press Media Pte Ltd • tel: (65) 6880 2838 Designed & Produced by
FDS Networks Group Ltd. 2004 - 06, World Trade Centre, 280 Gloucester Road, Causeway Bay, Hong Kong Tel: 852 2877 0668 • fax: 852 2802 3001 • http://www.fdsnetworks.com
FDS Networks Group Ltd.
Connectivity ANNUAL REPORT 2004
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Contents 01
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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>>> Corporate Profile
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.
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.
Annual Report 2004
FDS Networks Group Ltd.
We offer ITSM………
1
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President and CEO’s Statement
Keith S. Brothers President 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.
FDS Networks Group Ltd.
Year 2004 saw FDS Networks Group consolidate its financial recovery. ”
2
Annual Report 2004
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President and CEO’s Statement
Information technology markets in Asia improved steadily throughout 2004 and we continue to expect this improvement to continue into 2005.
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.
Revenue has increased by 43% to US$21,516K in FY2004 compared to 2003 due to improved IT market conditions across Asia in general.
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 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 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.
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.
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.
FDS Networks Group Ltd.
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.
Keith S. Brothers President and Chief Executive Officer
Annual Report 2004
3
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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
FDS Networks Group Ltd.
products and technical services.
4
Annual Report 2004
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Operations Review
Network Systems Integration
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 realtime 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.
Annual Report 2004
FDS Networks Group Ltd.
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.
5
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Operations Review
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:
FDS Networks Group Ltd.
Hong Kong Taipei Kunshan Beijing Shanghai Guangzhou
6
Annual Report 2004
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:Singapore Kuala Lumpur Bangkok 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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Financial Highlights
25 20 15 10 5 0 -5
2000
Turnover
2001
2002
2003
Profit/(loss)before Tax
2004 Profit/(loss)after Tax
For The Year Ended Dec 31, 2004 (In US $million)
2000
2001
2002
2003
2004
Turnover Profit/ (Loss) before tax Profit/ (Loss) after tax
17.55 2.50 2.23
17.08 0.86 0.62
13.44 (2.27) (2.30)
15.04 (2.30) (2.31)
21.52 0.81 0.73
12.32%
15.79%
71.89% DISTRIBUTION OF NETWORKING PRODUCTS PROVISION OF TECHNICAL SERVICES
FDS Networks Group Ltd.
NETWORK SYSTEM INTEGRATION
Annual Report 2004
7
>>> Board of Directors
Mr Keith Sean Brothers is the President and
Ms Hui Yin Hung is an Executive Director of the
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.
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.
FDS Networks Group Ltd.
From left to right: Keith Sean Brothers (President And Chief Executive) Hui Yin Hung (Executive Director)
8
Annual Report 2004
>>> Board of Directors
Mr Richard Anthony Bates is a Non-Executive
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.
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 Charles Edward Bullock is a NonExecutive 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.
FDS Networks Group Ltd.
Mr Lee Joo Hai is a Non-Executive Independent
Annual Report 2004
9
>>> Key Management
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 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 Duncan Cheng is the head of the Finance
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.
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
FDS Networks Group Ltd.
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.
Mr Duncan Cheng (Finance Department Head)
10 Annual Report 2004
Mr Lam Chun Hung (General Manager of FDS Solutions)
Mr Lok Wah Chong is the Country Manager of FDS
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.
Mr. Cheung Chun Hing (Group Assistant General Manager - Networking and ITSM)
>>> Group Structure
100%
100%
PT Fast Dealerboard System 100%
FDS Networks Group (BVI) Ltd
100%
FDS Networks (Thailand) Limited 100%
FDS Infrastructures Pte Limited 100%
Financial Dealerboard Systems Limited
100%
100%
FDS Call Centre Technology Limited
FDS Solutions Limited 100%
100%
FDS Networks (China) Limited
FDS Call Centre Technology (Taiwan) Limited 100%
100%
FDS Call Centre Technology (China) Limited
FDS Infrastructures Limited 100%
FDS Networks Pte Ltd 100%
FDS Networks (M) Sdn. Bhd. 100%
100%
FDS Catalog Limited
FDS Networks Limited 100%
FDS Infrastructures (M) Sdn. Bhd
FDS Networks Group Ltd.
