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Corporate InformationBoard of DirectorsSteve Ting Tuan Toon Executive ChairmanLim Chin Hu President and Chief Executive OfficerShirley Wong Swee Ping Vice PresidentTay Swee SzeDaniel YuRobert Yap Min ChoyTang Chun ChoyLiow Voon KheongSim Wong HooRobert Michael Stein Ng Keh Long (alternate director to Sim Wong Hoo)Dr. Harrison Wang Hong She (alternate director to Robert Michael Stein)

Company SecretariesDennis Chia Choon HweeHon Wei Seng

Audit CommitteeTay Swee Sze ChairmanDaniel YuSteve Ting Tuan Toon

Compensation CommitteeDaniel Yu ChairmanTay Swee SzeTang Chun ChoySteve Ting Tuan Toon

Registered Office57 Science Park Drive, The Faraday, Singapore Science Park, Singapore 118237Tel : (65) 6773 7227 Fax : (65) 6779 4455 Website: www.frontline.com.sg

Share RegistrarBarbinder & Co Pte Ltd8 Cross Street #11-00PWC Building Singapore 048424

AuditorsArthur AndersenCertified Public Accountants10 Hoe Chiang Road #18-00 Keppel TowersSingapore 089315

Philip Ling Soon Hwa Partner in-charge

Principal BankersThe Development Bank of Singapore LtdCitibank N.A

01 | Contents Page

corporate profile 02financial highlights 06milestones 08vision statement 10mission statement 12message from executive chairman and ceo 14operations review 18our business 20organisation structure 22board of directors 26regional network 28financial pages 32

Contents

02 | Corporate Profile

Frontline Technologies Corporation Ltd (‘Frontline’), listed on Mainboard of the Singapore Exchange,is a symbiotic group of Information Technology (‘IT’) services companies spanning the Asia-Pacificregion in five countries and ten cities. We thrive on the mission of enabling the best businessresults through IDEAS, PEOPLE and TECHNOLOGY. As a Total Solutions Provider, we provide a fullspectrum of services that include Consulting & Design, Infrastructure Implementation, SystemsIntegration & Application Development, and a whole host of Managed Services. In short, we seeto the entire cycle of a typical IT undertaking – from Consult, Build, Deploy to Manage. True toour full-service proposition, we boast of strong alliances with some of the world most renownedtechnology companies – including Sun Microsystems, Oracle, Veritas Software, Computer Associates,Internet Security Systems, StorageTek, CheckPoint Solutions and Hitachi Data Systems - to providethe most effective and competitive solutions to our customers. To date, we have helped numerousglobal multinationals and government organizations fulfill their IT endeavors, including Port ofSingapore Authority, Singapore Airlines, National Institute of Education, Ngee Ann Polytechnic,Seagate Technology (Singapore), Ummul Qura, Universiti Malaysia Sabah, Total AcccessCommunication (Thailand), Bangkok Bank, Petroleum Authority of Thailand, Advanced Info Service(Thailand), Heinz (Philippines), Industrial and Commercial Bank of China, and Sichuan Mobile.Recognized for our excellent service quality and business performance, Frontline has garneredseveral local and regional accolades, from the Enterprise 50 Award 1999/2000, Securities InvestorsAssociation Singapore’s Most Transparent Company (1st Runners Up) in 2001, and Asiamoney’sBest Newly-Listed Company and Best Small Company in Singapore awards for 2001.

Corporate Profile

03 | Corporate Profile

Singapore’s best newlylisted company and bestsmall company in 2001.Asiamoney

December 2001/ January 2002

05

06 | Financial Highlights

1. Turnover and Net Profits

Turnover

Net Profit

Financial Highlights

0

50

100

150

200

FY 00 FY 01 FY 02

$’m

164.8

111.3

62.2

10.69.0

5.7

8.9

15.9

13.4

2. Earnings before Interest, Taxation,

Depreciation and Amortisation

0

5

10

15

20

$’m

FY 00 FY 01 FY 02

FY 02FY 01FY 00

IT & Internet Infrastructure

Systems Integration

IT Consulting

Investment. Holding

78.9

36.6

27.3

12.34.8

0.50.3

48.8

12.5

4.0

0.0

115.4

3. Revenue by Business Segments

0

30

60

90

120

$’m

112.2

93.4

31.9

1.920.7

16

52,3

9.9

0.0

4. Revenue by Geography

Singapore

North Asia

Other ASEAN Countries

0

30

60

90

120

$’m

FY 00 FY 01 FY 02

07 | Financial Highlights

08 | Milestones

25 August 2001Frontline meets the Philippines President Gloria Arroyoat the Philippine-Singapore Business Council Forumheld at the Shangrila Hotel Singapore. Three out offour business agreements that were signed at theForum, and witnessed by the Philippines President,involved Frontline companies (Frontline TechnologiesCorporation Ltd, Frontline Solutions Pte Ltd andiASPire.net Pte Ltd). The signatories from Frontlineinclude Managing Director of Frontline TechnologiesPte Ltd, Mr Cheong Yen Niap, and Managing Directorof iASPire.net Pte Ltd, Mr Wong Wai Meng. ThePhilippines signatories are Cynthia R. Mamom; Ma. FeN. Ferriols; and Cristina A. Lee, signing on behalf of ITHoldings Inc., Beacon Frontline Solutions Inc. andiASPire.net Philippines Inc.. The high-profile signingceremony not only sealed Frontline’s relationship withits Philippines business partners but also marked theGroup’s aggressive entry into the Philippines market.

30 May 2001With turnover up 70% and net earnings up52%, Frontline delivers strong full-year financialresults for FY2001. The company’s goodfinancial performance is the result ofcontributory factors including its expansioninto more services to meet market demands,securing of larger-sized business contracts andprudent management.20 April 2001

The key staff of the Company gather at Desaru PerdanaResort for a sales kick-off for FY2002. A yearly tradition,this two-day corporate retreat helps boost morale,build teams, set targets and provide some level ofrecreation

16 April 2001Frontline takes a 30% stake in Thailand’sleading IT services company Logic CompanyLimited. The Thai company is a well-establishedprovider of client-server computing systemsand network-related infrastructure productsand services.

Milestones

26 March 2002Frontline is awarded Asiamoney’s Best Newly-Listed and Best Small Company Awards in2001. The awards are based on a pollconducted by Asiamoney, a Euromoneyinstitutional investor company. The pollquestionnaire was sent to nearly 2,000 fundmanagers, chief investment officers, heads ofresearch at fund management firms, insurancecompanies, and brokerage houses in the Asia-Pacific region (including Australia and Japan),Europe, and the United States of America.

18 October 2001Frontline takes a 30% stake in one of China’sleading IT services companies to form MDCL-Frontline (China) Ltd. Established in 1988, thecompany is a 190-man, total IT solutions provider.It is headquartered in Hong Kong, with operationsfocused on the China IT market, carried out throughits subsidiaries and regional offices in Beijing,Shanghai, Guangzhou and Chengdu.

30 August 2001The Company’s maiden Annual GeneralMeeting after listing is held in the CreativeResource Auditorium. The Board of Directorspresent include Mr Steve Ting, Mr Lim ChinHu, Ms Shirley Wong, Mr Harrison Wang, andMr Tay Swee Sze. The Group Chief FinancialOfficer Mr Dennis Chia is also present at theMeeting.

10 July 2001Frontline acquires a 49% stake in Philippines ITHoldings, Inc.. The Philippines company owns ajoint-venture company, Sun Microsystems (Phils)Inc. (‘SUNPHIL’), with Sun Microsystems Inc.. Thisinvestment concludes phase one of Frontline’s AsiaSouth regionalisation, after having set up operationsin Malaysia and Thailand.

28 March 2002Frontline takes an additional stake of 5% inMDCL-Frontline (China) Ltd.

09 | Milestones

10 | Vision

values

Focus on the Customers

Embrace Integrity

Achieve Excellence

Always Respect the Individual

Play as a Team

To be the leadingbillion-dollar,Pan-asian technologysolutions company

vision

11 | Vision

12 | Mission

Best business resultsthrough ideas, peopleand technology

mission

13 | Mission

Lim Chin HuPresident & Chief Executive Officer

Steve TingExecutive Chairman

14 | Message from Executive Chairman and CEO


OUR NINTH TRIUMPH

The Group has turned in its ninth consecutive year of profitability – an unbroken record sinceits inception in 1993. No mean feat, considering that the latter half of the twelve months infinancial year ended 31 March 2002 (FY2002), was fraught with worldwide economic turbulencesprecipitated by the tragic events of the September-11 catastrophe.

Despite the dismal economic conditions, our business report card for FY2002 reflects a 18.2%rise in net earnings to $10.6 million from $9.0 million, and a 48.1% rise in revenue to $164.8million from $111.3 million.

The Group’s three principal businesses – Information Technology (‘IT’) and Internet infrastructure,System Integration and IT Consulting – have all seen significant improvement in revenue growthof about 46.2%, 34.0% and 154.0% respectively from financial year ended 31 March 2001(FY2001). The dramatic growth in the consulting business is due to the Group’s successfulexpansion in its consulting practice to include Customer Relationship Management (‘CRM’) andEnterprise Application Integration (‘EAI’).

In FY2002, the Group expanded into the Philippines (Manila) and the People’s Republic of China(Beijing, Shanghai, Guangzhou and Chengdu), strengthening its regional operations substantially.Together with Thailand and Malaysia, the Group’s overseas operations contributed about 31.9%of total revenue and 36.0% of net earnings. Alongside active regional acquisitions during theyear, the Group continued to strengthen its organic business in Singapore, which grew by 20%over the previous financial year.

SACRIFICE FOR SUCCESS

The Group has weathered and overcome a number of economic slowdowns since it started in1993, but none as severe as the current one. But crises make us stronger and we firmly believethat we have and will become stronger after weathering the harsh economic times.

In November 2001, the Group management and staff voluntarily took a wage cut, of 7.5% to30%, in order to better manage our operating expenses and improve business performance.In addition, we also withdrew the Annual Wage Supplement, imposed a hire-and-travel freeze,and capped all discretionary capital expenditures in order to strengthen our financial position.

The Group-wide cost-cutting drive has helped to save approximately 5% of total operatingoverheads. We wish to take this opportunity to once again thank the Group management andstaff for their sacrifices to help the Group ride through the challenging times.

Message from Executive Chairman and CEO

SPREADING OUR WINGS ACROSS THE REGION

For the year ended 31 March 2002, the Frontline Group consolidated its presence in five countries– namely Singapore, Malaysia, People’s Republic of China, Thailand and Philippines – and tencities – namely, Singapore, Kuala Lumpur, Beijing, Shanghai, Guangzhou, Hong Kong, Chengdu,Bangkok, Chiangmai, and Manila. In aggregate, the Group commands a force of some 830spread across its subsidiaries and associate companies throughout the Asia-Pacific region.

The regional expansion has helped the Group move closer to its vision of being Asia’s PremierIT Services Company. We strive to be present in seven countries and twenty cities in the nextone to two years and with at least half of the Group’s net earnings derived from regionaloperations.

