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FDS Networks Group Ltd.

2004 - 06, World Trade Centre, 280 Gloucester Road, Causeway Bay, Hong KongTel: 852 2877 0668 • fax: 852 2802 3001 • http://www.fdsnetworks.com

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FDS Networks Group Ltd.

ANNUAL REPORT 2004

Connectivity

Contents01 Corporate Profile

02 President’s & Chief Executive Officer’s Statement

04 Operations Review

07 Financial Highlights

08 Board of Directors

10 Key Management

11 Group Structure

12 Corporate Information

13 Financial Contents

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So who are we?You have just discovered FDS

Networks Group Ltd. We are a network systems integration company entered in

Hong Kong with operations spanning Asia, including the main centres of mainland China.

In the old days Until recently most companies using global or

regional networks were big multinational concerns with a large demand for data and voice transmission.

Such organizations traditionally had a sizeable investment in Information Technology infrastructure and numerous staff

trained in the implementation and operation of communication networks. All we did in those days was network equipment sales,

installation and training.

But that was then...The companies now interested in becoming market leaders by investing in leading edge technology computer networks, are often smaller and leaner concerns who are interested in remaining lean and profitable. They may have no IT staff, only minimal technology resources and are determined to stay focused and market driven in their own field. They cannot afford to carry the expensive overhead of networking staff, nor having unqualified personnel with soldering irons running around the office causing chaos!

So where do we come in?We are in a position to help implement networks for you, handling all the activities from feasibility study, network design, equipment selection, installation, testing, hand over and operational training. We can help you in every step of the specification of your solution, from the general concepts to the minutest detail. In fact our customers range from International Banks with global wide area networks, and dealing rooms with very intensive voice and data switching demands, down to much smaller concerns who require a more hand held approach to achieving the benefits of their very own networking solution.

We offer conferencing services………The group offers audio conferencing services in Hong Kong, Singapore and Bangkok. We also provide managed audio conferencing services to multinational banks allowing them to cut their conference charges and IDD achieve serving by using their own network for voice conferencing calls.

We offer ITSM………Information Technology Service Management (ITSM) is basically software running on a network system which monitors the health of the network and allows tools to predict the growth in network bandwidth, nodes and operators – a valuable tool to both Telecommunications Service Providers and Enterprise Network Operators.

Corporate Profile

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1Annual Report 2004

> > > President and CEO’s StatementF

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2 Annual Report 2004

Keith S. BrothersPresident and Chief Executive Officer

“ During 2004 we have continued to invest in subsidiaries, new software services and products which should

increase our business activities in the IT field, and the continued

recovery in demand for IT products and services augers well for 2005.

Year 2004 saw FDS Networks Group consolidate its

financial recovery. ”

Information technology markets in Asia improved steadily throughout 2004 and we continue to expect this improvement to continue into 2005.

Revenue has increased by 43% to US$21,516K in FY2004 compared to 2003 due to improved IT market conditions across Asia in general.

The Group had a net profit before tax of US$814K for FY2004 compared to a net loss of US$2,300K in 2003. The Group had an overall net profit after tax in FY04 of US$726K compared to a loss of US$2,308K in FY03 and the FY04 figure includes a write back of US$326K against an overall provision of US$861K for doubtful debt made in 2003.

The increase in turnover by 43% from last year is largely attributable to infrastructure operations (structured cabling) in Singapore and Hong Kong and a satisfactory performance in Taiwan and Thailand.

New operations in Malaysia (FDS Infrastructures) and Kunshan in China in H2, 04, both performed well and showed net profit.

Our inventory level was down significantly by US$1,335K compared to FY2003 and this is due to significant shipments in backlog which added to inventory in 2003, as we could not ship the goods to customers and recognize revenue.

Trade receivables are US$6,003K in FY2004 compared to US$4,537K in 2003 and this is in line with the increase in turnover.

Trade payables are US$2,054K in FY2004 compared to US$2,311K in 2003 and this is in line with the increase in sales volume.

The Group continued to develop its platform for audio conferencing – the C-Bridge which will be sold separately and on rental as a managed audio conferencing service for large corporations which hold many large conferences. These corporations have lowered costs appreciably by using their own network for conferencing calls rather than IDD services. We now have established conference centres in Singapore and Hong Kong in addition to operating a “managed conference services” for multinational companies across the region.

During 2004 we have continued to invest in subsidiaries, new software services and products which should increase our business activities in the IT field, and the continued recovery in demand for IT products and services augers well for 2005.

Year 2004 saw FDS Networks Group consolidate its financial recovery.

Keith S. BrothersPresident and Chief Executive Officer

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3Annual Report 2004

President and CEO’s Statement

Operations Review

Year 2004 saw FDS Networks Group make steady progress in its business activities across the three major sectors of operation:

Network system integration, distribution of networking

products and technical services.

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Operations Review

Network Systems Integration

This involves end to end network system integration and also includes all the necessary software and controls to manage the network such as configuration changes, alarms and billing. These are normally substantial projects and involve mainly the banking and finance sector and telecommunications service providers.

Imaging and Workflow Solutions

Essentially, this is business solutions based on the processing of original imaged documents, across a computer network.

Call Centre Software Solutions

This is the rapidly evolving customer interaction recording and quality monitoring activity. FDS Networks Group has been an innovator of multimedia monitoring, analysis and e-learning software, with predefined integration to e-mail, web chat and customer information systems, our software suite empowers customers to optimize the performance of their Internet-enabled Call Centre and provide customers with the best services – across all media.

IT Service Management

Our various software solutions manage the IT infrastructure – networks, systems, and applications – to detect and resolve faults and potential outages, maximize availability and optimize performance in real-time.

Real time, with a history. While some products just report real time status, FDS Networks Group provides real-time information with comprehensive historical data so you get both the real-time events, and the historical context needed to manage IT

infrastructure. This unique combination of real-time status and historical context enables not just the detection of faults, but also detection of subtle variations that signify potential outages – before they happen.

Our products are organized into three convenient solution sets that focus on network, system, and application management. The solution sets make it easy to choose products pertaining to special needs – whether for applications or the whole underlying systems and network infrastructure on which applications depend. Additional suite-wide products provide management capabilities that work across all three technology areas.

We have achieved sales in IT service management products and services to the various Government Departments and within the private sector.

Infrastructures Networks

This Unit specializes in situations requiring large scale data transmission such as bank trading rooms. It involves the design and installation of structured cabling systems. The demand, particularly from new trading rooms has enables the Group to broaden its scope by handling electrical distribution.

Distribution of Networking Products

We distribute networking and communication products such as cables, adapters, modems, multiplexors, routers, switches, frame relay products and security encryption products. Many of these are used as components for the network system integration projects we undertake. These products are also marketed and supplied to resellers and end users as separate products rather than as part of a system.

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5Annual Report 2004

The main networking brand we distribute is the Black Box Catalogue range of products which is recognized as an established brand in the networking and communications industry.

Technical Services

Following the design and installation of the network, we provide after-sales technical support and services pursuant to agreed maintenance contracts with our customers. Such maintenance contracts are a major source of recurrent income. Technical support services for the various products, both hardware and software, that we supply and implement are also provided.

For large customers or mission critical systems (where network availability is critical, such as online banking systems), our maintenance agreements may be tailored to meet specific customer requirements, and include either 12 hours or 24 hours per day, 7 days per week service coverage arrangements.

Geographical Performance Review

Greater China

The Group has operations in the following cities:

Hong KongTaipeiKunshanBeijingShanghaiGuangzhou

Operations Review

During 2004 the Group has experienced a recovery in the business in Greater China although margins remained under pressure. Business was strong in Taiwan and new operations opened in Kunshan (little Taiwan) in July, were able to show a profit for the first six months. Other operations in China were stable but a full recovery in our Hong Kong operations did not fully materialize in 2004.

South East Asia

The Group has operations in the following centres:-

SingaporeKuala LumpurBangkok

In Singapore our business was particularly strong in 2004 in infrastructure operations where we benefited from a recovery in the IT spending of multinational Banks.

In Malaysia our business saw better conditions showing a start in the recovery of revenues.

In Thailand our operations moved from start up status to that of making a strong contribution toward profitability.

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Turnover Profit/(loss)before Tax Profit/(loss)after Tax

For The Year Ended 2000 2001 2002 2003 2004Dec 31, 2004 (In US $million)

Turnover 17.55 17.08 13.44 15.04 21.52Profit/ (Loss) before tax 2.50 0.86 (2.27) (2.30) 0.81Profit/ (Loss) after tax 2.23 0.62 (2.30) (2.31) 0.73

Financial Highlights> > >

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7Annual Report 2004

15.79%12.32%

71.89%

PROVISION OF TECHNICAL SERVICES

NETWORK SYSTEM INTEGRATION

DISTRIBUTION OF NETWORKING PRODUCTS

20

2000 2001 2002 2003 2004

15

10

5

0

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25

Board of Directors

Mr Keith Sean Brothers is the President and

Chief Executive of the Group. Before joining the

Group, Mr Brothers was director of sales for Asia

of Datacraft Asia Limited. Mr Brothers has over 20

years experience in the IT industry and for the last

10 years concentrated on IT sales of products and

services. Mr Brothers is responsible for business

development, corporate strategies, company

policies and overall management of the Group. Mr

Brothers holds a Bachelor of Science degree with

Honours from the University of Wales.