FDS Networks Group Ltd
Annual Report 2004 11
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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 Court 22 Victoria Street Hamilton, HM 12, Bermuda
HEAD OFFICE AND PRINCIPAL PLACE OF BUSINESS Unit 2004-6, World Trade Centre, 280 Gloucester Road, Causeway Bay, Hong Kong
BERMUDA SHARE REGISTRAR AND SHARE TRANSFER OFFICE
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Reid Management Limited Argyle House 41A Cedar Avenue Hamilton HM 12, Bermuda
SHARE TRANSFER AGENT Lim Associates (Pte) Ltd Ocean Building 10 Collyer Quay #19-08 Singapore 049315
FDS Networks Group Ltd.
AUDITORS
12 Annual Report 2004
Deloitte & Touche 6 Shenton Way, #32-00, DBS Building Tower Two Singapore 068809 Partner-In-Charge: Ernest Kan Yaw Kiong (Appointed on 16 May 2002)
Financial Contents 14
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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Corporate Governance
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 Nominating Audit Remuneration FDS Board Committee(“AC”) committee(“RC”) Committee(“NC”) No of No of No of No of No of No of No of No of meetings meetings meetings meetings meetings meetings meetings meetings held attended held attended held attended held attended
FDS Networks Group Ltd.
Name Keith Sean Brothers Yip Man Yiu(1) Peter Duncan Barker(2) Hui Yin Hung Lee Joo Hai Peter Charles Edward Bullock Richard Anthony Bates (1) (2)
4 4 4 4 4
4 2 0 4 3
– – – – 3
– – – – 3
1 – – – 1
1 – – – 1
2 – – – 2
2 – – – 2
4 4
4 3
3 3
3 3
1 1
1 1
2 2
2 2
Mr Yip Man Yiu resigned as a director of the Company on 2 December 2004. 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.
14 Annual Report 2004
Corporate Governance
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.
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.
Annual Report 2004
FDS Networks Group Ltd.
Principle 2: Board Composition and Balance
15
Corporate Governance
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.
FDS Networks Group Ltd.
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.
16 Annual Report 2004
Corporate Governance
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 $100,000
Exceeding $100,000 but not exceeding $250,000
Exceeding $250,000 X
Keith Sean Brothers Yip Man Yiu Peter Duncan Barker(2) Hui Yin Hung Lee Joo Hai Peter Charles Edward Bullock
X
(1)
Richard Anthony Bates (1) (2)
X X X X X
Mr Yip Man Yiu resigned as a director of the Company on 2 December 2004. He remains employed as an executive of the Company. 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 Peter Duncan Barker (1) Lam Chun Hung Gloria Yeh Simon James Crawford Price Robert Deverell (1)
Not exceeding $100,000
Exceeding $100,000 but not exceeding $250,000
Exceeding $250,000
X X X X X
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 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.
FDS Networks Group Ltd.
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.
Annual Report 2004
17
Corporate Governance
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.
FDS Networks Group Ltd.
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.
18 Annual Report 2004
Corporate Governance
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.
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.
FDS Networks Group Ltd.
Human Resource Risk Management
Annual Report 2004
19
Corporate Governance
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 foreignbased 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
FDS Networks Group Ltd.
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.
20 Annual Report 2004
Corporate Governance
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 Mercom Systems, Inc.
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)
Nil
Nil
Best Practices Guide
FDS Networks Group Ltd.
The Company has complied materially with the Best Practices Guide issued by SGX-ST.