AWARDS AND ACCOLADES

Our business performance has won various accolades from the industry, press and media, andbusiness partners during the year. Asiamoney, one of the most influential financial magazinesin Asia, has conferred us the Singapore’s Best Newly Listed Company and Best Small Companyin 2001 awards. The Securities Investors Association of Singapore honoured us with Singapore’sMost Transparent Company (New Issues) Runners-Up Award for 2001. Well regarded as apremier business partner, we won Sun Microsystems’ Diamond Sunshine Award and BestEnterprise Partner for Asia South 2002; Veritas Software Singapore’s Top Distributor and Value-Added Reseller in Asia South for 2001; Hitachi Data Systems’ Channel of the Year 2001;StorageTek South Asia’s Value Added-Reseller of the Year in 2001; and iPlanet’s Top Partner(New Business Performance) in Asia Pacific.


Our business performance has wonvarious accolades from the industry,press and media, and businesspartners during the year.


FORWARD STRATEGY

Although there have been signs of the industry recovering towards the last quarter of theFY2002, the Group has taken a cautious business approach in the current financial year. Ourstrategy in FY2003 is to continue to strengthen our Singapore operations and at the same timeexecute on phase three of our pan-Asia regionalisation – exploring opportunities in Australiaand India.

Alongside our pan-Asian regionalisation, Singapore remains an important market for the Groupas it is a focal point of business activities for many regional and global companies we serve. Assuch, we will continue to expand our Singapore market share by increasing the breadth, depthand competitiveness of our services offering.

Apart from expanding into the new regional locations of India and Australia, the Group alsoseeks to deepen our stakes in our existing overseas markets like China, Malaysia and Thailand.The Group will also continue its focus on integrating regional operations to achieve optimalresource efficiencies and profitability.

LASTLY

We have been through a very tough financial year and may be on our way to an even tougherone. The good news is that we have proven that by sheer determination and diligence, we haveovercome the challenges in FY2002, and there is every reason to believe that we will do so inFY2003 and beyond.

In closing, to everyone, particularly our Board, business partners, and shareholders, we expressour heart-felt appreciation and gratitude. For the Frontliners, we deeply appreciate yourcontribution, support and hard work for FY2002, and let us forge ahead into our tenth yearof success.

Steve Ting Lim Chin HuExecutive Chairman President & Chief Executive Officer

FY2002 - financial year ended 31 March 2001

Frontline recorded a revenue growth of 48.1% to $164.8 million, from $111.3 million in theprevious financial year. Our Singapore operations accounted for 20.1% of this growth. Groupoperating profit before interest, tax, depreciation and amortization and before provision fordiminution in investments increased 18.4% to $15.9 million from $13.4 million. Net profitincreased 18.2% to $10.6 million from $9.0 million.

We managed to sustain this growth despite a general weakness in the global and regionaleconomic environments. We attribute this growth to the continued focus on the expansion ofour range of technology and service capabilities and on sectors of the market which providebetter opportunities, such as the education, government and transport sectors, which collectivelyaccounted for 53.3% of our total revenue. We also diversified our operations into the regionin accordance with our regional expansion plans. Approximately (35.5%) of our net profit aftertax was contributed by our regional operations in China, Malaysia, Thailand and the Philippines.

The overall revenue growth was distributed across the IT & Internet infrastructure, systemsintegration and IT consulting components of our business, with the largest percentage increaserecorded in our IT consulting segment of approximately 154.0%. IT & internet infrastructurerevenues accounted for approximately 70.0% of our total revenue, a marginal reduction from70.9% in the previous year.

Net profit margin declined from 8.1% to 6.4%, as a result of the following :-.

• Global economic slowdown resulting in increasing competition and margin pressures whichled to a marginal decline in gross margins from 23.6% to 22.6%.

• In FY2002, we also started to consolidate the results for our operations in the Philippineswhere there is a significant effective minority interest in the main operations in the countryof 75%. In addition, the consolidation also resulted in interest on borrowings of $0.6 millionfor working capital purposes. If we had not consolidated the results of these operations,net profit margins would have been 7.3%.

• We continued to invest in human capital to augment our current service capabilities andto prepare ourselves for the recovery in the business climate, growing our team of ITconsultants and our sales force. However, during the latter half of the year, in line with thegeneral weakness in the economy, we restructured our operations to focus on our corebusiness of provision of IT services. Total human capital at the end of the year was 225 (forthe company and its subsidiaries in Singapore and Malaysia), a marginal decline as comparedto the total at the end of FY2001 of 243. To manage the increase in operating costs, weundertook various cost containment measures such as reductions in personnel costs andtravel expenditure. We accordingly experienced a net marginal increase in operating expensesas a result of these initiatives.

• Included in operating expenses was a provision of $0.7 million for diminution in value ofour investments in affiliated companies. In addition, during the year, we had to accountfor the effect of the accrual for unconsumed leave, goodwill amortization and deferred taxassets as a result of the introduction of new accounting standards, the net after tax effectof which resulted in a reduction in net profits of S$0.6 million.

Other operating income primarily relates to commission income received in respect of our EDAbusiness in China and to fees received for management consulting services provided to one ofour associate companies.

18 | Operations Review

Operations Review

In July 2001, we completed the acquisition of 49% of IT Holdings, Inc., whose subsidiary, SunMicrosystems Philippines Inc., is one of the leading IT services providers in the Philippines. In December2001, we completed our investment of 30% in MDCL-Frontline (China) Ltd (’MCDL-Frontline’), whoseoperations are carried out through its wholly owned subsidiary, Modern Devices (China) Ltd, in thePeople’s Republic of China. In March 2002, we acquired an additional 5% in MDCL-Frontline, bringingour current investment holding to 35%. The result of these investments, together with our investmentsin Thailand and Malaysia which were completed in FY2001, was a 19.6% contribution to net profitafter tax.

We also completed in September 2001, our investment in inCall Systems Inc, a company quoted onthe Nasdaq Over-the-Counter (OTC) securities market. This involved a swap of our convertible loaninvestment and other outstanding loans in 1st Call Pte Ltd, amounting to S$1.3 million, to shares ininCall. As of 31 March 2002, the market value of our investments in inCall was S$2.0 million, whichwas S$0.6 million above our cost of investment.

Our License and Distribution Agreement with Cadence Design (Ireland) Ltd expired on 31 December2001. We have since worked to transition the Electronics Design Automation (EDA) business back toCadence to enable us to focus our efforts on our core competencies in the area of IT services. Weexpect to mitigate the short term financial impact through our increased focus on our IT servicesoperations in China.

In the area of innovation and intellectual property development, the Group ceased development activityon iModel (a set of tool-kits to facilitate certain IT project deliverables) in FY2002.

Going forward, the Group will strengthen and enhance its innovation capabilities, under major, feashinitiatives targetted for FY2003. The Group will continue to proactively support innovation initiatives- including sourcing for external sources of funding (such as R&D grants), and ensuring high levelsof cost-effectiveness, productivity and commercial viability throughout the development process. TheGroup has put in place technology management processes to continuously elicit, assess and supportinnovation efforts. This ensures that resources expended on R&D efforts correlate to operational viabilty,commercialisation feasibility and the targeted returns on investment.

Earnings per share declined from 1.71 cents to 1.37 cents despite an increase in net profit after tax.This is due to the fact that in FY2002, the new shares which were issued in respect of the Company’sIPO were weighted for purposes of computing the EPS.

19 | Operations Review

20 | Our Business

It has been a winning strategy – our Total Solution Approach. One that sees to our customer’s entirespectrum of business needs, from consult, build, deploy to manage. Over the last year, we have alsorefined and redefined our suite of IT services to meet the dynamically changing demands of the regionalmarket. From hardware, software, networking, to the interoperability of them all - not forgetting thepost-sales support and maintenance - our proven implementation methodology works regardless ofproject scale, complexity, geography, and industry.

Distinguishing ourselves from the competitive industry players, we offer the following value propositions:

1) Management ease – A typical multiple-vendor management in a single project can be administrativelyhassle-some and at the same time muddles accountability. As a Total Solutions Provider, we areable to project manage on our customer’s behalf, bringing about absolute management ease tothem.

2) Cost efficiencies – As a Total Solutions Provider, we bypass multi-vendor mark-ups in pricing. Ourstrong alliances with our technology partners will allow us to enjoy preferential vendor rates,therefore we are able to provide the most competitive packages to our customers.

3) High options – We offer a wide array of technologies and services that cater to our customers’preferred requirements. Even if our customers do not wish to own any infrastructure, we canalso provide the outsourcing option where they could enjoy state-of-the-art technologies withno ownership woes.

4) Regional network – Our resources span the region to facilitate our customers’ cross-borderoperations. We have professional personnel, facilities, and networks sprawled across five countriesand ten cities to help our customers expand their business needs geographically.

5) Round-the-clock support – Our customers’ perennial uptime and optimal serviceability form themission of our support service. We have a 24x7 Internet data center and call center to see to ourcustomers’ round-the-clock operability. We offer Web, phone and on-site support service sevendays a week.

Consult, Build, Deploy & Manage

Our Business

consult

21 | Our Business

deploySystem Integration

Application Development

Software Development

Enterprise Application Integration

manageStorage Management Solution

Database Management Solution

Systems Management Solution

Network Management Solution

Internet Data Centre

Managed Services Provider build

Business Consulting

IT Security

Customer Relationship Management

Customer Experience

Enterprise Resource Planning

22 | Organisation Structure

REGIONAL OPERATIONS

Organisation Structure

INVESTEE /ASSOCIATE /

AFFILIATED CORPORATIONS

SINGAPORE OPERATIONS

23 | Organisation Structure

At Frontline,the culture is essentiallya company witha lot of heartin what it is doing.CEO I.T., SingaporeMay 2001

25

Steve Ting Tuan Toon (1)Founder, Executive Chairman and DirectorSteve Ting is our founder and Executive Chairman. Mr. Ting is a veteran in the technology industry with more than19 years of experience holding several management positions in Hewlett Packard Singapore and Mentor GraphicsCorporation Pte Ltd. He started his first company Mentor Graphics Associates Pte Ltd in 1993 and subsequently FrontlineTechnologies Pte Ltd in 1994. Mr Ting holds a Bachelor of Engineering Degree from the National University of Singapore,a Postgraduate Degree from the Institute of Marketing in the United Kingdom and a graduate Diploma in MarketingManagement from the Singapore Institute of Management. Mr. Ting is the Deputy Chairman of the Ngee AnnPolytechnic’s Electronic and Computer Engineering Advisory Committee. In recognition of his entrepreneurial achievements,Mr Ting was recently conferred the honorary title of Doctor of Philosophy in Business Administration from the WisconsinInternational University, USA.

Lim Chin Hu (2)President, Chief Executive Officer and DirectorLim Chin Hu is our President and Chief Executive Officer. Mr. Lim has more than 18 years of management experiencein the IT industry. From 1992 until he joined Frontline, Mr. Lim held several positions at Sun Microsystems, Inc., includingCorporate Director of e-Business and Channels for Asia-Pacific, Managing Director for Singapore and Country Directorfor Thailand, Indonesia, the Philippines and Vietnam. Before he joined Sun Microsystems, Inc., he held several managerialroles at Hewlett-Packard Singapore Pte Ltd. Mr. Lim holds a Diploma in Electrical and Electronics Engineering from NgeeAnn Polytechnic and a Bachelor Degree in Computer Science from the La Trobe University in Australia.

