ANNUAL REPORT by liuqingyan


									                                         GUL TECHNOLOGIES • ANNUAL REPORT 2004
(Company Registration No.: 198803137E)
149-A Gul Circle
Singapore 629606
A Member of Tuan Sing Group

                                                                                 2 0 0 4
                                                                                 A NN UA L R EP O RT

                                             To be a world-class,
                                             one-stop solution
                                             provider in the design
                                             and manufacture of
                                             high density, very high
                                             layer printed circuit
                                             boards and advanced
                                             interconnect substrates
                                             that best meet the needs
                                             of our customers


1 corporate profile 2 message to shareholders 5 operations review
10 corporate governance report 21 financial review 73 letter to shareholders
86 corporate information

                                                                                                                        Seoul, Korea
          Detroit                                       Cadiz                                                           WUXI, CHINA
         San Jose
       Longmont                                                                                                    SUZHOU, CHINA
                                                                                                             Taipei, Taiwan
      Guadalajara                                                                           Penang


                                                    SALES AND REPRESENTATIVE OFFICES
                                              AMERICAS                 ASIA                  EUROPE
                                              • Detroit, Michigan      • Singapore (HQ)      • Cadiz, Spain
                                              • Brookline, NH          • Suzhou, China       • Cologne, Germany
                                              • San Jose, California   • Wuxi, China
                                              • Lynchburg, VA          • Penang, Malaysia
                                              • Longmont, Colorado     • Taipei, Taiwan
                                              • Chihuahua, Mexico      • Seoul, Korea
                                              • Guadalajara, Mexico

FOUNDED IN 1988, Gul Technologies Singapore Ltd (GulTech) is one of Southeast Asia’s largest manufacturers
of doublesided, multi-layered and rigid-flex printed circuit boards (PCBs) for a variety of industrial applications. The
company was listed on SESDAQ in March 1997 and transferred to the main board of SGX in July 2000.

GulTech manufactures its high-quality products in its production facilities in Singapore, Suzhou and Wuxi, China.
Through innovative design and prototype expertise, the company continues to work in partnership with multinational
customers to provide leading edge solutions in a highly dynamic and fast-paced technological environment.

Today, GulTtech is a global supplier with sales and representative offices in North America, Asia and Europe. Our PCBs are
supplied to the Automotive industry (electronic engine control, power control module, anti-lock braking systems, speed
controls, clusters, telematics etc), Telecommunications industry (mobile phones, digital enhanced cordless telephones,
land mobile radios), Information Technology industry (disk and tape drives for computers, network routers, servers,
firewalls, port adapters, voice over internet protocol, wireless local area network), Healthcare industry (hearing aids,
infusion pumps, glucose monitoring devices), and other products like instrumentation (programmable logic controllers,
industrial controllers, bar code readers), digital cameras and avionics.

                           The Group made good progress in its
                           efforts to reposition itself in the printed
                           circuit board industry in FY2004 by
                           continuing its implementation of a
                           number of structural, operational and
                           financial restructuring activities.
  02 . . . GUL TECHNOLOGIES Annual Report 2004
                                                                                               MESSAGE TO

Closure of its loss-making Gultech North Carolina prototype                                  THE YEAR IN REVIEW
plant was finalised in 1Q2004 as the US prototype market
was not seeing good recovery and the general market           The Group increased its sales revenue from US$79.2
trend is to relocate production to low cost countries in      million in FY2003 to US$83.9 million in FY2004, with sales
Asia and Eastern Europe.                                      to customers in China doubling from US$8.6 million to
                                                              US$17.6 million year-on-year, and sales to Singapore and
The Group continued to enjoy strong support from its          Malaysian customers increasing by approx. 18% from
major shareholders by securing shareholders’ loans of         US$23.8 million to US$28.1 million year-on-year. The
approximately US$46 million to build and complete its new     increased contribution from Asian customers is testament
PCB plant in Wuxi, China. The plant became operational        to the global shift in PCB manufacturing and sourcing to
as of December 2004 and will ramp up in capacity during       Asia.
FY2005. This additional facility, with capacity of 750k
sq ft/month is key to helping the Group in securing new       In FY2004, the Group managed to reduce its EBITDA
top tier customers. With a total group capacity reaching      (i.e. Earnings Before Interest, Tax, Depreciation and
1,700k sq ft/month by the end of FY2005, we will be able      Amortisation) deficit from US$7.4 million to US$3.4 million.
to attract more large OEM customers from Europe, Korea,       Included in previous and current year’s EBITDA are one-
Taiwan and Japan.                                             time investment related gains of US$0.8 million and write
                                                              off of pre-operating expense of US$2.1 million respectively.
Expanding production capacity in China, attaining             The improvement is the result of management’s efforts in
economies of scale, expanding market reach and product        improving overall efficiency of the manufacturing plants
capability are our current goals. These strategic efforts     so as to improve the operational cash flow of the Group.
have already generated some positive results in FY2004
with qualification of new customers, and the Group will        The Group managed to cut its net loss by 26% in FY2004
continue its efforts into 2005.                               and this was achieved despite operating in a rising cost
                                                              environment where the Group experienced between 5%
The Group is also continuing its financial restructuring       to 15% increases in key raw material prices, and higher
activities in FY2005 through (i) a proposed capital           operating expenses due to rising energy costs.
reduction exercise, to write-off the accumulated losses of
the Company and to prepare the Company to raise new           Through      streamlined   operations   and    improved
equity in the future, and (ii) a proposed capitalisation      management over its inventories and accounts receivables,
by Gultech (Wuxi) Electronics Co., Ltd (“Gultech Wuxi”),      the Group managed to recover US$0.7 million bad debt
an indirect wholly-owned subsidiary of the Company, of        and reduce inventory provisions and write-offs by US$4.9
a RMB 50 million convertible loan granted by a related        million in FY2004. Overall, the Group reduced its net loss
party by way of a transfer of 49.0% ownership of Gultech      from US$25.6 million to US$18.9 million after taking in
Wuxi to the related party (the “Capitalisation”). These       one-time charge of US$2.1 million pre-operating expenses
exercises will strengthen the balance sheet of the Group      related to the new Wuxi plant and US$2.2 million product
going forward. A circular to shareholders setting out         charge.
further details of the above activities was dispatched to
shareholders on 8 March 2005.