Ms Hui Yin Hung is an Executive Director of the

Group. Prior to joining the Group, Ms Hui handled

various functions for Datacraft Asia Limited and was

also in charge of the management and administration

of the networking catalogue business for Datacraft

Asia Limited. Ms Hui holds a LCCI Higher Accounting

qualification.

From left to right:

Keith Sean Brothers (President And Chief Executive)

Hui Yin Hung (Executive Director)

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Board of Directors

Mr Lee Joo Hai is a Non-Executive Independent

Director of the Group. Mr Lee has more than 25

years of experience in accounting and auditing and

is currently a partner in a public accounting firm in

Singapore. Mr Lee is a Certified Public Accountant

of Singapore and is a member of the Institute of

Chartered Accountants in England and Wales.

Mr Peter Charles Edward Bullock is a Non-

Executive Independent Director of the Group. Mr

Bullock is a full time partner of the Hong Kong office

of Masons, an international law firm, and specializes

in IT-related risk management issues. Mr Bullock

also advises in relation to e-commerce. Mr Bullock

holds a LLB. (Honours) from the University of Bristol,

England and is a qualified solicitor. Mr Bullock is a

Member of the Society for Computers and Law, the

Hong Kong Computer Society and is an accredited

domain name arbitrator.

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9Annual Report 2004

Mr Richard Anthony Bates is a Non-Executive

Independent Director of the Group. Mr Bates is

a full time partner and head of the Company &

Commercial group of Kennedys, an international

law firm with offices in London and Hong Kong

(where Richard is based). Mr Bates holds a LLB.

(Honours) from the University of Sheffield, England.

He is admitted as a qualified solicitor in both Hong

Kong and England & Wales and is a member of the

Law Society in both jurisdictions. He is the author

of the Hong Kong chapter of International Agency,

Distribution and Licensing Agreements (3rd Edition)

published by FT Law & Tax.

Mr Peter Duncan Barker is a Director of FDS Infrastructures Limited. Prior to joining the Group, Mr Barker was operating manager in Asia for C-C-C (Hong Kong) Ltd. Mr Barker has over 10 years experience in premises cabling and electrical infrastructure. Mr Barker holds a full technological certificate for Electrical Installation qualifying with distinctions from Kingston Polytechnic College UK.

Mr Duncan Cheng is the head of the Finance Department of our Company and is responsible for all financial matters of our Group. Mr Cheng is a qualified accountant in the Hong Kong SAR and Australia and has many years of experience in the accounting industry. Mr Cheng was working in a Hong Kong SAR CPA firm for 2 years before going on to hold the positions of accountant and accounting manager in various companies in Hong Kong. Mr Cheng is a member of Hong Kong Society of Accountants and CPA Australia. He graduated from Curtin University of Technology, Australia with a Bachelors of Commerce degree.

Mr David Hui Wai Kin is the Country Manager for FDS Singapore. Prior to joining the Group, Mr. Hui was a consultant in the networking and data communications field to a number of Indonesian state owned companies and a marketing director of Netsys Pte Ltd. Mr. Hui has over 5 years of experience in the service oriented network solutions market. Mr. Hui graduated from the National University of Singapore in marketing.

Ms Gloria Yeh is the General Manager for FDS Call Centre Taiwan. Prior to joining the FDS Group in 2001, Miss Yeh was the founder and also the General Manager of the Gloria Technology Co., Ltd., a distributor of the Nortel Networks in Taiwan. Ms Yeh holds a Diploma in International Trading from Ming Chung College in Taiwan.

Key Management

Mr Lam Chun Hung is a General Manager of FDS Solutions. Prior to joining the Group, Mr. Lam was a system and technology manager for Wang Pacific Limited in Greater China. Mr. Lam has over 10 years experience in project management and system implementation. Mr. Lam holds a higher diploma in applied science from the Hong Kong Polytechnic University.

Mr Lok Wah Chong is the Country Manager of FDS Malaysia. Prior to joining the Group, Mr. Lok was the sales and technical manager for Infonet System and Services Pte Ltd in Singapore. Mr. Lok has 11 years of experience in data and telecommunications. Mr. Lok holds a Diploma in Electronics from the French-Singapore Institute and an Advanced Diploma in Computer Studies from the Informatics Computer School.

Mr. Simon Price is the Regional Manager for FDS Infrastructures. Prior to joining the Group, Mr. Price was a CEO of Circle Global Networks Ltd and a Regional Manager of CCC Systems Ltd. Mr. Price has over 10 years experience in premises structured cabling and networking infrastructure. Mr. Price holds a Bachelor of Business Management degree with Honours from Nottingham Trent University.

Mr. Cheung Chun Hing, is the Assistant General Manager of the Group’s networking division and IT Services Management Division in Hong Kong. He has 21 years experience in IT. Prior to joining the FDS Group, Mr. Cheung worked for DMX Technologies Limited as Regional Business Manager and as a General Manager for TopSoft Limited. Mr. Cheung holds a degree in Computer Science from the University of Alberta, Canada.

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10Annual Report 2004

Mr Duncan Cheng (Finance Department Head)

Mr Lam Chun Hung (General Manager of FDS Solutions)

Mr. Cheung Chun Hing (Group Assistant General Manager - Networking and ITSM)

Group Structure> > >

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100%

FDS SolutionsLimited

100%

FDS CallCentre Technology(Taiwan) Limited

100%

FDS CatalogLimited

100%

FDS Networks (M) Sdn. Bhd.

100%

FDS Networks(Thailand) Limited

100%

FDSInfrastructures

Pte Limited

100%

FinancialDealerboard

Systems Limited

100%

FDS Call CentreTechnology

Limited

100%

100%

FDSInfrastructures

Limited

100%

FDS Networks Pte Ltd

100%

FDS NetworksLimited

100%

100%

FDS NetworksGroup (BVI) Ltd

100%

FDS Infrastructures (M)

Sdn. Bhd

FDS Networks (China) Limited

100%

FDS Call Centre Technology (China)

Limited

100%

FDS NetworksGroup Ltd

PT FastDealerboard

System

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Corporate Information

BOARD OF DIRECTORS

Keith Sean Brothers (President and Chief Executive)Hui Yin Hung (Executive Director)Lee Joo Hai (Independent Director)Peter Charles Edward Bullock (Independent Director)Richard Anthony Bates (Independent Director)

COMPANY SECRETARY

Tan Min-Li, LLB (Hons), LLM

BERMUDA RESIDENT REPRESENTATIVE

A.S. & K. Services Ltd

REGISTERED OFFICE

Canon’s Court22 Victoria StreetHamilton, HM 12, Bermuda

HEAD OFFICE AND PRINCIPAL PLACE OF BUSINESS

Unit 2004-6, World Trade Centre,280 Gloucester Road,Causeway Bay, Hong Kong

BERMUDA SHAREREGISTRAR AND SHARE TRANSFER OFFICE

Reid Management LimitedArgyle House41A Cedar AvenueHamilton HM 12, Bermuda

SHARE TRANSFER AGENTLim Associates (Pte) LtdOcean Building10 Collyer Quay #19-08Singapore 049315

AUDITORSDeloitte & Touche6 Shenton Way, #32-00,DBS Building Tower TwoSingapore 068809Partner-In-Charge: Ernest Kan Yaw Kiong(Appointed on 16 May 2002)

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Financial Contents14 Corporate Governance

22 Report of the Directors

25 Auditors’ Report

26 Balance Sheets

27 Consolidated Profit and Loss Statement

28 Statements of Changes in Equity

29 Consolidated Cash Flow Statement

30 Notes to the Financial Statements

46 Statement of the Directors

47 Shareholdings Statistics

48 Notice of Annual General Meeting

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The Board of Directors of FDS Networks Group Ltd. recognises the importance of corporate governance in ensuring greater transparency, protecting the interests of its shareholders as well as strengthening investors’ confidence in its management and financial reporting and is committed to maintaining a high standard of corporate governance within the Group.

The SGX-ST’s Listing Manual requirement requires that an issuer which holds its Annual General Meeting (“AGM”) on or after 1 January 2003 ( the “effective date”) should describe its corporate governance practices with specific reference to the Code of Corporate Governance (“Code”) in its annual report.

This statement outlines the main corporate governance practices that were in place throughout the financial year ended 31 December 2004.

Board Matters

Principle 1 of the Code: Board’s Conduct of its Affairs

The Board comprises two executive directors and three independent non-executive directors. Key information regarding the directors is given in the Board of Directors section of this annual report. The Board of Directors (the “Board”) holds meetings on a regular basis throughout the year to approve the Group’s key strategic plans as well as major investments, disposals and funding decisions. The Board is also responsible for the overall corporate governance of the Group.

The Board considers that its composition of independent non-executive Directors provide an effective Board with a mix of knowledge, business contacts and successful business and commercial experience. The balance is important in ensuring that the strategies proposed by the executive management are fully discussed and examined, taking into account the long term interests of the Group.

