ECS Holdings Annual Report 2012 - Shaping Fundamentals for Growth

shapingfundamentalsfor growth

ECS Holdings Limited

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phone: +65 6659 6888 | fax: +65 6884 7549 | website: www.ecs.com.sg

eCs holdings limited(Incorporated in The Republic of Singapore)

Co. Reg. No.: 199804760R

8 temasek Boulevard#34-02 suntec tower three

singapore 038988

Corporate profileECS is a well-recognised provider of ICT products and services with three main businesses, namely Enterprise Systems, IT Services and Distribution. With a network of more than 23,000 active channel partners across China, Thailand, Malaysia, Singapore, Indonesia and the Philippines, ECS is well-positioned to be a regional partner of choice suitable for any global-leading ICT brand vendor tapping Asia Pacific’s ICT spending growth.

Leading global brand names like Hewlett-Packard (“HP”), Apple, Dell, Lenovo, Microsoft, IBM, Oracle and EMC leverage on ECS’ extensive channel partner network to distribute their products across the region.

The Group’s Enterprise Systems business aims to give MNCs, local government and domestic companies a competitive edge over their peers by designing, installing and implementing IT infrastructure. ECS’ IT Services business provides a comprehensive range of professional, technical support and training services.

ECS’ Distribution business leverages on a well-established and highly-efficient logistical and IT infrastructure to distribute fast- moving products in the most efficient manner.

The Group has a consistent track record of profitability and a management that is focused on operational excellence to achieve sustainable profit growth and to enhance shareholder returns.

Rationale

As a leading ICT products and services provider, ECS prides itself in never losing sight of the fundamentals of success. Financial strength, prudence, and good corporate governance have ensured consistent growth for the company since inception. And it is this back-to-basics philosophy that will continue to anchor the progress of the company even in a rapidly changing industry, with an uncertain economic climate unfolding.

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CONTENTS4 Chairman’s Statement 6 CEO’s Statement 10 Board of Directors 13 Senior Management

16 Corporate Executives 18 Corporate Information 20 Group Structure 21 Strategic Partners24 Regional Network 26 Business Model 27 Financial Highlights

28 2012 Awards 29 2012 Milestones 30 Corporate Governance Statement

To be a Premier Asia-Pacific ICT Company that thinks globally but acts locally, excelling in all our business segments to deliver optimal value to our stakeholders.

viSiON

To be the preferred supplier of choice for ICT products and value- added services by building strong customer relationships.

To sustain our entrepreneurial growth by seeking new markets & businesses.

To bring the best-of-breed ICT products and services to enhance the competitiveness of our customers’ businesses.

miSSiON



Efficiency boosts profitability and performance. To maintain our edge in an increasingly competitive world, ECS aims to improve operational efficiency, boost customer satisfaction and stay ahead of the game in all quarters - from supply chain management, distribution, and value-added services to customer and vendor relationships.

SCaliNg NEw hEighTSOf EffiCiENCy

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Dear Shareholders,

It gives me great pleasure to once again present this annual report, this time in my capacity as Executive Chairman.

Amidst continuing headwinds in the global economy and the distinctive shift of consumer preference towards mobility devices, I am pleased to present to you a commendable scorecard of ECS’ performance for the financial year ended 31 December 2012 (“FY2012”).

Financial Performance

Against the backdrop of weak U.S. economic recovery, the Eurozone debt crisis and slower growth in China, the Group’s FY2012 revenue increased 1.0% to $3.64 billion from a year earlier. I am pleased to note that the top-line included higher contributions from the Enterprise Segment in South East Asia, especially in the fourth quarter of FY2012. The Enterprise Segment, which offers higher margins, recorded a 20.8% growth to $1.1 billion for the whole of FY2012.

This positive development has to be seen against lower sales of our desktop PCs and notebooks, in line with a global consumer trend towards mobility devices, which offer lower margins.

Accordingly, net profit for FY2012 decreased 24.4% to $29.6 million as gross profit margin narrowed to 3.9% due to the change in sales mix which resulted in higher revenue contribution from lower-margin mobility devices in FY2012.

Dividend

The Board of Directors has proposed a first and final dividend of 2.2 cents per ordinary share, which is consistent with the previous year, and represents 27.2% of the profit attributable to shareholders.

The Board of Directors has proposed a first and final dividend of 2.2 cents per ordinary share, which is consistent with the previous year, and represents 27.2% of the profit attributable to shareholders.

ChaiRmaN’S STaTEmENT


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Our Strategies to Deal With Headwinds and Capture New Opportunities

Based on latest trends emerging in FY2012, the Group will focus more on emerging markets such as China for the mobility devices led by Apple products, and Indonesia for Enterprise Systems segment (for storage and software products).

We are also reviewing our vendor relationship to focus on key vendors and escalate such relationships with a view to expanding the product portfolio. Despite incurring some losses on key vendors, we will continue our relationship with them as we believe that they still have the potential to regain leading positions in the market as they offer more competitive products.

In terms of product portfolio, we will continue to tap on the growing market of mobility devices despite its lower-margin as we need to position ourselves well for this clear shift in global trends. At the same time we will also emphasise Enterprise Systems to grow our margin.

As we have done over the past few years, the Group will continue to focus on strengthening working capital management, as well as improve cost management through ongoing improvements in operating and financial efficiencies. These efforts manifested in the 40% lower finance costs recorded in FY2012 which resulted from better cash flow planning and cost reduction initiatives which led to lower average effective interest rates.

Significant Corporate Developments

On 8 December 2012, the Group announced the appointments of myself as Group Executive Chairman and of Mr Ong Wei Hiam as Group Chief Executive Officer, replacing Mr Narong Intanate who retired, effective 1 January 2013. I am concurrently serving as Non-Executive Chairman of Hong Kong Stock Exchange-listed VST Holdings Limited, the parent company of ECS. Mr Ong, who was appointed as Executive Director of ECS on 16 April 2012, is concurrently serving as Group CFO and Executive Director of VST Holdings.

I am deeply honoured by the faith and trust placed on me by my fellow members of the Board of Directors (“Board”). Together with Wei Hiam we will strive to maintain the forward-looking and inclusive management style that has helped ECS withstand various challenges through the years.

Following his retirement as Group CEO, Mr Intanate will continue to serve with the Board as Non-Executive Director with effect from 1 January 2013. The Board deeply appreciates the contributions of Mr Intanate during his tenure as Group CEO, especially his leadership at a time of major global economic challenges. While we respect his decision to retire as Group CEO, we are happy that he will continue to serve on the Board as non-executive director.

On the same day, the Group also announced the appointment of Mr Leong Horn Kee, a Non-Executive and Independent Director, as Lead Independent Director with effect from 1 January 2013.

Appreciation and Acknowledgement

On behalf of my fellow Directors, I wish to thank our customers, channel partners, vendors, technology partners, banks and business associates for their constant support; the management and staff for their dedication and hard work despite the challenging conditions; and our shareholders for their loyal support.

Mr Tay Eng HoeExecutive Chairman


shapingfundamentalsfor growth Chairman’s Statement Cont’d

Dear Shareholders,

I am presenting you this operational and financial update against the challenging global economic backdrop you are all aware of. Compounding the uncertainties in the United States, the Eurozone and a not-so-buoyant Chinese economy we are confronting a major shift in consumer preferences away from PCs and notebooks towards mobility devices.

Financial and Operations Review:

In the financial year under review (“FY2012”), the Group’s revenue increased 1.0% to $3.64 billion as compared to $3.61 billion in FY2011 driven by higher contributions from our higher-margin Enterprise Systems segment.

ECS’ FY2012 net profit decreased 24.4% to $29.6 million from $39.2 million for FY2011 with gross profit of $143.8 million compared to $167.3 million, respectively. Gross profit margin narrowed to 3.9% from 4.6% over the comparative period due to the change in sales mix which resulted in higher revenue contribution from lower-margin mobility devices in FY2012.

Finance costs decreased by 40.1% to $8.9 million in FY2012 from $14.9 million in FY2011 mainly due to cost savings achieved through better cashflow planning and cost reduction initiatives which led to lower average effective interest rates over the comparative period.

Cash and bank balances stood at $108.2 million as at 31 December 2012, lower than at $131.4 million a year earlier, while bank borrowings stood at $243.0 million, higher than $241.6 million as at 31 December 2011. The net gearing was at 0.40 times as at 31 December 2012.

Earnings per share (“EPS”) declined to 8.10 cents in FY2012 from 10.74 cents in FY2011 while net asset value (“NAV”) per share increased to 92.83 cents as at 31 December 2012 from 89.37 cents a year earlier. ECS has proposed a first and final dividend of 2.2 cents per share, representing 27.2% of the profit attributable to shareholders.

Revenue from Enterprise Systems segment was 20.8% higher in FY2012 of $1.11 billion as compared to FY2011 of $0.92 billion, mainly driven by higher sales of storage and software products. Enterprise Systems segment accounted for 30.4% of total revenue in FY2012 higher compared to 25.4% a year earlier, mainly due to exceptional growth of 81.4% year-on-year in the fourth quarter.

CEO’S STaTEmENT


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Review by Business Segments:

In terms of product portfolio, we will continue to tap on the growing market of mobility devices despite its lower-margin, and will tilt more towards Enterprise Systems to grow our margin, leveraging on existing vendors, for storage and software products.

Distribution:

The Distribution segment remained the main revenue driver in FY2012 with $2.50 billion revenue, lower by 6.1% as compared to $2.66 billion in FY2011. This segment contributed 68.6% of the total FY2012 revenue. This decrease was mainly due to lower sales of desktop PCs, notebooks and imaging products, partially offset by growth in sales of mobility devices.

The lower sales from desktop PCs reflect both the economic uncertainty and the clear shift in consumer IT patterns globally towards mobility devices.

Enterprise Systems:

Revenue from Enterprise Systems segment was 20.8% higher in FY2012 of $1.11 billion as compared to FY2011 of $0.92 billion, mainly driven by higher sales of storage and software products. Enterprise Systems segment accounted for 30.4% of total revenue in FY2012 higher compared to 25.4% a year earlier, mainly due to exceptional growth of 81.4% year-on-year in the fourth quarter.

In the year under review, ECS strengthened its relationship with our key Enterprise Systems vendors as they expanded regional alliance in China and South East Asia markets.

Review by Geographical Markets:

Geographically, South East Asia has performed better in this period while North Asia was challenged by the slower economic growth in China.

North Asia:

Although North Asia remained to be the revenue driver with $2.18 billion in FY2012 contributing 59.9% of the total revenue, its top line decreased by 6.2% from $2.33 billion in FY2011 due to lower sales of desktop PCs, media tablets and imaging products in the Distribution segment.

The performance was greatly affected by economic slowdown in China as well as the continued uncertainties in the global economy.

South East Asia:

Revenue contribution from South East Asia in FY2012 reflected a 14.2% growth to $1.46 billion from $1.28 billion in FY2011 mainly from improved sales of storage and software products. South East Asia’s scorecard includes $470.7 million revenue from Singapore in FY2012 (up $105.6 million or 28.9% from $365.1 million), driven by increased sales of storage products.

The growth is expected to continue as the Group will focus on South East Asia to grow its Enterprise Systems.

Outlook:

Notwithstanding these developments, ECS already has the foresight to transform its business mix by moving into mobility products and not be over-reliant on a few key vendors.

In view of an uncertain economic outlook, the Group will continue to focus on the fundamentals of operating cost management, improving working capital cycle, and strengthening balance sheet and operating cash flow.

As an established player in the industry, ECS will remain steadfast in the face of uncertainties, riding through the different economic cycles and shifts in technology trends.

Mr Ong Wei HiamGroup Chief Executive Officer


shapingfundamentalsfor growth CEO’s Statement Cont’d

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Satisfied and progressive staff are the true assets of the company. ECS will continue to prioritise the training, development and welfare of our people at all levels. Keeping our talents up-to-date and connected in terms of knowledge, information, skills, and work-life balance translates to growth for our people as well as the company.

TRaNSfORmiNgfOR ExCEllENCE

MR TAy ENG HOEMr Tay Eng Hoe was appointed as Executive Chairman of the Group on 1 January 2013. He was the founder of ECS Holdings Limited and also formerly the Group Chief Executive Officer. Mr Tay has been a Director of the Group since 1 April 2001. He brings with him more than 28 years of experience in the IT industry. Mr Tay is also a Director and was appointed as Non-Executive Chairman of VST Holdings Limited, the parent company of ECS Holdings Limited on 1 November 2012. In August 2005, he was conferred the Public Service Medal by the President of the Republic of Singapore in recognition for his public service to the country. Mr Tay holds a Bachelor of Science (Honours) degree from the LaTrobe University and a Master of Business Administration from the University of Melbourne.

MR ONG WEi HiAMMr Ong Wei Hiam was appointed as the Group Chief Executive Officer of ECS Holdings Limited on 1 January 2013 and was appointed as an Executive Director of the Company on 16 April 2012. Mr Ong is concurrently the Group Chief Financial Officer and Executive Director of VST Holdings Limited, the parent company of ECS Holdings Limited. Mr Ong holds a Bachelor degree in Economics from University College London and a Master Degree in Analysis, Design & Management of Information Systems from the London School of Economics and Political Science. He is a Fellow of the Institute of Chartered Accountants in England and Wales, and Fellow of the Hong Kong Institute of Certified Public Accountants. Prior to joining the VST Group, Mr Ong served in a senior position at PricewaterhouseCoopers and has extensive working experience in London and Hong Kong.

MR NARONG iNTANATEMr Narong Intanate was appointed as Executive Director of ECS Holdings Limited on 15 December 2000 and subsequently served as the Group Chief Executive Officer of ECS Group to focus on overall business growth opportunities from 1 July 2010 to 31 December 2012. With effect from 1 January 2013, following his retirement as Group CEO, Mr Intanate was redesignated as a Non-Executive Director of ECS Holdings Limited. He is the founder and Executive Chairman of The Value Systems Co., Ltd., a subsidiary of ECS Holdings Limited since 1988. He is also the founder and Chairman of Vnet Capital Co., Ltd., a leading private equity and venture capital firm in Thailand. Mr Intanate holds a Bachelor of Science in Business Administration and a Master of Business Administration from California State University. He is currently an advisor of the Hatyai University, and also the Board of Governors of The Bangkok Club. Prior to forming The Value Systems Co., Ltd., he was the Marketing Manager of Sahaviriya Infortech Computers Co., Ltd. from 1982 to 1983 and the Marketing Director of Sahaviriya OA from 1983 to 1988.

BOaRd Of diRECTORS


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MR FOO SEN CHiN Mr Foo Sen Chin was appointed as a Director on 15 December 2000 and is concurrently the Advisor to Group Human Resources of the Company. He is also the Managing Director and founder of ECS ICT Berhad, our associate company which is listed on the Main Board of Bursa Malaysia Securities Berhad. Mr Foo plays a pivotal role in steering the strategic direction of ECS ICT Berhad. His responsibilities include the development of its long term business goals, overall operation and management of ECS ICT Berhad. Prior to joining our Group, he was the General Manager of a computer bureau services company in Kuala Lumpur before forming ECS KU Sdn Bhd (formerly known as K.U. Sistems Sdn Bhd) in 1985. Mr Foo is an advisor to the current Council of PIKOM, Association of Computer and Multimedia Industry of Malaysia. He has a Bachelor of Science degree in Electrical and Electronic Engineering from the University of Birmingham, UK and he also holds a Master’s degree in Business Administration from the Cranfield School of Management in the United Kingdom.

MR lEONG HORN kEEMr Leong Horn Kee was appointed as an Independent Director on 15 December 2000 and the Lead Independent Director on 1 January 2013. He currently serves as the Chairman of the Audit Committee and a member of the Nominating and Compensation Committees. Mr Leong is currently the Chairman of CapitalCorp Partners Pte Ltd. Mr Leong was a Member of Parliament for 22 years and Singapore’s Non-Resident Ambassador to Mexico for 6 years. He has wide work experience in the public sector in the Ministries of Finance and Trade & Industry, and in the private sector in venture capital, merchant banking, corporate investments, hotels and property development. Mr Leong is currently a member of the Securities Industry Council. He holds a degree (Honours) in Production Engineering from Loughborough University, UK; a degree (Honours) in Economics from the University of London, UK; a degree in Chinese Language and Literature from Beijing Normal University, China; an MBA degree from Insead, France, and a Master in Business Research from the University of Western Australia.

MR TAN HuP FOiMr Tan Hup Foi was appointed as an Independent Director on 7 February 2006, and currently serves as Chairman of the Nominating Committee and a member of the Audit and Compensation Committees. He was the Chief Executive of Trans-Island Bus Services Ltd from 1994 to 2005 and also the Deputy President of SMRT Corporation Ltd from 2003 to 2005. He was also the Chairman of Ngee Ann Polytechnic Council from 2004 to 2011. Mr Tan is known internationally as the Honorary Vice President of the International Association of Public Transport (UITP) and Honorary Chairman of UITP Asia-Pacific Division. He was awarded the Bintang Bakti Masyarakat( Public Service Star) in 2008 and the Pingat Bakti Masyarakat (Public Service Medal) in 1996 by the President of Singapore. Mr Tan graduated from Monash University in Australia with a First Class Honours degree in Mechanical Engineering in 1974 and he obtained a Master of Science (Industrial Engineering) degree from University of Singapore in 1979.

Board of Directors Cont’d



MR kOH SOO kEONGMr Koh Soo Keong was appointed as an Independent Director on 11 February 2008, and currently serves as Chairman of the Compensation Committee and a member of the Audit and Nominating Committees. Mr Koh was, until April 2007, the Chief Executive Officer and President of Toll Asia Pte Ltd, formerly SembCorp Logistics Ltd (SembLog) which was acquired by Toll in May 2006. With over 20 years of experience in the logistics industry, he had helmed SembLog and its preceding companies since 1986. He is currently the Managing Director of EcoSave Pte Ltd. He is also the Chairman of the Agri-Food & Veterinary Authority of Singapore and Ascendas Funds Management (S) Ltd (managing Ascendas-REITs). He is a board member of four other publicly listed companies. He holds a Bachelor of Engineering (Honours), a Master of Business Administration and a Postgraduate Diploma in Business Law from the National University of Singapore.

MR MAO xiANGqiANMr Mao Xiangqian was appointed as Executive Director of the Company on 3 May 2010 and is also concurrently the President of ECS Technology (China) Limited, a principal subsidiary of ECS Holdings Limited. He has more than 20 years of experience in China’s ICT industry. Prior to joining the Group, Mr. Mao served as the Senior Vice President of Digital China Holdings Limited, one of China’s leading ICT distributor, and was President of Digital China Technology Limited, which is the distribution business division of Digital China Holdings Limited. Prior to Digital China, Mr Mao spent 10 years with the Lenovo Group. Mr Mao holds a Bachelor of Science (Machine Building and Automation) degree and a Master of Science (Modal Analysis) from Tianjin University as well as an Executive MBA degree from China Europe International Business School.

Board of Directors Cont’d


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SENiOR maNagEmENT

MR ONG WEi HiAMMr Ong Wei Hiam was appointed as the Group Chief Executive Officer of ECS Holdings Limited on 1 January 2013 and was appointed as an Executive Director of the Company on 16 April 2012. Mr Ong is concurrently the Group Chief Financial Officer and Executive Director of VST Holdings Limited, the parent company of ECS Holdings Limited. Mr Ong holds a Bachelor degree in Economics from University College London and a Master Degree in Analysis, Design & Management of Information Systems from the London School of Economics and Political Science. He is a Fellow of the Institute of Chartered Accountants in England and Wales, and Fellow of the Hong Kong Institute of Certified Public Accountants. Prior to joining the VST Group, Mr Ong served in a senior position at PricewaterhouseCoopers and has extensive working experience in London and Hong Kong.

MR EDDiE FOOMr Eddie Foo is the Group Chief Financial Officer of the Company and is concurrently the Group Company Secretary. Mr Foo is responsible for the Group’s overall financial strategy and management, corporate finance and treasury management, tax, and investor relations of ECS Holdings, and is also a director on the boards of various ECS companies. Mr Foo has several years of financial management and audit experience in multinational companies and public accounting firms. Prior to serving as Group Chief Financial Officer, Mr Foo was the Group Financial Controller of the Company. Mr Foo holds a Bachelor degree in Accountancy from the Nanyang Technological University and is a member of the Institute of Certified Public Accountants of Singapore.



MR liM TOW CHENGMr Lim Tow Cheng was appointed as the Executive Vice President, Group Business Development on 18 October 2005. Mr Lim is responsible for managing the regional expansion strategy and for identifying new business opportunities for the Group. He has more than 20 years of experience in senior management positions in the IT industry. Prior to joining the Group, Mr Lim was the Director for South Asia of Western Digital and has previously worked with Digiland International Limited for more than 8 years, holding several senior management positions, including as Chief Executive Officer. Mr Lim has an Honours degree in Economics from the National University of Singapore.

Senior Management Cont’d


annual report 2012

MR MAO xiANGqiANMr Mao Xiangqian was appointed as Executive Director of the Company on 3 May 2010 and is also concurrently the President of ECS Technology (China) Limited, a principal subsidiary of ECS Holdings Limited. He has more than 20 years of experience in China’s ICT industry. Prior to joining the Group, Mr. Mao served as the Senior Vice President of Digital China Holdings Limited, one of China’s leading ICT distributor, and was President of Digital China Technology Limited, which is the distribution business division of Digital China Holdings Limited. Prior to Digital China, Mr Mao spent 10 years with the Lenovo Group. Mr Mao holds a Bachelor of Science (Machine Building and Automation) degree and a Master of Science (Modal Analysis) from Tianjin University as well as an Executive MBA degree from China Europe International Business School.

