Contents. Vision To Be The Global Business Partner Of Choice In Niche Products and Services

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2 1 Vision To Be The Global Business Partner Of Choice In Niche Products and Services Mission To Deliver Continuous Growth and Breakthroughs In Business Performance With Total Customer Satisfaction Beliefs People Are Our Greatest Asset Results Oriented With Customer Satisfaction Organizational Agility Focus On Corporate Excellence Integrity At All Times Team-Based Approach Contents 2 Corporate Information 3 Group Corporate Structure 4 Financial Highlights 5 Board of Directors 6-10 Profile of Board of Directors Corporate Governance Statement Audit Committee Report Internal Control Statement Corporate Highlights Chairman & CEO s Message Chief Operating Officer s Report Directors Report 47 Statement by Directors 48 Statutory Declaration 49 Report of the Auditors Financial Statements Notes to the Financial Statements Statistics on Shareholdings 88 Notice of AGM 89 Notice of Dividend Entitlement Statement Accompanying Notice of AGM 92 List of Properties Proxy Form

3 2 CORPORATE INFORMATION Board Of Directors Michael Ng Kweng Chong Chairman and Chief Executive Officer Heng Huck Lee Chief Operating Officer Diong Chin Teck Dato Noor Ahmad Mokhtar Bin Haniff Dato Ng Kweng Moh Datuk Haji Hod Bin Parman Ng Kok Khuan Lim Chien Ch eng Ng Kweng Hong Dr. Chong Eng Keat Audit Committee Chairman Diong Chin Teck (Independent Non-Executive Director) Members Dr. Chong Eng Keat (Independent Non-Executive Director) Michael Ng Kweng Chong (Chairman & Chief Executive Officer) Secretaries Ong Eng Choon (MIA 2121) Lee Peng Loon (LS 00405) Registered Office A, Menara BHL Bank, Jalan Sultan Ahmad Shah, Penang, Malaysia. Tel : (604) Fax : (604) Share Registrars Agriteum Share Registration Services Sdn Bhd 2nd Floor, Wisma Penang Garden, 42, Jalan Sultan Ahmad Shah, Penang, Malaysia. Tel : (604) Fax : (604) Auditors KPMG, Penang Chartered Accountants Principal Financial Institutions Bumiputra-Commerce Bank Berhad United Overseas Bank (Malaysia) Berhad Citibank Berhad Southern Bank Bhd Arab Malaysian Merchant Bank Berhad OCBC Bank (Malaysia) Berhad Principal Solicitor Ghazi & Lim Stock Exchange Listing Main Board, The Kuala Lumpur Stock Exchange

4 3 GROUP CORPORATE STRUCTURE

5 4 FINANCIAL HIGHLIGHTS 280, , , , , , , , , , , , , , , , , , , , , ,000 80,000 91, ,000 40,000 31,893 41,115 22,460 26,242 60,000 40, ,000 20, Year ended 31 December RM 000 RM 000 RM 000 RM 000 Turnover 132, , , ,203 Profit Before Taxation 31,893 41,115 22,460 26,242 Profit After Taxation 29,913 37,999 21,544 21,899 Profit Attributable to Shareholders 28,241 36,836 20,466 20,631 As at 31 December Total Assets Employed 148, , , ,151 Shareholders Funds 91, , , ,733 Net Earnings Per Share (Sen) Net Tangible Assets Per Share (RM)

6 5 BOARD OF DIRECTORS 1 Michael Ng Kweng Chong Chairman and Chief Executive Officer 2 Heng Huck Lee Chief Operating Officer 3 Diong Chin Teck 4 Datuk Haji Hod Bin Parman 5 Ng Kok Khuan 6 Lim Chien Ch eng 7 Ng Kweng Hong 8 Dato Noor Ahmad Mokhtar Bin Haniff 9 Dr. Chong Eng Keat 10 Dato Ng Kweng Moh

7 6 PROFILE OF BOARD OF DIRECTORS Mr. Michael Ng Kweng Chong Mr. Michael Ng Kweng Chong, aged 55, is a Non-Independent Executive Director of Globetronics Technology Bhd ( GTB ). He was appointed to the Board of GTB on 31 July Mr. Michael Ng is currently the Chief Executive Officer and Chairman of GTB. He was the original founder of Globetronics Sdn Bhd (GSB) in He grew the Company from the initial paid-up fund of RM3 million 12 years ago and led the Company to a successful IPO in Today, Globetronics has grown to become a KLSE Main Board Company with more than 10 Subsidiaries & One Associated Company with revenues exceeding RM200 million per year. Michael Ng graduated from the University of London in 1972 with an Honours Degree in Mechanical Engineering. Besides being a Professional Engineer in Malaysia, he has earned many certifications and recognition in the areas of technical, management and business developments & expertise in the Hi-tech Semiconductor manufacturing arena. In his 18 successful years working for Intel Technology Sdn Bhd, Michael Ng grew rapidly from an Engineer in 1972 to various senior management positions within Intel Penang, the Asia Pacific and the US. Of significance were the senior management positions spanning 1 year in Intel US, 2 years each for the Far East Automotives Business Group and the Asia Pacific Quality Support Group covering South Korea, Taiwan, Hong Kong, Singapore and Malaysia for Intel. Mr. Michael Ng is a member of the Audit Committee, ESOS Committee and Remuneration Committee of GTB. He attended all six Board Meetings held during the financial year ended 31 December He has direct and indirect shareholdings of 41,563,321 ordinary shares of RM1.00 in GTB. Mr. Michael Ng is the brother of Dato Ng Kweng Moh, uncle of Mr. Ng Kok Khuan and cousin of Mr. Ng Kweng Hong who are the directors of GTB. He has no conflict of interest in any business arrangement involving the company. He has had no convictions for any offences within the past 10 years. Mr. Heng Huck Lee Mr. Heng Huck Lee, aged 46, a Malaysian, is an Non-Independent Executive Director of GTB. He was appointed to the Board of GTB on 31 July 1997 and made the Chief Operating Officer of GTB since July He graduated with a Bachelor of Applied Science (Honours) majoring in Computer/ Electronic Technology from University Sains Malaysia in He also obtained a Master in Business Administration from East Asia University in His past working experience includes a 10-year operations/management position with Intel Technology Sdn Bhd, currently the world s largest semiconductor manufacturer. He also has more than 5 years working experience as a Group General Manager with Shinca Sdn Bhd, an Original Equipment Manufacturer/subcontract manufacturer for a wide range of electronics and computer products from 1991 to Since joining GTB, he has successfully supported the group operation expansion from RM60 million to more than RM200 million a year in revenue. He attended five of the six Board Meetings held during the financial year ended 31 December He has direct shareholdings of 489,000 ordinary shares of RM1.00 in GTB. Mr. Heng Huck Lee does not have any family relationship with any director and/or major shareholder of GTB, nor any conflict of interest in any business arrangement involving the Company other than as disclosed in the Director s Report of the Annual Report. He has had no convictions for any offences within the past 10 years.