The Board conducts regular scheduled meetings and 3 meetings were held in 2004. Where circumstances require, ad hoc meetings are arranged. Board meetings are conducted in Hong Kong and attendance by directors is regular. The attendance of the directors at meetings of the Board and Board committees, as well as the frequency of such meetings, is as follows:-

Attendance at Meetings

FDS BoardAudit

Committee(“AC”)Remuneration

committee(“RC”)Nominating

Committee(“NC”)

Name

No of meetings

held

No of meetings attended

No of meetings

held


No of meetings

held


No of meetings

held


Keith Sean Brothers 4 4 – – 1 1 2 2Yip Man Yiu(1) 4 2 – – – – – –Peter Duncan Barker(2) 4 0 – – – – – –Hui Yin Hung 4 4 – – – – – –Lee Joo Hai 4 3 3 3 1 1 2 2Peter CharlesEdward Bullock 4 4 3 3 1 1 2 2Richard Anthony Bates 4 3 3 3 1 1 2 2

(1) Mr Yip Man Yiu resigned as a director of the Company on 2 December 2004.(2) Mr Peter Duncan Barker resigned as a director of the Company on 24 February 2004.

All directors are updated regularly on changes in company policies. The Company also provided ongoing education on Board processes, corporate governance and best practices.

Corporate Governance

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Principle 3: Role of Chairman and CEO

The Company has the same chairman and CEO, Mr Keith Sean Brothers, and he is an executive director. The Board believes that the division or responsibility between the chairman and CEO is not practical for the Company, taking into account the current board size and the nature and scope of the business operations. The chairman and CEO is the most senior executive in the Company and bears executive responsibility for the Group’s business, as well as for the working of the Board. The chairman and CEO ensures that board meetings are held when necessary and sets the Board meeting agenda in consultation with the Directors and the management. The chairman and CEO reviews most Board papers before they are presented to the Board and ensures that the Board members are provided with complete, adequate and timely information.

All major decisions made by our Chairman and CEO are reviewed by the AC. His performance and appointment to the Board is periodically reviewed by the NC and his remuneration package is periodically reviewed by the RC.

Principle 4: Board Membership

We believe that Board renewal must be an ongoing process, to ensure good governance and to maintain relevance to the business and changing needs of the Company. Our Bye-Laws require one-third of our directors (excluding the President and CEO) to retire and subject themselves to re-election by shareholders at every AGM. In other words, no director stays in office for more than three years without being re-elected by shareholders.

Principle 6: Access to Information

In order to ensure that the Board is able to fulfil its responsibilities, the management is required to provide adequate and timely information to the Board on Board affairs and issues that require the Board’s decision as well as ongoing reports relating to the operational and financial performance of the Company and the Group.

The Board has separate and independent access to the senior management and the Company Secretary at all time. Should Directors, whether as a group or individually, need independent professional advice, the Company Secretary will, upon direction by the Board, appoint a professional advisor selected by the group or the individual, and approved by the CEO, to render the advice. The cost of such professional advice will be borne by the Company.

The Company Secretary attends all board meetings and is responsible for the compliance with the board procedures. It is the Company Secretary’s responsibility to ensure that the Company complies with all rules and regulations that are applicable to the Company.

Nominating Committee

The NC was established on 20 January 2003 and comprises Messrs Peter Charles Edward Bullock, Lee Joo Hai, Richard Anthony Bates and Keith Sean Brothers with Mr Bullock, who is our independent non-executive Director, as the Chairman. The responsibilities of the NC are to determine the criteria for identifying candidates and reviewing nominations for the appointment of directors to the Board and also to decide how the Board’s performance may be evaluated and propose objective performance evaluation criteria for the Board’s approval.

Principle 2: Board Composition and Balance

The independence of each director is reviewed annually by the nominating committee (“NC”). The NC is of the view that the current Board, with independent non-executive Directors making up at least one-third of the Board, has a strong and independent element that is able to exercise objective judgement on corporate affairs independently from the management. The NC is also of the view that no individual or small group of individuals dominate the Board’s decision making process.

The NC is of the view that the current board size of five directors is appropriate, taking into account the nature and scope of the Company’s operations.


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Principle 5: Board Performance

The NC will use its best efforts to ensure that directors appointed to our Board possess the relevant background, experience and knowledge and that each director brings to the Board an independent and objective perspective to enable balanced and well-considered decisions to be made.

A formal review of the Board’s performance and that of individual Directors will be undertaken collectively and individually by the Board annually. The Board’s performance will also be reviewed informally by the NC with inputs from other Board members and the CEO.

Remuneration Matters

Principle 7: Procedures for Developing Remuneration Policies

Principle 8: Level and Mix of Remuneration

Principle 9: Disclosure on Remuneration

The RC was established in March 2001 to review the remuneration of the executive Directors of the Company and to provide a greater degree of objectivity and transparency in the setting of remuneration.

The RC comprises four board members, namely Messrs Lee Joo Hai and Peter Charles Edward Bullock who are independent Directors and Mr Keith Sean Brothers who is President and CEO of the Company. Mr Richard Anthony Bates chairs the RC.

The RC reviews and recommends to the Board, in consultation with management, a framework for all aspects of remuneration. The RC also determines the specific remuneration packages and terms of employment for each of the executive Directors of the Company, the senior executives and those employees related to the executive Directors and controlling shareholders of the Company.

The RC has access to expert professional advice on human resource matters whenever there is a need to consult externally. In its deliberations, the RC takes into consideration industry practices and norms in compensation in addition to the Company’s relative performance and the performance of the individual Directors. No Director will be involved in deciding his or her own remuneration.

The performance-related elements of remuneration should form a significant proportion of the total remuneration package of the executive Director. The remuneration of non-executive Directors should be determined by his contribution to the Company, taking into account factors such as efforts and time spent as well as his responsibilities on the Board. The Board will recommend the remuneration of the non-executive directors for approval at the AGM.

Directors’ Remuneration

Our executive Directors’ remuneration consists of their salary, allowances, bonuses, and performance share awards. The details of their remuneration package are given below.

Directors’ fees for independent non-executive directors are subject to the approval of shareholders at the AGM.

The basis of allocation of the number of share options for Directors takes into account that Director’s contribution and additional responsibilities at Board committees.


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For competitive reasons, the Company is not disclosing the annual remuneration of each individual director for the year under review. Instead, we are disclosing the band of remuneration as follows:-

Name Not exceeding $100,000Exceeding $100,000 but not exceeding $250,000 Exceeding $250,000

Keith Sean Brothers X

Yip Man Yiu(1) XPeter Duncan Barker(2) XHui Yin Hung XLee Joo Hai XPeter Charles Edward Bullock X

Richard Anthony Bates X

(1) Mr Yip Man Yiu resigned as a director of the Company on 2 December 2004. He remains employed as an executive of the Company.

(2) Mr Peter Duncan Barker resigned as a director of the Company on 24 February 2004. He remains employed as an executive of the Company.

Remuneration of Key Employees

Details of remuneration paid to the top five executives (who are not Directors of the company) of the Group for the financial are set out below. For competitive reasons, the Company is not disclosing the annual remuneration of each individual employee for the year under review. Instead, we are disclosing the band of remuneration as follows:

Name Not exceeding $100,000Exceeding $100,000 but not exceeding $250,000 Exceeding $250,000

Peter Duncan Barker (1) XLam Chun Hung XGloria Yeh XSimon James Crawford Price XRobert Deverell X

(1) Mr Peter Duncan Barker resigned as a director of the Company on 24 February 2004. He remains employed as an executive of the Company.

There are no employees in the Group who are immediate family members of a Director or the CEO.

Accountability and Audit

Principle 10: Accountability

The Board believes that it should promote best practices as a means to build an excellent business for our shareholders as they are accountable to shareholders for the Company and the Group’s performance.

The Board is mindful of its obligations to provide timely and fair disclosure of material information in compliance with statutory reporting requirements. Price sensitive information is first publicly released, either before the Company meets with any group of investors or analysts or simultaneously with such meetings. Financial results and annual reports will be announced or issued within the mandatory period.


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Principle 11: Audit Committee

Our AC is made up of three independent non-executive Directors, of which two have the appropriate accounting experience or related financial management expertise. Mr Lee Joo Hai, an independent Director, chairs the AC.

The AC holds periodic meetings and reviews primarily the following, where relevant, with the executive Directors and external auditors:-

(a) the audit plan, the evaluation of internal accounting controls together with management’s response and audit reports of the external auditors;

(b) the assistance given by the Company’s management to the external auditors;

(c) the half-yearly and annual Group financial statements prior to submission to the Board for approval and announcements of results to shareholders;

(d) interested person transactions as defined under Chapter 9 of the SGX-ST Listing Manual;

(e) the appointment of the external auditors of the Company; and

(f) the scope and results of the audit and its cost effectiveness and the independence and objectivity of external auditors of the Company;

In addition to the above, the AC meets with the external auditors, without the presence of management, at least once a year. The AC has the power to conduct or authorise investigations into any matters within its terms of reference. The AC also has full access to and the co-operation of the management and external auditors have unrestricted access to the AC. Minutes of the AC meetings are regularly submitted to the Board for its review.

There were no non-audit fees payable to the auditors of the company.

The AC constantly bears in mind the need to maintain a balance between the independence and objectivity of the external auditors and the work carried out by the external auditors based on value for money considerations.

The AC has recommended to the Board the nomination of Deloitte & Touche, for re-appointment as auditors of the Company at the forthcoming annual general meeting.

Principle 12: Internal Controls

The Board acknowledges that it is responsible for the overall internal control framework, but recognises that no cost effective internal control system will preclude all errors and irregularities, as a system is designed to manage rather than eliminate the risk of failure to achieve business objectives, and can provide only reasonable and not absolute assurance against material misstatement or loss. During the year, the AC, on behalf of the Board, has reviewed the effectiveness of the internal control system put in place by the management and is satisfied that there are adequate internal controls in the Company.