MR FOO SEN CHiNMr Foo Sen Chin was appointed as a Director on 15 December 2000 and is concurrently the Advisor to Group Human Resources of the Company. He is also the Managing Director and founder of ECS ICT Berhad, our associate company which is listed on the Main Board of Bursa Malaysia Securities Berhad. Mr Foo plays a pivotal role in steering the strategic direction of ECS ICT Berhad. His responsibilities include the development of its long term business goals, overall operation and management of ECS ICT Berhad. Prior to joining our Group, he was the General Manager of a computer bureau services company in Kuala Lumpur before forming ECS KU Sdn Bhd (formerly known as K.U. Sistems Sdn Bhd) in 1985. Mr Foo is an advisor to the current Council of PIKOM, Association of Computer and Multimedia Industry of Malaysia. He has a Bachelor of Science degree in Electrical and Electronic Engineering from the University of Birmingham, UK and he also holds a Master’s degree in Business Administration from the Cranfield School of Management in the United Kingdom.

MR SOMSAk PEjTHAvEEPORNDEjMr Somsak Pejthaveeporndej was appointed as the President of The Value Systems Co., Ltd., our wholly-owned subsidiary on 1 February 2009. He is responsible for the overall management of The Value Systems and has been with our Group since 1988. Mr Pethaveeporndej was formerly responsible for managing the Enterprise Systems & ICT Services Division of The Values Systems. He has more than 20 years experience in the IT industry. Prior to joining our Group, he was employed as a technical manager by Sun Shine Co., Ltd. from 1981 to 1984, followed by Sahaviriya Telecom Co., Ltd. from 1984 to 1988. He holds a Bachelor of Science degree majoring in electronics from Rajamangala University of Technology Krungthep, Thailand, and a Mini MBA from The Faculty of Commerce and Accountancy, Chulalongkorn University.

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Senior Management Cont’d

MR SEBASTiAN CHONGMr Sebastian Chong is the President of ECS Computers (Asia) Pte Ltd, the wholly-owned Singapore subsidiary of ECS Holdings Limited. Mr Chong joined ECS in 1990 and has over 20 years of experience in the IT industry. He is responsible for strategic direction, overall management, including the sales and operations of the commercial, consumer and retail segments of ECS Singapore. Mr Chong is also responsible for business development, business strategy and building of long term relationships with vendors, channels and partners.

MR ANTONiuSMr Antonius is the Executive Director of PT ECS Indo Jaya. He is responsible for product and sales especially for the commercial and enterprise sectors. Mr Antonius also oversees business development and overall planning of long term business goals for PT ECS Indo Jaya. Prior to joining PT ECS Indo Jaya in 2002, he worked for an electricity manufacturer in Indonesia as an IT consultant. Mr Antonius has a Bachelor’s degree in Information Systems from Bina Nusantara University and a Master of Management degree from Tarumanagara University, Indonesia.

MR jiMMy GOMr Jimmy Go is the founder and President of MSI-ECS Phils., Inc., our associate company. He has more than 25 years of experience in the IT industry in the Philippines. Mr Go started in the IT industry way back in 1982 after graduating from college selling Fujitsu & Apple computers. He currently holds a Bachelor degree in Electronics & Communication Engineering from De La Salle University with an award of Magna Cum Laude and Post Graduate degree of Masters in Business Administration in Ateneo de Manila University. Mr Go was also the past President of COMDDAP (Computer Manufacturers, Distributors & Dealers Association of the Philippines). In 1998, Mr Go was named President and CEO of MSI-Digiland. He was instrumental in growing the business of MSI in the Philippines, making it one of the biggest IT distributors in the country in less than 5 years.



MR EuGENE TANMr Eugene Tan is the Senior Vice President, Group Finance of ECS Holdings Limited since 1 March 2008. He is responsible for the financial management of the Group, which covers accounting, treasury, tax, financial control and reporting. Prior to his current appointment, Mr Tan was the Vice President, Finance of ECS Computers (Asia) Pte Ltd, the wholly-owned Singapore subsidiary of ECS Holdings Limited. Prior to joining the Group, Mr Tan worked for KPMG Singapore as a senior auditor. Mr Tan holds a Bachelor degree in Accountancy & Economics from the University of Reading.

CORpORaTE ExECuTivES


annual report 2012

MS PEGGy lEONGMs Peggy Leong-Yeo is the Senior Vice President, Group Human Resources for ECS Holdings Limited. Her main responsibilities are to establish HR strategies for the Group and to strengthen the Group’s human capital, which includes redefining leading-edge performance management and development practices to support leadership succession planning. She provides leadership and tactical support in the formulation, implementation and review of HR policies in key HR areas to support the Group’s strategic intent to ensure alignment and adoption of best practices. She has more than 20 years of Human Resources experience behind her working with a global multinational company. She holds a Diploma in Administrative Management from The Institute of Administrative Management in UK and a Master in Business Administration from the University of Birmingham, United Kingdom.

MR NEWMAN liMr Newman Li is the Vice President, Group Internal Audit of the Company. He is a member of CPA China and has more than 10 years of financial and audit experience. Prior to joining the Group, he worked for Foshan Power Construction Group Co. Ltd in 1998 and Guangdong Telecom in 2004. Mr Li holds a Bachelor degree in Accountancy from the Tianjin University of Commerce and was appointed to his current position since May 2008.

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Corporate Executives Cont’d



MS liM yOk yENMs Lim Yok Yen is the Vice President, Group Finance of ECS Holdings Limited. She is responsible for financial planning and analysis, budgeting, forecasting as well as working with partners and management to support the Group’s business growth strategy. Ms Lim is also responsible for all channel finance activities including credit management, working capital requirements and planning with vendor finance teams and internal business units. Prior to joining ECS in April 2008, she was a Group Accountant in a public listed company in Singapore where she handled Group reporting and treasury planning. Ms Lim has more than 13 years of experience in financial accounting and group reporting in the freight forwarding industry and companies listed on Singapore Exchange. Ms Lim is a Certified Public Accountant and also a member of Association of Chartered Certified Accountants (ACCA) since 2001.

MR CHRiSTANTO SuRyADARMAMr Christanto Suryadarma is the Vice President, Group Business Development for ECS Holdings Limited. Mr Suryadarma manages vendor-partner relationships, identifies new business opportunities for the Group and assists in geographical expansion to increase sustainable profitability at the Group and country levels. An experienced senior manager, Mr Suryadarma has more than 20 years of extensive experience in marketing, sales and general management, covering the Asia Pacific, ASEAN and Australasian regions. He has led cross-functional teams in implementing strategies and processes across varied industries including major international conglomerates, the computer software, semiconductor, IT, services and retail sectors. His most recent appointment was Senior Director, Microsoft Corporation covering Asia Pacific, Japan and India. Mr Suryadarma holds a Bachelor of Science, Electronics Engineering degree from the Satya Wacana Christian University.

MR PAul CHONGMr Paul Chong is the Assistant Vice President, Group Public Relations of ECS Holdings Limited and concurrently, the Vice President, Marketing of ECS Computers (Asia) Pte Ltd, the Group’s wholly-owned Singapore subsidiary. In his role for Group Public Relations, Mr Chong is responsible for the Group’s branding and communication programs, publicity, corporate affairs and internal communication between management and employees. As Vice President, Marketing, he is responsible for providing comprehensive marketing communications solutions such as direct marketing programs, promotions, events, seminars, tradeshows and advertising. Prior to joining the ECS Group in 1997, Mr Chong worked for 6 years in the public sector of Singapore handling national IT initiatives and training and development programs. Mr Chong holds a Bachelor degree in Business Administration from the National University of Singapore and a Master of Business Administration degree from the University of Western Australia.

CORpORaTE iNfORmaTiON

BOARD OF DiRECTORSMr Tay Eng Hoe (Executive Chairman)Mr Ong Wei Hiam (Executive Director)Mr Narong Intanate (Non-Executive Director)Mr Foo Sen Chin (Non-Executive Director)Mr Leong Horn Kee (Lead Independent Director)Mr Tan Hup Foi (Independent Director)Mr Koh Soo Keong (Independent Director)Mr Mao Xiangqian (Executive Director)

AuDiT COMMiTTEEMr Leong Horn Kee (Chairman)Mr Tan Hup FoiMr Koh Soo Keong

COMPENSATiON COMMiTTEEMr Koh Soo Keong (Chairman)Mr Leong Horn KeeMr Tan Hup Foi

NOMiNATiNG COMMiTTEEMr Tan Hup Foi (Chairman)Mr Leong Horn KeeMr Koh Soo KeongMr Tay Eng Hoe

iNvESTMENT COMMiTTEEMr Leong Horn Kee (Chairman)Mr Foo Sen ChinMr Tan Hup FoiMr Ong Wei Hiam SENiOR MANAGEMENT ATECS HOlDiNGS liMiTED:Mr Ong Wei Hiam (Group Chief Executive Officer)

Mr Eddie Foo Toon Ee (Group Chief Financial Officer)

Mr Lim Tow Cheng (Executive Vice President, Group Business Development)

SENiOR MANAGEMENT AT ECS HOlDiNGS liMiTED’S SuBSiDiARiES AND ASSOCiATE COMPANiES:Mr Mao Xiangqian (President)ECS Technology (China) Limited

Mr Somsak Pejthaveeporndej (President) The Value Systems Co., Ltd.

Mr Foo Sen Chin (Managing Director)ECS ICT Berhad

Mr Sebastian Chong (President)ECS Computers (Asia) Pte Ltd

Mr Antonius (Executive Director)PT ECS Indo Jaya

Mr Jimmy Go (President)MSI-ECS Phils., Inc.

CORPORATE ExECuTivES:Mr Eugene Tan (Senior Vice President, Group Finance)Ms Peggy Leong-Yeo (Senior Vice President, Group Human Resources)Mr Newman Li (Vice President, Group Internal Audit)Ms Lim Yok Yen (Vice President, Group Finance)Mr Christanto Suryadarma (Vice President, Group Business Development)Mr Paul Chong (Assistant Vice President, Group Public Relations)

AuDiTORSKPMG LLPCertified Public Accountants16 Raffles Quay #22-00Hong Leong BuildingSingapore 048581Partner-in-charge: Ms Chu Sook Fun(Since FY2011)

REGiSTRARM&C Services Private Limited112 Robinson Road #05-01Singapore 068902


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REGiSTERED OFFiCE8 Temasek Boulevard #34-02 Suntec Tower ThreeSingapore 038988

PRiNCiPAl BANkERSANZ BankCitibank, N.A.DBS Bank LtdKBC Bank N.V.Oversea-Chinese Banking CorporationStandard Chartered BankSumitomo Mitsui Banking CorporationUnited Overseas Bank Limited

COMPANy SECRETARyMr Eddie Foo Toon Ee, CPA

ECS OFFiCESECS Holdings Limited8 Temasek Boulevard#34-02 Suntec Tower ThreeSingapore 038988Website : www.ecs.com.sg

ECS Technology (China) Limited6/7F Wanliuyicheng BuildingNo. 11 Changchunqiao Road, Haidian DistrictBeijing, P.R.C. (100089)Offices in Beijing, Changchun, Changsha, Chengdu, Chongqing, Dalian, Fuzhou, Guangzhou, Guiyang, Harbin, Hefei, Hong Kong, Huhehaote Jinan, Kunming, Lanzhou, Nanchang, Nanjing, Nanning, Ningbo, Qingdao, Shanghai, Shenzhen, Shenyang, Shijiazhuang, Taiyuan, Tianjin, Urumqi, Wuhan, Xiamen, Xi’an, ZhengzhouWebsite : www.ecschina.com

The Value Systems Co., Ltd.21st Floor, Serm-Mit Tower159/35 Sukhumvit 21 Road (Asok) North Klongtoey, Wattana Bangkok 10110, ThailandOffices in Bangkok, Chiang Mai, Hat Yai, Khon Kaen, Nakhon Ratchasima, Nongkhai, Phitsanulok, Phuket, Rayong, Surat ThaniWebsite : www.value.co.th

ECS ICT BerhadLot 3, Jalan Teknologi 3/5Taman Sains SelangorKota Damansara47810 Petaling Jaya Selangor, MalaysiaOffices in Johor Bahru, Kota Kinabalu, Kuantan, Kuching, Penang, Petaling JayaWebsites : www.ecsm.com.my

ECS Computers (Asia) Pte Ltd19 Kallang Avenue#07-153 Singapore 339410Website : www.ecs.com.sg

PT ECS Indo JayaKomplek Mangga Dua SquareBlok E 34-37 Jl. Gunung Sahari Raya No.1Jakarta Utara 14420, IndonesiaOffices in , Bandung, Jakarta, Makassar, Medan, Semarang, Surabaya, YogyakartaWebsite : www.ecsindo.com

MSI-ECS Phils., Inc.Topy II Bldg, #3 Economia St.,Libis, Quezon City,1110, PhilippinesBranches in Cebu, Davao, Manila, TaguigWebsite : www.msi-ecs.com.ph

Corporate Information Cont’d

Corporate Information Cont’d


annual report 2012

gROup STRuCTuRE

ECS HOlDiNGS liMiTED

ChiNa

ThailaNd SiNgapORE philippiNES

iNdONESia viETNammalaySia

The value Systems Co., ltd.100%

PT ECS Indo Jaya100%

ECS indo Pte ltd89%

MSI-ECS Phils., Inc.49.99%

ECS infocom (Phils) Pte. ltd.100%

ECS vietnam Company limited100%

Pacific City (Asia Pacific) Pte Ltd100%

ECS Enterprise Solutions Pte Ltd100%

ECS Computers (Asia) Pte ltd100%

ECS KU Sdn Bhd100%

ECS Astar Sdn Bhd100%

ECS KUSH Sdn Bhd100%

ECS Pericomp Sdn Bhd100%

ECS iCT Berhad41%

ECS Technology (China) limited100%

ECS Technology Co., Ltd100%

EIT info-tech Limited100%

ECS Technology (HK) Co., Limited100%

ECS Chongqing Marketing & Payment Co., Ltd100%

ECS Beijing Chuang Yue Technology Co., Ltd100%

ECS (Shanghai) Management Co., Ltd100%

ECS China Technology (Shanghai) Co., Ltd100%

ECS Technology (Guangzhou) Co., Ltd100%

2021



STRaTEgiC paRTNERS

A clear vision opens a future of possibilities for the company. At ECS, our future is built upon solid fundamentals coupled with our unsatiable appetite to achieve our greatest potential. It is where our passion and our potential meet that we can continue to grow with sustained success.

ENviSiONiNg a fuTuREOf pOSSiBiliTiES

REgiONal NETwORk

01

0203

05

0604


annual report 2012

2425

01. CHiNAOffices: 33 | Cities: Beijing (2 Offices), Changchun, Changsha, Chengdu, Chongqing, Dalian, Fuzhou, Guangzhou, Guiyang, Harbin, Hefei, Hong Kong, Huhehaote Jinan, Kunming, Lanzhou, Nanchang, Nanjing, Nanning, Ningbo, Qingdao, Shanghai, Shenzhen, Shenyang, Shijiazhuang, Taiyuan, Tianjin, Urumqi, Wuhan, Xiamen, Xi’an, Zhengzhou

02. THAilANDOffices: 12 | Cities: Bangkok (3 offices), Chiang Mai, Hat Yai, Khon-Kaen, Nakhon Ratchasima, Nongkai, Phitsanulok, Phuket, Rayong, Surat Thani

03. MAlAySiAOffices: 6 | Cities: Johor Bahru, Kota Kinabalu, Kuantan, Kuching, Penang, Petaling Jaya

05. iNDONESiAOffices: 7 | Cities: Bandung, Jakarta, Makassar, Medan, Semarang, Surabaya, Yogyakarta

06. PHiliPPiNESOffices: 4 | Cities: Cebu, Davao, Manila, Taguig

Total Offices: 64

04 . SiNGAPORE (Hq)Offices: 2

Regional Network Cont’d



BuSiNESS mOdEl


annual report 2012

valuE pROduCTS• Servers• Storage• Application Software & Middleware• Networking &

Communication

vOlumE pROduCTS• Notebooks• Desktops• Printers & Imaging

Devices• Mobility Devices• Printing Supplies• Accessories & Options• Productivity Software

iCT vENDORS

• Aggregator of Best-of-Breed IT Products : Convenient

One Stop Supplier• Channel Development

and Management• Volume Aggregator• Efficient Inventory

Management to ensure timely delivery• Financial Credit Support

to Resellers / IT Partners• Consultancy /

Implementation• Managed Services• Post-Sales / Maintenance

Support• Professional Services• Training / Certification• Logistical Services

ECS

• Corporate Resellers• System Integrators• Application Providers• Retailers• ISVs• Superstores• Developers

CHANNEl PARTNERS

• Corporates• Manufacturing Industry• Government• Service Industry• Telcos & Service

Providers• Emerging Industry• SME• Home / SOHO• Consumer & Lifestyle

END uSERS

Economies of Scale for Better Pricing and Aggregation

Single Source Supplier

CompleteSolution

After Sales Support

2627



fiNaNCial highlighTS

4.03.53.02.52.01.51.00.5

FY08 FY09 FY10 FY11 FY120

DiviDENDS PER SHARE (cents)2.

7 3.0

3.6

2.2

2.2

400350300250200150100

50


SHAREHOlDERS’ EquiTy (S$ million)

237.

8

259.

5

296.

6

326.

5

339.

7

25

20

15

10

5


RETuRN ON EquiTy (%)

13.0 15

.4 19.1

12.6

8.9

25

20

15

10

5


RETuRN ON CAPiTAl EMPlOyED (%)

11.7

12.2 15

.3

13.8

9.2

4,0003,5003,0002,5002,0001,5001,000

500


REvENuE (S$ million)

2,94

9.9

3,25

2.0

3,08

5.4

3,60

7.2

3,64

3.7

8070605040302010


PROFiTABiliTy (S$ million)

29.4 38

.2

53.0

39.2

29.6

Net Profit Attributable to Equity Holders

4,0003,5003,0002,5002,0001,5001,000

500


REvENuE By BuSiNESS SEGMENT (S$ million)

2,949.9

1,133.3 1,187.9 1,132.5 916.0 1,106.9

1,783.0 2,034.2 1,928.4 2,663.0 2,500.5

33.629.9

24.5

28.236.33,252.0 3,085.4

3,607.2 3,643.7

Enterprise Systems Distribution IT Services

North Asia2,183.4

Southeast Asia1,460.3

REvENuE By GEOGRAPHiCAl SEGMENT (S$ million)

2012 awaRdS


annual report 2012

COuNTRy AWARDED By AWARD

ECS Holdings Security Investors' Association Singapore

Runner-up, Most Transparent Company (Technology) - SIAS 13th Investors' Choice Awards 2012

ECS Holdings DP Information S1000 - Ranked 19th for Top Public Listed Company by Sales Turnover

ECS Holdings DP Information Singapore International 100 - Ranked Top 13 by Overseas Sales Turnover

ECS China VMware Global Partner Network Award

ECS China VMware Training VATC Partner of the Year for APJ

ECS Thailand F5 Thailand Top Performing Distributor Award 2012

ECS Thailand HP Best Distributor Outstanding Overall TS Achievement

ECS Thailand HP Best Distributor Outstanding Enterprise Business Product Selling

ECS Thailand HP Best Distributor HP Software

ECS Thailand Intermec Distributor of the Year

ECS Thailand Oracle Partner of the Year - Value Added Distributor

ECS Malaysia Asus Distributor of the Year 2012

ECS Malaysia Cisco Distributor of the Year 2012

ECS Malaysia Dell Consumer Distributor of the Year 2012

ECS Malaysia HP The CEO Award Wholesaler Category 2012

ECS Malaysia HP Top Wholesaler for Industry Standard Server Broadbase Category

ECS Malaysia HP Top Wholesaler for HP Storage

ECS Malaysia HP Top Wholesaler for Industry Standard Server

ECS Malaysia HP HP PPS - Best Consumer Distributor for Hardware (PC) Sell-Thru

ECS Malaysia HP HP PPS - Best Distributor for Hardware (Printing) Sell-Thru

ECS Malaysia Oracle Remarketer Partner of the Year 2012

ECS Singapore Lenovo Top Distributor of the Year - Relationship Segment

ECS Singapore EMC Partner of the Year - Highest Over Achievement

ECS Indonesia Lenovo Best Lenovo SMB Distributor FY11/12

ECS Indonesia Microsoft Best Microsoft Distributor FY12

ECS Indonesia Intel Intel Ultrabook Great Team

ECS Philippines APC Distributor of the Year 2012

ECS Philippines Fortinet Fastest Distributor of the Year for SEA 2012

ECS Philippines IBM IBM xSeries run rate distributor of the Year 2012

2829



2012 milESTONES

COuNTRy MONTH DESCRiPTiON OF MilESTONE

ECS Thailand Apr - Jun 12 Appointed as NetApp Partner Program Distribution Partner with Support Services Certification

ECS Thailand Apr - Jun 12 The Value Systems established the Corporate Social Responsibility Campaign of "The Fairy Tale Project 6" at Wat Chokchang School, Uthai District, Ayudhya Province

ECS Thailand Oct - Dec 12 Appointed as F5 Authorised Distributor-FY2013

ECS Malaysia Jan - Mar 12 Appointed as Distributor for Huawei Device

ECS Malaysia Jun - Sep 12 Appointed as Distributor for Novell Suse

ECS Malaysia Oct - Dec 12 Appointed as Distributor for IBM SmartCloud

ECS Singapore Apr - Jun 12 Appointed as Distributor for A10 Networks

ECS Singapore Oct - Dec 12 Appointed as Distributor for Microsoft SPLA

ECS Indonesia Oct - Dec 12 Appointed as Distributor for Quest Software

ECS Indonesia Oct - Dec 12 Appointed as Distributor for EMC

ECS Indonesia Oct - Dec 12 Appointed as Distributor for Samsung Printer

ECS Indonesia Oct - Dec 12 Appointed as Distributor for Samsung Mobile

ECS Philippines Apr - Jun 12 Appointed as ZTE Mobile Distributor

ECS Philippines Apr - Jun 12 Appointed as Distributor for Fuji Xerox Printers


annual report 2012

ECS Holdings Limited (the “Company”) is committed to comply with the Code of Corporate Governance 2005 issued by the Corporate Governance Committee. It believes in maintaining a high standard of corporate governance and has put in place policies and practices that will help to protect its shareholders’ interest and enhance long term shareholder value. This report describes the main corporate governance practices that are adopted by the Company.

