e-infrastructure Enabler

Transcription

1 A N N U A L R E P O R T e-infrastructure Enabler e-services Provider e-distributor

2 CONTENTS About ECS Holdings Limited 2 Core Business Network 3 Financial Highlights 4 Chairman s Message 10 Chief Executive Officer s Message 14 Operations Review 18 Board of Directors 22 Management Staff 24 Organisation Chart 25 Corporate Governance 26 Corporate Information 28 Financial Statements 29 NOTE TO SHAREHOLDERS ECS Holdings Limited would like to inform our shareholders that the financial information set out in the Financial Highlights, Chairman s Message, Chief Executive Officer s Message and Operations Review sections of this Annual Report on Pages 4 to 21 are presented on a pro forma basis. The Pro forma Group refers to the companies which now form part of the ECS Holdings Group as a result of the restructuring exercise that was mentioned in our Prospectus dated 30 January The pro forma results have been prepared as if the restructured ECS Holdings Group had always been in existence. The pro forma results have been arrived at after making the pro forma adjustments described in the Prospectus. The financial statements of the ECS Holdings Group for the year ended 31 December 2000, based on the legal group, is set out on Pages 29 to 66 of this Annual Report.

3 ECS Holdings Limited About ECS Holdings Limited ECS Holdings Limited ( ECS ) is the holding company of a group of three companies comprising ECS Computers (Asia) Pte Ltd in Singapore, K.U. Sistem Holdings Sdn Bhd in Malaysia and The Value Systems Co., Ltd in Thailand ( the Group ). The Group is a leading e-infrastructure enabler and e-services provider serving and supporting Asia s growing internet economies. The substantial shareholders of ECS comprise Technocrat Investments Limited (35.7%). Solectron Technology Singapore Pte Ltd (29.0%) and V Investment Holdings Limited (8.7%) The shares of ECS are listed on the mainboard of the Singapore Exchange Securities Trading Limited as of 9 February 2001.

4 CORE BUSINESS NETWORK ECS Holdings Limited Blk 19 Kallang Avenue # Singapore ECS Computers (Asia) Pte Ltd Blk 19 Kallang Avenue # to 159 Singapore The Value Systems Co., Ltd. 34th Floor, Charn Issara Tower / New Petchburi Road Bangkapi, Huay-Kwang Bangkok 10320, Thailand K.U. Sistem Holdings Sdn. Bhd. 107 Block C Glomac Business Centre 10 Jalan SS6/1 Kelana Jaya Petaling Jaya Malaysia Mr Tay Eng Hoe Chief Executive Officer Mr Tay Eng Hoe Managing Director Mr Narong Intanate President Mr Foo Sen Chin Managing Director Mr Foong Kam Tho General Manager ECS Holdings Limited Annual Report

5 FINANCIAL HIGHLIGHTS 500, , ,000 Revenue (S$ 000) 267, , , , , , Profit (S$ 000) 20,000 16,000 12,000 8,000 4, ,093 11,169 8,289 3,184 1,436 4, (1) Profit Before Tax Profit After Tax & MI Earnings per share (cents) (0.00) Note: For meaningful comparison, earnings per share for 1997 and 1998 are computed based on the share capital existing in ECS Holdings Limited Annual Report 2000

6 FINANCIAL HIGHLIGHTS REVENUE The Group s revenue rose from $267.1 million in 1999 to $434.1 million in 2000 representing an increase of approximately 62.5% or $167.0 million over that of the previous year. The improvement in the Group s revenue is attributable to the stronger performance across all its business segments. With the economic recovery in Singapore, Malaysia and Thailand, many customers also increased their budget for IT expenditure to cater to both replacement and upgrading needs for their existing technologies. Furthermore, as businesses escalate to improve their competitive edge through the implementation of e-commerce infrastructure, the demand for the Group s internet and e-commerce related products and services also increased. This has been an important factor underlying the growth of the Group s e- enabling infrastructure business in PROFIT On a pro forma basis, the Group s profit after taxation and minority interests rose from $4.8 million in 1999 to $11.2 million in 2000 representing an increase of about 133.3% over the previous year. The higher profitability is a result of the strong business growth in Singapore, Malaysia and Thailand. EARNINGS PER SHARE Corresponding to the significantly improved profitability of the Group in 2000, its earnings per share also rose from 6.39 cents to 9.06 cents representing an increase of about 41.8% over that of the previous year. ECS Holdings Limited Annual Report

7 FINANCIAL HIGHLIGHTS 100% 80% Group Revenue Contribution by Product Category 60% 63.0% 62.6% 62.6% 54.0% 40% 20% 0% 4.0% 2.6% 3.5% 2.8% 34.4% 33.9% 34.6% 42.0% IT Products Distribution IT Services E-enabling Infrastructure Group Revenue Contribution by Geographical Segments 100% 23.4% 19.3% 21.1% 19.5% 50% 42.9% 32.7% 32.8% 30.1% 0% 33.7% 48.0% 46.1% % Malaysia Thailand Singapore 6 ECS Holdings Limited Annual Report 2000