                                                                               Annual Report 2004 GUL TECHNOLOGIES   . . . 03
During the financial year, the company was in technical        The Group has acquired new customers in the automotive,
breach of certain loan covenants for which its bankers        network and computer-related industries in FY2004
had given the necessary waivers to the company as at end      and expects that these new customers will contribute
of the year. Subsequent to the year end, the company          meaningfully to the Group’s revenue in FY2005.
completed negotiations with its bankers and refined some
of the financial covenants in the restructuring agreements     Looking forward, the Group will continue to face rising
to reflect current industry and company conditions.            material and operating costs due to capacity shortage
                                                              by raw material suppliers, unstable oil prices and rising
                                                              interest costs, as well as continued downward pressure on
OUTLOOK                                                       selling price. However with the expected growth in sales
                                                              revenue from newly acquired customers, the Directors
The Group will complete its Equipment facilitization          expect the performance of the Group in FY2005 to be
project in Wuxi, China in FY2005, and this will add another   better than FY2004.
450,000 sq ft/month production capacity to the Group,
thus bringing the total production capacity to 1.7 million    In closing, we would like to thank our fellow directors for
sq ft/month.                                                  their support and contributions. On behalf of the Board,
                                                              we would also like to thank all of our customers, business
According to PCB industry reports, the industry is expected   associates, financial institutions and especially the staff for
to grow 5% in FY2005 with Asia achieving a double digit       their hard work and team effort in 2004. The Board is also
growth of 10%. Key sectors in which the Group sells to        grateful for the support of the shareholders and will strive
like the automotive, disk drive and telecommunications        to improve shareholder value in 2005.
sectors are expected to continue its growth in FY2005.

The Group is well positioned, with its added capacity in
China, to capture increased demand from Asia. In addition,
the Group will be able to improve its competitiveness as it
                                                              Tan Kim Leong
operates in a larger low cost production base and achieve
economies of scale. The Group will also be able to improve
                                                              28 March 2005
production efficiency through plant specialisation.

                                                                                                      Gultech Wuxi

     04 . . . GUL TECHNOLOGIES Annual Report 2004

OVERVIEW AND OUTLOOK                                          2004 also saw high oil prices and high interest rates
                                                              dampening demand and raising production and operating
                                                              costs. In addition, raw material prices have increased
The global electronic industry and the PCB industry had a
                                                              sharply with average prices for certain key materials
strong growth in 1H2004 but slowed down towards the
                                                              having risen 5% to 15%.
end of that period and had a correction in 2H2004, ending
the year with approximately 10%(1) and 13%(1) growth          The global PCB industry is forecast to continue its growth by
respectively.   However the picture of the PCB industry       approximately 5%(2) in 2005, and as with the current trend
in Asia is better than the rest of the world with a 23%(2)    where the printed circuit fabrication sector continues its
                                                              migration from America and Western Europe to countries
growth in 2004. Asia’s total share of global PCB production
                                                              in Asia, Asia is expected to be better with an expected
is almost 73%(2) with North America just slightly below
                                                              growth of approximately 10%(2).
15%(2). Although China has taken steps to slow down its
rapid growth in 2004, the PCB industry still managed to       A further analysis of the market segments of the Group’s
achieve double digit growth.                                  customers are as follow:

                                                                                Annual Report 2004 GUL TECHNOLOGIES   . . . 05


The North American original equipment (OEM) market for       and entertainment devices to differentiate their new
automotive electronic products is expected to rise 6.7%      models.
yearly through 2008 to US$33.3 billion, as over ninety
percent of future vehicle technology introductions in        Gul, being the first company in Singapore and China to
North America over the next ten years will prominently       obtain the TS16949 certification, an ISO certificate for the
feature electronics(3).                                      automotive industry, is well positioned to capture this
                                                             expected growth. Gul’s established capabilities allowed
High oil prices have led to increased demand for smaller
                                                             the Group to secure another major customer related to
engines and performances to match that of the larger
                                                             the automotive industry at the end of 2003. The Group
displacement engines. This has led to advance engine
management technologies being developed and used.            was largely involved in building product samples for this
Globally, new legislation has increased safety standards     customer for qualification for mass production in 2004
and pollution control standards. All this has resulted in    and has since started mass production at the end of the
higher usage of electronic components in the engines. In     year. The expected growth in the industry plus sales
addition, according to the Telematics Research Group, the    revenue from this new customer is expected to contribute
automotive industry is increasingly looking to electronics   significantly to the Group’s revenue in 2005.

     06 . . . GUL TECHNOLOGIES Annual Report 2004
COMMUNICATIONS EQUIPMENT                                            CONSUMER PRODUCTS

World wide mobile phone shipments in 2004 rose 28.8%(4)             The consumer space is expected to continue to be
from 2003. The mobile phone market continues its growth             dominated by the latest digital devices, with new handheld
with increased handset units coupled with enhanced                  game consoles, hard-disk drive MP3 players, and digital
features (built-in cameras, 3G support) suggest that mobile         cameras leading the market. Increasingly consumers are
phone makers and their suppliers will continue to enjoy             looking at more complex models of handheld devices,
higher revenue. With various service providers around the           digital cameras and MP3 players, to have more applications,
world set to roll out 3G services in 2005, 3G mobile phones         and yet retain its compact size. This has resulted in some
sales are set to increase. Demand for camera phones has             manufacturers turning to rigid-flex printed circuit boards
also been increasing over the past few years and this trend         to meet their requirements. This offers the Group good
is expected to continue going forward.                              opportunities to further grow its revenue from rigid-
                                                                    flex PCB sales, which command higher selling prices as
The Chinese mobile market continues to offer vast                   compared to normal rigid PCBs.
opportunities for vendors and operators due to its large
population. The Group will continue to develop its Chinese
mobile customer base in 2005.
                                                                                    TURNOVER (US$’000)