Annual Report 2004
21
Report of the Directors
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 Officer Hui Yin Hung Lee Joo Hai Peter Charles Edward Bullock Richard 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 directors
As at January 1, 2004
As at December 31, 2004
As at January 21, 2005
42,982,398 219,918 50,000
42,982,398 219,918 100,000
42,982,398 219,918 100,000
Ordinary shares of US$0.05 each Keith Sean Brothers Hui Yin Hung Peter Charles Edward Bullock
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.
FDS Networks Group Ltd.
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.
22 Annual Report 2004
Report of the Directors
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:
Date of grant
Balance as at 1.1.2004 or date of grant if later
Options exercised
2000
15.06.2000
1,180,000
–
(300,000)
2001
31.05.2001
1,446,000
–
2002
01.04.2002
660,000
2004
23.08.2004
570,000
Options
#
Exercise period
880,000
S$0.65
15.6.2003 - 14.6.2010
(195,000)
1,251,000
S$0.39
31.5.2003 - 30.5.2011
–
(220,000)
440,000
S$0.32
01.4.2003 - 30.3.2012
–
(50,000)
520,000
S$0.12
23.8.2005 - 22.8.2014
(765,000)
3,091,000
lapsed due to resignations
The following are participants who receive 5% or more of the total number of ordinary share options available under the Scheme:
Aggregate number Aggregate number Aggregate of options number of granted since exercised since Number of commencement commencement options granted options granted of Scheme to outstanding of Scheme to as at end of during the end of financial end of financial year under financial year year under financial year review Name of participant under review Options lapsed under review 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
–
200,000
–
–
200,000
100,000
180,000
–
–
180,000
Yip Man Yiu Yeh Hsiu Ming
Annual Report 2004
FDS Networks Group Ltd.
c)
Balance as at 31.12.2004
Exercise price
3,856,000
Options lapsed#
23
Report of the Directors
The following are details of ordinary share options granted to directors: Aggregate number Aggregate number Aggregate of options number of granted since exercised since Number of commencement commencement options granted options granted of Scheme to outstanding of Scheme to as at end of during the end of financial end of financial year under financial year year under financial year review Name of participant under review Options lapsed under review 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
FDS Networks Group Ltd.
HUI YIN HUNG
March 7, 2005
24 Annual Report 2004
Auditors’ Report To the Members of FDS NETWORKS GROUP LTD
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 & Touche Certified Public Accountants
Ernest Kan Yaw Kiong Partner
FDS Networks Group Ltd.
Singapore March 7, 2005
Annual Report 2004
25
Balance Sheets December 31, 2004
Note
Group 2004 2003 US$’000 US$’000
Company 2004 2003 US$’000 US$’000
ASSETS Current assets: Cash and cash equivalents Trade receivables Other receivables Inventories
5 6 7 8
Total current assets Non–current assets: Plant and equipment Development costs Investments in subsidiaries Loans to subsidiaries Goodwill Deferred tax assets
9 10 11 11 12 13
Total non-current assets Total assets
1,732 6,003 568 1,427
1,616 4,537 1,030 2,762
71 – 5,088 –
296 – 4,914 –
9,730
9,945
5,159
5,210
557 178 – – 899 205
732 340 – – 1,067 193
– – 2,849 2,323 – –
– – 2,849 2,275 – –
1,839
2,332
5,172
5,124
11,569
12,277
10,331
10,334
2,054 1,409 129
2,311 2,494 131
– 1,129 –
– 1,165 –
3,592
4,936
1,129
1,165
41 41
41
–
–
41
–
–
LIABILITIES AND EQUITY Current liabilities: Trade payables Other payables Income tax payable
14 15
Total current liabilities Non–current liability: Deferred tax liability
13
Total non-current liability Capital and reserves: Issued capital Share premium Currency translation reserve Accumulated (losses) profits Total equity
FDS Networks Group Ltd.