8 FINANCIAL HIGHLIGHTS REVENUE BY BUSINESS SEGMENTS Growth was seen across all business segments during the year. E-enabling Infrastructure This segment saw the strongest growth in 2000 posting an increase of about $90.0 million or 97.3%. E-enabling infrastructure business contributed a total of $182.5 million during the year compared to $92.5 million in IT Services Revenue from IT services rose by approximately $9.6 million or 128.0%, rising from $7.5 million to $17.1 million in IT Products Distribution IT products distribution contributed about $234.5 million in 2000 compared to $167.1 million in This represents an increase of about $67.4 million or 40.3%. BY GEOGRAPHIC SEGMENTS Singapore The revenue from our operations in Singapore rose from $123.2 million to $219.0 million in 2000 representing an increase of about $95.8 million or 77.8%. Malaysia The contributions from Malaysia rose by about $28.1 million or 49.8% during the year from $56.4 million in 1999 to $84.5 million in Thailand In 2000, Thailand also saw significant growth contributing about $130.6 million to the Group s revenue. Comparing to the $87.5 million posted in 1999, year 2000 saw a significant growth of about $43.1 million or 49.3% with the stronger Thai economy. ECS Holdings Limited Annual Report

9 FINANCIAL HIGHLIGHTS Leverage Ratios Debt Equity Ratio External Borrowing vs Total Assets 4 2 Interest Expense (S$ 000) 3,077 2,230 1,189 1, Interest Coverage (Times) ECS Holdings Limited Annual Report 2000

10 FINANCIAL HIGHLIGHTS LEVERAGE RATIOS The Group s strong business growth in 2000 also brought about higher working capital requirements. This working capital demand was met primarily through bank borrowings. The Group s gearing rose from 1.16 in 1999 to 1.35 in 2000 reflecting the increased borrowings. INTEREST EXPENSE AND COVERAGE Corresponding to the higher borrowings, the Group s interest expense for the year rose from $1.2 million in 1999 to $1.5 million in However, the higher interest expense was mitigated by the stronger profitability of the Group. Interest cover in 2000 was 13.2 times compared to 8.0 times in the previous year. ECS Holdings Limited Annual Report

11 CHAIRMAN S MESSAGE Mr Chester Lin Chien Chairman 10 ECS Holdings Limited Annual Report 2000

12 CHAIRMAN S MESSAGE The year 2000 marks an important milestone in the history of ECS Holdings Limited ( ECS ). ECS has finally joined the ranks of listed companies in Singapore. On 9 February 2001 the shares of ECS commenced trading on the Singapore Exchange Securities Trading Limited. A total of $23,459,700 was raised from the Group s initial public listing and the funds were used to repay bank borrowings and for working capital. On a pro forma basis for the financial year ended 31 December 2000, ECS turned in strong growth across its operations in the region. Turnover rose to $434.1 million with pre-tax operating profit increasing by approximately % to $18.1 million. Profit after tax and minority interests rose to $11.2 million registering a 133.3% increase compared with Earnings per share rose 41.8% from 6.39 cents to 9.06 cents and net tangible asset backing per ordinary share rose by 70.8% to cents. No dividends will be declared this year as stated in the Company s prospectus dated 30 January Our Business Supported by the growth in the regional economies, our operations in Singapore, Malaysia and Thailand recorded strong performance. Turnover in Singapore rose from $123.2 million to $219.0 million, a growth of 77.8%, while in Malaysia and Thailand, our companies posted turnovers of $84.5 million and $130.6 million respectively, representing growth of about 49.8% and 49.3%. Profit before taxation from e-enabling infrastructure business and IT services business were about $10.8 million and $2.6 million representing approximately 60% and 14% of the Group s total business. The balance 26% of the business was derived from the Group s IT products distribution business segment. ECS Holdings Limited Annual Report

13 CHAIRMAN S MESSAGE e-distribution is a rapidly growing business segment in ECS. 12 ECS Holdings Limited Annual Report 2000

14 CHAIRMAN S MESSAGE Our People It has always been the philosophy of ECS to invest and to grow our people. People are an important asset of the Group. Our employees will continue to play an increasingly important role as we expand our business in the areas of e-enabling infrastructure and IT services. We are committed to train our employees and better their skills to further their personal growth. At ECS we encourage our employees to participate in community enriching services and extend a helping hand to people who require our assistance. Our Prospects The Board and Management of ECS remain optimistic about the business prospects of the Group into the new financial year. In addition to growing our business in Singapore, Malaysia and Thailand, we continue to search for opportunities that will help the growth and expansion of the Group in the region. On behalf of the Board, I would like to thank our shareholders, customers, business partners and employees for their support and help during our initial public listing. I would like to express my appreciation to the Board, Audit Committee and Compensation Committee for their counsel and commitment. Chester Lin Chien Chairman of the Board ECS Holdings Limited Annual Report

15 CHIEF EXECUTIVE OFFICER S MESSAGE Mr Tay Eng Hoe Chief Executive Officer 14 ECS Holdings Limited Annual Report 2000

16 CHIEF EXECUTIVE OFFICER S MESSAGE Year 2000 in Perspective The year 2000 was an important year for ECS Holdings Limited ( ECS ) as we prepared for our initial public offering. A total of 40,000,000 ordinary shares of $0.10 each comprising 35,545,000 New Shares and 4,455,000 Vendor Shares were offered by way of placement and public offer. With the overwhelming response from the public, we received a total of 17.6 times subscription for our public offer. Our shares commenced trading on the main board of the Singapore Exchange Securities Trading Limited on 9 February Performance by Business Segments The business of the Group during the 2000 financial year remained strong as companies continue to upgrade their information technology systems after the smooth transition into the new millennia. Moreover, as businesses and organisations further upgrade their operations and invest in advanced IT systems, we saw strong growth in our e-enabling infrastructure business. On a pro forma basis, during the year, our IT products distribution business turnover grew by about 40.3% from $167.1 million in 1999 to $234.5 million in 2000 while our e-enabling infrastructure business turnover grew from $92.5 million in 1999 to $182.5 million in 2000 representing a growth of 97.3%. Supporting the growth of our e- enabling infrastructure business, our IT services business turnover also expanded by 128.0% during the year. Performance by Geographic Segments The three countries within the Group - Singapore, Malaysia and Thailand all turned in strong performance in On a pro forma basis, Singapore reported a turnover of $219.0 million, a growth of about 77.8% over that of the previous year while Malaysia and Thailand contributed $84.5 million and $130.6 million representing growths of 49.8% and 49.3% respectively. ECS Holdings Limited Annual Report