COMPUTERS AND RELATED PRODUCTS                                                       90,000

From 2004 to 2009, the TFT-LCD market will increase a
total of 58%, to US$56 billion. Most notably, revenue in
the LCD TV market segment will increase at a compound                                85,000
annual growth rate (CAGR) of 36% and exceed revenue
in the notebook panel market segment in 2005 and LCD
monitors in 2007(5). The Group expects to be able to grow
its revenue in this sector in 2005.
Disc storage is a key enabling technology for the electronics
industry today. As storage become more personal and
central to the Consumer electronics market, the disk drive
industry is expected to experience strong revenue growth                             75,000
in 2005.                                                                                         2004     2003 2002

(1) Global Electronics Industry Business Outlook, by Walt Custer, (February 2005)

(2) The Printed Circuit Report, by Prismark Partners LLC, (February 2005)

(3) OEM Automotive Electronics in North America to 2008, by The Freedonia Group, Inc.

(4) Global Electronics Industry Business Outlook, (December 2004)

(5) Worldwide TFT-LCD Panel Demand and Supply 2005-2009 forecast, Market Analysis by IDC, (March 2005)

                                                                                        Annual Report 2004 GUL TECHNOLOGIES   . . . 07
                                                                    Sales to the automotive industry remained to be the
                                                                    largest portion of the Group’s revenue despite its lower
                                                                    contribution to the Group’s revenue in 2004. This
                                                                    decrease was offset by increased sales to customers
                                                                    in the telecommunications segment due to increased
                                                    30%             contributions by new customers in China.

                                                    24%             As highlighted in GulTech’s 2003 Annual Report, the
                                                    Network         Group’s strategy is to look beyond its traditional markets
  27%                                               and
  Others                                            Telecoms        such as America and Europe, and to explore and develop
                                                                    its customer base in Asia to take advantage of the rapid
                                                    Computer        growth in the region. This strategy has worked well and
                                                    & disk drives
                                                                    while sales to the Americas remained to be the largest
                                                                    contributor to the Group’s revenue, sales revenue from
                                                                    China/Hong Kong doubled from US$8.6 million to US$17.6
                                                                    million year-on-year. Sales to Singapore and Malaysia also
CHINA EXPANSION PLAN                                                increased by approximately 18% year-on-year.

GulTech’s Wuxi facility (Phase 1) was completed during              The Group was under immense cost pressure in 2004 as
2004 and was operational from December 2004 onwards.                key raw material prices have increased between 5% and
Phase 1 of the expansion has contributed an additional              15% due to global supply shortage. In addition, due to
300,000 sq ft/month production capacity to the Group.               worldwide increase in oil prices, overhead costs like heat,
Phase 2 of the expansion plan to double Wuxi’s production           light and power have also increased. While the Group
capacity to 600,000 sq ft is targeted to commence in                managed to negotiate for some increase in its selling
2005. With these added capacity, the Group is now well              prices, however the adjustments to selling prices could
positioned to capture the forecast growth in demand for             not match the rapid increase in production costs and
PCBs from China.                                                    hence the Group recorded a gross loss of US$4.6 million in
                                                                    FY2004. The Group had executed several cost containment
The Wuxi plant is the Group’s second plant in China after           programs during 2004 to reduce wastage and improve
its Suzhou plant. It is designed to manufacture multi-              yield, so as to counter inflationary costs experienced by
layer high density inter-connected printed circuit boards           the whole PCB industry and the Group.
and rigid-flex printed circuit boards. Besides the PCB
manufacturing capability, it is also earmarked to facilitate        Despite the challenging operating environment, the
new technology development, such as HDI Rigid Flex.                 Group managed to reduce its net loss by 26% from
                                                                    US$25.6 million to US$18.9 million year-on-year. This
                                                                    was achieved through continued stringent controls over
OPERATIONAL PERFORMANCE                                             debt collection resulting in the recovery of bad debts of
                                                                    US$0.7 million in FY2004 as opposed to a provision for
The Group achieved US$83.9 million of revenue for FY2004,           bad debts of US$1.4 million in FY2003. Better control
which was 6% higher than previous year’s result. The                over inventory also led to US$4.9 million lower write-offs
increase was largely due to improved product mix, where             and provisions for inventory. Financing costs also reduced
contribution to total revenue from higher selling priced            by US$1.1 million arising from the financial restructuring
PCBs like rigid-flex PCBs and High Density Interconnected            exercise undertaken by the Group since FY2003, with
PCBs increased by 8% from FY2003, and this led to overall           the capitalisation of a convertible loan in one of the
higher average selling prices for the Group.                        subsidiaries and rescheduling of certain bank debts. The

     08 . . . GUL TECHNOLOGIES Annual Report 2004
absence of a one-time US$2.9 million impairment loss
from the closure of the North Carolina plant in FY2003
also contributed to the improvement. One-time costs like
the US$2.1 million pre-operating charge by Gultech Wuxi,
which started commercial production in December 2004,
and US$2.2 million product charge related to products
manufactured in FY2003 partially offset the improvement
in the Group’s net loss.

The Group continued to achieve positive operating cash
flows with its improved performance. Current year capital
expenditure was largely financed by related company
and related party which signifies a strong commitment by
Gultech’s holding company and major shareholders to the


Since 2003, the Group embarked on a series of activities
to restructure its financial position, starting with the
capitalisation of S$20 million convertible loan by
Gultech Suzhou as approved by GulTech’s shareholders
on 12 December 2003. On 30 March 2004, the Group
restructured the repayment schedule of its banks debts in
Singapore and subsequently also completed negotiations
with its key Singapore bankers to refine certain bank
covenants on 28 March 2005. In addition, the Group also
obtained approval from its shareholders on 31 March
2005 to capitalise a RMB50 million convertible loan by
Gultech Wuxi, and to carry out a capital reduction exercise
to reduce the par value of each GulTech ordinary shares
from S$0.20 to S$0.01.

