt University and two technician Diplomas from a local polytechnic. Mr Awe has more than 23 years industrial experience, mainly in sales & marketing, and the last six years as General Manager in manufacturing companies.

ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

Corporate Governance

13


Corporate Governance Richard Yap Long Wen ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

14

Mr Richard Yap joined the Company since October 1997 and is currently the General Manager – Regional Operations. He manages and develops manufacturing capabilities of the Group’s operations to ensure efficiency. Mr Yap has more than 16 years experience in the manufacturing field rising from an engineer to a manufacturing manager. Mr Yap holds a MBA majoring in Strategic Management from Nanyang Technological University, and a Master of Science majoring in Industrial and Systems Engineering from the National University of Singapore. Glenn Wee Kim Teck Mr Glenn Wee joined the Company since May 1999 and is currently the Assistant Managing Director of our Thailand operations. Mr Wee has more than 20 years experience in the manufacturing field in the various roles of manufacturing supervision, production management and the last 12 years in operations/business development management. Koo Tin Fook Mr Koo joined Foamline Industries Sdn Bhd in 1988 and participated in the setup of Hardyflex Industries Sdn Bhd in 1989. He is currently the General Manager of these two companies in Malaysia. Mr Koo has more than 19 years of sales & marketing experience and more than seven years in general management. Miao Ying Mei Ms Miao joined Armstrong Odenwald Changchun Technology Co Ltd in 1999 as Deputy General Manager and was appointed as Director in the same year. She was promoted to General Manager in 2003. She graduated from the Jiling Province University, China, majoring in Commerce. Ms Miao’s experience from 1970 till now encompass accounting & financial management and general management in both provincial government and private setups in Changchun, including as Director of Finance Bureau, Changchun Gaosing Development Zone. Gunahin Rita Mr Rita holds a Bachelor’s Degree majoring in Commerce from Takachiho University, Tokyo. He joined the Company in November 2000 as Sales Manager – China Operations and was promoted to General Manager in-charge of our China Wuxi plant – Armstrong Technology (Wuxi) Co Ltd and China Dalian plant – Armstrong Technology (Dalian) Co Ltd since end of 2003. Mr Rita has many years of experience in purchasing and import & export trade.

Employee Share Option Scheme (ESOS) There is no participation of the share option scheme by the Company’s controlling shareholders and their associates. None of the options granted under the ESOS was offered at a discount.

(3)

Audit Committee Principle 11:

Audit Committee

The Audit Committee comprises of: Mr Peter Chan Pee Teck – Chairman

Independent non-Executive Director

Mr Tan Peng Chin

Independent non-Executive Director

Mr Anthony Ang Meng Huat

Independent non-Executive Director

The Audit Committee performs the following main functions: •

Review the accounts of the Company, the consolidated accounts of the Group before submission to the Board of Directors for final approval.

Review the audit plans of the external auditors.

Review the Company’s systems of internal controls.

Review interested and related party transactions.

Nominate external auditors for re-appointment.


Corporate Governance Audit Committee

(cont’d)

In performing its functions, the Audit Committee met and reviewed the findings of the auditors and the assistance given to them by management. Minutes of the Audit Committee meetings were submitted to the Board for information and review. The Audit Committee met the external auditors without the presence of the Company’s management for the financial year ended 31 December 2004 and had reviewed the independence of the external auditors annually and assessed the scope and results of external audit versus its costs. The Audit Committee had also reviewed all non-audit services provided by the auditors and confirmed that these non-audit services would not affect the independence of the auditors. Principle 12:

Internal Controls

The Group’s internal controls are designed to provide reasonable assurance that assets are safeguarded, that proper accounting records are maintained, and the financial information used within the business and for publication is reliable. In designing these controls, the Directors have given regard to the risks to which the businesses are exposed, the likelihood of such risks occurring and the costs of protecting against them. The Audit Committee in carrying out the scope of its duties, updates the Board from time to time on the issues and concerns discussed during the Audit Committee Meetings including those raised by the external auditors and where appropriate, will make the necessary recommendations to the Board. The Group’s business units are primarily responsible for the day-to-day management of the risks they generate. Risk management is a line responsibility of the business units, which identify the risks inherent in their business activities and implement the appropriate measures and controls to mitigate the risks. Corporate Management Office (CMO) which supports the Board and Top management in risk management provides an independent view of the Group’s risk profile. The CMO measures, monitors and reports consolidated risk information to the management and Board on a regular basis. The independent risk management function reports directly to the Chief Executive Officer and has direct access to the Board. The Audit Committee has reviewed the Group’s risk assessment, and based on the audit reports and management controls in place is satisfied that there are adequate internal controls in the Group. Principle 6:

Access to Information

In order to ensure that the Board is able to fulfill its responsibilities, management provides the Board members with regular update of Company’s performance. Where a decision has to be made before a Board meeting, a circulating Directors’ resolution is done in accordance with the Articles of Association of the Company and the Directors are provided with all necessary information to enable them to make informed decisions. The Directors have been provided with the phone numbers and e-mail particulars of the Company’s senior management and company secretary to facilitate access to obtain independent professional advice. Principle 13:

Internal Audit

The Board recognises the importance of maintaining a system of internal control processes to safeguard shareholders’ investments and the Group’s business and assets. The effectiveness of the internal financial control systems and procedures are monitored by management and the internal audit function is overseen by the Executive Director in order to identify, analyse and manage the risks incurred by the Group in its activities and promote continuous improvement to the Group’s operations.

ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

Principle 11:

15


Corporate Governance

ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

COMMUNICATION WITH SHAREHOLDERS Principle 10:

Accountability and Audit

Principle 14:

Communication with Shareholders

Principle 15:

Greater Shareholder Participation

It is the Company’s policy to practise timely and full disclosure of significant corporate information to all its shareholders. Price sensitive announcements including interim and full-year results are released through SGXNET and press release. All the shareholders of the Company receive the Annual Report and notice of AGM. At AGMs, shareholders are given the opportunity to air their views and ask questions regarding the Group and its businesses.

Dealings In Securities The Company has devised and adopted its own internal code to provide guidance to its Directors and employees on their dealings in its securities. This internal code is in line with SGX’s Best Practices Guide.

Interested Person Transactions 16

The Board conducts a review of interested party transaction (if any) regularly. There were no material interested person transactions during the financial year. The related party transactions shown in Note 33 of the Annual Report do not fall within the ambit of Chapter 9 of the Listing Manual.

Information Required by the Singapore Exchange Securities Trading Limited There are no material contracts to which the Company or its subsidiaries, is a party and which involve the interest of the Chief Executive Officer, each Director or controlling shareholders, either still subsisting at the end of the financial year, or if not then subsisting, entered into since the end of the previous financial year.


ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

Financial Reports

17

Report of the Directors 18 Statement by Directors 22 Auditors’ Report 23 Balance Sheets 24 Consolidated Profit and Loss Account 25 Consolidated Statement of Changes in Equity 26 Consolidated Statement of Cash Flows 27 Notes to the Financial Statements 29 Details of Properties 57 Statistics of Shareholdings 59 Notice of Annual General Meeting 60 Proxy Form 63


Report Of The Directors (Amounts are expressed in Singapore dollars unless otherwise stated)

ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

The Directors are pleased to present their report to the members together with the audited financial statements of Armstrong Industrial Corporation Limited (the “Company”) and its subsidiaries (the “Group”) for the financial year ended 31 December 2004 and balance sheet of the Company as at 31 December 2004.

Directors The Directors of the Company in office at the date of this report are: Mr Gilbert Ong Peng Koon Mr Steven Koh Gim Hoe Ms Patricia Chow Goon Chau Mr Peter Chan Pee Teck Mr Anthony Ang Meng Huat Mr Tan Peng Chin Mr Yeo Lai Huat

Arrangements to Enable Directors to Acquire Shares and Debentures Except for the Armstrong Industrial Corporation Share Option Scheme 2000, neither at the end of nor at any time during the financial year was the Company a party to any arrangement whose object is to enable the Directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.

18

Directors’ Interests in Shares and Debentures The following Directors, who held office at the end of the financial year, had, according to the register of Directors’ shareholdings required to be kept under Section 164 of the Companies Act, an interest in shares of the Company and related corporations, as stated below: Direct Interest

Deemed Interest

As at 1.1.2004

As at 31.12.2004

As at 21.1.2005

As at 1.1.2004

As at 31.12.2004

As at 21.1.2005

215,185,000 27,818,000 1,789,024 – 230,000

219,307,915 28,318,000 386,635 100,000 230,000

219,307,915 28,318,000 386,635 100,000 230,000

29,460,000 216,827,000 – 36,000 –

29,960,000 220,949,915 8,000,000 436,000 –

29,960,000 220,949,915 8,000,000 436,000 –

19,122,915 – 2,097,613

– – –

– – –

– 19,122,915 –

– – –

– – –

6,907,141 1,671,428

6,714,284 1,542,857

6,714,284 1,542,857

– –

– –

– –

Armstrong Industrial Corporation Limited Ordinary Shares of $0.10 each Mr Gilbert Ong Peng Koon Ms Patricia Chow Goon Chau Mr Anthony Ang Meng Huat Mr Steven Koh Gim Hoe Mr Yeo Lai Huat Warrants to Subscribe for Ordinary Shares of $0.10 each Mr Gilbert Ong Peng Koon Ms Patricia Chow Goon Chau Mr Anthony Ang Meng Huat Share Options to subscribe for Ordinary Shares of $0.10 each Mr Steven Koh Gim Hoe Mr Yeo Lai Huat


Report Of The Directors Directors’ Interests in Shares and Debentures (cont’d) Direct Interest

Deemed Interest

As at 1.1.2004

As at 31.12.2004

As at 21.1.2005

As at 1.1.2004

As at 31.12.2004

As at 21.1.2005

4,500

4,500

4,500

48

48

48

PT Armstrong Industri Indonesia Ordinary Shares of US$50 each Mr Yeo Lai Huat Yasuda Tsusho Ltd Ordinary Shares of US$1.00 each Mr Yeo Lai Huat

By virtue of Section 7 of the Companies Act, Cap 50, Mr Gilbert Ong Peng Koon and Ms Patricia Chow Goon Chau are deemed to be interested in the shares held by the Company in all its subsidiaries. Except as disclosed in this report, no other Director who held office at the end of the financial year had interest in the shares, share options, warrants or debentures of the Company or related corporations either at the beginning or end of the financial year and on 21 January 2005.

Directors’ Contractual Benefits Since the end of the previous financial year, no Director of the Company has received or become entitled to receive a benefit (other than a benefit or any fixed salary of a full-time employee of the Company included in the aggregate amount of emoluments shown in the financial statements, or any emoluments received from related corporation or fees paid to a firm of which a Director is a member or share options granted pursuant to the Armstrong Industrial Corporation Share Option Scheme), by reason of a contract made by the Company or a related corporation with the Director, or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest, except as disclosed in Note 33 to the financial statements.

Share Options (a)

Armstrong Industrial Corporation Share Option Scheme 2000 The Armstrong Industrial Corporation Share Option Scheme 1997 (the “Old Scheme”) was terminated and replaced by the Armstrong Industrial Corporation Share Option Scheme 2000 (the “Share Option Scheme”), which was approved and adopted at the Company’s Extraordinary General Meeting held on 3 November 2000. The termination of the Old Scheme will not affect the subscription rights comprised in options granted pursuant to the Old Scheme prior to termination, which shall continue to be exercisable in accordance with the Rules of the Old Scheme. During the financial year, the outstanding options granted under the Old Scheme lapsed upon the expiry of the exercise period. The Share Option Scheme is administered by the Remuneration Committee which comprises: Mr Mr Mr Mr

Tan Peng Chin – Chairman Peter Chan Pee Teck Anthony Ang Meng Huat Steven Koh Gim Hoe

Independent non-Executive Director Independent non-Executive Director Independent non-Executive Director Executive Director

ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

(Amounts are expressed in Singapore dollars unless otherwise stated)

19


Report Of The Directors (Amounts are expressed in Singapore dollars unless otherwise stated)

ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

20

Share Options (cont’d) (b)

Unissued Shares Under Option As at the end of the financial year, unissued shares of the Company under option were as follows:

Options Granted

Date Granted

Exercise Period

2000 Options 2001 Options

31.01.2001 03.06.2002

31.01.2002 to 29.01.2014 03.06.2003 to 02.06.2014

Exercise Price

Aggregate Options Outstanding

Exercisable Options

$0.12 $0.10

8,021,198 6,579,511

3,431,194 3,299,613

14,600,709

6,730,807

The details of options granted and exercised are as follows:

Option Participants

Exercise Period

Options Granted During the Year

Aggregate Aggregate Options Options Lapsed/ Granted Cancelled [1] [2]

Aggregate Options Exercised [3]

Aggregate Options Outstanding [4]

Exercise Price

Directors of the Company Mr Steven Koh Gim Hoe* 28.10.2000 to 02.06.2014

7,907,141

192,857

1,000,000

6,714,284

$0.10 - $0.12

28.10.2000 to 29.01.2014

1,671,428

128,571

1,542,857

$0.12

Directors of subsidiaries

28.10.2000 to 02.06.2014

2,532,853

411,569

448,000

1,673,284

$0.10 - $0.12

Employees

28.10.2000 to 02.06.2014

12,557,352

4,582,807

3,304,261

4,670,284

$0.10 - $0.12

24,668,774

5,315,804

4,752,261

14,600,709

Mr Yeo Lai Huat

*

Directors and employees granted 5% or more of the total options available under the Schemes.