Total liabilities and equity
26 Annual Report 2004
16
3,699 5,461 (194) (1,030)
3,699 5,461 (104) (1,756)
3,699 5,461 – 42
3,699 5,461 – 9
7,936
7,300
9,202
9,169
11,569
12,277
10,331
10,334
See accompanying notes to financial statements.
Consolidated Profit and Loss Statement
Year ended December 31, 2004
Note
Revenue
17
Group 2004 2003 US$’000 US$’000 21,516
15,039
Cost of sales
(14,220)
(10,099)
Gross profit
7,296
4,940
261
265
Other operating income Distribution costs
(1,110)
(1,145)
Administrative expenses
(4,871)
(5,670)
(760)
(707)
Other operating expenses Profit (Loss) from operations
816
Gain on disposal of investment Finance costs
–
18
(2)
(1)
Profit (Loss) before income tax
18
814
Income tax expense
19
(88)
Basic and diluted profit (loss) per share (cents)
20
(2,300) (8)
726
(2,308)
0.98
(3.12)
FDS Networks Group Ltd.
Net profit (loss) for the year
(2,317)
See accompanying notes to financial statements. Annual Report 2004
27
Statements of Changes in Equity Year ended December 31, 2004
Issued capital US$’000
Share premium US$’000
Currency translation reserve US$’000
Accumulated profits (losses) US$’000
3,699
5,461
(85)
Net loss for the year
–
–
–
Exchange translation difference
–
–
(19)
Balance at December 31, 2003
3,699
5,461
(104)
Net profit for the year
–
–
–
Exchange translation difference
–
–
(90)
Balance at December 31, 2004
3,699
5,461
(194)
(1,030)
7,936
Issued capital US$’000
Share premium US$’000
Accumulated profit (losses) US$’000
Total US$’000
3,699
5,461
(184)
8,976
–
–
193
193
3,699
5,461
9
9,169
–
–
33
33
3,699
5,461
42
9,202
Total US$’000
Group Balance at January 1, 2003
552 (2,308) – (1,756) 726 –
9,627 (2,308) (19) 7,300 726 (90)
Company Balance at January 1, 2003 Net loss for the year Balance at December 31, 2003 Net profit for the year
FDS Networks Group Ltd.
Balance at December 31, 2004
28 Annual Report 2004
See accompanying notes to financial statements.
Consolidated Cash Flow Statement Year ended December 31, 2004
2004 US$’000
2003 US$’000
Cash flows from operating activities: 814
Profit (Loss) before income tax
(2,300)
Adjustments for: Allowance for inventories
113
177
24
907
Amortisation of development costs
162
146
Amortisation of goodwill
166
166
33
–
328
326
Allowance for doubtful trade receivables
Written off pre-incorporated expenses Depreciation expense Loss on disposal of plant and equipment
1
18
Gain on disposal of investment
–
(18)
(386)
(49)
Interest income
(6)
(12)
Interest expense
2
1
Written back allowance for doubtful debts
Operating profit (loss) before working capital changes Decrease (Increase) in inventories
1,251 1,222 (1,104)
Increase in trade receivables
(638) (988) (1,114)
429
(291)
(Decrease) Increase in trade payables
(257)
471
(Decrease) Increase in other payables
(1,085)
957
Decrease (Increase) in other receivables
Cash generated from (used in) operations Interest received Interest paid Income tax (paid) refund
456 6
12
(2)
(1)
(101)
Net cash from (used in) operating activities
(1,603)
359
110 (1,482)
Cash flows from investing activities: (153)
(516)
Proceeds from disposal of plant and equipment
–
60
Additions of development costs
–
(246)
Net cash used in investing activities Effect of exchange rate changes in consolidation Net increase (decrease) in cash and cash equivalents
(153)
(702)
(90)
(10)
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
See accompanying notes to financial statements. Annual Report 2004
FDS Networks Group Ltd.
Purchase of plant and equipment
29
Notes to Financial Statements December 31, 2004
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.
FDS Networks Group Ltd.
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.