These activities have helped the Group to obtain fresh cash
resources for expansion and working capital purposes,
and at the same time, help minimise its debt position by
capitalising certain loans. The capital reduction exercise
will serve to give the Company the necessary flexibility to
undertake future equity or equity-related fund raising to
re-capitalise the balance sheet of the Company or other
corporate exercises involving the issue of shares.

                                                              Annual Report 2004 GUL TECHNOLOGIES   . . . 09

Good governance has been and remains the responsibility of the whole Board. The Board is committed to high standards
of corporate governance and has applied the Code of Corporate Governance (“the Code”) principles as set out in the
following segments; and deviations from the Code are explained.

I     Board Matters
II    Remuneration Matters
III   Accountability and Audit
IV    Communication with Shareholders

      (Principles 1 – 6)


The principal functions of the Board include
•    providing stewardship to the Company including charting its corporate strategies;
•    monitor Management performance and achieve an adequate return for shareholders; and
•    approve the Company’s annual business plan including the annual budget, capital expenditure and operational plans.

The Board approves the Company’s annual budget at the beginning of each year and material transactions that arises in
the course of the year as well as those that exceed the limits of authority delegated to the CEO. Material transactions
requiring Board approval include material acquisitions and disposals of assets, corporate and financial restructuring and
share issuance.

In addition to the 5 scheduled Board meetings to approve the annual budget and review the Company’s operations and
performance, the Board also held 2 ad-hoc meetings to address significant issues or transactions.

The Board is assisted by three Board committees, namely, the Nominating Committee (“NC”), the Remuneration
Committee (“RC”) and the Audit Committee (“AC”). The 2004 meetings of the Board and its committees, as well as
each Director’s attendance record are disclosed in this report.


The Company’s Board of Directors consists of six members (and one alternate director) from different backgrounds
in the private and/or public sector, whose core competencies, qualifications, skills and experiences are extensive. The
directors bring with them a broad range of expertise and experience in areas such as accounting, finance, management
and industry knowledge. The Directors’ professional qualifications, other appointment and academic background are
detailed in the biographic summaries persecuted in the following page.

At least one-third of the Board is non-Executive and independent of Management and the substantial shareholders.
The Board comprises two non-Executive and Independent Directors, two non-Executive and non-Independent Directors
and two Executive Directors. The Executive Directors constitute the key management of the Company.


Different individuals assume the Chairman and CEO functions . The Chairman, who is non-Executive, is responsible for
the Board, while the CEO has executive responsibilities for the Group’s businesses and is accountable to the Board.

      10. . . GUL TECHNOLOGIES Annual Report 2004
                                                    CORPORATE GOVERNANCE REPORT


The Directors’ professional qualifications, other appointments and academic background are detailed in the biographic
summaries presented below.

1.   Tan Kim Leong
Chairman (non-Executive Director, non-Independent)

Mr. Tan has been the Chairman of the Board and a non-Executive Director since 31 July 2002. He was elected on 7
May 2003. He is currently the Executive Chairman of BDO Binder Malaysia. He is also the Chairman of BDO Asia Pacific
Region, the fifth largest accounting and consulting firm in the world. He holds directorship in other Malaysian listed
company namely Gold IS Berhad. Mr Tan is also the Chairman of Koperasi Jayadiri Malaysia Berhad. He is a member of
the Malaysian Institute of Certified Public Accountants (MICPA), and the Malaysian Institute of Accountants (MIA). He
is also a Fellow of the Institute of Chartered Accountants, Australia (ICAA) and a Fellow of the Institute of Chartered
Secretaries and Administrators (ICSA).

Mr. Tan was last re-elected as a director at the Company’s Annual General Meeting on 7 May 2003.

2.   Tan Enk Ee
Chief Executive Officer (CEO)
Executive Director (non-Independent)
Member, Nominating Committee

Dr. Tan has been the Chief Executive Officer since 1 January 2003. Between September 2002 to December 2002, he was
the Chief Operating Officer. He was a Non Executive Director between July 2000 to September 2002. He is a director of
Hua Lin Tyre Co. Ltd. (listed in Shanghai Stock Exchange), a director of TS Matrix Berhad and also holds directorships in
Grand Hotel Group (listed on the Australian Stock Exchange). He practised as a medical doctor in Australia, Malaysia
and Hong Kong in the fields of anaesthesiology and emergency medicine. Dr. Tan was an Executive Director of Tuan
Sing Holdings Limited from year 2000 to 2003. He is also a member of MIT China Advisory Board and a Board Member
of Conservation International. Dr Tan holds a Bachelor of Medicine and Bachelor of Surgery degree from the University
of Sydney and is a Sloan Fellow from Massachusetts Institute of Technology where he obtained his MBA degree.

Dr. Tan was last re-elected as a director at the Company’s Annual General Meeting on 26 April 2004.

3.   William Liem
Executive Director (Non-Independent)

Mr. Liem was appointed as Executive Director on 19 January 2004. He is also a Director in GT Asia Pacific Holdings Pte
Ltd. He also holds directorships in other listed companies namely, SP Corporation Limited, Tuan Sing Holdings Limited
(both listed on Singapore Exchange) and Australia Stock Exchange listed Company Grand Hotel Company Limited as an
alternate director. Mr. Liem has held the position of Analyst with Lehman Brother and various management positions in
Gajah Tunggal Group and Habitat Properties Pte Ltd prior to his current position. He obtained his Bachelor of Science
in Business from the University of California at Berkley, and holds an MBA from MIT Sloan School of Management.

Mr. Liem was last re-elected as a director at the Company’s Annual General Meeting on 26 April 2004.