[1]

Aggregate options granted since commencement of the Old Scheme to the end of financial year.

[2]

Aggregate options lapsed/cancelled since commencement of the Old Scheme to end of financial year.

[3]

Aggregate options exercised since commencement of the Old Scheme to end of financial year.

[4]

Aggregate options outstanding as at end of financial year.

Except as disclosed above, no other executive or employee of the Company has received 5% or more of the total options available and no options have been granted to controlling shareholders of the Company or their associates during the financial year. Except as disclosed above, there were no unissued shares of the Company or its subsidiaries under options as at the end of the financial year. The options granted by the Company do not entitle the holders of the options, by virtue of such holdings, to any right to participate in any share issue of any other company.


Report Of The Directors Warrants During the year, 42,583,647 warrants were exercised and the exercise period has expired on 20 May 2004.

Audit Committee The audit committee performed the functions speciďŹ ed in the Companies Act. The functions performed are detailed in the Report on Corporate Governance.

Auditors Ernst & Young have expressed their willingness to accept re-appointment as auditors of the Company.

On behalf of the Board,

Gilbert Ong Peng Koon Director

Steven Koh Gim Hoe Director

Singapore 18 March 2005

ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

(Amounts are expressed in Singapore dollars unless otherwise stated)

21


Statement By Directors Pursuant to Section 201(15)

ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

We, Gilbert Ong Peng Koon and Steven Koh Gim Hoe, being two of the Directors of Armstrong Industrial Corporation Limited, do hereby state that, in the opinion of the Directors, (i)

the accompanying balance sheets, consolidated profit and loss account, consolidated statement of changes in equity and consolidated statement of cash flows together with notes thereto 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 at 31 December 2004, and of the results of the business, changes in equity and cash flows of the Group for the year then ended, and

(ii)

at the date of this statement there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due.

On behalf of the Board,

Gilbert Ong Peng Koon Director

22 Steven Koh Gim Hoe Director

Singapore 18 March 2005


Auditors’ Report We have audited the accompanying financial statements of Armstrong Industrial Corporation Limited (the “Company”) and its subsidiaries (the “Group”) for the year ended 31 December 2004, set out on pages 24 to 56. These financial statements are the responsibility of the Company’s Directors. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Directors, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, (a)

the consolidated financial statements of the Group and balance sheet of the Company are properly drawn up in accordance with the provisions of the Singapore Companies Act, Cap. 50 (the “Act”) and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2004 and the results, changes in equity and cash flows of the Group for the financial year ended on that date; and

(b)

the accounting and other records required by the Act to be kept by the Company and those subsidiaries incorporated in Singapore of which we are the auditors, have been properly kept in accordance with the provisions of the Act.

Without qualifying our opinion we draw attention to Note 9 to the financial statements. As at 31 December 2004, the Company has a long-term loan amounting to $11.1 million (2003: $11.1 million) due from a joint venture company, Soon Lee Realty Ltd, a company principally engaged in property development. The recoverability of the loan is dependent on the ability of the joint venture company to successfully realise its development plans for the land which is scheduled for completion in September 2007.

ERNST & YOUNG Certified Public Accountants

Singapore 18 March 2005

ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

to the Members of Armstrong Industrial Corporation Limited

23


Balance Sheets as at 31 December 2004 (Amounts are expressed in Singapore dollars unless otherwise stated)

Note ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

Group 2004 $’000

2003 $’000

Company 2004 $’000

2003 $’000

ASSETS LESS LIABILITIES Fixed assets Subsidiaries Associated company Other investments Goodwill on consolidation Intangible asset Loan to a joint venture company Loan to an investee company Current Assets Stocks Trade debtors Other debtors, deposits and prepayments Due from subsidiaries (trade) Due from subsidiaries (non-trade) Due from associated company (trade) Due from affiliated companies (trade) Loans to subsidiaries Fixed deposits Cash and bank balances

3 4 5 6 7 8 9 6A

39,555 – 1,730 879 150 76 11,053 –

39,479 – 2,029 1,180 14 91 11,055 600

18,993 15,123 80 827 – – 11,053 –

19,067 13,780 80 1,509 – – 11,055 600

10 11 12

14,877 19,215 919 – – 299 – – 505 11,789

12,145 19,573 1,538 – – 407 16 – 205 7,122

2,867 5,133 59 12,435 1,493 273 – 5,087 – 3,381

3,138 6,077 225 14,716 1,809 380 16 966 – 1,491

47,604

41,006

30,728

28,818

13,903 5,708 – 141 358 – – – 1,327 2,692 3,206 172 1,987

13,500 6,845 487 228 537 – – – 171 2,553 5,225 220 1,490

2,094 3,750 – 96 96 1,600 1,262 1,366 1,042 1,225 – 160 1,989

2,691 4,287 487 187 206 1,717 232 1,423 171 1,225 4,150 165 503

29,494

31,256

14,680

17,444

18,110

9,750

16,048

11,374

5,480 487 1,641

8,095 399 1,829

613 472 1,393

1,837 371 1,559

63,945

53,875

59,646

53,698

51,093 6,732 (9,862) 552 (3,344) 15,090

46,694 6,731 (9,862) 552 (2,622) 10,000

51,093 6,732 (9,862) – – 11,683

46,694 6,731 (9,862) – – 10,135

60,261 3,684

51,493 2,382

59,646 –

53,698 –

63,945

53,875

59,646

53,698

13 14 34

24 Current Liabilities Trade creditors Other creditors and accruals Bills payable to bank (unsecured) Due to associated company (trade) Due to affiliated companies (trade) Due to subsidiaries (trade) Due to subsidiaries (non-trade) Loans from subsidiaries Provision for taxation Term loans, current portion Short-term bank loans Lease obligations, current portion Bank overdrafts (unsecured)

15

13 16 17 17 18 17

Net Current Assets Non-current Liabilities Term loans, non-current portion Lease obligations, non-current portion Deferred taxation EQUITY Share Capital And Reserves Share capital Share premium Share discount Capital reserve Translation reserve Revenue reserve Minority interests

17 18 19

20 21 22 23 24

The accounting policies and explanatory notes on pages 29 to 56 form an integral part of the financial statements.


Consolidated Profit And Loss Account for the year ended 31 December 2004 (Amounts are expressed in Singapore dollars unless otherwise stated) Group 2004 $’000

2003 $’000

Other operating income Distribution and selling expenses Administrative expenses Other operating expenses

26

549 (4,428) (11,019) (1,144)

485 (3,431) (9,433) (130)

Profit From Operations Financial expenses Financial income Share of results of associated company

28 29 29

11,011 (1,109) 24 23

7,832 (621) 241 (1,250)

9,949 (1,457)

6,202 (1,240)

ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

Note

Profit After Taxation Minority interests

8,492 (2,594)

4,962 (754)

25

Net Profit Attributable To Members Of The Company

5,898

4,208

1.19 1.18

0.91 0.87

Turnover Cost of sales

25

Gross profit

Profit Before Taxation Taxation

Earnings per share (cents) – Basic – Diluted

30

31 31

113,255 (86,202)

94,026 (73,685)

27,053

20,341

The accounting policies and explanatory notes on pages 29 to 56 form an integral part of the financial statements.


Consolidated Statement Of Changes In Equity for the year ended 31 December 2004 (Amounts are expressed in Singapore dollars unless otherwise stated)

ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

Share Capital $’000

Share Premium $’000

Share Discount $’000

Capital Reserve $’000

Translation Reserve $’000

Revenue Reserve $’000

Total $’000

As At 1.1.2003 Issue of shares Net profit for the year Dividend paid (Note 32) Translation adjustments

46,360 334 – – –

6,713 18 – – –

(9,862) – – – –

552 – – – –

(2,144) – – – (478)

6,154 – 4,208 (362) –

47,773 352 4,208 (362) (478)

As At 31.12.2003

46,694

6,731

(9,862)

552

(2,622)

10,000

51,493

As At 1.1.2004 Issue of shares Net profit for the year Dividend paid (Note 32) Translation adjustments

46,694 4,399 – – –

6,731 1 – – –

(9,862) – – – –

552 – – – –

(2,622) – – – (722)

10,000 – 5,898 (808) –

51,493 4,400 5,898 (808) (722)

As At 31.12.2004

51,093

6,732

(9,862)

552

(3,344)

15,090

60,261

Group

26

The accounting policies and explanatory notes on pages 29 to 56 form an integral part of the financial statements.


Consolidated Statement Of Cash Flows Note

Cash Flows From Operating Activities Profit before taxation

Group 2004 $’000

2003 $’000

9,949

6,202

(23) 3,846 (19) 598 (24) 67

1,250 3,413 169 451 (34) 59

92 15 (30) 978 – (516)

(47) 15 (107) – 165 (736)

Operating profit before working capital changes Stocks Trade debtors Other debtors, deposits and prepayments Due from associated companies, net Trade creditors Other creditors and accruals Bills payable to banks Due to affiliated companies, net Fixed deposits pledged

14,933 (2,732) 358 619 21 403 (1,137) (487) (163) –

10,800 (920) (2,740) (537) (607) 1,684 (244) 356 200 1

Cash generated from operations Interest received Interest paid Income tax paid

11,815 24 (598) (467)

7,993 34 (451) (975)

Net cash generated from operating activities

10,774

6,601

– (198) (1,324) 320 – – 436 (4,368) 1,177

(17) – (593) 312 (600) (1,014) 317 (3,206) 649

(3,957)

(4,152)

Adjustments: Share of results of associated company Depreciation of fixed assets (Gain)/loss on disposal of fixed assets Interest expense Interest income Amortisation of goodwill on consolidation Provision /(write back of) for lower of cost and market value of quoted equity shares and amount under fund management Amortisation of intangible asset Gain on disposal of quoted equity shares, net of provision written back Provision for loan and impairment loss in investee company Loss on partial disposal of investment in associated company Translation adjustments

Cash Flows From Investing Activities Investment in club membership Investment in subsidiary company Investment in quoted equity shares Dividend received from associated company Long term loan to an affiliated company Net cash outflow from acquisition of a subsidiary Proceeds from sale of fixed assets Purchase of fixed assets Proceeds from sale of quoted equity shares Net cash used in investing activities

4

C B

The accounting policies and explanatory notes on pages 29 to 56 form an integral part of the financial statements.

ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

for the year ended 31 December 2004 (Amounts are expressed in Singapore dollars unless otherwise stated)

27


Consolidated Statement Of Cash Flows for the year ended 31 December 2004 (Amounts are expressed in Singapore dollars unless otherwise stated) Note ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

Cash Flows From Financing Activities Proceeds from term loans Proceeds from short-term bank loans Dividend paid Dividend paid to minority shareholders in subsidiaries Repayment of short-term bank loans Repayment of bank term loans Repayment of lease obligations Share capital contribution by minority shareholders Proceeds from issue of new shares, exercise of share options and warrant conversion, net of share issue expense

1,348 9,845 (808) (1,146) (11,837) (3,652) (561) 63

Net cash (used in) / generated from financing activities Net Increase In Cash And Cash Equivalents Cash And Cash Equivalents At Beginning Of Year Cash And Cash Equivalents At End Of Year

A.

Group 2004 $’000

A A

4,400

352 2,408

4,469 5,780 10,249

4,857 923 5,780

Cash And Cash Equivalents

Fixed deposits* Cash and bank balances Bank overdrafts

*

B.

4,803 11,710 (362) – (11,845) (1,961) (289) –

(2,348)

Cash and cash equivalents included in the consolidated statement of cash flows comprise the following: 2004 $’000

28

2003 $’000

2003 $’000

447 11,789 (1,987)

148 7,122 (1,490)

10,249

5,780

Excludes certain fixed deposits of a subsidiary amounting to $57,402 (2003: $57,627) pledged as security to a bank for performance guarantee granted to the subsidiary.