30 Annual Report 2004
Notes to Financial Statements December 31, 2004
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 straightline method, on the following bases: Office equipment, furniture and fittings Computer Equipment Leasehold improvements Spares, demo equipment and workshop tools Motor vehicles
-
3 to 6 years 3 years over the respective lease terms 3 years 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.
Annual Report 2004
FDS Networks Group Ltd.
2
31
Notes to Financial Statements December 31, 2004
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 statemanaged 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.
FDS Networks Group Ltd.
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.
32 Annual Report 2004
Notes to Financial Statements December 31, 2004
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.
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.
Annual Report 2004
FDS Networks Group Ltd.
4
33
Notes to Financial Statements December 31, 2004
4
RELATED PARTIES (Cont’d) Significant related parties transactions: Group 2004 2003 US$’000 US$’000 Purchase of goods
5
726
1,083
CASH AND CASH EQUIVALENTS During the current financial year, fixed deposits pledged amounting to US$219,590 in respect of banking facilities granted to certain subsidiaries of the company have been fully discharged.
6
TRADE RECEIVABLES Group 2004 2003 US$’000 US$’000
7
Outside parties Less allowance for doubtful trade receivables Net
6,786 (783) 6,003
5,607 (1,070) 4,537
Movements in allowance: Balance at beginning of year Foreign exchange realignment Charged to profit and loss statement Allowance written back Balance at end of year
1,070 75 24 (386) 783
246 (34) 907 (49) 1,070
OTHER RECEIVABLES Group 2004 2003 US$’000 US$’000
FDS Networks Group Ltd.
Subsidiaries (Note 11) Deposits Prepayments Tax recoverable Others
34 Annual Report 2004
– 172 350 23 23 568
– 148 671 38 173 1,030
Company 2004 2003 US$’000 US$’000 5,065 – 23 – – 5,088
4,798 2 24 – 90 4,914
Notes to Financial Statements December 31, 2004
8
INVENTORIES Group 2004 2003 US$’000 US$’000 Inventories, at cost Transfer to Plant and Equipment (Note 9)
887 (41) 846 581
Inventories, at net realisable value
Movements in allowance: Balance at beginning of year Charged to profit and loss statement Balance at end of year
1,427
2,762
302 113 415
125 177 302
PLANT AND EQUIPMENT Spares, Office demo equipment, equipment furniture and and workshops Motor Computer Leasehold equipment improvements vehicles tools fittings US$’000 US$’000 US$’000 US$’000 US$’000
Total US$’000
Group Cost: At beginning of year Additions Transfer from inventories (Note 8) Disposals/written off Foreign exchange realignment At end of year
429 40
882 95
195 –
480 5
22 13
2,008 153
7 (26) 6 456
34 (53) 16 974
– (8) 9 196
– (21) – 464
– – 1 36
41 (108) 32 2,126
Accumulated depreciation At beginning of year Depreciation for the year Disposals/written off Foreign exchange realignment At end of year
257 76 (9) 5 329
482 181 (34) 8 637
106 47 (3) 5 155
426 21 (7) – 440
5 3 – – 8
1,276 328 (53) 18 1,569
69
155
51
48
3
326
172
400
89
54
17
732
127
337
41
24
28
557
Depreciation for last year Net book value At beginning of year At end of year
Annual Report 2004
FDS Networks Group Ltd.
9
2,477 – 2,477 285
35
Notes to Financial Statements December 31, 2004
10
DEVELOPMENT COSTS Group US$’000 Cost: At beginning and end of year
597
Accumulated amortisation: At beginning of year Amortisation for the year At end of year
257 162 419
Amortisation for last year
146
Net book value: At beginning of year
340 178
At end of year
11
SUBSIDIARIES Company 2004 2003 US$’000 US$’000 Unquoted equity shares, at cost
2,849
2,849
Loans to subsidiaries Less allowance for doubtful loans Net
2,798 (475) 2,323
2,750 (475) 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 group 2004 2003 % %
Cost of investment by the company 2004 2003 US$’000 US$’000
FDS Networks Group Ltd.