(A) BOARD MATTERS

The Board’s Conduct of its Affairs

Principle 1 : Every company should be headed by an effective Board to lead and control the company. The Board is collectively responsible for the long-term success of the company. The Board works with management to achieve this objective and the management remains accountable to the Board.

The Board’s role is to:

a) provide entrepreneurial leadership, set strategic aims, and ensure that the necessary financial and human resources are in place for the company to meet its objectives;

b) establish a framework of prudent and effective controls which enables risks to be assessed and managed, including safeguarding of shareholders’ interests and the company’s assets;

c) review management performance; d) identify the key stakeholder groups and recognise that their perceptions affect the company’s reputation; e) set the company’s values and standards, and ensure that obligations to shareholders and other stakeholders are

understood and met; andf) consider sustainability issues, e.g. environmental and social factors, as part of its strategic formulation.

The Board meets to consider the following, without limitation, corporate events and/or actions:

a) approval of quarterly results announcements;b) approval of annual report and accounts;c) declaration of interim dividend and proposal of final dividends;d) approval of corporate strategy;e) authorisation of major transactions;f ) review and approval of annual budgets;g) compensation of senior management personnel; andh) convening of shareholders’ meetings.

All directors must objectively take decisions in the interests of the Company.

The Board has delegated the day-to-day management and running of the Company to the management headed by our Group Chief Executive Officer (“Group CEO”), while reserving certain key issues and policies for its approval. Additionally, to facilitate effective management, certain functions have been delegated to the following sub-committees, each of which has its own written terms of reference:

a) the Nominating Committee;b) the Compensation Committee;c) the Audit Committee;d) the Investment Committee; and e) the Risk Management Committee.

Newly-appointed directors are given briefings by the management on the Group’s activities and its strategic directions. Changes to regulations and accounting standards are monitored closely by management. To keep pace with regulatory changes, where these changes have an important bearing on the Company’s or directors’ disclosure obligations, directors are briefed either during Board meetings or at specially convened sessions conducted by professionals.

The Board intends to hold four meetings each year and shall also hold informal meetings as and when necessary. The Company’s Articles of Association provide for telephonic and videoconference meetings. The number of Board meetings held since the date of the last annual report, as well as the attendance of every Board member at those meetings is as follows:

Corporate GovernanCe Statement

3031


annual report 2012

DIRECTORS’ ATTENDANCE AT BOARD MEETINGS

Board

Board MemberNo. of

Meetings Attended

Tay Eng Hoe 5 5Narong Intanate 5 5Foo Sen Chin 5 5Leong Horn Kee 5 5Koh Soo Keong 5 5Tan Hup Foi 5 5Mao Xiangqian 5 4Ong Wei Hiam 5 5

Board Composition and Guidance

Principle 2 : There should be a strong and independent element on the Board, which is able to exercise objective judgement on corporate affairs independently, in particular, from management and substantial shareholders. No individual or small group of individuals should be allowed to dominate the Board’s decision making.

The Board comprises eight directors of which five are non-executive directors (including three independent directors) and three executive directors. The Company places great importance on the quality of its Board of Directors. The Group achieves this by appointing to its Board highly respected individuals and prominent leaders in their respective professions. The Board comprises individuals with proven track records in the public and/or corporate sector, and each is a highly respected member of the business community. As a group, they provide core competencies such as accounting or finance, business or management experience, industry knowledge, strategic planning and customer-based experience or knowledge. Key information regarding the directors is given in the Board of Directors section on pages 10 to 12 of the annual report.

Executive Chairman and Chief Executive Officer

Principle 3 : There should be a clear division of responsibilities between the leadership of the Board and the executives responsible for managing the company’s business. No one individual should represent a considerable concentration of power.

Mr Tay Eng Hoe was appointed as Executive Chairman of the Company on 1 January 2013. Mr Ong Wei Hiam was appointed as Group CEO with effect from 1 January 2013. The Executive Chairman and the Group CEO each perform separate functions to ensure that there is an appropriate balance of power and authority, and that accountability and independent decision-making are not compromised. The Executive Chairman plays an instrumental role in providing the Company with strong leadership and vision, assisting the Board to develop policies and strategies, and ensuring that these are implemented effectively. As Chairman of the Board, he bears primary responsibility for the workings of the Board, by ensuring effectiveness on all aspects of its role including setting agenda for Board meeting with input from management, and exercising control over the quality, quantity and timeliness of information flow between the Board and management. At annual general meetings and other shareholders’ meetings, he plays a pivotal role in fostering constructive dialogue between shareholders, the Board and management. As Executive Chairman, he is the most senior executive in the Company and bears executive responsibility for the Group’s business.

The Group CEO has full executive responsibilities over the running of the Group's business, the business direction and operational decisions of the Group. No individual or small group of individuals dominate the Board's decision making process.

Lead Independent Director

In line with the recommendation in Guideline 3.3 of the Code of Corporate Governance 2012, the Board has appointed Mr Leong Horn Kee as Lead Independent Director (“Lead ID”) on 1 January 2013. The role of the Lead ID is set out under the written terms of reference of the Lead ID, which has been approved by the Board.



annual report 2012

Board Membership & Board Performance

Principle 4 : There should be a formal and transparent process for the appointment and re-election of directors to the Board.

Principle 5 : There should be a formal annual assessment of the effectiveness of the Board as a whole and its committees and the contribution by each director to the effectiveness of the Board.

The Nominating Committee was formed on 6 January 2003 and comprises four directors, including three independent directors, Mr Tan Hup Foi, Mr Leong Horn Kee, Mr Koh Soo Keong and one executive director, Mr Tay Eng Hoe. Mr Tan Hup Foi is the Chairman of the Nominating Committee.

The role of the Nominating Committee is to perform the following functions:

a) identifies and reviews all nominations for Board appointments and re-nominations of directors;b) assesses the effectiveness of the Board as a whole and the contribution by each individual director to the

effectiveness of the Board; c) determine whether or not a director is independent;d) review of board succession plans for directors, in particular, the Chairman and for the CEO;e) the development of a process for evaluation of the performance of the Board, its committees and directors;f ) the review of training programs for the Board; andg) the appointment and re-election of directors.

In accordance with the Company’s Articles of Association, at each Annual General Meeting, one-third of the Board shall retire from office by rotation provided that no director holding office as Managing or Joint Managing Director shall be subject to retirement by rotation or be taken into account in determining the number of directors to retire.

Board Assessment & Evaluation Processes

Each board member is required to complete a Board Evaluation Questionnaire and send the Questionnaire directly to the Company Secretary. Based on the returns from each of the directors, the Company Secretary prepares a consolidated report and briefs the Chairman of the Nominating Committee on the report. The Company Secretary will thereafter present the report to the Board together with the recommendations of the Nominating Committee for discussion on the changes which should be made to help the Board discharge its duties more effectively.

Access to Information

Principle 6 : In order to fulfil their responsibilities, Board members should be provided with complete, adequate and timely information prior to Board meetings and on an on-going basis so as to enable them to make informed decisions to discharge their duties and responsibilities as directors.

All directors are provided with complete, adequate and timely information prior to meetings and on a regular basis to enable them to perform their roles properly. Directors are entitled to request additional information as needed to make informed decisions. All directors have separate and independent access to senior management and the Company Secretary. The Company Secretary has defined roles and responsibilities and attends all Board and sub-committee meetings of the Company. Should directors, whether as a group or individually, need independent professional advice in the furtherance of their duties, the cost of such professional advice will be borne by the Company.

(B) REMUNERATION MATTERS

Procedures for Developing Remuneration Policies

Principle 7 : There should be a formal and transparent procedure for fixing the remuneration packages of individual directors. No director should be involved in deciding his or her own remuneration.

The Compensation Committee oversees the general compensation of employees of our Group with a goal to motivate, recruit and retain employees and directors through competitive compensation and progressive policies. In particular, the Compensation Committee is responsible for overseeing our employee profit sharing scheme as well as the share incentives, including the ECS Share Option Scheme I, ECS Share Option Scheme II and ECS Performance Shares Scheme. The Compensation Committee of the Board comprises Mr Koh Soo Keong, Mr Leong Horn Kee, and Mr Tan Hup Foi. Mr Koh Soo Keong is the Chairman of the Compensation Committee.


3233


annual report 2012

Level and Mix of Remuneration; Disclosure of Remuneration

Principle 8 : The level and structure of remuneration should be aligned with the long-term interest and risk policies of the company, and should be appropriate to attract, retain and motivate the (a) directors to provide good stewardship of company, and (b) key management personnel to successfully manage the company. However, companies should avoid paying more than is necessary for this purpose.

Principle 9 : Every company should provide clear disclosure of its remuneration policy, level and mix of remuneration, and the procedure for setting remuneration, in the company’s annual report. It should also provide disclosure in relation to its remuneration policies to enable investors to understand the link between remuneration paid to directors and key management personnel, and performance.

The Group’s remuneration policy is to provide a competitive remuneration package so as to attract, retain and motivate directors and senior management with the required experience and expertise to run the Group successfully. In setting remuneration packages for executive directors and senior management of the Group, the pay and employment conditions within the industry and in comparable companies are taken into consideration.

The compensation package of the Group’s executive directors including its Executive Chairman, Group CEO and senior management consists of salary, allowances, share options and bonuses which are conditional upon meeting certain performance targets.

Non-executive directors have remuneration packages which consist of a directors’ fee component and a share option component pursuant to the Company’s Share Option Scheme. The directors’ fee policy is based on a scale of fees divided into basic retainer fees as a director and additional fees for serving on board committees. Directors’ fees for non-executive directors are subject to the approval of shareholders at the Annual General Meeting. The report on directors’ remuneration is given below:

SUMMARy COMpENSATION TABlE fOR ThE yEAR ENDED 31 DECEMBER 2012

Name of DirectorSalary

%Bonus

%fees

%

Allowancesand other

Benefits%

Total%

$1,500,000 to below $2,000,000Narong Intanate 18 79 - 3 100

$500,000 to below $1,500,000Nil

$250,000 to below $500,000Mao Xiangqian

-

82

-

14

-

-

-

4

-

100

Below $250,000Tay Eng HoeFoo Sen Chin

--

--

100100

--

100100

Leong Horn Kee - - 100 - 100Tan Hup Foi - - 100 - 100Koh Soo Keong - - 100 - 100Ong Wei Hiam 66 29 5 - 100

Executives’ Remuneration

Rather than setting out the names of the top five key executives who are not also directors of the Company, we have shown a Group-wide cross-section of executive remuneration by number of employees earning $100,000 upwards in bands of $250,000 below. This should give a macro view of the remuneration pattern in the Group, while maintaining confidentiality of staff remuneration matters.



annual report 2012

NO. Of EXECUTIVES IN REMUNERATION BANDS

Total Compensation (S$) No. of Employees

(Note 1)

Total fixedCompensation

(Note 2)

Total Variable Compensation

(Note 3)

Total Remuneration

$100,000 to $249,999 12 $1,521,769 $456,104 $1,977,873$250,000 to $499,999 5 $1,421,622 $486,316 $1,907,938$500,000 to $749,999 3 $760,284 $1,049,537 $1,809,821$750,000 to $1,000,000 2 $235,272 $1,395,703 $1,630,975Total 22 $3,938,947 $3,387,660 $7,326,607

Notes :

1. Including employees in local and overseas subsidiaries.2. Inclusive salaries, AWS, related CPF and other statutory contributions, allowances and fringe-benefits.3. Sales commission, bonus and other statutory contributions.

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

(C) ACCOUNTABIlITy AND AUDIT

Accountability

Principle 10 : The Board should present a balanced and understandable assessment of the company’s performance, position and prospects.

In presenting the annual financial statements and quarterly announcements to shareholders, it is the aim of the Board to provide the shareholders with a detailed analysis, explanation and assessment of the Group’s financial position and prospects. On a quarterly basis, Board members are provided with business and financial reports comparing actual performance with budget and with prior year comparisons with highlights on key business indicators and any significant business development. In addition, the Group CEO communicates regularly with Board members through informal meetings and phone calls with appropriate updates on Company developments. The heads of all business and support units provide a quarterly certification to the Group CEO and the Group Chief Financial Officer (“Group CFO”) stating, inter alia, that the head of such business or support unit is not aware of any circumstances not otherwise dealt with in the financial statements that would render any amount stated in the financial records misleading. The Group CEO and Group CFO in turn provide a Letter of Representation on a quarterly basis to the Audit Committee and the external auditors, KPMG LLP(“KPMG”), confirming that the financial statements have been properly drawn up.

Risk Management and Internal Controls

Principle 11 : The Board is responsible for the governance of risk. The Board should ensure that the management maintains a sound system of risk management and internal controls to safeguard the shareholders’ interests and the company’s assets, and should determine the nature and extent of the significant risks which the Board is willing to take in achieving its strategic objectives.

The Company currently has a Risk Management Committee and it has established a risk identification and management framework. In the Company, risks are identified and addressed, with the Board and senior management personnel of the Group and its subsidiaries taking ownership of these risks. In addition, the internal auditors reviewed the policies and procedures as well as key controls and highlighted issues to the directors and the Audit Committee. Furthermore, in performing their audit of the financial statements, the external auditors performed tests over operating effectiveness of certain controls that the auditors intended to rely on that are relevant to the Group’s preparation of its financial statements. The external auditors also reported any performance improvement points in such internal controls to the directors and the Audit Committee. Action plans to manage the risks are continuously being monitored and refined by management and the Board. Any material non-compliance or lapses in internal controls together with corrective measures are reported to the directors and the Audit Committee.


3435


annual report 2012

Based on the framework established, the Board opines, with the concurrence of the Audit Committee, that there are adequate internal controls in place within the Group addressing significant and critical financial, operational and compliance risks. The Board, together with the Audit Committee and management, will continue to enhance and improve the existing internal control framework to identify and mitigate these risks.

Audit Committee

Principle 12 : The Board should establish an Audit Committee with written terms of reference which clearly set out its authority and duties.

The Audit Committee comprises three members, of which all members, including the Chairman, are independent. The members of the Audit Committee at the date of this report are:

Leong Horn Kee ChairmanTan Hup Foi MemberKoh Soo Keong Member

The Audit Committee meets periodically to perform the following functions:-

a) reviewing the quarterly, half-yearly and annual financial statements before recommending them to the Board for approval;

b) reviewing interested person transactions (as defined in Chapter 9 of the Listing Manual (“Listing Manual”) of the Singapore Exchange Securities Trading Limited (“SGX-ST”), including such transactions conducted under the shareholders' general mandate previously obtained;

c) reviewing with external auditors the audit plan, their evaluation of the systems of internal controls, their annual reports and their management letters and management’s response;

d) reviewing and recommending to the Board the re-appointment of the external auditors, taking into consideration the non-audit services rendered by the external auditors and being satisfied that the nature and extent of such services will not prejudice the independence and objectivity of the external auditors;

e) reviewing the scope of internal audit procedures and the results and effectiveness of the internal audit;

f ) reviewing any suspected fraud or irregularity, or suspected infringement of any Singapore laws or regulations or rules of the SGX-ST or any other regulatory authority in Singapore, which has or is likely to have a material impact on the Group’s operating results or financial position, and reporting such matters to the Board; and

g) considering other matters as requested by the Board.

The Audit Committee has full access to and co-operation of the Company's management and the internal auditors and has full discretion to invite any director or executive officer to attend its meetings. The auditors, both internal and external, have unrestricted access to the Audit Committee. Reasonable resources have been made available to the Audit Committee to enable them to discharge their duties.

The Audit Committee held 4 meetings since the date of the last annual report. The Audit Committee reviewed the Interested Person Transactions for the year ended 31 December 2012 in accordance with the terms of the Shareholders' Mandate for such transactions as were approved on 25 April 2012. Interested Person Transactions with a total value of $115.7 million were examined and the Audit Committee is of the opinion that the said transactions were carried out on prevailing commercial terms and did not prejudice the interest of the shareholders of the Company.

The Audit Committee had reviewed and confirmed that the methods and procedures for determining the transaction prices relating to Interested Person Transactions have not changed since the last shareholders' approval. The Audit Committee also confirms that the methods and procedures are sufficient to ensure that the transactions will be carried out on normal terms and will not be prejudicial to the interests of the Company and its minority shareholders.



annual report 2012

The Audit Committee had reviewed the non-audit services provided by the external auditors and is satisfied with the independence of the auditors. The Audit Committee has recommended to the Board that the auditors, KPMG, be nominated for re-appointment at the forthcoming Annual General Meeting of the Company. Meetings and attendance are as follows:

Audit Committee

Name of DirectorNo. of

Meetings Attended

Leong Horn Kee (Chairman) 4 4Tan Hup Foi 4 4Koh Soo Keong 4 4

Internal Audit

Principle 13 : The company should establish an effective internal audit function that is adequately resourced and independent of the activities it audits.

The Group has an internal audit department which is independent of the activities it audits. It performs financial audits, implements operational and compliance controls. The Audit Committee approves the hiring, removal, evaluation and compensation of the head of the internal audit department. The Internal Auditor reports primarily to the Chairman of the Audit Committee and administratively to the Group CEO. The Internal Auditor plans its internal audit work in consultation with, but independent of, management, and its yearly plan is submitted to the Audit Committee for approval at the beginning of each year. The Internal Auditor has access to all the Company’s documents, records, properties and personnel and reports to the Audit Committee quarterly regarding its findings. The Audit Committee also meets with the Internal Auditor at least once during the year without the presence of management. The Audit Committee also ensures that the internal audit function is adequately resourced, and will review annually the adequacy of the internal audit function.

The internal auditors are expected to carry out their function according to standards set by nationally or internationally recognised professional bodies including the Standards for the Professional Practice of Internal Auditing set by The Institute of Internal Auditors.

Investment Committee

The Investment Committee is chaired by the independent and non-executive director, Mr Leong Horn Kee. The members of the Committee comprised Mr Foo Sen Chin, Mr Tan Hup Foi and Mr Ong Wei Hiam.

The Investment Committee meets periodically to perform the following functions:-

a) to review and recommend investment policy guidelines and capital expenditure plans to the Board;b) to review investment risk management policies;c) to evaluate and recommend any proposed investments, divestments, geographical expansion, mergers and

acquisitions, joint ventures for Board’s approval; andd) to review and monitor performance, forecast and business plan of investments.

Risk Management Committee

Risk management continues to play an important part in the Company’s business activities and is an essential component of its planning process. The Board has overall responsibility to ensure that the Company has the capability and necessary framework to manage risks in new and existing businesses and that business plans and strategies accord with the risks appetite that the Company undertakes to achieve its corporate objectives. To assist the Board in its risk management oversight, the Audit Committee has been authorised by the Board to provide oversight and review on matters relating to the risk management policies and systems of the Company.


3637


annual report 2012

The Audit Committee’s risk management function is assisted by a Risk Management Committee (“RM Committee”), whose members comprise senior management. The RM Committee is responsible for ensuring the effectiveness of the risk management framework of the Company, the objective of which is to provide an enterprise-wide view of the risks involved in the business, finance and operations, and a systematic process for identification, assessment, management and reporting of such risks on a consistent and reliable basis. The RM Committee is mandated to focus on key strategic risks whilst also ensuring that the business units are responsible for the day-to-day tracking, monitoring and control of risks within their operations.

The designated Risk Coordinator assists by providing the RM Committee with the quarterly status of the key strategic risk exposures and the senior management with a timely assessment of key risk exposures and any new emerging risks that may require assessment. The RM Committee reports quarterly to the Audit Committee on the overall strategic and operational risks positions, including mitigating measures, treatment plans and the occurrence or potential occurrence of significant risk events.

The RM Committee had, since 2012, established a formal risk management framework. Within this framework, significant business risks are identified, assessed, evaluated, monitored, managed, and reported on a regular basis.

