UNFOLDING A SOLID PRESENCE - 联合早报网ir.zaobao.com.sg/aztech/doc/aztech_ar2005.pdf1986. Mr Mun honed his managerial and entrepreneurial skills early in his ... shiro corporation

UNFOLDING A SOLID PRESENCE

ANNUAL REPOR T 2005

CONTENTS

Financial Highlights 1

Value-added Statement 3

President’s Message 4

Board of Directors 6

Key Management 9

The Year In Review 11

Financial Contents 17

Corporate Information IBC

ABOUT OUR COVER:

UNFOLDING A SOLID PRESENCE

The launch of Aztech’s new mega manufacturing facility in China epitomises the bolstering of our position and presence both in the region and in the world. Our enhanced

capabilities help boost our productivity and generate an enlarged scope of products, enabling us to capture a larger market share. We are well on our way to becoming a forerunner in the arena of data communication, voice communication and multimedia.

OUR VISION

To challenge the frontiers

of innovation in the

Electronics Design and

Manufacturing Industry.

OUR MISSIONHigh Quality and Cost Competitive

Products through Design and

Manufacturing Services.MP3 Player

IP Phone

Financial HigHligHts

turnover by business segment Fy2005 turnover by region Fy2005

ODM/OEM SalES

COntraCt ManufaCturing

rEtail DiStributiOn

37%

4%

41%

18%

aSia PaCifiC

EurOPE

nOrth & SOuth aMEriCaS

OthErS

group turnover Fy2005 group net proFit Fy2005

52%

14%

34%

s$’m

200

180

160

140

120

100

80

60

40

20

0

Fy2003 Fy2004 Fy2005

17%growth

118.04

178.58

152.14

s$’m

12

10

8

6

4

2

0

Fy2003 Fy2004 Fy2005

57%growth

2.83

10.13

6.43

1Aztech AnnuAl RepoRt 2005

As Aztech continues to expand from strength to strength,

so has our reach in the global market. With a presence in over

20 countries and growing, our quest is to penetrate all corners

of the earth and become a household brand that transcends

geographical boundaries.

Unlocking new Markets for growth

Aztech AnnuAl RepoRt 20052

Value-added statementFor tHe Year ended 31 december 2005

2005 2004 Changes $’000 $’000 %

revenue 178,584 152,135 17

suppliers of materials and services (144,033 ) (127,908)Gross value added from operations 34,551 24,227 43

other operating income 1,424 1,196 exchange (loss) gain (863) 602

total value added 35,112 26,025 35

Applied as follows:

to remunerate employees – salaries, wages and other benefits 16,654 12,268 36

to government – taxation 382 706 (46 )

to reward providers of capital – Dividend to shareholders 2,011 1,000 – interest on borrowings from banks 1,310 770

3,321 1,770 88

to maintain operations and expand the group – impairment loss on available-for-sale investment 80 -

– Depreciation and amortisation 6,558 5,847 – net earnings retained 8,117 5,434

14,755 11,281 31

35,112 26,025 35

Value added ratios

number of employees 1,871 1,722 9

Value added per employee ($’000) 19 15 27

Value added per $ of employment cost 2.11 2.12 (1 )

Value added per $ sales 0.20 0.17 18 Value added per $ of investment in property, plant and equipment

0.39

0.36

8

Cost of property, plant and equipment 90,368 71,570 26

Value added is the wealth created by the group by supplying its goods and services. this statement shows the total wealth created and how it was allocated.

to remunerate employees

to reward providers of capital

to government

to maintain operations and expand the group

48%

9% 1%

42%

2005

47%43%

3%7%

2004


President’s message

“2005 was a year of growth for

Aztech. Continuing on our upward

momentum, we rode the wave

of the buoyant electronics and

infocommunications sectors, and

seized business opportunities to

record our third straight year of

increased profit.”


A yeAr oF growth

we closed the year ending 31 December 2005 with a turnover of s$178.58 million, a 17% rise from the previous year. our net profit too, leapt from s$6.43 million in 2004 to s$10.13 million this year – a 57% increase. earnings per share was 2.53 cents, up from 1.61 cents in 2004.

the group’s profitability improved, with gross margin rising from 16% in 2004 to 18% in 2005. Profit before income tax leapfrogged by 50% from s$6.80 million in the previous year to s$10.22 million in 2005.

europe remained the major market, accounting for 41% of the group’s revenue, followed by asia Pacific, 37% and north and south americas, 18%. the asia Pacific region continued to register strong growth with revenue increasing by 90% this year.

as at 31 December 2005, the group’s balance sheet showed total assets of s$138.82 million against total liabilities of s$74.18 million, a net debt to equity ratio of 44% and shareholders’ funds of s$64.65 million.

inspiring conFidence

one of aztech’s strengths has always been our vertically integrated in- house services. we are more than just a manufacturer – from development and design to assembly and servicing, we provide the full spectrum of products and services for data communication, voice communication and multimedia products.

the opening of our new manufacturing facility in Dong guan, china, represents a milestone for aztech. with doubling of the existing manufacturing floorspace and housing more advanced equipment and technology, we are able to roll out more world-class products to meet the increasingly

sophisticated demand of consumers. By consolidating our resources in one comprehensive facility in china, we are able to ensure a cost efficient structure, thereby further augmenting our position as a one-stop shop.

the strategy for aztech has been to diversify within the three business segments and offer a wide-ranging selection of products and services. in line with this approach, our r&D is consistently studying market trends and identifying new fields in which we may develop our products and further grow our retail distribution business.

our strengths have traditionally been in data and voice communications, and during the year, we continued to create new products and re-design existing ones to keep them on par with industry demand. in the second half of 2005, we ventured into multimedia such as MP3 players and multimedia speakers and power conversion products. these products garnered positive feedback for their forward-looking and characteristic design and features.

Looking ForwArd

the strategy for diversification of products will continue in 2006. geographically, europe and north and south americas will remain important markets. as the fastest growing region, asia Pacific will offer a proliferation of opportunities, and aztech is poised to seize them.

the future of the infocommunications industry remains bright. as long as homes and offices continue to leverage on technology for work and play, there will always be demand for better and faster infocommunications and electronics products. the merging of telecommunications and technology has already led to unprecedented innovations, such as iP based and Bluetooth products. this trend shows no sign of slowing down anytime soon.

aztech is in a pivotal position. for the past three years, we have been consolidating our base and multiplying in strength. we are now on the brink of a new era of development and there will be no holds barred as we surge ahead in the race to become a major player in the global market.

dividend

in view of our performance in 2005, the Board of Directors is recommending a final one-tier tax exempt dividend of 0.50 cents per ordinary share for the year ended 31 December 2005. our dividend policy is about 20% of net profit.

in grAtitude

i wish to personally convey my thanks to the Board, the management team and the staff. an enterprise is only as good as its people and i am grateful that we have a united and committed team who is focused on helping the group attain success.

i must also acknowledge our partners and shareholders, without their continued support, we would not be where we are today. the world is our oyster and as we work in synergy together, i am confident that we will bring aztech to new heights.

Michael MunCEO and President

President’s message


board oF directors

leFt to rigHt:

Mr Michael Mun Hong Yew, Ms Patricia Ng Sok Cheng,

Mr Philip Tan Tee Yong, Mr Colin Ng Teck Sim and Mr Khoo Ho Tong.


board oF directors

mr michAeL mun hong yew CEO and President

has been appointed as ceo and President of aztech systems ltd since 1986. Mr Mun honed his managerial and entrepreneurial skills early in his working career with the singapore office of a British consumer electronics distributor. he was a Board Member of national science and technology Board from 11 January 1995 to 10 January 1999.

ms pAtriciA ng sok cheng Executive Director

is an executive Director of aztech systems ltd and was appointed in 1993. she is also the senior Vice President of the company. Ms ng’s experience includes developing business for oDM/oeM products, contract manufacturing services, and retail distribution sector. she also has experience in materials management and product development. she currently holds the post of general Manager of the company’s wholly-owned subsidiary, shiro corporation Pte ltd. she also holds directorships in some of aztech’s subsidiaries. Ms ng has been with aztech since 1986.

mr phiLip tAn tee yong Independent Director

is an independent Director appointed in 1993. he was re-elected to the Board in 2002. Mr tan is the owner and Managing Director of PtMc outsourcing Pte. ltd. a fellow of the chartered institute of Management accountants, he has over 40 years of experience in banking, accounting, finance, marketing and sales, commercial & banking software development, consulting, manufacturing and entrepreneurship. having worked in Mnc and local companies, he is familiar with the two different management styles. he has also assisted in 3 iPos and a rights issue. Mr tan was a Member of Parliament for 2 terms aggregating 7 years.

mr coLin ng teck sim Independent Director

an independent Director of aztech systems ltd, is a practising lawyer with over 20 years of experience. his practice focuses on corporate banking and finance including public listings of companies and also on securities and capital market instruments.

he has also advised on a number of public listings for companies in and outside of singapore. Mr ng was educated at the national University of singapore and admitted as advocate & solicitor in the supreme court of singapore in 1982. he was also admitted in 2000 as solicitor in the supreme court of england and wales. he is also a notary Public and commissioner of oaths and a member of the singapore stock exchange ltd’s appeals committee.

mr khoo ho tong Independent Director

is an independent Director of aztech systems ltd. he has been practising as a Public accountant for over 20 years. Mr khoo is also involved in a number of professional associations. he is a council member and member of various sub-committees of the institute of certified Public accountants, singapore. he is also the treasurer of the asean federation of accountants. his other posts include being an independent Director and non-executive Director of various listed companies. Mr khoo is a certified Public accountant in singapore.


UnwraPPing BreakthroUgh

ProDUcts

Aztech’s uncompromising commitment to quality drives us to

consistently generate a suite of award-winning products. Our aggressive

and proactive R&D efforts ensure that we are able to successfully

anticipate and keep up with market trends.

Skype DECT with USB Dongle


KeY management

mArtin chiA heok miin Senior Vice-President, Sales and Product Marketing

Mr chia joined aztech in 1989. he currently holds the position of senior Vice-President, responsible for product marketing and sales activities of the group. Prior to joining aztech, Mr chia was a marketing executive in a multinational sales company dealing in semiconductor and computer peripherals. he holds a Diploma in electronics and communication engineering from singapore Polytechnic.

JAson sAw chwee meng Vice-President, Research and Development, HQ R&D Centre

Mr saw re-joined aztech in May 2005. he was one of the pioneer members of aztech r&D team that designed the sound card product (1991-1999). he currently holds the position of

Vice-President, responsible for the planning, coordination, and execution of product designs and development handled by the hQ r&D centre and heads the technical support service team for the related products.

Prior to joining aztech (2000-2005), Mr saw was a Vice President of engineering in a startup company that designs and markets server appliance products. he holds a Diploma in electronics engineering from ngee ann Polytechnic.

Low wei chong Vice-President, Research and Development, Shenzhen R&D Centre

Mr low joined aztech in 1994. he currently holds the position of Vice-President, responsible for the planning, coordination, and execution of product designs and development of the voice products and other new products in shenzhen r&D centre.

he holds a Diploma in electronic engineering and an advanced Diploma in computer & communication systems from ngee ann Polytechnic.

hermAn so kAm hung Vice-President, Finance

Mr so joined aztech in 2003. he currently holds the position of Vice-President, responsible for the group’s financial management. he holds a Bachelor’s degree in accountancy from Monash University, australia. Prior to joining aztech, he worked in an international accounting firm and has over 7 years of experience in assurance and advisory services. he is an associate member of the hong kong institute of certified Public accountants and a member of cPa australia.


UnVeiling technology for

toDay’s lifestyle

At Aztech, we push the frontiers of technology.

Harnessing some of the world’s most cutting edge equipment,

we are constantly ahead of our time, providing new and

novel solutions for this generation and the next.


overview

incorporated in 1986, aztech systems ltd (“aztech”) is a global leader in oDM/oeM design and manufacturing services, contract manufacturing and retail distribution. headquartered in singapore with sales and support offices in Usa, germany, Malaysia and hong kong, the group employed approximately 1,900 employees worldwide in 2005. the group is listed on the singapore exchange ltd.

aztech’s manufacturing facility is located in Dong guan, china. we have four r&D centres in singapore, hong kong, shenzhen and Dong guan, china.

tHe Year in reView

our mAnuFActuring FAciLity

towards the end of 2005, the unveiling of our new manufacturing plant in Dong guan, china marked a major milestone for aztech. occupying a total area of 464,442 square feet or about the size of nine football fields, this impressive facility allow us to consolidate our current facilities in china under one roof, enabling us to multiply our capabilities and streamline costs.

its manufacturing facilities are world class and vertically integrated including plastic tooling, plastic injection, sMt, Bga, PcBa and box build assemblies. it houses some of the world’s most sophisticated

technologies and equipment such as high-speed sMt lines, through-hole insertion, micro Bga, chip-on-Board, chip mounters, ic placers, MPM screen printer and X-ray inspection.

with the new facility, aztech is entering our next phase of development. it will double our existing manufacturing capacity, giving aztech the springboard to be a key global player in the provision of a complete spectrum of high value-added and state-of-the-art manufacturing services and products.

the company also places great importance on employee welfare. the factory is equipped with all-inclusive lifestyle facilities to complement its manufacturing capabilities. complete with dormitories, executive apartments,

Our visiOn is“to challenge the frontiers of innovation in

the Electronics Design and Manufacturing industry”.

a fully-staffed clinic, a retail mini-mart, and recreational amenities such as library, internet cafe, basketball court, badminton court, table tennis and billiards area, the facility offers employees a comfortable and convenient home away from home.


tHe Year in reView

Aztech’s new manufacturing facility

in Dong Guan, China, houses some

of the world’s most sophisticated

technologies and equipment,

enabling us to multiply our

capabilities and streamline costs.

Reflow Oven Chip-on-Board

SMT Lines


odm/oem sALes

in 2005, our oDM/oeM sales business segment remained the largest contributor of the group’s turnover, registering a 6% growth from s$88.54 million in 2004 to s$93.47 million in 2005, accounting for more than half of the group’s total turnover.

During the year, we continued to leverage on our strong design experience and technology focus in data communication, voice communication and multimedia products. the main growth drivers were the aDsl2/2+ modems, homePlugs and Dect phones.

in terms of product launches, aztech remained at the forefront of innovation, introducing some of the world’s most groundbreaking solutions. these included the world’s first aDsl2+ homePlug 85Mbps Powerline residential gateway, combining aDsl with broadband capabilities to distribute data, voice and video throughout the home via electrical powerlines. other landmark products launched by aztech were the new VoiP analog telephone adaptors, iP-PBX system, iP Phones and VDsl/VDsl2 ethernet Bridge modems, among others.

tHe Year in reView

our reseArch And deveLopment (r&d)

with over 20 years of design experience, aztech’s four r&D centres are primed to deliver innovative products to meet and even exceed market requirements. to support the new chapter of aztech’s growth, we continue to invest in r&D. we spent s$2.7 million on r&D in 2005, an increase of 27% from the previous year. its staff strength also increased to over 100.

our investment in r&D has borne fruit, and enabled us to keep abreast of market trends and unfold new and cutting-edge solutions to our customers. in 2005, we continued to focus on some of our key strengths, such as broadband and networking.

as the market matures for some products such as aDsl products, we need to constantly harness leading edge technology to bring newer and more exciting solutions to the market, our VDsl 2 products, all-in-one residential gateway, iP-PBX system, skype Dect Phone being key examples.

while we build on our forte, our strategy is to offer a diversified array of products. in line with this direction, we are constantly exploring new segments to expand our product range. During the year, we identified the multimedia sector as one with potential growth value and launched avant-garde products such as MP3 players and multimedia speakers, all with a distinctive design unique to the market.

Internet Cafe for staff enjoyment Fully-staffed Clinic

QA Inspection


tHe Year in reView

Aztech’s business modeL

• Demandfordataandvoicecommunicationstoremainstrong

• GrowthinADSL2/2+,VoIPandDECTmarkets

• IncreaseincustomersfornewproductswhichwillbelaunchedinFY2006

• Expandproductline

• Intensifymarketingeffortstopenetratenewmarketsandsecurehighermarketshare

• ExtendAztechandShirobrandproductstomorenewmarkets

• Continuetostrengthenoverallmanufacturingcapabilitiestocatercustomers’requirements

• Securemorenewprojectsfromexistingcustomers

• Broadencustomerbase

mAin growth drivers:• aDsl 2/2+

• homePlugs

• Dect

odm/oem sALes

6%growth

s$’m

140

120

100

80

60

40

20

0Fy2004 Fy2005

88.54 93.47

revenue boosted by:• higher demand by existing customers

• securing more new projects from existing customers

• securing new customers onboard

contrAct mAnuFActuring

27%growth

s$’m

70

60

50

40

30

20

10

0Fy2004 Fy2005

48.05

60.80

retAiL distribution

revenue boosted by:• wider range of product offerings

• strengthening of its marketing efforts in building brand awareness

• extending its reach to new markets

growth56%

s$’m30

27

24

21

18

15

12

9

6

3

0Fy2004 Fy2005

15.55

24.32

Fy2005 vs Fy2004 growth


contrAct mAnuFActuring

our contract Manufacturing business segment, covering PcBa and box build assemblies, plastic tooling and plastic injection, also turned in a commendable performance in 2005. it recorded an impressive jump of 27% from s$48.05 million in 2004 to s$60.80 million in 2005, or about 34% to the group’s total turnover.

the laudable results were largely attributed to aztech’s ability to provide a high quality and cost effective manufacturing services. as more companies continue to outsource their manufacturing solutions, our ability to deliver high quality products at low costs has proven to be attractive with customers. as a result, we enjoyed heightened demand for our services from existing customers as well as an increase in our customer base.

going into 2006, the contract manufacturing industry remains upbeat. we will build on our current capabilities while maintaining flexibility, in order to tailor our solutions to our customers’ needs. as we strive to bring more customers on board and strengthen our relationship with existing ones, our contract manufacturing business segment is well positioned to grow from strength to strength.

our pioneering approach has won the admiration of our partners and customers. at the 2005 hong kong electronics fair, aztech clinched the silver award for outstanding innovation and technology Products (security/wireless category) for its triple play aDsl2+ VoiP wireless 802.11g residential gateway.

to boost brand awareness and attract more customers, we participated extensively in major international exhibitions and used these events as platforms to unveil many of our new products. some of them included ces 2005 in Us, ceBit 2005 in germany, hong kong electronics fair 2005, commworld 2005 in Philippines,

Broadband world forum 2005 in spain, internet telephony conference & expo in the Us, and telecomm india 2005.

the oDM/oeM sales business segment looks promising in 2006, and will be supported by our heightened manufacturing capabilities in china. we anticipate the demand for data communication, voice communications and multimedia products to remain robust and the aDsl 2/2+, VoiP and Dect markets to experience stable growth. we will continue to build on our winning formula of innovation to pioneer new products and enhance existing ones to maintain cost-competitiveness.