17 CHIEF EXECUTIVE OFFICER S MESSAGE e-enabling infrastructure business will become increasingly important as companies in the region implement and upgrade their IT infrastructure. 16 ECS Holdings Limited Annual Report 2000

18 CHIEF EXECUTIVE OFFICER S MESSAGE Prospects Ahead Following our initial public offering, the Group will be looking into the opportunities to expand our business into the surrounding Asian countries. It remains the objective of the Group to continue our growth through a combination of equity acquisitions and partnerships. This strategy will help us ascertain continuity in the new business entities that we acquire and better manage business risks. Besides the regional expansion, the Group will also focus necessary resources to enhance existing operations in Singapore, Malaysia and Thailand in order to improve profitability and achieve higher revenue growth. We will focus investment to upgrade our IT infrastructure, provide more training for our staff s development and enhance our operational process to improve efficiency. To support the continued growth of the Group, we will also be sourcing for more product lines and widen our range of services. While the current financial year may see some consolidation in the IT market globally, we remain optimistic that the Group s performance will improve as we continue to broaden our product offerings to meet the expanding IT services and e-infrastructure needs in the surrounding Asian countries. Finally, I would like to thank all our customers, principals, employees, business associates and friends for their help over all these years. We are all committed to ensure the future growth of ECS as the Group embeds its footprints in the region. Tay Eng Hoe Chief Executive Officer ECS Holdings Limited Annual Report

19 OPERATIONS REVIEW The B-2-B on-line system at ECS helps expedite the ordering and delivery of IT equipment to resellers in the market. 18 ECS Holdings Limited Annual Report 2000

20 OPERATIONS REVIEW SINGAPORE Singapore continues to see strong growth across all segments of our business. During the year, contributions from Singapore were approximately 50.4% and 55.0% of the Group s turnover and profit before taxation. Complementing the increased business activities, our staff strength also rose from 121 as at the end of 1999 to 160 employees by 31 December 2000 representing an increase of about 32%. The new employees comprise mainly technicians and engineers whose primary roles are to support our e-enabling infrastructure and e-services business. This move corresponds to our strategy to focus on these two high value added segments of our business. To facilitate and expedite the delivery of our products to customers, we activated our business-to-business ( B2B ) on-line system for our e-distribution business in March Following the launch of this on-line system, we have received very encouraging response from our customers. The B2B on-line system has also been instrumental in supporting our ability to improve our productivity and customer service delivery. The response time to our customers orders have experienced significant improvement whereby all orders received via our on-line system can be delivered within 24 hours from the time of receipt. MALAYSIA During the year, Malaysia posted a turnover of $84.5 million, representing an increase of 49.8% over the $56.4 million reported in the previous year. At the profit before taxation, Malaysia contributed about $2.1 million representing approximately 11.5% of the Group s profit before taxation. In August 2000, we opened the new warehouse cum service centre at Hicom Glenmarie in Shah Alam. The warehouse, occupying an area of about 20,000 sq feet, will provide additional warehousing space and catering to the higher business volume in Malaysia. Part of the warehouse was organised as a service centre to provide more efficient services and faster turn around time for repair services. ECS Holdings Limited Annual Report

21 OPERATIONS REVIEW ECS provides training services to our customers. We are the authorised training centre for Sun Microsystem, iplanet and Check Point. 20 ECS Holdings Limited Annual Report 2000

22 OPERATIONS REVIEW THAILAND Business in Thailand was very brisk during the year. At the turnover level, our Thai operations reported a total turnover of $130.6 million representing an increase of about 49.3% over that of Corresponding to the higher business activity, profit before taxation also grew by about 79.4% to $6.1 million. In 2000, four new service centres were opened in Thailand. These are located in the southern, northern and northeastern parts of Thailand in Surat, Phuket, Pitsanuloke and Nakornratchaseema. Three new products were added during the year. These were Toshiba notebooks, IBM personal computers, notebook and workstation and Check Point network security and management software. Our Thai B2B on-line system, Value Online experienced a 300% growth during the year. Total sales for the year rose from 42 million baht in 1999 to 178 million baht in In June 2000 we also launched a new version of the web-based management information systems for sales, credit, procurement and inventory management and the new on-line payment system. ECS Holdings Limited Annual Report