8 7 PROFILE OF BOARD OF DIRECTORS Mr. Diong Chin Teck Mr. Diong Chin Teck, aged 70, a Malaysian, is an Independent Non-Executive Director of GTB. He was appointed to the Board of GTB on 29 May He is a Fellow of the Institute of Chartered Accountants in Australia and a member of the Malaysian Institute of Accountants. He obtained his professional training in accountancy in Melbourne, Australia and was admitted as a member of The Institute of Chartered Accountants in Australia in He joined KPMG in 1967 and worked in their Kuala Lumpur, Ipoh and Penang offices. He was made a partner of the firm in 1971 and held the position until his retirement in While he was with the firm, he was involved in providing audit, taxation and consultancy services to clients from various industries including manufacturing, plantation and the banking sector. He is the Chairman of the Audit Committee in GTB. Mr. Diong currently sits on the Board of ABN Amro Bank Berhad, Eurospan Holdings Berhad and Asas Dunia Berhad. He attended all six Board Meetings held during the financial year ended 31 December He has direct shareholdings of 7,200 ordinary shares of RM1.00 in GTB. Mr. Diong Chin Teck does not have any family relationship with any director and/or major shareholder of GTB, nor any conflict of interest in any business arrangement involving the Company. He has had no convictions for any offences within the past 10 years. Dato Noor Ahmad Mokhtar bin Haniff Dato Noor Ahmad Mokhtar bin Haniff, aged 62, a Malaysian, is an Independent Non- Executive Director of GTB. He was appointed to the Board of GTB on 31 July He graduated with a Bachelor of Arts (Honours) degree majoring in Economics from Universiti Malaya in 1964 and also obtained a Diploma in Education in 1965 from Universiti Malaya. From 1965 to 1970, he was an Educationist with the Ministry of Education. He assumed the position of Special Assistance to the Chief Minister of Penang with Penang City Council from 1970 to 1971 before joining the Universiti Sains Malaysia as Senior Assistant Registrar. In 1972, he joined Penang Development Corporation as the Principal Director of the Free Trade Zones and was subsequently promoted to Administration Manager in 1976 and Deputy General Manager in From 1991 to 1996 he was the General Manager of Penang Development Corporation. He is the Chairman of the Remuneration Committee in GTB. He sits on the Board of Amtek Holding Bhd, Eurospan Holdings Bhd and Yikon Corporation Bhd. He attended all six Board Meetings held during the financial year ended 31 December He has direct shareholdings of 8,588 ordinary shares of RM1.00 in GTB. Dato Noor Ahmad Mokthar bin Haniff does not have any family relationship with any director and/or major shareholder of GTB, nor any conflict of interest in any business arrangement involving the Company. He has had no convictions for any offences within the past 10 years.

9 8 PROFILE OF BOARD OF DIRECTORS Dato Ng Kweng Moh Dato Ng Kweng Moh, aged 61, a Malaysian, is a Non-Independent Non-Executive Director of GTB. He was appointed to the Board of GTB on 31 July He is one of the Founder Members of GTB and currently is the Executive Director of General Produce Agency Sdn Bhd, with more than 30 years of experience in the rubber and palm oil industry, housing development and investment holdings since He attended all six Board Meetings held during the financial year ended 31 December He has indirect shareholdings of 955,800 ordinary shares of RM1.00 in GTB. Dato Ng Kweng Moh is the brother of Mr. Ng Kweng Chong, uncle of Mr. Ng Kok Khuan and cousin of Mr. Ng Kweng Hong who are the directors of GTB. He has no conflict of interest in any business arrangement involving the Company. He has had no convictions for any offences within the past 10 years. Datuk Haji Hod Bin Parman Datuk Haji Hod Bin Parman, 60, a Malaysian, is a Non-Independent Non- Executive Director of GTB. He was appointed to the Board of GTB on 6 March He is currently the Non-Executive Director of Malaysian Technology Development Corporation Sdn Bhd (MTDC). He graduated with a Diploma in TV Engineering from Technical College Kuala Lumpur (now known as Universiti Teknologi Malaysia) and also has a Bachelor of Science in Electrical and Electronics (Honours) degree from University of Strathclyde, United Kingdom. Datuk Hod has been involved for more than 34 years in the communications industry. He started his career as an Engineer with Jabatan Telekom Malaysia in He then joined Jabatan Telekomunikasi Malaysia in 1987 and held the position of Director General. In 1999, Datuk Hod took up the appointment as the Consultant and Director for the Communications and Multimedia Commission Malaysia. He is currently the Chief Executive Officer of Solsis (M) Sdn Bhd. He did not attend any of the Board Meetings held during the financial year ended 31 December 2002 as his effective appointment date was on 6 March He has no direct or indirect shareholdings in GTB. Datuk Hod does not have any family relationship with any director and/or major shareholder of GTB, nor any conflict of interest in any business arrangement involving the Company. He has had no convictions for any offences within the past 10 years.