The risk governance structure of the Company is regularly reviewed against international standards and best practices in risk management. The Company recognises that the risk management process is an ongoing process and aims under its risk governance structure to continue to look for ways to improve in the following areas:

a) increase monitoring and control capabilities in its review of significant strategic business risks;b) review the effectiveness of the systems of internal controls to limit, mitigate, manage and monitor identified

risks;c) ensure that the operating systems deliver adequate and timely information required for effective risk

management; and d) build on and integrate into its existing governance and management systems the appropriate tools for effective

management of strategic business risks which are reflective of changes in markets, products and emerging best practices.

(D) COMMUNICATION WITh ShAREhOlDERS

Principle 14 : Companies should treat all shareholders fairly and equitably, and should recognise, protect and facilitate the exercise of shareholders’ rights, and continually review and update such governance arrangements.

Principle 15 : Companies should actively engage their shareholders and put in place an investor relations policy to promote regular, effective and fair communication with shareholders.

Principle 16 : Companies should encourage greater shareholder participation at general meetings of shareholders, and allow shareholders the opportunity to communicate their views on various matters affecting the company.

The Group does not practice selective disclosure. In line with continuous obligations of the Group pursuant to the Listing Manual and the Companies Act, Chapter 50, of Singapore, the Board’s policy is that all shareholders are informed of all major developments of the Group. Price-sensitive information is released publicly, and quarterly results and annual reports are announced or issued within the mandatory period and are available on the Group’s website. Thereafter, a briefing by management is held jointly for the media and analysts every half yearly. All shareholders of the Group receive the annual report and notice of Annual General Meeting. Shareholders are encouraged to attend the Annual General Meeting to ensure a high level of accountability and to stay informed of the Group’s strategy and goals.

Code of Business Conduct and Ethics

The Board and senior management are committed to conducting business with integrity and consistent with high standards of business ethics, and in compliance with all applicable laws and regulatory requirements. The Company has adopted an internal code of business conduct and ethics which sets out the Company’s ethical values and business principles and provides a communicable and understandable framework for staff to observe these values and principles such as honesty, integrity, responsibility and accountability at all levels of the organisation. The code is available on the Company’s intranet and is easily accessible by all employees.



annual report 2012

The code provides guidance on issues such as:

a) conflicts of interest and the appropriate disclosures to be made;b) the Company’s stance against corruption and bribery;c) compliance with applicable laws and regulations;d) compliance with Company’s policies and procedures, including those on internal controls and accounting;e) safeguarding and proper use of Company’s assets, confidential information and intellectual property rights,

including the respect of the intellectual property rights of third parties; andf ) competition and fair dealing in the conduct of the Company’s business, in its relationships with customers,

suppliers, competitors and towards its employees.

(E) DEAlING IN SECURITIES

The Company has adopted its own internal Code of Best Practices on Securities Transactions (“Code”) with regard to dealings in the Company’s shares by its directors and executives. It emphasizes that the law on insider dealing is applicable at all times, notwithstanding that the Code provides certain window periods for directors and executives to deal in the shares of the Company. The Code also enables the Company to monitor such share transactions by requiring directors and executives to report to the Company whenever they deal in the Company’s shares. In the opinion of the directors, the Company has complied with the Best Practices stipulated in Listing Manual Rule 1207 (18) of the SGX-ST Listing Manual.

In addition, pursuant to Rule 728 of the Listing Manual, where any borrowings or loans of the Company or its subsidiaries contains any provisions which makes reference to the shareholding interest of any controlling shareholder(s), the Company will obtain an undertaking from such controlling shareholder(s) to notify the Company, as soon as it becomes aware, of any share pledging arrangements relating to these shares and of any event which may result in a breach of the Company’s loan provisions.

(f) INTERESTED pARTy TRANSACTIONS

The Group has adopted an internal policy in respect of any transactions with interested persons and has procedures established for the review and approval of the Group’s Interested Party Transactions (“IPT”).

Pursuant to Rule 907 of the Listing Manual, the Group has the following IPTs entered into during the financial year, together with the corresponding aggregate value of the IPTs entered into with the same interested person, are disclosed as follows:

Name of Interested person

Aggregate value of all IpTs during the financial year under review

(excluding transactions less than $100,000 and transactions conducted under shareholders’

mandate pursuant to Rule 920 of listing Manual of SGX-ST)

Aggregate value of all IpTs conducted under

shareholders’ mandate pursuant to Rule 920 of

listing Manual of SGX-ST (excluding transactions

less than $100,000)

a) Transactions for the sale of goods and services with Vnet Capital Co., Ltd and its subsidiaries

- S$4,672,930

b) Transactions for the sale of goods and services with VST Holdings Ltd and its subsidiaries

- S$98,701,575

c) Transactions for the purchase of goods with VST Holdings Ltd and its subsidiaries

- S$597,577


financial contents

40 Directors’ Report

45 Statement by Directors

46 Indepedent Auditors’ Report

47 Statement of Financial Position

48 Consolidated Statement of Comprehensive Income

49 Consolidated Statement of Changes in Equity

51 Consolidated Statement of Cash Flows

52 Notes to the Financial Statements

96 Shareholdings Statistics

97 Notice of Annual General Meeting


annual report 2012

DireCtorS’ report

We are pleased to submit this annual report to the members of the Company together with the audited financial statements for the financial year ended 31 December 2012.

Directors

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

Tay Eng HoeNarong IntanateFoo Sen ChinLeong Horn KeeTan Hup FoiKoh Soo KeongMao XiangqianOng Wei Hiam

Directors’ interests

According to the register kept by the Company for the purposes of Section 164 of the Companies Act, Chapter 50 (the Act), particulars of interests of directors who held office at the end of the financial year (including those held by their spouses and infant children) in shares, debentures, warrants or share options of the Company and in related corporations (other than wholly-owned subsidiaries) are as follows:

Name of director and corporationin which interests are held

holdings at beginning

of the year

holdings at end of the year

ECS holdings limited- options to subscribe for ordinary shares at $0.550 per share between 15/10/2011 and 15/10/2020

Narong Intanate 1,500,000 1,000,000Mao Xiangqian 900,000 900,000Foo Sen Chin 300,000 300,000

ECS holdings limited- options to subscribe for ordinary shares at $0.550 per share between 15/10/2011 and 15/10/2015

Tay Eng Hoe 700,000 700,000Leong Horn Kee 400,000 400,000Koh Soo Keong 400,000 400,000Tan Hup Foi 400,000 400,000Ong Wei Hiam 300,000 300,000

ECS holdings limited- ordinary shares

Narong Intanate – 569,000

Except as disclosed in this report, no director who held office at the end of the financial year had interests in shares, debentures, warrants or share options of the Company, or of related corporations, either at the beginning of the financial year, or at the end of the financial year.

Except as disclosed in this report, neither at the end of, nor at any time during the financial year, was the Company a party to any arrangement whose objects are, or one of whose objects is, to enable the directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.

4041


annual report 2012

DireCtorS’ report

Directors’ interests (cont’d)

There were no changes in any of the above mentioned interests in the Company between the end of the financial year and 21 January 2013.

During the financial year, certain of its subsidiaries have, in the normal course of business entered into transactions with companies in which Mr Narong Intanate has an interest. These transactions include the purchase and sale of information technology products and services amounted to $139,787 (2011: $394,548) and $15,680,193 (2011: $19,908,337) respectively and are carried out on normal commercial terms.

However, the directors have not received nor will they be entitled to receive any benefits arising out of these transactions other than those which they may be entitled to as shareholders of those companies or as a member of the firm.

Except as disclosed above and in note 33 to the financial statements, since the end of the last financial year, no director has received or become entitled to receive a benefit by reason of a contract made by the Company or a related corporation with the director or with a firm of which he is a member or with a company in which he has a substantial financial interest.

Share options

The Company

(a) Share option scheme

The ECS Share Option Scheme II (“Scheme II”) was approved and adopted by its members at an Extraordinary General Meeting held on 13 December 2000. Scheme II provides an opportunity for employees and directors, including non-executive directors, of the Group who have contributed significantly to the growth and performance of the Group to participate in the equity of the Company.

The above scheme is administered by the Compensation Committee (the “Committee”) which comprises the following directors:

Koh Soo Keong (Chairman) Leong Horn Kee Tan Hup Foi

Details of Scheme II were set out in the Directors’ Report for the year ended 31 December 2000.

(b) Options granted

On 15 October 2010, the Group granted 13,770,000 share options pursuant to the rules of the ECS Share Option Scheme II. The options have an exercise price of $0.550 per share; a vesting period of 1 year from date of grant; and can be exercised within 5 years from date of grant for non-executive directors and 10 years from date of grant for executive directors and employees.

(c) Issue of shares under option

During the financial year, the Company has issued 550,000 shares under the share option scheme of the Company.

(d) Unissued shares under option

Date of grant of options

Exercise price per share Exercise period

Number of option holders

at 31 December 2012

Options outstanding

at 31 December 2012

15/10/2010 $0.550 15/10/2011 to 15/10/2015 5 2,200,00015/10/2010 $0.550 15/10/2011 to 15/10/2020 45 9,850,000

The details of options granted and exercised are as follows:


annual report 2012

Share options (cont’d)

(d) Unissued shares under option (cont’d)

Name of participantsOptions granted

Aggregate options granted

Aggregate optionsexercise

Aggregate options

forfeited/ lapsed

Aggregate options

outstanding[1] [2] [3] [4] [5]

Executive directors- Narong Intanate – 11,006,000 (9,406,000) (600,000) 1,000,000- Mao Xiangqian – 900,000 – – 900,000- Ong Wei Hiam – 300,000 – – 300,000

Non-executive directors- Tay Eng Hoe – 5,676,000 (2,226,000) (2,750,000) 700,000- Foo Sen Chin – 4,160,000 (3,340,000) (520,000) 300,000- Leong Horn Kee – 678,000 – (278,000) 400,000- Koh Soo Keong – 520,000 – (120,000) 400,000- Tan Hup Foi – 400,000 – – 400,000

former directors- Wong Heng Chong – 1,713,000 (1,113,000) (600,000) –- Lin Chien – 128,000 – (128,000) –- Chay Yee Meng – 188,000 – (188,000) –- Teo Ek Tor – 130,000 – (130,000) –- Wang Fangmin – 50,000 – (50,000) –- Hsieh Fu Hua – 88,000 – (88,000) –- Lee Suet Fern – 258,000 – (258,000) –

Employees (including executive officers)- Foong Kam Tho – 8,629,000 (6,679,000) (1,950,000) –- Other employees – 32,162,000 (50,000) (24,462,000) 7,650,000

– 66,986,000 (22,814,000) (32,122,000) 12,050,000

[1] Options granted during the financial year under review.

[2] Aggregate options granted since commencement of the schemes to the end of the financial year under review.

[3] Aggregate options exercised since commencement of the schemes to the end of the financial year under review.

[4] Aggregate options lapsed since commencement of the schemes to the end of the financial year under review.

[5] Aggregate options outstanding as at end of the financial year under review.

Except as disclosed, since the commencement of the option schemes:

(i) no option has been granted to the controlling shareholder of the Company or their associates;

(ii) no participant under the schemes has been granted 5% or more of the total options available under the schemes; and

(iii) no option has been granted to employees of subsidiaries under the schemes.

The options granted by the Company do not entitle the holders of the options, by virtue of such holding, to any rights to participate in any share issue of any other company.

DireCtorS’ report

4243


annual report 2012

Share options (cont’d)

ECS Indo pte ltd

(a) Options granted

On 16 October 2009, the subsidiary granted 450,000 share options to a minority shareholder and four senior employees of the subsidiary. Each option is, upon full payment of the exercise price, convertible into one new ordinary share of the company. The options are exercisable at any time within 3 years from the grant date and are settled by physical delivery of shares.

(b) Issue of shares under option

During the financial year, there were no issuance of shares under the share option scheme of the company.

(c) Unissued shares under option


Exercise price per share Exercise period

Number of option holders

at 31 December 2012

Options outstanding

at 31 December 2012

16/10/2009 US$1.8156 16/10/2009 to 16/10/2012 – –

The options have expired during the financial year.

Except as disclosed above, there were:

(i) no options granted by the Company or its subsidiaries to any person to take up unissued shares in the Company or its subsidiaries;

(ii) no shares issued by virtue of any exercise of option to take up unissued shares of the Company or its subsidiaries; and

(iii) no unissued shares of the Company or its subsidiaries under option at the end of the financial year.

ECS performance Share Scheme

The ECS Performance Share Scheme (the “Scheme”) was approved at the Company’s Extraordinary General Meeting held on 1 December 2006. The Scheme is administered by the Compensation Committee which comprises the Non-Executive Directors Messrs Koh Soo Keong, Leong Horn Kee and Tan Hup Foi.

Group Executives who have attained the age of 21 years on or before the date of grant of the Award (as defined below), Group Executive Directors and Non-Executive Directors are eligible to participate in the Scheme (“Participants”). The Scheme is to reward Participants by award of existing Shares held as treasury shares in the Company (“Awards”), which are given free of charge to the Participants according to the extent to which their performance targets set under the Scheme are achieved at the end of a specified performance period.

Since the commencement of the Scheme, no Awards have been granted.

Audit committee

The members of the Audit Committee during the year and at the date of this report are:

Leong Horn Kee (Chairman, Lead Independent director)Tan Hup Foi (Independent director)Koh Soo Keong (Independent director)

The Audit Committee performs the functions specified by section 201B of the Companies Act, the SGX Listing Manual and the Code of Corporate Governance.

DireCtorS’ report


annual report 2012

Audit committee (cont’d)

The Audit Committee held four meetings since the last directors’ report. In performing its functions, the Audit Committee met with the Company’s external and internal auditors to discuss the scope of their work and the results of their examination and evaluation of the Company’s internal accounting control system.

The Audit Committee also reviewed the following:

• assistanceprovidedbytheCompany’sofficerstotheinternalandexternalauditors;

• quarterlyfinancial informationandannualfinancial statementsof theGroupandtheCompanyprior to theirsubmission to the directors of the Company for adoption; and

• interestedpersontransactions(asdefinedinChapter9oftheListingManualoftheSingaporeExchange).

The Audit Committee has full access to management and is given the resources required for it to discharge its functions. It has full authority and discretion to invite any director or executive officer to attend its meetings. The Audit Committee also recommends the appointment of the external auditors and reviews the level of audit and non-audit fees.

The Audit Committee is satisfied with the independence and objectivity of the external auditors and has recommended to the Board of Directors that the auditors, KPMG LLP, be nominated for re-appointment as auditors at the forthcoming Annual General Meeting of the Company.

In appointing our auditors of the Company, subsidiaries and significant associated companies, we have complied with Rules 712 and 715 of the SGX Listing Manual.

Auditors

The auditors, KPMG LLP, have indicated their willingness to accept re-appointment.

On behalf of the Board of Directors

__________________________Ong Wei hiamDirector

__________________________Tay Eng hoeDirector

8 March 2013

DireCtorS’ report

4445


annual report 2012

In our opinion:

(a) the financial statements set out on pages 47 to 95 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 31 December 2012 and of the results, changes in equity and cash flows of the Group for the year ended on that date in accordance with the provisions of the Singapore Companies Act, Chapter 50 and Singapore Financial Reporting Standards; and

(b) at the date of this statement, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due.

The Board of Directors has, on the date of this statement, authorised these financial statements for issue.

On behalf of the Board of Directors

__________________________Ong Wei hiamDirector

__________________________Tay Eng hoeDirector

8 March 2013

Statement by DireCtorS


annual report 2012

Members of the Company ECS Holdings Limited

Report on the financial statements

We have audited the accompanying financial statements of ECS Holdings Limited (the Company) and its subsidiaries (the Group), which comprise the statement of financial position of the Group and the Company as at 31 December 2012, statement of comprehensive income, statement of changes in equity and statement of cash flows of the Group for the year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 47 to 95.

Management’s responsibility for the financial statements

Management is responsible for the preparation of financial statements that give a true and fair view in accordance with the provisions of the Singapore Companies Act, Chapter 50 (the Act) and Singapore Financial Reporting Standards, and for devising and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair profit and loss accounts and balance sheets and to maintain accountability of assets.

Auditors’ responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements of the Group and the statement of financial position of the Company are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2012 and the results, changes in equity and cash flows of the Group for the year ended on that date.

Report on other legal and regulatory requirements

In our opinion, 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.

KpMG llpPublic Accountants andCertified Public Accountants

Singapore8 March 2013

inDepenDent auDitorS’ report

4647


annual report 2012

Group CompanyNote 2012 2011 2012 2011

$’000 $’000 $’000 $’000

Non-current assetsProperty, plant and equipment 4 9,100 9,981 95 111Intangible assets 5 33,522 33,522 – –Subsidiaries 6 – – 215,325 189,442Interest in associates 7 48,923 46,329 3,320 3,320Deferred expenses 18 3,065 3,320 – –Deferred tax assets 8 8,791 8,298 – –

103,401 101,450 218,740 192,873Current assetsInventories 9 280,804 231,749 – –Trade and other receivables 10 576,009 552,608 36,841 29,994Deferred expenses 18 2,271 2,493 – –Cash and cash equivalents 13 108,210 131,397 4,357 19,628

967,294 918,247 41,198 49,622

Total assets 1,070,695 1,019,697 259,938 242,495

Equity attributable to owners of the CompanyShare capital 14 113,117 112,815 113,117 112,815Reserves 15 226,562 213,724 15,844 17,977

339,679 326,539 128,961 130,792Non-controlling interests 1,339 1,303 – –Total equity 341,018 327,842 128,961 130,792

Non-current liabilitiesFinancial liabilities 17 110,268 101,340 110,250 101,238Deferred income 18 3,822 3,938 – –Deferred tax liabilities 8 3,192 2,913 27 27

117,282 108,191 110,277 101,265

Current liabilitiesFinancial liabilities 17 134,004 141,341 4,288 1,313Deferred income 18 3,037 3,154 – –Trade and other payables 19 471,866 431,243 16,112 8,895Current tax payable 3,488 7,926 300 230

612,395 583,664 20,700 10,438

Total liabilities 729,677 691,855 130,977 111,703

Total equity and liabilities 1,070,695 1,019,697 259,938 242,495

Statement of finanCial poSitionAs at 31 December 2012

The accompanying notes form an integral part of these financial statements.


annual report 2012

ConSoliDateD Statement of ComprehenSive inCome Year ended 31 December 2012

Note 2012 2011$’000 $’000

Revenue 22 3,643,651 3,607,165Cost of sales (3,499,842) (3,439,869)Gross profit 143,809 167,296Other income 6,781 9,323Selling and distribution expenses (73,448) (79,487)General and administrative expenses (38,196) (36,965)profit from operations 23 38,946 60,167Finance costs 24 (8,947) (14,927)Share of profit of associates, net of tax 6,997 6,917profit before income tax 36,996 52,157Income tax expense 25 (7,207) (12,738)profit for the year 29,789 39,419

Other comprehensive incomeExchange (loss)/gain on translation of net assets of foreign subsidiaries (8,031) 4,357Share of foreign currency translation differences of associates (809) (522)Other comprehensive income for the year, net of tax (8,840) 3,835

Total comprehensive income for the year 20,949 43,254

profit attributable to:Owners of the Company 29,646 39,230Non-controlling interests 143 189profit for the year 29,789 39,419

Total comprehensive income attributable to:Owners of the Company 20,888 43,044Non-controlling interests 61 210Total comprehensive income for the year 20,949 43,254

Earnings per share- Basic 26 8.10 cents 10.74 cents- Fully diluted 26 8.10 cents 10.65 cents


4849


annual report 2012

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5051


annual report 2012

Note 2012 2011$’000 $’000

Cash flows from operating activitiesProfit before income tax 36,996 52,157

Adjustments for:Depreciation of property, plant and equipment 4 2,646 2,190Equity-settled share-based payment 23 – 54Finance costs 24 8,947 14,927Interest income 23 (551) (704)Loss on disposal of property, plant and equipment 23 37 17Net fair value loss/(gain) on financial instruments 23 65 (1,260)Property, plant and equipment written off 23 1 175Share of profit of associates (6,997) (6,917)

41,144 60,639Changes in working capital:Inventories (58,512) (25,684)Trade and other receivables (44,355) (14,577)Trade and other payables 59,262 37,170Cash (used in)/generated from operations (2,461) 57,548Income taxes paid (11,758) (12,860)Net cash (used in)/from operating activities (14,219) 44,688

Cash flows from investing activitiesDividend received from associates 2,443 807Interest received 551 704Loan received from associate – 6,801Proceeds from disposal of property, plant and equipment 67 83Purchases of property, plant and equipment (2,169) (4,910)Net cash from investing activities 892 3,485

Cash flows from financing activitiesDividends paid to equity holders of the Company (8,050) (13,153)Interest paid (9,551) (14,579)Payment of finance lease (132) (200)Proceeds from issuance of shares 302 –Proceeds from bank loans/trade financing 1,316,632 898,308Repayment of bank loans/trade financing (1,303,707) (879,597)Net cash used in financing activities (4,506) (9,221)

Net (decrease)/increase in cash and cash equivalents (17,833) 38,952Cash and cash equivalents at 1 January 131,397 92,500Effect of exchange rate fluctuations on cash held (5,354) (55)Cash and cash equivalents at 31 December 13 108,210 131,397

ConSoliDateD Statement of CaSh flowSYear ended 31 December 2012



annual report 2012

The financial statements were authorised for issue by the Board of Directors on 8 March 2013.

1 Domicile and activities

ECS Holdings Limited (the “Company”) is incorporated in the Republic of Singapore and has its registered office at 8 Temasek Boulevard, #34-02, Suntec Tower Three, Singapore 038988.