Fixed Assets During the financial year, the Group acquired fixed assets with an aggregate cost of $4,973,341 (2003: $3,366,859) of which $605,560 (2003: $161,254) was acquired by means of finance leases. Cash payments of $4,367,781 (2003: $3,205,605) were made to purchase fixed assets.

C.

Net Cash Outflow From Acquisition Of A Subsidiary Fixed assets Stocks Trade debtors Other debtors, deposits and prepayments Cash and bank balances Due to former holding company Trade creditors Other creditors and accruals Lease obligations Bank overdrafts Term loans Purchase consideration Purchase consideration – via dividend income Purchase consideration – via share swap Less: Cash and cash equivalents of subsidiary assumed on acquisition Cash outflow from acquisition

The accounting policies and explanatory notes on pages 29 to 56 form an integral part of the financial statements.

2003 $’000 5,636 539 645 283 1 (217) (1,264) (20) (59) (1,015) (3,806) 723 (289) (434) (1,014) (1,014)


Notes To The Financial Statements 1.

Corporation Information Armstrong Industrial Corporation Limited (the “Company”), a company incorporated in Singapore, is a public limited company listed on the Singapore Exchange Securities Trading Limited. The registered office of Armstrong Industrial Corporation Limited is located at 531 Bukit Batok Street 23, Singapore 659547. The principal activities of the Company are those of investment holding and the manufacture and sale of precision die-cut foam and rubber moulded components for a wide range of technology and other applications. The principal activities of the subsidiaries are disclosed in Note 4 to the financial statements. There have been no significant changes in the nature of these activities during the financial year. The Company and its subsidiaries (the “Group”) operates in five countries and the Group and Company employed 1,940 and 233 (2003: 1,820 and 239) employees as of 31 December 2004 respectively.

2.

Significant Accounting Policies (a)

Basis Of Preparation The financial statements of the Company and of the Group, which are expressed in Singapore dollars, have been prepared under the historical cost convention except for certain leasehold land and building carried at revalued amounts. The financial statements have been prepared in accordance with Singapore Financial Reporting Standards (FRS) as required by the Companies Act. The accounting policies have been consistently applied by the Company and the Group and are consistent with those used in the previous financial year.

(b)

Principles Of Consolidation The consolidated financial statements comprise the financial statements of the Company and its subsidiaries. All intercompany balances, transactions and any unrealised profit or loss on intercompany transactions are eliminated on consolidation. The results of subsidiaries acquired or sold during the year are consolidated for the periods from or to the date of acquisition or disposal. Assets and liabilities of the foreign subsidiaries are translated into Singapore dollars at the exchange rates ruling at balance sheet date. The results of foreign subsidiaries are translated into Singapore dollars at the weighted average exchange rates applicable for the financial year. Foreign currency translation adjustments arising on consolidation are accumulated as a separate component of equity.

(c)

Subsidiaries A subsidiary is defined as a company, in which the Group has a long-term interest of more than 50% of the equity or in whose financial and operating policy decisions the Group controls. Investments in subsidiaries are stated in the Company’s balance sheet at cost less impairment losses. An assessment of investments in subsidiaries is performed when there is indication that the asset has been impaired or the impairment losses recognised in the prior years no longer exist.

(d)

Associated Company An associated company is a company, not being a subsidiary, in which the Group has an equity interest of not less than 20% nor more than 50% and in whose financial and operating policy decisions the Group exercises significant influence. Investment in associated company is stated in the Company’s balance sheet at cost less impairment losses. Investment in associated company is accounted for in the consolidated financial statements using the equity method. Any unrealised gain arising from transactions with associated companies is eliminated to the extent of the portion attributable to the Group.

ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

31 December 2004 (Amounts are expressed in Singapore dollars unless otherwise stated)

29


Notes To The Financial Statements 31 December 2004 (Amounts are expressed in Singapore dollars unless otherwise stated)

ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

2.

Significant Accounting Policies (cont’d) (e)

Affiliated Company An affiliated company is a company, not being a subsidiary or an associated company, in which one or more of the Directors or shareholders of the Company have a significant equity interest or exercise significant influence.

(f)

Foreign Currencies Foreign currency transactions are recorded at exchange rates approximating those ruling at the transaction dates. Foreign currency monetary assets and liabilities outstanding at the balance sheet date are translated into the respective measurement currencies at exchange rates ruling at that date. Non-monetary assets and liabilities are measured using the exchange rates ruling at the transaction dates. All resultant exchange differences are recognised in the profit and loss account.

(g)

Fixed Assets Fixed assets are stated at cost or valuation less accumulated depreciation and any impairment loss. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to working condition for its intended use. Expenditure for additions, improvements and renewals are capitalised and expenditure for maintenance and repairs are charged to the profit and loss account. When assets are sold or retired, their cost and accumulated depreciation are removed from the financial statements and any gain or loss resulting from their disposal is included in the profit and loss account. Construction-in-progress represents machinery under installation and renovation in progress and is stated at cost. Construction-in-progress is not depreciated until such time as the relevant assets are completed and put into operational use.

30

The revalued leasehold land and building is stated at the valuation when it was first revalued prior to 1 January 1997. Where fixed assets are revalued, any surplus on revaluation is credited to capital reserve. A decrease in the net carrying amount arising on revaluation of fixed assets is charged against any related revaluation surplus to the extent that the decrease does not exceed the surplus held in reserve relating to a previous revaluation of the same asset. The amount by which the deficit on revaluation exceeds the surplus held in capital reserve is charged to the profit and loss account. (h)

Depreciation Depreciation is calculated on the straight-line method to write off the cost of fixed assets over their estimated useful lives. The estimated useful lives of fixed assets are as follows: Leasehold land and buildings Plant and machinery Furniture, fittings and office equipment Motor vehicles Computers Tools and equipment Renovation

20 - 60 years 5 - 10 years 5 - 12 years 5 years 3 years 3 - 10 years 5 years

Freehold land is not depreciated. Fully depreciated fixed assets are retained in the financial statements until they are no longer in use and no further charge for depreciation is made in respect of these assets. (i)

Intangible Assets Goodwill on Consolidation Goodwill on consolidation represents the excess of cost of acquisition over the fair value of the net identifiable assets acquired and is recognised as an asset in the balance sheet. Goodwill on consolidation is amortised on a systematic basis over its useful life of 5 years during which future economic benefits are expected to flow to the enterprise. License Fees License fees are capitalised and amortised on a straight-line basis over 10 years.


Notes To The Financial Statements 31 December 2004 (Amounts are expressed in Singapore dollars unless otherwise stated)

Significant Accounting Policies (cont’d) (j)

Cash And Cash Equivalents Cash and cash equivalents are defined as cash on hand, fixed deposits and short-term, highly liquid investments readily convertible to known amounts of cash and subject to insignificant risk of changes in values. Cash on hand and in banks are carried at cost.

(k)

Trade And Other Receivables Trade receivables, which generally have 30 - 120 day terms, are recognised and carried at original invoice amount less an allowance for any uncollectible amounts. An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off when identified. Receivables from associated and affiliated companies are recognised and carried at cost less an allowance for any uncollectible amounts.

(l)

Stocks Stocks are valued at the lower of cost and net realisable value. Costs incurred in bringing each product to its present location and condition are accounted for as follows: – Raw materials – purchase cost on a weighted average basis. – Finished goods and work-in-progress – cost of direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity and on a weighted average basis. – Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. Provision is made for deteriorated, damaged, obsolete and slow-moving stocks.

(m)

Trade And Other Payables Liabilities for trade and other payable which are normally settled on 30 – 120 day terms, are carried at cost which is the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the Group. Payables to affiliated and associated companies are carried at cost.

(n)

Other Investments Quoted and unquoted investments held for the long term are stated at cost. Provision is made for any impairment losses. Investments held as current assets are stated at the lower of cost and market value on a portfolio basis.

(o)

Impairment Of Assets Fixed assets and long term investments are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Whenever the carrying amount of an asset exceeds its recoverable amount, an impairment loss is recognised in the profit and loss account for items of fixed assets and long term investments carried at cost. The recoverable amount is the higher of an asset’s net selling price and value in use. The net selling price is the amount obtainable from the sale of an asset in an arm’s length transaction. Value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life. Recoverable amounts are estimated for individual assets or, if it is not possible, for the cash-generating unit. Reversal of impairment losses recognised in prior years is recorded when there is an indication that the impairment losses recognised for the asset no longer exist or have decreased. The reversal is recorded in income or as a revaluation increase. However, the increased carrying amount of an asset due to a reversal of an impairment loss is recognised to the extent it does not exceed the carrying amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised for that asset in prior years.

ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

2.

31


Notes To The Financial Statements 31 December 2004 (Amounts are expressed in Singapore dollars unless otherwise stated)

2.

Significant Accounting Policies (cont’d)

ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

(p)

Leases Finance Lease Finance leases, which effectively transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the present value of the minimum lease payments at the inception of the lease term and disclosed as leased fixed assets. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income. Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term. Operating Lease Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased assets are classified as operating leases. Operating lease payments are recognised as an expense in the profit and loss account on a straight-line basis over the lease term.

(q)

Employee Benefits Defined Contribution Plans The Group participates in the national pension schemes as defined by the laws of the countries in which it has operations. In particular, the Singapore companies in the Group make contributions to the Central Provident Fund scheme in Singapore, a defined contribution pension scheme. These contributions are recognised as compensation expense in the same period as the employment that gives rise to the contribution.

32

Equity Compensation Benefits The Company has an employee share option scheme whereby employees are granted non-transferable options to purchase the Company’s shares. There are no charges to earnings upon the grant or exercise of these options. When the options are exercised, equity is increased by the amount of the proceeds received. The dilutive effect of outstanding options is reflected as additional share dilution in the computation of earnings per share. Employee Leave Entitlement Employee entitlements to annual leave are recognised when they accrue to employees. An accrual is made for estimated liability for annual leave as a result of service rendered by employees up to the balance sheet date. (r)

Borrowing Costs Borrowing costs are generally expensed as incurred. Borrowing costs are capitalised if they are directly attributable to the acquisition, construction or production of a qualifying asset. Capitalisation of borrowing costs commences when the activities to prepare the asset for its intended use or sale are in progress and the expenditures and borrowing cost are being incurred. Borrowing costs are capitalised until the assets are ready for their intended use. If the resulting carrying amount of the asset exceeds its recoverable amount, an impairment loss is recorded.

(s)

Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are reviewed at each balance sheet date and adjusted to reflect the best current estimate.

(t)

Revenue Recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised. Revenue From Sale Of Goods Revenue from sale of goods is recognised upon delivery of goods and services and acceptance by customers.


Notes To The Financial Statements 31 December 2004 (Amounts are expressed in Singapore dollars unless otherwise stated)

Significant Accounting Policies (cont’d) Management Fees Management fees are recognised upon the rendering of management and consultation services to and acceptance by subsidiaries. Dividend Income Dividend income is recognised when the shareholder’s rights to receive payment is established. Interest Income Revenue is recognised as the interest accrues unless collectibility is in doubt. Group turnover excludes intercompany transactions. (u)

Income Taxes Deferred income tax is provided, using the liability method, and is applied to all temporary differences at the balance sheet date between the carrying amounts of assets and liabilities and the amounts used for tax purposes. Deferred tax liabilities are recognised for all taxable temporary differences (unless the deferred tax liability arises from goodwill amortisation or the initial recognition of an asset or liability in a transaction that is not a business combination and at the time of the transaction affects neither accounting profit nor taxable profit or loss). Deferred tax liabilities are recognised for all taxable temporary differences associated with investments in subsidiaries and associated companies, except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, carry-forward of unused tax assets and unused tax losses can be utilised (unless the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither accounting profit nor taxable profit or loss). For deductible temporary differences associated with investments in subsidiaries and associated companies, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilised. The carrying amount of a deferred tax asset is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of the deferred tax asset to be utilised. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.

(v)

Financial Instruments Financial assets and financial liabilities carried on the balance sheet include cash and cash equivalents, trade and other accounts receivables and payable, long-term receivables, loans, borrowings and investments. The accounting policies on recognition and measurement of these items are disclosed in the respective accounting policies found in this Note. Forward foreign exchange contracts are accounted for as foreign currency transactions. The forward foreign exchange contracts are marked to market at balance sheet date and the gains and losses on such contracts are recognised in the profit and loss statement.

(w)

Segments For management purposes, the Group is organised on a world-wide basis into five major operating businesses. The divisions are the basis on which the Group reports its primary segment information. Segment revenue, expenses and results include transfers between business segments and between geographical segments. Such transfers are accounted for on an arm’s length basis.

ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

2.

33


Notes To The Financial Statements 31 December 2004 (Amounts are expressed in Singapore dollars unless otherwise stated)

ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

3.