Held 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
36 Annual Report 2004
Notes to Financial Statements December 31, 2004
SUBSIDIARIES (Cont’d)
Subsidiary
Principal activities
Country of incorporation/ place of business
Effective equity held by the group 2004 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
–
Hong Kong
100
100
Held by FDS Networks Limited FDS Catalog Limited#
Catalogue sale of telecommunication equipment
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
Annual Report 2004
FDS Networks Group Ltd.
11
37
Notes to Financial Statements December 31, 2004
11
SUBSIDIARIES (Cont’d)
Subsidiary
Principal activities
Country of incorporation/ place of business
Effective equity held by the group 2004 2003 % %
Held by FDS Networks (China) Limited FDS Call Centre Technology (China) Limited *** * # @ ## ** @@ ***
12
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).
GOODWILL
Group
Group US$’000
Cost: At beginning of year Foreign exchange realignment At end of year
1,976 (2) 1,974
Accumulated amortisation and impairment loss: At beginning of year Amortisation for the year At end of year
909 166 1,075
Amortisation for last year Net book value: At beginning of year
FDS Networks Group Ltd.
At end of year
38 Annual Report 2004
166 1,067 899
Notes to Financial Statements December 31, 2004
13
DEFERRED TAX ASSETS/LIABILITY Group 2004 2003 US$’000 US$’000
14
Deferred tax assets Balance at beginning of year Transfer to profit and loss statement (Note 19) Balance at end of year
193 12 205
122 71 193
Deferred tax liability Balance at beginning of year Transfer to profit and loss statement (Note 19) Balance at end of the year
(41) – (41)
(16) (25) (41)
TRADE PAYABLES Group 2004 2003 US$’000 US$’000 Outside parties Related party (Note 4)
15
1,972 82 2,054
1,976 335 2,311
OTHER PAYABLES Group 2004 2003 US$’000 US$’000 Due to a director Deposits received Subsidiaries (Note 11) Withholding tax payable Sundry payables and accruals
258 594 – 5 552 1,409
– 2,002 – 5 487 2,494
Company 2004 2003 US$’000 US$’000 258 – 838 – 33 1,129
– – 1,136 – 29 1,165
Amount due to a director is unsecured, bears interest at 5% per annum and is repayable on demand. ISSUED CAPITAL Group and Company 2004 2003 2004 Number of ordinary US$’000 shares of US$0.05 each
2003 US$’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
3,699
3,699
73,979,500
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. Annual Report 2004
FDS Networks Group Ltd.
16
39
Notes to Financial Statements December 31, 2004
17
REVENUE Group 2004 2003 US$’000 US$’000 Network system integration Distribution in networking products Provision of technical services
18
15,468 3,397 2,651 21,516
8,981 3,969 2,089 15,039
PROFIT (LOSS) BEFORE INCOME TAX Group
Number of employees
2004
2003
175
168
2004
2003
– 2 5 7
1 1 5 7
Number of directors of the company in remuneration bands is as follows:
$500,000 and above $250,000 to $499,999 Below $250,000 Total
Group 2004 2003 US$’000 US$’000 Allowance for doubtful trade receivables Allowance for inventories Cost of defined contribution plan included in staff costs Directors’ fees Directors’ remuneration Foreign exchange adjustment gain Interest income from bank balances Non-audit fees to auditors Reversal of allowance for doubtful trade receivables Staff costs (including directors’ remuneration)
19
24 113 125 92 678 (157) (6) – (386) 3,987
907 177 146 89 834 (115) (12) – (49) 3,698
INCOME TAX EXPENSE
FDS Networks Group Ltd.