Hong Kong Electronics FairACM Show in Malaysia

Plastic Injection Machines

tHe Year in reView


retAiL distribution

the retail Distribution segment, marketing both aztech and shiro brand of products, creates more growth opportunities for the aztech group, as it enables us to be nearer to the consumers to better understand their needs.

specialising in consumer electronics, consumer telecommunication, broadband and VoiP products, shiro products are designed to meet the needs, lifestyle and aspirations of today’s consumers. in its second year of operation, shiro turned in encouraging results, with turnover soaring by 56% from s$15.55 million in 2004 to s$24.32 million in 2005, accounting for 14% of the group’s total turnover in 2005.

some of the contributing factors to its brilliant performance were the unleashing of integrated marketing efforts to bolster brand awareness and creating market demand, intensive press relation programs, advertising and active participation in both international trade shows and local exhibitions. such activities enabled it to reinforce its positioning. today, shiro has entrenched itself as a lifestyle consumer player in over 20 countries. its extensive range of lifestyle products

includes MP3 players, multimedia speakers, digital cameras, digital cordless phones (Dect Phone), caller iD phones, walkie talkies, aDsl broadband and VoiP products, all bearing its signature stamp of high quality, performance, cost-effectiveness and style. with a solid foundation in place, shiro is well on the path to growing its reach to even more parts of the world and heightening demand for its products on a global scale.

During the year in review, aztech brand products continue to enjoy success in Malaysia. aztech was voted one of the top two brands in Malaysia for wireless products by readers of two leading it magazines, hwM and Pc 3. we were also voted number 1 in wireless networking in Malaysia, according to a Q3 y2005 survey by iDc.

HomePlug DECT Phone

MP3 Players

tHe Year in reView

going forward, we will extend our spectrum of aztech and shiro brand products in digital consumer electronics, consumer telecommunications, broadband and VoiP to more new markets. Marketing efforts and the penetration of different distribution channels will be intensified in a bid to conquer a larger share of the market.


CORPORATE GOVERNANCE 18

REPORT OF THE DIRECTORS 26

AUDITOR’S REPORT 35

BALANCE SHEETS 36

CONSOLIDATED PROFIT AND LOSS STATEMENT 38

STATEMENTS OF CHANGES IN EQUITY 39

CONSOLIDATED CASH FLOW STATEMENT 41

NOTES TO FINANCIAL STATEMENTS 43

STATEMENT OF DIRECTORS 84

ANALYSIS OF SHAREHOLDINGS 85

NOTICE OF ANNUAL GENERAL MEETING 87

PROXY FORM 99

FINANCIAL CONTENTS

17AZTECH ANNUAL REPORT 2005

CORPORATE GOVERNANCE REPORT

The Board of Directors and Management are committed to maintaining a high standard of corporate governance by complying with the benchmark set by the Code of Corporate Governance issued in March 2001 (the “Code’).

The Group believes that it is substantially in compliance with the Code. The key aspects of our Group’s corporate governance framework and practices in compliance with the provisions of the Code are discussed in the succeeding pages.

The Group is currently working on enhancing its Code in line with the Code of Corporate Governance 2005 issued by the Council on Corporate Disclosure and Governance, Singapore.

BOARD’S CONDUCT OF ITS AFFAIRS

The Board is responsible for the Group’s system of corporate governance and is ultimately accountable for the overall policies of the Group. Specifically, it approves the Group’s strategic plans, annual budgets, major investment proposals and reviews the financial performance of the Group. It delegates the formulation of business policies and day-to-day management to the Chief Executive Officer (“CEO”) and Executive Director.

The Company has adopted internal guidelines which stipulate that material matters such as dealings with capital assets exceeding value of $500,000, any investments of the Group not in the ordinary course of the Group’s business and any expenditure by the Group in excess of $500,000 which is not in the budget shall require the approval of the Board

The full Board meets regularly and ad-hoc meetings are convened as and when they are deemed necessary. The Board delegates specific responsibilities to the Audit Committee (“AC”), Nominating Committee (“NC”) and Remuneration Committee (“RC”). These committees function within clearly defined terms of reference.

BOARD COMPOSITION

The Board comprises five Directors, three of whom are Non-Executive and Independent Directors. Our Directors bring with them invaluable experience and extensive business experience with the right mix and collectively possess the necessary core competencies to allow discussions on matters of policy, strategy and performance to be critical, informed and constructive.

Michael Mun Hong Yew is the Chairman and CEO of the Group. He plays an instrumental role in developing the business of the Group and provides the Group with strong leadership and vision and oversees the daily running of the Group’s operations. As the Chairman, Mr Mun, amongst other matters, exercises control over the quality, quantity and timeliness of the flow of information between the Management of the Company and the Board.

The Board is of the view that it is in the best interests of the Group to adopt a single leadership structure so as to ensure that the decision-making process of the Group is smooth and effective. Furthermore, with the small size of the Board and the existence of a strong independent element on the Board, there is adequate balance of power within the Board.

CORPORATE GOVERNANCE

AZTECH ANNUAL REPORT 200518

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 business and operations of the Group.

Key information, as required under the Code, regarding each Director is disclosed in page 7 and in Annexure 1 of this Report. The list of directorships or chairmanships, as the case may be, held by each Director both present and those held over the preceding three years in other listed companies is disclosed in Annexure 2 herein.

ACCESS TO INFORMATION AND ACCOUNTABILITY

The Board is provided with timely and complete information. In meetings where the Group’s financial performance is presented, the Group’s actual results are compared with budgets. For other matters where the Board is required to make decisions, the Management provides the Board with sufficient background explanatory information on financial, business and corporate issues to enable the Directors to be properly briefed on issues to be considered.

The Directors are given free access to the Group’s operational facilities and have direct access to the Management and Head of Finance to have a better understanding of the Group’s business operations.

The Directors also have separate and independent access to the Company Secretary. The Company Secretary attends all Board meetings and Board Committee meetings. The Company Secretary is responsible for ensuring that Board procedures are followed and that applicable rules and regulations are complied with. Aside from access to the advice and services of the Company Secretary and the Company’s Management, the Directors may, as and when necessary, seek independent professional advice concerning the Company’s affairs. The Board as a whole is updated on risks management and the key changes in the relevant regulatory requirements and accounting standards. All new Directors will go through an orientation programme whereby they would be briefed by the Company Secretary on their obligations as Directors and relevant statutory and regulatory compliance issues. They will also be briefed by the Management on the Group’s businesses and operations.

DIRECTORS’ ATTENDANCE AT BOARD & BOARD COMMITTEE MEETINGS

The attendance details of the Directors at Board and Board Committee meetings are set out below:

Board of Directors

Audit Committee

Nominating Committee

Remuneration Committee

Number of Meetings Held 10 5 2 3

Name of Director Number of Meetings Attended

Michael Mun Hong Yew 10 2

Patricia Ng Sok Cheng 10 3

Colin Ng Teck Sim 10 5 2

Philip Tan Tee Yong 10 5 3

Khoo Ho Tong 10 5 2 3



BOARD COMMITTEES

NC

The NC was set up on November 27, 2002 and comprises of the following members:-

Colin Ng Teck Sim Chairman and Independent Director

Khoo Ho Tong Member, Independent Director

Michael Mun Hong Yew Member, CEO / President

The NC assesses the effectiveness of the Board as a whole and the contribution by each Director to the effectiveness of the Board on an annual basis. In the assessment of the Board’s effectiveness, the NC takes into consideration, amongst others, the role of the Board, the Board’s ability to strategise and propose sound business directions, monitor internal controls and enhance long term shareholders’ value. The NC is also charged with reviewing all nominations for the appointment and re-appointment of Directors and to review the independence of Directors annually.

RC

The RC was set up on November 27, 2002 and comprises of the following members:-

Khoo Ho Tong Chairman, Independent Director

Philip Tan Tee Yong Member, Independent Director

Patricia Ng Sok Cheng Member, Executive Director

During the year, the RC carried out its duties in accordance with its terms of reference, which include reviewing and approving the remuneration package of the Executive Directors and key executives of the Group. The RC also administers the Group’s share option scheme. The RC has access to expert advice relating to executive compensation outside of the Company

Directors’ fees are paid annually to the Non-Executive Directors and are recommended by the RC and endorsed by the Board. When deciding on the level of fees to be paid to each Non-Executive Director, the RC takes into account the responsibilities that are required of each Non-Executive Director. Directors’ fees are paid to Directors subject to obtaining approval at the AGM. The Executive Directors do not receive any Directors’ fees.

For the financial year ended December 31, 2005, no employee of the Group, whose remuneration exceeded $150,000, was an immediate family member of a Director. Immediate family means spouse, child, adopted child, stepchild, brother, sister or parent.

The Code also requires the remuneration of the Directors and at least the top 5 key executives who are not Directors to be disclosed within bands of $250,000. The details of the remuneration of the Directors and top 5 key executives are set out below:



Directors’ Remuneration

Fees % Basic

Salary % Variable Remuneration %

Benefits in kind Total %

Executive Directors

Between $1,000,000 and $1,250,000

Michael Mun Hong Yew - 50 32 18 100

Between $250,000 and $500,000

Patricia Ng Sok Cheng - 68 28 4 100

Non-Executive Directors

Below $250,000

Philip Tan Tee Yong 100 - - - 100

Colin Ng Teck Sim 100 - - - 100

Khoo Ho Tong 100 - - - 100

During the year, no share options were granted to the Directors. The number of outstanding share options of the Directors can be found in the Directors’ Report.

1. The Directors’ fees payable to the Non-Executive Directors is subject to approval at the AGM.

2. Variable remuneration includes CPF, annual wage supplement, bonuses, allowances and payments under profit sharing scheme.

3. Benefits in kind include accommodation and car cost, where applicable.

4. Remuneration bands within which no Directors fall in are not included.

Top 5 Key Executives’ Remuneration

Number of Top 5 Key Executives in Remuneration Bands

Remuneration Bands 2005

$500,000 and above -

$250,000 to $499,000 -

$100,000 to $249,999 4

Below $100,000 1

Total 5

Note: For competitive reasons, the Company is not disclosing the identity of the Key Executives and the percentage breakdown of their remuneration.



AC

The AC was set up on January 22, 1994 and currently comprises of the following members:

Philip Tan Tee Yong Chairman, Independent Director

Khoo Ho Tong Member, Independent Director

Colin Ng Teck Sim Member, Independent Director

The members of the AC have relevant accounting, auditing, financial management and legal expertise and experience. The AC is guided by its terms of reference, which set out its functions and responsibilities. These include reviewing the half-yearly and full year financial statements, reviewing the audit plan and evaluating accounting controls and audit report with external auditors. In addition, the AC also reviews and evaluates major internal controls and reviews all interested person transactions.

The AC conducted a review of the independence of External Auditors and the total fees for non-audit services compared with audit services and confirmed that the nature and volume of non-audit services would not prejudice the independence and objectivity of the Auditors. On a yearly basis and when required, the AC meets with the External Auditors without the presence of Management.

Accountability and Reporting

The Management provides the Board with management and financial information, which includes quarterly results, which is compared to approved budgets and the prior year results, forecasts for profit and cash flow and borrowing levels. The Board reviews and approves the Group’s annual budget.

The Board aims to provide the shareholders with a balanced and timely assessment of the Group’s performance and activities. The Group reports its financial results half-yearly. The results are published through the SGXnet and the Company’s website.

Internal Controls

The Group maintains internal controls and systems that are designed to provide reasonable assurance as to the integrity and reliability of its financial statements and to adequately verify and safeguard the Group’s assets. The Board is satisfied that based on the information furnished to it and on its own observations, the present internal controls and risk management processes are satisfactory for the nature and size of the Group’s operations and business.

Internal Audit

The Internal Audit function is headed by the Internal Auditor. She reports directly to the Chairman of the AC on audit matters, and to the CEO on administrative matters. The Internal Auditor submits regular reports to the AC, which includes reviews as to whether the Group’s internal controls and systems are adequate and are functioning effectively. The AC reviews the scope, methodology, and observations of the Internal Auditor’s report. It is the Group’s policy to support the Internal Audit activities to meet and comply with acceptable internal audit standards and practices.



Interested Person Transactions

The Company has adopted an internal policy in respect of any transactions with interested persons. All transactions with interested persons are reviewed by the Board. Details of such transactions are disclosed in the financial statements.

During 2005, there were no interested person transactions exceeding $100,000. There were also no interested person transactions conducted under shareholders’ mandate pursuant to Rule 920.

No Material Contracts

Since the end of financial year 2004, the Company and its subsidiaries did not enter into any material contracts in which the CEO, Directors or Controlling Shareholders has any interest and no such material contracts subsist at

the end of financial year 2005.

Communication with Shareholders

In line with continuous disclosure obligations of the Company pursuant to the SGX-ST’s Listing Manual, the Board and Management have adopted the policy to provide timely information to all shareholders of all major developments and activities of the Group via SGXNET, Press Releases, Corporate web site and investor relations site www.shareinvestor.com.

The Management has met with its bankers and where relevant and appropriate, the press and analysts, when its annual results were released to explain the results and respond to queries. All shareholders of the Company receive annual reports and notices of AGM. At AGMs, shareholders are given the opportunity to communicate their views and direct questions to the Directors and Management regarding the Company. The members of the Board and Board Committees as well as the External Auditors are also present at the AGMs. Shareholders and the

public can access information on the Group’s website at www.aztech.com.

Dealing in Securities

The Group’s policies on share dealings have been issued to all Directors and key officers of the Group. The Company’s 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-year/full year results and ending on the date of the announcement of the results.

All officers of the Group are required on an annual basis to submit a written confirmation of their compliance with the internal guidelines. The Company has complied materially with the Best Practices Guide issued by the SGX-ST.

Pavani Nagarajah Company Secretary March 17, 2006



Annexure 1

Director

Date of appointment/

Re-appointment

Nature of

appointment Prime function

Share holding in Aztech

(Direct/Indirect)

Mun Hong Yew, Michael Age : 56

6 August 1986 Executive Chairman/CEO Member – NC

22.99%

Ng Sok Cheng, Patricia Age: 45

6 April 1993/12 April 2004

Executive Senior Vice-President Member – RC

3.33%

Tan Tee Yong, Philip Age: 59

27 June 1993/ 8 April 2005

Non Executive Independent

Director

Chairman – AC Member –RC

Nil

Ng Teck Sim, Colin Age: 50

12 October 1993/ 30 May 2003


Director

Chairman – NC Member – AC

Nil

Khoo Ho Tong Age: 65

12 November 2002/ 30 May 2003


Director

Chairman – RC Member – AC

Member – NC

Nil




Annexure 2

The details of each of the Directors’ directorships and/or chairmanships, both present and those held over the preceding 3 years in other listed companies’ as well as other major appointments are as follows:

DirectorPeriod of

Appointment Corporation Prime function Other functions

Ng Teck Sim, Colin From Year 2000 to present

TPA Strategic Holdings Ltd

Independent Director

Chairman - AC Member - NC

From Year 2004 to present

Media Asia Entertainment

Group Ltd


Non-Exec Chairman Chairman - AC Member – RC

Khoo Ho Tong From Year 1999 to

August 2005

Asiamedic Limited


Chairman of AC Member of NC & RC


Nam Lee Pressed Metal Industries Ltd


Chairman - AC Member - NC & RC


Tastyfood Holdings Ltd


Chairman - AC Member - NC & RC


AsiaTravel. com Holdings Ltd


Chairman - AC Member - RC


Eng Kong Holdings Ltd


Chairman - NC Member - AC & RC


J K Technology Group Ltd


Member – AC NC & RC


Kingsmen Creatives Ltd

Non-Executive Chairman - RC Member - AC & NC


The Directors present their report together with the audited consolidated financial statements of the Group and balance sheet and statement of changes in equity of the Company for the financial year ended December 31, 2005.

1 DIRECTORS

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

• Michael Mun Hong Yew

• Patricia Ng Sok Cheng

• Philip Tan Tee Yong

• Colin Ng Teck Sim

• Khoo Ho Tong

2 AUDIT COMMITTEE

The Board has adopted the principles as described in the Code of Corporate Governance formulated by the Singapore Exchange Securities Trading Limited (“SGX-ST”) with regards to the Audit Committee. The members of the Audit Committee of the Company at the date of this report are as follows:

• Philip Tan Tee Yong (Chairman and Independent Director)

• Colin Ng Teck Sim (Non-Executive Independent Director)

• Khoo Ho Tong (Non-Executive Independent Director)

The Audit Committee has met 4 times since the last Annual General Meeting (“AGM”) and has reviewed the following, where relevant, with the Executive Directors, the External Auditors and Internal Auditors of the Company:

a) the audit plans and results of the External and Internal Auditors’ examination and evaluation of the Group’s systems of internal accounting controls;

b) the Group’s financial and operating results and accounting policies;

c) the financial statements of the Company and the consolidated financial statements of the Group before their submission to the Directors of the Company and the External Auditors’ report on those financial statements;

d) the half year and full year annual announcements on the results and financial position of the Company and the Group;

e) the co-operation and assistance given by the management to the Group’s External and Internal Auditors;

f ) interested person transactions; and

g) the re-appointment of the external auditors of the Company.

The Audit Committee has full access to and co-operation of the management and has been given the resources required for it to discharge its function properly. It also has full discretion to invite any Director and Executive officer to attend its meetings. The External and Internal Auditors have unrestricted access to the Audit Committee.

The Audit Committee has recommended to the Directors the nomination of Deloitte & Touche for re-appointment as external auditors of the Company at the forthcoming annual general meeting.

REPORT OF THE DIRECTORS



3 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 for the Aztech Group Employee Share Option Scheme 2000 and the ThatWeb Group Share Option Scheme as detailed in paragraphs 4 and 6 of this report.

4 DIRECTORS’ INTERESTS IN SHARES AND DEBENTURES

The Directors of the Company holding office at the end of the financial year had no interests in the share capital and debentures of the Company and related corporations as recorded in the register of Directors’ shareholdings kept by the Company under Section 164 of the Singapore Companies Act except as follows:

Names of Directors and companies in which interests are heldAt beginning

of yearAt end of year

The Company Shares of $0.05 each

Aztech Systems Ltd (Ordinary shares of $0.05 each)

Michael Mun Hong Yew 11,783,388 11,783,388

Patricia Ng Sok Cheng 13,403,474 13,403,474

Michael Mun Hong Yew (deemed interest) 80,735,998 80,735,998

Aztech Group Employee Share Option Scheme 2000 Options to subscribe for ordinary shares of $0.05 each

Michael Mun Hong Yew 3,000,000 3,000,000

Patricia Ng Sok Cheng 3,935,000 3,185,000

Philip Tan Tee Yong 500,000 500,000

Colin Ng Teck Sim 500,000 500,000

Khoo Ho Tong 500,000 500,000

Subsidiary

Aztech Communication Pte Ltd (Formerly known as ThatWeb Solutions Pte Ltd)

Options to subscribe for ordinary shares of $1.00 each

ThatWeb Group Share Option Scheme

Michael Mun Hong Yew 90,000 -

By virtue of Section 7 of the Singapore Companies Act, Michael Mun Hong Yew is deemed to have an interest in the Company and in all the subsidiaries of the Company.