Fixed Assets At Valuation

At Cost

Plant and Machinery $’000

Furniture, Fittings and Office Equipment $’000

Motor Vehicles $’000

Computers $’000

Tools and Equipment $’000

Renovation $’000

Constructionin-Progress $’000

Total $’000

131

19,879

5,474

2,603

1,594

2,847

2,039

437

64,780

2,143

375

888

119

262

333

836

4,973

(617)

(52)

(632)

(61)

(433)

(161)

(27)

(1,983)

250

4

4

50

404

(712)

(30)

(352)

(5)

(500)

(57)

(68)

(32)

(21)

(24)

(13)

(1,102)

1,286

28,125

126

21,155

5,744

2,791

1,624

2,705

2,591

521

66,668

326

4,339

10,838

3,553

1,361

1,399

2,154

1,331

25,301

12

578

1,849

338

357

103

293

316

3,846

(488)

(40)

(424)

(61)

(423)

(130)

(1,566)

Translation adjustments

(13)

(68)

(257)

(39)

(35)

(28)

(15)

(13)

(468)

As at 31.12.2004

325

4,849

11,942

3,812

1,259

1,413

2,009

1,504

27,113

629

1,551

267

355

109

320

182

3,413

As at 31.12.2004

961

23,276

126

9,213

1,932

1,532

211

696

1,087

521

39,555

As at 31.12.2003

973

24,138

131

9,041

1,921

1,242

195

693

708

437

39,479

Leasehold Land and Building $’000

Leasehold Land and Buildings $’000

Freehold Land $’000

1,299

28,477

Additions

17

Disposals Reclassifications

(a) Group Cost Or Valuation As at 1.1.2004

Translation adjustments As at 31.12.2004 Accumulated Depreciation

34

As at 1.1.2004 Charge for the year Disposals

Charge for 2003 Net Book Value


Notes To The Financial Statements 3.

Fixed Assets (cont’d)

Plant and Machinery $’000

Furniture, Fittings and Office Equipment $’000

Motor Vehicles $’000

Computers $’000

Tools and Equipment $’000

Renovation $’000

Constructionin-Progress $’000

Total $’000

18,620

5,081

3,522

1,174

799

852

786

30,834

Additions

138

576

21

30

20

512

1,297

Disposals

(571)

(14)

(597)

(18)

(384)

(161)

(1,745)

18,620

4,510

3,646

1,153

802

498

645

512

30,386

2,813

3,699

2,321

722

746

757

709

11,767

365

262

108

161

33

45

40

1,014

(444)

(11)

(402)

(18)

(383)

(130)

(1,388)

3,178

3,517

2,418

481

761

419

619

11,393

365

292

103

183

41

43

43

1,070

As at 31.12.2004

15,442

993

1,228

672

41

79

26

512

18,993

As at 31.12.2003

15,807

1,382

1,201

452

53

95

77

19,067

(b) Company

Leasehold Land and Building $’000

Cost As at 1.1.2004

As at 31.12.2004 Accumulated Depreciation As at 1.1.2004 Charge for the year Disposals As at 31.12.2004 Charge for 2003 Net Book Value

The leasehold land and building stated at valuation was revalued by the directors as of June 1994 based on appraisals received from an independent firm of professional valuers. The surplus arising from the revaluation has been taken to capital reserve. Had the leasehold land and building been stated at cost less accumulated depreciation, the net book value as at 31 December 2004 would have been $705,769 (2003 : $729,029). As at 31 December 2004, the Company’s leasehold land and building with a net book value of approximately $15,442,000 (2003: $15,807,000) have been pledged as security for a bank term loan granted to the Company (Note 17). Certain fixed assets of subsidiaries with net book value of approximately $6,112,000 (2003: $5,952,000) have been pledged as security for term loans granted to the subsidiaries (Note 17). As at 31 December 2004, the Group and the Company had motor vehicles and plant and machinery under finance leases with net book values of approximately $931,000 (2003: $962,000) and $886,000 (2003: $691,000) respectively.

4.

Subsidiaries (a)

Investment in subsidiaries comprises: Company 2004 $’000 Unquoted equity shares, at cost

15,123

2003 $’000 13,780

ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

31 December 2004 (Amounts are expressed in Singapore dollars unless otherwise stated)

35


Notes To The Financial Statements 31 December 2004 (Amounts are expressed in Singapore dollars unless otherwise stated)

ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

36

4.

Subsidiaries (cont’d) (b)

The Group had the following subsidiaries as at 31 December 2004:

Name of Company

Principal Activities

Country of Incorporation and Place of Business

Percentage of Equity Held by the Group

Cost of Investment by the Company

2004 %

2003 %

2004 $’000

2003 $’000

Held by the Company Armstrong Rubber Manufacturing Pte Ltd #

Manufacture and sale of rubber parts and components of electronic and other instruments

Singapore

100

100

570

570

Foamline Industries Sdn Bhd @

Fabrication of foam products

Malaysia

100

100

576

576

Hardyflex Industries Sdn Bhd @

Manufacture and sale of rubber products, hardware, industrial parts and components

Malaysia

92.5

92.5

2,321

2,321

Armstrong Technology (Wuxi) Co Ltd ^^

Manufacture and sale of die-cut foam components

People’s Republic of China

100

100

2,806

2,806

Armstrong Technology (Shanghai) Co Ltd *

Manufacture and sale of mechanical sub-assembly parts, rubber and foam components Manufacture and sale of die-cut foam components

People’s Republic of China

100

100

513

174

Indonesia

52

52

829

829

PT Armstrong Industri Indonesia ^ Armstrong-Odenwald (Asia) Pte Ltd #

Architectural, engineering and related technical consultancy services

Singapore

80

80

2,080

2,080

Armstrong Rubber & Chemical Products Co Ltd @

Manufacture and sale of die-cut foam components

Thailand

64.8

64.1

2,734

2,580

Manufacture and sale of metal stamping and sub-assembly mechanical components

Thailand

100

100

1,844

1,844

Manufacture and sale of die-cut foam components

People’s Republic of China

100

850

Trading of materials and machineries

Malaysia

52

52

Manufacture and sale of foam products, rubber products for general applications in sealing, dampening and sound absorption functions and related product’s tooling fabrication, processing and sales

People’s Republic of China

80##

80##

Armstrong Mechanical Components Co Ltd (formerly known as NT Precision (Thailand) Co Ltd) @ Armstrong Technology (Dalian) Co Ltd **

Held by Armstrong Rubber Manufacturing Pte Ltd Yasuda Tsusho Ltd @@ Held by Armstrong-Odenwald (Asia) Pte Ltd Armstrong Odenwald Changchun Technology Co Ltd (formerly known as Changchun Armstrong-Odenwald Chao Wei Technology Co Ltd) Ø

15,123 13,780


Notes To The Financial Statements 4.

Subsidiaries (cont’d) @ # Ø ^ ^^ * ** @@ ##

Audited by member firms of Ernst and Young Global Audited by Ernst and Young, Singapore Audited by Jilin Hao Ling Certified Public Accountants Co Ltd Audited by Andiek Sumaryono & Partners Registered Public Accountants Audited by Wuxi Dazhong Certified Public Accountants Co Ltd Audited by Shanghai LSC Certified Public Accountants Audited by Dalian Intime Partnership CPAS Audited by Chieng & Associates Chartered Accountants In accordance with the joint venture agreement, the percentage of equity to be held by the Group shall be 82.5% with the remaining 17.5% equity interest held by a joint venture partner. As at 31 December 2003, the joint venture partner has yet to inject capital into the joint venture company. During the year, the Group paid the joint venture partner RMB969,000 (equivalent to $198,097) in exchange for the right to the 17.5% equity. The Group further invested RMB2,290,000 (equivalent to $511,124) as additional share capital in the subsidiary company.

During the financial year, the Company increased the paid up capital of its wholly-owned subsidiary company, Armstrong Technology (Shanghai) Co Ltd from US$100,000 (equivalent to $174,596) to US$300,000 (equivalent to $512,987) via injection of additional capital of US$200,000 (equivalent to $338,391) in cash. During the financial year, the Company increased its shareholding in Armstrong Rubber & Chemical Products Co Ltd from 64.1% to 64.8% via acquisition of 355 new ordinary shares of Baht 10,000 each for a cash consideration of Baht 3,550,000 (equivalent to $153,715). During the financial year, the Company incorporated a wholly-owned subsidiary Armstrong Technology (Dalian) Co Ltd. The cost of investment of US$500,000 (equivalent to $849,735) was paid for in cash.

5.

Associated Company (a)

Investment in associated company comprises: Group 2004 $’000 Unquoted equity shares, at cost Share of post-acquisition profits, net of dividends received

(b)

Company 2004 $’000

2003 $’000

2003 $’000

80

80

80

80

1,650

1,949

1,730

2,029

80

80

Details of the associated company are as follows:

Name of Company

Bridgestone Armstrong Pte Ltd *

* Audited

Principal Activities

Trading of die-cut foam and rubber moulded products

by Ernst and Young, Singapore

Country of Incorporation and Place of Business

Singapore

Percentage of Equity Held by the Company

Cost of Investment by the Company

2004 %

2003 %

2004 $’000

2003 $’000

40

40

80

80

ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

31 December 2004 (Amounts are expressed in Singapore dollars unless otherwise stated)

37


Notes To The Financial Statements 31 December 2004 (Amounts are expressed in Singapore dollars unless otherwise stated)

ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

38

6.

Other Investments Note Investment in unquoted equity shares, at cost Less: Provision for impairment in value, representing provision for the year

Investment in quoted equity shares, at cost Less: Provision for impairment in value Principal sum of amounts under fund management Less: Provision for impairment in value Club memberships Translation adjustments Less: Provision for impairment in value Investment in Batam property Less: Provision for impairment in value

Group 2004 $’000

2003 $’000

Company 2004 $’000

2003 $’000

796

796

1,184

1,184

(378)

(766)

418

796

418

1,184

(a)

457

303

457

303

(b)

(149)

(86)

(149)

(86)

308

217

308

217

(c)

111

111

111

111

(d)

(24)

(17)

(24)

(17)

87

94

87

94

111 (7) (39)

111 – (39)

52 – (39)

52 – (39)

65

72

13

13

95 (94)

95 (94)

95 (94)

95 (94)

1

1

1

1

879

1,180

827

1,509

(e)

(f)

(a)

As at 31 December 2004, the market value of quoted equity shares amounted to approximately $308,000 (2003: $217,000).

(b)

Movements in provision for lower of cost and market value of quoted equity shares during the year are as follows: Group and Company 2004 2003 $’000 $’000

(c)

At beginning of year Provision for the year Write back of provision Written off against provision

86 85 – (22)

180 – (26) (68)

At end of year

149

86

As at 31 December 2004, the market value of amounts under fund management amounted to approximately $87,000 (2003: $94,000).


Notes To The Financial Statements 6.

Other Investments (cont’d) (d)

Movement in provision for lower of cost and market value of amounts under fund management during the year is as follows: Group and Company 2004 2003 $’000 $’000 At beginning of year Provision for the year Write back of provision

17 7 –

38 – (21)

At end of year

24

17

(e)

There was no movement in provision for impairment in value of club memberships during the year.

(f)

There was no movement in provision for impairment in value of investment in Batam property during the year.

6A. Loan To An Investee Company Group 2004 $’000 Loan to an investee company (previously an affiliated company) Less: Provision for doubtful debts, representing provision for the year

2003 $’000

Company 2004 $’000

2003 $’000

600

600

600

600

(600)

(600)

600

600

The loan is unsecured, bears interest at 8% per annum and is repayable in the year 2008. The interest income has not been accrued for since the inception of the loan as collectibility is in doubt. The loan is subordinated to a bank loan undertaken by the investee company.

7.

Goodwill On Consolidation Group 2004 $’000 Goodwill on consolidation Additions during the year Less accumulated amortisation

Movement in accumulated amortisation during the year is as follows: At beginning of year Amortisation for the year At end of year

8.

2003 $’000

607 203 (660)

607 – (593)

150

14

593 67 660

534 59 593

Intangible Asset Intangible asset comprises license fees paid by a subsidiary to a German company (the “Licenser”) for the transfer of the licensed technology and know-how in connection with the development, design, manufacture, engineering, application and sale of the “licensed products” to the subsidiary. The license is for a period of 10 years.

ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

31 December 2004 (Amounts are expressed in Singapore dollars unless otherwise stated)

39


Notes To The Financial Statements 31 December 2004 (Amounts are expressed in Singapore dollars unless otherwise stated)

ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

40

8.

Intangible Asset (cont’d) Group 2004 $’000 Intangible asset Less accumulated amortisation

Movement in accumulated amortisation during the year is as follows: At beginning of year Amortisation for the year At end of year

9.