Group
Current Deferred (Note 13) Underprovision in respect of prior years
40 Annual Report 2004
2004 US$’000
2003 US$’000
100 (12) 88 – 88
36 (46) (10) 18 8
Notes to Financial Statements December 31, 2004
INCOME TAX EXPENSE (Cont’d) The income tax expense varied from the amount of income tax expense determined by applying the Singapore income tax rate of 20% (2003 : 22%) to profit before income tax as a result of the following differences:
Income tax expense (benefit) at statutory rate Non-allowable (taxable) items Prior years’ tax loss carryforwards utilised (previously not recognised) Deferred tax benefits not recognised Underprovision in respect of prior year Effect of different tax rates of overseas operations Exempt income Other items
2004 US$’000
2003 US$’000
163 (46) (101) 63 – 25 (6) (10) 88
(506) 167 – 378 18 (8) (44) 3 8
Company The company is not subject to income tax in the jurisdiction in which it operates. Group The current taxation is provided based on the prevailing income tax rates in the respective countries the Group operates in. The charge for taxation is based on the results for the year as adjusted for items which are nontaxable and/or disallowable. Losses incurred by some subsidiaries are not allowed to be offset against profits earned by other subsidiaries in the Group. However, these losses are available for set-off against future profits of the respective subsidiaries subject to the agreement of the relevant tax authorities. As at the financial year end, the Group had unabsorbed tax losses which are available for set-off against future taxable income subject to agreement of the relevant tax authorities, details of which are as follows:
Tax losses Amount at beginning of year Amount arising during the year Adjustment to prior year Amount utilised in current year Amount at end of year Deferred tax benefit arising from the above Amount recognised (Note 13) Deferred tax benefit unrecorded
2004 US$’000
2003 US$’000
3,951 526 28 (506) 3,999
2,234 1,717 – – 3,951
800 (12) 788
869 (71) 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.
Annual Report 2004
FDS Networks Group Ltd.
19
41
Notes to Financial Statements December 31, 2004
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 Group
Minimum lease payments under operating leases
2004
2003
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: Group
Within 1 year Within 2 to 5 years
22
2003
282 173
332 128
SEGMENTAL INFORMATION a)
FDS Networks Group Ltd.
2004
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.
42 Annual Report 2004
Notes to Financial Statements December 31, 2004
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.
FDS Networks Group Ltd.
22
Annual Report 2004
43
22
i)
44 Annual Report 2004
Capital expenditure Depreciation Amortisation Written off pre-incorporated expenses Loss on disposal of plant and equipment
308 195 188 – –
109 236 236 24 –
2,870
1
5
25 52 52
547
18
–
137 86 82
1,268
–
4
19 40 40
427
–
–
71 45 42
667
1
33
153 328 328
18
–
516 326 312
4,977
Total liabilities
2,489
3,592
(2,311) 12 (1) (8) (2,308)
15,039
15,039 –
4,805 172
810 6 (2) (88) 726
21,516
21,516 –
3,463 129
1,511
(159)
– (159)
Segment liabilities Unallocated corporate liabilities
1,298
(558)
(286)
– (286)
12,277
2,871
390
2,090
2,089 1
Consolidated 2004 2003 US$’000 US$’000
11,528
1,663
(571)
2,651
2,651 –
Eliminations 2004 2003 US$’000 US$’000
Total assets
6,496
(274)
4,127
3,969 158
Provision of technical services 2004 2003 US$’000 US$’000
10,878 1,399
7,574
(1,182)
3,473
3,397 76
Distribution of networking products 2004 2003 US$’000 US$’000
10,535 993
OTHER INFORMATION Segment assets Unallocated corporate assets
694
8,981
15,678
Total revenue
RESULTS Segment results Interest income Interest expense Income tax Net profit/(Loss) for the year
8,981 –
15,468 210
Network system integration 2004 2003 US$’000 US$’000
REVENUE External sales Inter-segment sales
Information by business segments:
SEGMENTAL INFORMATION (Cont’d)
FDS Networks Group Ltd.