10 9 PROFILE OF BOARD OF DIRECTORS Mr. Ng Kok Khuan Mr. Ng Kok Khuan, aged 52, a Malaysian, is a Non-Independent Non-Executive Director of GTB. He was appointed to the Board of GTB on 19 May He graduated with a Diploma of Business Studies in 1975 from Australia and is a member of the Malaysian Institute of Accountants. From 1976 to 1977 he was employed as the Internal Auditor of Central Finance Berhad. In 1978 he was appointed as the Company Secretary of General Produce Agency Sdn Bhd and he has held the position since then. He is a member of the ESOS Option Committee in GTB. He attended all six Board Meetings held during the financial year ended 31 December He has direct and indirect shareholdings of 734,500 ordinary shares of RM1.00 in GTB. Mr. Ng Kok Khuan is the nephew of Mr. Ng Kweng Chong, Dato Ng Kweng Moh and Mr. Ng Kweng Hong who are the directors of GTB. He has no conflict of interest in any business arrangement involving the Company. He has had no convictions for any offences within the past 10 years. Mr. Lim Chien Ch eng Mr. Lim Chien Ch eng, aged 50, a Malaysian, is a Non-Independent Non-Executive Director of GTB. He was appointed to the Board of GTB on 31 July He graduated with a Bachelor of Social Science (Honours) degree majoring in Politics from Universiti Sains Malaysia in 1976, and a Bachelor of Law (LLB. Hons) from King s College, University of London in He was called to the English Bar in 1980 and the Malaysia Bar in He has been practicing as an Advocate and Solicitor since 1981 and is now a partner in a legal firm with offices in Penang, Seberang Jaya and Kuala Lumpur. He is the Chairman of the ESOS Committee in GTB. Currently, he sits on the Board of Chin Well Holdings Berhad. He attended five of the six Board Meetings held during the financial year ended 31 December He has direct shareholdings of 1,050,000 ordinary shares of RM1.00 in GTB. Mr. Lim Chien Ch eng does not have any family relationship with any director and/or major shareholder of GTB, nor any conflict of interest in any business arrangement involving the Company. He has had no convictions for any offences within the past 10 years.

11 10 PROFILE OF BOARD OF DIRECTORS Mr. Ng Kweng Hong Mr. Ng Kweng Hong, aged 45, a Malaysian, is a Non-Independent Non-Executive Director of GTB. He was appointed to the Board of GTB on 25 July He graduated with a Bachelor of Science (Honours) degree in 1982 from the University of Manchester Institute of Science and Technology, UK. From 1982 to 1988, he worked with two local leading software houses, Malay Sino Technologies Sdn Bhd and Federal Computer Services Sdn Bhd, which were heavily involved in software development. Subsequently he joined another two multinational companies, The Eastern Garment Manufacturing Company Sdn Bhd and Sony Electronics (Malaysia) Sdn Bhd from 1988 to 2001, initially heading the IT operations and later involved in the material control operations. He attended all six of the Board Meetings held during the financial year ended 31 December He has direct and indirect shareholdings of 9,000 ordinary shares of RM1.00 in GTB. Mr. Ng Kweng Hong is the cousin of Mr. Ng Kweng Chong and Dato Ng Kweng Moh, and is the uncle of Mr. Ng Kok Khuan who are the directors of GTB. He has no conflict of interest in any business arrangement involving the Company. He has had no convictions for any offences within the past 10 years. Dr. Chong Eng Teoh Eng Keat Dr. Chong Eng Teoh Eng Keat, aged 57, a Malaysian, is an Independent Non- Executive Director of GTB. He was appointed to the Board of GTB on 3 March He graduated with a PhD in Chemistry from the Australian National University in Australia and started his career as a lecturer in the School of Chemistry at Universiti Sains Malaysia in He then joined Intel Technology Sdn Bhd ( Intel ), Penang as a senior process engineer in During his 22 years in Intel, Dr. Chong acquired extensive local as well as international experience, which include being the pioneer General Manager of Intel s R & D operations in Penang as well as General Manager of Intel s assembly and test operations in Phoenix, Arizona, USA. He was subsequently appointed to head Intel s Kulim operations in 1995 as the Managing Director of Intel s Board and Systems manufacturing group. In 2000, Dr. Chong was appointed as the General Manager of Intel s worldwide board and systems operations and held that position until he retired in August He is currently a member of the Audit Committee in GTB. He did not attend any Board Meetings held during the financial year ended 31 December 2002 as his effective appointment date was on 3 March He has no direct or indirect shareholdings in GTB. Dr. Chong Eng Keat does not have any family relationship with any director and/or major shareholder of GTB, nor any conflict of interest in any business arrangement involving the Company. He has had no convictions for any offences within the past 10 years.