2003 $’000

151 (75)

151 (60)

76

91

60 15 75

45 15 60

Loan To A Joint Venture Company Group and Company 2004 2003 $’000 $’000 Loan to joint venture company Interest receivable from a joint venture company

10,233 4,267

10,233 3,704

Less deferred interest income

14,500 (3,447)

13,937 (2,882)

11,053

11,055

In 1997, the Company entered into an agreement with Sin Soon Lee Realty Company (Private) Limited, a company incorporated in Singapore, to participate as shareholders in Soon Lee Realty Ltd (the “Joint Venture Company”) whose principal activity is the purchase and development of a parcel of land. The Company has subscribed for 15,000 ordinary shares of $1 each in the Joint Venture Company at par for cash, which represents a 15% equity interest in the joint venture. This has been reflected as other investments in the financial statements of the Company. In addition, the Company extended a loan to the Joint Venture Company. The loan is unsecured and interest on the loan is charged at 0.5% per annum above the Singapore base lending rate. As the Joint Venture Company is principally engaged in property development, the recoverability of the loan is dependent on the ability of the Joint Venture Company to successfully realise its development plans for the land which are scheduled for completion in September 2007. The Directors have expressed confidence that the loan is recoverable and accordingly, no provision has been made in the financial statements. Pending the successful completion of the sale of the remaining plots of land, the interest income from the loan has been deferred and not recognised in the profit and loss statement.

10. Stocks

Finished goods – at cost – at net realisable value Work-in-progress Raw materials at net realisable value Goods-in-transit

Group 2004 $’000

2003 $’000

Company 2004 $’000

2003 $’000

3,217 62 2,062 9,237 299

2,223 186 2,058 7,490 188

767 45 496 1,559 –

726 61 522 1,829 –

14,877

12,145

2,867

3,138


Notes To The Financial Statements 10. Stocks (cont’d) Movements in provision for stock obsolescence during the year are as follows: At beginning of year Provision for the year Write-back of provision Write off against provision Translation adjustment

1,842 265 (65) (328) (18)

1,380 683 (93) (163) 35

1,019 119 (57) (244) –

885 260 (91) (35) –

At end of year

1,696

1,842

837

1,019

Group 2004 $’000

2003 $’000

11. Trade Debtors

Trade debtors Less provision for doubtful trade debts

Company 2004 $’000

2003 $’000

19,735 (520)

21,133 (1,560)

5,265 (132)

7,299 (1,222)

19,215

19,573

5,133

6,077 41

Movements in provision for doubtful trade debts during the year are as follows: At beginning of year Provision for the year Write off against provision Translation adjustment At end of year

1,560 103 (1,131) (12)

1,565 10 – (15)

1,222 41 (1,131) –

1,222 – – –

520

1,560

132

1,222

12. Other Debtors, Deposits And Prepayments Group 2004 $’000 Other debtors Staff advances Deposits Prepayments Prepaid taxes Advance payments

2003 $’000

ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

31 December 2004 (Amounts are expressed in Singapore dollars unless otherwise stated)

Company 2004 $’000

2003 $’000

120 15 108 231 375 70

543 24 147 322 491 11

34 – 3 22 – –

145 5 5 70 – –

919

1,538

59

225

13. Due From / (To) Subsidiaries (Non-trade) These balances are unsecured, interest-free and repayable on demand.

14. Loans To Subsidiaries In prior year, the loan amount of $965,599 was unsecured and repayable on demand. Interest was charged at 1% per annum above the bank’s lending rate. At 31 December 2004, loans to subsidiary companies are unsecured, interest-free and repayable on demand.


Notes To The Financial Statements 31 December 2004 (Amounts are expressed in Singapore dollars unless otherwise stated)

ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

42

15. Other Creditors And Accruals

Other creditors Accrued purchases Accrued operating expenses Deposits received Amounts held as collateral [Note 34(e)(ii)]

Group 2004 $’000

2003 $’000

Company 2004 $’000

2003 $’000

509 663 3,911 493 132

761 610 5,331 11 132

335 464 2,336 483 132

300 432 3,416 7 132

5,708

6,845

3,750

4,287

16. Loans From Subsidiaries The loans from subsidiaries are unsecured and repayable on demand. Interest is charged at 3.5% (2003: 3.5%) per annum.

17. Term Loans / Short-term Bank Loans / Bank Overdrafts (a)

Term Loans

Loan repayments: – due within 1 year – due between 1 to 5 years

Group 2004 $’000

2003 $’000

Company 2004 $’000

2003 $’000

2,692 5,480

2,553 8,095

1,225 613

1,225 1,837

8,172

10,648

1,838

3,062

Details of the term loans are as follows: Company Term Loan 1 The bank loan amount of $1,837,276 (2003: $3,062,127) is secured by a first legal mortgage over the Company’s leasehold land and building with a net book value of approximately $15,442,000 (2003: $15,807,000) at 531 Bukit Batok Street 23, Singapore 659547 and is repayable over 35 quarterly instalments commencing November 1997. Interest is charged at 1.25% above SWAP (Interbank) rate. Subsidiaries Term Loan 2 The bank loan amount of $3,836,704 (2003: $4,664,812) is secured by a corporate guarantee from the Company and a charge over the subsidiary’s fixed assets with a net book value of approximately $1,978,000 (2003: $2,206,000). It is repayable in 60 monthly instalments from November 2003 and bears interest at the Minimum Lending Rate less 2.25% per annum. Term Loan 3 Term loan 3 amount of $2,498,173 (2003: $2,921,338) is repayable on a monthly basis over 9 years commencing April 2004 and bears interest at the Minimum Lending Rate less 0.5% per annum but not less than the rate of 12-month fixed deposit plus 3.0% per annum. The term loan is secured by a corporate guarantee from the Company and a charge over the subsidiary’s fixed assets with a net book value of approximately $4,134,000 (2003: $3,746,000). The effective interest rate on term loans for the year ranged from 1.94% to 6.50% (2003: 1.92% to 6.75%) per annum.


Notes To The Financial Statements 17. Term Loans / Short-term Bank Loans / Bank Overdrafts (cont’d) (b)

Short-term Bank Loans Short-term bank loan of the Group amounting to $3,206,336 (2003: $859,742) is secured by a corporate guarantee from the Company and a charge over a subsidiary’s fixed assets with a net book value of approximately $4,134,000 (2003: $3,746,000). The remaining short-term loans are unsecured. The loans are repayable within the next 12 months and bear interest at 1.90% to 6.50% (2003: 1.90% to 6.00%) per annum.

(c)

Bank Overdrafts The effective interest rate on bank overdrafts for the year ranged from 4.75% to 7.00% (2003: 4.75% to 7.00%).

18. Lease Obligations

Group

Payments $’000

Interest $’000

Principal $’000

More than 1 year and not later than 5 years Later than 5 years

466 91

(59) (11)

407 80

Not later than 1 year

557 197

(70) (25)

487 172

754

(95)

659

2003 More than 1 year and not later than 5 years Later than 5 years

463 11

(73) (2)

390 9

Not later than 1 year

474 250

(75) (30)

399 220

724

(105)

619

448 91

(56) (11)

392 80

539 184

(67) (24)

472 160

723

(91)

632

2003 More than 1 year and not later than 5 years Later than 5 years

428 11

(66) (2)

362 9

Not later than 1 year

439 190

(68) (25)

371 165

629

(93)

536

2004

Company 2004 More than 1 year and not later than 5 years Later than 5 years Not later than 1 year

Lease terms range from 3 to 7 years with options to purchase at the end of the lease term. Lease terms do not contain restrictions concerning dividends, additional debt and further leasing. The effective interest rates of the lease obligations range from 4.2% to 13.0% (2003: 5.0% to 13.0%) per annum.

ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

31 December 2004 (Amounts are expressed in Singapore dollars unless otherwise stated)

43


Notes To The Financial Statements 31 December 2004 (Amounts are expressed in Singapore dollars unless otherwise stated)

ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

19. Deferred Taxation

Deferred Tax Liabilities Timing differences arising from fixed assets Capital reserve

Deferred Tax Asset Timing differences arising from fixed assets Others Net deferred tax liabilities

Group 2004 $’000

2003 $’000

Company 2004 $’000

2003 $’000

1,846 –

1,723 191

1,482 –

1,632 –

1,846

1,914

1,482

1,632

162 43

12 73

– 89

– 73

205

85

89

73

1,641

1,829

1,393

1,559

20. Share Capital Group and Company 2004 2003 $’000 $’000

44 Authorised: – 800,000,000 (2003: 800,000,000) ordinary shares of $0.10 each

80,000

80,000

Issued and fully paid: – 510,935,450 (2003 : 466,939,472) ordinary shares of $0.10 each

51,093

46,694

During the year, the Company increased its issued and paid-up capital from $46,693,947 to $51,093,545 by way of an allotment of 43,995,978 new ordinary shares of $0.10 each for cash pursuant to the exercise of employee share options and warrants conversion. The holders of ordinary shares are entitled to receive dividends as and when declared by the Company. All ordinary shares carry one vote per share.

21. Share Premium The share premium account may be applied only for the purposes specified in the Companies Act. The balance is not available for distribution of dividends except in the form of shares. Group and Company 2004 2003 $’000 $’000 At beginning of year Add: premium from exercise of employee share options

6,731 1

6,713 18

At end of year

6,732

6,731

22. Share Discount This represents share discount arising from the issue of 197,246,284 ordinary shares of $0.10 each at a discount of $0.05 per share pursuant to the rights issue in the prior year.


Notes To The Financial Statements 23. Capital Reserve Capital reserve comprises: Group 2004 $’000 Asset revaluation reserve Legal reserve

2003 $’000

447 105

447 105

552

552

Legal Reserve: Under Section 1202 of the Thailand Civil and Commercial Code, Armstrong Rubber & Chemical Products Co Ltd, a subsidiary incorporated in Thailand, has to allocate not less than 5 percent of retained earnings to its legal reserve each time it declares a dividend payment, until the reserve reaches not less than 10 percent of registered capital.

24. Revenue Reserve Group 2004 $’000

2003 $’000

Retained by: Company Subsidiaries Associated companies

11,683 1,757 1,650

10,135 (2,084) 1,949

At end of year

15,090

10,000

25. Turnover Turnover represents the invoiced value of goods sold, net of discounts and returns.

26. Other Operating Income Group 2004 $’000 Dividend income – unquoted investments – quoted investments Administrative and management fees from associated company Rental income – associated company – outside parties Gain / (loss) on disposal of fixed assets Gain on disposal of quoted equity shares (Provision) / write back of provision for lower of cost and market value of quoted equity shares and amount under fund management Other income – affiliated company – outside parties

2003 $’000

34 30 12

35 5 12

90 42 19 30

90 55 (169) 107

(92)

47

– 384

50 253

549

485

ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

31 December 2004 (Amounts are expressed in Singapore dollars unless otherwise stated)

45


Notes To The Financial Statements 31 December 2004 (Amounts are expressed in Singapore dollars unless otherwise stated)

ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

46

27. Personnel Expenses Group 2004 $’000 Wages, salaries and bonuses Pension contributions Other personnel expenses

2003 $’000

17,605 1,607 2,790

15,733 1,515 1,681

22,002

18,929

28. Profit From Operations This is determined after charging the following:

Non-audit fees paid to auditors of the Company Non-audit fees paid to other auditors Amortisation of goodwill on consolidation Amortisation of intangible asset Depreciation of fixed assets Loss on partial disposal of investment in associated company Operating lease expenses Directors’ remuneration – Directors of the Company – Directors of subsidiaries Directors’ fees – Directors of the Company Key Executives’ remuneration Fees paid to a firm of which a Director is a member Personnel expenses (Note 27)* * This

Group 2004 $’000

2003 $’000

10 – 67 15 3,846 – 735

16 6 59 15 3,413 165 673

1,344 372

1,350 350

92 491 10 22,002

68 491 11 18,929

includes the amount shown as Directors’ remuneration and Key Executives’ remuneration.