Shirley Wong Swee Ping (3)Co-founder, Vice President and DirectorShirley Wong Swee Ping is our co-founder and Vice President. Ms. Wong, who oversees our PRC business operationsis predominantly based in Shanghai and Beijing. Before founding Frontline, Ms. Wong was the Sales Director of MentorGraphics Associates Pte Ltd and the Design Engineer of Chartered Electronics Industries Ltd, Regional ApplicationsManager of Cadnetix Pte Ltd (formerly known as Dazix Pte Ltd and subsequently Intergraph Pte Ltd) and Design Managerat Flextronics Pte Ltd. Ms. Wong holds a Diploma in Electrical and Electronics Engineering from City and Guilds.

Tay Swee Sze (4)Independent DirectorTay Swee Sze, a practicing Certified Public Accountant, is the Managing Director of TSS Advisory Pte Ltd, which focuseson business financial advisory services. Up till June 2000, he was a partner at Arthur Andersen, Singapore and headedits Global Corporate Finance Division primarily responsible for Corporate Recovery Services. Mr. Tay also served as partnerin the Audit & Business Advisory division, in its Emerging Business group. Prior to re-joining Arthur Andersen, Mr. Taywas in the Deputy Regional Financial Controller of Citibank Asia Pacific Consumer Bank from 1989 to 1993. He is amember of the Institute of Certified Public Accountants of Singapore. He also sits on the Executive & Advisory Committeefor Victoria Junior College and Victoria School. Mr. Tay holds a Bachelor of Accountancy (Hons) from the then Universityof Singapore, now known as the National University of Singapore.

Daniel Yu (5)Independent DirectorDaniel Yu is the President of Sun Microsystems, Greater China. Since joining Sun Microsystems, Inc. in 1985 at itsCalifornia headquarters, he held a series of senior management and executive positions, including Financial Controllerfor Sun Microsystems, Inc. World-Wide Field Operations before transferring to Asia in 1989. Prior to joining SunMicrosystems, Inc., Mr. Yu was a Financial Controller at Apple Computers and a Senior Internal Auditor at Ford MotorCompany. He holds a Bachelor of Science and a Master of Business Administration from the University of California,Berkeley.

Robert Yap Min Choy (6)Non-executive DirectorRobert Yap is the Executive Vice President (Information Technology) of PSA Corporation Ltd and Managing Director ofPortnet.com Pte Ltd. Concurrently, Mr. Yap also serves as the Chairman of DBHR Pte Ltd and Autoscan Pte Ltd, Deputy-Chairman of Dalian Portnet Co Ltd and as a board director for various other subsidiaries within the PSA Group includingPSA International, PSA China, CWT Distribution Ltd (listed in Singapore), CIAS International Pte Ltd and COSMOS NV(Belgium). Prior to joining PSA Corporation, Mr. Yap was the Director of Corporate Information Technology with PHILIPSElectronics Asia Pacific. Mr. Yap holds a Bachelor of Mechanical Engineering (Hons) and Masters of Engineering Sciencefrom the University of New South Wales, Australia.

1 2 3 4 5 6

26 | Board of Directors

Board of Directors

Tang Chun Choy (7)Non-executive DirectorTang Chun Choy is the Vice-Chairman of Walden International Investment Group which manages Pacven, InfoTechand other venture funds. Prior to joining the Walden International Group in 1989, Mr. Tang was with the then ChemicalBank for 10 years and his last position, from 1985 to 1988, as its General Manager based in Singapore. He also heldvarious management and executive positions at Chemical Bank’s offices in New York and Jakarta from 1981 to 1985.Earlier in his career, Mr. Tang was an Engineer and Project Coordinator at Esso Singapore Pte Ltd. Mr. Tang holdsdirectorships in several public and private companies, including Creative Technology Ltd (”Creative”), InformaticsHoldings Ltd and Lindeteves-Jacoberg Limited in Singapore. Mr. Tang holds a Bachelor degree in Engineering (Hons)from the then University of Singapore (now known as the National University of Singapore) and a Masters Degree inBusiness Administration from the University of British Columbia.

Liow Voon Kheong (8)Non-executive DirectorLiow Voon Kheong is General Manager of EDB Investments Pte Ltd, the strategic equity co-investment arm of theSingapore Economic Development Board (”EDB”). Mr Liow has held various senior positions in EDB since 1976,including Division Director (Electronics), overseeing the development of Singapore’s electronics industry, and concurrentlymanaging EDB’s venture capital investments and other strategic investment funds of EDB. He was also the AssistantManaging Director (Operations) EDB until end 2001. Mr. Liow graduated from the National University of Singaporewith a Bachelor of Electrical and Electronics Engineering Degree and a Diploma in Business Administration.

Sim Wong Hoo (9)Non-executive DirectorSim Wong Hoo, who founded Creative in 1981, is the Chairman and Chief Executive Officer of Creative, a companythat is listed on the SGX-ST and NASDAQ. Mr. Sim holds a Diploma in Electronics & Electrical Engineering from NgeeAnn Polytechnic in Singapore. Mr. Sim has received the Businessman of the Year award in Singapore twice, in 1993and 1998.

Robert Michael Stein (10)Non-executive DirectorRobert Michael Stein is a Senior Advisor of Deutsche Bank Group, Asia Pacific, and a Board Director of the SingaporeStock Exchange. He was previously the CEO of Deutsche Bank Group, Asia Pacific. Prior to joining Deutsche Bank,Mr. Stein was the Head of Debt and Equity Markets at Merrill Lynch, Asia Pacific (Hong Kong) and was with LazardFreres New York in the Government Advisory Group, ‘‘Troika’’ (New York). Mr Stein holds a Masters of Science inInternational and Developmental Economics from Oxford University and a Bachelor of Arts degree (Hons), Philosophyand Biochemistry from Dartmouth College.

Ng Keh Long (11)Alternate Director to Sim Wong HooNg Keh Long is currently Senior Vice President and Chief Financial Officer of Creative. He joined Creative in 1993 asFinancial Controller and has held various financial positions including Director of Corporate Planning, CorporateTreasurer and Acting Chief Financial Officer. In 1998, he was appointed as the Chief Financial Officer of Creative. Priorto joining Creative, Mr. Ng was a Senior Manager with Price Waterhouse (now known as PricewaterhouseCoopers)and has more than 10 years’ experience in finance, accounting and auditing. He holds a Bachelor of Accountancydegree from the National University of Singapore.

Harrison Wang Hong She (12)Alternate Director to Robert Michael SteinHarrison Wang Hong She is the Chief Executive Officer of e-Millennium Limited, which is the General Partner of Thee-Millennium Asia L.P. Dr Wang joined Deutsche Bank, AG in 2000 as Managing Director, Head of e-Business AsiaPacific and later transformed his employment under e-Millennium Limited. Previously, Dr Wang was Managing Directorfor GE & GE Capital with responsibilities of Asia Business Development and various other businesses. Dr Wang hadmore than 10 years experiences in Silicon Valley covering industrial automation technologies and venture capitalinvestment for institutions including Dyna Mechanatronics, H&Q Asia Pacific, Adept Technology and Stanford ArtificialIntelligence Laboratory. Dr Wang holds a Doctor of Philosophy in Robotics and Industrial Automation and a Masterof Science in Mechanical Engineering both from Stanford University and a Bachelor of Science in Mechanical Engineeringfrom the National Taiwan University.

27 | Board of Directors

7 8 9 10 11 12

You can find us in five countries and tencities in the Asia-Pacific region, and ourgeographical network is still rapidlyexpanding. Whether in Beijing orBangkok, we deliver our best practices,customer service, and quality assurance– all in the name of ‘Frontline’.

Steve TingExecutive Chairman

Regional Network

28 | Regional Network

BangkokLogic Company LimitedCDG House, 202Nanglinchi RoadChongnonsi, YannawaBangkok 10120Thailand

Kuala LumpurFrontline Technologies Corporation (M) Sdn BhdLevel 6, South East, No 7 Jalan TasikMines Resort City43300 Seri Kembangan, SelangorDarul EhsanMalaysia

SingaporeFrontline Technologies Corporation Ltd57 Science Park DriveThe FaradaySingapore Science ParkSingapore 118237

Frontline Technologies Pte Ltd53 Science Park DriveThe FaradaySingapore Science ParkSingapore 118237

Frontline Solutions Pte Ltd51A Science Park DriveThe FaradaySingapore Science ParkSingapore 118237

Green House Group Pte Ltd71 Amoy StreetSingapore 069890

BeijingMDCL-Frontline (China) LtdRoom 1510-1515Canway Building66 Nan Li Shi LuPostal Code 100045PRC

ManilaIT Holdings, Inc32nd Floor, PhilAm Life Tower8767 Paseo de RoxasMakati CityPhilippines

ShanghaiMDCL-Frontline (China) LtdRoom 205 No 1515Nanjing Xi RoadPostal Code 200040PRC

Hong KongMDCL-Frontline (China) LtdRoom 1303Stanhope House734-738 King’s HouseQuarry BayHong Kong

ChengduMDCL-Frontline (China) LtdUnit B-C, 20/F, New Times PlazaNo 42 Wenwu Street, Xinhua RoadPostal Code 610017PRC

GuangzhouMDCL-Frontline (China) LtdRoom 901Metro PlazaNo 183 Tianhe Bei RoadPostal Code 510075PRC

29 | Regional Network

The growth rate of thecompany is nothingshort of phenomenal.International Data CorporationSeptember 2001

31

Designed by Green House Communications

32

DIRECTORS’ REPORT

FOR THE YEAR ENDED 31 MARCH 2002

(Amounts in Singapore dollars unless otherwise stated)

The directors are pleased to present their report to the members together with the audited

financial statements of the Company and the consolidated financial statements of the Company

and its subsidiaries (the Group) for the financial year ended 31 March 2002.

Directors

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

Steve Ting Tuan Toon

Lim Chin Hu

Shirley Wong Swee Ping

Tay Swee Sze

Daniel Yu

Robert Michael Stein

Tang Chun Choy

Liow Voon Kheong

Sim Wong Hoo

Yap Min Choy (appointed on 4 April 2001)

Ng Keh Long (alternate director to Sim Wong Hoo)

Harrison Wang Hong She (alternate director to Robert Michael Stein, appointed on 4 April 2001)

Principal Activities

The principal activity of the Company is that of investment holding. The principal activities of

the subsidiaries are as shown in Note 7 to the financial statements.

There were no significant changes in the nature of these activities during the financial year.

Employees

The total number of employees in the Company and the Group at the end of the financial year

was 26 and 361 (2001: 24 and 243) respectively.