The financial statements of the Company as of and for the year ended 31 December 2012 comprise the Company and its subsidiaries (together referred to as the “Group” and individually as “Group entities”) and the Group’s interest in associates.

The principal activities of the Company are those relating to investment holding and provision of management services. The principal activities of the subsidiaries are set out in note 6 to the financial statements.

The immediate and ultimate holding company is VST Holdings Limited, a company incorporated in the Cayman Islands.

2 Basis of preparation

2.1 Statement of compliance

The financial statements have been prepared in accordance with Singapore Financial Reporting Standards (“FRS”).

2.2 Basis of measurement

The financial statements have been prepared on the historical cost basis except for certain financial assets and financial liabilities as described below.

2.3 functional and presentation currency

The financial statements are presented in Singapore dollars which is the Company’s functional currency. All financial information presented in Singapore dollars has been rounded to the nearest thousand, unless otherwise stated.

2.4 Use of estimates and judgements

The preparation of financial statements in conformity with FRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

Information about critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the financial statements, assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year is described in notes 5 and 7.

2.5 Accounting policies for new transactions and events

Distributions of non-cash assets to owners of the Company

From 1 January 2012, the Group has applied INT FRS 117 Distributions of Non-cash Assets to owners in accounting for distributions of non-cash assets to owners of the Company. The new accounting policy (see note 3.3 (iii)) has been applied prospectively.

noteS to the finanCial StatementSThese notes form an integral part of the financial statements

5253


annual report 2012

noteS to the finanCial StatementS

3 Significant accounting policies

The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements, and have been applied consistently by Group entities, except as explained in note 2.5, which addresses changes in accounting policies.

3.1 Basis of consolidation

(i) Business combinations

Business combinations are accounted for using the acquisition method in accordance with FRS 103 Business Combination as at the acquisition date, the date on which control is transferred to the Group. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Group takes into consideration potential voting rights that are currently exercisable.

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss.

Costs related to the acquisition, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration is classified as equity, it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent consideration are recognised in profit or loss.

For non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the acquiree’s net assets in the event of liquidation, the Group elects on a transaction-by-transaction basis whether to measure them at fair value, or at the non-controlling interests’ proportionate share of the recognised amounts of the acquire’s identifiable net assets, at the acquisition date. All other non-controlling interests are measured at acquisition-date fair value or when applicable, on the basis specified in another standard.

When share-based payment awards (replacement awards) are required to be exchanged for awards held by the acquiree’s employees (acquiree’s awards) and relate to past services, then all or a portion of the amount of the acquirer’s replacement awards is included in measuring the consideration transferred in the business combination. This determination is based on the market-based value of the replacement awards compared with the market-based value of the acquiree’s awards and the extent to which the replacement awards relate to past and/or future service.

(ii) Subsidiaries

Subsidiaries are entities controlled by the Group. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

The accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by the Group. Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance.

(iii) Investments in associates

Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies of these entities. Significant influence is presumed to exist when the Group holds between 20% and 50% of the voting power of another entity.

Investments in associates are accounted for using the equity method (equity-accounted investees) and are recognised initially at cost. The cost of the investments includes transaction costs.

The consolidated financial statements include the Group’s share of the profit or loss and other comprehensive income of the equity-accounted investees, after adjustments to align the accounting policies of the equity-accounted investees with those of the Group, from the date that significant influence or joint control commences until the date that significant influence or joint control ceases.


annual report 2012


3 Significant accounting policies (cont’d)

3.1 Basis of consolidation (cont’d)

(iv) Acquisition of non-controlling interests

Acquisitions of non-controlling interests are accounted for as transactions with owners in their capacity as owners and therefore no goodwill is recognised as a result of such transactions. The adjustments to non-controlling interests are based on a proportionate amount of the net assets of the subsidiary. Any difference between the adjustment to non-controlling interests and the fair value of consideration paid is recognised directly in equity and presented as part of equity attributable to owners of the Company.

(v) Loss of control

Upon the loss of control, the Group derecognises the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently, it is accounted for as an equity-accounted investee or as an available-for-sale financial asset depending on the level of influence retained.

(vi) Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income or expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the Group’s interest in the investees. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

(vii) Accounting for subsidiaries and associates

Investments in subsidiaries and associates are stated in the Company’s statement of financial position at cost less accumulated impairment losses.

3.2 foreign currencies

(i) Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of Group entities at the exchange rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at the reporting date. The reporting currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the year, adjusted for effective interest and payments during the year, and the amortised cost in foreign currency translated at the exchange rate at the end of the year.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date on which the fair value was determined. Non-monetary items in a foreign currency that are measured in terms of historical cost are translated using exchange rate at the date of the transaction. Foreign currency differences arising on retranslation are recognised in profit or loss, except for the following differences which are recognised in other comprehensive income arising on the retranslation of:

• available-for-saleequityinstrumentsexceptonimpairmentinwhichcaseforeigncurrencydifferencesthathave been recognised in other comprehensive income are reclassified to profit or loss;

• afinancialliabilitydesignatedasahedgeifthenetinvestmentinaforeignoperationtotheextentthatthehedge is effective; or

• qualifyingcashflowhedgestotheextentthehedgeiseffective.

Foreign currency differences arising on retranslation are recognised in the profit or loss.

5455


annual report 2012



3.2 foreign currencies (cont’d)

(ii) Foreign operations

The assets and liabilities of foreign operations, excluding goodwill and fair value adjustments arising on acquisition, are translated to Singapore dollars at exchange rates at the end of the reporting period. The income and expenses of foreign operations are translated to Singapore dollars at exchange rates at the dates of the transactions. Goodwill and fair value adjustments arising on the acquisition of a foreign operation on or after 1 January 2005 are treated as assets and liabilities of the foreign operation and translated at the closing rate. For acquisitions prior to 1 January 2005, the exchange rates at the date of acquisition were used.

Foreign currency differences are recognised in other comprehensive income, and presented in the foreign currency translation reserve (translation reserve) in equity. However, if the operation is a non-wholly-owned subsidiary, then the relevant proportionate share of the translation difference is allocated to the non-controlling interests. When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the profit or loss on disposal. When the Group disposes of only part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to non-controlling interests. When the Group disposes of only part of its investment in an associate that includes a foreign operation while retaining significant influence, the relevant proportion of the cumulative amount is reclassified to profit or loss.

When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, foreign exchange gains and losses arising from such a monetary item are considered to form part of a net investment in a foreign operation. These are recognised in other comprehensive income, and are presented in the translation reserve equity.

3.3 financial instruments

(i) Non-derivative financial assets

The Group initially recognises loans and receivables and deposits on the date that they are originated. All other financial assets are recognised initially on the trade date, which is the date that the Group becomes a party to the contractual provisions of the instrument.

The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability.

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

Non-derivative financial assets comprise loans and receivables.

Loans and receivables

The carrying amount of the dividend is remeasured at each reporting date and at the settlement date, with any changes recognised directly in equity as adjustments to the amount of the distribution. On settlement of the transaction, the Group recognises the differences, if any, between the carrying amount of the assets distributed and the carrying amount of the liability in profit or loss.

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses.


annual report 2012



3.3 financial instruments (cont’d)

(i) Non-derivative financial assets (cont’d)

Loans and receivables (cont’d)

Loans and receivables comprise cash and cash equivalents and trade and other receivables.

Cash and cash equivalents comprise cash balances and bank deposits.

(ii) Non-derivative financial liabilities

The Group initially recognises subordinated liabilities on the date that they are originated. Financial liabilities for contingent consideration payable in a business combination are recognised at the acquisition date. All other financial liabilities are recognised initially on the trade date, which is the date that the Group becomes a party to the contractual provisions of the instrument.

The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or expired.

Financial liabilities for contingent consideration combination are initially measured at fair value. Subsequent changes in the fair value of the contingent consideration are recognised in profit or loss.

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

The Group classifies non-derivative financial liabilities into the other financial liabilities category. Such financial liabilities are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortised cost using the effective interest method.

Other financial liabilities comprise loans and borrowings, bank overdrafts, and trade and other payables.

Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

(iii) Share capital

Ordinary shares

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects.

Repurchase, disposal and reissue of share capital (treasury shares)

When share capital recognised as equity is repurchased, the amount of the consideration paid, which includes directly attributable costs, net of any tax effects, is recognised as a deduction from equity. Repurchased shares are classified as treasury shares and are presented in the reserve for own share account. When treasury shares are sold or reissued subsequently, the amount received is recognised as an increase in equity, and the resulting surplus or deficit on the transaction is presented in non-distributable capital reserve.

Distribution of non-cash assets to owners of the Company

The Group measures a liability to distribute non-cash assets as a dividend to the owners of the Company at the fair value of the assets to be distributed. The carrying amount of the dividend is remeasured at each reporting date and at the settlement date, with any changes recognised directly in equity as adjustments to the amount of the distribution. On settlement of the transaction, the Group recognises the differences, if any, between the carrying amount of the assets distributed and the carrying amount of the liability in profit or loss.

5657


annual report 2012



3.3 financial instruments (cont’d)

(iv) Derivative financial instruments

The Group holds derivative financial instruments to hedge its foreign currency and interest rate risk exposures. Embedded derivatives are separated from the host contract and accounted for separately if the economic characteristics and risks of the host contract and the embedded derivative are not closely related, a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative, and the combined instrument is not measured at fair value through profit or loss.

Derivatives are recognised initially at fair value; attributable transaction costs are recognised in profit or loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are recognised in profit or loss.

The fair value of interest rate swaps is the estimated amount that the Group would receive or pay to terminate the swap at the statement of financial position date, taking into account current interest rates and the current credit-worthiness of the swap counterparties. The fair value of forward exchange contracts is their quoted market price at the statement of financial position date, being the present value of the quoted forward price.

(v) Financial guarantee contracts

Financial guarantee contracts are regarded as insurance contracts under which the Group accepts significant insurance risk from a third party by agreeing to compensate that party on the occurrence of a specified uncertain future event. Provisions are recognised when it is probable that the guarantee will be called upon and an outflow of resources embodying economic benefits will be required to settle the obligations.

3.4 property, plant and equipment

(i) Recognition and measurement

Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses.

Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for its intended use, the cost of dismantling and removing the items and restoring the site on which they are located and capitalised borrowing costs. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.

When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

The gain or loss on disposal of an item of property, plant and equipment is determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and is recognised net within other income/other expenses in profit or loss.

(ii) Subsequent costs

The cost of replacing a component of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the component will flow to the Group, and its cost can be measured reliably. The carrying amount of the replaced component is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in the profit or loss as incurred.

(iii) Depreciation

Depreciation is based on the cost of an asset less its residual value. Significant components of individual assets are assessed and if a component has a useful life that is different from the remainder of that asset, that component is depreciated separately.


annual report 2012



3.4 property, plant and equipment (cont’d)

(iii) Depreciation (cont’d)

Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each component of an item of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Assets under construction are not depreciated.

Depreciation is recognised from the date that the property, plant and equipment are installed and are ready for use, or in respect of internally constructed assets, from the date that the asset is completed and ready for use.

The estimated useful lives are as follows: -

Freehold building - 50 yearsLeasehold improvements - 10 yearsOffice equipment - 5 yearsFurniture and fittings - 5 yearsComputers - 5 yearsMotor vehicles - 5 years

Depreciation methods, useful lives and residual values are reviewed at the end of each reporting period and adjusted if appropriate.

3.5 Intangible assets

(i) Goodwill

Goodwill represents the excess of:

• thefairvalueoftheconsiderationtransferred;plus

• therecognisedamountofanynon-controllinginterestsintheacquiree;plus

• if the business combination is achieved in stages, the fair value of the existing equity interest in theacquiree,

over the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.

When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.

Subsequent measurement

Goodwill is measured at cost less accumulated impairment losses. In respect of equity accounted investees, the carrying amount of goodwill is included in the carrying amount of the investment, and an impairment loss on such an investment is not allocated to any asset, including goodwill, that forms part of the carrying amount of the equity-accounted investee.

3.6 leased assets

Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.

Other leases are operating leases and are not recognised in the Group’s statement of financial position.

5859


annual report 2012



3.7 Inventories

Inventories are measured at the lower of cost and net realisable value.

Cost is calculated using the weighted average cost formula and comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. In arriving at net realisable value, due allowance is made for all obsolete and slow moving inventories.

3.8 Impairment

(i) Non-derivative financial assets

A financial asset not carried at fair value through profit or loss is assessed at the end of each reporting period to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event has a negative effect on the estimated future cash flows of that asset that can be estimated reliably.

Objective evidence that financial assets (including equity securities) are impaired can include default or delinquency by a debtor, restructuring of an amount due to the Group on terms that the Group would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers or issuers in the Group, economic conditions that correlate with defaults or the disappearance of an active market for a security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment. The Group considers a decline of 20% to be significant and a period 9 months to be prolonged.

Loans and receivables

The Group considers evidence of impairment for loans and receivables at both a specific asset and collective level. All individually significant loans and receivables are assessed for specific impairment. All individually significant receivables found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified.

Loans and receivables that are not individually significant are collectively assessed for impairment by grouping together loans and receivables with similar risk characteristics.

In assessing collective impairment, the Group uses historical trends of the probability of default, the timing of recoveries and the amount of loss incurred, adjusted for management’s judgement as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical trends.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows, discounted at the asset’s original effective interest rate. Losses are recognised in profit or loss and reflected in an allowance account against loans and receivables. Interest on the impaired asset continues to be recognised. When a subsequent event (e.g. repayment by a debtor) causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.


annual report 2012



3.8 Impairment (cont’d)

(ii) Non-financial assets

The carrying amounts of the Group’s non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For goodwill, and intangible assets that have indefinite useful lives or that are not yet available for use, the recoverable amount is estimated each year at the same time. An impairment loss is recognised if the carrying amount of an asset or its related cash-generating unit (“CGU”) exceeds its recoverable amount.

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. 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 or CGU. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGU. Subject to an operating segment ceiling test, for the purposes of goodwill impairment testing, CGUs to which goodwill has been allocated are aggregated so that the level at which impairment testing is performed reflects the lowest level at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a business combination is allocated to groups of CGUs that are expected to benefit from the synergies of the combination.

The Group’s corporate assets do not generate separate cash inflows and are utilised by more than one CGU. Corporate assets are allocated to CGUs on a reasonable and consistent basis and tested for impairment as part of the testing of the CGU to which the corporate asset is allocated.

Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the CGU (group of CGUs), and then to reduce the carrying amounts of the other assets in the CGU (group of units) on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

Goodwill that forms part of the carrying amount of an investment in an associate is not recognised separately, and therefore is not tested for impairment separately. Instead, the entire amount of the investment in an associate is tested for impairment as a single asset when there is objective evidence that the investment in an associate may be impaired.

3.9 Dividends

Dividends on ordinary shares are recognised as a liability in the period in which it is declared.

3.10 Employee benefits

(i) Defined contribution plans

A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognised as an employee benefit expense in profit or loss in the periods during which services are rendered by employees.

6061


annual report 2012



3.10 Employee benefits (cont’d)

(ii) Short-term employee benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

(iii) Share-based payments

The grant date fair value of share-based payment awards granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period that the employees unconditionally become entitled to the awards. The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market vesting conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.

The fair value of the amount payable to employees in respect of share appreciation rights, which are settled in cash, is recognised as an expense with a corresponding increase in liabilities, over the period that the employees unconditionally become entitled to payment. The liability is remeasured at each reporting date and at settlement date. Any changes in the fair value of the liability are recognised as personnel expense in profit or loss.

3.11 Revenue recognition

(i) Goods sold

Revenue from the sale of goods in the course of ordinary activities is measured at the fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates. Revenue is recognised when persuasive evidence exists, usually in the form of an executed sales agreement, that the significant risks and rewards of ownership have been transferred to the customer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. If it is probable that discounts will be granted and the amount can be measured reliably, then the discount is recognised as a reduction of revenue as the sales are recognised.

The timing of the transfer of risks and rewards varies depending on the individual terms of the sales agreement. For sales of IT products, transfer usually occurs when the product is received at the customer’s warehouse; however, for some international shipments, transfer occurs upon loading of the goods on to the relevant carrier.

(ii) Service fees

Fees from service maintenance contracts are recognised over the period of the contract.

3.12 lease payments

Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease. Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed.


annual report 2012



3.12 lease payments (cont’d)

Determining whether an arrangement contains a lease

At inception of an arrangement, the Group determines whether such an arrangement is or contains a lease. A specific asset is the subject of a lease if fulfilment of the arrangement is dependent on the use of that specified asset. An arrangement conveys the right to use the asset if the arrangement conveys to the Group the right to control the use of the underlying asset.

At inception or upon reassessment of the arrangement, the Group separates payments and other consideration required by such an arrangement into those for the lease and those for other elements on the basis of their relative fair values. If the Group concludes for a finance lease that it is impracticable to separate the payments reliably, then an asset and a liability are recognised at an amount equal to the fair value of the underlying asset. Subsequently, the liability is reduced as payments are made and an imputed finance charge on the liability is recognised using the Group’s incremental borrowing rate.

3.13 finance costs

Finance costs comprise interest expense on borrowings that are recognised in profit or loss. Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method.

3.14 Income tax

Income tax expense comprises current and deferred tax. Current tax and deferred tax is recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:

• temporarydifferencesontheinitialrecognitionofassetsorliabilitiesinatransactionthatisnotabusinesscombination and that affects neither accounting nor taxable profit or loss;

• temporarydifferencesrelatedtoinvestmentsinsubsidiariesandassociatestotheextentthattheGroupisable to control the timing of the reversal of the temporary difference and it is probable that they will not reverse in the foreseeable future; and

• taxabletemporarydifferencesarisingontheinitialrecognitionofgoodwill.

The measurement of deferred taxes reflects the tax consequences that would follow the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

6263


annual report 2012



3.14 Income tax (cont’d)

A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

In determining the amount of current and deferred tax, the Company takes into account the impact of uncertain tax positions and whether additional taxes and interest may be due. The Company believes that its accruals for tax liabilities are adequate for all open tax years based on its assessment of many factors including interpretations of tax law and prior experience. The assessment relies on estimates and assumptions and may involve a series of judgments about future events. New information may become available that causes the Company to change its judgment regarding the adequacy of existing tax liabilities, such changes to tax liabilities will impact tax expense in the period that such a determination is made.

3.15 Earnings per share

The Group presents basic and diluted earnings per share data for its ordinary shares. Basic earnings per share is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the year, adjusted for own shares held. Diluted earnings per share is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares, which comprise share options granted to employees.

3.16 Segment reporting

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. All operating segments’ operating results are reviewed regularly by the Group’s CEO to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.

Segment results that are reported to the CEO include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets (primarily the Company’s headquarters), head office expenses, and income tax assets and liabilities.

Segment capital expenditure is the total cost incurred during the year to acquire property, plant and equipment, and intangible assets other than goodwill.

3.17 New standards and interpretations not adopted

A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 January 2012, and have not been applied in preparing these consolidated financial statements. None of these are expected to have a significant effect on the consolidated financial statements of the Group.


annual report 2012

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6465


annual report 2012


4 property, plant and equipment (cont’d)

leasehold improvements

Office equipment

furniture and

fittings Computers TotalCompany $’000 $’000 $’000 $’000 $’000

CostAt 1 January 2011 272 15 25 378 690Additions 23 13 31 41 108Disposal/write off (273) (11) (24) (345) (653)At 31 December 2011 22 17 32 74 145Additions – 3 – 11 14Disposal/write off – (2) – (2) (4)At 31 December 2012 22 18 32 83 155

Accumulated depreciationAt 1 January 2011 185 12 22 223 442Depreciation charge for the year 19 4 4 43 70Disposal/write off (202) (11) (22) (243) (478)At 31 December 2011 2 5 4 23 34Depreciation charge for the year 3 4 6 14 27Disposal/write off – (1) – – (1)At 31 December 2012 5 8 10 37 60

Carrying amountsAt 1 January 2011 87 3 3 155 248At 31 December 2011 20 12 28 51 111At 31 December 2012 17 10 22 46 95

5 Intangible assets

Group2012 2011

$’000 $’000

Goodwill on consolidation 33,522 33,522

Impairment testing for goodwill

For the purpose of impairment testing, goodwill is allocated to the Group’s CGU of ECS Technology (China) Limited group of companies being a group of entities operating in the same geographical location with similar principal activities.

The recoverable amount of each CGU is based on its value-in-use. Value-in-use is determined by discounting the future cash flows generated from the continuing use of the unit and is based on the following key assumptions:

Cash flows were projected based on actual operating results and the five-year business plan.

The anticipated annual revenue growth included in the cash flow projections ranges from 6.1% to 10.4% (2011: (2.9%) to 18.6%) per annum for the years 2013 to 2017 (2011: 2012 to 2016), giving an average annual growth in revenue of 7.4% (2011: 12.4%).

A pre-tax discount rate of 14.4% (2011: 14.6%) per annum was used. The discount rate used reflects the risk-free rate and the premium for specific risks relating to the business unit.

Terminal value was estimated using a growth rate of 4.3% (2011: Nil).


annual report 2012


5 Intangible assets (cont’d)

The values assigned to the key assumptions represent management’s assessment of future trends in the IT industry and are based on both external sources and internal sources and both past performance (historical data) and its expectations for market development.