29. Financial Expenses / (Income) Group 2004 $’000

2003 $’000

(a) Financial expenses Interest expense – bank overdrafts – finance leases – bank term loans – bills payable to banks – others Foreign exchange loss, net Bank charges Payment discounts

38 29 487 2 42 312 147 52

20 34 299 8 90 -– 99 71

1,109

621


Notes To The Financial Statements 29. Financial Expenses / (Income) (cont’d) Group 2004 $’000

2003 $’000

(b) Financial income Interest income – fixed deposits – bank balances Foreign exchange gain, net

14 10 –

25 9 207

24

241

30. Taxation (a) Group 2004 $’000 Current taxation – current year – under / (over) provision in respect of prior years Deferred taxation – current year – over provision in respect of prior years Tax deducted at source Share of tax of associated company

(b)

2003 $’000

1,592 22

840 (16)

11 (200) 31

167 – 253

1,456 1

1,244 (4)

1,457

1,240

Reconciliation between tax expense and the product of accounting profit multiplied by the applicable tax rate is as follows: Group 2004 $’000

2003 $’000

Accounting profit before taxation

9,949

6,202

Tax at domestic tax rates applicable to profits in the countries concerned* Adjustments: Expenses not deductible for tax purposes Income not subject to tax Over provision in respect of prior years Share of tax of associated company Utilisation of prior year losses Deferred tax assets not recognised Reduction in tax rate Others

2,392

2,090

376 (663) (178) 1 (975) 650 (109) (37)

177 (575) (16) (4) (610) 154 – 24

1,457

1,240

* This

is computed by aggregating separate computations for each company in their respective countries.

ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

31 December 2004 (Amounts are expressed in Singapore dollars unless otherwise stated)

47


Notes To The Financial Statements 31 December 2004 (Amounts are expressed in Singapore dollars unless otherwise stated)

ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

48

30. Taxation (cont’d) A loss-transfer system of group relief (group relief system) for companies was introduced in Singapore with effect from year of assessment 2003. Under the group relief system, a company belonging to a group may transfer its current year unabsorbed capital allowances, current year unabsorbed trade losses and current year unabsorbed donations (loss items) to another company belonging to the same group, to be deducted against the assessable income of the latter company. The Company’s subsidiaries intend to transfer unutilised tax losses of $63,000 (2003: $79,000) and unabsorbed capital allowances of $Nil (2003: $837,000) to the Company under the group relief system, subject to compliance with the relevant rules and procedures and agreement of the Inland Revenue Authority of Singapore. The current year tax expense of the Company is net of the tax effects of the unutilised tax losses transferred. The Group has unutilised tax losses and unabsorbed capital allowances of approximately $4.1 million (2003: $7.1 million) and $Nil (2003: $222,000) respectively, available for offset against future taxable income, subject to the agreement of the relevant income tax authorities and compliance with certain provisions of the tax legislation of the respective countries in which the subsidiaries operate. The potential deferred tax asset arising from these unutilised tax losses and unabsorbed capital allowances has been recognised in the financial statements to the extent deemed recoverable. Armstrong Rubber & Chemical Products Co Ltd The subsidiary was granted promotional privileges by the Board of Investment of Thailand for the manufacture of electronic component parts made from rubber, elastomeric sponge and urethane foam pursuant to investment promotion certificate No. 6663/2545 and for the manufacture of plastic component parts pursuant to investment promotion certificate No. 1082/2539. Among the significant privileges are exemptions from corporate income tax on profits from the promoted activities for a period of eight years, commencing as from the date of first earning operating income (1997). Thereafter, profits from the promoted activities are subject to income tax at a reduced rate of 50% of the normal tax rate, for a further period of five years. Armstrong Odenwald Changchun Technology Co Ltd / Armstrong Technology (Dalian) Co Ltd / Armstrong Technology (Wuxi) Co Ltd / Armstrong Technology (Shanghai) Co Ltd In accordance with the “Income Tax Law of the People’s Republic of China (“PRC”) for enterprises with Foreign Investment and Foreign Enterprises”, the subsidiaries in PRC are entitled to full exemption from Enterprise Income Tax (“EIT”) for the first two years and a 50% reduction in EIT for the next three years, commencing from the first profitable year after offsetting all tax losses carried forward from the previous five years. The subsidiaries in PRC have not commenced paying EIT. Yasuda Tsusho Ltd The subsidiary was incorporated in Federal Territory of Labuan, Malaysia under the Offshore Companies Act, 1990. In accordance with the Labuan Offshore Business Activity Tax Act, 1990, taxation charge is based on RM20,000 upon commencement of business.

31. Earnings Per Share Basic earnings per share is calculated by dividing the net profit for the year attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share is calculated by dividing the net profit attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year (adjusted for the effects of dilutive options).


Notes To The Financial Statements 31. Earnings Per Share (cont’d) The following reflects the income and share data used in the basic and diluted earnings per share computations for the years ended 31 December: Group 2004 2003 $’000 $’000 Net profit attributable to ordinary shareholders for basic and diluted earnings per share

5,898

4,208

The weighted average number of ordinary shares is calculated as follows: Number of Shares 2004 2003 ’000 ’000 Issued ordinary shares at beginning of year Weighted average number of ordinary shares issued during the year

466,939 29,123

463,599 943

Weighted average number of issued ordinary shares Effect of dilutive share options

496,062 3,425

464,542 17,969

Adjusted weighted average number of ordinary shares applicable to diluted earnings per share

499,487

482,511

32. Dividend A final dividend of 0.2 cents per share and special dividend of 0.6 cents per share, less tax at 20%, amounting to approximately $3,270,000 has been proposed by the directors in respect of the financial year ended 31 December 2004, subject to shareholders’ approval at the forthcoming Annual General Meeting of the Company. A final dividend of 0.2 cents per share, less tax at 20% amounting to approximately $808,000 in respect of the financial year ended 31 December 2003 was paid during the financial year ended 31 December 2004.

33. Related Party Information The Group had significant transactions with related parties on terms agreed between the parties as follows: Group 2004 $’000

2003 $’000

Income Sales to associated company Administrative and management fees from associated company Other income from affiliated company Rental income from associated company

3,444 12 – 90

3,089 12 50 90

2,533 11,911 10 26 960

2,500 9,562 11 26 –

Costs and expenses Purchases from affiliated company Purchases from shareholder of a subsidiary Fees paid to a firm of which a Director is a member Rental expense paid to a Director Dividend paid to a minority shareholder in which a Director has an equity interest

ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

31 December 2004 (Amounts are expressed in Singapore dollars unless otherwise stated)

49


Notes To The Financial Statements 31 December 2004 (Amounts are expressed in Singapore dollars unless otherwise stated)

ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

34. Commitments And Contingent Liabilities (a)

Operating Lease Commitments (i)

As Lessee The Group had entered into lease agreements for land and staff housing, resulting in future rental commitments which can, subject to certain terms in the agreements, be revised annually based on prevailing market rates. Lease terms do not contain restrictions on the Group’s activities concerning dividends, additional debt or further leasing. As at 31 December 2004, the Group had aggregate minimum lease commitments as follows: Group 2004 2003 $’000 $’000 Within 1 year Between 1 and 5 years After 5 years

(ii)

596 1,474 8,798 10,868

480 1,239 8,683 10,402

As Lessor The Group and the Company leases out part of a leasehold building under operating lease arrangements, with leases negotiated for a term of 2 years. The terms of the lease generally also require the tenant to pay a security deposit.

50

As at 31 December 2004, the Group and the Company had aggregate future minimum lease receivable under operating leases as follows: Group and Company 2004 2003 $’000 $’000 Future minimum lease receivables – not later than 1 year – 1 year to 5 years

(b)

65 3

8 –

68

8

Capital Expenditure Commitments As at 31 December 2004, the Group and the Company had capital expenditure contracted but not provided for in the financial statements as follows: Group Company 2004 2003 2004 2003 $’000 $’000 $’000 $’000 Fixed assets purchase commitments

(c)

1,623

393

1,623

36

Bank Guarantees Group 2004 $’000 Not provided for in the financial statements – bank guarantees

337

2003 $’000

327

Company 2004 $’000

283

2003 $’000

288

As at 31 December 2004, fixed deposits of a subsidiary amounting to $57,402 (2003: $57,627) was pledged as security to a bank for performance guarantee granted to the subsidiary.


Notes To The Financial Statements 34. Commitments And Contingent Liabilities (cont’d) (d)

Forward Foreign Exchange Contracts As at 31 December 2004, the Group had outstanding forward foreign exchange contracts for the purchase of approximately JPY266 million (2003: JPY115 million), $63,000 (2003: $24,000) and US$10,000 (2003: US$39,000) in respect of hedging trade payables.

(e)

Contingent Liabilities (i)

Bonds Pursuant to the Joint Venture Agreement with Sin Soon Lee Realty Company (Private) Limited (“SSLRPL”) the aggregate amount of liability arising under guarantees, indemnities and covenants given by the Company and SSLRPL, whether jointly or severally, to secure the indebtedness and obligations of Soon Lee Realty Ltd (“SLRL”) for the purpose of the joint venture is to be shared by the Company and SSLRPL in the proportion of 15% and 85% respectively. On 1 December 1997, SLRL issued $96,000,000 in principal amount of secured bonds (the “Bonds”) pursuant to the terms and conditions contained in a trust deed entered into between SLRL, SSLRPL, the Company and the Trustee. The trust deed was subsequently amended by several supplemental trust deeds in October 2000, August 2001, March 2002 and June 2002. These provided that the Bonds are due on 28 March 2002. However, on 28 March 2002, an agreement was reached with the bondholders to extend the redemption period for the bonds for another three years to March 2005. Subsequent to the end of the financial year, an agreement was reached with the bondholders to extend the redemption period for the Bonds to March 2008. At the end of the year, the principal sum remaining due on the Bonds is approximately $44 million. The Bonds are secured by, inter alia, a mortgage on a property of SLRL located in Singapore, as well as mortgages over various other properties in Malaysia, which are owned by Onsan Holdings Sdn Bhd, Sin Soon Lee Realty Company (M) Sdn Bhd and Ban Lan Sdn Bhd. $19 million of the bonds are redeemable in March 2005, $7 million in March 2006, $15 million in March 2007, and the remaining balance of $3 million in March 2008.

(ii)

Bankers’ Guarantee In prior year, the Company requested a bank to issue a bankers’ guarantee, in the name of SLRL, of $155,750 in favour of Land Transport Authority of Singapore. Under the terms of the bankers’ guarantee, the Company shall be liable for any claims made by Land Transport Authority of Singapore against the bank to the extent of the guarantee amount. To indemnify the Company against SSLRPL’s share of loss should the guarantee crystallise, a Director of SSLRPL has placed a deposit of $132,389 with the Company as security for the Company’s obligations in connection with the guarantee (Note 15).

(iii)

Litigation by Minority Shareholder There is a suit by a minority shareholder (who was an ex-employee) who has a 5% interest in Hardyflex Industries Sdn Bhd (“HISB”), which is a subsidiary of the Company. A Director of the Company had originally owned 85% of HISB. In anticipation of the listing of the Company in 1995 and the corporate restructuring to be undertaken, the Director transferred all his shares to the Company in exchange for new shares in the Company to be issued to him. The minority shareholder has commenced proceedings in the Malaysian High Court against HISB, the Director and the Company, claiming that there was oppression against him. The minority shareholder has not claimed any specific amount of damages. However, he has asked that, inter alia, the Company purchases his shares in HISB at a price to be determined or alternatively, that HISB be wound up. In the event that HISB is wound up, the Company would have to make a provision for writing off its original cost of investment in HISB amounting to approximately $2.3 million, and any winding up cost to be incurred less amount recoverable from disposal of assets. The suit has been served on HISB in Malaysia since 2002. Having consulted legal counsels, both in Malaysia and Singapore, the Directors are of the opinion that the claim has no merit and accordingly, no provision has been made in the financial statements.

ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

31 December 2004 (Amounts are expressed in Singapore dollars unless otherwise stated)

51


Notes To The Financial Statements 31 December 2004 (Amounts are expressed in Singapore dollars unless otherwise stated)

ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

52

34. Commitments And Contingent Liabilities (cont’d) (iv)

As at 31 December 2004, the Company had given undertakings to Armstrong Rubber Manufacturing Pte Ltd, Armstrong Mechanical Components Co Ltd and Armstrong Technology (Shanghai) Co Ltd to provide financial support to these subsidiary companies, where necessary, to enable these companies to operate as going concerns and to meet their obligations for at least 12 months from the date of this report.

(v)

As at 31 December 2004, the Company had given corporate guarantees of up to Baht 367 million (2003: Baht 183 million) and US$850,000 (2003: US$1,850,000), equivalent to $16,807,000 (2003: $11,015,000) for the banking facilities granted to its subsidiary companies.