12 11 CORPORATE GOVERNANCE STATEMENT Introduction and Objective Since the issuance of the Malaysian Code on Corporate Governance (The Code) in March 2000, Globetronics Technology Bhd and its group of companies (the Group) has formulated a code of corporate governance, which sets out the principles and best practices to be applied in the Group s operations. The principles are based on the Code, namely those of transparency, integrity and accountability to achieve the ultimate objective of realising longterm shareholders value while taking into account the interests of other stakeholders. The Listing Requirements of Kuala Lumpur Stock Exchange (KLSE Listing requirements), which came into effect in June 2001 made it mandatory for listed companies to disclose their compliance with the Code. Set out below is a statement of how the Group has applied the principles and complied with the best practice provisions laid down in the Code throughout the 12 months ended 31 December BOARD OF DIRECTORS An effective Board sets the policies which will enable them to lead and guide the Company to achieve its goals. The Board currently has a total of ten directors. Out of the ten, there are two Executive Directors and the balance are Non- Executives. During the year, the Independent Directors are Dato Noor Ahmad Mokhtar Bin Haniff, Mr. Diong Chin Teck and Mr. Tan Chin Kong which makes up one third of the Board. A brief profile of each Director is presented on pages 6 to 10. Both Mr. Tan Chin Kong and Dato Dr. Mohd Aminuddin Bin Mohd Rouse resigned as an Independent Non-Executive Director and Non-Independent Non-Executive Director of GTB respectively on 25 February Dr. Chong Eng Keat was appointed as an Independent Non-Executive Director of GTB on 3 March 2003 and Datuk Haji Hod Bin Parman was appointed as Non-Independent Non-Executive Director of GTB on 6 March 2003 to comply with Chapter of the KLSE Listing Requirements. For the financial year ended 31st December 2002, the Board held six meetings. Details of the meetings are as follows:- Date of Board Meeting Time Venue 25 February :30amGlobetronics Board Room, Penang 23 April :30amGlobetronics Board Room, Penang 10 June :30amGlobetronics Board Room, Penang 30 July :30amGlobetronics Board Room, Penang 29 October :30amGlobetronics Board Room, Penang 27 December :30am Globetronics Board Room, Penang At these meetings, strategies and performance of the Company were being reviewed and evaluated in light of any changing circumstances whether economic, social or political. Although all Directors have an equal responsibility for the Group s operations, the role of Independent Non-Executive Directors is particularly important in ensuring that the strategies proposed by the executive management are fully discussed and examined with due regard to risk management. The decisions were arrived at after taking into account the long term interests, not only of the shareholders, but also of employees, customers, suppliers, and the many communities in which the Group conducts its business.

13 12 CORPORATE GOVERNANCE STATEMENT BOARD COMMITTEES In discharging its fiduciary duty, the Board is assisted by the following Board Committees, namely the Audit Committee, the Remuneration Committee and the Executive Share Options Scheme Committee. The terms of reference of each Committee have been approved by the Board and comply with the recommendations of the Code. Audit Committee The composition and terms of reference of this Committee together with its report are presented on pages 19 to 21 in the Annual Report. Remuneration Committee This Committee sets out the framework and recommends to the Board the remuneration package, rewards and other benefits to the Executive Directors, after taking into account individual and companies performance. Nevertheless, the remuneration of Non-Executive Directors is a decision for the Board as a whole. However, the respective individual Director is required to abstain from deliberations and voting on decisions in respect of his individual remuneration. The Remuneration Committee consists of : Dato Noor Ahmad Mokhtar Bin Haniff (Independent Non-Executive Director, appointed as member and Chairman on 1 January 2003) Mr. Lim Chien Ch eng (Non-Independent Non-Executive Director, retired as Chairman on 1 January 2003) Mr. Ng Kweng Chong (Non-Independent Executive Director) Mr. Tan Chin Kong (Independent Non-Executive Director, retired as member on 1 January 2003) Executive Share Options Scheme ( ESOS ) Committee This Committee has the power to administer the ESOS in such manner as it shall in its discretion deem fit; including such powers and duties conferred upon it under the Bye-Laws of the ESOS. The Committee ensures that the ESOS is administered in accordance with the Bye-Laws. The ESOS Committee consists of : Mr. Lim Chien Ch eng (Non-Independent Non-Executive Director, appointed as member and Chairman on 1 January 2003) Mr. Ng Kok Khuan (Non-Independent Non-Executive Director) Mr. Ng Kweng Chong (Non-Independent Executive Director) Dato Noor Ahmad Mokhtar Bin Haniff (Independent Non-Executive Director, retired as member and Chairman on 1 January 2003) Subject to the approval of the Board, the ESOS Committee will be dissolved upon the expiry of the ESOS in DIRECTORS REMUNERATION (a) Aggregate remuneration of Directors for financial year 2002 categorised into appropriate components are as follows:- Benefit Other Fees Salaries Bonus in-kind Emoluments Total RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Executive Directors 80 1, ,948 Non Executive Directors , ,309