23 BOARD OF DIRECTORS Mr Chester Lin Chien is the Chairman of our Company. Mr Lin was appointed as Chairman of the Company on 1 October He is also the president of Solectron Asia Pacific Region and managing director of Solectron Technology Singapore Pte Ltd (formerly known as NatSteel Electronics Ltd) our substantial shareholder. Prior to joining Solectron Technology Singapore Pte Ltd, Mr Lin spent 10 years in General Instruments of Taiwan where he held senior positions in the quality production and engineering departments before leaving for a management position at General Electric in Singapore, where he worked for 6 years. In 1984, Mr Lin started the Singapore subsidiary of US-based SCI Systems, Inc. He holds a Bachelor of Science degree in Electrical Engineering from the Taipei Institute of Technology. Mr Tay Eng Hoe is a Director and the Chief Executive Officer of our Company. Mr Tay was appointed as a Director of the Company on 1 April He is also the managing director of ECS Computers (Asia) Pte Ltd and a director of The Value Systems Co. Ltd., our subsidiaries. He holds a Bachelor of Science (Honours) degree from La-Trobe University and a Master of Business Administration degree from Melbourne University. Prior to joining our Company, he was managing Engineering Computer Services (S) Pte Ltd, a CAD/CAM company and prior to that, an officer of the National Productivity Board. Mr Chay Yee Meng is a Director of our Company. Mr Chay was appointed as a Director of the Company on 1 October He is also a director of ECS Computers (Asia) Pte Ltd and The Value Systems Co. Ltd. He holds a Bachelor of Accountancy degree from Nanyang University. He started his career as an audit assistant in Arthur Young in In 1982 he left for a position as a senior accountant and project manager of GM Singapore Pte Ltd. In 1987, he was employed by SCI Singapore as a financial controller and director. He is currently the director and vice-president of finance, Solectron Asia Pacific Region and a board member of Solectron Technology Singapore Pte Ltd (formerly known as NatSteel Electronics Ltd.) Mr Foo Sen Chin is a Director of our Company. Mr Foo was appointed as a Director of the Company on 15 December He is also the managing director of K.U. Sistem Holdings Sdn Bhd, our subsidiary. He holds a Master s degree in Business Administration from the Cranfield School of Management in the United Kingdom. Prior to joining our Company, he was the general manager of a computer bureau services company in Kuala Lumpur before forming K.U. Sistem Sdn Bhd in ECS Holdings Limited Annual Report 2000

24 BOARD OF DIRECTORS Mr Narong Intanate is a Director of our Company. Mr Narong was appointed as a Director of the Company on 15 December He is also the president of The Value Systems Co. Ltd., our subsidiary. He holds a Bachelor of Science degree in Business Administration and a master of Business Administration from California State University. Prior to forming The Value Systems Co. Ltd., he was the marketing manager of Sahaviriya Computers Co., Ltd from 1982 to Between 1983 to 1988, he was the marketing director of Sahaviriya OA. Mr Wong Heng Chong is a Director and the Chief Financial Officer of our Company. Mr Wong was appointed as a Director of the Company on 15 December He is a member of the Institute of Chartered Accountants in Australia and holds a diploma in Management Studies from the University of Chicago Graduate School of Business. Prior to joining our Company, he was an executive director of Boustead Singapore Limited. He was also a director and the group financial controller of QAF Limited. Prior to joining QAF Limited, he was a director and group general manager of Sunshine Allied Investments Limited (now known as Network Foods International Limited). Mr Hsieh Fu Hua is a Director of our Company. Mr Hsieh is the general partner of PrimePartners Asset Management, Inc. and former group managing director of the BNP Prime Peregrine Group. Mr Hsieh was appointed as a Director of the Company on 27 March He has over 27 years of experience in merchant banking in Asia. Prior to forming PrimePartners in 1994, he was chief executive officer of Morgan Grenfell Asia Holdings Pte. Ltd. From 1983 to 1985, he headed the Singapore branch of Lloyds Bank International. Mr Hsieh has served on the boards of several country funds and is a director of CapitaLand Limited and a member of the Governing Council of the Singapore Institute of Management. He is a graduate of the University of Singapore with an honours degree in business administration. Mrs Lee Suet Fern is an Independent Director of our Company. She was appointed as an Independent Director of the Company on 15 December She sits on the Advisory Committee of the Nanyang Technological University s School of Accountancy and Business, and the Singapore National Committee for Pacific Economic Cooperation Council. She is a practicing advocate and solicitor of the Supreme Court of Singapore. She qualified as a barrister-at-law at Gray s Inn, London and graduated from Cambridge University with a double first in law. Mr Leong Horn Kee is an Independent Director of our Company. He was appointed as an Independent Director of the Company on 15 December He graduated with a Bachelor of Technology in Production Engineering Loughborough University in the United Kingdom. He also holds an Economics degree from the University of London and a Masters in Business Administration from INSEAD, France. He is currently the chief executive officer/managing director of Yeo Hiap Seng Limited and an executive director of the Far East Organisation. He is also a member of parliament and the chairman of the Government Parliamentary Committee for Finance, Trade and Industry. ECS Holdings Limited Annual Report

25 MANAGEMENT STAFF Mr Tay Eng Hoe Director and Chief Executive Officer, appointed on 1 April He is also the Managing Director of ECS Computers (Asia) Pte Ltd. He holds a Bachelor of Science (Honours) degree from La- Trobe University and a Master of Business Administration degree from Melbourne University. Mr Wong Heng Chong Director, appointed on 15 December He is also the Chief Financial Officer of ECS Holdings Limited and a member of The Institute of Chartered Accountants in Australia. He holds a diploma in Management Studies from University of Chicago Graduate School of Business. Mr Foo Sen Chin Director, appointed on 15 December He is also the managing director of K.U. Sistem Holdings Sdn Bhd. He holds a Master s degree in Business Administration from Cranfield School of Management in the United Kingdom. Mr Narong Intanate Director, appointed on 15 December He is also the president of The Value Systems Co., Ltd. He holds a Bachelor of Science degree in Business Administration and a Master of Business Administration from California State University. Mr Foong Kam Tho General Manager of ECS Computers (Asia) Pte Ltd. He holds a Bachelor of Science degree (Computer Science) from the National University of Singapore. Mr Wee Sien Yang Financial Controller of ECS Computers (Asia) Pte Ltd and Company Secretary of ECS Holdings Limited. He is a Certified Public Accountant of Singapore and an associate member of the Association of Chartered Certified Accountants in the United Kingdom. Mr Somsak Pejthaveeporndej Vice president of the sales division of The Value Systems Co., Ltd. He holds a Bachelor of Science degree majoring in electronics from Rajapat Institution Bangkok, Thailand. Mr Soong Jan Hsung General manager and executive director of Astar Marketing Sdn Bhd and Pericomp-Sistech Sdn Bhd. He holds a Bachelor of Science (Honours) degree in Mathematics from the University of Malaya. 24 ECS Holdings Limited Annual Report 2000