33

DIRECTORS’ REPORT (Continued)

Results for the Financial Year

Group Company

$ $

Profit attributable to shareholders 10,617,477 920,075

Accumulated (losses) profits, brought forward (2,509,453) 505,056

Accumulated profits, carried forward 8,108,024 1,425,131

Transfers to or from Reserves or ProvisionsExcept as shown in the financial statements, there were no material transfers to or from

reserves or provisions during the financial year.

Acquisition and Disposal of Subsidiaries

In June 2001, the Company acquired IT Holdings, Inc. and its subsidiaries as follows:

Interest Attributable

acquired Consideration net assets

% $ $

Acquired by the Comany

IT Holdings, Inc. and its subsidiaries 49 4,950,195 2,391,682

This subsidiary has been consolidated as a subsidiary of the Company as at 31 March 2002 as

the Company exercises control over the Board of Directors of the subsidiary.

During the financial year, the Company also incorporated a subsidiary, FTI, Inc., an investment

holding company incorporated in Mauritius. The subsidiary is 100% owned by the Company

and has an issued and paid up capital of US$2.

During the financial year, a subsidiary of the Company disposed the following company:

Interest

disposed by Interest Share of net

subsidiary after disposal Consideration assets disposed

% % $ $

Disposed by a subsidiary company

Thunk Pte Ltd 52 Nil 13,000 5,659

There were no other acquisition or disposals of subsidiaries during the financial year.

34


Issue of Shares or Debentures

The Company

During the financial year, the Company increased its issued and paid-up capital as follows:

Shares issued and consideration Purpose

Over allotment of shares

Acquisition of subsidiary

Acquisition of associated

company

Investment by subsidiary paid

on behalf by the Company

Subsidiaries

Frontline Technologies Corporation (M) Sdn. Bhd.

During the financial year, Frontline Technologies Corporation (M) Sdn. Bhd. increased its authorised

share capital from RM1,000,000 to RM10,000,000 through the creation of 9,000,000 ordinary

shares of RM1 each.

The subsidiary then increased its issued and paid-up share capital from RM2 to RM1,950,002 by

way of the issuance of 1,950,000 new ordinary shares of RM1 each at a premium of RM1 each via

the capitalisation of the amount due to the Company amounting to RM3,900,000.

Apart from the above, no other shares or debentures were issued by the Company or its subsidaries

during the financial year.

Arrangements to Enable Directors to Acquire Shares or Debentures

Saved as disclosed in the financial statements, neither at the end nor at any time during the

financial year was the Company a party to any arrangement whose object was to enable the

directors of the Company to acquire benefits by means of the acquisition of shares or debentures

of the Company or any other body corporate.

748,000 ordinary shares of $0.05 each at a premium of $0.17

per share for cash, due to exercise of overallotment option by

manager of the initial public offering

7,733,191 ordinary shares of $0.05 each at a premium of $0.17

per share as partial consideration for the acquisition of 49%

equity interest in a subsidiary, IT Holdings, Inc. and its subsidiaries


per share as partial consideration for the acquisition of 30%

equity interest in an associated company, MDCL – Frontline

(China) Ltd


per share on behalf of its subsidiary, Frontline Technologies

Corporation (M) Sdn. Bhd., in exchange for 15,000 shares of an

investment in equity shares of inter-XS Sdn. Bhd and acquisition

of business as disclosed in Note 5 to the financial statements

These shares rank pari passu in all respects with the then existing ordinary shares of the Company.

35



Directors’ Interests in Shares or Debentures

The interests of the directors who held office at the end of the financial year in the shares or

debentures of the Company and related corporations, according to the register kept by the

Company for the purposes of section 164 of the Companies Act, were as follows:

Other shareholdings in which the director is

Held by director as at deemed to have an interest as at

1 April 31 March 21 April 1 April 31 March 21 April

2001 2002 2002 2001 2002 2002

The Company

Ordinary shares of $0.05

each

Steve Ting Tuan Toon 116,124,548 100,524,548 100,524,548 13,450,000 - -

Shirley Wong Swee Ping 28,904,570 23,904,570 23,904,570 3,920,000 1,960,000 1,960,000

Lim Chin Hu 45,750,000 38,825,000 38,825,000 - - -

Daniel Yu 330,000 330,000 330,000 - - -

Tay Swee Sze 941,000 1,282,000 1,282,000 - - -

Sim Wong Hoo - - - 59,250,252 56,250,252 56,250,252

No other director had an interest in the shares or debentures of any company in the Group

either at the beginning, or date of appointment if later, or the end of the financial year and

on 21 April 2002.

Directors’ Contractual Benefits

Since the end of the previous financial year, no director has received or become entitled to

receive a benefit (other than a benefit or any fixed salary of a full-time employee of the Company

included in the aggregate amount of emoluments shown in the financial statements, or any

emoluments received from related corporations) by reason of a contract made by the Company

or a related corporation with the director or with a firm of which the director is a member, or

with a company in which the director has a substantial financial interest, except as disclosed in

Note 30 to the financial statements.

Dividends

The directors do not recommend payment of a dividend and no dividend has been paid or

declared by the Company since the end of the previous financial year.

Bad and Doubtful Debts

Before the financial statements of the Company were prepared, the directors took reasonable

steps to ascertain that proper action had been taken in relation to the writing off bad debts

and providing for doubtful debts of the Company and satisfied themselves that no bad debts

of the Company need to be written off as bad and no provision for doubtful debts was

required.

At the date of this report, the directors are not aware of any circumstances which would

render the amount of bad debts written off or the amount of provision for doubtful debts in

the consolidated financial statements inadequate to any substantial extent.

36


Current Assets

Before the financial statements of the Company were prepared, the directors took reasonable

steps to ascertain that any current assets of the Company which were unlikely to realise their

book values in the ordinary course of business had been written down to their estimated

realisable values or that adequate provision had been made for the diminution in value of

such current assets.

At the date of this report, the directors are not aware of any circumstances which would

render the values attributed to current assets in the consolidated financial statements

misleading.

Charges on Assets and Contingent Liabilities

At the date of this report, no charge on the assets of the Company or any other corporation in

the Group which secures the liabilities of any other person has arisen since the end of the

financial year and no contingent liability of the Company or any other corporation in the

Group has arisen since the end of the financial year, except as disclosed in Note 31 to the

financial statements.

Ability to Meet Obligations

No contingent or other liability has become enforceable or is likely to become enforceable

within the period of twelve months after the end of the financial year which, in the opinion of

the directors, will or may substantially affect the ability of the Company and of the Group to

meet their obligations as and when they fall due.

Other Circumstances Affecting the Financial Statements

At the date of this report, the directors are not aware of any circumstances not otherwise

dealt with in this report or the consolidated financial statements which would render any

amount stated in the financial statements of the Company and the consolidated financial

statements misleading.

Unusual Items

In the opinion of the directors, the results of the operations of the Company and of the Group

for the financial year have not been substantially affected by any item, transaction or event of

a material and unusual nature.

Unusual Items after the Financial Year

In the opinion of the directors, no item, transaction or event of a material and unusual nature

has arisen in the interval between the end of the financial year and the date of this report

which would affect substantially the results of the operations of the Company and of the

Group for the financial year in which this report is made, except as disclosed in Note 35 to the

financial statements.

37


Share OptionsFrontline Technologies Corporation Ltd Share Option Scheme 2000 (“ the Scheme”)

During the financial year, the Company issued 91,260,000 options to the employees of theCompany to subscribe for ordinary shares of the Company of $0.05 each at the price of $0.22per share. The exercise period of the option is from 28 January 2004 where up to 33% ofoptions granted to the employees may be exercised, to 27 January 2006 where 100% of theoptions may be exercised. As at 31 March 2002, no options have been granted to directors ofthe Company, controlling shareholders of the Company or associates of the Company and noemployees have received 5% or more of the total options available under the Scheme.

As at 31 March 2002, no options have been exercised under this Scheme.

The options under the Scheme do not entitle the holder to participate in any share issue ofany other corporation by virtue of the option.

Overallotment optionsIn connection with the Company’s initial public offering during the previous financial year, theCompany granted The Development Bank of Singapore Ltd, the manager of the initial publicoffering, an over-allotment option to subscribe for up to an additional 28,500,000 newordinary shares at the invitation price of $0.22 each.

During the financial year, part of the over-allotment option was exercised and 748,000ordinary shares of $0.05 each were issued at the invitation price of $0.22 each. Theunexercised balance of the option expired on 14 April 2001.

Apart from the above, no other options to take up unissued shares of the Company wasgranted during the year.

WarrantsDuring the previous financial year, the Company issued warrants (“First CTI Warrants”) to astrategic investor CTI II Limited (“CTI”), a wholly-owned subsidiary of Creative TechnologiesLimited, which were exercisable for $5,800,000 worth of ordinary shares of par value $0.05each in the Company at an exercise price equivalent to the invitation price of $0.22 each perthe initial public offering of the Company. This translated into 26,363,000 ordinary shares ofpar value of $0.05 each. These warrants are exercisable within 18 months from the listing ofthe Company’s shares on the Singapore Exchange Securities Trading Limited (“ SGX-ST”) on 16March 2001. The Company also issued additional warrants (“Second CTI Warrants”) to CTI tosubscribe for another 6,000,000 ordinary shares at an exercise price of $0.25 each. TheseSecond CTI Warrants are exercisable between 16 March 2002 to 15 March 2004. Upon exerciseof the First CTI Warrants, 50% of the ordinary shares arising from such exercise will be locked-up until the date falling 6 months after the issue and allotment of such ordinary shares andthe remainder on the date falling 12 months after such issue and allotment.

During the previous financial year, the Company also issued 15,500,000 warrants (“em2Warrants”) to another strategic investor e-Millenium 2 Fund L.P., a limited partnershipregistered in the Cayman Islands. The exercise price is equivalent to the invitation price of$0.22 each per the initial public offering and the exercise period is up to 18 months from thelisting of the Company’s shares on the SGX-ST on 16 March 2001. Upon exercise of the em2Warrants, 50% of the ordinary shares arising from such exercise will be locked-up until thedate falling 6 months after the date of the listing of the Company’s shares on the SGX-ST on16 March 2001, falling 12 months after the listing of the Company’s shares on the SGX-ST on16 March 2001.

As at 31 March 2002, no warrants have been exercised.

38


Corporate Governance

The Board of Directors is responsible for overseeing the overall business strategy and corpo-

rate governance of the Group. As at the date of this report, the Board comprises an executive

chairman, two executive directors and nine non-executive directors (including two alternate

directors). The Board met formally two times during the financial year and is regularly kept

appraised and updated on material developments throughout the year.

The Audit Committee and the Compensation Committee assist the Board in discharging its

responsibilities.

The Board believes that best practices in corporate governance bear a positive correlation with

improved accountability and investment value for the benefit of the Company’s shareholders.

The Board supports and takes proactive measures to ensure best practices in corporate

governance throughout the Group, in consonance with guidance issued by the Singapore

Exchange Securities Trading Ltd and the Code of Corporate Governance (“Code”). The

Company’s Compensation Committee, which oversees, inter alia, the remuneration of

executive directors, is in consonance with the Code on the formation of the Remuneration

Committees. To facilitate the implementation of the Code, the Audit Committee has initiated

an on-going compliance review, with a view to strengthening and adhering to high corporate

governance standards throughout the Company.