The Directors’ interests as at January 21, 2006 were the same as those at the end of the financial year.


5 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 which is required to be disclosed under Section 201(8) of the Singapore Companies Act, 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 except for the Profit Sharing Scheme (“Scheme”) as described below and as disclosed in the financial statements.

Certain Directors received remuneration from related corporations in their capacity as Directors and/or executives of those related corporations.

There were certain transactions (as shown in the financial statements) with corporations in which certain Directors have an interest.

Scheme

The Company has entered into the Scheme, which was recommended by the Remuneration Committee and approved by the Board of Directors, with the following Directors of the Company:

• Michael Mun Hong Yew


For Michael Mun Hong Yew

In accordance with the Scheme, Michael Mun Hong Yew is entitled to profit share based on the amount of the audited consolidated profit after tax (“PAT”), as computed in the following manner:

(i) When PAT is equal to or exceeds $5 million (“Minimum Profit”) but less than $10 million, the amount shall be equal to 1.2% of the PAT;

(ii) When PAT is equal to or exceeds $10 million but is less than $15 million, the amount shall be equal to 1.6% of the PAT; and

(iii) When the PAT is equal to or exceeds $15 million, the amount shall be 2.0% of the PAT.




5 DIRECTORS’ RECEIPT AND ENTITLEMENT TO CONTRACTUAL BENEFITS (CONT’D)

For Patricia Ng Sok Cheng

In accordance with the Scheme, Patricia Ng Sok Cheng is entitled to share in the Profit Sharing Pool (“Pool”), based on the amount of PAT, as computed in the following manner:

(i) When PAT is equal to or exceeds Minimum Profit, but less than $10 million, the Pool shall be equal to 1.8% of the PAT;

(ii) When PAT is equal to or exceeds $10 million but is less than $15 million, the Pool shall be equal to 2.4% of the PAT; and

(iii) When the PAT is equal to or exceeds $15 million, the Pool shall be 3.0% of the PAT.

Under the Scheme, the Remuneration Committee shall review and recommend Patricia Ng Sok Cheng’s share of the Pool. The actual amount payable to her shall be deliberated and decided by the Board of Directors provided that her share shall not be less than 10.0% of the Pool.

As at the end of the financial year, an accrual of $200,000 has been made pursuant to the Scheme.

6 SHARE OPTIONS

AZTECH GROUP EMPLOYEE SHARE OPTION SCHEME 2000 (“ESOS 2000”)

(a) Names of the Members of the Committee Administering ESOS 2000

ESOS 2000 was approved and adopted at the Company’s EGM held on March 10, 2000. ESOS 2000 was administered by the Remuneration Committee comprising the following members:

• Khoo Ho Tong (Chairman)



Participants who are members of the Committee were not involved in the deliberations in respect of options granted to that participant.



6 SHARE OPTIONS (CONT’D)

(b) Outstanding options

The number of Shares available under the Scheme shall not exceed 15% of the issued share capital of the Company. The number of outstanding share options under the scheme are as follows:

Date options granted Exercise period

Offer price per option⁽¹⁾

Number of options

granted

Number of options exercised

Number of options cancelled

Number of options

outstanding as at December

31, 2005

January 12, 2001

January 13, 2002 to

January 12, 2006

$0.207 (“A”) $0.166 (“B”)

519,000 - 410,000 109,000

November 7, 2001

November 8, 2002 to

November 7, 2006

$0.086 (“A”) $0.069 (“B”)

4,311,650 1,945,000 2,257,400 109,250

January 30, 2002

January 31, 2003 to January 30,

2007

$0.105 (“A”) $0.084 (“B”)

589,800 28,000 561,800 -

December 30, 2002

December 31, 2003 to

December 30, 2007

$0.089 (“A”) $0.071 (“B”)

3,444,050 1,721,000 1,152,000 571,050

August 6, 2003

August 7, 2004 to August 6,

2008

$0.095 (“A”) $0.076 (“B”)

3,373,250 1,244,000 1,281,000 848,250

December 30, 2003

December 31, 2004 to

December 30, 2008

$0.137 (“A”) $0.110 (“B”)

16,118,750 128,000 4,475,000 11,515,750

May 18, 2004

May 19, 2005 to May 18, 2009

$0.149 (“A”) $0.119 (“B”)

3,300,000 - - 3,300,000

June 12, 2004

June 13, 2005 to June 12, 2009

$0.135 (“A”) $0.112 (“B”)

1,000,000 - - 1,000,000

June 12, 2004

June 13, 2005 to June 12, 2009

$0.135 (“A”) $0.108 (“B”)

9,365,000 100,000 2,340,000 6,925,000

July 14, 2004

July 15, 2005 to July 14, 2009

$0.130 (“A”) $0.104 (“B”)

600,000-

500,000 100,000

42,621,500 5,166,000 12,977,200 24,478,300

Holders of the above share options have no right to participate in any share issues of any other company and no employee or employee of related corporations has received 5% or more of the total options available under ESOS 2000, except as detailed below.




There are no options granted to any of the Company’s controlling shareholders or their associates (as defined in the Singapore Exchange Securities Trading Listing Manual), except as detailed below.

Note: (1) “A” – Option Price that is applicable if option exercised after the 1st anniversary of the date of the acceptance of the offer but before the 2nd anniversary of the date of the acceptance of the offer. Option Price A is finalised based on the average of the last dealt prices per share of the Company on the SGX-ST for the period of five (5) consecutive market days prior to the date the option is offered.

“B” – Option Price that is applicable if option exercised after the 2nd anniversary of the date of the acceptance of the offer but before the expiry of sixty (60) months from the date of the acceptance of the offer.

(2) All options granted under ESOS 2000 (Price “B”) were granted at a discount of 20.0%.

(3) Each option entitles participants to subscribe for one ordinary share of $0.05 each in the Company.

(c) Participants who are Directors/controlling shareholder/associate of controlling shareholder/executive

(i)

Name of participant

Options granted

during the financial year under review

Aggregate options

granted since commencement

of scheme to end of December 31,

2005

Aggregate options

exercised since commencement


2005

Aggregate options

lapsed since commencement


2005

Aggregate options

outstanding as at end of

December 31, 2005

Directors of the Company

Michael Mun Hong Yew (1)(4)(5)

- 3,000,000 - - 3,000,000

Patricia Ng Sok Cheng (4)

- 4,070,000 135,000 750,000 3,185,000

Khoo Ho Tong - 500,000 - - 500,000

Colin Ng Teck Sim

- 500,000 - - 500,000

Philip Tan Tee Yong

- 500,000 - - 500,000

- 8,570,000 135,000 750,000 7,685,000



(ii)

Name of participant

Options granted during

the financial year under

review

Aggregate options

granted since commencement


2005

Aggregate options

exercised since commencement


2005

Aggregate options

lapsed since commencement


2005

Aggregate options


December 31, 2005

Associate of controlling shareholder of the Company

Jeremy Mun Weng Hung (2)(5)

- 300,000 - - 300,000

(iii)

Name of participant

Other participant who received 5% or more of the total available options other than (i) and (ii)

Martin Chia Heok Miin (3)(4)

- 3,742,500 169,000 500,000 3,073,500

Note: (1) Michael Mun Hong Yew is also controlling shareholder of the Company.

(2) Jeremy Mun Weng Hung is the son of Michael Mun Hong Yew.

(3) Martin Chia Heok Miin holds the position of Senior Vice-President of Sales and Product Marketing of the Company.

(4) Participants received 5.0% or more of total available options.

(5) Options granted to Michael Mun Hong Yew and Jeremy Mun Weng Hung were approved by resolutions passed at the EGM of the Company dated April 12, 2004.

(d) Issue of shares under the options

During the financial year, the Company issued a total of 2,710,000 ordinary shares of $0.05 each at the following exercise price, pursuant to the exercise of options under the ESOS 2000 to take up unissued shares of the Company:

(i) 182,600 at $0.069 (v) 115,000 at $0.173

(ii) 940,400 at $0.071 (vi) 128,000 at $0.137

(iii) 283,000 at $0.095 (vii) 100,000 at $0.135

(iv) 961,000 at $0.076





THATWEB GROUP EMPLOYEE SHARE OPTION SCHEME (“ThatWeb ESOS”)

(a) Names of the Members of the Committee Administering ThatWeb ESOS

ThatWeb ESOS was approved and adopted at the Company’s and the subsidiary’s EGM held on March 10, 2000. ThatWeb ESOS was administered by the Remuneration Committee comprising the following members:

• Khoo Ho Tong (Chairman)



(b) Outstanding options

The number of Shares available under the Scheme shall not exceed 15% of the issued share capital of the Company. The number of outstanding share options under the scheme are as follows:

Date options granted Exercise periodOffer price per option

Number of options

granted

Number of options

lapsed

Number of options outstanding as at

December 31, 2005

November 8, 2000 November 9, 2001 to November 8,

2005

$1.00 90,000 90,000 -

Note: (1) No options were granted at a discount under the ThatWeb ESOS.

(2) Each option entitles participants to subscribe for one ordinary share of $1.00 each in ThatWeb Solutions Pte Ltd.

Holders of the above share options have no right to participate in any share issues of any other company and no employee or employee of related corporations has received 5% or more of the total options available under ThatWeb ESOS except as detailed below.

There are no options granted to any of the Company’s controlling shareholders or their associates (as defined in the Singapore Exchange Securities Trading Listing Manual), except as detailed below.

(c) Participant who is Director/controlling shareholder

Name of participant

Options granted

outstanding during the

financial year under review

Aggregate options granted since

commencement of scheme to end of December 31,

2005

Aggregate options exercised since


2005

Aggregate options lapsed since


2005

Aggregate options


December 31, 2005

Michael Mun Hong Yew

- 90,000** - 90,000 -




Note: (1) Pursuant to Rule 11 of ThatWeb ESOS, 1,500 options originally granted to Michael Mun Hong Yew in Year 2000 was adjusted to 90,000 due to the increase of the share capital of ThatWeb Solutions Pte Ltd. Michael Mun Hong Yew is a Director and controlling shareholder of both the Company and the subsidiary.

(2) Options granted to Michael Mun Hong Yew were approved by a resolution passed at the EGM of the Company and the subsidiary dated March 10, 2000.

(3) **No participant other than Michael Mun Hong Yew received 5.0% or more of the total available options.

(d) Issue of shares under the options

During the financial year, no shares were issued pursuant to the exercise of options under ThatWeb ESOS.

Except for the above, no other options to take up unissued shares of the Company and subsidiaries were granted and no other shares were issued by virtue of the exercise of options to take up unissued shares of the Company or its subsidiaries. As at end of the financial year, except for the above, there were no unissued shares of any other subsidiaries under option.

7 AUDITORS

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

ON BEHALF OF THE DIRECTORS


Patricia Ng Sok Cheng

March 17, 2006


AUDITORS’ REPORT TO THE MEMBERS OF AZTECH SYSTEMS LTD

We have audited the consolidated financial statements of the Group and the balance sheet and statement of changes in equity of Aztech Systems Ltd for the financial year ended December 31, 2005 set out on pages 36 to 83. 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 the 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 and statement of changes in equity of the Company are properly drawn up in accordance with the provisions of the Singapore Companies Act, Cap. 50 (the “Act”) and 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, 2005 and the results, changes in equity and cash flows of the Group and the changes in equity of the Company for the year ended on that date; and

b) the accounting and other records required by the Act to be kept by the Company and by those subsidiaries incorporated in Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act.

Deloitte & Touche Certified Public Accountants

Prakash Ambelal Desai PartnerAppointed on May 22, 2002

Singapore March 17, 2006

AUDITORS’ REPORT


GROUP COMPANY

Note 2005 2004 2005 2004

$’000 $’000 $’000 $’000

Restated Restated

ASSETS

Current assets:

Cash and bank balances 7 15,325 11,375 7,450 5,876

Trade receivables 8 31,931 29,694 3,483 2,868

Other receivables and prepayments 9 1,123 718 32,574 23,874

Inventories 10 31,778 25,466 - -

Total current assets 80,157 67,253 43,507 32,618

Non-current assets:

Investment in subsidiaries 11 - - 17,357 17,233

Available-for-sale investments 12 1,097 1,737 1,050 1,737

Property, plant and equipment 13 53,332 35,224 23,084 23,657

Deferred tax assets 14 268 - - -

Deferred expenditure 15 3,970 3,830 3,409 2,607

Total non-current assets 58,667 40,791 44,900 45,234

Total assets 138,824 108,044 88,407 77,852

BALANCE SHEETS AS AT DECEMBER 31, 2005

See accompanying notes to financial statements.


BALANCE SHEETS AS AT DECEMBER 31, 2005

GROUP COMPANY

Note 2005 2004 2005 2004

$’000 $’000 $’000 $’000

Restated Restated

LIABILITIES AND EQUITY

Current liabilities:

Borrowings 16 23,608 10,603 1,833 687

Trade payables 17 20,492 30,117 14,318 14,336

Other payables and provisions 18 9,809 3,322 3,156 1,047

Income tax payable 283 193 - -

Finance leases 19 1,877 349 - -

Total current liabilities 56,069 44,584 19,307 16,070

Non-current liabilities:

Borrowings 16 13,752 8,015 7,328 8,015

Finance leases 19 4,358 262 - -

Total non-current liabilities 18,110 8,277 7,328 8,015

Capital and reserves:

Issued capital 20 20,109 19,974 20,109 19,974

Share premium 87,408 87,308 87,408 87,308

Foreign currency translation reserve (858) (767) - -

Employee share-based compensation reserve

21 597 407 597 407

Accumulated losses (42,611) (51,739) (46,342) (53,922)

Total equity 64,645 55,183 61,772 53,767

Total liabilities and equity 138,824 108,044 88,407 77,852



GROUP

Note 2005 2004

$’000 $’000

Restated

Revenue 22 178,584 152,135

Cost of sales (146,860) (127,125)

Gross profit 31,724 25,010

Other operating income 23 1,424 1,196

Selling and distribution costs (7,746) (4,401)

Administrative expenses (13,471) (13,855)

Finance costs 24 (1,707) (1,151)

Profit before income tax 10,224 6,799

Income tax 25 (96) (365)

Net profit for the year 26 10,128 6,434

Earning per share (cents)

- Basic 27 2.53 1.61

- Diluted 27 2.47 1.60


CONSOLIDATED PROFIT AND LOSS STATEMENTYEAR ENDED DECEMBER 31, 2005


NoteIssued capital

Share premium

Foreign currency

translation reserve

Employee share based

compensation reserve

Accumulated losses Total

$’000 $’000 $’000 $’000 $’000 $’000

GROUP

Balance at January 1, 2004

19,922 87,273 (630) - (58,173) 48,392

Issue of shares 20 52 35 - - - 87

Effect of adoption of FRS 102

21 - - - 407 - 407

Currency translation differences

- - (137) - - (137)

Net profit for the year

- - - - 6,841 6,841


- - - - (407) (407)

Net profit for the year (Restated)

- - - - 6,434 6,434

Balance at January 1, 2005 (Restated)

19,974 87,308 (767) 407 (51,739) 55,183

Issue of shares 20 135 93 - - - 228

Recognition of share based payment

21 - 7 - 190 - 197

Currency translation differences

- - (91) - - (91)

Dividend paid 28 - - - - (1,000) (1,000)


- - - - 10,128 10,128

Balance at December 31, 2005

20,109 87,408 (858) 597 (42,611) 64,645


STATEMENTS OF CHANGES IN EQUITYYEAR ENDED DECEMBER 31, 2005


NoteIssued capital

Share premium

Foreign currency

translation reserve

Employee share based

compensation reserve

Accumulated losses Total

$’000 $’000 $’000 $’000 $’000

COMPANY

Balance at January 1, 2004 19,922 87,273

- -(58,592) 48,603

Issue of shares 20 52 35 - - - 87

Effect of adoption of FRS 102 21

- - -407

-407


- - - -6,141 6,141


- - - -(407) (407)


- - - -(1,064) (1,064)

Net profit for the year (Restated)

- - - -4,670 4,670

Balance at January 1, 2005 (Restated) 19,974 87,308 - 407 (53,922) 53,767

Issue of shares 20 135 93 - - - 228

Recognition of share based payment

21 - 7 - 190 - 197

Dividend paid 28 - - - - (1,000) (1,000)


- - - - 8,580 8,580

Balance at December 31, 2005

20,109 87,408-

597 (46,342) 61,772


STATEMENTS OF CHANGES IN EQUITY YEAR ENDED DECEMBER 31, 2005


2005 2004

$’000 $’000

Restated

Operating activities

Profit before income tax 10,224 6,799

Adjustments for:

Share based payment 197 407

Reversal of doubtful trade receivables (7) (65)

Allowance of inventories 240 456

Impairment loss on available-for-sale investments 80 -

Depreciation 4,005 3,624

Loss on disposal of plant and equipment 31 3

Amortisation on deferred expenditure 2,553 2,223

Provision for (Reversal of ) warranty 18 (76)

Interest income (177) (27)

Interest expense 1,310 770

Operating profit before working capital changes 18,474 14,114

Trade receivables (2,230) (14,322)

Other receivables and prepayments (405) (135)

Inventories (6,552) (5,166)

Trade payables (9,625) 5,834

Other payables and provisions 6,469 810

Cash generated from operations 6,131 1,135

Interest paid (1,310) (770)

Income tax paid (273) (195)

Net cash from operating activities 4,548 170

CONSOLIDATED CASH FLOW STATEMENTYEAR ENDED DECEMBER 31, 2005



Note 2005 2004

$’000 $’000

Restated

Investing activities

Proceeds from available-for-sale investments 560 -

Proceeds on disposal of property, plant and equipment 128 51

Purchase of property, plant and equipment A (11,610) (4,318)

Deferred expenditure (2,696) (2,121)

Interest received 177 27

Net cash used in investing activities (13,441) (6,361)

Financing activities

Dividend paid (1,000) -

Decrease in pledged fixed deposits 1,718 899

Repayment of obligations under finance leases A (1,072) (261)

Net proceeds from bank borrowings 15,007 6,931

Proceeds from issue of shares 228 87

Net cash from financing activities 14,881 7,656

Effect of translation of foreign subsidiaries (320) 101

Net increase in cash and cash equivalents 5,668 1,566

Cash and cash equivalents at beginning of year 9,657 8,091

Cash and cash equivalents at end of year 15,325 9,657

Cash and cash equivalents consist of:

Cash and bank balances 15,325 11,375

Less: Fixed deposit pledged - (1,718)

15,325 9,657

Note A: Purchase of Property, Plant and Equipment

During the financial year the Group acquired property, plant and equipment with an aggregate cost of $22,040,000 (2004 : $4,968,000 ) of which $6,696,000 (2004 : $650,000 ) was acquired by means of finance leases and $3,734,000 was financed by a 3-year deferred payment scheme agreed with the developer. Cash payments of $11,610,000 (2004 : $4,318,000 ) were made to purchase the property, plant and equipment.