26 ORGANISATION CHART ECS Holdings Limited 99.9%* EC Sure Holdings (Thailand) Co., Ltd. 75%* (Thailand) The Value Systems Co., Ltd. 100% (Singapore) ECS Computers (Asia) Pte Ltd 60% (Malaysia) K.U. Sistem Holdings Sdn Bhd 70% Antara IT Sdn Bhd 100% Astar Marketing Sdn Bhd 100% K.U. Sistem Sdn Bhd 80% Pericomp- Sistech Sdn Bhd * denotes effective interest ECS Holdings Limited Annual Report

27 CORPORATE GOVERNANCE Board of Directors The Board at ECS Holdings Limited comprises nine directors namely Mr Chester Lin Chien (Chairman), Mr Tay Eng Hoe (Chief Executive Officer), Mr Wong Heng Chong (Chief Financial Officer), Mr Chay Yee Meng, Mr Foo Sen Chin, Mr Narong Intanate, Mr Hsieh Fu Hua, Mr Leong Horn Kee (independent) and Mrs Lee Suet Fern (independent). ECS places great importance on the quality of its Board of Directors. The Group achieves this by appointing to its Board highly respected individuals and prominent leaders in their respective professions. The current Board of ECS comprises individuals with proven track record in the public and/or corporate sector, and is each a highly respected member of the business community. The Board shall hold at least three formal meetings a year and shall also hold informal meetings regularly. The Board of Directors supervises the management of the business and affairs of the Group and approves the Group s strategic operational initiatives, major investments and funding decisions. Apart from fulfilling its statutory responsibilities, the Board reviews the Group s financial performance and compensation of senior management personnel. These functions are performed either directly or through the Board committees like the Audit Committee and the Compensation Committee, as well as through a system of Delegation of Authority to senior management personnel within the Group. AUDIT COMMITTEE The Audit Committee comprises our independent directors, Mr Leong Horn Kee and Mrs Lee Suet Fern and our Chief Financial Officer, Mr Wong Heng Chong. Mr Leong is the Chairman of the Audit Committee. The Audit Committee shall meet periodically to perform the following functions:- 26 ECS Holdings Limited Annual Report 2000

28 CORPORATE GOVERNANCE Monitoring the effectiveness of the management of financial business risks and the reliability of management reporting; Monitoring the compliance with laws and regulations, particularly those of the Companies Act, Chapter 50 and the Singapore Exchange Listing Manual; Reviewing the appropriateness of half year and full year annoucements and reports; Reviewing the effectiveness and efficiency of internal and external audits; and Reviewing related party transactions. Specific functions of the audit committee include reviewing the scope of work of the internal and external auditors, the assistance given by the Company to the auditors and receiving and considering the reports of the internal and external auditors including their evaluation of the system of internal controls. The consolidated financial statements of the Company are reviewed by the audit committee prior to their submission to the Board of Directors for adoption. The audit committee also recommends the appointment of the external auditors and reviews the level of audit fees. Compensation Committee We have established a Compensation Committee with the responsibility to oversee the general compensation of employees of our Group with a goal to motivate, recruit and retain employees and directors through competitive compensation and progressive policies. In particular, the Compensation Committee is responsible for overseeing our employee profit sharing scheme as well as the share incentives, including the ECS Share Option Scheme I and ECS Share Option Scheme II. The Compensation Committee of the Board comprises Mr Leong Horn Kee, Mr Chester Lin and Mr Tay Eng Hoe. Mr Leong is the Chairman of the Compensation Committee. ECS adopts the Best Practices Guide issued by The Singapore Exchange Securities Trading Limited and has issued its own internal compliance code on dealings in securities by the company, its directors and officers. ECS Holdings Limited Annual Report

29 CORPORATE INFORMATION AUDITORS KPMG Certified Public Accountants 16 Raffles Quay #22-00 Hong Leong Building Singapore (Partner-in-charge: Ms Frances Cheang Chin Neo) SHARE REGISTRAR M&C Services Private Limited 138 Robinson Road #17-00 Hong Leong Centre Singapore REGISTERED OFFICE 19 Kallang Avenue # Singapore PRINCIPAL BANKERS ABN AMRO Bank 63 Chulia Street Singapore Citibank N.A. 3 Temasek Avenue Centennial Tower Singapore Deutsche Bank 6 Shenton Way #15-08 DBS Building Tower Two Singapore Oversea-Chinese Banking Corporation 65 Chulia Street OCBC Centre Singapore Overseas Union Bank Limited 1 Raffles Place OUB Centre Singapore Standard Chartered Bank 6 Battery Road Singapore United Overseas Bank Limited 80 Raffles Place UOB Plaza 1 Singapore COMPANY SECRETARY Wee Sien Yang, CPA 28 ECS Holdings Limited Annual Report 2000

30 CONTENTS Directors Report 30 Statement by Directors 40 Report of the Auditors 41 Balance Sheets 42 Profit and Loss Accouts 43 Statements of Changes in Equity 44 Statement of Cash Flows 45 Notes to the Financial Statements 47 Analysis of Shareholdings 67 Notice of Annual General Meeting 68 Proxy Form 71 ECS Holdings Limited Annual Report