                                                                               Annual Report 2004 GUL TECHNOLOGIES   . . . 11

4.   Cheng Hong Kok
Non-Executive Director (Independent)
Member, Audit Committee
Chairman, Remuneration Committee
Chairman, Nominating Committee

Mr. Cheng has been a non-Executive Independent Director since 10 July 2002, a Member of the Audit Committee since
October 2002; and Chairman of the Nominating Committee and Remuneration Committee since December 2002. He
holds directorships in other Singapore listed companies namely, SP Corporation Limited, Orchard Parade Holdings Ltd
and Singapore Petroleum Co Ltd. Mr. Cheng held various senior positions in Singapore Petroleum Company Limited
in corporate planning, finance and administration, supply and trading, and marketing and distribution from 1970 to
1980 and became the President and Chief Executive Officer of the Company from 1981 to 1996. Through Singapore
Petroleum Company Limited, he was involved in the Asean Council on Petroleum (ASCOPE) for many years. He was a
Board Member of the Singapore Economic Development Board from 1987 to 1990 and a member of the Government
Economic Planning Committee from 1989 to 1991. Mr Cheng holds a Bachelor of Science (Chemical Engineering) degree
with First Class Honours from the University of London and received an Advanced Executive Management Certificate
from the J. L. Kellogg Graduate School of Management, Northwestern University in the USA. He was a Singapore State
Scholar as well as an Eisenhower Fellow.

Mr. Cheng was last re-elected as a director at the Company’s Annual General Meeting on 7 May 2003.

5.   Kaka Singh
Non-Executive Director (Independent)
Chairman, Audit Committee
Member, Remuneration Committee
Member, Nominating Committee

Mr. Singh has been a non-Executive Director since 20 May 2002, the Chairman of the Audit Committee since October
2002 and a Member of the Nominating Committee and Remuneration Committee since December 2002. He also holds
directorships in Tuan Sing Holdings Limited and Sunningdale Precision Industries Ltd (both listed on the Singapore
Exchange). Mr Singh is the Chairman of Chio Lim & Associates, Certified Public Accountants (Howarth International).
He was a senior partner of Deloitte & Touche between 1985 and 2000; and the past Chairmen of the Audit Practice
Committee and the Accounting Standards Committee of the Institute of Certified Public Accountants of Singapore.
He has previously been the chairman of the Singapore Association of the Institute of Chartered Secretaries and
Administrators and the president of the Singapore branch of the Institute of Chartered Management Accountants.
He is a council Member of the Association of Chartered Certified Accountants in London and ICSA in London. Mr
Singh holds a Masters in Business Administration from the Cass Business School of the London City University.

Mr. Singh was last re-elected as a director at the Company’s Annual General Meeting on 7 May 2003.

     12. . . GUL TECHNOLOGIES Annual Report 2004
                                                   CORPORATE GOVERNANCE REPORT

6.   David Lee Kay Tuan
Non-Executive Director (non-Independent)
Member, Audit Committee
Member, Remuneration Committee

Mr. Lee has been a non-Executive Director since 17 October 2003, a Member of the Audit Committee and Remuneration
Committee since October 2003. He is the CEO of Tuan Sing Holdings Limited (listed on the Singapore Exchange). He also
holds directorships in SP Corporation Limited (listed on the Singapore Exchange) and Grand Hotel Company Limited
(listed on the Australian Stock Exchange). He established Messrs Ang & Lee, a law firm and was its managing partner
between 1994 and 2001. Mr. Lee holds a Bachelor of Law (Hons) degree from the National University of Singapore.

Mr. Lee was last re-elected at the Company’s Annual General Meeting on 26 April 2004.

7.   Lei Huai Chin
(Alternate Director to Mr David Lee Kay Tuan)
Non-Executive Director (non-Independent)

Mr. Lei is the alternate director to Mr David Lee Kay Tuan since 18 November 2003. He was an Executive Director,
Corporate Finance and CFO of Tuan Sing Holdings Limited (listed on the Singapore Exchange) from May 2000 to March
2004. He holds directorship in SP Corporation Limited (listed on the Singapore Exchange). He previously worked as a
Financial Analyst with Uniroyal Chemical Corporation (USA) from 1990 to 1993. From 1994 onwards, Mr. Lei held various
positions in the Gajah Tunggal Group of companies in Indonesia, namely, Financial Analyst, General Manager, Finance
Director and Executive Vice President. Since 1999, he has been the Finance Director of GT Asia Pacific Holdings Pte Ltd
(Singapore). Mr. Lei holds a Bachelor of Science degree from the London School of Economics and Political Science and
an MBA degree from the University of Southern California, USA.

At each AGM, one-third of the Board is required, under the Company’s Articles, to retire and stand for re-election.
Newly appointed Director must submit himself for election at the AGM immediately following his appointment.

The following director will retire and seek re-election at the coming AGM:

1.   Mr. Cheng Hong Kok
2.   Mr. Tan Kim Leong

Mr. Cheng Hong Kok will, upon re-election as a Director of the Company, remain a member of the Audit Committee
and will be considered independent.


New directors are given an information package to familarise themselves with the structure, businesses and operations
of the Company. The Directors are also kept up-to-date by Management on pertinent developments of corporate laws
and governance.

                                                                             Annual Report 2004 GUL TECHNOLOGIES   . . . 13

Management endeavor to provide the Board with timely and adequate information before each Board meeting so that
the Directors can better understand the issues and contribute effectively in the Board’s decision making process. Where
complete information on certain matters could not be supplied to the Board, Management will advise the Board of
available information pending the collation of the outstanding information. Additional information will be provided
if requested by any Director. The members of the Board have separate and independent access to the Company’s
Management, as well as to the Company Secretary at all times.

The Board is provided with management accounts on a monthly basis which contain key performance indicators
that inform the Directors of the Company’s on-going performance, position and prospects. The Board also reviews
and approves for release the Company’s half-year and full-year results. When updating the Board of the Company’s
performance, the Board is kept apprised (with the necessary explanation) of material variances between the projections
(in the approved budget) and the actual results . Directors, individually or as a group, may seek independent professional
advice after consultation with the Chairman of the Board.


The NC reviews and recommends to the Board the appointment of new directors as well as the submission for re-
nomination and re-election of directors. The other responsibilities of the NC are to:
•    determine, based on the Company’s internal guidelines, if a Director is able to carry out his duties in the light of
     his commitments to other companies;
•    determine annually whether or not a Director is independent as defined under the Code;
•    assess the effectiveness of the Board as a whole;
•    assess the contributions of each Director to the effectiveness of the Board; and
•    ensure that the Company has a succession plan for key Executive Directors and officers, including appointing,
     training and mentoring senior management.