Group management believes that any reasonably possible changes in the above key assumptions applied are not likely to materially cause the recoverable amount to be lower than its carrying amount.

6 Subsidiaries

CompanyNote 2012 2011

$’000 $’000

Unquoted equity shares, at cost 97,559 97,426Quasi-equity loans to subsidiaries, at cost (a) 7,516 7,516Loans to subsidiaries (b) 110,250 84,500

215,325 189,442

(a) The quasi-equity loans to subsidiaries are unsecured and interest-free. The settlement of these loans is neither planned nor likely to occur in the foreseeable future. As these loans are, in substance, part of the Company’s net investments in the subsidiaries, the loans are stated at cost.

(b) The loans to subsidiaries are unsecured, repayable on 27 September 2015 (2011: 30 August 2013) and bear interest at 3.68% (2011: 3.47% to 3.52%) per annum.

Details of the significant subsidiaries are set out below.

Country of incorporation/ business

Group’s effective equity interest

Name of company principal activities 2012 2011% %

ECS Computers (Asia) Pte Ltd Provider of information technology products and services for IT infrastructure

Singapore 100 100

ECS Indo Pte Ltd1 Distributor of information technology products

Singapore 89.18 89.12

The Value Systems Co., Ltd (a) Provider of information technology products and services for IT infrastructure

Thailand 100 100

ECS Technology (China) (a) Limited Investment holding, provider of information technology products and services for IT infrastructure

Hong Kong 100 100

EC Sure Holdings (Thailand) Co., Ltd(a) Investment holding Thailand 99.9 99.9

ECS Infocom (Phils) Pte. Ltd. Investment holding Singapore 100 100

ECS Vietnam Company Limited (b) 2 Trading of information and communications technology products and services

Vietnam 100 100

6667


annual report 2012


6 Subsidiaries (cont’d)

Country of incorporation/ business

Group’s effective equity interest

Name of company principal activities 2012 2011% %

Subsidiaries of ECS Computers (Asia) pte ltd

Pacific City (Asia Pacific) Pte Ltd Retail of information technology products, IT equipment and accessories

Singapore 100 100

ECS Enterprise Solutions Pte Ltd Provider of information technology products and services for IT infrastructure

Singapore 100 100

Subsidiary of ECS Indo pte ltd

PT ECS Indo Jaya (c) Distributor of information technology products

Indonesia 89.18 89.12

Subsidiaries of ECS Technology (China) limited

ECS (Shanghai) Management Co., Ltd (a)

Provider of information technology products and services for IT infrastructure

People’sRepublicof China

100 100

ECS China Technology (Shanghai) Co., Ltd (a)



100 100

ECS Beijing Chuang Yue Technology Co., Ltd (a)



100 100

EIT info-tech Limited (a) Provider of information technology products and services for IT infrastructure

Hong Kong 100 100

ECS Technology (HK) (a) Co., Limited


Hong Kong 100 100

ECS Chongqing Marketing & Payment Co., Ltd (a) 3

Electronic settlement business centre and provider of information technology products and services for IT infrastructure.


100 –


annual report 2012


6 Subsidiaries (cont’d)

1 On 26 March 2012, there was an acquisition of non-controlling interests which resulted in an increase in the Group’s effective equity interest from 89.12% to 89.18%.

2 On 5 February 2012, the Company injected a capital of $125,000 into ECS Vietnam Company Limited.

3 On 15 February 2012, ECS Technology (China) Limited, a wholly owned subsidiary of the Company, has incorporated a wholly owned subsidiary, ECS Chongqing Marketing & Payment Co., Ltd. On 5 March 2012, ECS Technology (China) Limited has injected a capital of $12,600,000 into the newly incorporated subsidiary.

(a) Audited by other member firms of KPMG International for consolidation purposes.

(b) Exempted from audit in the country of incorporation.

(c) Audited by another firm of Certified Public Accountants.

KPMG LLP Singapore is the auditor of all the Singapore incorporated subsidiaries.

7 Interest in associates

Group Company2012 2011 2012 2011

$’000 $’000 $’000 $’000

Investment in associates 48,372 45,744 3,320 3,320Loan to associate 551 585 – –

48,923 46,329 3,320 3,320

The loan to an associate is denominated in United States dollars, unsecured and interest-free. Settlement is neither planned nor likely to occur in the foreseeable future. As this loan is, in substance, part of the Company’s net investment in the associate, it is stated at cost.

Details of the associates are as follows:

Name of associate Audited byCountry ofincorporation

Effective equity held by the Group2012 2011

MSI-ECS Phils., Inc. Pelayo Teodoro Santamaria & Co. Philippines 49.99% 49.99%

ECS ICT Berhad (“ECSB”) KPMG Malaysia Malaysia 41% 41%

ECSB is listed on the Main Market of Bursa Malaysia Securities. Based on its closing price at the reporting date, the fair value of the Group’s investment in ECSB is $30,715,000 (2011: $25,227,000). MSI-ECS Phils., Inc. is not listed.

Included in the investment in ECSB is goodwill on acquisition and customer relationships amounting to $6,388,000 (2011: $6,388,000) and $4,157,000 (2011: $4,157,000) respectively. These amounts have been determined based on a fair valuation of ECSB’s identifiable net assets in accordance with the requirement of FRS 28. The intangible asset relating to customer relationships is amortised over an estimated useful life of 5 years amounting to $333,000 for the year (2011: $333,000).

6869


annual report 2012


7 Interest in associates (cont’d)

The summarised financial information set out below relating to the associates are not adjusted for the percentage of ownership held by the Group.

2012 2011$’000 $’000

Revenue 809,339 774,474Profit after taxation 14,533 15,053Total assets 225,849 200,423Total liabilities 129,874 111,127

Impairment testing for investment in an associate

As the market value of the Group’s shareholding in ECSB at reporting date is below the carrying value of the Group’s investment in ECSB, management performed an impairment assessment to determine the recoverable value of its investment in ECSB.

The recoverable amount of ECSB is based on its value-in-use. Value-in-use is determined by discounting the future cash flows generated from the continuing use of ECSB and is based on the following key assumptions:

• CashflowsareprojectedbasedonactualoperatingresultsandexpectedgrowthanticipatedbytheGroup.

• Theanticipatedannualrevenuegrowthincludedinthecashflowprojectionsrangesfrom1.9%to5.9%perannum (2011: 7.7% to 10.2% per annum) for the years 2013 to 2017 (2011: 2012 to 2016), giving an average annual growth in revenue of 3.3% (2011: 8.6%).

• Apre-taxdiscountrateof17.4%(2011:15.6%)perannumwasused.Thediscountrateusedreflectstherisk-free rate and a premium for specific risks relating to ECSB.

• Terminalvaluewasestimatedusingagrowthrateof3.0%(2011:3.5%).

The values assigned to the key assumptions represent management’s assessment of future trends in the IT industry and are based on both external sources and internal sources and both past performance (historical data) and its expectations for market development.

Group management believes that any reasonably possible changes in the above key assumptions applied are not likely to materially cause the recoverable amount to be lower than its carrying amount.


annual report 2012


8 Deferred tax

Deferred tax liabilities and assets are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred taxes relate to the same tax authority. The amounts determined after appropriate offsetting are included in the balance sheet as follows:

Assets liabilities2012 2011 2012 2011

$’000 $’000 $’000 $’000

Group

Provisions 8,791 8,298 – –Accelerated tax depreciation – – (3,192) (2,913)Deferred tax assets/(liabilities) 8,791 8,298 (3,192) (2,913)Set off of tax – – – –Net deferred tax assets/ (liabilities) 8,791 8,298 (3,192) (2,913)

Company

Accelerated tax depreciation – – (27) (27)Deferred tax assets/(liabilities) – – (27) (27)Set off of tax – – – –Net deferred tax assets/ (liabilities) – – (27) (27)

7071


annual report 2012

noteS to the finanCial StatementS8

Def

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––

–(2

7)


annual report 2012


9 Inventories

Group2012 2011

$’000 $’000

Trading inventories 225,973 209,330Goods in transit 65,193 31,635

291,166 240,965Allowance for obsolete inventories (10,362) (9,216)

280,804 231,749

Comprises:Inventories, at cost 65,193 31,635Inventories, at net realisable value 215,611 200,114

280,804 231,749

In 2012, changes in trading inventories recognised as cost of sales amounted to $3,598,102,000 (2011: $3,557,148,000).

10 Trade and other receivables


$’000 $’000 $’000 $’000

Trade receivables 502,108 495,040 – –Bills receivable 4,019 14,852 – –Amounts due from affiliated companies 45,172 18,769 – –

551,299 528,661 – –Allowance for doubtful receivables (22,840) (19,440) – –

528,459 509,221 – –Amount due from related corporations 11 2,626 2,196 36,538 29,802

531,085 511,417 36,538 29,802Deposits and other receivables 12 20,233 17,487 95 107Loans and receivables 551,318 528,904 36,633 29,909Prepayments 24,691 23,704 208 85

576,009 552,608 36,841 29,994

An affiliated company is a company, other than a related corporation, which directly or indirectly through one or more intermediaries, is under common significant influence.

The Group and the Company’s exposure to credit and impairment losses, currency and interest rate risks related to trade and other receivables are disclosed in note 21.

7273


annual report 2012


11 Amounts due from/to related corporations


$’000 $’000 $’000 $’000

Amounts due from subsidiaries - Dividend receivable – – 4,981 7,419Non-trade receivables – – 8,996 4,751Loans receivable – – 19,935 15,436

– – 33,912 27,606Amounts due from associate -Non-trade receivables 2,626 2,196 2,626 2,196

2,626 2,196 2,626 2,196

10 2,626 2,196 36,538 29,802

Amounts due to subsidiaries - Non-trade payables – – 5,660 375Loans payable – – 7,513 5,200

19 – – 13,173 5,575

The loans due from subsidiaries are unsecured, repayable on demand and bear interest at rates ranging from 2.54% to 6.50% (2011: 2.04% to 6.50%) per annum.

The non-trade balances are unsecured, repayable on demand and interest-free. The loans payable are unsecured, repayable on demand and bear interest at 2.72% to 3.05% (2011: 1.57% to 3.36%) per annum.

There is no allowance made for doubtful receivables arising from the outstanding balances.

12 Deposits and other receivables


$’000 $’000 $’000 $’000

Deposits 7,769 2,258 95 105Recoverables 1,327 4,142 – –Tax recoverables 4,461 6,860 – –Other receivables 5,133 2,964 – 2Call option (a) 1,543 1,263 – –Deposits and other receivables 10 20,233 17,487 95 107

(a) On 4 January 2006, a subsidiary entered into a call option agreement with a shareholder of the associate for US$1 cash consideration which will entitle the subsidiary to acquire additional 10% equity interest in the associate. The call option is exercisable beginning 4 July 2008 and ending on the date falling three years thereafter, unless otherwise further extended by the shareholder in writing, at an option price equivalent to US$450,000. On 1 May 2011, the shareholder agreed to defer the commencement date of the call option period to sixty months from 4 January 2006 and ending on the date falling three years thereafter, unless otherwise further extended by the shareholder in writing. The fair value of the call option as at the reporting date has been recognised as an option asset with its corresponding change in fair value during the year recognised in profit or loss.


annual report 2012


13 Cash and cash equivalents

Group Company2012 2011 2012 2011

$’000 $’000 $’000 $’000

Cash at bank and in hand 106,316 116,611 4,357 9,228Fixed deposits 1,894 14,786 – 10,400Cash and cash equivalents 108,210 131,397 4,357 19,628

The weighted average effective interest rates per annum relating to cash and cash equivalents, excluding bank overdrafts, at the reporting date for the Group range from 0.10% to 3.90% (2011: 0.05% to 1.49%) per annum. Interest rates reprice at daily to monthly intervals.

The Group and the Company’s exposure to currency risks are disclosed in note 21.

14 Share capital

Group and Company No. of shares

2012 2011’000 ’000

Issued and fully paid, with no par value:At 1 January and 31 December 365,910 365,360

During the financial year, the Company has issued 550,000 ordinary shares, at an issue price of $0.55 per share, pursuant to the exercise of options granted under the ECS Share Option Scheme II (see note 16).

All shares rank equally with regards to the Company’s residual assets. The holders of ordinary shares are entitled to receive dividends as declared from time to time, and are entitled to one vote per share at meetings of the Company.

15 Reserves


$’000 $’000 $’000 $’000

Currency translation reserve (a) (17,365) (8,607) – –Dividend reserve (b) 8,050 8,038 8,050 8,038General reserve (c) 6,927 6,462 – –Accumulated profits 228,950 207,831 7,794 9,939

226,562 213,724 15,844 17,977

(a) Currency translation reserve

The currency translation reserve of the Group comprises foreign exchange differences arising from the translation of the financial statements of foreign operations.

(b) Dividend reserve

The dividend reserve of the Group represents dividends proposed which are subject to approval of the shareholders at a general meeting.

7475


annual report 2012


15 Reserves (cont’d)

(c) General reserve

According to the current People’s Republic of China (“PRC”) Company Law, the PRC subsidiaries of the Group are required to transfer 10% of their profit after taxation to statutory surplus reserve until the surplus reserve balance reaches 50% of the registered capital. For the purpose of calculating the amount to be transferred to reserve, the profit after taxation is the amount determined under PRC accounting standards. The amount of transfer to this reserve has to be made before profit distribution to shareholders.

Legal reserve is set up under the provision of the Civil and Commercial Code of Thailand, which requires that a company shall allocate not less than 5% of its net profit appropriated for payment of dividend to a reserve account (“legal reserve”) upon each dividend distribution, until the balance reaches an amount not less than 10% of the registered authorised capital. The legal reserve is not available for dividend distribution.

16 Equity compensation benefits

The Company

The ECS Share Option Scheme II (“Scheme II”) was approved and adopted by its members at an Extraordinary General Meeting held on 13 December 2000. Scheme II provides an opportunity for employees and directors, including non-executive directors, of the Group who have contributed significantly to the growth and performance of the Group to participate in the equity of the Company.

The above scheme is administered by the Compensation Committee (the “Committee”) which comprises the following directors:

Koh Soo Keong (Chairman)Leong Horn KeeTan Hup Foi

Information regarding the scheme is set out below:

Scheme II

(a) The exercise price of the options exercisable pursuant to Scheme II is set either at:

- a price equal to the average of the last dealt price for the three consecutive trading days immediately preceding the grant of the option; or

- a discount to the market price not exceeding 20% of the market price in respect of that option.

(b) Options granted are exercisable at any time after the first anniversary of the grant date and in the case of options with exercise price set at a discount, at any time after the second anniversary of date of grant. Options granted to employees and executive directors are exercisable up to the tenth anniversary of date of grant and those granted to non-executive directors are exercisable up to the fifth anniversary of the date of grant.

(c) The scheme will continue to be in force at the discretion of the Committee, subject to a maximum period of 10 years commencing 13 December 2000.

On 15 October 2010, the Group granted 13,770,000 share options pursuant to the rules of the ECS Share Option Scheme II. The options have an exercise price of $0.550 per share; a vesting period of 1 year from date of grant; and can be exercised within 5 years from date of grant for non-executive directors and 10 years from date of grant for executive directors and employees.


annual report 2012


16 Equity compensation benefits (cont’d)

The Company (cont’d)

At 31 December 2012, details of the options granted were as follows:


Exercise price per

share

Options outstanding

at 1 January

2012Options granted

Options exercised

Options forfeited or lapsed

Options outstanding

at 31 December

2012Exercise

period

15/10/2010 $0.550 10,650,000 – (550,000) (250,000) 9,850,00015/10/2011 to

15/10/2020

15/10/2010 $0.550 2,200,000 – – – 2,200,00015/10/2011 to

15/10/2015

The fair value of the employee share options is measured using quoted share price on measurement date and exercise price of the instrument.

ECS Indo pte ltd

On 16 October 2009, the subsidiary granted 120,000 share options to four senior employees of a subsidiary. Each option is, upon full payment of the exercise price, convertible into one new ordinary share of the company. The options are exercisable at any time within 3 years from the grant date and are settled by physical delivery of shares. The options have expired during the financial year.

At 31 December 2012, details of the options granted to senior employees were as follows:


Exercise price per

share

Options outstanding

at 1 January

2012Options granted

Options exercised

Options forfeited or lapsed

Options outstanding

at 31 December

2012Exercise

period

16/10/2009 US$1.8156 113,392 – – (113,392) –16/10/2009 to

16/10/2012

The fair value of such equity-settled share based payments was determined based on adjusted market comparables.

7677


annual report 2012


17 financial liabilities


$’000 $’000 $’000 $’000

Non-current liabilitiesUnsecured bank loans 110,250 101,238 110,250 101,238Finance lease liabilities 18 102 – –

110,268 101,340 110,250 101,238

Current liabilitiesUnsecured trade financing 13,000 35,271 – –Unsecured bank loans (a) 119,759 105,055 3,200 –Finance lease liabilities 71 133 – –Derivative liabilities 1,174 882 1,088 1,313

134,004 141,341 4,288 1,313

Total financial liabilities 244,272 242,681 114,538 102,551

(a) A negative pledge has been given in respect of all of the assets of certain subsidiaries with a total net book value at 31 December 2012 of $328,685,000 (2011: $282,248,000).

Included in unsecured bank loans is a syndicated loan amounting to $110,250,000 (2011: $101,238,000). On 27 September 2012, the Company has signed a $110,250,000 three-year term loan financing facility with three major financial institutions. The facility was fully drawn on 17 October 2012 to refinance the $101,238,000 syndicated loan. The syndicated loan bears interest at 2.73% to 3.25% (2011: 2.88% to 3.02%) per annum. The long term portion of the syndicated loan amounted to $110,250,000 (2011: $101,238,000) and is due on 27 September 2015 (2011: 30 August 2013). The loans are guaranteed by certain subsidiaries.

Finance lease liabilities

At 31 December, the Group has obligations under finance leases that are payable as follows:

principal Interest future minimum

lease payments$’000 $’000 $’000

2012Repayable within 1 year 71 18 89Repayable after 1 year but within 5 years 18 5 23

89 23 112

2011Repayable within 1 year 133 34 167Repayable after 1 year but within 5 years 102 25 127

235 59 294


annual report 2012


17 financial liabilities (cont’d)

Terms and debt repayment schedule

Terms and conditions of financial liabilities are as follows:

Nominal 31 December 2012 31 December 2011

Currencyinterest

rateyear of

maturityface

valueCarrying amount

face value

Carrying amount

$’000 $’000 $’000 $’000

Group

Unsecured bank loans and trade financing- floating rate SGD 1.51% - 2.1% 2013 27,521 27,521 6,208 6,208- floating rate USD 2.56% - 3.4% 2013 – 2015 138,021 138,021 173,695 173,695- floating rate RMB 5.32% - 6.16% 2013 37,948 37,948 35,281 35,281- floating rate THB 2.98% - 3.48% 2013 35,640 35,640 22,140 22,140- floating rate IDR 8.9% - 9.0% 2013 3,879 3,879 4,240 4,240

243,009 243,009 241,564 241,564Finance lease liabilities IDR 7.00% 2014 112 89 294 235Derivative liabilities – – – 1,174 1,174 882 882

244,295 244,272 242,740 242,681

Company

Unsecured bank loans- floating rate SGD 2.02% 2013 3,200 3,200 – –- floating rate USD 2.68% 2015 110,250 110,250 101,238 101,238

113,450 113,450 101,238 101,238Derivative liabilities – – – 1,088 1,088 1,313 1,313

114,538 114,538 102,551 102,551

18 Deferred income and expenses

Deferred income and expenses relate to fees billed/paid in advance on service maintenance contracts and consist of:

Group2012 2011

$’000 $’000

Deferred incomeCurrent portion 3,037 3,154Non-current portion 3,822 3,938

6,859 7,092

Deferred expensesCurrent portion 2,271 2,493Non-current portion 3,065 3,320

5,336 5,813

7879


annual report 2012


19 Trade and other payables


$’000 $’000 $’000 $’000

Trade payables 440,900 390,831 – –Accruals and other payables 20 30,966 40,412 2,939 3,320Amounts due to subsidiaries 11 – – 13,173 5,575

471,866 431,243 16,112 8,895

The Group and the Company’s exposure to liquidity and currency risks related to trade and other payables are disclosed in note 21.