35. Employee Benefits The Company has an employee share incentive plan for the granting of non-transferable options to employees. Options are granted for terms of 1 to 10 years to purchase the Company’s ordinary shares at not less than the market value of the shares at the date of grant. The options are exercisable beginning on the first anniversary of the date of grant. Information with respect to the number of options granted under the Company’s employee option plans is as follows: Options Over Number of Shares 2004

Weighted Average Exercise Price 2004

Options Over Number of Shares 2003

Weighted Average Exercise Price 2003

Outstanding at beginning of year Lapsed Exercised

17,431,771 (1,347,892) (1,508,615)

$0.12 $0.23 $0.11

22,335,859 (1,563,828) (3,340,260)

$0.12 $0.12 $0.11

Outstanding at end of year

14,600,709

$0.11

17,431,771

$0.12

Exercisable at end of year

6,730,807

$0.11

4,757,210

$0.15

Outstanding

Exercisable

Options

Average Life

Average Option Price

Options

Average Option Price

$0.10 $0.12

6,579,511 8,021,198

9.4 8.6

$0.10 $0.12

3,299,613 3,431,194

$0.10 $0.12

Total

14,600,709

9.0

$0.11

6,730,807

$0.11

Option Price

36. Group Segmental Reporting (a)

Business Segments The Group is organised on a worldwide basis into five main operating divisions, namely: (i)

Information Technology

(ii)

Office Automation

(iii)

Consumer Electronics / Telecommunications

(iv)

Automotive

(v)

Industrial Engineering

Other operations include the printing business and trading of adhesive and foam products.


Notes To The Financial Statements 36. Group Segmental Reporting (cont’d)

2004 Turnover External sales Inter-segment sales

Information Technology $’000

Office Automation $’000

Consumer Electronics/ Telecommunications $’000

19,457 –

30,495 –

37,731 –

21,633 –

3,939 –

– 26,764

– (26,764)

1,427

2,953

3,479

2,071

430

2,690

(1,062)

Automotive $’000

Industrial Engineering $’000

Others $’000

Eliminations $’000

Total $’000

113,255 –

Total sales Segment results Unallocated income Unallocated expenses

113,255

Profit from operations Financial expenses, net Share of results of associated company Taxation Minority interests

11,011 (1,085) 23 (1,457) (2,594)

Net profit for the year Segment assets Investment in associated company Unallocated assets

5,898 12,559

12,302

19,061

12,942

2,397

15,680

74,941

– –

– –

– –

– –

– –

– –

– –

1,730 24,376

Total assets Segment liabilities Unallocated liabilities

101,047 2,712 –

4,537 –

5,304 –

3,311 –

417 –

3,829 –

– –

Total liabilities Capital expenditure Depreciation and amortisation Other non-cash expenses 2003 Turnover External sales Inter-segment sales

Profit from operations Financial expenses, net Share of results of associated company Taxation Minority interests Net profit for the year

20,110 16,992 37,102

571

716

1,420

761

112

1,393

4,973

729 379

678 147

910 140

603 88

120 35

888 480

– –

3,928 1,261

19,876 –

23,618 –

29,848 –

18,164 –

2,520 –

– 10,484

– (10,484)

94,026 –

Total sales Segment results Unallocated income

11,988 1 (978)

94,026 2,154

1,702

1,765

1,624

213

1,091

(911)

7,638 194 7,832 (380) (1,250) (1,240) (754) 4,208

ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

31 December 2004 (Amounts are expressed in Singapore dollars unless otherwise stated)

53


Notes To The Financial Statements 31 December 2004 (Amounts are expressed in Singapore dollars unless otherwise stated)

ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

54

36. Group Segmental Reporting (cont’d)

2003 Segment assets Investment in associated company Unallocated assets

Information Technology $’000

Office Automation $’000

Consumer Electronics/ Telecommunications $’000

17,918

11,870

19,548

12,216

2,060

9,636

73,248

– –

– –

– –

– –

– –

– –

– –

2,029 20,177

Automotive $’000

Industrial Engineering $’000

Others $’000

Eliminations $’000

Total $’000

Total assets

95,454

Segment liabilities Unallocated liabilities

5,039 –

4,412 –

5,597 –

3,396 –

516 –

2,505 –

– –

Total liabilities

41,579

Capital expenditure Depreciation and amortisation Other non-cash expenses (b)

21,465 20,114

301

875

1,092

797

49

253

3,367

890 316

605 106

829 267

607 82

92 33

464 162

– –

3,487 966

Geographical Segments Turnover is based on where the goods are produced. Assets and additions to property, plant and equipment are based on the location of those assets. Turnover Segment Assets Capital Expenditure 2004 2003 2004 2003 2004 2003 $’000 $’000 $’000 $’000 $’000 $’000 Singapore Malaysia Indonesia Thailand China

31,286 10,147 25,930 32,845 13,047

29,256 8,898 20,660 24,806 10,406

46,786 7,898 6,691 22,716 16,956

48,037 7,474 6,730 20,506 12,707

1,341 130 201 1,224 2,077

559 240 144 706 1,718

113,255

94,026

101,047

95,454

4,973

3,367

37. Financial Instruments Financial Risk Management Objectives And Policies The main risks arising from the Group’s financial instruments are interest rate risk, liquidity risk, credit risk, foreign exchange risk and market risk. The Board reviews and agrees policies for managing each of these risks and they are summarised below. It is the Group’s policy not to trade in derivative contracts. Interest Rate Risk The Group obtains additional financing through bank borrowings and leasing arrangements. The Group’s policy is to obtain the most favourable interest rates available without increasing its foreign currency exposure. Surplus funds are placed with reputable banks. Information relating to the Group’s interest rate exposure is also disclosed in the notes on the Group’s borrowing and leasing obligations.


Notes To The Financial Statements 37. Financial Instruments (cont’d) Liquidity Risk Short-term funding is obtained from revolving credit and overdraft facilities. Credit Risk Credit risk, or the risk of counterparties defaulting, is managed through the application of credit approvals, credit limits and monitoring procedures. The carrying amount of cash and cash equivalents, trade debtors and other debtors represent the Group’s maximum exposure to credit risk in relation to financial assets. No other financial assets carry a significant exposure to credit risk. The Group has no significant concentrations of credit risk, except for loan to a joint venture company which represents 26% (2003: 28%) of the total carrying value of financial assets. Foreign Exchange Risk The foreign exchange risk of the Group arises from subsidiaries operating in foreign countries, which generate revenue and incur costs denominated in foreign currencies. The Group’s local subsidiaries also generate revenue and incur costs in foreign currencies which give rise to foreign exchange risk. The Group enters into forward foreign exchange contracts to hedge against its foreign exchange risk resulting from anticipated sale and purchase transactions denominated in foreign currencies, primarily in US dollars and Japanese Yen. Market Risk The Group has investments in quoted equity shares and amounts under fund management, which are subject to market risks as the market value of these investments are affected by changes in market prices. The Group manages its exposure to market risks by maintaining a portfolio of equities with different risk profiles. Fair Values The following methods and assumptions are used to estimate the fair value of each class of financial instrument for which it is practicable to estimate fair value. Cash And Cash Equivalents The carrying amount approximates fair value due to their nature and liquidity. Trade Debtors, Other Debtors And Deposits, Trade Creditors, Other Creditors And Short-term Bank Loans The carrying amount approximates fair value because these assets and liabilities are of short-term maturity. Long-term Borrowings The fair value of the long-term loans is based on the quoted market price for the same or similar issues or on the current rates available for debt with the same maturity profile. The fair value of non-current loans, borrowings or other payables with variable interest rates approximates their carrying amounts. Quoted And Unquoted Investments The fair value of quoted investments is estimated based on quoted market prices for these investments. For unquoted investments, it is not practicable to determine the fair value because of the lack of quoted market prices and the assumptions used in valuation models to value these investments cannot be reasonably determined. Lease Obligations The fair value of lease obligations is determined by discounting the relevant cash flow using current interest rates for similar instruments at balance sheet date. The carrying amounts approximate the fair value as at 31 December 2004.

ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

31 December 2004 (Amounts are expressed in Singapore dollars unless otherwise stated)

55


Notes To The Financial Statements 31 December 2004 (Amounts are expressed in Singapore dollars unless otherwise stated)

37. Financial Instruments (cont’d) ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

56

Foreign Exchange Forward Contract The fair value of foreign exchange forward contracts is estimated based on the difference between the applicable forward rates prevailing at the balance sheet date and the contracted forward rates, multiplied by the notional amount and discounted to present value. The carrying amount approximates the fair value as at 31 December 2004. Loan To A Joint Venture Company It is not practicable to determine the fair value of loan to the Joint Venture Company as the timing of the expected cash flows of these loans cannot be reasonably determined. Disclosure of the nature of financial instruments and their significant terms and conditions that could affect the amount, timing and certainty of future cash flow is presented in the respective Notes to the financial statements, where applicable.

38. Subsequent Events In January 2005, the Group has entered into an Asset Sale and Purchase Agreement for the sale of one of the land and factory building, all other fixed assets and certain inventories relating to its metal stamping business of a subsidiary company for a total consideration of Baht 117,168,000 (equivalent to approximately $4.8 million). The loss of disposal of the said assets is estimated at approximately $582,000.

39. Authorisation Of Financial Statements The financial statements of Armstrong Industrial Corporation Limited and its subsidiaries for the year ended 31 December 2004 were authorised for issue in accordance with a resolution of the Directors on 18 March 2005.


Details Of Properties 31 December 2004

Purpose / Valuation Date (where applicable)

Approximate Area (in square feet)

Office and factory building

81,316 (built in area 167,605)

60 years from 1996

No. 17 Jalan 16/13A Section 16 40000 Shah Alam Malaysia

Office and factory building

3,900 (built in area 3,090)

99 years from 1989

No. 14 Jalan TSB 6 Taman Industri Sungai Buloh 47000 Sungai Buloh Selangor Darul Ehsan Malaysia

Office and factory building

8,396 (built in area 5,520)

99 years from 1993

No. 16 Jalan Perdagangan 14 Taman Universiti, 81300 Skudai Johor Darul Takzim Malaysia

Office and factory building

6,000 (built in area 5,151)

Freehold

No. 4 Jalan TSB 11 Taman Industri Sungai Buloh 47000 Sungai Buloh Selangor Darul Ehsan Malaysia

Office and factory building

44,218 (built in area 38,148)

99 years from 1993

Blk C1 No. 3 Lemahabang Bekasi 17550 Indonesia

Office and factory building

60,000 (built in area 40,000)

30 years from 1994

Blok V-78H Lemahabang Bekasi 17530 Indonesia

13,800 (built in area 9,590)

30 years from 1993

Office and factory building

Leasehold/Freehold Building/Location

Tenure of Lease

Held by the Company

Singapore: 531 Bukit Batok Street 23 Singapore 659547

Held by Subsidiaries

Malaysia:

Indonesia:

ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

As at 31 December 2004, the leasehold/freehold properties of the Group consist of the following:

57


Details Of Properties 31 December 2004

ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

Leasehold/Freehold Building/Location

Purpose / Valuation Date (where applicable)

Approximate Area (in square feet)

591 Moo 17 Soi Bangplee Phattana, Theparak Rd Bangsaothong, King-amphur Bangsaothong, Samutprakarn 10540 Thailand

Office and factory building

52,016 (built in area 30,569)

Freehold

501 Moo 9 Highway No. 304 Rd NongPlong, Srimahapho Prachinburi 25140 Thailand

Office and factory building

144,337 (built in area 67,658)

Freehold

58

38 Moo 1, (Hi-Tech Industrial Estate) Banpo, Bang Pa-In Ayuthaya 13160 Thailand

Office and factory building

116,250 (built in area 65,100)

Freehold

48/2 Moo 6, Lard Lum Kaew Road Khu Bang Luang District Amphur Lard Lum Kaew Pathumthani 12140 Thailand

Office and factory building

8,568 (built in area 5,813)

Freehold

No 5, Xingchuang Road 1 Wuxi - Singapore Industrial Park Jiangsu Province China

Office and factory building

114,751 (built in area 42,293)

50 years from 1997

Dongjiang Wuxi City Jiangsu Province China

Residential

734

66 years from 1996

Tenure of Lease

Held by Subsidiaries

Thailand:

China:


Statistics Of Shareholdings Authorised Share Capital Fully Paid and Issued Shares Class of Shares Voting Rights

$80,000,000.00 $51,106,387.70 Ordinary Shares Of $0.10 Each 1 Vote Per Share

Distribution of Shareholdings Size of Holdings

No. of Shareholders

%

No. of Shares

%

158 6,062 2,851 25

1.74 66.64 31.34 0.28

64,962 26,659,079 137,226,610 347,113,226

0.01 5.22 26.85 67.92

9,096

100.00

511,063,877

100.00

Name Gilbert Ong Peng Koon Patricia Chow Goon Chau United Overseas Bank Nominees Pte Ltd DBS Nominees Pte Ltd HL Bank Nominees (S) Pte Ltd OCBC Nominees Singapore Private Limited UOB Kay Hian Pte Ltd OCBC Securities Private Ltd Jojo Krisnawan Tsui Sung Lam Kim Eng Securities Pte Ltd Wong Kien Chorn Singapore Nominees Pte Ltd Ong Eugene Chan Tien Lok G K Goh Stockbrokers Pte Ltd Lau Chin Kia Citibank Nominees S’pore Pte Ltd Pantja Boen Soesanto Lim & Tan Securities Pte Ltd

No. of Shares 219, 307,915 28,318,000 23,077,417 17,061,105 9,451,000 8,529,875 5,747,000 4,467,000 4,439,000 3,131,000 2,740,135 2,300,000 2,130,000 1,748,000 1,677,000 1,586,137 1,500,000 1,475,000 1,440,000 1,347,000

% 42.91 5.54 4.52 3.34 1.85 1.67 1.12 0.87 0.87 0.61 0.54 0.45 0.42 0.34 0.33 0.31 0.29 0.29 0.28 0.26

TOTAL

341,472,584

66.81

1 – 999 1,000 – 10,000 10,001 – 1,000,000 1,000,001 and above Total

Twenty Largest Shareholders No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Percentage of Shareholdings held by the Public as at 10 March 2005 As at 10 March 2005, the percentage of shareholdings held in the hands of the public was approximately 50% and Rule 723 of the Listing Manual is complied with.