The Company received the following accolades during the financial year:

(a) The Securities Investors Association of Singapore’s Most Transparent Company Award

(Runner-up, 2001); and

(b) Asiamoney’s Best Newly-Listed Company in Singapore (2001) and the Best Small

Company Awards.

The Board believes that these accolades validate the Company’s strong commitment towards

best practices in investor disclosure and corporate governance. Good corporate governance

goes hand in hand with ensuring a high degree of integrity and reliability in the business,

financial and operational processes throughout the Company.

Audit Committee

The Audit Committee comprises one executive director and two independent non-executive

directors, one of whom is also the Chairman of the Committee. The members of the Audit

Committee are:

Tay Swee Sze (Chairman)

Daniel Yu


39


Corporate Governance (Continued)

Audit Committee (Continued)

The Committee performs the functions set out in the Companies Act. In performing those

functions, the Committee reviewed the overall scope of both internal and external audits and

the assistance given by the Company’s officers to the auditors. The Committee met with the

internal and external auditors to discuss the results of their respective examinations and their

evaluation of the systems of internal accounting controls. The Committee also reviewed the

financial statements of the Company and the consolidated financial statements of the Group

for the year ended 31 March 2002, as well as the external auditors’ report thereon.

The Audit Committee of the Company has pursuant to Section 201B of the Companies Act

(Cap. 50) nominated Ernst & Young to be appointed as auditors of the Company at the

forthcoming Annual General Meeting. As such, the incumbent auditors, Arthur Andersen, will

not seek re-appointment as auditors of the Company at the said Annual General Meeting.

Compensation Committee

The Compensation Committee comprises one executive director, one non-executive director

and two independent directors, one of whom is the Chairman of the Committee. The

members of the Compensation Committee are:

Daniel Yu (Chairman)

Tay Swee Sze


Tang Chun Choy

The Committee oversees and approves the remuneration packages and terms of employment

of the executive directors as well as reviews, implements and administers the Frontline

Technologies Corporation Ltd Share Option Scheme 2000.

40


Corporate Governance (Continued)

Other Information Required by the Singapore Exchange Securities Trading Limited

No material contracts to which the Company or any related company is a party and which involve

directors’ interests subsisted at, or have been entered into since the end of the previous year.

Auditors

Arthur Andersen would be retiring as auditors of the Company.

On behalf of the Board of Directors

STEVE TING TUAN TOON LIM CHIN HU

Director Director

Singapore

26 June 2002

41

Statement by Directors

In the opinion of the directors of Frontline Technologies Corporation Ltd, the financialstatements set out on pages 44 to 90 are drawn up so as to give a true and fair view ofthe state of affairs of the Company and of the Group as at 31 March 2002 and of theresults and changes in equity of the Company and of the Group and cash flows of theGroup for the year ended and at the date of this statement, there are reasonablegrounds to believe that the Company will be able to pay its debts as and when theyfall due.

On behalf of the Board of Directors

STEVE TING TUAN TOON LIM CHIN HU

Director Director

Singapore

26 June 2002

42

Auditors’ Report to the Members of

Frontline Technologies Corporation Ltd

We have audited the financial statements of Frontline Technologies Corporation Ltd and the

consolidated financial statements of Frontline Technologies Corporation Ltd and its subsidiaries

as at 31 March 2002 and for the year then ended set out on pages 44 to 90. These financial

statements are the responsibility of the Company’s directors. Our responsibility is to express an

opinion on these financial statements based on our audit.

We conducted our audit in accordance with Singapore Standards on Auditing. Those Standards

require that we plan and perform the audit to obtain reasonable assurance about whether the

financial statements are free of material misstatement. An audit includes examining, on a test

basis, evidence supporting the amounts and disclosures in the financial statements. An audit

also includes assessing the accounting principles used and significant estimates made by the

directors, as well as evaluating the overall financial statement presentation. We believe that

our audit provides a reasonable basis for our opinion.

In our opinion:

(a) the financial statements and consolidated financial statements are properly drawn up in

accordance with the provisions of the Companies Act and Statements of Accounting

Standard in Singapore and so as to give a true and fair view of:

(i) the state of affairs of the Company and of the Group as at 31 March 2002 and of

the results and changes in equity of the Company and of the Group and cash flows

of the Group for the year then ended; and

(ii) the other matters required by section 201 of the Act to be dealt with in the

financial statements and consolidated financial statements;

(b) the accounting and other records and the registers required by the Act to be kept by the

Company and by those subsidiaries incorporated in Singapore have been properly kept in

accordance with the provisions of the Act.

43

Auditors’ Report to the Members of

Frontline Technologies Corporation Ltd (Continued)

We have considered the financial statements and, where they are required by the laws of the

country of incorporation, the auditors’ report of the subsidiaries, of which we have not acted

as auditors, being financial statements included in the consolidated financial statements. The

names of these subsidiaries are shown in Note 7 to the financial statements.

We are satisfied that the financial statements of the subsidiaries that have been consolidated

with the financial statements of the Company are in form and content appropriate and proper

for the purposes of the preparation of the consolidated financial statements and we have

received satisfactory information and explanations as required by us for those purposes.

The auditors’ reports on the financial statements of the subsidiaries were not subject to any

qualification and in respect of the subsidiaries incorporated in Singapore did not include any

comment made under section 207(3) of the Act.

Arthur Andersen

Certified Public Accountants

Singapore

26 June 2002

44

BALANCE SHEETSAS AT 31 MARCH 2002(Amounts in Singapore dollars)

Note Group Company

2002 2001 2002 2001

$ $ $ $

Share capital and reservesShare capital 3 39,251,485 37,865,238 39,251,485 37,865,238Share premium 4 39,046,675 33,395,248 38,840,059 33,188,632Revenue reserve 5 8,108,024 (2,509,453) 1,425,131 505,056Translation reserve (657,704) (119,987) - -

85,748,480 68,631,046 79,516,675 71,558,926Minority interest 8,359,835 1,994,604 - -

94,108,315 70,625,650 79,516,675 71,558,926

Fixed assets 6 4,476,743 2,309,842 - -Subsidiaries 7 - - 19,065,782 12,279,039Associated companies 8 13,562,593 1,484,647 34,690,995 12,744,670Other investments 9 7,379,817 7,254,024 7,130,222 7,209,024Prepaid maintenance costs 177,927 442,500 - -Deferred tax asset 28 1,187,013 - - -Goodwill on acquisition 10 14,013,086 - - -Miscellaneous deposits 520,138 - - -Deferred charges 116,970 - - -

Current assetsStocks 11 13,095,043 16,577,403 - -Work-in-progress 12 210,050 668,000 - -Trade debtors 13 48,460,537 43,475,850 - -Other debtors, deposits

and prepayments 14 5,307,946 4,964,403 195,410 1,150,777Due from subsidiaries (non-trade) 15 - - 14,329,646 10,205,342Due from affiliated

companies (non-trade) 15 522,131 795,053 108,935 696,650Due from affiliated

companies (trade) 1,028,201 1,598,147 - -Due from an associated

company (non-trade) 15 558,697 - 558,697 -Due from holding companies of

corporate shareholders (trade) 3,714,681 1,651,402 - -Due from minority corporate

shareholder of a subsidiary(non-trade) 15 442,639 3,407 - -

Due from a corporate shareholder(non-trade) 15 30,000 - 30,000 -

Short-term loan to anaffiliated company 15 45,000 - 45,000 -

Tax recoverable 16 598,926 866,000 598,926 866,000Fixed deposits 17 13,475,496 21,327,100 9,746,873 20,079,229

45

BALANCE SHEETS (Continued)Note Group Company

2002 2001 2002 2001

$ $ $ $

Current assets (Continued)

Short term investments 18 7,329,543 - 7,329,543 -

Cash and bank balances 20,951,035 24,235,521 608,368 17,871,045

115,769,925 116,162,286 33,551,398 50,869,043

Current liabilities

Trade creditors 27,662,454 28,400,524 - -

Other creditors and accruals 19 17,030,225 19,773,582 3,663,225 8,993,188

Provision for product warranty 20 200,000 358,500 - -

Project work-in-progress - 13,221 - -

Due to an affiliated company (trade) - 120,899 - -

Due to an affiliated company

(non-trade) 15 1,861,956 - - -

Due to subsidiaries (non-trade) 15 - - 11,167,548 2,533,662

Due to a minority corporate shareholder

of a subsidiary (trade) 3,081,429 2,768,220 - -

Due to an associated company

(non-trade) 15 90,949 - 90,949 -

Due to directors of the Company

(non-trade) 15 - 38,055 - -

Due to directors of subsidiaries

(non-trade) 15 183,304 199,105 - -

Notes payable 21 5,131,188 - - -

Provision for taxation 3,640,621 3,679,591 - -

Hire purchase creditors,

current portion 22 37,845 71,131 - -

Bills payable to a bank 23 3,425,106 1,317,163 - -

Bank overdrafts (unsecured) 313,512 - - -

62,658,589 56,739,991 14,921,722 11,526,850

Net current assets 53,111,336 59,422,295 18,629,676 39,342,193

Non-current liabilities

Deferred tax liability 28 104,175 166,112 - 16,000

Hire purchase creditors,

non-current portion 22 78,952 121,546 - -

Unearned revenue,

non-current portion 254,181 - - -

94,108,315 70,625,650 79,516,675 71,558,926

The accompanying notes are an integral part of the financial statements.