Principle 13: Internal Audits

The Internal Audit (“IA”) is headed by the Financial Controller. The Company has also outsourced some of its internal audit functions. The Financial Controller reports directly to the Audit Committee (“AC”) on audit matters, and to the Board of Directors on administrative matters. The AC reviews IA’s reports on a half yearly basis. The AC also reviews the annual IA plan to ensure that the IA has the necessary resources to perform its functions adequately.

To ensure the adequacy of the internal audit functions, the AC will review the IA’s activities on a half yearly basis.


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Communication with Shareholders

Principle 14: Communication with Shareholders

Principle 15: Greater Shareholder Participation

We recognise the importance of regular and timely communication with shareholders.

The Company does not practise selective disclosure. In line with continuous obligations of the Company pursuant to the SGX-ST Listing Manual, the Board’s policy is that all shareholders should be equally informed on a timely basis of all major developments that impact the Company or the Group.

We support the Code’s principle to encourage shareholder participation. Shareholders are encouraged to attend the AGM to ensure a high level of accountability and to stay informed of the Company’s strategy and goals. Notice of the AGM is despatched to shareholders, together with explanatory notes or a circular on items of special business (if necessary), at least 14 working days before the meeting. The Board welcomes questions from shareholders who have an opportunity to raise issues either informally or formally before or at the AGM. The Chairmen of the Audit, Remuneration and Nominating Committees are normally available at the meeting to answer those questions relating to the work of these committees.

Dealing in Securities

The Company has adopted practices in relation to dealings in the Company’s securities pursuant to the SGX-ST Best Practices Guide applicable to all its officers. Its officers are not allowed to deal in the Company’s shares during the period commencing one month before the announcement of the Company’s half-yearly and full year results and ending on the date of the announcement of the results.

Directors and executives are also expected to observe insider trading laws at all times even when dealing with securities within permitted trading period.

Risk Management Policies and Processes

Our management oversees our Group’s risk management policies and processes and reports to the Board on areas of significant risks to the Group’s operations. In addressing and managing the risks faced by our Group, the management is also supported by the AC, the NC and the RC.

The following have been identified as significant strategic, business and financial risk factors relevant to the Group’s operations. The risks identified and outlined below may not be conclusive. Some risks may not be known to the Group and some that the Group currently does not believe to be material could later turn out to be material. All these risks could materially affect the Group’s business, its turnover, operating profit, net assets, liquidity and capital resources.

Financial Risk Management

Please refer to page 33 of the Annual Report for details.

Human Resource Risk Management

The IT services industry is a skills-intensive industry where one of the key elements of our success is the continued service of our core team of experienced and skilled personnel. Our success also depends on the continued efforts of our senior management team to pursue and execute our growth strategies within our main business activities. A high turnover or the loss of key personnel without adequate replacement will have an adverse impact on our operations and competitiveness.


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The Company therefore places great emphasis in establishing comprehensive human resource policies for the recruitment, compensation and development of its staff, in consultation with and supported by the Remuneration Committee. The Group has implemented remuneration packages that aim at retaining existing personnel and attracting more quality people to join the Group. The Group has set up a share option scheme and attractive reward packages for key management personnel that contributed to the success of the Group. This ensures, particularly in times of growth of shareholder value, that the Company’s human assets are nurtured and retained, so that the ability to maintain a skilled workforce and the Company ‘s competitive edge is preserved.

Competition Risk Management

The markets for our products and services are highly competitive and our competitors include both local and foreign-based companies. Our continued success depends on our ability to compete effectively and to adapt to rapidly changing market conditions.

The Company will continue to diversify its range of products and services and its geographical markets, so as to provide diversification and a broader base from which to enhance our revenue and profits and promote business growth and expansion.

Risk Management Relating to Rapidly Changing Technologies

The IT services industry in which we operate is a fast developing industry characterized by rapid advancement in trends and technology, frequent new product and service introductions, changes in customer requirements and evolving industry standards. If we do not keep in with these changes in a timely manner, we will find it difficult to compete effectively and successfully.

The Company therefore recognizes the importance of enhancing our ability to identify technological trends within our areas of businesses. We also ensure that our staff are updated on the latest technological developments. Our technical personnel also participate actively in international trade shows to evaluate new products and technologies.

Political and Regulatory Risk Management

Our operations and performance may be adversely affected by any political, social, economic and regulatory uncertainties in regions where we conduct our business. Any modification or change in policies by the relevant authorities in these regions may lead to changes in laws or regulations, or the interpretation thereof, as well as changes in currency conversion policies, taxation and import and export restrictions.

We seek to be constantly updated with the development of the changes to the government policies and regulations through our local offices or contacts in our major markets, and also through effective use of external legal advisers. This allows us to react promptly to any policies changes that might affect our business operations in these markets.

Interested Person Transaction Risk Management

In respect of transactions entered by the Company and its subsidiaries with its controlling shareholders, Chief Executive Officer, Directors and their respective associates, the Company is guided by and complies with the provisions of Chapter 9 of the Singapore Exchange Securities Trading Limited’s Listing Manual. Such Interested Person Transactions are also reviewed by our AC. This is to ensure that such transactions are entered into on an arm’s length basis and on normal commercial terms, which are generally no more favourable than those extended to unrelated third parties.


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Other Information

Material Contracts

There are no material contracts entered into by the Company or any of its subsidiaries involving the interests of the Chief Executive Officer, director or controlling shareholder of the Company.

Interested Person Transactions

In compliance with Rule 920 of the Listing Manual, the aggregate value of recurrent interested persons transactions of revenue or trading nature conducted during the financial year ended 31 December 2004 by the Group were as follows:

Names of Interested Person

Aggregate value of all interested person transactions during

the financial year under review (excluding transactions less

than $100,000) and transactions conducted under shareholders’ mandate pursuant to Rule 920

Aggregate value of all interested person transactions conducted under shareholders’ mandate

pursuant to Rule 920 (excluding transactions less than $100,000)

Mercom Systems, Inc. Nil Nil

Best Practices Guide

The Company has complied materially with the Best Practices Guide issued by SGX-ST.


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The directors present their report together with the audited financial statements of the Company and of the Group for the financial year ended December 31, 2004.

1 DIRECTORS

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

Keith Sean Brothers - President and Chief Executive OfficerHui Yin HungLee Joo HaiPeter Charles Edward BullockRichard Anthony Bates

2 ARRANGEMENTS TO ENABLE DIRECTORS TO ACQUIRE BENEFITS BY MEANS OF THE ACQUISITION OF SHARES AND DEBENTURES

Neither at the end of the financial year nor at any time during the financial year did there subsist any arrangement whose object is to enable the directors of the Company to acquire benefits by means of the acquisition of shares or debentures in the Company or any other body corporate except as disclosed in paragraph 3 below.

3 DIRECTORS’ INTERESTS IN SHARES AND DEBENTURES

The directors of the Company holding office at the end of the financial year had no interests (direct and/or deemed) in the share capital of the Company except as follows:

Name of directorsAs at

January 1, 2004As at

December 31, 2004As at

January 21, 2005

Ordinary shares of US$0.05 each

Keith Sean Brothers 42,982,398 42,982,398 42,982,398Hui Yin Hung 219,918 219,918 219,918Peter Charles Edward Bullock 50,000 100,000 100,000

4 DIRECTORS’ RECEIPT AND ENTITLEMENT TO CONTRACTUAL BENEFITS

Since the beginning of the financial year, no director has received or become entitled to receive a benefit 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.

5 SHARE OPTIONS

At the Special General Meeting held on June 15, 2000, shareholders approved the FDS Share Option Scheme (the “Scheme”). Under the Scheme, the Company may grant options to executive directors and full-time employees of the Company and its subsidiaries to subscribe for ordinary shares at par value of US$0.05 each in the Company. The number of shares to be issued in respect of all options granted shall not exceed 15% of the issued shares of the Company on the preceding day. Options are granted for tenures of 5 years and 10 years.

The Scheme is administered by a committee comprising 2 directors, namely Mr Keith Sean Brothers and Miss Hui Yin Hung. No controlling shareholder of the Company or his associate participates in the Scheme.

Report of the Directors

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a) Share Options Granted

Options were granted pursuant to the Scheme to certain directors and full-time employees of the company and its subsidiaries to subscribe for 570,000 ordinary shares of US$0.05 each in the company at an exercise price of S$0.12 per share. The subscription price for each share was fixed in accordance with the terms of the Scheme.

b) Unissued Shares under Option

At the end of the financial year, there were 3,091,000 unissued shares of the Company under options granted pursuant to the Scheme. Details of the options to subscribe for ordinary shares of US$0.05 each in the capital of the Company granted to certain executive directors and full-time employees of the Company and its subsidiaries pursuant to the Scheme are as follows:

OptionsDate of grant

Balance as at

1.1.2004 or date of

grant if later

Options exercised

Options lapsed#

Balance as at

31.12.2004Exercise

price Exercise period

2000 15.06.2000 1,180,000 – (300,000) 880,000 S$0.65 15.6.2003 - 14.6.2010

2001 31.05.2001 1,446,000 – (195,000) 1,251,000 S$0.39 31.5.2003 - 30.5.2011

2002 01.04.2002 660,000 – (220,000) 440,000 S$0.32 01.4.2003 - 30.3.2012

2004 23.08.2004 570,000 – (50,000) 520,000 S$0.12 23.8.2005 - 22.8.2014

3,856,000 (765,000) 3,091,000

# lapsed due to resignations

c) The following are participants who receive 5% or more of the total number of ordinary share options available under the Scheme:

Name of participant

Number of options granted

during the financial year under review

Aggregate number

granted since commencement

of Scheme to end of financial

year under review

Aggregate number

of options exercised since commencement


year under review Options lapsed

Aggregate number of

options granted outstanding as at end of

financial year under review

Peter Duncan Barker – 200,000 – – 200,000

Lam Chun Hung 50,000 240,000 – – 240,000

Simon James Crawford Price

50,000 490,000 – – 490,000

Yip Man Yiu – 200,000 – – 200,000

Yeh Hsiu Ming 100,000 180,000 – – 180,000


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The following are details of ordinary share options granted to directors:

Name of participant

Number of options granted

during the financial year under review

Aggregate number

granted since commencement


year under review

Aggregate number

of options exercised since commencement


year under review Options lapsed

Aggregate number of

options granted outstanding as at end of

financial year under review

Hui Yin Hung – 550,000 – – 550,000

No shares of the Company and its subsidiaries were issued by virtue of exercise of options.