CONSOLIDATED CASH FLOW STATEMENTYEAR ENDED DECEMBER 31, 2005


1 GENERAL

The Company (Registration No. 1986-01642-R) is incorporated in the Republic of Singapore with its principal place of business and registered office at 31 Ubi Road 1, Aztech Building, Singapore 408694. The Company is listed on the Singapore Stock Exchange Dealing and Automated Quotation Systems. The financial statements are expressed in Singapore dollars.

The principal activities of the Company are to engage in the design, manufacture and distribution of multicommunication products and computer peripherals.

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

The consolidated financial statements of the Group and the balance sheet and statement of changes in equity of the Company for the year ended December 31, 2005 were authorised for issue by the Board of Directors on March 17, 2006.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF ACCOUNTING – The financial statements are prepared in accordance with the historical cost convention, except as disclosed in the accounting policies below, and are drawn up in accordance with the provisions of the Singapore Companies Act and Singapore Financial Reporting Standards (“FRS”).

In the current financial year, the Group has adopted all the new and revised FRSs and Interpretations of FRS (“INT FRS”) issued by the Council on Corporate Disclosure and Governance that are relevant to its operations and effective for annual periods beginning on or after January 1, 2005. The adoption of these new/revised FRSs and INT FRSs has no material effect on the financial statements except as disclosed below and in the notes to the financial statements.

FRS 39 – Financial Instruments: Recognition and Measurement

In accordance with FRS 39, investments are classified as “available-for-sale investments”, “financial assets at fair value through profit and loss”, “loans and receivables”, and “held-to-maturity investments”. The classification depends on the purpose of holding the investments. Under this accounting standard, the investments of the Group are classified as “available-for-sale investments” and are carried at fair value, with changes in fair values recognised in equity. The changes in accounting policies have been made in accordance with the transitional provision of FRS 39. The investments of the Group are reclassified from “other investments” to “available-for-sale investments” and no financial impact has arisen as a result of the change as the carrying value approximates the fair value at the time of adoption of this standard.

FRS 39 provides more rigorous criteria for the derecognition of financial assets than the criteria adopted in previous periods. Under FRS 39, a financial asset is derecognised, when and only when, either the contractual rights to the asset’s cash flow expire, or the asset is transferred and the transfer qualifies for derecognition in accordance with FRS 39. The decision as to whether a transfer qualifies for derecognition is made by applying a combination of risks and rewards and control tests. The Group has adopted the relevant transitional provisions and the revised accounting policy prospectively for transfers of financial assets on or after January 1, 2005. As a result, the Group’s discounted bills with recourse amounting to $823,000 which were outstanding but derecognised at December 31, 2004 have not been restated. However, related bank borrowings of approximately $4,164,000 have been recognised as permitted under FRS 39 on the balance sheet date. The change has no effect on the results for the year and any prior period.

NOTES TO FINANCIAL STATEMENTSDECEMBER 31, 2005


NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2005

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

FRS 102 – Share-based Payment

Equity-settled share option scheme

FRS 102 Share-based Payment requires the recognition of equity-settled share-based payments at fair value at the date of grant. Prior to the adoption of FRS 102, the Group did not recognise the financial effect of share-based payments until such payments were settled.

In accordance with the transitional provisions of FRS 102, the accounting standard has been applied retrospectively to all grants of equity instruments after November 22, 2002 that were unvested as of January 1, 2005. The accounting standard therefore applies to share options granted in 2004.

For 2004, the change in accounting policy has resulted in a net decrease in profit for the year of $407,000. The balance sheet at December 31, 2004 has been restated to reflect the recognition of a share options reserve of $407,000.

For 2005, the impact of share-based payments is a net charge to income of $197,000. At December 31, 2005, the share options reserve amounted to $597,000.

The share-based payments expense of $197,000 (2004 : $407,000) has been included as part of administrative expenses.

FRS 21 (revised) – The Effects of Changes in Foreign Exchange Rates

In accordance with FRS 21 (revised), the exchange differences arising on a monetary item that form part of a reporting entity’s net investment in a foreign operation shall be recognised in profit or loss in the separate financial statements of the reporting entity or the individual financial statements of the foreign operation, as appropriate. In the financial statements that include the foreign operation and the reporting entity (e.g. consolidated financial statements when the foreign operation is a subsidiary), such exchange differences shall be recognised initially in a separate component of equity and recognised in profit or loss on disposal of the net investment.

With the adoption of FRS 21 (revised) retrospectively from January 1, 2005, the currency translation differences of $1,064,000 which was previously recognised in the Company’s foreign currency translation reserve, has now been recognised as an expense in the profit and loss statement of the Company. Accordingly, the accumulated losses as at January 1, 2005 of the Company has been increased by $1,064,000.

The adoption of FRS 21 (revised) does not have any financial impact to the financial statements of the Group.

At the date of authorisation of these financial statements, the following FRSs and INT FRSs were issued but not effective:

• FRS 40 - Investment Property• FRS 106 - Exploration for and Evaluation of Mineral Resources• FRS 107 - Financial Instruments: Disclosure• INT FRS 104 - Determining whether an Arrangement contains a Lease

• INT FRS 105 - Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds

• INT FRS 106 - Liabilities Arising from Participating in a Specific Market – Waste Electrical and Electronic equipment



Amendments to FRS 1 Presentation of Financial Statements on Capital Disclosures.

Amendments to FRS 101 First-time Adoption of Financial Reporting Standards on comparative disclosures for FRS 106 Exploration for and Evaluation of Mineral Resources.

Amendments to FRS 104 Insurance Contracts on financial guarantee contracts.

Consequential amendments were also made to various standards as a result of these new/revised standards.

Amendments to hedge accounting provisions of FRS 39 Financial Instruments: Recognition and Measurement on hedge accounting provisions, fair value option and financial guarantee contracts.

The Directors anticipate that the adoption of the above FRSs, INT FRSs and amendments to FRSs that were issued but not yet effective until future periods will not have a material impact on the financial statements of the Group.

BASIS OF CONSOLIDATION – The consolidated financial statements incorporate the financial statements of the Company and entities (including special purpose entities) controlled by the Company (its subsidiaries). Control is achieved when the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated profit and loss statement 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 into line with those used by other members of the Group.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Minority interests in the net assets of the consolidated subsidiaries are identified separately from the Group’s equity therein. Minority interests consist of the amount of those interests at the date of the original business combination (see below) and the minority’s share of changes in equity since the date of the combination. Losses applicable to the minority in excess of the minority’s interest in the subsidiary’s equity are allocated against the interests of the Group except to the extent that the minority has a binding obligation and is able to make an additional investment to cover its share of those losses.

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.

BUSINESS COMBINATIONS – The acquisition of subsidiaries is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under FRS 103 are recognised at their fair values at the acquisition date, except for non-current assets (or disposal groups) that are classified as held for sale in accordance with FRS 105 Non-Current Assets Held for Sale and Discontinued Operations, which are recognised and measured at fair value less costs to sell.





Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in the consolidated profit and loss statement.

The interest of minority shareholders in the acquiree is initially measured at the minority’s proportion of the net fair value of the assets, liabilities and contingent liabilities recognised.

FINANCIAL INSTRUMENTS – Financial assets and financial liabilities are recognised on the Group’s balance sheet when the Group becomes a party to the contractual provisions of the instrument.

Trade receivables

Trade receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in the profit and loss statement when there is objective evidence that the asset is impaired. The allowance recognised is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition.

Available-for-sale investments

For available-for-sale investments, gains and losses arising from changes in fair value are recognised directly in equity, until the security is disposed of or is determined to be impaired, at which time the cumulative gain or loss previously recognised in equity is included in the profit or loss for the period. Impairment losses recognised in the profit or loss for equity instruments classified as available-for-sale are not subsequently reversed through profit or loss.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

Financial liabilities and equity

Financial liabilities and equity instruments issued by the Group are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. The accounting policies adopted for specific financial liabilities and equity instruments are set out below.

Bank borrowings

Interest-bearing bank loans and overdrafts are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method. Any difference between the proceeds (net of transaction costs) and the settlement or redemption of borrowings is recognised over the term of the borrowings in accordance with the Group’s accounting policy for borrowing costs (see below).




Trade payables

Trade payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method.

Equity instruments

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

INVENTORIES – Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Cost is calculated using the weighted average method. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.

PROPERTY, PLANT AND EQUIPMENT – Property, 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.

The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised as income.

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

• Freehold property - 2%• Leasehold property - 1.75% to 4%• Computer and office equipment - 20% to 33.33%• Factory equipment - 12.5% to 20%• Factory furniture and fittings - 20%• Office furniture and fittings - 20%• Research and development equipment and tools - 20% to 33.33%• Software applications - 33.33%• Motor vehicles - 20%

Fully depreciated assets still in use are retained in the financial statements.

Properties in the course of construction for production, rental or administrative purposes, or for purposes not yet determined, are carried at cost, less any recognised impairment loss. Cost includes professional fees and, for qualifying assets, borrowings costs capitalised in accordance with the Group’s accounting policy. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, the term of the relevant leases.




RESEARCH AND DEVELOPMENT COSTS – Expenditure on research activities is recognised as an expense in the period in which it is incurred. An internally generated intangible asset is recognised only if all the following conditions are met:

- an asset is created that can be identified; - it is probable that the asset created will generate future economic benefits; and - the development cost of the asset can be measured reliably.

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 normally does not exceed 3 years. Where no internally generated asset can be recognised, development expenditure is charged to the profit and loss statement in the period in which it is incurred.

IMPAIRMENT OF ASSETS EXCLUDING GOODWILL – 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 any). When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in the profit and loss statement, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so 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 (cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in the profit and loss statement, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

PROVISIONS – Provisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group will be required to settle that obligation. Provisions are measured at the directors’ best estimate of the expenditure required to settle the obligation at the balance sheet date, and are discounted to present value where the effect is material.

Warranty costs are provided on the basis that reflects the estimated liability to repair or replace products covered under warranty at the year end date, and are determined based on past history of such costs.

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.




The Group as lessor

Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term.

The Group as lessee

Assets held under finance leases are recognised as assets of the Group at their fair value or, if lower, at the present value of the minimum lease payments, determined at the inception of the lease. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Group’s general policy on borrowing costs.

Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight-line basis over the lease term.

SHARE-BASED PAYMENTS – The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value (excluding the effect of non market-based vesting conditions) at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of shares that will eventually vest and adjusted for the effect of non market-based vesting conditions.

Fair value is measured using the Black-Scholes pricing model. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferrability, exercise restrictions and behavioural considerations.

REVENUE RECOGNITION – Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts and sales related taxes.

Sales of goods are recognised when goods are delivered and title has passed.

Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount.

Dividend income from investments is recognised when the shareholders’ rights to receive payment have been established.

BORROWING COSTS – Borrowing costs directly attributable to the acquisition, construction, or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in the profit and loss statement in the period in which they are incurred.




RETIREMENT BENEFIT COSTS – Payments to defined contribution retirement benefit plans are charged as an expense as they fall due. Payments made to state-managed retirement benefit schemes, such as the Singapore Central Provident Fund, are dealt with as payments to defined contribution plans where the Group’s obligations under the plans are equivalent to those arising in a defined contribution retirement benefit plan.

EMPLOYEE LEAVE ENTITLEMENT – Employee entitlements to annual leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave as a result of services rendered by employees up to the balance sheet date.

INCOME TAX – Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the profit and loss statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are not taxable or tax deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted in countries where the subsidiaries operate by the balance sheet date.

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised. Deferred tax is charged or credited to profit and loss statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

FOREIGN CURRENCY TRANSACTIONS AND TRANSLATION – The individual financial statements of each Group entity are presented in the currency of the primary economic environment in which the entity operates (its functional currency). The consolidated financial statements of the Group and the balance sheet of the Company are presented in Singapore dollars, which is the functional currency of the Company, and the presentation currency for the consolidated financial statements.




In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functional currency are recorded at the rates of exchange prevailing on the date of the transaction. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences arising on the settlement of monetary items, and on retranslation of monetary items are included in profit or loss for the period. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in equity. For such non-monetary items, any exchange component of that gain or loss is also recognised directly in equity.

For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations (including comparatives) are expressed in Singapore dollars using exchange rates prevailing on the balance sheet date. Income and expense items (including comparatives) are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are classified as equity and transferred to the Group’s translation reserve. Such translation differences are recognised in profit or loss in the period in which the foreign operation is disposed of.

On consolidation, exchange differences arising from the translation of the net investment in foreign entities (including monetary items that, in substance, form part of the net investment in foreign entities), are taken to the foreign currency translation reserve.

Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate.

3 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

Critical judgements in applying the Group’s accounting policies

In the process of applying the Group’s accounting policies which are described in Note 2 above, the management is of the opinion that there are no critical judgements involved that have a significant effect on the amounts recognised in the financial statements.

Key sources of estimation uncertainty

Other than the matter discussed below, management is of the view that there are no assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

Recoverability of deferred development cost

During the year, management reconsidered the recoverability of its deferred expenditure, which is included in its balance sheet at December 31, 2005 at $3,970,000. This assessment of the recoverability of the deferred expenditure cost is based on the presumption that the outcome of the projects can be estimated reliably. Management has reviewed the status of such projects and is satisfied that the estimated revenue from the projects is realistic and indicates full project recovery.


4 FINANCIAL RISKS AND MANAGEMENT

The main risks arising from the Group’s financial instruments are credit risk, interest rate risk, liquidity risk and foreign exchange risk. The Board of Directors reviewed and adopted the policies for managing each of these risks and they are summarised below:

i) Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss to the Group. The Group has adopted the policy of only dealing with creditworthy counterparties as a means of mitigating the risk of financial losses from default. Credit risk is managed through the application of credit approvals, credit limits and monitoring procedures. Where appropriate, the Group obtains collateral from its customers. Cash terms, advance payments and letter of credits are required for customers of lower credit standing. An allowance for impairment is made where there is an identified loss event which, based on previous experience, is evidence of a reduction in the recoverability of the cash flows.

As of December 31, 2005, 28.5% (2004 : 68.8%) of trade receivables for the Group relate to amounts due from 5 major customers.

The Group places its cash with creditworthy institutions.

The maximum exposure to credit risk in the event that the counterparties fail to perform their obligations as at the end of the financial year in relation to each class of recognised financial assets is the carrying amount of those assets as stated in the balance sheet, reduced by the effects of any netting agreements with counterparties.

ii) Interest rate risk

The Group’s exposure to interest rate risk arises from cash and cash equivalents placed with and borrowing from banks and financial institutions in Singapore.

The interest bearing cash and cash equivalents placed with banks are short-term in nature and the interest rate on finance leases are fixed on the date of inception. Variation in short-term interest rate is not expected to have a material impact on the results of the Group.

As interest on bank borrowings varies according to market rates, the Directors are of the view that such variations in interest rate will not have a material impact on the results of the Group. Hence, the Group does not hedge against the interest rate risk associated with its bank borrowings.

iii) Liquidity risk

Liquidity risk refers to the risk that the Group may have difficulty meeting commitments associated with financial instruments.

In the management of liquidity risk, the Group monitors and maintains a level of cash and cash equivalents deemed adequate by the management to finance the Group’s operations and where required, additional funding is obtained through bank borrowings.



4 FINANCIAL RISKS AND MANAGEMENT (CONT’D)

iv) Foreign currency risk

The Group generates revenue and incurs costs in foreign currencies which give rise to foreign exchange risk. In the management of foreign exchange risk, the Group has both its foreign currency receipts and payments predominantly in United States dollars, thereby creating a natural hedge to mitigate the effects of fluctuations in exchange rates. The Group also manages foreign currency risk by closely monitoring the timing of the inception and settlement of the foreign currency transactions. It is the Group’s policy not to enter into derivative contracts.

v) Fair values of financial assets and liabilities

The fair values of financial assets and financial liabilities reported in the balance sheet approximate the carrying amounts of those assets and liabilities, due to the relatively short-term maturity of these financial instruments. The fair values of other classes of financial assets and liabilities are disclosed in the respective notes to financial statements.

5 RELATED COMPANY BALANCES

Related companies in these financial statements refer to members of the Group of companies. The intercompany balances are unsecured, interest-free and are repayable within the next twelve months unless stated otherwise.

6 RELATED PARTY TRANSACTIONS

(a) Related parties are entities with common direct or indirect shareholders and/or directors. 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.

(b) By virtue of Section 7 of the Singapore Companies Act, Michael Mun Hong Yew is deemed to have an interest in the Company and in all the subsidiaries of the Company.

In accordance with FRS 24 - Related Party Disclosures, the close members of the family of Michael Mun Hong Yew are considered to be related parties.

(c) Some of the Group’s transactions and arrangements are with related parties and the effect of these on the basis determined between the parties are reflected in these financial statements. Such related party transactions are reviewed by the Audit Committee. The balances with related parties are unsecured, interest-free and repayable within the next twelve months unless otherwise stated.



6 RELATED PARTY TRANSACTIONS (CONT’D)

During the year, Group entities entered into the following transactions with related parties:

GROUP

2005 $’000

2004 $’000

(1) Transaction with companies in which Michael Mun Hong Yew has an equity interest:

Rental income (24) (24)

Revenue from sale of goods - (97)

Purchase of goods 25 39

(2) Transaction with a company in which a relative of Michael Mun Hong Yew has an equity interest:

Purchase of goods - 703

(3) Transaction with an entity in which Michael Mun Hong Yew is a director:

Return of capital from venture fund (608) -

(4) Transaction with companies in which certain Independent Directors have an interest:

Consulting services 6 38

Corporate secretarial services 10 10

(5) Salaries paid to employees of the Group who are relatives of Michael Mun Hong Yew:

Salary expenses 174 134

The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or received. No expense has been recognised in the period for bad or doubtful debts in respect of the amounts owed by related parties.