14 13 CORPORATE GOVERNANCE STATEMENT (b) The number of Directors of the Company whose total remuneration for financial year 2002 falls within the following bands is summarised as follows:- Number of Directors Range of remuneration Executive Non-Executive RM50,000 and below 6 RM50,001 to RM100,000 2 RM900,001 to RM950,000 1 RM950,001 to RM1,000,000 1 RE-ELECTION OF DIRECTORS In accordance with the Company s Articles of Association, all Directors who are appointed by the Board are subject to election by shareholders at the first Annual General Meeting after their appointment. In accordance with the Articles of Association, one third of the remaining Directors are required to submit themselves for re-election by rotation at each Annual General Meeting. Directors over seventy years of age are required to submit themselves for re-appoinment annually in accordance with Section 129(6) of the Companies Act, SUPPLY OF INFORMATION TO BOARD MEMBERS Board Meetings are structured with a pre-set agenda. Board papers for the agenda are circulated to Directors well before the appointed date of the meeting so as to give the Directors time to deliberate on the issues to be raised at the meeting. At other times, directors have direct access to the Senior Management and the services of the Company Secretaries. Directors, especially newly appointed ones, are encouraged to visit the Group s operating centres to familiarise themselves with the operations of the Group. DIRECTORS TRAINING All the Directors except for the newly appointed directors Dr. Chong Eng Keat and Datuk Haji Hod Bin Parman have attended and completed the Mandatory Accreditation Programme(MAP) conducted by the Research Institute of Investment Analysis Malaysia(RIIAM), an affiliate company of the Kuala Lumpur Stock Exchange. Directors are encouraged to attend continuous education programmes and seminars to keep abreast with developments in the market place. RELATIONS WITH SHAREHOLDERS AND INVESTORS The Board encourages shareholders active participation at the Company s Annual General Meetings and endeavours to ensure all Board Members are in attendance. The auditors are also present in the Company s Annual General Meeting. In addition, the Company makes various announcements through the Stock Exchange, in particular the timely release of the quarterly results within two months from the close of a particular quarter. Copies of the full announcement are supplied to the shareholders and members of the public upon request. Members of the public can also obtain the full financial results and the Company s announcements from the KLSE website. Additionally, the Company s website, provides easy access to the latest quarterly and annual results of the Group. The Executive Directors (where relevant) and the Group Financial Controller also hold discussions with research analysts, fund managers and shareholders periodically at the head office or at organised roadshows. Presentations are made, as appropriate, to explain the Company s strategy, performance and major developments. However, any information that may be regarded as undisclosed material information about the Company will not be given to any single shareholder or shareholder group.

15 14 CORPORATE GOVERNANCE STATEMENT FINANCIAL REPORTING The Board takes responsibility for presenting a balanced and understandable assessment of the Group s operations, financial position and prospects each time it releases its quarterly and annual financial statements to the shareholders. The Audit Committee reviews the information to be disclosed to ensure its accuracy and adequacy. INTERNAL CONTROLS The Board acknowledges its responsibilities for the Group s systems of internal control covering not only financial but also operational, compliance as well as risk management matters. The internal control system involves each business and is designed to meet the Group s particular needs and to manage risks to which it is exposed. These systems can therefore only provide reasonable assurance against material omission or loss. RELATIONSHIP WITH AUDITORS The role of the Audit Committee in relation to the external auditors is spelt out on pages 19 to 21 of the Audit Committee Statement in the Annual Report. COMPLIANCE OF THE CODE Save as disclosed below, the Group has substantially complied with the Principles and Best Practices of the Code:- (a) The Board is mindful of the dual roles held by the Chairman/CEO but is of the view that there are sufficient independent-minded Directors on the Board with wide boardroom experience to provide the necessary check and balance. Besides, the Board has also developed over the years a clearly defined framework including the formation of various Board Committees to discuss and decide on policy matters and related issues on a regular basis. The Chairman/CEO as a rule abstains from all deliberations and voting on matters which he is directly or deemed interested. All related party transactions involving him are dealt with in accordance with the KLSE Listing Requirements.

16 15 CORPORATE GOVERNANCE STATEMENT (b) Although the Group has in place an effective internal control system, steps are being taken to formalise the existing process in which risks are being identified, assessed and reviewed so that they will be embeded onto the Group s business. (c) The Board of Directors collectively, rather than a separate Nomination Committee is responsible for recommending the right candidate with the necessary skill, experience and competencies to be filled in the Board. DIRECTORS RESPONSIBILITY STATEMENT In respect of the preparation of the audited financial statements, the Directors are required by the Companies Act,1965 to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Company and the Group and their results and cash flows for that year. In preparing the financial statements for the financial year ended 31st December 2002, the Directors have:- used appropriate accounting policies and applied them consistently; made judgements and estimates that are reasonable and prudent; and stated whether applicable approved accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements. The Directors are responsible for ensuring that proper accounting records are kept and which disclose with reasonable accuracy the financial position of the Company and the Group and to enable them to ensure that the financial statements comply with the Companies Act, They have a general responsibility for taking such steps that are reasonably open to them to safeguard the assets of the Company, to prevent and detect fraud and other irregularities. ADDITIONAL COMPLIANCE INFORMATION a.share Buybacks During the financial year, the Company does not have any share buybacks in place. b.options, Warrants or Convertible Securities A total of 1,768,000 options were exercised during the financial year pursuant to the Company s ESOS. The Company did not issue any warrants or convertible securities. c.american Depository Receipt (ADR) or Global Depository Receipt (GDR) Programme During the financial year, the Company does not have any ADR or GDR programme in place. d.imposition of Sanctions/Penalties There were no sanctions and/or penalties imposed on the Company and its subsidiaries, Directors or management by the relevant regulatory bodies during the financial year. e.non-audit Fees The amount of non-audit fees paid to the external auditors by the Group for the financial year amounted to RM26,000 f.profit Guarantee During the financial year, there were no profit guarantees given by the Company. g.variation in Results During the financial year, there were no profit estimates, forecasts, projections or unaudited results announced which differ by 10% or more from the audited results.