No unissued shares, other than as disclosed above, are under options at the end of the financial year.

No options were granted at a discount during the financial year.

6 AUDITORS

The auditors, Deloitte & Touche, have expressed their willingness to accept re-appointment.

ON BEHALF OF THE DIRECTORS

KEITH SEAN BROTHERS

HUI YIN HUNG

March 7, 2005


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We have audited the financial statements of FDS Networks Group Ltd for the financial year ended December 31, 2004 set out on pages 26 to 45. These financial statements are the responsibility of the company’s directors. Our responsibility is to express an opinion on these financial statements based on our audit.

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

In our opinion,

(a) the consolidated financial statements of the group and the balance sheet of the company are properly drawn up in accordance with Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the group and of the company as at December 31, 2004, the changes in equity of the group and company, and the results and cash flows of the group for the financial year then ended; and

(b) the accounting and other records kept by those subsidiaries incorporated in Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Singapore Companies Act, Cap 50.

Deloitte & ToucheCertified Public Accountants

Ernest Kan Yaw KiongPartner

SingaporeMarch 7, 2005

Auditors’ ReportTo the Members of FDS NETWORKS GROUP LTD

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Group CompanyNote 2004 2003 2004 2003

US$’000 US$’000 US$’000 US$’000

ASSETS

Current assets:Cash and cash equivalents 5 1,732 1,616 71 296Trade receivables 6 6,003 4,537 – –Other receivables 7 568 1,030 5,088 4,914Inventories 8 1,427 2,762 – –

Total current assets 9,730 9,945 5,159 5,210

Non–current assets:Plant and equipment 9 557 732 – –Development costs 10 178 340 – –Investments in subsidiaries 11 – – 2,849 2,849Loans to subsidiaries 11 – – 2,323 2,275Goodwill 12 899 1,067 – –Deferred tax assets 13 205 193 – –

Total non-current assets 1,839 2,332 5,172 5,124

Total assets 11,569 12,277 10,331 10,334

LIABILITIES AND EQUITY

Current liabilities:Trade payables 14 2,054 2,311 – –Other payables 15 1,409 2,494 1,129 1,165Income tax payable 129 131 – –

Total current liabilities 3,592 4,936 1,129 1,165

Non–current liability:Deferred tax liability 13 41 41 – –

Total non-current liability 41 41 – –

Capital and reserves:Issued capital 16 3,699 3,699 3,699 3,699Share premium 5,461 5,461 5,461 5,461Currency translation reserve (194) (104) – –Accumulated (losses) profits (1,030) (1,756) 42 9

Total equity 7,936 7,300 9,202 9,169

Total liabilities and equity 11,569 12,277 10,331 10,334

Balance SheetsDecember 31, 2004

See accompanying notes to financial statements.

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GroupNote 2004 2003

US$’000 US$’000

Revenue 17 21,516 15,039

Cost of sales (14,220) (10,099)

Gross profit 7,296 4,940

Other operating income 261 265

Distribution costs (1,110) (1,145)

Administrative expenses (4,871) (5,670)

Other operating expenses (760) (707)

Profit (Loss) from operations 816 (2,317)

Gain on disposal of investment – 18

Finance costs (2) (1)

Profit (Loss) before income tax 18 814 (2,300)

Income tax expense 19 (88) (8)

Net profit (loss) for the year 726 (2,308)

Basic and diluted profit (loss) per share (cents) 20 0.98 (3.12)

Consolidated Profit and Loss StatementYear ended December 31, 2004


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Issued capital

Share

premium

Currency translation

reserve

Accumulated profits

(losses) TotalUS$’000 US$’000 US$’000 US$’000 US$’000

Group

Balance at January 1, 2003 3,699 5,461 (85) 552 9,627

Net loss for the year – – – (2,308) (2,308)

Exchange translation difference – – (19) – (19)

Balance at December 31, 2003 3,699 5,461 (104) (1,756) 7,300

Net profit for the year – – – 726 726

Exchange translation difference – – (90) – (90)

Balance at December 31, 2004 3,699 5,461 (194) (1,030) 7,936

Issued capital

Share premium

Accumulated profit

(losses) TotalUS$’000 US$’000 US$’000 US$’000

Company

Balance at January 1, 2003 3,699 5,461 (184) 8,976

Net loss for the year – – 193 193

Balance at December 31, 2003 3,699 5,461 9 9,169

Net profit for the year – – 33 33

Balance at December 31, 2004 3,699 5,461 42 9,202

Statements of Changes in EquityYear ended December 31, 2004


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2004 2003US$’000 US$’000

Cash flows from operating activities:

Profit (Loss) before income tax 814 (2,300)

Adjustments for:

Allowance for inventories 113 177

Allowance for doubtful trade receivables 24 907

Amortisation of development costs 162 146

Amortisation of goodwill 166 166

Written off pre-incorporated expenses 33 –

Depreciation expense 328 326

Loss on disposal of plant and equipment 1 18

Gain on disposal of investment – (18)

Written back allowance for doubtful debts (386) (49)

Interest income (6) (12)

Interest expense 2 1

Operating profit (loss) before working capital changes 1,251 (638)

Decrease (Increase) in inventories 1,222 (988)

Increase in trade receivables (1,104) (1,114)

Decrease (Increase) in other receivables 429 (291)

(Decrease) Increase in trade payables (257) 471

(Decrease) Increase in other payables (1,085) 957

Cash generated from (used in) operations 456 (1,603)

Interest received 6 12

Interest paid (2) (1)

Income tax (paid) refund (101) 110

Net cash from (used in) operating activities 359 (1,482)

Cash flows from investing activities:

Purchase of plant and equipment (153) (516)

Proceeds from disposal of plant and equipment – 60

Additions of development costs – (246)

Net cash used in investing activities (153) (702)

Effect of exchange rate changes in consolidation (90) (10)

Net increase (decrease) in cash and cash equivalents 116 (2,194)

Cash and cash equivalents at beginning of year 1,616 3,810

Cash and cash equivalents at end of year 1,732 1,616

Consolidated Cash Flow StatementYear ended December 31, 2004


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1 GENERAL

The company bearing registration number 27646 is incorporated in Bermuda as an exempted company with limited liabilities and is listed on the Singapore Exchange Securities Trading Limited. The registered office of the company is situated at Canon’s Court, 22 Victoria Street, Hamilton, HM12, Bermuda and its principal place of business is at Room 2004, 20/F, World Trade Centre, Causeway Bay, Hong Kong. The financial statements are expressed in US dollars which is the measurement currency. This is because a majority of the company’s transactions are denominated in United States dollars.

The principal activity of the company is that of an investment holding company. The company is domiciled in Hong Kong and does not have a place of business in Singapore and is not a tax resident for Singapore tax purposes.

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

The financial statements of the Company and the consolidated financial statements of the Group for the year ended December 31, 2004 were authorised for issue by the Board of Directors on March 7, 2005.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF ACCOUNTING - The financial statements are prepared in accordance with the historical cost convention and are drawn up in accordance with the provisions of Singapore Financial Reporting Standards.

BASIS OF CONSOLIDATION - The consolidated financial statements incorporate the financial statements of the company and enterprises controlled by the company (its subsidiaries) made up to 31 December each year. Control is achieved where the company has the power to govern the financial and operating policies of an investee enterprise so as to obtain benefits from its activities. On acquisition, the assets and liabilities of the relevant subsidiaries are measured at their fair values at their date of acquisition.

The results of subsidiaries acquired or disposed of during the financial year are included in the consolidated financial statements from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used in line with those used by the company. All significant intercompany transactions and balances between group enterprises are eliminated on consolidation.

In the company’s financial statements, investments in subsidiaries are carried at cost less any impairment in net recoverable value that has been recognised in the profit and loss statement.

FINANCIAL ASSETS - Financial assets include cash and bank balances, trade and other receivables. Trade and other receivables are stated at their nominal values as reduced by appropriate allowances for estimated irrecoverable amounts.

FINANCIAL LIABILITIES AND EQUITY - Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. Financial liabilities include trade and other payables which are stated at their nominal values. Equity instruments are recorded at the fair value of the consideration received, net of direct issue costs. Share options are recorded when exercised and the exercise price is allocated between issued capital and share premiums accordingly.