6 RELATED PARTY TRANSACTIONS (CONT’D)

Compensation of Directors and key management personnel

The remuneration of Directors and other members of key management during the year was as follows:

GROUP

2005 $’000

2004 $’000

Short-term benefits 2,457 1,850

Share based payments 94 206

2,551 2,056

The remuneration of Directors and key management is determined by the Remuneration Committee having regard to the performance of individuals.

7 CASH AND BANK BALANCES

GROUP COMPANY

2005 $’000

2004 $’000

2005 $’000

2004 $’000

Cash at bank 7,915 3,917 168 261

Fixed deposits 7,361 7,420 7,278 5,614

Cash on hand 49 38 4 1

Total 15,325 11,375 7,450 5,876

Bank balances and cash comprise cash held by the Group and short-term bank deposits with an original maturity of 3 months or less. The carrying amounts of these assets approximate their fair values.

Fixed deposits bear interest at an average rate of 2.4% (2004 : 1.2%) per annum and for a tenor of approximately 30 days (2004 : 30 days).

The Group and the Company’s cash and bank balances that are not denominated in the functional currencies of the respective entities are as follow:

GROUP COMPANY

2005 $’000

2004 $’000

2005 $’000

2004 $’000

Renminbi 38 4 - -

United States dollars 6,498 7,518 952 2,888

Hong Kong dollars - 13 - -



8 TRADE RECEIVABLES

GROUP COMPANY

2005 $’000

2004 $’000

2005 $’000

2004 $’000

Outside parties 31,521 29,151 3,055 2,321

Allowance for doubtful trade receivables (25 ) (12 ) - -

Trade receivables due from related parties (Note 6)

435 555 428 547

Total 31,931 29,694 3,483 2,868

The Group and the Company’s trade receivables that are not denominated in the functional currencies of the respective entities are as follow:

GROUP COMPANY

2005 $’000

2004 $’000

2005 $’000

2004 $’000

United States dollars 27,683 28,067 3,055 2,321

Hong Kong dollars 67 - - -

Malaysia Ringgit - 47 - -

9 OTHER RECEIVABLES AND PREPAYMENTS

GROUP COMPANY

2005 $’000

2004 $’000

2005 $’000

2004 $’000

Current

Other receivables and prepayments

1,123 718 65 44

Subsidiaries (Notes 5 and 11) - - 56,249 46,835

Allowance for doubtful other receivables

- - (23,740)

(23,005 )

Total 1,123 718 32,574 23,874

Non current

Subsidiaries ( Notes 5 and 11) - - - 19,311

Allowance for doubtful other receivables

- - - (19,311)

Total - - - -



9 OTHER RECEIVABLES AND PREPAYMENTS (CONT’D)

The Group and the Company’s other receivables and prepayments that are not denominated in the functional currencies of the respective entities are as follow:

GROUP COMPANY

2005 $’000

2004 $’000

2005 $’000

2004 $’000

United States dollars 391 - 31,296 23,299

Hong Kong dollars 83 - - -

10 INVENTORIES

GROUP

2005 $’000

2004 $’000

At cost:

Finished goods 4,014 3,985

Work-in-progress 6,636 4,997

Raw materials 19,024 15,082

29,674 24,064

Finished goods, at net realisable value 2,104 1,402

Total 31,778 25,466

11 INVESTMENT IN SUBSIDIARIES

COMPANY

2005 $’000

2004 $’000

Unquoted equity shares, at cost 57,478 38,156

Impairment loss (40,121 ) (20,923 )

Carrying amount 17,357 17,233



11 INVESTMENT IN SUBSIDIARIES (CONT’D)

The subsidiaries of the Group are set out below:

Name of Company

Place of incorporation and operation

Proportion of ownership interest

and voting power held by the Group

Cost of investment by

the CompanyPrincipal

activity

2005 %

2004 %

2005 $’000

2004 $’000

Held by the Company

AZ – Technology Sdn Bhd (1)

Malaysia 100 100 61 61 Distribution and sale of multicommunication

products and computer peripherals

and provision of marketing services

Aztech Systems GmbH(2)

Germany 100 100 6,531 6,531 Distribution and sale of multicommunication

products and computer peripherals and

provision of marketing services

Aztech Labs, Inc. (2) United States of America

100 100 24,614 5,292 Distribution and sale of multicommunication


and provision of marketing services

ThatWeb.Com Inc.(2) (3)

United States of America

100 100 * * Dissolved

Aztech International Ltd (2)

Hong Kong 100 100 * * Dormant

Aztech Systems (Hong Kong) Ltd (1)

Hong Kong 100 100 13,922 13,922 Manufacture and sale of multicommunication


Azfin Semiconductors Pte Ltd

Singapore 82 82 3,000 3,000 Dormant



Name of Company






activity

2005 %

2004 %

2005 $’000

2004 $’000

Shiro Corporation Pte Ltd

Singapore 100 100 250 250 Manufacture, development and sale

of consumer electronic products and computer

peripherals

Shiro Corporation (HK) Limited (1)

Hong Kong 100 100 * * Sale of consumer electronic products and

computer peripherals

Hitemco Pte Ltd Singapore 100 100 3,000 3,000 Development of and investment

in properties

Shiro International Pte Ltd (Formerly known as Azuno Manufacturing Pte Ltd)

Singapore 100 100 100 100 Dormant

Aztech Communication Pte Ltd (Formerly known as ThatWeb Solutions Pte Ltd)

Singapore 100 100 6,000 6,000 Research and development

and sales of internet related products

and services

Held by Aztech Systems (Hong Kong) Ltd

Aztech Communication Device (DG) Ltd (1)

People’s Republic of China

100 100 - - Manufacture and sale of multicommunication

products and plastic injection parts





Name of Company






activity

2005 %

2004 %

2005 $’000

2004 $’000

Held by Aztech Systems(Hong Kong) Ltd

Aztech Communication Device (Shenzhen) Ltd (1)


100 100 - - Research and development of

multicommunication products

Held by ThatWeb Solutions Pte Ltd

ThatWeb Solutions (Shanghai) Co. Ltd (4)


- - - - In process of liquidation

57,478 38,156

All the companies are audited by Deloitte & Touche, Singapore except for the subsidiaries that are indicated as follows:

(1) Audited by overseas practices of Deloitte Touche Tohmatsu.

(2) Not required to be audited by law in its country of incorporation. The net tangible asset (NTA) and pre-tax profits of the entities are less than 20% of the Group’s consolidated NTA and pre-tax profits respectively. Their unaudited financial statements have been reviewed as part of the Group audit.

(3) The company was dissolved on February 2, 2005.

(4) Not audited as the company is in the process of liquidation.

* Less than $1,000.




12 AVAILABLE-FOR-SALE INVESTMENTS

GROUP COMPANY

2005 $’000

2004 $’000

2005 $’000

2004 $’000

Non-current

At cost:

Unquoted venture fund* 894 1,501 894 1,501

Unquoted equity shares 220 220 220 220

Club memberships 363 316 316 316

1,477 2,037 1,430 2,037

Impairment loss (380 ) (300 ) (380 ) (300 )

Fair value 1,097 1,737 1,050 1,737

* Michael Mun Hong Yew is also a Director of this venture fund. Accordingly, the venture fund is a related party.



13 P

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13 P

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13 P

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13 PROPERTY, PLANT AND EQUIPMENT (CONT’D)

(c) Major properties of the Group are as follows:

Description Location Existing useArea

(in sq metres)Tenure of

lease Net Book Value

2005$’000

2004$’000

Leasehold Property

31 Ubi Road 1 Aztech Building

Singapore 408694

Self use and for rental

7,114 27 years with effect

from July 27, 1994 with an

option to renew for a further 30 years

22,476 22,961

Freehold Property

ACE Building (5th Storey)

146B Paya Lebar Road Singapore

409017

For rental 545 Freehold 2,038 2,073

Leasehold Property

Dongguan Jiu Jiang Shui

Village, Chang Ping Town,

Dong Guan City, Guang Dong

Province, China

Self use 43,146 50 years with effect

from October 1,

2002

9,574 -

The Aztech Building is used substantially for supply of goods and services and for administrative support purposes by the Group and the Company.

The fair value of the ACE Building which is held for rental purposes is $2,000,000 (2004 : $2,000,000) based on the professional valuation carried out by Cushman and Wakefield on February 1, 2006 on an open market value basis.



14 DEFERRED TAX ASSETS

The following are the major deferred tax liabilities and assets recognised and the movements thereon, during the current and prior reporting periods:

Accelerated tax depreciation

$’000Provisions

$’000Tax losses

$’000Total

$’000

Group

At January 1, 2005 - - - -

Charge (credit) to profit and loss for year

361 (32 ) (597 ) (268 )

At December 31, 2005 361 (32 ) (597 ) (268 )

Certain deferred tax assets and liabilities have been offset in accordance with the Group and Company’s accounting policy. The following is the analysis of the deferred tax balances (after offset) for balance sheet purposes:

GROUP COMPANY

2005 $’000

2004 $’000

2005 $’000

2004 $’000

Deferred tax liabilities 361 - - -

Deferred tax assets (629 ) - - -

Net (268 ) - - -

Subject to the agreement with the Comptroller of Income Tax and the tax authorities in the relevant foreign tax jurisdictions in which the Group operates and conditions imposed by law, the Group has tax losses carryforwards available for offsetting against future taxable income as detailed below. In addition, the Singapore tax loss carryforwards are subject to the retention of majority shareholders as defined.

GROUP COMPANY

2005 $’000

2004 $’000

2005 $’000

2004 $’000

As at January 1 62,953 85,933 6,310 27,864

Adjustment for prior years 17,707 (10,307 ) 17,964 (11,954 )

Arising in current year 314 583 - -

Exchange difference (467 ) - - -

Amount utilised (14,468 ) (13,256 ) (11,994 ) (9,600 )

As at December 31 66,039 62,953 12,280 6,310

Deferred tax benefit on above not recorded

16,718 16,853 2,456 1,262



14 DEFERRED TAX ASSETS (CONT’D)

A net deferred tax asset has been recognised in respect of $3,407,000 (2004 : Nil) of such losses. No deferred tax asset has been recognised in respect of the remaining tax losses of $62,632,000 (2004 : $62,953,000) due to the unpredictability of future profit streams of the relevant subsidiaries and the fact that the tax losses of the Company have yet to be finalised by the Singapore tax authorities.

Future tax benefits from the Group tax losses carryforwards amounting to $41,065,000 are available for an unlimited future period. The remaining tax losses carryforwards amounting to $24,974,000 have a limited life ranging from 15 to 20 years to offset against future profits after which any unutilised amount will be forgone.

15 DEFERRED EXPENDITURE

GROUP $’000

COMPANY $’000

Deferred development cost

Costs:

At January 1, 2004 10,326 9,547

Additions 2,121 1,485

At January 1, 2005 12,447 11,032

Additions 2,696 2,879

Currency realignment 3 -

At December 31, 2005 15,146 13,911

Accumulated amortisation:

At January 1, 2004 6,394 6,378

Amortisation for the year 2,223 2,047

At January 1, 2005 8,617 8,425

Amortisation for the year 2,553 2,077

Currency realignment 6 -

December 31, 2005 11,176 10,502

Carrying amount:

At December 31, 2005 3,970 3,409

At December 31, 2004 3,830 2,607

The deferred expenditure above has finite useful lives, and is amortised. The amortisation period for development costs incurred is 3 years.

The amortisation of deferred development cost has been included under administrative expenses.



16 BORROWINGS

GROUP COMPANY

2005 $’000

2004 $’000

2005 $’000

2004 $’000

Current:

Secured

Bills discounted with recourse

4,164 - 1,146 -

Bills payable 8,590 2,398 - -

Export trade loan 7,798 - - -

Term loan 1,124 - - -

Bank loan 687 687 687 687

Factoring finance - 7,518 - -

Unsecured

Loan from developer 1,245 - - -

23,608 10,603 1,833 687

Non-current:

Secured

Term loan 3,935 - - -

Bank loan 7,328 8,015 7,328 8,015

Unsecured

Loan from developer 2,489 - - -

13,752 8,015 7,328 8,015

Total borrowings 37,360 18,618 9,161 8,702

As the interest on borrowings are at market rate, the management is of the opinion that the carrying value of the borrowings approximates the fair value.



16 BORROWINGS (CONT’D)

GROUP COMPANY

2005$’000

2004$’000

2005$’000

2004$’000

The borrowings are repayable as follows:

On demand or within one year 23,608 10,603 1,833 687

In the second year 4,180 687 687 687

In the third year 3,618 687 687 687

In the fourth year 687 687 687 687

In the fifth year 687 687 687 687

After five years 4,580 5,267 4,580 5,267

37,360 18,618 9,161 8,702

Less: Amount due for settlement within 12 months (shown under current liabilities)

(23,608) (10,603) (1,833) (687)

Amount due for settlement after 12 months 13,752 8,015 7,328 8,015

The Group’s borrowings that are not denominated in the functional currencies of the respective entities are as follow:

GROUP

2005$’000

2004$’000

United States dollars 25,611 9,916

The Group has banking facilities relating to bills discounted with recourse, trade bills payable, revolving credit export trade loan and bank overdrafts of $46,125,210 (2004 : $20,856,000), of which $20,552,000 (2004 : $9,916,000) have been utilised as at December 31, 2005. These banking facilities are secured by a corporate guarantee from the Company (2004 : Banking facilities were secured by a subsidiary’s pledged fixed deposits of approximately $1,718,000, trade receivables of a subsidiary of $9,397,000 (for factoring finance only) and a corporate guarantee from the Company). These banking facilities bear interest rates from 3.1% to 8.5% (2004 : 2.2% to 7.0%) per annum.

The term loan of approximately $5,059,000 extended to the Group is repayable over 3 years. (2006 : $1,124,000; 2007 : $2,248,000; 2008 : $1,687,000). The loan bears interest at United States Prime Lending Rate less 0.5% per annum or at 1.5% over the Lender’s cost of funds, whichever is higher. It is calculated on a 360 day basis and the actual number of days elapsed. The loan is secured by corporate guarantees from the Company.

The bank loan of approximately $9,000,000 extended to the Company is repayable over 156 equal monthly principal instalments of about $57,698 each commencing September 2005. The loan bears interest at the bank’s swap cost for the selected interest period plus 1.75% per annum calculated on a 365 day basis and the actual number of days elapsed. The loan is secured by first fixed legal mortgage over the leasehold building known as Aztech Building at 31 Ubi Road 1, Singapore 408694 and assignment of insurance on the mortgaged property (Note 13).



16 BORROWINGS (CONT’D)

The Group has obtained a 3-year unsecured term loan of $3,733,602 (RMB 18,000,000) from the developer for the construction of new factory in Dong Guan, China. The loan bears interest at 3-year Renminbi lending rate, repayable in monthly installments of $103,750 (RMB 500,000) commencing from January 1, 2006.

17 TRADE PAYABLES

GROUP COMPANY

2005 $’000

2004 $’000

2005 $’000

2004 $’000

Outside parties 20,492 30,117 20 73

Subsidiaries (Notes 5 and 11) - - 14,298 14,263

Total 20,492 30,117 14,318 14,336

Trade payables principally comprise amounts outstanding for trade purchases and ongoing costs.

The Group and Company’s trade payables that are not denominated in the functional currencies of the respective entities are as follow:

GROUP COMPANY

2005 $’000

2004 $’000

2005 $’000

2004 $’000

Renminbi 121 15 - -

United States dollars 12,408 22,625 14,297 14,264

Euro 1 2 - -

Hong Kong dollars 27 98 - -



18 OTHER PAYABLES AND PROVISIONS

GROUP COMPANY

2005 $’000

2004 $’000

2005 $’000

2004 $’000

Subsidiaries (Notes 5 and 11) - - 1,344 295

Accrued expenses 4,394 1,268 1,812 40

Customer deposits 1,331 982 - 218

Provision for warranty 106 88 - -

Payables for property, plant and equipment

3,254 - - -

Other payables 724 984 - 494

Total 9,809 3,322 3,156 1,047

Provision for warranty

Balance at January 1 88 164 - 139

Charge (Reversal) to profit and loss 18 (76 ) - (139 )

Balance at December 31 106 88 - -

The provision for warranty represents management’s best estimate of the Group’s liability under 12 months warranties granted on computer peripherals and multicommunication products based on past experience and industry averages for defective products.

The Group and Company’s other payables that are not denominated in the functional currencies of the respective entities are as follow:

GROUP COMPANY

2005 $’000

2004 $’000

2005 $’000

2004 $’000

Renminbi 72 - - -

United States dollars 4,531 649 1,056 -

Euro 96 - - -

Hong Kong dollars 1,705 552 - -



19 OBLIGATIONS UNDER FINANCE LEASES

GROUP

Minimum lease paymentsPresent value of minimum

lease payments

2005 $’000

2004 $’000

2005 $’000

2004 $’000

Amounts payable under finance leases:

Within one year 2,212 371 1,877 349

In the second to fifth years inclusive 4,710 279 4,358 262

6,922 650 6,235 611

Less: Future finance charges (687 ) (39 ) - -

Present value of lease obligations 6,235 611 6,235 611

Less: Amount due for settlement within 12 months (shown under current liabilities) (1,877 ) (349 )

Amount due for settlement after 12 months 4,358 262

It is the Group’s policy to acquire certain of its property, plant and equipment under finance leases. The average lease term is 3 years. For the year ended December 31, 2005, the average effective borrowing rate was 5.5% (2004 : 4.1%). Interest rates are fixed at the contract date, and thus expose the Group to fair value interest rate risk. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.

The fair value of the Group’s lease obligations approximates their carrying amount.

The Group’s obligations under finance leases are secured by the lessors’ title to the leased assets (Note 13).




20 ISSUED CAPITAL

GROUP COMPANY

2005$’000

2004$’000

2005$’000

2004$’000

Number of ordinary shares of $0.05 each

Authorised 600,000 600,000 30,000 30,000

Issued and paid up:

At January 1 399,477 398,438 19,974 19,922

Exercise of share options 2,710 1,039 135 52

At December 31 402,187 399,477 20,109 19,974

The Aztech Group Share Option Scheme 2000 (“ESOS 2000”) was approved and adopted at the Company’s Extraordinary General Meeting held on March 10, 2000.

Details of the schemes as well as share options granted during the year and those outstanding as at the end of the financial year are set out in paragraph 6 of the Report of the Directors.

During the financial year, 2,710,000 ordinary shares of $0.05 each in the Company were issued at the following subscription price, pursuant to the exercise of options granted under ESOS 2000.

(i) 182,600 at $0.069

(ii) 940,400 at $0.071

(iii) 961,000 at $0.076

(iv) 283,000 at $0.095

(v) 115,000 at $0.173

(vi) 128,000 at $0.137

(vii) 100,000 at $0.135

The new shares ranked pari passu in all respects with existing shares of the Company.