Notes to Financial Statements
December 31, 2004
ii)
Capital expenditure
Segment assets
OTHER INFORMATION
Total revenue
Inter-segment sales
External sales
REVENUE
4,311 345
65
6,210
8,007
5,087
135
6,075
233
7,774
29
1,485
5,881
41
5,840
22
1,396
3,296
18
3,278
47
3,828
6,100
1
6,099
115
4,609
4,775
5
4,770
12
1,128
1,814
11
1,803
34
1,961
917
1
916
(286)
(286)
(159)
(159)
153
11,528
21,516
–
21,516
516
12,277
15,039
–
15,039
Singapore/ Mainland Malaysia China/Taiwan Hong Kong Others Eliminations Consolidated 2004 2003 2004 2003 2004 2003 2004 2003 2004 2003 2004 2003 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
Information by geographic regions:
SEGMENTAL INFORMATION (Cont’d)
FDS Networks Group Ltd.
22
Notes to Financial Statements December 31, 2004
Annual Report 2004
45
Statement of Directors
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
FDS Networks Group Ltd.
March 7, 2005
46 Annual Report 2004
Statistics of Shareholdings As At 15th March 2005
DISTRIBUTION OF SHAREHOLDINGS Class of Shares Voting Rights
: :
Ordinary shares of US$0.05 each 1 Vote per share NO. OF SHAREHOLDERS SIZE OF SHAREHOLDINGS
%
NO. OF SHARES
%
1 - 999 1,000 - 10,000 10,001 - 1,000,000 1,000,001 AND ABOVE
– 1,387 297 3
– 82.22 17.60 0.18
– 4,640,125 15,406,629 53,932,746
– 6.27 20.83 72.90
TOTAL
1,687
100.00
73,979,500
100.00
NO. OF SHARES
%
TWENTY LARGEST SHAREHOLDERS NO.
NAME
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
BROTHERS KEITH SEAN YIP MAN YIU KIM ENG SECURITIES PTE. LTD. DBS VICKERS SECURITIES (S) PTE LTD PHILLIP SECURITIES PTE LTD LIM & TAN SECURITIES PTE LTD HO SWEE LUN LIM CHEE SAN TAN SIEW GUAN VIOLET WONG SEE TONG GWEE MONG SIA CITIBANK NOMINEES SINGAPORE PTE LTD RBC (ASIA) LTD OCBC SECURITIES PRIVATE LTD HUI YIN HUNG SIM KOK HAI CHOO CHENG MENG UOB KAY HIAN PTE LTD CHOW LAI WAI NANCY TJOA TJOEN KHAY @ CHUA CHOON KAI
42,737,398 8,230,190 2,965,158 947,836 644,750 526,000 470,000 325,000 295,000 288,000 260,000 254,125 245,000 234,000 219,918 210,000 200,000 193,000 185,000 185,000
57.77 11.12 4.01 1.28 0.87 0.71 0.64 0.44 0.40 0.39 0.35 0.34 0.33 0.32 0.30 0.28 0.27 0.26 0.25 0.25
TOTAL
59,615,375
80.58
SUBSTANTIAL SHAREHOLDERS
Name Brothers Keith Sean Yip Man Yiu
Direct Interest 42,737,398 8,230,190
No. of Ordinary Shares % Indirect Interest 57.77 245,000 11.12 –
% 0.33 –
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.
Annual Report 2004
FDS Networks Group Ltd.
Substantial Shareholders of the Company as at 15 March 2005.
47
Notice Of Annual General Meeting
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
FDS Networks Group Ltd.
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
48 Annual Report 2004
Notice Of Annual General Meeting
(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 BOARD TAN MIN-LI Company Secretary
Date: 1 April 2005 Singapore
(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.
FDS Networks Group Ltd.
Notes:
Annual Report 2004
49
Notice Of Annual General Meeting
(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.
FDS Networks Group Ltd.
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.
50 Annual Report 2004