31 DIRECTORS REPORT For the year ended 31 December 2000 We, the undersigned directors, on behalf of all the directors of the Company, submit this annual report to the members together with the audited financial statements of the Group and of the Company for the financial year ended 31 December DIRECTORATE The directors in office at the date of this report are as follows:- Lin Chien (Chairman) Tay Eng Hoe (Chief Executive Officer, appointed on 1 April 2000) Chay Yee Meng Foo Sen Chin (Appointed on 15 December 2000) Narong Intanate (Appointed on 15 December 2000) Wong Heng Chong (Appointed on 15 December 2000) Leong Horn Kee (Appointed on 15 December 2000) Lee Suet Fern (Appointed on 15 December 2000) Hsieh Fu Hua (Appointed on 27 March 2001) PRINCIPAL ACTIVITIES The principal activities of the Company are those relating to investment holding and the distribution of information technology products. The principal activities of the subsidiaries are set out in note 4. There have been no significant changes in such activities during the financial year. ACQUISITIONS AND DISPOSALS OF SUBSIDIARIES During the financial year, the Company - (a) (b) (c) Acquired an additional 40% interest in the equity of its subsidiary, ECS Computers (Asia) Pte Ltd ( ECSA ), for a consideration of $4,403,754, representing the Company s share of the fair value of the identifiable net assets of ECSA at the date of acquisition. Following the acquisition, ECSA became a wholly owned subsidiary. Acquired a 60% interest in the equity of K.U. Sistem Holdings Sdn. Bhd ( KU ), incorporated in Malaysia, for a consideration of RM 6,210,990 ($2,831,591), representing the Company s share of the fair value of the identifiable net assets of KU at the date of acquisition. Incorporated a 99.9% owned subsidiary, EC Sure Holdings (Thailand) Co., Ltd ( EC Sure ) in Thailand, with an issued share capital of Baht 2 million and partly paid up to Baht 500,000. In addition, EC Sure acquired a 38% interest in the equity of The Value Systems Co., Ltd ( VS ), incorporated in Thailand. The consideration for EC Sure s acquisition of VS amounted to Baht 66,159,514 ($2,847,103) based on a relevant share of the fair value of identifiable net assets of Baht 90,481,890 ($3,981,203). Following EC Sure s acquisition, the Group s effective interest in VS increased from a 37% equity accounted associated company to a 75% controlled subsidiary. Except as disclosed, the Company and its subsidiaries did not acquire or dispose of any subsidiaries. 30 ECS Holdings Limited Annual Report 2000

32 DIRECTORS REPORT FINANCIAL RESULTS Results of the Group and of the Company for the financial year are as follows:- The Group The Company $ $ Profit from ordinary activities after taxation 11,819, ,254 Minority interests (3,373,669) - Profit attributable to members of the Company 8,445, ,254 Unappropriated profits/(accumulated losses) brought forward 1,551,226 (1,495,191) Unappropriated profits/(accumulated losses) carried forward 9,996,712 (1,311,937) TRANSFERS TO AND FROM RESERVES AND PROVISIONS There were the following material transfers to/(from) reserves during the financial year:- The Group The Company $ $ Capital Reserve - Capital Reserve arising on consolidation of subsidiaries 1,044,624 - Currency Translation Reserve - Exchange differences on translation of net assets of foreign subsidiary and associated company (741,390) - Movements in provisions are as set out in the accompanying notes to the financial statements. ISSUES OF SHARES AND DEBENTURES During the financial year:- (a) (b) (c) (d) On 24 July 2000, subsidiary, EC Sure Holdings (Thailand) Co., Ltd issued 196,000 preference shares and 204,000 ordinary shares of Baht 5 each, partly paid up to Baht 1.25 per share for cash to incorporate the company. On 18 September 2000, the authorised share capital of the Company was revised from $23,065,000 divided into 18,500,000 ordinary shares of $1 each ( Ordinary Share ), 4,500,000 redeemable non-participating cumulative convertible preference shares of $1 each ( Class A RCCPS ) and 6,500,000 redeemable nonparticipating convertible preference shares of $0.01 each ( Class B RCPS ) to $23,065,000 divided into 23,065,000 Ordinary Shares by the cancellation of 4,500,000 Class A RCCPS and 6,500,000 Class B RCPS and the creation of 4,565,000 Ordinary Shares. On 13 December 2000, the authorised share capital of the Company was increased from $23,065,000 to $50,000,000 by the creation of an additional 26,935,000 Ordinary Shares. Thereafter, each Ordinary Share comprised in the existing authorised and issued and paid-up share capital was sub-divided into 10 ordinary shares of $0.10 each. On 29 December 2000, the Company issued 96,430,000 ordinary shares of $0.10 each fully paid at par for cash to provide funds for the repayment of bank borrowings which had been taken to finance the Group s acquisition of subsidiaries. Except as disclosed, neither the Company nor its subsidiaries issued any shares or debentures during the financial year. ECS Holdings Limited Annual Report