17 16 CORPORATE GOVERNANCE STATEMENT h.utilisation of Proceeds During the financial year, the Company had utilised part of the proceeds from the disposal of its 29% equity interest in SMCI Globetronics Technology Industries Sdn Bhd, amounting to RM33,825,600 to pay a special dividend of12.5% less tax (12.5 sen per share less tax) to the shareholders on 28 June The total paid out of this special dividend amounted to RM8,467,605 i.material Contracts Save as disclosed below, there are no material contracts (not being contracts entered into in the ordinary course of business) which have been entered into by the Company or its subsidiaries within the past two(2) years preceding the date of this Annual Report:- I. A conditional share sale agreement dated 2 November 2001 between the Company and Sumitomo Metal (SMI) Electronics Devices Inc., Japan for the disposal of 29% of the issued and paid-up share capital of SMCI Globetronics Technology Industries Sdn Bhd comprising 15,660,000 ordinary shares of RM1.00 each for a total cash consideration of RM33,825,600. This transaction was completed on 24 January II. III. IV. A conditional share sale agreement dated 21 June 2002 between Globetronics International Incorporated ( GII ), a wholly-owned subsidiary of the Company, with Heng Huck Lee, Ng Kok Choon, Cheah Sin Hock, Wong Boon Hooi and Premier Oracle Sdn Bhd ( POSB ) to acquire the remaining 10,800,000 ordinary shares of Peso1.00 each representing 20.0% of the issued and paid-up share capital of Globetronics Philippines Inc., which are not already owned by GII, for a total cash consideration of RM3,802,255. This transaction was completed on 23 October A conditional share sale agreement dated 21 June 2002 between the Company with Heng Huck Lee, Visvaraj A/L Ayadurai Alala Sundram, Tan Chin Kong, Lim Eng Poh and POSB to acquire the remaining 140,000 ordinary shares of RM1.00 each representing 7.0% of the issued and paid-up share capital of ISO Technology Sdn Bhd, which are not already owned by the Company, for a total cash consideration of RM1,431,197. This transaction was completed on 23 October A conditional share sale agreement dated 21 June 2002 between the Company with POSB to acquire the remaining 150,000 ordinary shares of RM1.00 each representing 20.0% of the issued and paid-up share capital of Globetronics Multimedia Technology Sdn Bhd, which are not already owned by the Company, for a total cash consideration of RM391,793. This transaction was completed on 23 October V. A conditional share sale agreement dated 21 June 2002 between the Company with POSB, Heng Huck Lee and Lau Kean Cheong to acquire the remaining 125,000 ordinary shares of RM1.00 each representing 20.0% of the issued and paid-up share capital of Globetronics Industries Sdn Bhd, which are not already owned by the Company, for a total cash consideration of RM350,753. This transaction was completed on 23 October VI. A conditional sale & purchase agreement dated 20 November 2002 between ISO Technology Sdn Bhd, a wholly-owned subsidiary of the Company with Advanced Micro Devices Export Sdn Bhd to acquire the following properties and equipment at the following considerations:- i. Two (2) pieces of land with a building erected thereon at a total cash consideration of RM6,350,000. Description of land a. No. Lot 1959, Mukim 12, Daerah Barat Daya, Negeri Pulau Pinang comprised in Pajakan Negeri No. Pendaftaran474. b. No. P.T.PTBP/PM/140/78, Mukim 12, Daerah Barat Daya, Negeri Pulau Pinang comprised in No. H.S.(D) (previously H.S.(D) 2543).

18 17 CORPORATE GOVERNANCE STATEMENT Description of building A two (2) storey factory building with office erected thereon bearing assessment address Lot 1959, Bayan Lepas Free Trade Zone, Phase III, Penang which also include the fixtures and fittings. ii. Facility equipment at a total cash consideration of RM1,650,000 Part of Lot 1959 is leased to Tenaga Nasional Berhad under Lease Presentation No /96, Volume 10, Folio No. 185 for 30 years commencing from 28 June 1995 and expiring on 27 July Save for the lease, the properties and facility equipment are free from any and all charges, liens and all encumbrances of whatsoever nature. j.contracts Relating to Loans During the financial year, there were no contracts relating to loans by the Company. k.revaluation of Landed Properties The Company does not have a revaluation policy on landed properties. l.recurrent Related Party Transactions Of A Revenue or Trading Nature The aggregate value of transactions as stated below are for transactions entered into for the period from January 2002 to October With effect from November 2002, ISO, GISB and GPI became the wholly-owned subsidiaries of GTB. Name of companies/ Abbreviations interested related parties Nature of Relationships GTB Globetronics Technology Bhd The ultimate holding company of ISO, GISB and GPI ISO ISO Technology Sdn Bhd 93% owned subsidiary of GTB GISB Globetronics Industries Sdn Bhd 80% owned subsidiary of GTB GPI Globetronics Philippines Inc. 80% owned subsidiary of GII which in turn is 100% owned by GTB HHL Heng Huck Lee Director and shareholder of GTB, GISB, ISO and GPI TCK Tan Chin Kong Director and shareholder of GTB and shareholder of ISO NKC Ng Kok Choon Shareholder of GTB and director and shareholder of GPI CSH Cheah Sin Hock Shareholder of GTB and director and shareholder of GPI RAJ Visvaraj A/L Ayadurai Shareholder of GTB and director and shareholder of ISO Alala Sundram Subsidiaries Aggregate value of Involved Transactions Interested Related Parties transactions (RM) ISO & GISB Supply of sub-contracting services HHL, TCK and RAJ 505,159 for assembly & testing of integreted (via the transactions in ISO) circuits. HHL (via the transactions in GISB) GISB Purchase and sale of direct materials HHL 1,272,106 such as packages and lids, electronic (via the transactions in GISB) components, piece parts and consumables for electronics industry.