20 Accruals and other payables

Group Company2012 2011 2012 2011

$’000 $’000 $’000 $’000

Accrued operating expenses 17,034 18,116 2,291 2,485Deposits received 7,677 13,895 – –Other payables 5,322 6,864 140 54Interest payables 933 1,537 508 781

30,966 40,412 2,939 3,320

21 financial instruments

Credit risk

The maximum amount of financial assets, representing the maximum exposure to credit risk, at the reporting date was:

Group Company2012 2011 2012 2011

$’000 $’000 $’000 $’000

Non-current loans to subsidiaries – – 110,250 84,500Loans and receivables 551,318 528,904 36,633 29,909Cash and cash equivalents 108,210 131,397 4,357 19,628

659,528 660,301 151,240 134,037

The maximum exposure to credit risk for loans and receivables at the reporting date by geographic region was:

Group Company2012 2011 2012 2011

$’000 $’000 $’000 $’000

China 292,872 308,429 8,132 7,414Thailand 123,775 97,970 2,587 –Singapore 40,366 56,733 23,232 20,299Indonesia 68,592 63,576 – –Philippines 2,676 2,196 2,676 2,196Hong Kong 23,037 – – –Others – – 6 –

551,318 528,904 36,633 29,909


annual report 2012


21 financial instruments (cont’d)

Credit risk (cont’d)

The maximum exposure to credit risk for loans and receivables at the reporting date by type of customer was:

Group Company2012 2011 2012 2011

$’000 $’000 $’000 $’000

Value added resellers 223,275 219,743 – –System integrators 69,064 64,643 – –Direct accounts 65,583 57,567 – –Retailers 134,210 108,140 – –Others 59,186 78,811 36,633 29,909

551,318 528,904 36,633 29,909

Impairment losses

The aging of loans and receivables at the reporting date was:

Group Company2012 2011 2012 2011

$’000 $’000 $’000 $’000

GrossNot past due 421,265 370,683 36,633 29,909Past due 0 – 30 days 71,646 94,327 – –Past due 31 – 120 days 45,635 45,064 – –Past due 121 – 365 days 15,534 23,798 – –More than one year 20,078 14,472 – –

574,158 548,344 36,633 29,909Impairment lossesNot past due – – – –Past due 0 – 30 days – – – –Past due 31 – 120 days (1,125) (1,592) – –Past due 121 – 365 days (3,583) (5,508) – –More than one year (18,132) (12,340) – –

(22,840) (19,440) – –

The movements in the allowance for impairment in respect of loans and receivables during the year were as follows:


$’000 $’000 $’000 $’000

At 1 January 19,440 14,140 – –Utilised during the year (174) (575) – –Allowances made during the year 23(b) 4,333 5,585 – –Translation differences on consolidation (759) 290 – –At 31 December 22,840 19,440 – –

The loans and receivables that were not past due or impaired at the reporting date is assessed to be at acceptable risk.

Based on historical default rates, the Group believes that no further impairment allowance is necessary in respect of loans and receivables as at 31 December 2012 and 31 December 2011. These receivables are mainly arising with customers that have a good record with the Group.

8081


annual report 2012



Liquidity risk

The following are the contractual maturities of financial liabilities, including estimated interest payments:

Cash flowsCarrying amount

Contractual cash flows

Within 1 year

Between 1 to 5 years

$’000 $’000 $’000 $’000

Group

2012Unsecured trade financing 13,000 (13,000) (13,000) –Unsecured bank loans 230,009 (238,121) (122,718) (115,403)Finance lease liabilities 89 (112) (89) (23)Derivative liabilities- Inflow – 19,821 19,821 –- Outflow 1,174 (20,995) (20,995) –Trade and other payables 464,189 (464,189) (464,189) –

708,461 (716,596) (601,170) (115,426)

2011Unsecured trade financing 35,271 (35,271) (35,271) –Unsecured bank loans 206,293 (213,385) (109,150) (104,235)Finance lease liabilities 235 (294) (167) (127)Derivative liabilities- Inflow – 20,337 20,337 –- Outflow 882 (21,219) (21,219) –Trade and other payables 417,348 (417,348) (417,348) –

660,029 (667,180) (562,818) (104,362)

Company

2012Unsecured bank loans 113,450 (121,562) (6,159) (115,403)Derivative liabilities- Inflow – 296 296 –- Outflow 1,088 (1,384) (1,384) –Trade and other payables 16,112 (16,112) (16,112) –

130,650 (138,762) (23,359) (115,403)

2011Unsecured bank loans 101,238 (107,292) (3,057) (104,235)Derivative liabilities- Inflow – 2,030 2,030 –- Outflow 1,313 (3,343) (3,343) –Trade and other payables 8,895 (8,895) (8,895) –

111,446 (117,500) (13,265) (104,235)

It is not expected that the cash flow included in the maturity analysis could occur significantly earlier, or at significantly different amounts.


annual report 2012



Exposure to currency risk

The Group’s exposure to foreign currency risk based on notional amounts was as follows:

‹--------------------- 2012 --------------------› ‹-------------------- 2011 --------------------›USD IDR php ThB USD IDR php ThB

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Group

Loans and receivables 33,169 16,351 – 2,587 55,789 4,417 – 2,488Cash and cash equivalents 7,597 2,929 – – 15,157 589 – –Unsecured bank loans/trade financing (110,250) (3,879) – – (108,108) (4,240) – –Trade and other payables (19,179) (6,536) – – (99,653) (1,248) – –Forward exchange contracts and hybrid swaps 74,650 – – – 89,808 – – –Loans receivable from associates 2,822 – 456 – 2,365 – 416 –Finance lease liabilities – (89) – – – (235) – –

(11,191) 8,776 456 2,587 (44,642) (717) 416 2,488

‹--------------- 2012 --------------› ‹------------- 2011 ---------------›USD php ThB USD php ThB

$’000 $’000 $’000 $’000 $’000 $’000

Company

Loan receivables- non-current 110,250 – – 84,500 – –- current 13,580 456 – 8,904 416 –Dividend receivables 1,095 – 2,587 3,796 – 2,488Cash and cash equivalents 3,701 – – 10,911 – –Unsecured bank loans/trade financing (110,250) – – (101,238) – –Forward exchange contracts and hybrid swaps 55,125 – – 71,500 – –

73,501 456 2,587 78,373 416 2,488

Sensitivity analysis

A 1% strengthening of the Singapore dollar against the above currencies at 31 December would have increased/(decreased) profit or loss before tax by the amounts shown below. This analysis is based on foreign currency exchange rate variances that the Group considered to be reasonably possible at the end of the reporting period. The analysis assumes that all other variables, in particular interest rates, remain constant and ignores any impact of forecasted sales and purchases. The analysis is performed on the same basis for 2011.

8283


annual report 2012



Group Company profit or loss profit or loss

2012 2011 2012 2011$’000 $’000 $’000 $’000

USD 112 446 (735) (784)IDR (88) 7 – –PHP (5) (4) (5) (4)THB (26) (25) (26) (25)

A 1% weakening of the Singapore dollar against the above currencies at 31 December would have had the following effect as shown below, on the basis that all other variables remain constant.

Group Company profit or loss profit or loss

2012 2011 2012 2011$’000 $’000 $’000 $’000

USD (112) (446) 735 784IDR 88 (7) – –PHP 5 4 5 4THB 26 25 26 25

Interest rate risk

The Group’s exposure to market risk for changes in interest rates relates primarily to the Group’s debt obligations. The Group manages some of its exposure to floating rate interest by entering into interest rate swaps and hybrid swaps.

At reporting date, the interest rate profile for the interest-bearing financial instruments was:

Group Company Carrying amount Carrying amount

2012 2011 2012 2011$’000 $’000 $’000 $’000

fixed rate instrumentsFinancial liabilities (89) (235) – –

Variable rate instrumentsFinancial assets – – 130,185 99,936Financial liabilities (243,009) (241,564) (120,963) (106,438)

(243,009) (241,564) 9,222 (6,502)

Fair value sensitivity analysis for fixed rate instruments

The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss, and the Group does not designate derivatives (interest rate swaps) as hedging instruments under a fair value hedge accounting model. Therefore a change in interest rates at the reporting date would not affect profit or loss.

Cash flow sensitivity analysis for variable rate instruments

A change of 100 basis points in interest rates at the reporting date would have increased/ (decreased) profit or loss before tax by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. The analysis is performed on the same basis for 2011.


annual report 2012



Groupprofit or loss

Companyprofit or loss

100 bp increase

100 bp decrease

100 bp increase

100 bp decrease

Group $’000 $’000 $’000 $’000

31 December 2012Variable rate instruments (2,430) 2,430 92 (92)Interest rate swaps and hybrid swaps 205 (205) 205 (205)Cash flow sensitivity (net) (2,225) 2,225 297 (297)

31 December 2011Variable rate instruments (2,416) 2,416 (65) 65Interest rate swaps and hybrid swaps 218 (218) 218 (218)Cash flow sensitivity (net) (2,198) 2,198 153 (153)

Fair values

The carrying amounts of the Group and the Company’s financial instruments carried at cost or amortised cost are not materially different from their fair values as at 31 December 2012.

Fair value hierarchy

The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

• Level1 : quoted prices (unadjusted) in active markets for identical assets or liabilities

• Level2 : inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices)

• Level3 : inputs for the asset or liability that are not based on observable market data (unobservable inputs).

8485


annual report 2012



level 1 level 2 level 3 Total$’000 $’000 $’000 $’000

Group

31 December 2012Option asset – – 1,543 1,543Derivative liabilities – (1,174) – (1,174)

31 December 2011Option asset – – 1,263 1,263Derivative liabilities – (882) – (882)

Company

31 December 2012Derivative liabilities – (1,088) – (1,088)

31 December 2011Derivative liabilities – (1,313) – (1,313)

AssetsmeasuredatfairvaluebasedonLevel3

Fair value measurement at end of the reporting date:

Group Option asset

$’000

2012

Balance at beginning of the year 1,263Total gains in profit or loss 280Transfer out of Level 3 –Balance at end of the year 1,543

2011

Balance at beginning of the year 979Total gains in profit or loss 284Transfer out of Level 3 –Balance at end of the year 1,263

Gains included in profit or loss for the year is presented in other income as follows:

2012 2011$’000 $’000

Total gains included in profit or loss for the year 280 284

Total gains for the period included in profit or loss for assets held at the end of the reporting date 280 284


annual report 2012


22 Revenue Group

2012 2011$’000 $’000

Sale of IT products 3,607,339 3,578,927IT services 36,312 28,238

3,643,651 3,607,165

Transactions within the Group have been excluded in arriving at revenue for the Group.

23 profit from operations

The following items have been included in arriving at profit from operations:

(a) Staff costs Group

2012 2011$’000 $’000

Wages and salaries 54,145 54,898Contributions to defined contribution plans 8,569 8,179

(b) Other expenses/(income)

Allowances made for- obsolete inventories 1,961 2,735- doubtful trade receivables 4,333 5,585Audit fees paid/payable to:- auditors of the Group 644 722Bad debts written off/(back), net 11 (83)Directors’ fees 320 344Equity-settled share-based payment – 54Exchange gains, net (non-trade) (379) (2,225)Interest income- banks (512) (356)- associate (39) (348)Inventories written off 65 48Loss on disposal of property, plant and equipment 37 17Non-audit fees paid/payable to auditors of the Group 70 105Net fair value loss/(gain) on financial instruments 65 (1,260)Operating lease expenses 7,576 6,936Property, plant and equipment written-off 1 175Depreciation expense 2,646 2,190

8687


annual report 2012


24 finance costs Group

2012 2011$’000 $’000

Recognised in profit for the yearInterest paid and payable on- bank overdrafts 4 4- finance leases 33 42- short-term loans 7,483 13,429- trade financing 1,427 1,452

8,947 14,927

25 Income tax expense Group

2012 2011$’000 $’000

Tax expenseCurrent tax expense- Current year 8,081 13,760- Over provided in prior years (397) (78)

7,684 13,682Deferred tax expense- Movements in temporary differences (455) (1,434)- Changes in tax rates (22) 490

(477) (944)

Income tax expense for the year 7,207 12,738

Reconciliation of effective tax rate

Profit before tax 36,996 52,157

Income tax at 17% 6,289 8,867Non-deductible expenses 1,184 1,264Income not subject to tax (286) (265)Effect of different tax rates in foreign jurisdictions 1,472 3,363Changes in tax rates (22) 490Income tax at concessionary rate (400) (115)Over provided in prior years (397) (78)Withholding taxes on profits from PRC subsidiaries 437 546Share of profit of associates, net of tax (1,189) (1,176)Others 119 (158)Income tax expense for the year 7,207 12,738


annual report 2012


26 Earnings per share Group

2012 2011$’000 $’000

Basic earnings per share is based on:Net profit for the year ($’000) 29,646 39,230

Number of shares outstanding at the beginning of the year (’000) 365,360 365,360Weighted average number of shares issued during the year (’000) 421 –Weighted average number of shares in issue during the year (’000) 365,781 365,360

For the purpose of calculation of the diluted earnings per ordinary share, the weighted average number of ordinary shares in issue during the year is adjusted to take into account the dilutive effect arising from the dilutive share options, with the potential ordinary shares weighted for the period outstanding:

Number of shares2012 2011’000 ’000

Weighted average number of shares used in calculation of basic earnings per share 365,781 365,360Weighted average number of dilutive potential ordinary shares 3,158 8,988Number of shares that would have been issued at fair value (3,066) (6,084)Weighted average number of ordinary shares (diluted) 365,873 368,264

27 Operating segments

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

Segment information is presented in respect of the Group’s business and geographical segments. The primary format, business segments, is based on the Group’s management and internal reporting structure.

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items mainly comprise interest-earning assets and related revenue, interest in the associate, interest-bearing loans, borrowings and related expenses, income tax assets and liabilities, negative goodwill and corporate assets and expenses.

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

The main business segments of the Group are the following:

Segments principal activities

Enterprise systems Provider of enterprise systems tools (middleware, operating systems, Unix/NT servers, databases, storage and security products) for IT infrastructure.

IT services IT infrastructure design and implementation, training, maintenance and support services.

Distribution Distribution of IT products (desktop PCs, notebooks, handhelds, printers, etc) for the commercial and consumer markets.

8889


annual report 2012


27 Operating segments (cont’d)

Information regarding the results of each reportable segment is included below. Performance is measured based on segment profit before income tax, as included in the internal management reports that are reviewed by the Group’s CEO. Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries.

Enterprise Systems IT Services Distribution Consolidated2012 2011 2012 2011 2012 2011 2012 2011

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

External revenue 1,106,904 915,948 36,312 28,238 2,500,435 2,662,979 3,643,651 3,607,165

Depreciation and amortisation (804) (556) (26) (17) (1,816) (1,617) (2,646) (2,190)

Reportable segment profit before interest and tax 21,798 23,450 1,531 1,800 15,617 34,917 38,946 60,167

Reportable segment assets 266,292 205,465 7,809 5,695 580,850 576,631 854,951 787,791Capital expenditure 629 1,261 33 67 1,507 3,582 2,169 4,910Reportable segment liabilities 150,484 111,599 4,398 3,133 323,845 323,603 478,727 438,335

Reconciliations of reportable segments profit or loss, assets and liabilities and other material items.

2012 2011$’000 $’000

profit or lossTotal profit for reportable segments 38,946 60,167Unallocated amounts:- Finance costs (8,947) (14,927)Share of profit of associate 6,997 6,917Consolidated profit before tax 36,996 52,157


annual report 2012


27 Operating segments (cont’d)

2012 2011$’000 $’000

AssetsTotal assets for reportable segments 854,951 787,791Investments in associate 48,923 46,329Other unallocated amounts 166,821 185,577Consolidated total assets 1,070,695 1,019,697

liabilitiesTotal liabilities for reportable segments 478,727 438,335Other unallocated amounts 250,950 253,520Consolidated total liabilities 729,677 691,855

28 Geographical segments

The Group operates principally in North Asia and South East Asia including Singapore. In presenting information on the basis of geographic segments, segment revenue is based on the geographic location of operations. Segment assets are based on the geographic location of the assets.

Revenue Non-current assets2012 2011 2012 2011

$’000 $’000 $’000 $’000

North Asia 2,183,359 2,328,449 37,019 37,499South East Asia (excluding Singapore) 989,641 913,631 4,562 4,620Singapore 470,651 365,085 4,106 4,704

3,643,651 3,607,165 45,687 46,823

29 Determination of fair values

A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods or as disclosed in the notes specific to that asset or liability. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

(i) Inventories

The fair value of inventories is determined based on the estimated selling price in the ordinary course of business less the estimated costs of completion and sale, and a reasonable profit margin based on the effort required to complete and sell the inventories.

(ii) Trade and other receivables

The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of interest at the measurement date. Short-term receivables with no stated interest rate are measured at the original invoice amount if the effect of discounting is immaterial. Fair value is determined at initial recognition and, for disclosure purposes, at each annual reporting date.

9091


annual report 2012


29 Determination of fair values (cont’d)

(iii) Derivatives

The fair value of forward exchange contracts is based on their listed market price, if available. If a listed market price is not available, then fair value is estimated by discounting the difference between the contractual forward price and the current forward price for the residual maturity of the contract using a risk-free interest rate (based on government bonds).

The fair value of interest rate swaps is based on broker quotes. These quotes are tested for reasonableness by discounting estimated future cash flows based on the terms and maturity of each contract and using market interest rates for a similar instrument at the measurement date. Fair values reflect the credit risk of the instrument and include adjustments to take into account of the credit risk of the Group entity and counterparty when appropriate.

(iv) Non-derivative financial liabilities

Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date. For finance leases, the market rate of interest is determined by reference to similar lease agreements.

30 financial risk management

Overview

Risk management is integral to the whole business of the Group. The management continually monitors the Group’s risk management process to ensure that an appropriate balance between risk and control is achieved. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities.

The Audit Committee oversees how management monitors compliance with the Group’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The Audit Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.

Credit risk

The principal risk to which the Group is exposed is credit risk in connection with the guarantee contracts it has issued. The credit risk represents the loss that would be recognised upon a default by the parties to which the guarantees were given on behalf of. To mitigate these risks, management continually monitors the risks and has established processes including performing credit evaluations of parties it is providing the guarantee on behalf of. Guarantees are only given to its subsidiaries.

The Group has a credit policy in place which establishes credit limits for customers and monitors their balances on an ongoing basis. Credit evaluations are performed on all customers requiring credit over a certain amount. If the customers are independently rated, these ratings are used. Otherwise, the credit quality of customers is assessed after taking into account its financial position and past experience with the customers.

The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables. The main components of this allowance are a specific loss component that relates to individually significant exposures.

The allowance account in respect of trade and other receivables is used to record impairment losses unless the Group is satisfied that no recovery of the amount owing is possible. At that point, the financial asset is considered irrecoverable and the amount charged to the allowance account is written off against the carrying amount of the impaired financial asset.

Cash and fixed deposits are placed with banks and financial institutions which are regulated.


annual report 2012


30 financial risk management (cont’d)

Liquidity risk

The Group monitors its liquidity risk and maintains a level of cash and cash equivalents deemed adequate by management to finance the Group’s operations and to mitigate the effects of fluctuations in cash flows. Typically the Group ensures that it has sufficient cash on demand to meet expected operational expenses for a period of 60 days, including the servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters.

In addition, as at the reporting date, the Group maintains various lines of credit, amounting to $769,559,000 (2011: $707,000,000), of which $659,309,000 (2011: $592,000,000) are uncommitted.

Market risk

Market risk is the risk that changes in market prices, such as interest rates and foreign exchange rates will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return on risk.

Foreign currency risk

The Group incurs foreign currency risk mainly from foreign currency denominated sales, purchases and borrowings that are denominated in currencies other than the various functional currencies of Group entities. The currencies giving rise to this risk are primarily the United States Dollar (“USD”), Indonesian Rupiah (“IDR”), Philippines Peso (“PHP”) and Thailand Baht (“THB”). Movements in their exchange rates against the Singapore dollar could result in the Group incurring foreign exchange losses/gains.

The Group recognises that any significant fluctuations in the USD dollar may affect the Group’s foreign currency risk. As a result, the Group actively monitors its exposure and uses forward foreign exchange contracts and hybrid swaps to hedge against USD dollar exposures, as and when necessary and where possible.

In view of the nature of the Group’s business which spans several countries, foreign exchange risks will continue to be an integral aspect of the Group’s risk profile in the future.

Interest rate risk

The Group hedges its exposure to changes in interest rates on certain borrowings by entering into interest rate swaps and hybrid swaps.

Insurance risk

The Company only issues guarantees to its subsidiaries.

Capital management

The Board’s policy is to maintain a sound capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Capital consists of ordinary shares, retained earnings and non-controlling interest of the Group. The Board of Directors monitors the return on capital, which the Group defines as net operating income divided by total shareholders’ equity excluding minority interest. The Board also monitors the level of dividends to ordinary shareholders.

The Group has a share buy-back mandate to purchase its own shares on the market; the timing of these purchases depends on market prices. Primarily, the shares purchased are intended to be used for issuing shares under the Group’s share option programme. Buy and sell decisions are made on a specific transaction basis by the Board. No shares have been purchased to date.

There were no changes in the Group’s approach to capital management during the year.

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annual report 2012


31 Commitments

Operating lease commitments

At 31 December, the Group has commitments for future minimum lease payments under non-cancellable operating leases as follows:

Group2012 2011

$’000 $’000

Payable:

Within 1 year 4,175 4,315After 1 year but within 5 years 3,670 6,690

7,845 11,005

The Group leases office premises and warehouse facilities under operating leases. The leases typically run for an initial period of three years, with an option to renew the lease after that date.

32 Contingent liabilities (unsecured)

Guarantees issued

At 31 December, there were contingent liabilities in respect of the following:

(a) Guarantees given to suppliers by the Company in respect of credit facilities extended to certain subsidiaries and associates amounted to $370,065,000 (2011: $382,611,000), of which the amount utilised was $118,859,000 (2011: $196,594,000). The guarantees are renewed on a yearly basis; and

(b) Guarantees given to financial institutions by the Company in respect of credit facilities extended to certain subsidiaries and associates amounted to $331,453,000 (2011: $276,568,000), of which the amount utilised was $121,240,000 (2011: $112,144,000). The guarantees are renewed on a yearly basis.

The Company has accounted for these corporate guarantees as insurance contracts. There are no terms and conditions attached to the guarantee contracts that would have a material effect on the amount, timing and uncertainty of the Group’s future cash flows.