21 EMPLOYEE SHARE BASED COMPENSATION RESERVE

Equity-settled share option scheme

The Company has a share option scheme for all employees of the Group. The scheme is administered by the Remuneration Committee. Options are exercisable at a price based on the average of the last done prices for the shares of the Company on the Stock Exchange of Singapore Dealing and Automated Quotation System for the 5 market days preceding the date of grant. The vesting period is 1 year. If the options remain unexercised after a period of 5 years from the date of grant, the options expire. Options are forfeited if the employee leaves the Group before the options vest. Details of the share options outstanding during the year are as follows:


21 EMPLOYEE SHARE BASED COMPENSATION RESERVE (CONT’D)

GROUP AND COMPANY

2005 2004

Number of share options

Weighted average exercise price

Number of share options

Weighted average exercise price

$ $ $ $

Outstanding at January 1 36,397,300 0.200 27,916,900 0.173

Granted during the year - - 14,265,000 0.138

Forfeited during the year (5,136,000) 0.143 (4,745,600) 0.146

Exercised during the year (2,710,000) 0.085 (1,039,000) 0.084

Expired during the year (4,073,000) 0.267 - -

Outstanding at December 31 24,478,300 0.134 36,397,300 0.200

Exercisable at December 31 24,478,300 0.134 22,852,300 0.154

The weighted average share price at the date of exercise for share options exercised during the year was $0.085. The options outstanding at the end of the year have a weighted average remaining contractual life of 3.1 years (2004 : 3.6 years).

In 2004, options were granted on May 18, June 12 and July 14. The estimated fair values of the options granted on those dates are $164,477, $559,781 and $28,898 respectively. No options were issued in 2005.

These fair values were calculated using The Black-Scholes pricing model. The inputs into the model were as follows:

2005 2004

Weighted average share price Nil $0.13

Weighted average exercise price Nil $0.11

Expected volatility Nil $0.57

Expected life Nil 28 months

Risk free rate Nil 2.3%

Expected dividend yield Nil Nil

Expected volatility was determined by calculating the historical volatility of the Company’s share price over the previous 3 years. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non transferability, exercise restrictions and behavioural considerations.

The Group and the Company recognised total expenses of $197,000 (2004 : $407,000) related to equity-settled share-based payment transactions during the year.

22 REVENUE

GROUP

2005 2004$’000 $’000

Sales of goods 178,584 152,049

Contract income - 86

Total 178,584 152,135




23 OTHER OPERATING INCOME

GROUP

2005 2004$’000 $’000

Rental income 1,126 824Interest income 177 27Others 121 345Total 1,424 1,196

24 FINANCE COSTS

GROUP

2005 2004$’000 $’000

Bank charges 397 381Interest expense for: Trust receipts and invoice financing 807 295 Finance leases 179 19 Long-term bank loan 324 456Total 1,707 1,151

25 INCOME TAX

GROUP

2005 2004 $’000 $’000

Current - Singapore 239 134 - Foreign 135 165(Over) Under provision in prior years – current (10) 66Deferred taxation 78 -Adjustment in respect of deferred tax benefits previously not recognised (346) -Net 96 365

Domestic income tax is calculated at 20% (2004 : 20%) of the estimated assessable profit for the year. Taxation for other jurisdictions is calculated at the rates prevailing in the relevant jurisdictions.

The income tax expense varied from the amount of income tax expense determined by applying the Singapore income tax rate of 20% (2004 : 20%) to profit before income tax as a result of the following differences:-

GROUP

2005 2004 $’000 $’000

Income tax expense of statutory rate 2,045 1,441 Effects of different tax rates of overseas subsidiaries (231) (360)Non-allowable items 2,164 1,640 Deferred tax benefit not recognised 11 151 Utilisation of deferred tax benefits previously not recognised (4,047) (2,703)(Over) Under provision in prior years - current (10) 66 Others 164 130 Total income tax expense 96 365



26 NET PROFIT FOR THE YEAR

GROUP

Net profit for the year has been arrived after charging (crediting) the following:

2005 2004

$’000 $’000

Staff costs (including Directors’ remuneration) 16,654 12,268

Costs of defined contribution plans included in staff costs 687 531

Directors’ remuneration:

Directors of the Company 1,492 1,172

Directors of subsidiaries 118 113

Directors’ fees:

Directors of the Company 185 170

Exchange (gain) loss, net (863) 602

Audit fees paid to auditors:

Auditors of the Company

- Current year 129 91

- Overprovision in current year 20 -

Other auditors 120 64

Non-audit fees paid to auditors:

Auditors of the Company 25 28

Other auditors 18 18

Loss on disposal of plant and equipment 31 3

Depreciation of property, plant and equipment 4,005 3,624

Amortisation of intangible assets (included in administration expenses) 2,553 2,223

Total depreciation and amortisation 6,558 5,847



27 EARNINGS PER SHARE

GROUP

2005 2004

$’000 $’000

Number of shares

Weighted average number of ordinary shares for the purposes of basic earnings per share

400,686 399,414

Effect of dilutive potential ordinary shares:

Share options 10,246 3,898

Weighted average number of ordinary shares for the purposes of diluted earnings per share

410,932 403,312

Earnings

Net profit attributable to shareholders ($’000) 10,128 6,434

Basic earnings per share (cents) 2.53 1.61

Effect of dilutive potential ordinary shares:

Interest on share options (net of tax) 0.06 0.01

Fully diluted earnings per share (cents) 2.47 1.60

Fully diluted earnings per share is based on 410,932,268 (2004 : 403,311,650) ordinary shares assuming the full exercise of share options outstanding during the year and adjusting the (weighted average) number of ordinary shares to reflect the effect of all potentially dilutive ordinary shares.

Impact of changes in accounting policy

Changes in the Group’s accounting policies during the year are described in detail in Note 2 to the financial statements. To the extent that those changes have had an impact on results reported for 2005 and 2004, they have had an impact on the amounts reported for earnings per share. The following table summarises that impact on both basic and diluted earnings per share:-

IMPACT ON BASIC EARNINGS PER SHARE

IMPACT ON DILUTED EARNINGS PER SHARE

2005 cents

2004 cents

2005 cents

2004 cents

Recognition of share-based payments as expenses (0.05) (0.10) (0.05) (0.10)



28 DIVIDEND

On May 13, 2005, a dividend of $0.0025 per ordinary share (total dividend $1,000,000) was paid to shareholders in respect of the financial year ended December 31, 2004. This dividend was not accrued as a liability for the year ended December 31, 2004 in accordance with FRS10 – Events after the Balance Sheet date. However the dividend was disclosed as a reserve as a separate component of equity as permitted under the FRS10 prevailing at that time. However, with the adoption of FRS10 revised, with effect from January 1, 2005, the Company ceased disclosing dividend proposed after the balance sheet date as a separate component of equity. Accordingly, the 2004 comparatives had been restated to conform with the current year treatment where dividends declared after the balance sheet date are disclosed in the notes to the financial statements.

In respect of the current year, the Directors proposed that a dividend of $0.005 per share will be paid to shareholders on May 10, 2006. This dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements. The proposed dividend is payable to all shareholders on the Register of Members on April 20, 2006. The total estimated dividend to be paid is $2,011,000.

29 CONTINGENT LIABILITIES AND COMMITMENTS

(a) Operating lease commitments

GROUP

2005$’000

2004$’000

Minimum lease payments under operating leases included in the profit and loss statement 1,349 1,167

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

GROUP COMPANY

2005$’000

2004$’000

2005$’000

2004$’000

Future minimum lease payments payable:

Within one year 1,139 1,134 409 409

In the second to fifth years inclusive 2,011 2,353 1,497 1,595

After five years 2,847 3,158 2,847 3,158

Total 5,997 6,645 4,753 5,162



29 CONTINGENT LIABILITIES AND COMMITMENTS (CONT’D)

The Group as lessor

The Group rents out its leasehold property in Singapore under operating leases. Property rental income earned during the year was $1,126,000 (2004: $824,000). The properties are expected to generate rental yields of 5.0% on an on going basis. All of the properties held for rental income have committed tenants for the next 3 years.

At the balance sheet date, the Group has contracted with tenants for the following future minimum lease payments:

GROUP

2005 2004

$’000 $’000

Within one year 904 954

In the second to fifth years inclusive 772 485

After five years - -

1,676 1,439

(b) Contingent liabilities

GROUP COMPANY

2005 2004 2005 2004

$’000 $’000 $’000 $’000

Corporate guarantees given by the Company to banks in connection with bank facilities utilised by subsidiaries – secured (Note 16)

- - 26,161 9,916

Corporate guarantee given by the Company to a supplier in connection with purchases by a subsidiary – secured

- - 39 820

Bills discounted with bank – secured - 823 - -

Banker’s guarantees – unsecured 514 504 475 461

In addition to the guarantees disclosed above, the Company has given undertakings to provide continuing financial support to certain of its subsidiaries with capital deficiencies amounting to $15,398,000 (2004 : $33,322,000) to enable them to continue as going concerns and to meet their obligations for at least 12 months from the date of this report.


29 CONTINGENT LIABILITIES AND COMMITMENTS (CONT’D)

(c) Capital expenditure commitments

GROUP AND COMPANY

2005 2004

$’000 $’000

Capital expenditure in respect of the acquisition of property, plant and equipment

Contracted for but not provided for in the financial statements

100 14,318

(d) Land use right

Pursuant to a land use right agreement dated June 15, 2002, a subsidiary of the Company is committed to pay to the local authority in People’s Republic of China land management fee of about $20,000 (RMB100,000) per annum with an increment rate of 10.0% every five years till September 2052.

30 SEGMENT INFORMATION

(a) Business segments

The Group is organised on a worldwide basis into three main operating divisions, namely:

- ODM/OEM Sales : Design, develop, manufacture and market of data communication, voice communication and multimedia products on ODM and OEM basis.

- Contract Manufacturing : Electronic Design and Contract Manufacturing

- Retail Distribution : Distribution and sale of consumer electronic products and computer peripherals

Segment revenue and expense: Segment revenue and expense are the operating revenue and expense reported in the Group’s profit and loss statement that are directly attributable to a segment and the relevant portion of such revenue and expense that can be allocated on a reasonable basis to a segment.

Segment assets and liabilities: Segment assets include all operating assets used by a segment and consist principally of operating receivables, inventories and property, plant and equipment, net of allowances and provisions. Capital expenditure includes the total cost incurred to acquire property, plant and equipment and deferred expenditure directly attributable to the segment. Segment liabilities include all operating liabilities and consist principally of accounts payable.

The comparative figures for business segment have been restated to conform with current year’s presentation. The internet segment was replaced by the retail segment, in order to enhance comparability with current year’s financial statements. Accordingly, reclassifications have been made from the Multi-communication segment (ODM/OEM), to the new retail distribution segment, to arrive at the restated Multi-communication (ODM/OEM) and retail distribution segment figures.




30 S

EGM

ENT

INFO

RM

AT

ION

(CO

NT

’D)

(a)

Bu

sin

ess

seg

men

ts (c

on

t’d)

OD

M/O

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CO

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M

AN

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UR

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RET

AIL

D

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UT

ION

ELIM

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TIO

NG

RO

UP

2005

2004

2005

2004

2005

2004

20

05

20

04

2005

2004

$’00

0$’

000

$’00

0$’

000

$’00

0$’

000

$’

000

$’

000

$’00

0$’

000

Rev

enu

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sal

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88,5

3560

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48,0

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178,

584

152,

135

Inte

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4,75

111

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(14,

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(11,

314)

-

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from

con

tinui

ng o

per

atio

ns10

8,22

599

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60,7

9548

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24,3

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(11,

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178,

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152,

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Inte

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30 S

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INFO

RM

AT

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(CO

NT

’D)

(a)

Bu

sin

ess

seg

men

ts (c

on

t’d)

OD

M/O

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M

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D

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2005

2004

2005

2004

2005

2004

20

05

20

04

20

05

20

04

$’00

0$’

000

$’00

0$’

000

$’00

0$’

000

$’

000

$’

000

$’

000

$’

000

Res

ult

s

Segm

ent r

esul

ts11

,363

12,2

6710

,570

6,3

05 7

61

554

(2,3

88)

(1,5

86)

20

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17,5

40

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com

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1,42

4

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)

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9,6

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30

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27

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22,

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74

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52,8

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5 7

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6

206

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6,55

8

5,

847



30 SEGMENT INFORMATION (CONT’D)

(b) Geographical segments

Segment revenue: Segment revenue is analysed based on the location of customers regardless of where the goods are produced.

Segment assets and capital expenditure: Segment assets and capital expenditure are analysed based on the location of those assets. Capital expenditure includes the total cost incurred to acquire property, plant and equipment and intangible assets.

REVENUE ASSETSCAPITAL

EXPENDITURE

2005$’000

2004$’000

2005$’000

2004$’000

2005$’000

2004$’000

Europe 72,996 60,181 18,176 7,399 13 -

Asia Pacific 66,573 35,107 113,359 82,179 24,702 7,087

North and South Americas 32,849 51,416 6,379 17,528 21 2

Others 6,166 5,431 910 938 - -

Total 178,584 152,135 138,824 108,044 24,736 7,089

31 SUBSEQUENT EVENT

(1) Subsequent to the financial year, the Company issued the 252,000 shares of $0.05 each at the exercise price of $0.11 pursuant to the exercise of options granted under ESOS 2000.

The new shares ranked pari passu in all respect with existing shares of the Company.

(2) On December 21, 2005, the Company entered into a conditional Put and Call Option Agreement with HSBC Institutional Trust Services (Singapore) Limited (“the purchaser”), trustees for Ascendas Real Estate Investment Trust, for the sale of Aztech Building at a consideration of $23,000,000. Profit on disposal of the property is approximately $564,000 which is expected to be booked in the financial year ending December 31, 2006.

Upon the completion of the aforesaid agreement, the Group will enter into a tenancy agreement with the purchaser to lease back the property for a term of 7 years. The annual rental for the first 2 years is $2,043,000. The rental is subject to an escalation of 5.0% in the 3rd year and 5th year of the term.

The condition has been fulfilled upon the passing of the resolution approving the sale and lease back of the property by the shareholders at the Extraordinary General Meeting of the Company held on January 27, 2006 and the sale of the building had been completed on February 21, 2006.



STATEMENT OF DIRECTORS

In the opinion of the Directors, the consolidated financial statements of the Group and the balance sheet and statement of changes in equity of the Company as set out on pages 36 to 83 are drawn up 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, 2005, and of the results, changes in equity and cash flows of the Group and changes in equity of the Company 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 when they fall due.

ON BEHALF OF THE DIRECTORS



March 17, 2006


ANALYSIS OF SHAREHOLDINGSAS AT MARCH 10, 2006

NO. OF ISSUED SHARES : 402,439,000

AMOUNT OF ISSUED SHARE CAPITAL : $20,137,070

CLASS OF SHARES : ORDINARY SHARES

VOTING RIGHTS : 1 VOTE PER SHARE

SIZE OF SHAREHOLDINGS NO. OF SHAREHOLDERS

% NO. OF SHARES %

1 - 999 9 0.07 2,097 0.00

1,000 - 10,000 10,402 77.18 43,187,500 10.73

10,001 - 1,000,000 3,040 22.56 135,192,643 33.59

1,000,001 & ABOVE 26 0.19 224,056,760 55.68

TOTAL 13,477 100.00 402,439,000 100.00

TOP TWENTY SHAREHOLDERS NO. OF SHARES %

AVS INVESTMENTS PTE LTD 71,296,190 17.72

UNITED OVERSEAS BANK NOMINEES PTE LTD 32,322,728 8.03

DBS NOMINEES PTE LTD 24,866,000 6.18

NG SOK CHENG 13,403,474 3.33

MUN HONG YEW 11,783,388 2.93

OCBC NOMINEES SINGAPORE PTE LTD 10,962,000 2.72

DBS VICKERS SECURITIES (S) PTE LTD 8,816,000 2.19

HSBC (SINGAPORE) NOMINEES PTE LTD 5,657,000 1.41

SIEW CHAK HUNG 5,449,790 1.35

MORGAN STANLEY ASIA (S’PORE) SECURITIES PTE LTD 4,750,000 1.18

OCBC SECURITIES PRIVATE LTD 4,532,000 1.13

NG AH KAU @ NG KIM POH 4,403,039 1.09

FOO FONG G 3,923,830 0.98

PHILLIP SECURITIES PTE LTD 3,087,950 0.77

LOH NGIANG GUAN NEE TEO KIEN LOO 3,000,000 0.75

KIM ENG SECURITIES PTE. LTD. 2,101,000 0.52

BRAHMANA KARTA SAKRI OR SUDRIANI SAKRI 2,050,000 0.51

UOB KAY HIAN PTE LTD 2,025,000 0.50

TENG SEE KOON CONSTRUCTION PTE LTD 1,500,000 0.37

CITIBANK CONSUMER NOMINEES PTE LTD 1,476,000 0.37

TOTAL 217,405,389 54.03

Note: As at March 10, 2006, approximately 73.36% of the shareholding was held in the hands of the public. As such, Rule 723 is complied with.


ANALYSIS OF SHAREHOLDINGSAS AT MARCH 10, 2006

SUBSTANTIAL SHAREHOLDERS AS AT MARCH 10, 2006(as shown in the Register of Substantial Shareholders)

NO. OF SHARES

Direct Interest Deemed Interest

1. AVS Investments Pte Ltd 71,296,190 -

2. Task Solutions Limited - 71,296,190*

3. Michael Mun Hong Yew 11,783,388 80,735,998*

* Notes

1. Michael Mun Hong Yew is deemed to have an interest in 71,296,190 ordinary shares (“Shares”) held by AVS Investments Pte Ltd, 439,808 Shares held by AZT Holdings Pte Ltd, 8,000,000 Shares held by his nominees, UOB Nominees Pte Ltd and 1,000,000 Shares held by his nominees, OCBC Securities Pte Ltd.