Substantial Shareholders as at 10 March 2005 as recorded in the Company’s Register of Substantial Shareholders Name of Substantial Shareholder Mr Gilbert Ong Peng Koon Ms Patricia Chow Goon Chau *

Direct Interest No of Shares 219,307,915 28,318,000

% 42.91 5.54

Mr Gilbert Ong Peng Koon is deemed to be interested in the following shares: Shares registered in name of UOB Nominees Pte Ltd 1,438,000 Shares owned by Ms Patricia Chow Goon Chau 28,522,000 29,960,000

**

Ms Patricia Chow Goon Chau is deemed to be interested in the following shares: Shares registered in name of UOB Nominees Pte Ltd 204,000 Shares owned by Mr Gilbert Ong Peng Koon 220,745,915 220,949,915

Deemed Interest No of Shares 29,960,000* 220,949,915**

% 5.86 43.23

ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

as at 10 March 2005

59


Notice Of Annual General Meeting ARMSTRONG INDUSTRIAL CORPORATION LIMITED ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

60

Company Registration Number: 198003808K (Incorporated in Singapore)

NOTICE IS HEREBY GIVEN that the 2005 Annual General Meeting of the Company will be held at the Conference Room, 531 Bukit Batok Street 23, Singapore 659547 on Monday, 25 April 2005 at 9 a.m. to transact the following businesses:

ORDINARY BUSINESS 1.

To receive and consider the Directors’ report and accounts for the year ended 31 December 2004 and the Auditor’s report thereon.

Resolution 1

2.

To approve a first and final dividend of 0.2 cents per ordinary share, less tax at 20% for the year ended 31 December 2004.

Resolution 2

3.

To approve a special dividend of 0.6 cents per ordinary share, less tax at 20% for the year ended 31 December 2004.

Resolution 3

4.

To approve the proposed Directors’ fees of $89,025 for the year ended 31 December 2004. (2003: $64,500) [see Explanatory Note (a)].

Resolution 4

5.

To re-elect Mr Tan Peng Chin pursuant to Article 104 of the Articles of Association [see Explanatory Note (b)].

Resolution 5

6.

To re-elect Ms Patricia Chow Goon Chau pursuant to Article 104 of the Articles of Association.

Resolution 6

7.

To re-appoint Ernst & Young as Auditors for the ensuing year and to authorise the Directors to fix their remuneration.

Resolution 7

8.

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

SPECIAL BUSINESS 9.

To consider and, if thought fit, to pass the following resolutions as ordinary resolution: That pursuant to Section 161 of the Companies Act, Chapter. 50 and the listing rules of the Singapore Exchange Securities Trading Limited, the Directors be and are hereby authorised to issue shares in the Company (whether by way of bonus issue, rights issue or otherwise) at any time and upon such terms and conditions and for such purposes and to such persons as the Directors may, in their absolute discretion, deem fit provided that: (i) the aggregate number of shares to be issued pursuant to this Resolution does not exceed 50% of the issued share capital of the Company, of which the aggregate number of shares to be issued other than on a pro-rata basis to existing shareholders of the Company does not exceed 20% of the Company’s issued share capital; (ii) for the purpose of determining the aggregate number of shares that may be issued under (i) above, the percentage of issued share capital shall be based on the issued share capital of the Company at the time this Resolution is passed, after adjusting for (a) new shares arising from the conversion or exercise of any convertible securities or employee share options that are outstanding when this Resolution is passed, and (b) any subsequent consolidation or subdivision of shares; and (iii) unless revoked or varied by the Company in general meeting, such authority conferred by this Resolution shall continue in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is the earlier [see Explanatory Note (c)].

Resolution 8


Notice Of Annual General Meeting

Company Registration Number: 198003808K (Incorporated in Singapore)

SPECIAL BUSINESS (cont’d) 10. That the Directors be and are hereby authorised to allot and issue from time to time such number of shares in the capital of the Company as may be required to be issued pursuant to the exercise of options under the Armstrong Industrial Corporation Share Option Scheme 2000 (“the Scheme”) provided always that the aggregate number of shares to be issued pursuant to the Scheme shall not exceed 15% of the issued share capital of the Company from time to time. [see Explanatory Note (d)].

Resolution 9

NOTICE IS HEREBY GIVEN that the Transfer Books and Register of Members of the Company will be closed on 18 May 2005 for the preparation of dividend warrants. Duly completed transfers received by the Company’s Registrar, Messrs Lim Associates (Pte) Ltd of 10 Collyer Quay #19-08 Ocean Building Singapore 049315, up to the close of business at 5.00 pm on 17 May 2005 will be registered to determine shareholders’ entitlement to the proposed dividend. The dividend if approved, will be paid on 31 May 2005 to shareholders registered in the books of the Company on 17 May 2005. In respect of shares in security accounts with the Central Depository (Pte) Limited (“CDP”), the said final and special dividend will be paid by the Company to CDP which will in turn distribute the dividend entitlements to holders of shares in accordance with its practice. By Order Of the Board

Chuang Sheue Ling Company Secretary 8 April 2005 Singapore

ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

ARMSTRONG INDUSTRIAL CORPORATION LIMITED

61


Notice Of Annual General Meeting ARMSTRONG INDUSTRIAL CORPORATION LIMITED ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

62

Company Registration Number: 198003808K (Incorporated in Singapore)

Explanatory Notes: Explanatory Note (a) The proposed increased Directors’ Fees of $89,025 was calculated based on the framework adopted by the Company payable to Independent Directors as disclosed in the Corporate Governance Report. Explanatory Note (b) Mr Tan Peng Chin, if re-elected, will remain as the Audit Committee member and is considered an Independent Director.

Explanatory Notes on Special Business to be transacted:Explanatory Note (c) Ordinary Resolution 8 will empower the Directors from the date of the Annual General Meeting until the date of the next Annual General Meeting to issue further shares in the Company. The maximum number of shares, which the Directors may issue under this resolution, shall not exceed the quantum set out in the resolution. Explanatory Note (d) Ordinary Resolution 9 is to allow the Directors to issue shares in the Company pursuant to the exercise of options granted or to be granted under the Armstrong Industrial Corporation Share Option Scheme 2000 provided that the aggregate number of shares to be issued does not exceed 15% of the issued share capital of the Company from time to time.

Notes (i)

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

(ii)

If a proxy is to be appointed, the form must be deposited at the registered ofďŹ ce of the Company, 531 Bukit Batok Street 23, Singapore 659547 not less than 48 hours before the meeting.

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

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


Proxy Form 1. For investors who have used their CPF monies to buy Armstrong Industrial Corporation’s shares, this Annual Report is sent to them at the request of their CPF Approved Nominees solely FOR INFORMATION ONLY.

ARMSTRONG INDUSTRIAL CORPORATION LTD (Company Registration Number : 198003808K) (Incorporated in Singapore)

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

I/We _____________________________________________________________________________________________________(Name) of ______________________________________________________________________________________________________(Address) being a member/members of ARMSTRONG INDUSTRIAL CORPORATION LTD hereby appoint: Name

Address

NRIC/Passport Number

Proportion of Shareholdings (%)

Address

NRIC/Passport Number

Proportion of Shareholdings (%)

and/or (delete as appropriate) Name

as my/our proxy/proxies to vote for me/us on my/our behalf, at the 2005 Annual General Meeting of the Company to be held on Monday 25 April 2005 at 9 a.m., and at any adjournment thereof. I/We direct my/our proxy/proxies to vote for or against the Resolutions to be proposed at the Meeting as indicated hereunder. If no specific direction as to voting is given, the proxy/ proxies will vote or abstain from voting at his/their discretion, as he/they will on any other matter arising at the Meeting. No.

Resolutions

1.

To adopt Reports and Accounts

2.

To approve First and Final Dividend

3.

To approve Special Dividend

4.

To approve Directors’ Fees

5.

To re-elect Mr Tan Peng Chin

6.

To re-elect Ms Patricia Chow Goon Chau

7.

To re-appoint Auditors and authorise the Directors to fix their remuneration

8.

To approve the Ordinary Resolution under Section 161 of the Companies Act, Cap. 50

9.

To authorise the Directors to issue and allot additional shares in accordance with the provisions of the Scheme

For

Against

Dated this ___________ day of ____________________ 2005.

Total No. of Shares Held _______________________________________ Signature(s) of Member(s)/Common Seal IMPORTANT: PLEASE READ NOTES OVERLEAF

ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

Important

63


ARMSTRONG INDUSTRIAL CORPORATION LIMITED ANNUAL REPORT 2004

64

NOTES 1.

A member entitled to attend and vote at the Meeting is entitled to appoint one or two proxies to attend and vote in his stead.

2.

Where a member appoints more than one proxy, the appointments shall be invalid unless he specifies the proportion of his holding (expressed as a percentage of the whole) to be represented by each proxy.

3.

A proxy need not be a member of the Company.

4.

A member should insert the total number of shares held. If the member has shares entered against his name in the Depository Register (as defined in Section 130A of the Companies Act, Cap. 50 of Singapore), he should insert that number of shares. If the member has shares registered in his name in the Register of Members of the Company, he should insert that number of shares. If the member has shares entered against his name in the Depository Register and registered in his name in the Register of Members, he should insert the aggregate number of shares. If no number is inserted, this form of proxy will be deemed to relate to all shares held by the member.

5.

The instrument appointing a proxy or proxies must be deposited at the Company’s registered office at 531 Bukit Batok Street 23 Singapore 659547 not less than 48 hours before the time set for the Meeting.

6.

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

7.

Where an instrument appointing a proxy is signed on behalf of the appointor by an attorney, the letter or power of attorney or a duly certified copy thereof must (failing previous registration with the Company) be lodged with the instrument of proxy, failing which the instrument may be treated as invalid.

GENERAL The Company shall be entitled to reject a Proxy Form which is incomplete, improperly completed, illegible or where the true intentions of the appointor are not ascertainable from the instructions of the appointor specified on the Proxy Form. In addition, in the case of shares entered in the Depository Register, the Company may reject a Proxy Form if the member, being the appointor, is not shown to have shares entered against his name in the Depository Register as at 48 hours before the time appointed for holding the Meeting, as certified by The Central Depository (Pte) Limited to the Company.


Group of Companies SINGAPORE Armstrong Industrial Corporation Limited Armstrong Rubber Manufacturing Pte Ltd Armstrong Odenwald (Asia) Pte Ltd Bridgestone Armstrong Pte Ltd

MALAYSIA Foamline Industries Sdn Bhd (JB, KL, Penang) Hardyflex Industries Sdn Bhd Yasuda Tsusho Ltd Bridgestone Armstrong (M) Sdn Bhd

THAILAND Armstrong Rubber & Chemical Products Co Ltd (Samutprakarn, Prachinburi, Ayuthaya) Armstrong Mechanical Components Co Ltd (Ayuthaya)

CHINA Armstrong Technology (Wuxi) Co Ltd Armstrong Technology (Shanghai) Co Ltd Armstrong Technology (Dalian) Co Ltd Armstrong Odenwald Changchun Technology Co Ltd

INDONESIA

A

razorSHARK Design

PT Armstrong Industri Indonesia

LEGEND: Subsidiaries Associated / Affiliated / Joint Venture


Armstrong Industrial Corporation Limited 531 Bukit Batok Street 23 Singapore 659547 Tel: (65) 6665 8588 Fax: (65) 6665 8665 www.armstrong.com.sg

Armstrong Industrial Annual Report 2004  

A razorSHARK design. 2005, March.

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