The Company has undertaken to provide continuing financial support to certain subsidiaries to enable them to continue to operate as going concerns and to meet their obligations as and when they fall due.

33 Related parties

Transactions with directors and other key management personnel

Key management personnel of the Group are those persons having the authority and responsibility for planning, directing and controlling the activities of the Group. The directors and directors of subsidiaries and members of the management team are considered as key management of the Group.


annual report 2012


33 Related parties (cont’d)

Key management personnel compensation comprises remuneration of directors and other key management personnel as follows:

Group Company2012 2011 2012 2011

$’000 $’000 $’000 $’000

Directors of the Company- Short-term employment benefits 2,255 2,549 1,655 840- Other long-term benefits 22 20 7 –Directors of the subsidiaries - Short-term employment benefits 2,490 2,298 973 889- Other long-term benefits 65 48 35 21Executive officers - Short-term employment benefits 3,650 3,071 – –- Other long-term benefits 76 55 – –

8,558 8,041 2,670 1,750

During the year, certain of its subsidiaries have, in the normal course of business entered into the following transactions with companies in which certain directors have interests:

Group2012 2011

$’000 $’000

Purchase of information technology products and services 140 395Sales of information technology products and services 15,680 19,908

The directors and other key management personnel participate in the Company’s share option plans, the terms and conditions of which are stated in note 16.

Other related party transactions

For the purpose of these financial statements, parties are considered to be related to the Group if the Group has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Group and the party are subject to common control or common significant influence. Related parties may be individuals or other entities.

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annual report 2012


33 Related parties (cont’d)

Other than disclosed elsewhere in the financial statements, during the financial year, there were the following significant transactions with related parties, based on terms agreed by the parties:

Group Company2012 2011 2012 2011

$’000 $’000 $’000 $’000

Subsidiaries- dividend income – – 4,981 7,390- interest expense – – (267) (169)- interest income – – 4,966 4,552- management fee income – – 1,754 1,726

Affiliate- sales 152,394 42,743 – –- purchases (2,889) – – –

Associates- dividend income 2,443 807 2,443 807- interest income 39 348 39 348- management fee income 1,018 844 1,018 844- service fee income 1,284 844 1,284 844


annual report 2012

Class of shares - Ordinary shares Voting rights - On a show of hands: One vote for each member On poll: One vote for each ordinary share

Analysis of Shareholdings

Range of Shareholdings No. of Shareholders % No. of Shares %

1 - 999 5 0.62 2,096 0.00

1,000 - 10,000 462 56.97 2,565,189 0.70

10,001 - 1,000,000 337 41.55 24,389,796 6.67

1,000,001 and above 7 0.86 338,953,093 92.63

811 100.00 365,910,174 100.00

Based on information available to the Company as at 13 March 2013, 10.32% of the issued ordinary shares of the Company are held by the public and therefore Rule 723 of the Listing Manual is complied with.

Top 20 Shareholders

No. Name of Shareholder No. of Shares %

1 Raffles Nominees (Pte) Ltd 327,883,093 89.61

2 UOB Kay Hian Pte Ltd 2,512,000 0.69

3 DBS Nominees Pte Ltd 2,408,000 0.66

4 Citibank Nominees Singapore Pte Ltd 2,329,000 0.64

5 Hong Leong Finance Nominees Pte Ltd 1,463,000 0.40

6 Lim & Tan Securities Pte Ltd 1,325,000 0.36

7 United Overseas Bank Nominees Pte Ltd 1,033,000 0.28

8 Maybank Kim Eng Securities Pte Ltd 933,796 0.26

9 See Beng Lian Janice 810,000 0.22

10 Maybank Nominees (S) Pte Ltd 750,000 0.20

11 Atma Singh S/O Nand Singh 740,000 0.20

12 Koh Seng Chuah 718,000 0.20

13 See Lop Fu James @ Shi Lap Fu James 619,000 0.17

14 Tan Su Lan @ Tan Soo Lung 615,000 0.17

15 Narong Intanate 569,000 0.16

16 OCBC Securities Private Ltd 468,000 0.13

17 Lim Meng Seng 430,000 0.12

18 Vision Capital Private Limited 400,000 0.11

19 Phillip Securities Pte Ltd 399,000 0.11

20 Foo Seck Huat 388,000 0.11

346,792,889 94.80

Substantial Shareholders

Name of substantial shareholder

Number of shares registered in the name

of the substantial Shareholder

Number of shares in which substantial shareholder is

deemed to have an interest

Total percentage (%)

VST Holdings Limited - 327,580,093(1) 327,580,093 89.52

L&L Limited - 327,580,093(1) 327,580,093 89.52

Notes:(1) Deemed interest through Raffles Nominees Pte Ltd

ShareholDinGS StatiStiCSAs at 13 March 2013

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annual report 2012

notiCe of annual General meetinG

ECS hOlDINGS lIMITED(Incorporated in the Republic of Singapore)Company Registration No. 199804760R

NOTICE IS hEREBy GIVEN that the Fifteenth Annual General Meeting of the Company will be held at 19 Kallang Avenue #07-153 Singapore 339410 on Monday, 29 April 2013 at 3.00 p.m. to transact the following business :-

Ordinary Business

1 To receive and adopt the Directors’ Report and Audited Accounts for the financial year ended 31 December 2012 and the Auditors’ Report thereon. [Resolution 1]

2 To declare a one-tier tax exempt first and final dividend of 2.2 cents per ordinary share for the year ended 31 December 2012. [Resolution 2]

3 (a) To re-elect Mr Koh Soo Keong who is retiring in accordance with Article 91 of the Company’s Articles of Association, as Director of the Company. [Resolution 3(a)]

Note: Mr Koh Soo Keong, if re-elected, will remain as the Chairman of the Company’s Compensation Committee, and a member of the Company’s Nominating Committee and Audit Committee, and will be considered as an independent director for the purposes of Rule 704(8) of the Listing Manual of the Singapore Exchange Securities Trading Limited (the “SGX-ST”, and the Listing Manual of the SGX-ST, the “listing Manual”).

(b) To re-elect Mr Tay Eng Hoe who is retiring in accordance with Article 91 of the Company’s Articles of Association, as Director of the Company. [Resolution 3(b)]

Note: Mr Tay Eng Hoe, if re-elected, will remain as the Chairman of the Company and a member of the Company’s Nominating Committee.

(c) To re-elect Mr Narong Intanate who is retiring in accordance with Article 91 of the Company’s Articles of Association, as Director of the Company. [Resolution 3(c)]

4 To re-appoint KPMG LLP as Auditors and to authorise the Directors to fix their remuneration. [Resolution 4]

5 To approve the payment of Directors’ Fees of $320,479.00 for the year ended 31 December 2012. (2011: $343,500.00). [Resolution 5]

6 To consider and, if thought fit, to pass the following as Ordinary Resolutions, with or without modifications:-

(a) THAT pursuant to Section 161 of the Companies Act (Chapter 50) of Singapore (the “Act”) and the listing rules of the SGX-ST, authority be and is hereby given to the Directors to:-

(i) issue shares in the capital of the Company whether by way of bonus issue, rights issue or otherwise;

(ii) make or grant offers, agreements or options (collectively “Instruments”) that might or would require shares to be issued, including but not limited to the creation and issue of (as well as adjustments to) warrants, debentures or other instruments convertible into shares; and/or

(iii) issue additional Instruments convertible into shares arising from adjustments made to the number of Instruments,

at any time and upon such terms and conditions and for such purposes and to such persons as the Directors may, in their absolute discretion, deem fit; and (notwithstanding the authority conferred by this Resolution may have ceased to be in force) issue shares in pursuance of any Instrument made or granted by the Directors while this Resolution was in force,

provided that:


annual report 2012

(1) the aggregate number of shares to be issued pursuant to this Resolution (including shares to be issued in pursuance of any Instruments made or granted pursuant to this Resolution) shall not exceed 50% of the total number of issued shares in the capital of the Company excluding treasury shares (as calculated in accordance with sub-paragraph (2) below), of which the aggregate number of shares to be issued other than on a pro rata basis to shareholders of the Company shall not exceed 20% of the total number of issued shares in the capital of the Company excluding treasury shares (as calculated in accordance with sub-paragraph (2) below);

(2) (subject to such manner of calculation as may be prescribed by the SGX-ST) for the purpose of determining the aggregate number of shares that may be issued under paragraph (1) above, the percentage of issued shares shall be based on the total number of issued shares in the capital of the Company excluding treasury shares at the time this Resolution is passed, after adjusting for:

(A) new shares arising from the conversion or exercise of any convertible securities;

(B) new shares arising from the exercise of share options or vesting of share awards which are outstanding or subsisting at the time this Resolution is passed, provided that the aforesaid share options or share awards were granted in compliance with Part VIII of Chapter 8 of the Listing Manual; and

(C) any subsequent bonus issue or consolidation or subdivision of shares;

(3) in exercising the authority conferred by this Resolution, the Company shall comply with the provisions of the Listing Manual for the time being in force (unless such compliance has been waived by the SGX-ST) and the Articles of Association for the time being of the Company; and

(4) (unless revoked or varied by the Company in general meeting) the authority conferred by this Resolution shall continue in force until the conclusion of the next annual general meeting of the Company or the date by which the next annual general meeting of the Company is required by law to be held, whichever is the earlier.

[See Explanatory Note (i)] [Resolution 6(a)]

(b) That for the purposes of Chapter 9 of the Listing Manual:

(i) the Shareholders’ General Mandate for the Company, its subsidiaries and associated companies or any of them to enter into any of the transactions falling within the types or categories of interested person transactions as described in section 3.1 (Interested Person Transactions) of Appendix A attached to this annual report with VST Holdings Limited, its subsidiaries and/or its associates (as set out in section 3.2) be and is hereby approved, provided that such transactions are entered into on an arm’s length basis, on normal commercial terms and in accordance with the guidelines for interested person transactions as set out in section 3.5 (Review Procedures) of Appendix A;

(ii) the aforesaid Shareholders’ General Mandate shall, unless earlier revoked or varied by the Company in general meeting, continue in force until the next annual general meeting of the Company; and

(iii) 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, without limitation, executing all such documents and approving any amendment, alteration or modification to any document) as they may consider desirable, expedient or necessary or in the interests of the Company to give effect to the aforesaid Shareholders’ General Mandate and/or this Resolution 6(b).

[See Explanatory Note (ii)] [Resolution 6(b)]

(c) That for the purposes of Chapter 9 of the Listing Manual:

(i) the Shareholders’ General Mandate for the Company, its subsidiaries and associated companies or any of them to enter into any of the transactions falling within the types or categories of interested person transactions as described in section 3.1 (Interested Person Transactions) of Appendix A with the associates of Mr Narong Intanate (as set out in section 3.2), a Director of the Company, be and is hereby approved, provided that such transactions are entered into on an arm’s length basis, on normal commercial terms and in accordance with the guidelines for interested person transactions as set out in section 3.5 (Review Procedures) of Appendix A;


9899


annual report 2012

(ii) the aforesaid Shareholders’ General Mandate shall, unless earlier revoked or varied by the Company in general meeting, continue in force until the next annual general meeting of the Company; and

(iii) 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, without limitation, executing all such documents and approving any amendment, alteration or modification to any document) as they may consider desirable, expedient or necessary or in the interests of the Company to give effect to the aforesaid Shareholders’ General Mandate and/or this Resolution 6(c).

[See Explanatory Note (ii)] [Resolution 6(c)]

(d) That:

(i) for the purposes of the Act, the exercise by the Directors of the Company of all the powers of the Company to purchase or otherwise acquire the ordinary shares in the capital of the Company not exceeding in aggregate the Prescribed Limit (as hereafter 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 hereafter defined), whether by way of:

(a) on-market purchases (each a “Market purchase”) on the SGX-ST; and/or

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

be and is hereby authorised and approved generally and unconditionally (the “Share Buyback Mandate”);

(ii) unless varied or revoked by the Company in general meeting, the authority conferred on the Directors of the Company pursuant to the Share Buyback 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:

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

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

(c) the date on which the authority contained in the Share Buyback Mandate is varied or revoked (the “Relevant period”);

(iii) in this Resolution:

“prescribed limit” means 10% of the issued ordinary share capital of the Company as at the date of passing of this Resolution unless the Company has effected a reduction of the share capital of the Company in accordance with the applicable provisions of the Act, at any time during the Relevant Period, in which event the issued ordinary share capital of the Company shall be taken to be the amount of the issued ordinary share capital of the Company as altered (excluding any treasury shares that may be held by the Company from time to time); and

“Maximum price” in relation to a share to be purchased, means an amount (excluding brokerage, stamp duties, applicable goods and services tax and other related expenses) not exceeding:

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

(ii) in the case of an Off-Market Purchase: 120% of the Highest Last Dealt Price,

where:



annual report 2012

“Average Closing price” means the average of the closing market prices of a share over the last five market days, on which transactions in the shares were recorded, preceding the day of the Market Purchase, and deemed to be adjusted for any corporate action that occurs after the relevant five-day period;

“highest last Dealt price” means the highest price transacted for a share as recorded on the market day on which there were trades in the shares immediately preceding the day of the making of the offer pursuant to the Off-Market Purchase; and

“day of the making of the offer” means the day on which the Company announces its intention to make an offer for the purchase of shares from shareholders of the Company stating the purchase price (which shall not be more than the Maximum Price calculated on the foregoing basis) for each share and the relevant terms of the equal access scheme for effecting the Off- Market Purchase; and

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

[See Explanatory Note (iii)] [Resolution 6(d)]

7 To transact any other business that may be properly transacted at an annual general meeting. [Resolution 7]

By Order of the Board

Eddie Foo Toon EeCompany Secretary

Singapore

12 April 2013


100101


annual report 2012

Explanatory Notes:

(i) Resolution 6(a), if passed, will authorise the Directors to issue shares in the capital of the Company and to make or grant Instruments (such as warrants or debentures) convertible into shares, and to issue shares in pursuance of such Instruments, up to a number not exceeding 50% of the total number of issued shares in the capital of the Company, of which up to 20% may be issued other than on a pro rata basis to shareholders. For the purpose of determining the aggregate number of shares that may be issued, the percentage of issued shares shall be based on the total number of issued shares excluding treasury shares in the capital of the Company at the time that Resolution 6(a) is passed, after adjusting for (a) new shares arising from the conversion or exercise of any convertible securities, (b) new shares arising from the exercise of share options or vesting of share awards which are outstanding or subsisting at the time that Resolution 6(a) is passed, provided that the aforesaid share options or share awards were granted in compliance with Part VIII of Chapter 8 of the Listing Manual, (c) any subsequent bonus issue or consolidation or subdivision or shares.

(ii) Resolutions 6(b) and 6(c), if passed, will authorise the Company, its subsidiaries and associated companies, from the date of the annual general meeting until the conclusion of the next annual general meeting, to enter into interested person transactions with certain interested persons of the Company and/or their associates. Each of such mandates shall, unless revoked or varied by the Company in general meeting, continue in force until the next annual general meeting of the Company. For further details on the interested person transactions and interested persons referred to, please see Appendix A to this Notice.

(iii) Resolution 6(d), if passed, will renew effective up to the next annual general meeting of the Company the Share Buyback Mandate for the Company to purchase or acquire its ordinary shares (unless prior thereto, the 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 amount of financing required for the Company to purchase or acquire its ordinary shares, and the impact on the Company’s financial position, cannot be ascertained as at the date of this Notice of Annual General Meeting as these will depend on the number of ordinary shares purchased or acquired and the price at which such ordinary shares were purchased or acquired. For further details on the Share Buyback Mandate, please see Appendix B to this Notice.

proxies :

A member entitled to attend and vote at the annual general meeting may appoint not more than two proxies to attend and vote on his behalf and where a member appoints more than one proxy, the proportion of the shareholding concerned to be represented by each proxy shall be specified in the form of proxy. A proxy need not be a member of the Company. The instrument appointing a proxy must be deposited at the office of the Company’s Share Registrar, M & C Services Private Limited, 112 Robinson Road #05-01, Singapore 068902, not less than forty-eight hours before the time set for the holding of the annual general meeting.

NOTICE Of BOOKS ClOSURE AND DIVIDEND pAyMENT DATE NOTICE IS ALSO HEREBY GIVEN that the Share Transfer Books and Register of Members of the Company will be closed on 8 May 2013, for the purpose of determining the members’ entitlements to the dividend to be proposed at the Annual General Meeting of the Company to be held on 29 April 2013. Duly completed registrable transfers in respect of shares in the Company received up to the close of business at 5.00 p.m. on 7 May 2013 by the Company’s Share Registrar, M & C Services Private Limited, will be registered to determine members’ entitlements to such dividend. Members whose securities accounts with The Central Depository (Pte) Ltd are credited with shares in the Company as at 5.00 p.m. on 7 May 2013 will be entitled to such proposed dividend. The proposed dividend, if approved at the Annual General Meeting, will be paid on 17 May 2013.


This page is intentionally left blank.

pROXy fORMannUal GeneRal MeetinG

ECS hOlDINGS lIMITED(Incorporated in the Republic of Singapore)Company Registration No. 199804760R

I/We

of

being a member/members of ECS HOLDINGS LIMITED hereby appoint

Name AddressNRIC/passportNumber

proportion ofShareholdings (%)

and/or (delete as appropriate)

as my/our proxy/proxies to vote for me/us on my/our behalf and, if necessary, to demand a poll, at the Annual General Meeting of ECS HOLDINGS LIMITED to be held at 19 Kallang Avenue #07-153 Singapore 339410 on 29 April 2013 at 3.00 p.m. and at any adjournment thereof.

(Please indicate with an “X” in the spaces provided whether you wish your vote(s) to be cast for or against the Ordinary 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.)

NO ORDINARy RESOlUTIONS fOR AGAINSTOrdinary Business :

1. Adoption of Reports and Accounts

2. Declaration of a one–tier tax exempt first and final dividend of 2.2 cents per ordinary share for the year ended 31 December 2012

3. Re-election of Directors :

(a) Mr Koh Soo Keong

(b) Mr Tay Eng Hoe

(c) Mr Narong Intanate

4. Re-appointment of Auditors

5. Approval of Directors’ Fees of S$320,479/- for the year ended 31 December 2012

Special Business6. (a) Authority for Directors to issue shares pursuant to Section 161 of the Companies

Act (Chapter 50) of Singapore and the Listing Manual of the Singapore Exchange Securities Trading Limited

(b) To approve the proposed renewal of the Shareholders’ General Mandate for Interested Person Transactions with VST Holdings Limited, its subsidiaries and/or associates

(c) To approve the proposed renewal of the Shareholders’ General Mandate for Interested Person Transactions with the associates of Mr Narong Intanate, a Director of the Company

(d) To approve the proposed renewal of the Share Buyback Mandate

7. Any other ordinary business

Dated this day of 2013.

Signature(s) of member(s) or Common Seal

Important:1. For investors who have used their CPF monies to buy the Company’s shares, the An-

nual Report is forwarded to them at the request of their CPF Approved Nominees and is sent solely fOR INfORMATION ONly.

2. 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.

3. CPF Investors who wish to attend the Annual General Meeting as OBSERVERS have to submit their requests through their respective Agent banks so that their Agent banks may register with the Company Secretary of ECS Holdings Limited not less than 48 hours before the time appointed for holding the meeting.

Total Number of Shares held:

IMpORTANT: Please ReaD notes oVeRleaf

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) of Singapore), 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 of the Company entitled to attend and vote at a meeting of the Company is entitled to appoint not more than two proxies to attend and vote on his behalf. A proxy need not be a member of the Company.

3 Where a member appoints more than one proxy, the proportion of the shareholding concerned to be represented by each proxy shall be specified in the form of proxy, failing which, the appointment shall be deemed to be in the alternative.

4 The instrument appointing a proxy must be deposited at the office of the Share Registrar of the Company, M&C Services Private Limited at 112 Robinson Road #05-01, Singapore 068902, not less than forty-eight (48) hours before the time appointed for the holding of the Annual General Meeting.

5 The instrument appointing a proxy must be signed by the appointor or his attorney. Where the instrument appointing a proxy is given by a corporation, it must be given either under its common seal or signed on its behalf by an attorney or a duly authorised officer of the corporation.

6. Where an instrument appointing a proxy is signed on behalf of the appointor by an attorney, the letter or power of attorney or a duly certified copy thereof must (failing previous registration with the Company) be lodged with the instrument of proxy, failing which the instrument may be treated as invalid.

7. A corporation which is a member may by a resolution of its directors or other governing body authorise such

person as it thinks fit to act as its representative at the Annual General Meeting, in accordance with Section 179 of the Companies Act (Chapter 50) of Singapore.

General:

The Company shall be entitled to reject an instrument of proxy 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 of proxy. In addition, in the case of shares entered in the Depository Register, the Company may reject an instrument of proxy lodged if the member, being the appointor, is not shown to have shares entered against his name in the Depository Register as at forty-eight (48) hours before the time appointed for the holding of the Annual General Meeting, as certified by The Central Depository (Pte) Limited to the Company.



annual report 2012

eCs ho

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phone: +65 6659 6888 | fax: +65 6884 7549 | website: www.ecs.com.sg

eCs holdings limited(Incorporated in The Republic of Singapore)

Co. Reg. No.: 199804760R

8 temasek Boulevard#34-02 suntec tower three

singapore 038988

ECS Holdings Annual Report 2012 - Shaping Fundamentals for Growth

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