2. Task Solutions Limited is deemed to have an interest 71,296,190 Shares held by AVS Investment Pte Ltd.


NOTICE IS HEREBY GIVEN THAT the Annual General Meeting of AZTECH SYSTEMS LTD will be held at 31 Ubi Road 1, Aztech Building, Singapore 408694 on Wednesday, April 12, 2006 at 10.00 am for the following purposes:

AS ORDINARY BUSINESS

1. To receive and, if approved, to adopt the Audited Accounts for the financial year ended December 31, 2005 together with the Directors’ Report and Auditors’ Report thereon. [Resolution 1]

2. To declare a final one-tier tax exempt dividend of $0.005 per share for the financial year ended December 31, 2005 as recommended by the Directors. [Resolution 2]

3. To approve the Directors’ Fees of S$185,000 for the financial year ended December 31, 2005. (2004 : S$170,000) [Resolution 3]

4. To re-elect Mr Colin Ng Teck Sim who is retiring under Article 107 of the Articles of Association. [Resolution 4]

5. To re-appoint Messrs Deloitte & Touche as auditors of the Company and to authorize the Directors to fix their remuneration. [Resolution 5]

6. 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:

7. IT WAS RESOLVED THAT the Directors be and are hereby authorised pursuant to the provisions of Section 161 of the Companies Act, Cap. 50 (the “Act”) 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

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

8. IT WAS RESOLVED THAT approval be and is hereby given to the Directors to offer and grant options under the Aztech Group Employees’ Share Option Scheme 2000 which was approved by the shareholders at an Extraordinary General Meeting of the Company on March 10, 2000 (“ESOS 2000”) and to allot and issue from time to time such number of shares in the Company as may be required to be issued pursuant to the exercise of options under the ESOS 2000, PROVIDED ALWAYS THAT the aggregate number of shares to be issued pursuant to the ESOS 2000 shall not exceed fifteen per cent (15%) of the total issued share capital of the Company from time to time. [Resolution 7]

NOTICE OF ANNUAL GENERAL MEETINGAZTECH SYSTEMS LTD (Incorporated in the Republic of Singapore – Company Registration No. 198601642R)



9. IT WAS RESOLVED THAT:-

(a) the purposes of Sections 76C and 76E of the Act, the exercise by the Directors of the Company of all powers of the Company to purchase or otherwise acquire issued ordinary shares of the Company (“Shares”), not exceeding in aggregate the Prescribed Limit (as hereinafter defined), at such price(s) as may be determined by the Directors of the Company from time to time up to the Maximum Price (as hereinafter defined), whether by way of:-

(i) market purchase(s) (each a “Market Purchase”) on the Singapore Exchange Securities Trading Limited (“SGX-ST”); and/or

(ii) off-market purchase(s) (each an “Off-Market Purchase”) effected otherwise than on the SGX-ST in accordance with any equal access scheme(s) as may be determined or formulated by the Directors of the Company as they consider fit, which scheme(s) shall satisfy all the conditions prescribed by the Act,

and otherwise in accordance with all other laws and regulations and rules of the SGX-ST as may for the time being be applicable, be and is hereby authorised and approved generally and unconditionally (the “Share Purchase Mandate”);

(b) unless varied or revoked by the Company in general meeting, the authority conferred on the Directors of the Company pursuant to the Share Purchase Mandate may be exercised by the Directors at any time and from time to time during the period commencing from the passing of this Resolution and expiring on the earlier of:-

(i) the date on which the next annual general meeting of the Company is held; or

(ii) the date by which the next annual general meeting of the Company is required by law to be held;

(c) in this Resolution:-

“Prescribed Limit” means ten per cent (10%) of the issued ordinary share capital of the Company as at the date of passing of this Resolution; and

“Maximum Price” in relation to a Share to be purchased or acquired, means an amount (excluding brokerage, commission, stamp duties, applicable goods and services tax, clearance fees and other related expenses) not exceeding:-

(i) in the case of a Market Purchase, 105% of the Average Closing Price of the Shares; and

(ii) in the case of an Off-Market Purchase pursuant to an equal access scheme, 120% of the Average Closing Price of the Shares;

where:-

“Average Closing Price” means the average of the closing market prices of a Share over the last five (5) market days on which transactions in the Shares were recorded on the SGX-ST immediately preceding the date of the Market Purchase by the Company or, as the case may be, the date of the making of the offer pursuant to the Off-Market Purchase, and deemed to be adjusted for any corporate action that occurs after the relevant five-day period; and

“date of the making of the offer” means the date on which the Company announces its intention to make an offer for the purchase or acquisition of Shares from holders of Shares, stating therein the relevant terms of the equal access scheme for effecting the Off-Market Purchase; and


(d) the Directors of the Company and/or any of them be and are hereby authorised to complete and do all such acts and things (including executing such documents as may be required) as they and/or he may consider expedient or necessary to give effect to the transactions contemplated by this Resolution. [Resolution 8]

NOTICE IS HEREBY GIVEN that the Share Transfer Books and Register of Members of the Company will be closed on April 21, 2006, for the preparation of dividend warrants. The final one-tier tax exempt dividend of $0.005 per share for the financial year ended December 31, 2005 will be paid on May 10, 2006.

Duly completed transfers received by the Company’s Share Registrar, B.A.C.S. Pte Ltd of 63 Cantonment Road, Singapore 089758 up to close of business at 5 p.m. on April 20, 2006 will be registered to determine shareholders’ entitlement to the said dividend. Members whose securities accounts with the Central Depository (Pte) Limited are credited with shares at 5 p.m. on April 20, 2006 will be entitled to the said dividend.

BY ORDER OF THE BOARD

Ms Pavani NagarajahCompany SecretaryDate: March 28, 2006 Singapore

Notes:

(i) A member entitled to attend and vote at the Meeting is entitled to appoint a proxy to attend and vote in his stead. A member of the Company, which is a corporation, is entitled to appoint its authorized representative or proxy to vote on its behalf.

A proxy need not be a member of the Company.

The instrument appointing a proxy must be deposited at the Company’s registered office at 31 Ubi Road 1, Aztech Building, Singapore 408694 at least 48 hours before the time of the Meeting.

(ii) If re-elected under Resolution 4, Mr Colin Ng Teck Sim will remain the Chairman of the Nominating Committee, and a member of the Audit Committee and will be considered an independent director of the Company.

(iii) 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.

(iv) Resolution 7, if passed, will empower the Directors to offer and grant options and issue shares pursuant to the Aztech Group Employees’ Share Option Scheme 2000, which was approved by the shareholders at an Extraordinary General Meeting of the Company on March 10, 2000 (“ESOS 2000”), provided always that the aggregate number of shares to be issued pursuant to ESOS 2000 shall not exceed fifteen per cent (15%) of the Company’s issued share capital for the time being. 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.




EXPLANATORY STATEMENT TO ORDINARY RESOLUTION 8Resolution for the Renewal of the Share Buyback Mandate

SGX-ST assumes no responsibility for the correctness of any of the statements made, reported, contained or opinions expressed in this explanatory statement.

A. Rationale for the Share Purchase Mandate

The purchase by a company of its issued shares is one of the ways in which the return on equity of the company may be improved, thereby increasing shareholder value. By obtaining a Share Purchase Mandate, the Company will have the flexibility to undertake purchases of Shares at any time, subject to market conditions, during the period when the Share Purchase Mandate is in force.

The Share Purchase Mandate will also facilitate the return to the Shareholders by the Company of surplus cash (if any) which is in excess of the Group’s financial needs in an expedient and cost-effective manner.

The Directors further believe that Share purchases by the Company may help to mitigate short-term market volatility in the Company’s Share price, off-set the effects of short-term speculation and bolster Shareholders’ confidence.

If and when circumstances permit, the Directors will decide whether to effect the share purchases via market purchases or off-market purchases, after taking into account the amount of surplus cash available, the prevailing market conditions and the most cost-effective and efficient approach. The Directors do not propose to carry out purchases pursuant to the Share Purchase Mandate to such an extent that would, or in circumstances that might, result in a material adverse effect on the financial position of the Group.

Shareholders should note that purchases or acquisitions of Shares pursuant to the Share Purchase Mandate may not be carried out to the full limit as authorised.

B. Authority and Limits of the Share Purchase Mandate

Approval is being sought from Shareholders at the AGM for the renewal of a general and unconditional Share Buyback Mandate for the purchase by the Company of its issued Shares. If approved, the Share Buyback Mandate will be renewed from the date of the AGM and continue in force until the date of the next annual general meeting of the Company or such date as the next annual general meeting is required by law to be held, unless prior thereto, share buybacks are carried out to the full extent mandated or the Share Buyback Mandate is revoked or varied by the Company in general meeting. The Share Buyback Mandate will be put to Shareholders for renewal at each subsequent annual general meeting of the Company.

The authority and limitations placed on purchases or acquisitions of Shares by the Company under the Share Purchase Mandate are summarised below:-

(a) Maximum Number of Shares

The total number of Shares which may be purchased or acquired by the Company pursuant to the Share Purchase Mandate shall not exceed ten per cent. (10%) of the issued ordinary share capital of the Company as at the date of the last AGM of the Company held before the resolution authorising the Share Purchase Mandate is passed or as at the date on which the resolution authorising the Share Purchase Mandate is passed, whichever is the higher.

Purely for illustrative purposes, on the basis of 402,439,000 Shares in issue as at the Latest Practicable Date March 10, 2006 and assuming that no further Shares are issued on or prior to the AGM, not more than 40,243,900 Shares (representing 10% of the Shares in issue as at that date) may be purchased or acquired by the Company pursuant to the proposed Share Purchase Mandate.


(b) Duration of Authority

Purchases or acquisitions of Shares may be made, at any time and from time to time, by the Company on and from the date of the AGM at which the Share Purchase Mandate is approved up to the earliest of:

(i) the date on which the next AGM of the Company is held or required by law to be held;

(ii) the date on which the share purchases are carried out to the full extent mandated; or

(iii) the time when the authority conferred by the Share Purchase Mandate is revoked or varied by the Shareholders of the Company in general meeting.

The Share Purchase Mandate may be renewed at each AGM or other general meeting of the Company.

(c) Manner of Purchases or Acquisitions of Shares

Purchases or acquisitions of Shares may be effected by the Company by way of:-

(i) on-market purchases (“Market Purchases”); and/or

(ii) off-market purchases, otherwise than on a securities exchange, in accordance with an “equal access scheme” as defined in Section 76C of the Companies Act (“Off-Market Purchases”).

Market Purchases refer to purchases or acquisitions of Shares by the Company effected on the SGX-ST through the Central Limit Order Book trading system, and/or through one or more duly licensed dealers appointed by the Company for the purpose.

In an Off-Market Purchase, the Directors may impose such terms and conditions which are not inconsistent with the Share Purchase Mandate, the Listing Manual, the Act and other applicable laws and regulations, as they consider fit in the interests of the Company in connection with or in relation to any equal access scheme or schemes. An equal access scheme must, however, satisfy the following conditions:-

(i) offers for the purchase or acquisition of Shares shall be made to every person who holds Shares to purchase or acquire the same percentage of their Shares;

(ii) all of those persons shall be given a reasonable opportunity to accept the offers made; and

(iii) the terms of all the offers are the same, except that there shall be disregarded:-

(aa) differences in consideration attributable to the fact that the offers may relate to Shares with different accrued dividend entitlements;

(bb) (if applicable) differences in consideration attributable to the fact that the offers relate to Shares with different amounts remaining unpaid; and

(cc) differences in the offers introduced solely to ensure that each person is left with a whole number of Shares.

Under the Listing Manual, if the Company wishes to make an Off-Market Purchase, the Company will issue an offer document containing, inter alia, the following information to all Shareholders:-

(i) the terms and conditions of the offer;

(ii) the period and procedures for acceptances; and

(iii) the information required under Rule 883(1), (2), (3), (4) and (5) of the Listing Manual.




(d) Maximum Purchase Price

The purchase price (excluding ancillary expenses such as brokerage, commission, applicable goods and services tax, stamp duties, clearance fees and other related expenses) to be paid for the Shares will be determined by the Directors. However, the purchase price to be paid for the Shares must not exceed the maximum price (“Maximum Price”) as set out below:-

(i) in the case of a Market Purchase, 105% of the Average Closing Price of the Shares; and

(ii) in the case of an Off-Market Purchase, 120% of the Average Closing Price of the Shares,

in each case, excluding related expenses of the purchase or acquisition.

For the above purposes:-

“Average Closing Price” means the average of the closing market prices of a Share over the last five (5) Market Days on which transactions in the Shares were recorded on the SGX-ST immediately preceding the date of the Market Purchase by the Company or, as the case may be, the date of the making of the offer pursuant to the Off-Market Purchase, and deemed to be adjusted for any corporate action that occurs after the relevant five-day period; and

“date of the making of the offer” means the date on which the Company announces its intention to make an offer for the purchase or acquisition of Shares from holders of Shares, stating therein the relevant terms of the equal access scheme for effecting the Off-Market Purchase.

C. Purchased Shares: Cancelled or Held in Treasury

Shares which are purchased or acquired by the Company may be cancelled or held by the Company as treasury shares. All shares purchased by the Company will be automatically delisted by the SGX-ST.

If cancelled, all rights and privileges attached to that Share shall expire on cancellation and certificates in respect thereof will be cancelled and destroyed by the Company as soon as reasonably practicable following settlement of any such purchase.

D. Source of Funds

The Company may, at its discretion, purchase Shares pursuant to the Share Purchase Mandate out of capital and/or out of distributable profits.

The Directors do not propose to exercise the Share Purchase Mandate in a manner and to such an extent that the working capital position of the Group would be materially adversely affected.

The Company intends to use internal sources of funds and/or external borrowings to finance purchases or acquisitions of its Shares. The amount of funding required for the Company to purchase or acquire its Shares and the financial impact on the Company and the Group arising from such purchases or acquisitions of the Shares pursuant to the proposed Share Purchase Mandate will depend on, inter alia, the aggregate number of Shares purchased or acquired, the consideration paid at the relevant time, and the amount (if any) borrowed by the Company to fund the purchases or acquisitions.


E. Solvency Test

Under the Act in force as at the Latest Practicable Date, we may not purchase Shares if we know that our Company is not solvent. For this purpose, a company is “solvent” if:

(1) the company is able to pay its debts in full at the time of the payment for the purchase and will be able to pay its debts as they fall due in the normal course of business during the period of 12 months immediately following the date of the payment; and

(2) the value of the company’s assets is not less than the value of its liabilities (including contingent liabilities) and will not after the proposed purchase, become less than the value of its liabilities (including contingent liabilities) having regard to the most recent financial statements of the company and all other circumstances that the directors or managers of the company know or ought to know affect, or may affect, such values.”

F. Financial Effects

The Company’s total issued share capital will be diminished by the total issue price of the Shares purchased or acquired by the Company.

The financial effects on the Group arising from purchases or acquisitions of Shares which may be made pursuant to the Share Purchase Mandate will depend on, inter alia, the aggregate number of Shares purchased or acquired, the consideration paid at the relevant time, and the amount (if any) borrowed by the Group to fund the purchases or acquisitions.

Based on the existing issued and paid-up ordinary share capital of the Company as at the Latest Practicable Date, the purchase by the Company of 10 per cent (10%) of its issued Shares will result in the purchase or acquisition of 40,243,900 Shares.

Assuming the Company purchases or acquires the 40,243,900 Shares at the Maximum Price, the maximum amount of funds required (excluding related brokerage, commission, applicable goods and services tax, stamp duties, clearance fees and other related expenses) is:-

(a) $8.532 million in the case of Market Purchases of Shares based on S$0.212 per Share (being the price equivalent to five per cent. (5%) above the Average Closing Price of the Shares traded on the SGX-ST for the five (5) consecutive Market Days immediately preceding the Latest Practicable Date); and

(b) $9.739 million in the case of Off-Market Purchases of Shares based on S$0.242 per Share (being the price equivalent to twenty per cent. (20%) above the Average Closing Price of the Shares traded on the SGX-ST for the five (5) consecutive Market Days immediately preceding the Latest Practicable Date).

For illustrative purposes only, on the basis of the assumptions set out above, and based on the audited financial statements of the Group for the financial year ended December 31, 2005, and assuming that:-

(i) the Share Purchase Mandate had been effective on January 1, 2005;

(ii) the purchases or acquisitions of Shares are financed solely by internal resources;

(iii) the Company’s distributable profit is S$6.569 million as at December 31, 2005, taking into account the dividend declared in 2005; and

(iv) the capital of the Company is $107.517 million as at December 31, 2005.

The financial effects of the purchase or acquisition of such Shares by the Company on the audited financial statements of the Group for the financial year ended December 31, 2005 would have been as follows:-




Market Purchases

Group Company

Before Share Purchase

After SharePurchase

Before SharePurchase

After SharePurchase

As at December 31, 2005

Shareholders’ Funds (S$’000) 64,645 56,113 61,772 53,240

NTA (S$’000) 60,675 52,143 58,363 49,831

Current Assets (S$’000) 80,157 71,625 43,507 34,975

Current Liabilities (S$’000) 56,069 56,069 19,307 19,307

Total Borrowings (S$’000) 43,595 43,595 9,161 9,161

Number of Shares (000) 402,187 361,943 402,187 361,943

Financial Ratios

NTA per Share (cents) 15.09 14.41 14.51 13.77

Earnings per Share (cents) 2.52 2.80 2.13 2.37

Gearing (times) 0.67 0.78 0.15 0.17

Current Ratio (times) 1.43 1.28 2.25 1.81

Off Market Purchases

Group Company

Before Share Purchase

After SharePurchase

Before SharePurchase

After SharePurchase

As at December 31, 2005

Shareholders’ Funds (S$’000) 64,645 54,906 61,772 52,033

NTA (S$’000) 60,675 50,936 58,363 48,624

Current Assets (S$’000) 80,157 70,418 43,507 33,768

Current Liabilities (S$’000) 56,069 56,069 19,307 19,307

Total Borrowings (S$’000) 43,595 43,595 9,161 9,161

Number of Shares (000) 402,187 361,943 402,187 361,943

Financial Ratios

NTA per Share (cents) 15.09 14.07 14.51 13.43

Earnings per Share (cents) 2.52 2.80 2.13 2.37

Gearing (times) 0.67 0.79 0.15 0.18

Current Ratio (times) 1.43 1.26 2.25 1.75

(1) Total borrowings comprise liabilities arising from borrowings from banks and other financial institutions, and outstanding debt securities.

(2) Gearing is computed based on the ratio of total borrowings to shareholders’ funds.

(3) Current ratio is derived based on current assets divided by current liabilities.


For illustrative purposes, it has been assumed that the purchases or acquisitions of Shares are financed solely by internal resources. Where the purchase or acquisition of Shares is financed through external borrowings or financing, there would also be an increase in the gearing ratios of the Group and the Company and a decline in the current ratios of the Group and the Company, with the actual impact dependent on, inter alia, the number of Shares purchased or acquired and the prices at which the Shares are purchased or acquired.

Shareholders should note that the financial effects set out above are for illustration purposes only (based on the aforementioned assumptions). The actual impact will depend on, inter alia, the number and price of the Shares purchased or acquired (if any). In particular, Shareholders should note that the above analysis is based on the audited financial statements of the Group for the financial year ended December 31, 2005 and is not necessarily representative of future financial performance.

The Company may take into account both financial and non-financial factors (for example, stock market conditions and the performance of the Shares) in assessing the relative impact of a share purchase before execution.