The NC consists of three members, the majority of whom, including the Chairman, are non-Executive and Independent

The members of the NC are:
•    Mr. Cheng Hong Kok, Chairman (Independent, non-Executive)
•    Mr. Kaka Singh (Independent, non-Executive)
•    Dr. Tan Enk Ee (non-Independent, Executive)

During the year (1 January 2004 to 31 December 2004), the NC held one scheduled meeting.

The NC is of the view that two of the six Directors are independent as defined by the Code. No individual or group of
individuals dominates the decision making process of the Board. The NC is of the view that the current board size of
six is appropriate considering the needs and demands of the Company.


The NC is responsible for assessing the Board’s effectiveness which includes providing stewardship, corporate governance
and monitoring management performance with the objective of enhancing long term shareholders’ value. In reviewing
the Board’s effectiveness, the NC takes into account feedback from Board members as well as the directors’ individual
skill sets and experience. The NC also takes into account guidelines set out in the Code for the evaluation and assessment
of the performance of the Board.

     14. . . GUL TECHNOLOGIES Annual Report 2004
                                                               CORPORATE GOVERNANCE REPORT

With regard to an individual director’s performance, the Company has adopted a self appraisal system administered
by the NC. The appraisal covers attendance at meetings, level of participation at meetings and contribution made by
Directors in light of their individual expertise.

Attendance at Board and Committee Meetings

During the year (1 January 2004 to 31 December 2004), the Board held five scheduled meetings and two adhoc

                                                                                   Audit                     Remuneration                Nomination
                                                   Board                         Committee                    Committee                  Committee











                            No. of

                                                       No. of

                                                                                No. of

                                                                                                             No. of

                                                                                                                                         No. of

Name of Director

Tan Kim Leong*               5        5                    2     2               -          -                  -            -             -                -
Kaka Singh**                 5        5                    2     2               3        3                    1           1              1              1
Cheng Hong Kok***            5        5                    2     2               3        3                    1           1              1              1
Tan Enk Ee                   5        4                    2     2               -          -                  -            -             1              1
David Lee Kay Tuan           5        5                    2     2               3        3                    1           1              -                -
William Liem                 5        5                    2     2               -          -                  -            -             -                -

*    Chairman of Board of Directors
**   Chairman of the Audit Committee
*** Chairman of the Remuneration Committee and Nominating Committee

     (Principles 7 – 9)


The RC comprises of three Directors, the majority of whom are non-Executive and Independent Directors .

The members of the RC are:
•    Mr. Cheng Hong Kok, Chairman (Independent and non-Executive)
•    Mr. Kaka Singh (Independent and non-Executive)
•    Mr. David Lee Kay Tuan (non-Independent and non-Executive)

The RC members are well-versed in the area of executive compensation given their extensive managerial and corporate
experience. The members of the RC also have access to expert advice inside and outside the Company whenever it is

During the year (1 January 2004 to 31 December 2004), the RC held 1 scheduled meeting.

The principal responsibilities of the RC are to:
•    offer an independent perspective to assist the Board to review the annual remuneration framework for non-
     Executive Directors and Executive Directors which the Company has in place; and
•    determine, based on recommendations from Management and in consultation with the Chairman of the Board,
     the specific remuneration packages for the CEO, each Executive Director and any relative of a Director and/or
     substantial shareholder who is employed in managerial position by the Company , if any.

                                                                                                       Annual Report 2004 GUL TECHNOLOGIES    . . . 15

No member of the RC is involved in deciding his own remuneration. In the case of the CEO, the Chairman is the father
of the CEO and therefore is not involved in the Board’s decision in approving the CEO’s remuneration. The CEO has an
employment contract with the Company which can be terminated by either party giving three months’ notice. None of
the non-Executive Directors is on service contract with the Company.


The Company’s remuneration policy for Executive Directors is based on individual performance, Company performance
and industry benchmarking compared with companies in similar industries. A significant proportion of the Executive
Directors’ remuneration package is linked to the Company’s performance as well as each individual director’s performance.
This is designed to align Directors’ interests with those of shareholders’ and link rewards to corporate and individual
performance. The remuneration policy has been endorsed by the entire Board. Executive Directors do not receive
Directors’ fees from the Company or from its subsidiaries /associated company where they have been appointed to
these Boards, since their salaries compensate for services rendered as members of these Boards. Any Director fees for
services rendered by the Executive Directors to these entities are paid to the Company.

Non-executive Directors are paid a fixed fee. Payment of Directors’ fees is subject to shareholders’ approval at the AGM.
The RC is of the view that remuneration of non-Executive Directors is appropriate to the level of contribution taking
into account factors such as effort and time spent, and responsibilities of the Directors. The RC and the Board are of the
view that the remuneration of the Directors is adequate but not excessive.

The Board has not included an annual remuneration report (as suggested under Guidance Note 9.5 of the Code) as the
Board is of the view that the matters which are to be required to be disclosed in the annual remuneration report have
been sufficiently disclosed in this Report and in the Financial Statements of the Company.


A summary of each non-Executive and Executive Director’s remuneration payable for FY2004 is shown below:

                                                          Breakdown of Remuneration in Percentage (%)           Total Remuneration in
                                                 Directors’                            Variable                compensation bands of
Name of Director                    Status (1)      Fees (2)     Salary    Benefits      Bonus       Total      US$152,000 (S$250,000 )
Tan Kim Leong                        NE, NI         100%          0%         0%          0%         100%            <US$152,000
Kaka Singh                          NE, Ind         100%          0%         0%          0%         100%            <US$152,000
Cheng Hong Kok                      NE, Ind         100%          0%         0%          0%         100%            <US$152,000
David Lee Kay Tuan (Alternate:
                                     NE, NI         100%          0%         0%          0%         100%            <US$152,000
Lei Huai Chin)
Tan Enk Ee                          Exec, NI         0%          99%         1%          0%         100%       US$152,000 to US$304,000
William Liem                        Exec, NI         0%           0%         0%          0%             0%          <US$152,000
Total Directors’ Remuneration                    US$87,388 US$162,452      US$2,186               US$252,026
(%)                                                 (35%)        (64%)       (1%)                  (100%)

(1) Ind – Independent / NI – non-Independent / Exec – Executive / NE – non-Executive
(2) Directors’ fees as a lump sum are subject to approval by shareholders at the AGM on April 2005
(3) Directors’ fees for Mr David Lee Kay Tuan are paid directly to their employers

      16. . . GUL TECHNOLOGIES Annual Report 2004
                                                        CORPORATE GOVERNANCE REPORT

Remuneration of top executives (Other than the Company’s Executive Directors)

The Company’s staff remuneration policy is based on individual performance, Company performance and industry
benchmarking gathered from companies in comparable industries.