INVENTORIES - Inventories, comprising networking and telecommunication parts are stated at the lower of cost (mainly determined on a first-in-first-out basis) and net realisable value. Cost includes all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Net realisable value represents the estimated selling price less all estimated costs to completion and costs to be incurred in marketing, selling and distribution.

Notes to Financial StatementsDecember 31, 2004

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2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

PLANT AND EQUIPMENT - Plant and equipment are carried at cost less accumulated depreciation and any impairment loss where the recoverable amount of the asset is estimated to be lower than its carrying amount.

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

Office equipment, furniture and fittings - 3 to 6 yearsComputer Equipment - 3 yearsLeasehold improvements - over the respective lease termsSpares, demo equipment and workshop tools - 3 yearsMotor vehicles - 8 years

Fully depreciated plant and equipment are retained in the financial statements until they are no longer in use.

GOODWILL - Goodwill arising from the acquisition of businesses represents the excess of the cost of the acquisition over the fair value of the net identifiable assets acquired. Goodwill is stated at cost and amortised over a period of 10 years commencing from the date of acquisition.

RESEARCH AND DEVELOPMENT COSTS - Research expenditure is recognised as an expense when incurred. Costs incurred on development projects are recognised as intangible assets only if all the following conditions are met:

• the technical feasibility of completing the intangible asset so that it will be available for use or sale;

• the intention to complete the intangible asset and to use or sell it;

• the ability to use or sell the intangible asset;

• it is probable that the asset created will generate future economic benefits;

• the availability of adequate technical, financial and other resources to complete the development and to use or sell the asset; and

• the development cost of the asset can be measured reliably.

Other development expenditures are recognised as expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. Development costs that have been capitalised as intangible assets are amortised from the commencement of the commercial production on a straight-line basis over the period of its expected benefits, which is on average 3 years.

IMPAIRMENT OF ASSETS - At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. Impairment losses are recognised as an expense immediately.

When an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised as an income immediately.


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2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

LEASES - Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. Rental payable under operating leases are charged to profit and loss statement on a straight-line basis over the terms of the relevant lease.

REVENUE RECOGNITION -

a) Revenue from sale of goods is recognised when significant risks and rewards of ownership are transferred to the buyer and the amount of revenue and costs of the transaction can be measured reliably;

b) Income from maintenance contracts is apportioned over the period covered by the maintenance contracts;

c) Service fee income is recognised when the related services are rendered; and

d) Income from network integration projects is recognised based on the percentage of completion method over the period taken to complete the project.

INCOME TAX - Tax expense is determined on the basis of tax effect accounting, using the liability method, and it is applied to all significant temporary differences arising between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, except that the potential tax saving relating to a tax loss carryforward is not recorded as an asset unless there is a reasonable expectation of realisation in the foreseeable future.

Deferred tax is charged or credited to the profit and loss statement. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same tax authority.

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

FOREIGN CURRENCY TRANSACTIONS AND TRANSLATION - Transactions in foreign currencies are recorded in United States Dollars at the rates ruling on the dates of the transactions. At each balance sheet date, recorded monetary balances and balances carried at fair value that are denominated in currencies other than US dollars are reported at the rate ruling at the balance sheet date. All realised and unrealised exchange adjustment gains and losses are dealt with in the profit and loss statements.

For inclusion into the consolidated financial statements, assets and liabilities of foreign subsidiaries are translated into US dollars at rates of exchange approximating those pertaining at the balance sheet date. The profit and loss statements are translated into US dollars at the average exchange rate for the year and the opening net investment in subsidiaries is translated into US dollars at historical rate. Exchange differences, due to such currency translations are taken to currency translation reserves. On disposal of a foreign entity, the accumulated exchange translation differences are recognised in the profit and loss statement as part of the profit or loss on disposal.


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3 FINANCIAL RISK MANAGEMENT

The Group is exposed to various financial risks arising from the normal course of business and manages them as follows:

i) Foreign exchange risk

The Group’s operational activities are mainly carried out in US dollars and HK dollars. The HK dollar is pegged to the US dollar. The Group also has operational activities carried out in Singapore dollars, Malaysian ringgit, Thai Bahts, New Taiwan dollars and Renminbi. The Group is exposed to foreign currency risk for these foreign currencies. The Group has not however engaged in any financial derivative instruments during the year.

ii) Interest rate risk

The Group’s exposure to market risk for changes in interest rates relate primarily to interest-earning fixed deposits with financial institutions which are not considered significant to the operations of the Group. The Group’s amount due to a director is fixed at 5% per annum and is repayable on demand (Note 15). Accordingly, the interest rate risk is considered to be limited.

iii) Credit risk

The Group has appropriate credit policies in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed on all customers regularly.

The Group has no significant concentration of credit risk. Cash is placed with reputable financial institutions. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet.

iv) Liquidity risk

The Group manages the liquidity risk by ensuring the availability of funding through an adequate amount of committed credit facilities from financial institutions. In addition, the Group also maintains surplus cash for future investment opportunities. Due to the nature of the Group’s underlying business, management aims at maintaining flexibility in funding by keeping committed credit lines available.

v) Fair value of financial assets and financial liabilities

The carrying amounts of the financial assets and financial liabilities in the financial statements approximate their respective net fair values.

4 RELATED PARTIES

Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial and operating decisions.

Some of the company’s transactions and arrangements and terms thereof are arranged by or between members of the group and the effect of these on the basis determined between the parties are reflected in these financial statements.

The balance with the related party is unsecured, interest-free and has no fixed repayment term.


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4 RELATED PARTIES (Cont’d)

Significant related parties transactions:

Group2004 2003

US$’000 US$’000

Purchase of goods 726 1,083

5 CASH AND CASH EQUIVALENTS

During the current financial year, fixed deposits pledged amounting to US$219,590 in respect of banking facilities granted to certain subsidiaries of the company have been fully discharged.

6 TRADE RECEIVABLES

Group2004 2003

US$’000 US$’000

Outside parties 6,786 5,607Less allowance for doubtful trade receivables (783) (1,070)Net 6,003 4,537

Movements in allowance:Balance at beginning of year 1,070 246Foreign exchange realignment 75 (34)Charged to profit and loss statement 24 907Allowance written back (386) (49)Balance at end of year 783 1,070

7 OTHER RECEIVABLES

Group Company2004 2003 2004 2003

US$’000 US$’000 US$’000 US$’000

Subsidiaries (Note 11) – – 5,065 4,798Deposits 172 148 – 2Prepayments 350 671 23 24Tax recoverable 23 38 – –Others 23 173 – 90

568 1,030 5,088 4,914


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8 INVENTORIES

Group2004 2003

US$’000 US$’000

Inventories, at cost 887 2,477Transfer to Plant and Equipment (Note 9) (41) –

846 2,477Inventories, at net realisable value 581 285

Movements in allowance:

1,427 2,762

Balance at beginning of year 302 125Charged to profit and loss statement 113 177Balance at end of year 415 302

9 PLANT AND EQUIPMENT

Office equipment, furniture

and fittings

Computer equipment

Leasehold improvements

Spares, demo

equipment and

workshops tools

Motor vehicles Total

US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

GroupCost:

At beginning of year 429 882 195 480 22 2,008Additions 40 95 – 5 13 153Transfer from inventories

(Note 8) 7 34 – – – 41Disposals/written off (26) (53) (8) (21) – (108)Foreign exchange realignment 6 16 9 – 1 32At end of year 456 974 196 464 36 2,126

Accumulated depreciationAt beginning of year 257 482 106 426 5 1,276Depreciation for the year 76 181 47 21 3 328Disposals/written off (9) (34) (3) (7) – (53)Foreign exchange realignment 5 8 5 – – 18At end of year 329 637 155 440 8 1,569

Depreciation for last year 69 155 51 48 3 326

Net book valueAt beginning of year 172 400 89 54 17 732

At end of year 127 337 41 24 28 557


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10 DEVELOPMENT COSTS

GroupUS$’000

Cost:At beginning and end of year 597

Accumulated amortisation:At beginning of year 257Amortisation for the year 162At end of year 419

Amortisation for last year 146

Net book value:At beginning of year 340

At end of year 178

11 SUBSIDIARIES

Company2004 2003

US$’000 US$’000

Unquoted equity shares, at cost 2,849 2,849

Loans to subsidiaries 2,798 2,750Less allowance for doubtful loans (475) (475)Net 2,323 2,275

The loans to subsidiaries are unsecured, interest-free and are not expected to be repaid within the next twelve months.

The amounts due from and to subsidiaries are unsecured, interest-free and has no fixed repayment term.