46

STATEMENTS OF PROFIT AND LOSS


(Amounts in Singapore dollars)

Note Group Company

2002 2001 2002 2001

$ $ $ $

Turnover 24 164,794,401 111,291,676 3,060,974 2,865,474

Cost of sales (127,603,356) (85,003,499) - -

Gross profit 37,191,045 26,288,177 3,060,974 2,865,474

Other operating income 1,172,793 200,179 370,426 -

Distribution and selling expenses (16,839,538) (8,599,942) - -

Administrative expenses (10,317,148) (5,051,740) (3,204,139) (2,244,461)

Other operating expenses - (260,411) - -

Profit from operations 25 11,207,152 12,576,263 227,261 621,013

Financial income, net 27 190,714 128,422 943,889 106,235

Profit before taxation 11,397,866 12,704,685 1,171,150 727,248

Share of results of associated

companies 2,136,546 124,366 - -

Taxation 28 (3,037,709) (3,553,827) (251,075) (287,163)

Profit after taxation 10,496,703 9,275,224 920,075 440,085

Minority interest 120,774 (292,047) - -

Profit attributable to shareholders 10,617,477 8,983,177 920,075 440,085

Earnings per share (cents)

Basic 29 1.37 1.71

Diluted 29 1.34 1.71


47

STATEMENTS OF CHANGES IN EQUITY



Reserve on

Share Share Revenue consolidation, Translation

Group capital premium reserve net reserve Total

$ $ $ $ $ $

Balance at 3,951,730 6,094,922 5,152,501 1,690,861 - 16,890,014

1 April 2000

Net profit - - 8,983,177 - - 8,983,177

Issue of shares 11,621,001 49,592,833 - - - 61,213,834

Transfer from share

premium to

share capital 22,292,507 (22,292,507) - - - -

Goodwill arising on

acquisition of

subsidiaries and

associated

company - - - (15,465,347) - (15,465,347)

Goodwill arising from

acquisition of

business - - - (2,870,645) - (2,870,645)

Goodwill charged to

revenue reserve - - (16,645,131) 16,645,131 - -

Translation differences - - - - (119,987) (119,987)

Balance at

31 March 2001 37,865,238 33,395,248 (2,509,453) - (119,987) 68,631,046

Net profit - - 10,617,477 - - 10,617,477

Issue of shares 1,386,247 5,651,427 - - - 7,037,674

Translation differences - - - - (537,717) (537,717)

Balance at

31 March 2002 39,251,485 39,046,675 8,108,024 - (657,704) 85,748,480

48

STATEMENTS OF CHANGES IN EQUITY (Continued)


Reserve on

Share Share Revenue consolidation, Translation

Company capital premium reserve net reserve Total

$ $ $ $ $ $

Balance at

1 April 2000 3,951,730 6,094,922 64,971 - - 10,111,623

Net profit - - 440,085 - - 440,085

Issue of shares 11,621,001 49,386,217 - - - 61,007,218

Transfer from share

premium to

share capital 22,292,507 (22,292,507) - - - -

Balance at

31 March 2001 37,865,238 33,188,632 505,056 - - 71,558,926

Net profit - - 920,075 - - 920,075

Issue of shares 1,386,247 5,651,427 - - - 7,037,674

Balance at 31

31 March 2002 39,251,485 38,840,059 1,425,131 - - 79,516,675


49

CONSOLIDATED STATEMENT OF CASH FLOWS



2002 2001

$ $

Cash flows from operating activities

Profit before taxation 11,397,866 12,704,685

Adjustments for:

Amortisation of goodwill on acquisition 547,501 -

Depreciation of fixed assets 1,759,353 729,745

Write-back of provision for product warranty (158,500) (29,500)

Provision for doubtful trade debts 450,640 589,985

Provision for doubtful non-trade debts 24,275 118,375

Provision for stock obsolescence 39,000 361,500

Provision for diminution in value of other investments 736,433 -

(Gain) loss on disposal of fixed assets (172) 39,178

Gain on disposal of a subsidiary (7,341) -

Loss on disposal of quoted investments - 7,971

Fixed assets written off - 21,473

Pre-operating expense written off - 9,922

Interest income (662,648) (270,551)

Interest expense 708,715 125,043

Operating profit before working capital changes 14,835,122 14,407,826

Stocks 6,925,269 (10,851,450)

Work-in-progress, net 444,729 (654,779)

Trade debtors 8,203,233 (24,954,629)

Other debtors, deposits and prepayments 3,431,981 (3,057,533)

Due from associated companies, net (467,748) -

Due from an affiliated company, net 2,583,925 (2,272,301)

Due from holding companies of corporate shareholders (2,063,279) (1,651,402)

Due from a corporate shareholder (30,000) -

Due to immediate holding and related companies 12,980 -

Trade creditors (9,155,097) 17,836,395

Bills and notes payable 112,669 1,317,163

Due to a minority corporate shareholder of a subsidiary (126,023) 424,297

Due to directors (53,856) 4,851

Other creditors and accruals (4,146,633) 2,299,858

Translation difference (199,707) (124,235)

Cash generated from (used in) operations 20,307,565 (7,275,939)

Income taxes paid (4,118,997) (3,721,714)

Interest received 662,648 270,551

Interest paid (708,715) (125,043)

Net cash from (used in) operating activities 16,142,501 (10,852,145)

50

CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)

2002 2001

$ $

Cash flows from investing activities

Purchase of fixed assets (1,376,836) (1,410,618)

Pre-operating expense paid - (9,922)

Proceeds from disposal of fixed assets 141,123 16,937

Proceeds from disposal of quoted investments - 992,029

Purchase of other investments (862,226) (5,829,992)

Investment in associated companies (17,510,075) (2,895,288)

Acquisition of subsidiaries, net of cash acquired (Note B) (697,550) (35,974)

Disposal of subsidiary, net of cash disposed (Note C) (4,382) -

Decrease (increase) in fixed deposits pledged to banks 965,587 (422,363)

Purchase of short-term investments (7,329,543) -

Net cash used in investing activities (26,673,902) (9,595,191)

Cash flows from financing activities

Proceeds from issuance of ordinary shares 164,560 59,905,000

Receipt from minority shareholders of a subsidiary for previously

unpaid issued shares - 65,998

Net payment to hire purchase creditors (59,736) (160,540)

Dividend paid - (1,950,000)

Initial public offering expenses paid (12,438) (4,577,948)

Loan to an affiliated company (45,000) -

Net cash generated from financing activities 47,386 53,282,510

Net (decrease) increase in cash and cash equivalents (10,484,015) 32,835,174

Cash and cash equivalents at beginning of year 44,487,651 11,652,477

Cash and cash equivalents at end of year (Note A) 34,003,636 44,487,651

Note A Cash and cash equivalentsCash and cash equivalents included in the consolidated statement of cash flows comprise the

following balance sheet amounts:2002 2001

$ $

Fixed deposits (unpledged portion) 13,366,113 20,252,130

Cash and bank balances 20,951,035 24,235,521

Bank overdrafts (313,512) -

34,003,636 44,487,651

51


Note B Analysis of acquisition of subsidiaries

The attributable net assets of subsidiaries acquired as at their respective dates of acquisition

during the year were as follows:2002 2001

$ $

Fixed assets 2,994,918 596,139

Goodwill 575,059 -

Stocks 3,481,909 -

Trade debtors 13,639,860 1,226,643

Other debtors, deposits and prepayments 3,428,334 110,441

Cash and bank balances 2,551,343 2,245,996

Trade creditors (8,422,688) (1,069,516)

Other creditors and accruals (1,669,102) (89,180)

Due to holding company - (31,971)

Provision for taxation (593,517) (263,362)

Deferred taxation - (38,923)

Obligation under hire purchase - (229,451)

Due to directors - (232,309)

Bills and notes payable (7,126,461) -

Minority interest (3,978,672) -

Net assets acquired 4,880,983 2,224,507

Goodwill arising from acquisition of subsidiaries 2,558,513 4,136,509

Less: Minority interest (2,489,301) (1,111,014)

Total purchase consideration 4,950,195 5,250,002

Less:

- Issuance of shares by the Company as part of consideration (1,701,302) (3,000,003)

- Due to holding company - 31,971

- Cash and bank balances acquired (2,551,343) (2,245,996)

Acquisition of subsidiaries, net of cash acquired 697,550 35,974

52


Note C Analysis of disposal of subsidiary

The attributable net assets of subsidiary disposed at its date of disposal during the year are as

follows:2002 2001

$ $

Fixed assets 21,649 -

Trade debtors 1,300 -

Deposits and prepayments 4,000 -

Cash and bank balances 30,362 -

Trade creditors (5,661) -

Due to immediate holding company, net (10,778) -

Due to a related company, net (2,202) -

Other creditors and accruals (11,644) -

Finance lease obligations (16,144) -

Net assets disposed 10,882 -Less: Minority interest (5,223) -

Gain on disposal of subsidiary 7,341 -

Total sale consideration 13,000 -

Less: Cash and bank balances disposed (30,362) -

Due to immediate holding and related companies 12,980 -

Disposal of subsidiary, net of cash disposed (4,382) -


53

NOTES TO THE FINANCIAL STATEMENTS


(Amounts in Singapore dollars unless otherwise stated)

These notes are an integral part of and should be read in conjunction with the accompanyingfinancial statements.

1. GENERALThe Company is a public limited company domiciled and incorporated in Singapore. The address

of the Company’s registered office is 57 Science Park Drive, The Faraday, Singapore Science Park,Singapore 118237.

The principal activity of the Company is that of investment holding. The principal activities ofthe subsidiaries are as shown in Note 7 to the financial statements.

The financial statements of Frontline Technologies Corporation Ltd and the consolidated finan-cial statements of Frontline Technologies Corporation Ltd and its subsidiaries as at 31 March2002 and for the year then ended were authorised for issue in accordance with a directors’

resolution dated 26 June 2002.

2. SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

The financial statements, expressed in Singapore dollars, are prepared in accordance withStatements of Accounting Standard in Singapore and under the historical cost convention modified

by the revaluation of property use right.

Revenue recognition

(i) Revenue from short term projects/contracts are recognised using the completed contractmethod. A project/contract is considered completed when all costs except insignificant

items have been incurred and the installation is operating according to specifications.Revenue from long term projects/contracts, as defined by management to be more than 6months, are recognised using the percentage-of-completion method. The percentage-of-

completion for a given project/contract is determined after considering the relationship ofvalue of work done to-date to total project/contract revenue for the project/contract;

(ii) Revenue from sales are recognised at time of delivery of goods and acceptance by customers;

(iii) Maintenance service revenue billed in advance is recorded as unearned revenue and is

prorated over the contractual period;

(iv) Consultancy revenue is recognised when the services are rendered to the customers;

(v) Revenue from training contracts is earned upon conducting of training for the customers;

54

NOTES TO THE FINANCIAL STATEMENTS (Continued)

2. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Revenue recognition (Continued)

(vi) Commission income is earned on the sales of products to customers when a certain salesquota set by the principal is met and when there is a reasonable certainty of collection from theprincipal;

(vii) Dividend income is recognised on the date dividends are declared to be payable; and

(viii) Management fee is recognised on an accrual basis.

Basis of consolidation

The Group financial statements include the financial statements of the Company and itssubsidiaries. The results of subsidiaries acquired or disposed of during the financial year areincluded in or excluded from the Group financial statements with effect from the respectivedates of acquisition or disposal. Significant intercompany balances and transactions have beeneliminated on consolidation.

When a subsidiary or joint venture is acquired, any difference between the consideration paidand the fair values of the net assets acquired represents goodwill on acquisition. This amount iscapitalised and amortised on a straight line basis to the consolidated profit and loss account overits useful life which is estimated by the management to be 15 years.

The result of foreign subsidiaries are translated into Singapore dollars at the average exchangerates for the year and balance sheet items are translated at exchange rates ruling at the balancesheet date except for share capital and reserves which are translated at historical exchange rates.Exchange differences arising from the above transaction are taken directly to the translationreserve until the disposal of the subsidiary.

Subsidiaries

Investments in subsidiaries are stated in the financial statements of the Company at cost. Provisionis made when there is a decline in value that is other than temporary.

A subsidiary is a company in which the Group, directly or indirectly, holds more than half of theissued share capital, or controls more than half of the voting power, or controls the compositionof the Board of Directors.

Associated company

An associated company is defined as a company, not being a subsidiary, in which the Group hasa long-term interest of not less than 20% of the equity and in whose financial and operatingpolicy decisions the Group exercises significant influence.

Investment in associated companies are stated in the financial statements of the Company atcost. Provision for diminution in investment in associated companies is made when, in the opinionof the directors, there has been a decline in value of the investment that is other than temporary.