The table below shows the ranges of gross remuneration received by the Group’s top five Executives (excluding Executive
Directors) in the Company and in the Group’s Singapore and overseas subsidiaries, but does not include any associated
companies. There is no Group employee related to a Director or the CEO, whose remuneration exceeded US$91,000
($150,000) for the financial year ended 31 December 2004.

                                                                                                              Total Remuneration
                                                         Breakdown of Remuneration in Percentage (%)           in Compensation
                                                                                                                    bands of
                                                                                 Variable                         US$152,000
Name of Employee                 Position              Salary 1)    Benefits      Bonus 2)         Total           (S$ 250,000)
Harold Lin           General Manager of Gultech          76%          0%          24%            100%            US$152,000 to
                     (Suzhou) Electronics Co., Ltd*                                                               US$304,000
Jeremy Chee          General Manager of Gultech         100%          0%           0%            100%            US$152,000 to
                     (Suzhou) Electronics Co., Ltd                                                                US$304,000
Thomas Hurng         General Manager of Gultech          74%          0%          26%            100%            US$152,000 to
                     (Wuxi) Electronics Co., Ltd                                                                  US$304,000
Pearl Foong          VP, Finance & Accounting            98%          2%           0%            100%            < US$152,000
Gong Horng Lin       VP, Operations Gultech (Wuxi)       82%          0%          18%            100%            < US$152,000
                     Electionics Co., Ltd
Total Employee’s
Remuneration                                          US$650,019   US$1,969    US$113,878     US$765,866
(%)                                                     (85%)        (0%)        (15%)          (100%)

* Resigned in 2004

     (Principles 10 – 13)


The Board recognises that it is accountable to shareholders for the performance of the Group. In discharging this
responsibility, the Board ensures the timely release of all significant information to shareholders as well as all statutory
reporting requirements. To enable the Board to discharge this function, Management provides the Board with balanced
and understandable management accounts of the Group’s performance, position and prospects on a monthly basis and
whenever any significant issue arises.


The AC consists of three Directors, two of whom are Independent and non-Executive.

They are:
•    Mr. Kaka Singh, Chairman (Independent, non-Executive)
•    Mr. Cheng Hong Kok (Independent, non-Executive)
•    Mr. David Lee Kay Tuan (Non-Independent, non-Executive)

                                                                                   Annual Report 2004 GUL TECHNOLOGIES   . . . 17

The Board is of the view that the AC members are appropriately qualified to discharge their responsibilities and that all
of its members have accounting and/or related financial management expertise.

During the year (1 January 2004 to 31 December 2004), the AC held 3 scheduled meetings.

The principal functions of the AC are to:
•    assist the Board in fulfilling its responsibilities for reviewing the Company’s financial reporting process, systems of
     internal control and management of financial risks, the audit process, and the Company’s process for monitoring
     compliance with laws and regulations and its own code of business conduct;
•    review the scope, results and cost effectiveness of the Company’s audit, as well as the independence and objectivity
     of the External Auditors;
•    review the effectiveness and adequacy of the internal audit function which is outsourced to a professional firm;
•    review the effectiveness of the Company’s system for monitoring compliance with laws and regulations and the
     results of any Management investigation and follow-up (including disciplinary action) of any fraudulent acts or
•    be satisfied that all regulatory compliance matters have been considered in the preparation of the financial
•    review annually the independence of the External Auditors as well as the nature and extent of non-audit services
     provided by the External Auditors to the Company to ascertain that the independence and objectivity of the
     External Auditors is not prejudiced;
•    review the risk management framework implemented by the Company; and
•    conduct a review of interested person transactions.

The AC has explicit authority to investigate any matter within its terms of reference. It has full access to, and co-
operation of, management and full discretion to invite any director or any member of Management to attend its
meetings . At least once a year, the Company’s External Auditors, (PricewaterhouseCoopers) meet separately with the
AC without the presence of Management.

As part of the AC’s assessment of the External Auditors’ independence, the AC conducted an annual review of the non-
audit services provided by the External Auditors in 2004. The AC is of the view that the non-audit services provided by
the External Auditors do not prejudice their objectivity and independence.


GulTech has established risk management framework to support and guide the Board of Directors, Management and
staff in identifying, reviewing and monitoring the financial, operational, market and regulatory risks that may affect
GulTech’s outputs, projects or operating process at the Group, Division, subsidiary and business unit level.

The Company’s risk management process covers all key areas of GulTech’s business activities and is carried out through
a bottom-up approach from the business units to the Group. The implementation of GulTech’s annual risk management
process includes: (i) identification of risks; (ii) documentation of risks; (iii) treatment of risks; (iv) reporting of risks; and
(v) monitoring of risks.

     18. . . GUL TECHNOLOGIES Annual Report 2004
                                                    CORPORATE GOVERNANCE REPORT

The key elements of the Group’s system of internal controls are as follows:

•    Operating Structure
     There is a clearly defined operating structure with lines of responsibility and delegation authority, with adequate
     reporting mechanisms to senior management and the Board.

•    Policies and Procedures
     Controls are detailed in formal procedures, instructions and manuals. Compliance is verified by the Group’s internal
     and external auditors, and TS16949, ISO9001, ISO14001, QS9000 and Singapore Quality Class auditors.