The significant subsidiaries of the Group are set out below:

Subsidiary Principal activities

Country of incorporation/

place of business

Effective equity held

by the groupCost of investment

by the company 2004 2003 2004 2003

% % US$’000 US$’000Held by the company

FDS Networks Group (BVI) Ltd#

Investment holding British Virgin Islands

100 100 2,749 2,749

PT Fast Dealerboard System Networks*

Distribution, installation and servicing of telecommunication equipment

Indonesia 100 100 100 100

2,849 2,849


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11 SUBSIDIARIES (Cont’d)



place of business


by the group2004 2003

% %Held by FDS Networks Group (BVI) Ltd

FDS Networks Pte Ltd@ Provision of equipment, service and support to customers requiring the establishment and integration of Datacomm and LAN networking products and systems

Singapore 100 100

FDS Call Centre Technology Limited#

Investment holding and provision of management services

Hong Kong 100 100

FDS Networks (M) Sdn. Bhd##

Data and telecommunications Malaysia 100 100

FDS Infrastructures Limited#

Distribution, installation and servicing telecommunication equipment

Hong Kong 100 100

FDS Networks Limited# Distribution, installation and servicing telecommunication equipment

Hong Kong 100 100

FDS Networks (China) Limited#

Trading of communication products and accessories

Hong Kong 100 100

FDS Infrastructures Pte Limited@

Distribution, installation and servicing of telecommunication equipment

Singapore 100 100

FDS Networks (Thailand) Limited**

Trading of networking products and systems, computer software and hardware and computer maintenance support and consultancy services

Thailand 100 100

FDS Infrastructures (M) Sdn. Bhd##

Data and telecommunications Malaysia 100 –

Held by FDS Networks Limited

FDS Catalog Limited# Catalogue sale of telecommunication equipment

Hong Kong 100 100

Held by FDS Call Centre Technology Limited

FDS Solutions Limited# Trading of computer software and hardware and computer maintenance support and consultancy services

Hong Kong 100 100

FDS Call Centre Technology (Taiwan) Limited@@

Trading and integration of business machines and communication equipment

Taiwan 100 100


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11 SUBSIDIARIES (Cont’d)



place of business


by the group2004 2003

% %Held by FDS Networks (China) Limited

FDS Call Centre Technology (China) Limited ***

Trading and integration of business machines and communication equipment

China 100 –

* Audited by Hans Tuanakotta & Mustofa, Indonesia.# Audited by Deloitte Touche Tohmatsu, Hong Kong.@ Audited by Deloitte & Touche, Singapore.## Audited by Deloitte Kassim Chan, Malaysia.** Audited by Deloitte Touche Tohmatsu Jaiyos, Thailand.@@ Audited by Deloitte & Touche, Taiwan.*** Entity audited by Guangzhou Zhong Shen Certified Public Accountants Limited; entity’s branch office in

Kunshan (audited by Kunshan Gongxin Certified Public Accountants Co. Ltd).

12 GOODWILL

GroupGroup US$’000

Cost: At beginning of year 1,976 Foreign exchange realignment (2) At end of year 1,974

Accumulated amortisation and impairment loss: At beginning of year 909 Amortisation for the year 166 At end of year 1,075

Amortisation for last year 166

Net book value: At beginning of year 1,067

At end of year 899


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13 DEFERRED TAX ASSETS/LIABILITY

Group2004 2003

US$’000 US$’000

Deferred tax assetsBalance at beginning of year 193 122Transfer to profit and loss statement (Note 19) 12 71Balance at end of year 205 193

Deferred tax liabilityBalance at beginning of year (41) (16)Transfer to profit and loss statement (Note 19) – (25)Balance at end of the year (41) (41)

14 TRADE PAYABLES

Group2004 2003

US$’000 US$’000

Outside parties 1,972 1,976Related party (Note 4) 82 335

2,054 2,311

15 OTHER PAYABLES

Group Company2004 2003 2004 2003

US$’000 US$’000 US$’000 US$’000

Due to a director 258 – 258 – Deposits received 594 2,002 – – Subsidiaries (Note 11) – – 838 1,136Withholding tax payable 5 5 – – Sundry payables and accruals 552 487 33 29

1,409 2,494 1,129 1,165

Amount due to a director is unsecured, bears interest at 5% per annum and is repayable on demand.

16 ISSUED CAPITAL

Group and Company2004 2003 2004 2003

Number of ordinaryshares of US$0.05 each

US$’000 US$’000

Authorised 120,000,000 120,000,000 6,000 6,000

Issued and paid up: At beginning and end of year 73,979,500 73,979,500 3,699 3,699

As at December 31, 2004, the company has 3,091,000 (2003 : 3,286,000) outstanding options granted to certain directors and full time employees to subscribe for ordinary shares of the company pursuant to the FDS share option scheme.


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17 REVENUE

Group2004 2003

US$’000 US$’000

Network system integration 15,468 8,981Distribution in networking products 3,397 3,969Provision of technical services 2,651 2,089

21,516 15,039

18 PROFIT (LOSS) BEFORE INCOME TAX

Group2004 2003

Number of employees 175 168

Number of directors of the company in remuneration bands is as follows:

2004 2003

$500,000 and above – 1$250,000 to $499,999 2 1Below $250,000 5 5 Total 7 7

Group2004 2003

US$’000 US$’000

Allowance for doubtful trade receivables 24 907Allowance for inventories 113 177Cost of defined contribution plan included in staff costs 125 146Directors’ fees 92 89Directors’ remuneration 678 834Foreign exchange adjustment gain (157) (115)Interest income from bank balances (6) (12)Non-audit fees to auditors – – Reversal of allowance for doubtful trade receivables (386) (49)Staff costs (including directors’ remuneration) 3,987 3,698

19 INCOME TAX EXPENSE

Group2004 2003

US$’000 US$’000

Current 100 36Deferred (Note 13) (12) (46)

88 (10)Underprovision in respect of prior years – 18 88 8


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19 INCOME TAX EXPENSE (Cont’d)

The income tax expense varied from the amount of income tax expense determined by applying the Singapore income tax rate of 20% (2003 : 22%) to profit before income tax as a result of the following differences:

2004 2003US$’000 US$’000

Income tax expense (benefit) at statutory rate 163 (506)Non-allowable (taxable) items (46) 167Prior years’ tax loss carryforwards utilised (previously not recognised) (101) –Deferred tax benefits not recognised 63 378Underprovision in respect of prior yearEffect of different tax rates of overseas operations

–25

18(8)

Exempt income (6) (44)Other items (10) 3 88 8

Company

The company is not subject to income tax in the jurisdiction in which it operates.

Group

The current taxation is provided based on the prevailing income tax rates in the respective countries the Group operates in. The charge for taxation is based on the results for the year as adjusted for items which are non-taxable and/or disallowable. Losses incurred by some subsidiaries are not allowed to be offset against profits earned by other subsidiaries in the Group. However, these losses are available for set-off against future profits of the respective subsidiaries subject to the agreement of the relevant tax authorities.

As at the financial year end, the Group had unabsorbed tax losses which are available for set-off against future taxable income subject to agreement of the relevant tax authorities, details of which are as follows:

2004 2003US$’000 US$’000

Tax lossesAmount at beginning of year 3,951 2,234Amount arising during the year 526 1,717Adjustment to prior year 28 – Amount utilised in current year (506) – Amount at end of year 3,999 3,951

Deferred tax benefit arising from the above 800 869Amount recognised (Note 13) (12) (71)Deferred tax benefit unrecorded 788 798

The balance of deferred tax benefit of approximately US$788,000 (2003 : US$798,000) was not recognised due to the uncertainty of profits of certain subsidiaries.


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20 PROFIT (LOSS) PER SHARE

The calculation of basic profit (loss) per share is based on the Group profit (loss) for the year of approximately US$726,000 (2003 : (US$2,308,000)) divided by the number of ordinary shares in issue as at the end of year of 73,979,500 (2003 : 73,979,500).

Diluted (profit) loss per share is computed on the same basis as the basic profit (loss) per share as the effect of the share options has been ignored for it is anti-dilutive in nature during the year.

21 OPERATING LEASE COMMITMENTS

Group2004 2003

Minimum lease payments under operating leases 428 468

At the balance sheet date, the commitments in respect of non-cancellable operating leases for the rental of office premises and warehouses were as follows:

Group2004 2003

Within 1 year 282 332Within 2 to 5 years 173 128

22 SEGMENTAL INFORMATION

a) The Group defines its business segments as follows:

Business activities Principal activities

Network system integration Network system integration involves the design and implementation of integrated telecommunication and/or data communication networks to enable an organisation to communicate various types of information electronically within the organisation or with another organisation across different geographical locations. The various types of information that can be communicated include the computer data, voice, facsimile, photographic images and video. The networks can provide for communication of such information over a geographical scope which may cover a limited area such as within a building (Local Area Network or LAN) or cover a wide area between cities and across geographical frontiers (Wide Area Network or WAN).

Distribution of networking products Distribution of networking and communications hardware products covers, cables, adapters, modems, multiplexers, routers, switches, frame relay products and security encryption products. Many of these are used as components for the network system integration projects.

Provision of technical services Relates to after-sales technical support and services pursuant to agreed maintenance contracts.


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22 SEGMENTAL INFORMATION (Cont’d)

b) Segment information:

i) A segment is a distinguishable component of the Group that is engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments.

ii) Inter-segment pricing is determined on terms agreed between the parties to the transactions. Segment results, assets and liabilities include items directly attributable to a segment as well as those can be allocated on a reasonable basis. Unallocated items mainly comprise corporate assets and liabilities.

iii) Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more than one period.

iv) Segment information is presented in respect of the Group’s geographical and business segments. The primary format, business segments, is based on the Group’s management and internal reporting structure. In presenting information on the basis of business segments, segment revenue and segment assets are based on the nature of the products or services provided by the Group. Information for geographical segments is presented based on the geographical location of the customers for segment revenue and the geographical location of the assets for segment assets.


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In the opinion of the directors, the financial statements of the Company and the consolidated financial statements of the Group set out on pages 26 to 45 are drawn up so as to give a true and fair view of the state of affairs of the Company and of the Group as at December 31, 2004, the changes in equity of the Group and Company, and the results and cash flows of the Group for the financial year then ended and at the date of this statement there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due.