55



Associated company (Continued)

At the Group level, the investment in associated companies are accounted for under the equity

method whereby the Group’s share of the results of the associated companies is included in the

consolidated statement of profit and loss and the Group’s share of the post-acquisition reserves

of associated companies is adjusted against the cost of investment in the consolidated balance

sheet.

The excess of the purchase consideration over the Group’s share of the fair value of the associated

company at the point of acquisition represents goodwill on acquisition. This amount is capitalised

and amortised over its useful life, which is estimated by the management to be 15 years.

Affiliated company

An affiliated company is defined as a company, not being a subsidiary or an associated company,

in which the shareholders and/or directors of the Company have significant equity interests or

exercise significant influence.

Fixed assets

Fixed assets are stated at cost or valuation net of depreciation and any impairment loss.

Depreciation is provided for all fixed assets at rates calculated to write off the cost or revalued

amount, less estimated residual value, of each asset on a straight-line basis over its estimated

useful life as follows:

Years

Property use right 10

Leasehold improvements 6

Furniture and fittings 3 - 5

Office equipment 3 - 5

Demonstration equipment 3

Computer hardware and software 3

Motor vehicles 7

Renovation 5

Property use right comprises payments made for the right of a subsidiary to use an office space

in People’s Republic of China for a period of 50 years commencing July 1996. This property use

right was revalued by the directors of the subsidiary in May 1997 and the directors are of the

opinion that the economic useful life of this office space is 10 years at the time of acquiring this

right and accordingly, this right is depreciated over this period.

There is no fixed policy with respect to the revaluation of fixed assets. Fixed assets are revalued

as and when considered appropriate by the directors.

Investments

Investment held on long-term basis are stated at cost. Provision is made where there is a decline

in value that is other than temporary.

56



Other investments

Quoted and unquoted investments held for the long term are stated at cost. Provision is

made for any decline in value that is other than temporary.

Other non-current assets

Other non-current assets include non-current deposits and other debtors and are recognised

and carried at original invoiced amount less provision for doubtful debts. An estimate for

doubtful debts is made when collection of the full amount is no longer probable. Bad debts

are written off as incurred.

Impairment of assets

Fixed assets, goodwill on acquisition, long term investments, other investments and other non-

current assets are reviewed for impairment whenever events or changes in circumstances

indicate that the carrying amount of the asset may not be recoverable. Whenever the carrying

amount of an asset exceeds its recoverable amount, an impairment loss is recognised in the

income statement for items of fixed assets, goodwill on acquisition, long term investments,

other investments and other non-current assets carried at cost. The recoverable amount is the

higher of an asset’s net selling price and value in use. The net selling price is the amount

obtainable from the sale of an asset in an arm’s length transaction. Value in use is the present

value of estimated future cash flows expected to arise from the continuing use of an asset and

from its disposal at the end of its useful life. Recoverable amounts are estimated for individual

assets or, if it is not possible, for the cash-generating unit.

Reversal of an impairment loss recognised in prior years is recorded when there is an

indication that the impairment loss recognised for an asset no longer exists or has decreased.

The reversal is recorded in the income statement.

Prepaid maintenance costs, miscellaneous deposits and deferred charges

Prepaid maintenance costs relate to maintenance fees paid in advance to a third party for the

contracted period and are charged to the profit and loss account over the contractual period

as the services are performed by the third party. Miscellaneous deposits relate to various

deposits with third party suppliers and service providers. Deferred charges relate to various

cash performance bonds paid by a subsidiary prior to the start of a certain project or before

joining a bid.

Stocks

Stocks (consisting of computer software and hardware) are stated at the lower of cost and net

realisable value, with the cost being generally determined using the weighted-average

method. Provision is made for deteriorated, damaged, obsolete and slow-moving stocks.

57



Trade and other debtors

Trade and other debtors, which generally have 30 – 90 day terms, are recognised and carried

at original invoiced amount less provision for doubtful debts. An estimate for doubtful debts

is made when collection of the full amount is no longer probable. Bad debts are written off as

incurred.

Cash and cash equivalents

Cash consists of cash on hand and cash with banks, including fixed deposits and bank over-

drafts. Cash equivalents are short-term, highly liquid investments that are readily convertible

to known amounts of cash and that are subject to an insignificant risk of changes in value.

Short term investments

Short term investments consist of bonds which are stated at lower of cost, adjusted for any

amortisation of premium and accretion of discount, and the market value determined on a

portfolio basis.

Trade and other creditors

Trade and other creditors, which are normally settled on 30 – 90 day terms, are carried at cost

which is the fair value of the consideration to be paid in the future for goods and services

received.

Notes payable

Notes payable are carried at cost net of transaction costs.

Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a

result of past event, it is probable that an outflow of resources embodying economic benefits

will be required to settle the obligation and a reliable estimate can be made of the amount of

the obligation.

Provision for warranty is made on products sold for a period of up to one year from the date

of installation. Provision for product warranty cost is made at the time of sale by the

Company based on the estimated returns and costs to be incurred in providing the warranty.

Operating leases

Leases where the lessor effectively retains substantially all the risks and benefits of ownership

of the leased assets are classified as operating leases. Operating lease payments are

recognised as an expense in the profit and loss account on a straight line basis over the lease

term.

58



Hire purchase

Where assets are financed by hire purchase contracts that give rights approximating to

ownership, the assets are capitalised as if they had been purchased outright at the values

equivalent to the present value of the total rental payable during the periods of the hire

purchase and the corresponding hire purchase commitments are included under liabilities.

The excess of the hire purchase payments over the recorded hire purchase obligations is

treated as finance charges which are allocated over each hire purchase term to give a constant

rate of interest on the outstanding balance at the end of each period.

Employee equity compensation benefits

The Company has an employee share option scheme whereby employees are granted non-

transferable options to purchase the Company’s shares. There are no charges to earnings

upon the grant or exercise of these options.

Work-in-progress/progress billings

Project work-in-progress is stated at cost plus attributable profit to date net of progress billing

and provision for foreseeable losses. Costs include direct labour, material and overheads

incurred in connection with the project. Provision for anticipated losses on uncompleted

contracts are made in the period in which such losses are determined.

Income tax

Income tax expense is determined on the basis of tax effect accounting, using the liability

method, and is applied to all temporary differences at the balance sheet date between the

carrying amounts of assets and liabilities and the amounts used for tax purposes.

Deferred tax liabilities are recognised for all taxable temporary differences.

Deferred tax assets are recognised for all deductible temporary differences to the extent that

it is probable that taxable profit will be available against which the deductible temporary

difference can be utilised.

Deferred tax liabilities are not provided on undistributed earnings of foreign subsidiaries to

the extent the earnings are intended to remain indefinitely invested in those entities. A

deferred tax liability is recognised for all taxable temporary differences, unless the deferred

tax liability arises from goodwill for which amortisation is not deductible for tax purposes.

The carrying amount of a deferred tax asset is reviewed at each balance sheet date and

reduced to the extent that is no longer probable that sufficient taxable profit will be available

to allow the benefit of part or all of the deferred tax asset to be utilised.

59



Financial instruments

Financial assets and financial liabilities carried on the balance sheet include cash and cash

equivalents, other investments, loans, trade and other accounts receivable and payables. The

accounting policies on recognition and measurement of these items are disclosed in the

respective accounting policies found in this Note.

Foreign currency transactions and balances

The accounting records of the companies in the Group are maintained in their respective

currencies.

Transactions in foreign currencies during the financial year are recorded in respective

currencies using exchange rates approximating those ruling at transaction dates. Foreign

currency monetary assets and liabilities at the balance sheet date are translated into respective

currencies at exchange rates approximating those ruling at that date. All resultant exchange

differences are dealt with through the profit and loss account.

Segments

For management purposes, the Group is organised into four main operating divisions which is

the basis on which the Group reports its primary segment information.

Segment revenue, expenses and results include transfers between business segments. Such

transfers are accounted for on an arm’s length basis.

Change in accounting policies

On adoption of SAS 22 (2000) with effect from 1 April 2001, the Group has changed the

accounting policy on the treatment of goodwill arising on acquisition of businesses. The

Group has adopted the transitional provision of not restating the goodwill that has previously

been written off against revenue reserves, with the view of including the previously written

off goodwill in the determination of profit and loss when the businesses are disposed of or

discontinued. The result of adopting this choice of transitional provision is that the adoption

of SAS 22 (2000) has no effect on the comparatives or the opening balances of accumulated

profits.

During the financial year, the Group changed its accounting policy from recognising deferred

tax benefits only upon reasonable expectation of the realisation to recognising deferred tax

benefits for all deductible temporary differences to the extent that it is probable that taxable

profit will be available against which the deductible temporary difference can be utlilised to

be in accordance with SAS 12 (Revised), Income Taxes. The change in the accounting policy

does not have a significant impact on the financial statements of the Company and the Group

for the current financial year. The financial statements for the year ended 31 March 2001 have

not been restated for this change as the impact was not material to the financial statements.

60


3. SHARE CAPITAL2002 2001

$ $

Authorised- 2,000,000,000 ordinary shares of $0.05 each 100,000,000 100,000,000

Issued and fully paid- 785,029,702 (2001: 757,304,761)

ordinary shares of $0.05 each 39,251,485 37,865,238

The Company increased its issued and paid-up capital as follows:

Shares issued and consideration Purpose

748,000 ordinary shares of $0.05 each at a premium of $0.17 Over allotment of sharesper share for cash, due to exercise of overallotment option bymanager of the initial public offering

7,733,191 ordinary shares of $0.05 each at a premium of $0.17 Acquisition of subsidiary

per share as partial consideration for the acquisition of 49%equity interest in a subsidiary, IT Holdings, Inc. and itssubsidiaries

15,843,750 ordinary shares of $0.05 each at a premium of $0.23 Acquisition of associated

per share as partial consideration for the acquisition of 30% companyequity interest in an associated company, MDCL – Frontline(China) Ltd

3,400,000 ordinary shares of $0.05 each at a premium of $0.17 Investment by subsidiary paidper share on behalf of its subsidiary, Frontline Technologies on behalf by the CompanyCorporation (M) Sdn. Bhd., in exchange for 15,000 shares ofan investment in equity shares of inter-XS Sdn. Bhd andacquisition of business as disclosed in Note 5 to the financialstatements

These shares rank pari passu in all respects with the then existing ordinary shares of theCompany.

Share OptionsFrontline Technologies Corporation Ltd Share Option Scheme 2000 (“ the Scheme”)

During the financial year, the Company issued 91,260,000 options to the employees of theCompany to subscribe for ordinary shares of the Company of $0.05 each at the price of $0.22per share. The exercise period of the option is from 28 January 2004 where up to 33% ofoptions granted to the employees may be exercised, to 27 January 2006 where 100% of theoptions may be exercised. As at 31 March 2002, no options have been granted to directors ofthe Company, controlling shareholders of the Company or associates of the Company and noemployees have received 5% or more of the total options available under the Scheme.

As at 31 March 2002, no options have been exercised under this Scheme.