19 18 CORPORATE GOVERNANCE STATEMENT Subsidiaries Aggregate value of Involved Transactions Interested Related Parties transactions (RM) ISO, GISB Purchase and sale of indirect materials HHL, TCK and RAJ 108,459 & GPI such as electro-static discharge (via the transactions in ISO) materials, chemical and cleanroom HHL products, packaging materials and (via the transactions in GISB) services. HHL, NKC and CSH (via the transactions in GPI) ISO & GISB Purchase and sale of computer HHL, TCK and RAJ 1,370,759 software and related equipments. (via the transactions in ISO) HHL (via the transactions in GISB) ISO & GISB Provision of system solutions and HHL, TCK and RAJ 955,493 Information Technology (IT) (via the transactions in ISO) consultations. HHL (via the transactions in GISB) GISB Rental of factory premises located HHL 215,000 at Plot 2, Phase 4, Bayan Lepas (via the transactions in GISB) Free Industrial Zone, Penang with a built up area of approximately 7,858 square feet ISO, GISB Provision of headcount to support HHL, TCK and RAJ 1,924,450 & GPI in administration, human resource (via the transactions in ISO) and traning. HHL (via the transactions in GISB) HHL, NKC and CSH (via the transactions in GPI) ISO & GISB Provision of transportation and related HHL, TCK and RAJ 120,165 services such as logistic planning, (via the transactions in ISO) shipping and administration services HHL (via the transactions in GISB) Grand Total 6,471,591

20 19 AUDIT COMMITTEE REPORT The Audit Committee consists of: Mr. Diong Chin Teck (Independent Non- Executive Director, appointed as Chairman on 1 January 2003) Dr. Chong Eng Keat (Independent Non-Executive Director, appointed as member on 3 March 2003) Mr. Ng Kweng Chong (Non-Independent Executive Director) Dato Noor Ahmad Mokthar Bin Haniff (Independent Non-Executive Director, retired as member and Chairman on 1 January 2003) Mr. Tan Chin Kong (Independent Non-Executive Director, appointed as member on 1 January 2003 and subsequently resigned as member on 25 February 2003) Terms Of Reference The Term of Reference for the Audit Committee set out by the Board of Directors is as follows:- Size and Composition The Audit Committee shall be appointed by the Board of Directors from amongst its members and shall consist of not fewer than three members of whom a majority shall be the independent non-executive directors of the Company or any related corporation. A Chairman should be elected and he should not be an executive director or employee of the Company or related corporation. Objectives The primary objective of the Audit Committee is to assist the Board of Directors in fulfilling its responsibility relating to the accounting and reporting practices of the Company and its subsidiaries.

21 20 AUDIT COMMITTEE REPORT In addition, the Audit Committee shall oversee and appraise the quality of the audit conducted both by the Company s internal and external auditors; maintain, through regular scheduled meetings, a direct line of communication between the Board of Directors, internal and external auditors for the exchange of views and information, as well as to confirm their respective authority and responsibilities; and, determine the adequacy of the Group s administrative, operating and accounting controls. Authority The Audit Committee shall have unrestricted access to both the internal and external auditors and to senior management of the Company and the Group. The Audit Committee shall also have the ability to consult independent experts where they consider it necessary to carry out their duties. Duties and Responsibility The primary duties and responsibility of the Audit Committee are as follows: (a) Consider the appointment of the external auditors, the scope, fees and any questions of resignation or dismissal, and inquire into the staffing and competency of the External Auditors in performing their work. (b) Review with the External Auditors the scope of their audit plan, their evaluation of the system on internal control and the audit report on the financial statements. (c) Discuss the impact of any proposed changes in accounting policies, principles and practice for the financial statements focusing particularly on:- any changes in accounting policies and practices; significant adjustments arising from the audit; the going concern assumption; compliance with accounting standards and other legal requirements. (d) Review the quarterly and annual financial statements prior to submission to the Board for approval. (e) In relation to the internal audit function:- Review the adequacy of the scope, function and resources of the internal audit function, and that it has the necessary authority to carry out its work. Review the internal audit programme and results of the internal audit process and where necessary ensure that appropriate action is taken on the recommendations of the internal audit function. Review any appraisal or assessment of the performance of the members of the internal audit function. (f) Keep under review the effectiveness of the internal control systems and in particular to review and monitor the implementation of recommendation of the External Auditors management letter and management s response. (g) Consider and review any related party transaction that may arise within the Company or the Group. (h) Identify and direct any special projects or investigation deemed necessary. Internal Audit Function The function of the Internal Audit Department is independent of the activities carried out by the various operating units within the Group. The Internal Audit Department undertakes the internal audit functions of reviewing the various subsidiaries compliance with internal control procedures; ascertaining that the Company s and Group s assets are safeguarded and accounted for and carrying out investigations and special reviews from time to time as requested by the Management. Audit reports issued to the respective subsidiaries incorporating the findings and recommendations on the systems and control weaknesses noted in the course of the audit and the Management s response thereto are extended to the Audit Committee for review and comment.