ON BEHALF OF THE DIRECTORS

KEITH SEAN BROTHERS

HUI YIN HUNG

March 7, 2005

Statement of Directors

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DISTRIBUTION OF SHAREHOLDINGS

Class of Shares : Ordinary shares of US$0.05 eachVoting Rights : 1 Vote per share

SIZE OF SHAREHOLDINGSNO. OF

SHAREHOLDERS % NO. OF SHARES %

1 - 999 – – – –1,000 - 10,000 1,387 82.22 4,640,125 6.2710,001 - 1,000,000 297 17.60 15,406,629 20.831,000,001 AND ABOVE 3 0.18 53,932,746 72.90

TOTAL 1,687 100.00 73,979,500 100.00

TWENTY LARGEST SHAREHOLDERS

NO. NAME NO. OF SHARES %

1 BROTHERS KEITH SEAN 42,737,398 57.772 YIP MAN YIU 8,230,190 11.123 KIM ENG SECURITIES PTE. LTD. 2,965,158 4.014 DBS VICKERS SECURITIES (S) PTE LTD 947,836 1.285 PHILLIP SECURITIES PTE LTD 644,750 0.876 LIM & TAN SECURITIES PTE LTD 526,000 0.717 HO SWEE LUN 470,000 0.648 LIM CHEE SAN 325,000 0.449 TAN SIEW GUAN VIOLET 295,000 0.4010 WONG SEE TONG 288,000 0.3911 GWEE MONG SIA 260,000 0.3512 CITIBANK NOMINEES SINGAPORE PTE LTD 254,125 0.3413 RBC (ASIA) LTD 245,000 0.3314 OCBC SECURITIES PRIVATE LTD 234,000 0.3215 HUI YIN HUNG 219,918 0.3016 SIM KOK HAI 210,000 0.2817 CHOO CHENG MENG 200,000 0.2718 UOB KAY HIAN PTE LTD 193,000 0.2619 CHOW LAI WAI NANCY 185,000 0.2520 TJOA TJOEN KHAY @ CHUA CHOON KAI 185,000 0.25

TOTAL 59,615,375 80.58

SUBSTANTIAL SHAREHOLDERS

Substantial Shareholders of the Company as at 15 March 2005.

No. of Ordinary SharesName Direct Interest % Indirect Interest %Brothers Keith Sean 42,737,398 57.77 245,000 0.33Yip Man Yiu 8,230,190 11.12 – –

SHAREHOLDINGS IN THE HANDS OF PUBLIC

As at 15 March 2005, approximately 41.47% of the issued and ordinary shares of the Company was held in the hands of the public and Rule 723 of the Listing Manual is complied with.

Statistics of ShareholdingsAs At 15th March 2005

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NOTICE IS HEREBY GIVEN THAT the Annual General Meeting of FDS NETWORKS GROUP LTD., an exempted company incorporated with limited liability in Bermuda (the “Company”) will be held at 77 Bencoolen Street #02-01 Singapore 189653 on Friday, 22 April 2005 at 2:30 PM for the following purposes: -

AS ORDINARY BUSINESS

1. To receive and, if approved, to adopt the Audited Accounts for the financial year ended 31 December 2004 together with the Directors’ Report and Auditors’ Report thereon.

Resolution 1

2. To approve the Directors’ Fees of US$92,000 for the financial year ended 31 December 2004 (2003: US$89,000).

Resolution 2

3. To re-elect Ms. Hui Yin Hung who is retiring under Bye-Law no. 104 of the Bye-Laws of the Company as a Director.

Resolution 3

4. To re-appoint Messrs Deloitte & Touche as auditors of the Company and to authorize the Directors to fix their remuneration.

Resolution 4

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

AS SPECIAL BUSINESS

To consider and, if thought fit, to pass the following resolutions (with or without amendments) as Ordinary Resolutions:

6. FDS SHARE OPTION SCHEME

IT WAS RESOLVED THAT the Directors be and are hereby authorised to offer and grant, from time to time, options in accordance with the provisions of the FDS Share Option Scheme and to allot and issue from time to time such number of shares as may be required to be issued pursuant to the exercise of options under the FDS Share Option Scheme PROVIDED ALWAYS THAT the aggregate number of shares to be issued pursuant to the FDS Share Option Scheme shall not exceed fifteen percent (15%) of the total issued share capital of the Company at any time.

Resolution 5

7. AUTHORISATION TO ISSUE SHARES AND CONVERTIBLE SECURITIES

IT WAS RESOLVED THAT the Directors be and are hereby authorised to allot and issue shares and convertible securities of the Company on such terms and conditions and with such rights or restrictions as they may deem fit PROVIDED ALWAYS THAT the aggregate number of shares and convertible securities to be issued pursuant to this resolution shall not exceed fifty per cent (50%) of the issued share capital of the Company, of which the aggregate number of shares and convertible securities to be issued other than on a pro rata basis to existing shareholders shall not exceed twenty per cent (20%) of the issued share capital of the Company and that such authority shall continue in force until the conclusion of the next Annual General Meeting or the expiration of the period within which the next Annual General Meeting of the Company is required by law to be held, whichever is the earlier. For the purposes of this resolution, the percentage of issued share capital shall be based on the Company’s issued share capital at the time of the passing of this resolution after adjusting for: -

(a) new shares arising from the conversion or exercise of convertible securities or from exercising employee share options outstanding or subsisting at the time of the passing of this resolution; and

Notice Of Annual General Meeting

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(b) any subsequent consolidation or subdivision of shares.Resolution 6

8. To consider and, if thought fit, to pass the following resolution as an Ordinary Resolution: -

(a) Transactions with Mercom Systems, Inc

That approval be and is hereby given for the purposes of Chapter 9 of the Listing Manual of the Singapore Exchange Securities Trading Limited, for the Company, its subsidiaries and associated companies (the “Group”) or any of them to undertake distribution activities of Mercom Products for Mercom Systems, Inc. (our Chief Executive Officer Keith Sean Brothers is a shareholder and non-executive director of Mercom Systems, Inc.), on a regular basis, full particulars of which are set out in the Company’s Letter to Shareholders dated 1 April 2005, provided that such transactions are made on an arm’s length basis and on normal commercial terms.

(b) That such approval given in paragraph 8(a) above (the “Mandate”) shall, unless revoked or varied by the Company in general meeting, continue in force until the date when the next Annual General Meeting of the Company is held, provided that such transactions are made on an arm’s length basis and on normal commercial terms.

(c) That the Directors of the Company be and are hereby authorised to execute all such documents and do all such acts and things as they may consider necessary or expedient in the interests of the Company to give effect to this resolution and/or the Mandate.

Resolution 7

BY ORDER OF THE BOARDTAN MIN-LICompany Secretary

Date: 1 April 2005Singapore

Notes:

(i) A member entitled to attend and vote at the Meeting is entitled to appoint a proxy to attend and vote in his behalf. A member who is holder of two (2) or more shares may appoint not more than two (2) proxies to attend the same occasion. A proxy need not also be a member. The instrument appointing a proxy, the CDP Proxy Form and/or the power of attorney or other authority, if any, under which it is signed or notarially certified copy of that power or authority shall be deposited at the Share Transfer Agent’s office at Lim Associates (Pte) Ltd, at 10 Collyer Quay #19-08, Ocean Building, Singapore 049315 at least 48 hours before the time of the Annual General Meeting or adjourned meeting or poll (as the case may be) at which the person named in such instrument proposes to vote, and in default the instrument of the proxy will not be treated as valid.

(ii) Resolution 6, if passed, will empower the Directors of the Company to issue shares and convertible securities in the Company up to a maximum of fifty per cent (50%) of the issued share capital of the Company (of which the aggregate number of shares and convertible securities to be issued other than on a pro rata basis to existing shareholders shall not exceed twenty per cent (20%) of the issued share capital of the Company) for such purposes as they consider would be in the interests of the Company. This authority will continue in force until the next Annual General Meeting of the Company or the expiration of the period within which the next Annual General Meeting is required by law to be held, whichever is the earlier, unless the authority is previously revoked or varied at a general meeting.


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(iii) Resolution 7, if passed, will empower the Company, through its Board of Directors, its subsidiaries and target associated companies or any of them to enter into any of the above-mentioned Interested Person Transactions. Such approval shall, unless revoked or varied by the Company in general meeting, continue in force until the date when the next Annual General Meeting of the Company is held.

The Audit Committee of the Company has confirmed that the methods or procedures for determining the transaction prices of the interested person transactions have not changed since the last shareholder approval on 14 April 2004 and that such methods or procedures are sufficient to ensure that the interested person transactions will be carried out on normal commercial terms and will not be prejudicial to the interests of the Company and its minority shareholders. Mr Keith Sean Brothers, together with his associates, will abstain from voting at the forthcoming AGM on the ordinary resolution relating to the proposed renewal of the Shareholder Mandate and will not accept nomination as proxy or otherwise for voting at the AGM in respect of such ordinary resolution, unless such Shareholder shall have given specific instructions in his Proxy Form as to the manner in which his votes are to be cast in respect of such resolutions. Particulars of the shareholder’s mandate, and the Audit Committee’s confirmation, in respect of its proposed renewal, are contained in the Company’s Letter to Shareholders dated 1 April 2005.


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