•    Financial Reporting
     The annual budget is planned and prepared with feedback from senior management of each operating company
     in the Group, and reviewed and approved by the Board. The monthly reporting to the Board will include results
     from actual performance compared against budget and revised forecasts.

•    Internal Audit / External Audit
     Compliance with company policies, internal controls and procedures designed to manage risks and safeguard the
     business and assets of the Group are monitored by internal and external auditors.

•    Property and Liability Risks
     The Group’s risk exposures are consistently reviewed on an annual basis by its Insurance Brokers together with
     management to ensure that its insurance programme continues to address the risk exposures identified and is
     adequate for its needs. In addition, each operating plant in the Group has their respective Safety Committees
     which carry out monthly audit of the premises to ensure that the Group’s assets are safeguarded and industrial
     accidents do not happen.

•    Investment Projects
     These are subject to formal authorisation procedures with designated levels of authority. Major projects are
     subject to Board review and approval.

Dealings in securities

The Company believes that it has complied with the SGX-ST Best Practices Guide. Towards this end, the Company has
adopted a policy whereby the Company’s officers are not allowed to deal in the Company’s securities during the period
commencing one month before the announcement of the Company’s annual or half-year results and ending on the
day of announcement of results. The Company’s officers are also to refrain from dealing in the Company’s securities for
short-term consideration.

The Board is of the view that the Company has in place an adequate system of internal controls.

                                                                              Annual Report 2004 GUL TECHNOLOGIES   . . . 19


The AC annually reviews the activities and organisational structure of the Company’s internal audit function to ensure
that no unjustified restrictions or limitations are made. The AC reviews and approves the annual Internal Audit (“IA”)
plan in order to ensure that the IA function is adequate. It also oversees the implementation of the IA plan and ensures
that Management provides the necessary co-operation to enable the internal auditor to perform its function. The
internal auditor’s primary line of reporting is the Chairman of the AC, although the internal auditor also reports to the
CEO on administrative matters.

GulTech’s IA function is outsourced to LTC & Associates. The AC reviews annually the adequacy of the IA function. The
Internal Auditor is guided by the Standards for the Professional Practice of Internal Auditing set by The Institute of
Internal Auditors.

The internal auditor annually reviews the effectiveness of the Company’s material internal controls, including financial,
operational and compliance controls, and risk management practices.

     (Principles 14 - 15)


The Company communicates with shareholders and the investing community through announcements that are
released to the SGX-ST via SGXNET. These include the half-year and full-year results, material transactions, and other
developments relating to the Group requiring disclosure under the corporate disclosure policy of the SGX-ST.

The Company has investor relations officers who respond to investor queries, as well as ensure the fair and timely
dissemination of all of the Company’s public releases. The Company also maintains a website where
the public can access information on the Company as well as latest announcements released by the Company.

All shareholders of the Company are sent a copy of the Annual Report and notice of the Annual General Meeting
(AGM). The notice of AGM, giving notice of all items of business to be transacted at the AGM, is also advertised in the

At the AGM, the Company’s shareholders have the opportunity to participate effectively through open discussions and
to vote on the resolutions tabled at the AGM. At General Meetings, separate resolutions are put up for approval on
each distinct issue. Shareholders can vote either in person or through proxies.

The Chairman of the Board, as well as the Chairmen of the Audit, Nominating and Remuneration Committees will be
present and available to address questions at general meetings. The External Auditors will also be present to assist the
Directors in addressing any relevant queries by shareholders.

     20. . . GUL TECHNOLOGIES Annual Report 2004

          Annual Report 2004 GUL TECHNOLOGIES   . . . 11
                                   FINANCIAL CALENDAR

   Announcement of half-year results                 13 August 2004
   Announcement of full-year results                 1 March 2005
   Despatch of Annual Report                         11 April 2005
   Annual General Meeting                            26 April 2005

   Proposed announcement of half-year results        August 2005
   Proposed announcement of full-year results        February 2006

                                       GROUP DIRECTORY
REGISTERED OFFICE                        Gultech (Suzhou) Electronics Co., Ltd   REPRESENTATIVE OFFICES
                                         80 Su Hong Xi Road
9 Oxley Rise                             Suzhou Industrial Park                  USA
#03-02 The Oxley                         Suzhou 215021, Jiangsu Province, PRC    Detroit, Michigan
Singapore 238697                         Telephone        : 86-512-6767 1711     Brookline, NH
Telephone       : 65-6223 7211           Facsimile        : 86-512-6761 0023     San Jose, California
Facsimile       : 65-6224 1085           E-mail           :    Lynchburg, VA
                                                                                 Longmont, Colorado
                                         Gultech (Wuxi) Electronics Co., Ltd
                                         32 Chun Hui Dong Road,                  Mexico
                                         Xishan Economic Development Zone,       Chihuahua
Gul Technologies Singapore Ltd
                                         Wuxi 214101, Jiangsu Province, PRC.     Guadalajara
(Company Registiation No.: 198803137E)
                                         Telephone         : 86-510-866 8888
149-A Gul Circle
                                         Facsimile         : 86-510-866 7999     Europe
Singapore 629606
                                         E-mail            :   Cadiz, Spain
Telephone        : 65-6861 6522
Facsimile        : 65-6861 0381                                                  Cologne, Germany
                                         TECHNICAL SALES OFFICE
E-mail           :
                                         Singapore                               Taipei, Taiwan
                                         149-A Gul Circle                        Seoul, Korea
                                         Singapore 629606
                                         Telephone        : 65-6861 6522
                                         Facsimile        : 65-6861 0381
                                         E-mail           :
Gul Technologies Singapore Ltd           Lot 17, Ground floor,
149-A Gul Circle                         Hotel Equatorial Penang
Singapore 629606                         1, Jalan Bukit Jambul,
Telephone        : 65-6861 6522          11900 Bayan Lepas
Facsimile        : 65-6861 0381          Penang, Malaysia
E-mail           :     Telephone         : 604-644 1933
                                         Facsimile         : 604-645 1933

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