G. Reporting Requirements under the Act

Within 30 days of the passing of a Shareholders’ resolution to approve the purchases of Shares by the Company, the Company shall lodge a copy of such resolution with the Accounting and Corporate Regulatory Authority.

The Company shall notify the Accounting and Corporate Regulatory Authority within 30 days of a purchase of Shares on the SGX-ST or otherwise. Such notification shall include the following:

(1) the date of the purchase;

(2) the number of Shares purchased;

(3) the number of Shares cancelled;

(4) the number of Shares held as treasury shares;

(5) the Company’s issued share capital before the purchase;

(6) the Company’s issued share capital after the purchase;

(7) the amount of consideration paid by the Company for the purchase of the Shares; and

(8) whether the Shares were purchased out of the profits or the capital of the Company.

H. Requirements in the Listing Manual

(a) Under the Listing Manual, a listed company may purchase shares by way of Market Purchases at a price per share which is not more than five percent (5%) above the average closing market price, being the average of the closing market prices of the shares over the last five (5) Market Days, on which transactions in the shares were recorded, before the day on which the purchases were made. The Maximum Price for a Share in relation to Market Purchases by the Company, referred to in section F above, conforms to this restriction.

(b) The Listing Manual specifies that a listed company shall report all purchases or acquisitions of its shares to the SGX-ST not later than 9.00 a.m (i) in the case of a Market Purchase, on the Market Day following the day on which the Market Purchase was effected, and (ii) in the case of an Off-Market Purchase, on the second Market Day after the close of acceptances of the offer. The notification of such purchases or acquisitions to the SGX-ST shall be in such form, and shall include such details, as may be prescribed by the SGX-ST in the Listing Manual.



(c) The Listing Manual does not expressly prohibit any purchase of shares by a listed company during any particular time(s). However, as the Company would be regarded as an “insider” in relation to any proposed purchase or acquisition of its shares, the Company will not undertake any purchase or acquisition of Shares pursuant to the Share Purchase Mandate in the following circumstances:

(i) at any time after any matter or development of a price-sensitive nature has occurred or has been the subject of a decision of the Board until the price-sensitive information has been publicly announced; and

(ii) in the case of Market Purchases, during the period commencing one month immediately before the announcement of the Company’s half-year or full-year results, as the case may be, and (if applicable) the period of two weeks before the announcement of the Company’s other interim results, as the case may be,

(d) The Listing Manual requires a company to ensure that at least ten percent (10%) of equity securities (excluding preference shares and convertible equity securities) in a class that is listed is held by public shareholders. The “public”, as defined under the Listing Manual, are persons other than the directors, chief executive officer, substantial shareholders or controlling shareholders of the Company and its subsidiaries, as well as the associates of such persons.

As at the Latest Practicable Date, there are approximately 295,214,905 Shares in the hands of the public, representing approximately 73.36% of the issued ordinary share capital of the Company. Accordingly, the Company is of the view that there is, at present, a sufficient number of Shares held by public shareholders which would permit the Company to undertake purchases and acquisitions of its Shares up to the full ten percent (10%) limit pursuant to the proposed Share Purchase Mandate, without adversely affecting the listing status of its Shares on the SGX-ST.

I. Certain Take-over Code Implications

(a) Obligation to Make a Take-over Offer

Any resultant increase in the percentage of voting rights held by a Shareholder and persons acting in concert with him, following any purchase or acquisition of Shares by the Company, will be treated as an acquisition for the purposes of Rule 14 of the Take-over Code (“Rule 14”). Consequently, depending on the number of Shares purchased or acquired by the Company and the Company’s issued share capital at that time, a Shareholder or group of Shareholders acting in concert with each other could obtain or consolidate effective control of the Company and could become obliged to make a take-over offer under Rule 14.

(b) Persons Acting in Concert

Under the Take-over Code, persons acting in concert comprise individuals or companies who, pursuant to an agreement or understanding (whether formal or informal), co-operate, through the acquisition by any of them of shares in a company to obtain or consolidate effective control of that company. Unless the contrary is established, the following persons, inter alia, will be presumed to be acting in concert, namely, (i) a company with any of its directors (together with their close relatives, related trusts as well as companies controlled by any of the directors, their close relatives and related trusts), and (ii) a company, its parent, subsidiaries and fellow subsidiaries, and their associated companies and companies of which such companies are associated companies, all with each other. For this purpose, a company is an associated company of another company if the second company owns or controls at least twenty per cent. (20%) but not more than fifty per cent. (50%) of the voting rights of the first-mentioned company.



(c) Effect of Rule 14 and Appendix 2

The circumstances under which Shareholders (including Directors) and persons acting in concert with them respectively will incur an obligation to make a take-over offer under Rule 14 after a purchase or acquisition of Shares by the Company are set out in Rule 14 and Appendix 2 of the Take-over Code. In general terms, the effect of Rule 14 and Appendix 2 is that, unless exempted, Directors and persons acting in concert with them will incur an obligation to make a take-over offer for the Company under Rule 14 if, as a result of the Company purchasing or acquiring Shares, the voting rights of such Directors and their concert parties would increase to thirty per cent. (30%) or more, or, if the voting rights of such Directors and their concert parties fall between thirty per cent. (30%) and fifty percent. (50%) of the Company’s voting rights, the voting rights of such Directors and their concert parties would increase by more than one per cent. (1%) in any period of six (6) months.

Under Appendix 2 of the Take-over Code, a Shareholder not acting in concert with the Directors will not be required to make a take-over offer under Rule 14 if, as a result of the Company purchasing or acquiring its Shares, the voting rights of such Shareholder would increase to thirty per cent. (30%) or more, or, if such Shareholder holds between thirty per cent. (30%) and fifty per cent. (50%) of the Company’s voting rights, the voting rights of such Shareholder would increase by more than one per cent. (1%) in any period of six (6) months. Such Shareholder need not abstain from voting in respect of the resolution authorising the proposed Share Purchase Mandate.

(d) Directors’ and Substantial Shareholders’ Interests

Based on the Register of Directors’ Shareholdings and the Register of Substantial Shareholders of the Company, as at the Latest Practicable Date, the shareholdings of the Directors and of the Substantial Shareholders in the Company before and after the purchase of Shares pursuant to the proposed Share Purchase Mandate, assuming (i) the Company purchases the maximum amount of ten percent (10%) of the issued ordinary share capital of the Company, and (ii) there is no change in the number of Shares held by the Directors and Substantial Shareholders or which they are deemed to be interested in, will be as follows:-

As at Latest Practicable Date

Before Share Purchase After Share Purchase

Total Number of Shares in

which interested % of Issued

Shares (1) % of Issued

Shares (1)

Total Number of share

options held

Directors

Michael Mun Hong Yew (2) 92,519,386 22.99 25.54 3,000,000

Patricia Ng Sok Cheng 13,403,474 3.33 3.70 3,185,000

Colin Ng Teck Sim - - - 500,000

Philip Tan Tee Yong - - - 500,000

Khoo Ho Tong - - - 500,000

Substantial Shareholders

AVS Investments Pte Ltd 71,296,190 17.72 19.68 -

Task Solutions Limited (3) 71,296,190 17.72 19.68 -

Michael Mun Hong Yew (2) 92,519,386 22.99 25.54 3,000,000



Notes:-

(1) Based on an issued share capital of 402,439,000 Shares as at the Latest Practicable Date.

(2) As at the Latest Practicable Date, Michael Mun Hong Yew’s aggregate interest consists of 11,783,388 Shares which he holds directly, 71,296,190 Shares held by AVS Investments Pte Ltd, 439,808 Shares held by AZT Holdings Pte Ltd, 8,000,000 Shares held by UOB Nominees Pte Ltd and 1,000,000 Shares held by OCBC Securities Pte Ltd.

(3) As at the Latest Practicable Date, Task Solutions Limited is deemed to have an interest in 71,296,190 Shares held by AVS Investment Pte Ltd.

As at the Latest Practicable Date, none of our Directors or Substantial Shareholders will be obliged to make a mandatory take-over offer in the event that the Company purchased the maximum 10% of the issued Shares under the proposed Share Purchase Mandate. In this regard, our Substantial Shareholder, Michael Mun Hong Yew, who is presumed to have an interest in 92,519,386 Shares, is regarded as acting in concert with his son Mun Weng Hung who holds 350,000 Shares and 300,000 share options and his brother Mun Hon Pheng who holds 429,235 Shares as at the Latest Practicable Date, pursuant to the Take-over Code.

Shareholders who are in doubt as to whether they would incur any obligation to make a takeover offer as a result of any purchase of Shares by the Company pursuant to the Share Purchase Mandate are advised to consult their professional advisers and/or the Securities Industry Council before they acquire any Shares in the Company during the period when the Share Purchase Mandate is in force.

The statements herein do not purport to be a comprehensive or exhaustive description of all implications that may arise under the Take-over Code. Shareholders are advised to consult their professional advisers and/or the Securities Industry Council and/or other relevant authorities at the earliest opportunity as to whether an obligation to make a take-over offer would arise by reason of any purchase or acquisition of Shares by the Company.

J. No Share Buybacks in the Previous 12 months

The Company has not made any share buybacks in the 12 months preceding the date of this Notice.

K. Recommendation

The Directors are of the opinion that the proposed Share Buyback Mandate for the buyback by the Company of its Shares is in the best interests of the Company. They accordingly recommend that Shareholders vote in favour of the Resolution, being the ordinary resolution number 8 relating to the Share Buyback Mandate set out in page 88 of this Annual Report.

L. Directors’ Responsibility Statement

The Directors collectively and individually accept responsibility for the accuracy of the information given in this Explanatory Statement and confirm, having made all reasonable enquires, that to the best of their knowledge and belief, the facts stated and opinion expressed in this Explanatory Statement are fair and accurate that there are no material facts the omission of which would make any statement in this Explanatory Statement misleading.



I/We __________________________________________________________________________________________

of ____________________________________________________________________________________________

being a Member(s) of Aztech Systems Ltd, hereby appoint Mr/Mrs/Ms

Name Address NRIC/PASSPORT NO.Proportion of

Shareholdings (%)

or failing him/her, the Chairman of the Annual General Meeting of the Company (“AGM”) as my/our proxy, to vote for me/us and on my/our behalf at the AGM of the Company, to be held at 31 Ubi Road 1, Aztech Building, Singapore 408694 on Wednesday, April 12, 2006, and at any adjournment thereof in the following manner:

RESOLUTIONS FOR AGAINST

1. To adopt the Audited Accounts, Director’s Report and Auditors’ Report

2. Declaration of final one-tier tax-exempt dividend of $0.005 per share

3. To approve the payment of Directors’ Fees

4. To re-elect Mr Colin Ng Teck Sim as a Director under Article 107

5. To re-appoint Auditors and authorise Directors to fix their remuneration

6. To authorise Directors to allot shares pursuant to Section 161 of the Companies Act, Cap. 50

7. To authorise Directors to offer and grant options, and allot and issue shares in connection with the exercise of options granted pursuant to Aztech Group Employees’ Share Option Scheme 2000

8. To renew Share Buy Back Mandate

If you wish to exercise all your votes For or Against, please tick with “ √ ”. Alternatively, please indicate the number of votes For or Against each resolution.

If this form of proxy contains no indication as to how the proxy should vote in relation to each resolution , the proxy shall, as in the case of any other business raised at the meeting, vote as the proxy deems fit.

As witness my/our hand(s) this________________________day of________________________2006.

______________________________Signature of Shareholder OR

The Common Seal of the company was hereunto affixed in the presence of :

____________________ ________________________Director Director/Secretary


AZTECH SYSTEMS LTDPROXY FORM ANNUAL GENERAL MEETING

IMPORTANT :

This Annual Report is forwarded to CPF Investors at the request of their CPF Approved Nominees and is sent solely FOR INFORMATION. This Proxy Form is not valid for use by CPF Investors and shall be ineffective for all intents and purposes if used or purported to be used by them.

No. of Shares held

AZTECH SYSTEMS LTD PROXY FORM FOR ANNUAL GENERAL MEETING

NOTES:

1. Please insert the total number of shares held by you. If you have shares entered against your name in the Depository Register (as defined in Section 130A of the Companies Act, Chapter 50), you should insert that number of shares. If you have shares registered in your name in the Register of Members, you should insert that number of shares. If you have shares entered against your name in the Depository Register and shares registered in your name in the Register of Members, you should insert the aggregate number of shares entered against your name in the Depository Register and registered in your name in the Register of Members. If no number is inserted, the instrument appointing a proxy or proxies shall be deemed to relate to all the shares held by you.

2. A member entitled to attend and vote at a meeting of the Company is entitled to appoint not more than two proxies to attend and vote instead of him.

3. Where a member appoints two proxies, he shall specify the percentage of his shares to be represented by each proxy and if no percentage is specified, the first named proxy shall be deemed to represent 100 per cent of his shareholding and the second named proxy shall be deemed to be an alternate to the first named.

4. A proxy need not be a member of the Company.

5. The instrument appointing a proxy or proxies together with the letter or power of attorney, if any, under which it is signed or a duly certified copy thereof, must be deposited at the registered office of the Company at 31 Ubi Road 1, Aztech Building, Singapore 408694, not less than 48 hours before the time appointed for the Annual General Meeting.

6. The instrument appointing a proxy or proxies must be under the hand of the appointor or his attorney duly authorized in writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed either under its seal or under the hand of an officer or attorney duly authorized.

7. A corporation which is a member may authorize by resolution of its directors or other governing body such person as it thinks fit as its representative at the Annual General Meeting, in accordance with Section 179 of the Companies Act Chapter 50.

8. Please indicate with an “ √ ” in the spaces provided whether you wish your vote(s) to be for or against the Resolutions as set out in the Notice of Annual General Meeting. In the absence of specific directions, the proxy/proxies will vote or abstain as he/they may think fit, as he/they will on any other matter arising at the Annual General Meeting.

9. The Company shall be entitled to reject the instrument appointing a proxy or proxies if it is incomplete, improperly completed or illegible or where the true intentions of the appointor are not ascertainable from the instructions of the appointor specified in the instrument appointing a proxy or proxies.

10. In the case of a member whose shares are entered against his name in the Depository Register, the Company may reject any instrument appointing a proxy or proxies lodged if the member, being the appointor, is not shown to have shares entered against his name in the Depository Register as at 48 hours before the time appointed for holding the Annual General Meeting, as certified by The Central Depository (Pte) Limited to the Company.


CORPORATE INFORMATION

CHAIRMAN/CEO


DIRECTORS



Philip Tan Tee Yong

Colin Ng Teck Sim

Khoo Ho Tong

AUDIT COMMITTEE

Philip Tan Tee Yong (Chairman)

Colin Ng Teck Sim

Khoo Ho Tong

NOMINATING COMMITTEE

Colin Ng Teck Sim (Chairman)

Khoo Ho Tong


REMUNERATION COMMITTEE

Khoo Ho Tong (Chairman)

Philip Tan Tee Yong


COMPANY SECRETARIES

Pavani Nagarajah

Pradeep Kumar Singh

AUDITORS

Deloitte & Touche

6 Shenton Way, #32-00

DBS Building, Tower Two

Singapore 068809

Prakash Ambelal Desai

Partner-in-charge

Appointed May 22, 2002

REGISTRAR

B.A.C.S Pte Ltd

63 Cantonment Road

Singapore 089758

REGISTERED OFFICE

31 Ubi Road 1

Aztech Building

Singapore 408694

COMPANY REGISTRATION NO.

198601642R

A razorSHARK Design

H E A D O F F I C E

AZTECH SYSTEMS LTD

No. 31 Ubi Road 1, Aztech Building, Singapore 408694

Tel: (65) 6741-7211 Fax: (65) 6749-1198

Website: http://www.aztech.com

OVERSEAS OFFICES

Greater China Office

AZTECH SYSTEMS (HONG KONG) LTDRooms 2-10, 3/F, No. 1 Science Park East Ave, Hong Kong Science Park, Pak Shek Kok, Shatin, New Territories, Hong KongTel: (852) 2757-1177Fax: (852) 2753-0578

USA

AZTECH LABS, INC. 4005 Clipper CourtFremont, CA 94538, USATel: (1) (510) 683-9800Fax: (1) (510) 683-9803

Germany

AZTECH SYSTEMS GmbH Kreuzberger Ring 2165205 WiesbadenGermanyTel: (49) (0) 611-9748-450 Fax: (49) (0) 611-9748-455

Malaysia

AZ-TECHNOLOGY SDN BHD 105 & 106, Ground Floor, Block A, Kelana Business Centre,97, Jalan SS7/2, Kelana Jaya,47301 Petaling Jaya,Selangor, MalaysiaTel: (60) (03) 7804-8450Fax: (60) (03) 7804-8457

R & D CENTRES

HQ R & D CENTRE31 Ubi Road 1, Aztech Building,Singapore 408694Tel: (65) 6741-7211Fax: (65) 6749-1198

SHENZHEN R &D CENTREBlk C Room Nos. 306~308Intelig Technology Digital Park No. 8 Hong Mian RoadFutian Free Trade ZoneShenzhen, China Post Code: 518038Tel: (86) (755) 2533-1110 Fax: (86) (755) 2533-1117

HONG KONG R & D CENTRE Room 2-10, 3/F, No. 1 Science Park East Ave, Hong Kong Science Park, Pak Shek Kok, Shatin, New Territories, Hong Kong Tel: (852) 2757-1177Fax: (852) 2753-0578

DONG GUAN R & D CENTRE Jiu Jiang Shui Village, Chang Ping Town, Dong Guan City, Guang Dong Province, ChinaTel: (86) (769) 8393-1888 (86) (769) 8393-6688Fax: (86) (769) 8393-1138

MANUFACTURING FACILITIES

China

AZTECH COMMUNICATION DEVICE (DG) LTDJiu Jiang Shui Village, Chang Ping Town, Dong Guan City, Guang Dong Province, ChinaTel: (86) (769) 8393-1888 (86) (769) 8393-6688Fax: (86) (769) 8393-1138

DISTRIBUTION SUBSIDIARY

SHIRO CORPORATION PTE LTD31 Ubi Road 1, #07-00Aztech Building,Singapore 408694Tel: (65) 6843-1333Fax: (65) 6749-3083Website: http://www.shirocorp.com

SHIRO CORPORATION (HK) LIMITED Rooms 2-10, 3/F, No. 1 Science Park East Ave, Hong Kong Science Park, Pak Shek Kok, Shatin, New Territories, Hong KongTel: (852) 2757-1177Fax: (852) 2753-0578

Documents

UNFOLDING A SOLID PRESENCE - 联合早报网ir.zaobao.com.sg/aztech/doc/aztech_ar2005.pdf1986. Mr Mun honed his managerial and entrepreneurial skills early in his ... shiro corporation