22 21 AUDIT COMMITTEE REPORT Activities The Committee had six meetings during the year ended 31 December Details of the meetings are as follows:- Date of Audit Committee Meeting Time Venue 25 February :00amGlobetronics Board Room, Penang 23 April :00pmGlobetronics Board Room, Penang 10 June :00amGlobetronics Board Room, Penang 5 July :00amGlobetronics Board Room, Penang 30 July :30amGlobetronics Board Room, Penang 29 October :30amGlobetronics Board Room, Penang At these meetings, all the Audit Committee members were present and the following activities were covered:- (a) Reviewed the audit plan and appraised the audit reports submitted by the Internal Auditors. The audit reports covered all the subsidiaries of the Group incorporating the audit findings and recommendations on the systems and controls weakness noted during the course of the audit; (b) Reviewed the shift in recent audit focus from compliance based to the risk based approach. In this context, internal audit was required to assess the effectiveness of the existing internal control system in anticipation of potential risks and consider a new audit approach thereon; (c) Reviewed the quarterly financial statements and Annual Report of the Group prior to presentation for the Board s approval; (d) Reviewed the related party transactions that had arisen within the Company or the Group; (e) Considered the reappointment of external auditors; (f) Reviewed with the external auditors their audit plan prior to commencement of audit; (g) Discussed and reviewed the Group s financial statements with the external auditors including issues and findings noted in the course of the audit of the Group; (h) Reviewed and discussed with the external auditors their evaluation of the system of internal controls of the Group; (i) Reviewed and discussed the external auditors management letter in relation to the respective companies of the Group containing the major findings during the course of their year end audit and the management s response; (j) Discussed and reviewed updates of new developments on accounting standards issued by the Malaysian Accounting announcements; and (k) Ensured the compliance of the Revamp KLSE Listing Requirement and Malaysian Code of Corporate Governance.

23 22 INTERNAL CONTROL STATEMENT Introduction The Board believes that the practice of good corporate governance is an on-going process and not just an annual matter to be covered as compliance in the Annual Report. The Board is committed to practising the highest standards of corporate governance and observing best practices throughout the Group, and will continue to improve on current practices. The Group aims to maintain a sound system of internal control to safeguard shareholders investment and the Group s assets. The KLSE Listing Requirements require Directors of listed companies to include a statement in annual reports on the state of their internal controls. The Institute of Internal Auditors Malaysia Statements on Internal Control: Guidance for Directors of Public Listed Companies ( Guidance ) provides guidance for compliance with these requirements. Set out below is the Board s Internal Control Statement, which has been prepared in accordance with the Guidance. Responsibilities The Board recognises the importance of sound internal controls and risk management practices to good corporate governance. The Board affirms its overall responsibility for the Group s systems of internal controls and risk management, and for reviewing the adequacy and integrity of those systems. In view of the inherent limitations in any system of internal controls, the systems are designed to manage rather than eliminate the risk of failure to achieve business objectives. Accordingly, it can only provide reasonable but not absolute assurance against material misstatement or loss. The Group s system of internal control involves all management and staff from each business units. The Board is responsible for determining key strategies and policies for significant risks and control issues, whilst functional managers of the subsidiaries are responsible to implement the Board s policies effectively by designing, operating, monitoring and managing risks and control processes. Risk Management Framework The Board with the assistance of the Internal Audit Department undertook to identify and evaluate the principal business risks in critical areas of the Company and the major subsidiaries of the Group, assessing the likelihood of material exposures and identifying the measures taken to manage these risks. This was done through desktop reviews, interviews with Senior Management and workshop reviews. The Board has initiated an ongoing process of identifying, evaluating, and managing significant risks encountered by the Company and the Group in a structured manner. This would entail establishing procedures for reporting and monitoring of risks and controls. Regular reviews will be conducted on a yearly basis with additional reviews to be carried out as and when required. These initiatives would ensure that the Company and the Group have in place a formalised ongoing process to identify, measure and manage the significant risks affecting the achievement of its business objectives. Other Key Components of Internal Control System The other key components of the Company s and the Group s internal control systems are described below: Board Meetings The Board meets at least quarterly and has a formal agenda on matters for discussion. The Chairman/CEO, together with the respective Executive Directors, leads the presentation of board papers and provide comprehensive explanation of pertinent issues. In arriving at any decision, on recommendation by the Management, a thorough deliberation and discussion by the Board is a prerequisite. In addition, the Board is kept updated on the Company s and the Group s activities and operations on a regular basis.

24 23 INTERNAL CONTROL STATEMENT Organisational Structure With Formally Defined Responsibility Lines and Delegation of Authority There is in place an organisational structure with formally defined responsibility lines and authorities to facilitate quick response to changes in the evolving business environment and accountability for operation performance. Capital and non-capital expenditures and acquisition and disposal of investment are subjected to appropriate review. Performance Management Framework Comprehensive management reports are generated on a regular and consistent basis to facilitate the Board, the Company s and the Group s Management to perform financial and operating reviews on the various operating units. The reviews encompass areas such as financial and non-financial key performance indicators, variances between budget and operating results and compliance with laws and regulations. The Company and the Group have in place a detailed and well-controlled budgeting process that provides a responsibility accounting framework. Operational Policies and Procedures The documented policies and procedures form an integral part of the internal control system to safeguard the Company s and the Group s assets against material losses and ensure complete and accurate financial information. The documents consist of memoranda, circulars, manuals and handbooks that are continuously being revised and updated to meet operational needs Weaknesses in Internal Control A number of minor internal control weaknesses were identified during the period, all of which have been, or are being, addressed. None of the weaknesses have resulted in any material losses, contingencies or uncertainties that would require mention in the Group s annual report. This statement is made in accordance with a resolution of the Board of Directors dated 31 March 2003.