33 DIRECTORS REPORT ARRANGEMENTS TO ENABLE DIRECTORS TO ACQUIRE SHARES AND DEBENTURES On 21 December 2000, the Company granted one-off stock options to the executive directors of the Company and the Group to subscribe for an aggregate 15,585,000 shares of the Company at the exercise price of $0.10 per share, as disclosed under Share Options. Other than for the share options granted, there were no arrangements during the financial year entered into by the Company or the Group to enable the directors to acquire shares or debentures of the Company or any other company. DIRECTORS INTERESTS IN SHARES OR DEBENTURES According to the register kept by the Company for the purposes of Section 164 of the Companies Act, Chapter 50, particulars of interests of directors who held office at the end of the financial year in shares and share options in the Company and related corporations are as follows:- Holdings in the name of the director, spouse or infant children Other holdings in which the director is deemed to have an interest At beginning At beginning of the year/ of the year/ date of At end date of At end appointment of the year appointment of the year The Company Ordinary shares of $0.10 each fully paid Tay Eng Hoe ,450,000 Foo Sen Chin ,000 Narong Intanate ,988,000 Options to subscribe for ordinary shares of $0.10 each exercisable between 21/12/2001 to 20/12/2002 at $0.10 per share Tay Eng Hoe - 1,113, Foo Sen Chin - 1,670, Narong Intanate - 4,453, Wong Heng Chong - 556, Options to subscribe for ordinary shares of $0.10 each exercisable between 21/12/2002 to 20/12/2005 at $0.10 per share Tay Eng Hoe - 1,113, Foo Sen Chin - 1,670, Narong Intanate - 4,453, Wong Heng Chong - 556, There was no change in any of the abovementioned interests in the Company between the end of the financial year and 21 January Except as disclosed above, no director who held office at the end of the financial year had interests in shares or debentures of the Company or of related corporations either at the beginning of the financial year, or date of appointment, if later or at the end of the financial year. 32 ECS Holdings Limited Annual Report 2000

34 DIRECTORS REPORT DIVIDENDS Since the end of the last financial year, no dividend has been paid in respect of that previous year. No dividend has been paid or is proposed to be paid in respect of the financial year under review. OTHER STATUTORY INFORMATION (a) Bad and Doubtful Debts Before the profit and loss account and the balance sheet of the Company were made out, the directors took reasonable steps to ascertain what action had been taken in relation to writing off bad debts and providing for doubtful debts of the Company. The directors have satisfied themselves that all known bad debts have been written off and that adequate provision has been made for doubtful debts. At the date of this report, the directors are not aware of any circumstances which would render any amounts written off for bad debts or provided for doubtful debts in the Group inadequate to any substantial extent. (b) Current Assets Before the profit and loss account and the balance sheet of the Company were made out, the directors took reasonable steps to ascertain that current assets of the Company which were unlikely to realise their book values in the ordinary course of business have been written down to their estimated realisable values and that adequate provision has been made for the diminution in value of such current assets. At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report which would render the values attributable to current assets in the consolidated financial statements misleading. (c) Charges and Contingent Liabilities Since the end of the financial year:- no charge on the assets of the Company or any corporation in the Group has arisen which secures the liabilities of any other person; and no contingent liability of the Company or any corporation in the Group has arisen. (d) Ability to Meet Obligations No contingent liability or other liability of the Company or any corporation in the Group has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the directors, will or may substantially affect the ability of the Group or of the Company to meet their obligations as and when they fall due. (e) Other Circumstances Affecting the Financial Statements At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or the financial statements which would render any amount stated in the consolidated financial statements or the financial statements of the Company misleading. ECS Holdings Limited Annual Report

35 DIRECTORS REPORT OTHER STATUTORY INFORMATION (CONT D) (f) Unusual Items In the opinion of the directors, no item, transaction or event of a material and unusual nature has substantially affected the results of the operations of the Group or of the Company during the financial year. In the opinion of the directors, no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial year and the date of this report which is likely to affect substantially the results of the operations of the Group or of the Company for the financial year in which this report is made. DIRECTORS INTERESTS IN CONTRACTS Since the end of the last financial year, no director has received or become entitled to receive a benefit by reason of a contract made by the Company or a related corporation with the director or with a firm of which he is a member or with a company in which he has a substantial financial interest. SHARE OPTIONS (a) Share Option Shares The ECS Share Option Scheme I ( Scheme I ) was approved at the Company s extraordinary general meeting held on 13 December 2000 to grant one-time share options to certain eligible directors and executives of the Company in recognition of their contribution to the growth and performance of the Company. The ECS Share Option Scheme II ( Scheme II ) was approved at the Company s extraordinary general meeting held on 13 December Scheme II provides an opportunity for employees and directors, including non-executive directors, of the Group who have contributed significantly to the growth and performance of the Group to participate in the equity of the Company. The above schemes are administered by a compensation committee ( Committee ) comprising directors of the Company and the Group. The Committee comprises the following members:- Leong Horn Kee (Chairman) Lin Chien Tay Eng Hoe Size of the Plan The total number of new shares over which options may be granted shall not exceed 22,264,000 shares for Scheme I and shall be determined at the discretion of the Committee for Scheme II. Grant of Option Options pursuant to Scheme I were granted on 21 December Options pursuant to Scheme II may be granted at any time during the period when Scheme II is in force, except that no options shall be granted during the period of 30 days immediately preceding the date of announcement of the Company s financial results. 34 ECS Holdings Limited Annual Report 2000

36 DIRECTORS REPORT SHARE OPTIONS (CONT D) (a) Share Option Shares (CONT D) Acceptance of Option The grant of an option shall be accepted within 30 days from the date of grant and accompanied by payment to the Company of a nominal consideration of $1. Exercise Price The exercise price for each share in respect of which an option is exercisable pursuant to Scheme I shall be the par value of the share. Under Scheme II, the exercise price shall be determined by the Committee at its absolute discretion and fixed at:- - A price equal to the average of the last dealt prices for a share, as determined by reference to the Financial News or other publication published by the Singapore Exchange Securities Trading Limited for the three consecutive trading days immediately preceding the grant of the options (the Market Price ); or - A price which is set at a discount to the Market Price provided that the maximum discount shall not exceed 20% of the Market Price and the shareholders of the Company in general meeting shall have authorised the making of offers and grants of option under Scheme II at a discount not exceeding the maximum discount as aforesaid. Where the exercise price as determined above is less than the par value of the share, the exercise price shall be the par value. Exercise of Option Options pursuant to Scheme I shall be exercisable after the first anniversary but before the fifth anniversary of the date of grant of the option, subject to the following:- - Up to 50% of the shares in respect of which option is granted may be exercised within the 12 month period after the first anniversary of the date of grant of the option; and - The balance of the shares in respect of which option is granted may be exercised at any time after the expiry of the aforesaid 12 month period. Options granted pursuant to Scheme II shall be exercisable, in the case of options with exercise price set at Market Price, at any time after the first anniversary of date of grant and in the case of options with exercise price set at a discount, at any time after the second anniversary of date of grant. Options granted to employees and executive directors are exercisable up to the tenth anniversary of date of grant and those granted to non-executive directors are exercisable up to the fifth anniversary of the date of grant. Duration of the Schemes Scheme I and Scheme II shall continue to be in force at the discretion of the Committee, subject to a maximum period of 5 years and 10 years respectively commencing 13 December ECS Holdings Limited Annual Report

37 DIRECTORS REPORT SHARE OPTIONS (CONT D) (b) Options Granted On 21 December 2000, the following options were granted to eligible persons under Scheme I at the exercise price of $0.10 per share:- No. of No. of Shares under Option Option Category Holders Period 1 Period 2 Total (1) (2) Executive directors - Tay Eng Hoe 1 1,113,000 1,113,000 2,226,000 - Foo Sen Chin 1 1,670,000 1,670,000 3,340,000 - Narong Intanate 1 4,453,000 4,453,000 8,906,000 - Wong Heng Chong 1 556, ,500 1,113,000 Executive officer - Foong Kam Tho 1 3,339,500 3,339,500 6,679, ,132,000 11,132,000 22,264,000 (1) Exercisable between 21/12/2001 to 20/12/2002 (2) Exercisable between 21/12/2002 to 20/12/2005 No options were granted under Scheme II. (c) Issue of Shares Under Option During the financial year, no shares were issued pursuant to the exercise of options, under the Company s share option schemes, to take up unissued shares of the Company or its subsidiaries. (d) Unissued Shares under Option At the end of the financial year, unissued shares of the Company under Scheme I are as follows:- Aggregate Exercise Options Exercise Period Period Outstanding 21/12/ /12/2002 $ ,132,000 21/12/ /12/2005 $ ,132,000 22,264, ECS Holdings Limited Annual Report 2000

38 DIRECTORS REPORT SHARE OPTIONS (CONT D) (d) Unissued Shares under Option (cont d) The details of options granted and exercised during the year are as follows:- Aggregate Aggregate Aggregate Name of Options Options Options Options Participants Granted Granted Exercised Outstanding (1) (2) (3) (4) Executive directors - Tay Eng Hoe 2,226,000 2,226,000-2,226,000 - Foo Sen Chin 3,340,000 3,340,000-3,340,000 - Narong Intanate 8,906,000 8,906,000-8,906,000 - Wong Heng Chong 1,113,000 1,113,000-1,113,000 Executive officer - Foong Kam Tho 6,679,000 6,679,000-6,679,000 22,264,000 22,264,000-22,264,000 (1) Options granted during the financial year under review. (2) Aggregate options granted since commencement of the scheme to the end of the financial year under review. (3) Aggregate options exercised since commencement of the scheme to the end of the financial year under review. (4) Aggregate options outstanding as at end of the financial year under review. The options granted by the Company do not entitle the holders of the options, by virtue of such holdings, to any right to participate in any share issue of any other company. Except as disclosed, there were:- (i) (ii) (iii) no options granted by the Company or its subsidiaries to any person to take up unissued shares in the Company or its subsidiaries; no shares issued by virtue of any exercise of option to take up unissued shares of the Company or its subsidiaries; and no unissued shares of the Company or its subsidiaries were under option at the end of the financial year. ECS Holdings Limited Annual Report

39 DIRECTORS REPORT AUDIT COMMITTEE The audit committee was formed by the Board of Directors during the year and its members at the date of this report are as follows:- Leong Horn Kee Lee Suet Fern Wong Heng Chong (Chairman) The principal responsibility of the audit committee is to assist the Board of Directors in the identification and monitoring of areas of significant business risks including the following:- The effectiveness of the management of financial business risks and the reliability of management reporting; Compliance with laws and regulations, particularly those of the Companies Act, Chapter 50 and the Singapore Exchange Listing Manual; The appropriateness of half year and full year announcements and reports; The effectiveness and efficiency of internal and external audits; and Related party transactions. Specific functions of the audit committee include reviewing the scope of work of the internal and external auditors, the assistance given by the Company to the auditors and receiving and considering the reports of the internal and external auditors including their evaluation of the system of internal controls. The consolidated financial statements of the Company are reviewed by the audit committee prior to their submission to the Board of Directors for adoption. The audit committee also recommends the appointment of the external auditors and reviews the level of audit fees. In addition, the audit committee has, in accordance with Chapter 9A of the Singapore Exchange Listing Manual, reviewed the requirements for approval and disclosure of interested person transactions, reviewed the internal procedures set up by the Company to identify and report and where necessary, seek approval for interested person transactions and, with the assistance of the internal auditors, reviewed interested person transactions. The audit committee has recommended to the Board of Directors that the auditors, KPMG, be nominated for reappointment as auditors at the forthcoming Annual General Meeting of the Company. 38 ECS Holdings Limited Annual Report 2000