The options under the Scheme do not entitle the holder to participate in any share issue ofany other corporation by virtue of the option.

61


3. SHARE CAPITAL

Overallotment options

In connection with the Company’s initial public offering during the last financial year, the

Company granted The Development Bank of Singapore Ltd, the manager of the initial public

offering, an over-allotment option to subscribe for up to an additional 28,500,000 new

ordinary shares at the invitation price of $0.22 each.

During the financial year, the over-allotment option was exercised and 748,000 ordinary shares

of $0.05 each were issued at the invitation price of $0.22 each. The unexercised balance of the

option expired on 14 April 2001.

Apart from the above, no other options to take up unissued shares of the Company was

granted during the year.

Warrants

During the previous financial year, the Company issued warrants (“First CTI Warrants”) to a

strategic investor CTI II Limited (“CTI”), a wholly-owned subsidiary of Creative Technologies

Limited, which were exercisable for $5,800,000 worth of ordinary shares of par value $0.05

each in the Company at an exercise price equivalent to the invitation price of $0.22 each per

the initial public offering of the Company. This translated into 26,363,000 ordinary shares of

par value of $0.05 each. These warrants are exercisable within 18 months from the listing of

the Company’s shares on the SGX-ST on 16 March 2001. The Company also issued additional

warrants (“Second CTI Warrants”) to CTI to subscribe for another 6,000,000 ordinary shares at

an exercise price of $0.25 each. These Second CTI Warrants are exercisable between 16 March

2002 to 15 March 2004. Upon exercise of the First CTI Warrants, 50% of the ordinary shares

arising from such exercise will be locked-up until the date falling 6 months after the issue and

allotment of such ordinary shares and the remainder on the date falling 12 months after such

issue and allotment.

During the previous financial year, the Company also issued 15,500,000 warrants (“em2

Warrants”) to another strategic investor e-Millenium 2 Fund L.P., a limited partnership

registered in the Cayman Islands. The exercise price is equivalent to the invitation price of

$0.22 each per the initial public offering and the exercise period is up to 18 months from the

listing of the Company’s shares on the SGX-ST on 16 March 2001. Upon exercise of the em2

Warrants, 50% of the ordinary shares arising from such exercise will be locked-up until the

date falling 6 months after the date of the listing of the Company’s shares on the SGX-ST on

16 March 2001, falling 12 months after the listing of the Company’s shares on the SGX-ST on

16 March 2001.

As at 31 March 2002, no warrants have been exercised.

62


4. SHARE PREMIUMGroup Company

2002 2001 2002 2001

$ $ $ $

At beginning of year 33,395,248 6,094,922 33,188,632 6,094,922Arising from issue of ordinary shares- 64,487 ordinary shares of $1 each

at a premium of $2,935,516 - 2,935,516 - 2,935,516- 387,928 ordinary shares of $1 each

at a premium of $13,262,072 - 13,262,072 - 13,262,072- 20,250,000 ordinary shares of $0.05

each at a premium of $0.17 each - 3,442,500 - 3,442,500- 13,121,721 ordinary shares of $0.05

each at a premium of $0.17 each - 2,230,693 - 2,230,693- 190,000,000 ordinary shares of $0.05

each at a premium of $0.17 per share - 32,300,000 - 32,300,000- 748,000 ordinary shares of $0.05

each at a premium of $0.17 per share 127,160 - 127,160 -- 7,733,191 ordinary shares of $0.05

each at a premium of $0.17 per share 1,314,642 - 1,314,642 -- 15,843,750 ordinary shares of $0.05

each at a premium of $0.23 per share 3,644,063 - 3,644,063 -- 3,400,000 ordinary shares of $0.05

each at a premium of $0.17 per share 578,000 - 578,000 -Transfer to share capital- conversion of RCPS to ordinary shares - (1,563,979) - (1,563,979)- bonus issue out of capital surplus - (20,728,528) - (20,728,528)Less expenses incurred in relation to

issuance of shares (12,438) (4,784,564) (12,438) (4,784,564)Intercompany expenses relating to initial

public offering that was charged toshare premium - 206,616 - -

At end of year 39,046,675 33,395,248 38,840,059 33,188,632

5. REVENUE RESERVEGroup Company

2002 2001 2002 2001

$ $ $ $

At beginning of year (2,509,453) 5,152,501 505,056 64,971Net profit for the year 10,617,477 8,983,177 920,075 440,085Goodwill charged to revenue reserve - (16,645,131) - -

At end of year 8,108,024 (2,509,453) 1,425,131 505,056

63


5. REVENUE RESERVES (Continued)

Group

2002 2001

Retained by: $ $

Company 1,425,131 505,056

Subsidiaries 21,656,818 13,562,887

Associated companies 1,671,206 67,735

Net goodwill arising from acquisition of subsidiaries,

associated company and business taken directly to

revenue reserves (Note A) (16,645,131) (16,645,131)

8,108,024 (2,509,453)

Note A:

The 2001 amount includes goodwill arising from acquisition of business taken directly to revenue

reserve of $2,870,645. During the year ended 31 March 2001, Frontline Technologies Corporation

(M) Sdn. Bhd. acquired the business of a company and secured the services of 6 key employees cum

shareholders of that company for a consideration of not less than RM5,500,000. The consideration

is payable to the 6 individuals and is contingent on Frontline Technologies Corporation (M) Sdn.

Bhd. meeting an agreed net profit after taxation for the calendar years ended 31 December 2000

and 2001.

Approximately RM2,100,000 will be paid in cash and the remaining consideration in ordinary

shares of the Company valued at the invitation price of $0.22 each per the initial public offering of

the Company.

In accordance with the agreement, the 6 individuals are required to reinvest part of the cash

component of the consideration into Frontline Technologies Corporation (M) Sdn. Bhd.. Therefore

there is a potential dilution of the Company’s equity interest in Frontline Technologies Corporation

(M) Sdn. Bhd.. Management anticipates that the Company’s equity interest in the subsidiary will

reduce to 90% subsequently upon reinvestment by these 6 individuals.

The purchase consideration has been accrued based on the management’s best estimate of

RM6,300,000 ($2,870,645). As at 31 March 2002, the purchase consideration has not been finalised

and the goodwill on acquisition will be adjusted against revenue reserve as and when the final

consideration can be ascertained.

64


6. FIXED ASSETS

At Valuation At Cost

Group Computer

Property Leasehold Furniture and Office Demonstration hardware and Motor

use right Improvements fittings equipment equipment software vehicles Renovation Total

$ $ $ $ $ $ $ $ $

As at 1.4.2001 405,508 - 1,034,704 346,514 217,731 2,164,812 330,900 183,567 4,683,736

Arising from

acquisition of

subsidiaries - 1,506,850 52,377 3,132,399 1,659,180 91,771 112,234 - 6,554,811

Additions - 35,065 29,463 445,058 - 471,062 2,466 393,722 1,376,836

Disposals - - (26,860) (320,892) (37,890) (251,426) (59,115) - (696,183)

Arising from

disposal of a

subsidiary - - (1,498) - - (30,676) - - (32,174)

Translation difference - (145,120) (2,654) (300,693) (159,791) (5,994) (10,810) 398 (624,664)

As at 31.3.2002 405,508 1,396,795 1,085,532 3,302,386 1,679,230 2,439,549 375,675 577,687 11,262,362

Accumulated depreciation

As at 1.4.2001 166,205 - 638,464 154,155 185,801 1,085,057 77,786 66,426 2,373,894

Arising from

acquisition of

subsidiaries - 81,712 42,826 1,956,868 1,310,947 57,272 110,268 - 3,559,893

Charge for the year 40,551 172,232 115,327 497,317 134,487 644,011 44,249 111,179 1,759,353

Disposals - - (20,935) (300,612) (22,884) (151,686) (59,115) - (555,232)

Arising from disposal

of a subsidiary - - (300) - - (10,225) - - (10,525)

Translation difference - (7,869) (3,835) (188,376) (126,253) (4,824) (10,618) 11 (341,764)

As at 31.3.2002 206,756 246,075 771,547 2,119,352 1,482,098 1,619,605 162,570 177,616 6,785,619

Charge for 2001 40,551 - 144,454 51,085 13,033 410,302 36,180 34,140 729,745

Net book value

As at 31.3.2002 198,752 1,150,720 313,985 1,183,034 197,132 819,944 213,105 400,071 4,476,743

As at 31.3.2001 239,303 - 396,240 192,359 31,930 1,079,755 253,114 117,141 2,309,842

65


6. FIXED ASSETS (Continued)

During the year, the Group acquired fixed assets with an aggregate cost of $1,376,836 (2001:

$1,534,384), of which $Nil (2001: $123,766) was acquired by means of hire purchase. Cash

payments of $1,376,836 (2001: $1,410,618) were made to purchase the fixed assets.

Included in the fixed assets of the Group are motor vehicles under hire purchase with net book

value of approximately $211,000 (2001: $253,000) and computer hardware and software

under hire purchase with net book value of approximately $15,000 (2001: $104,000).

The property use right relates to the right of a subsidiary to use an office located in People’s

Republic of China for a period of 50 years commencing July 1996. This property use right was

revalued by the directors of the subsidiary on 26 May 1997 to the then current market value of

$405,508. The deficit on revaluation totaling $210,056 was written off to profit and loss

account in 1997. The directors are of the opinion that the economic useful life of this office

space is 10 years at the time of acquiring this right and accordingly, this right is depreciated

over this period.

Had the property use right been carried at cost less accumulated depreciation, the net book

value of the property use right that would have been in the financial statements as at 31

March 2002 would have been $246,228 (2001: $307,784).

7. SUBSIDIARIES

(a) Investment in subsidiaries comprises:

2002 2001

$ $

Unquoted equity shares at cost 19,065,782 12,279,039

(b) Details of the subsidiaries are as follows:

Country of Percentage of

incorporation effective equity

and place of interest held by Cost of investment

Name Principal activities business the Group by the Company

2002 2001 2002 2001

% % $ $

Frontline Sales, marketing, and Singapore 100 100 2,834,000 2,834,000

Technologies Pte support of

Ltd internet-based

infrastructure, including

computer systems,

software, storage,

networking and

security systems.

Stor.H Pte Ltd Currently dormant. Singapore 100 100 991,616 991,616

(formerly known as

MGA Systems

Design Pte Ltd)

66


7. SUBSIDIARIES (Continued)





2002 2001 2002 2001

% % $ $

Frontline Provision of consulting Singapore 100 100 1,998,908 1,998,908Solutions Pte Ltd services in IT-Business

and InformationsTechnology, IT-Businesssystems intergration,project managementand InformationTechnology services.

CCTPL Pte Ltd Sales, marketing, Singapore and 73 73 1,204,500 1,204,500(formerly known as distribution and People’s RepublicCadence China support of computer of ChinaTechnologies Pte Ltd) aided engineering respectively

systems.

Frontline Systems Sales, marketing, Singapore 100 100 2 2Design Pte Ltd distribution and

support of computeraided engineeringsystems, computeraccessories andprovision of softwareconsultancy services.

FTI Ventures Pte Ltd Inactive since date Singapore 100 100 2 2(formerly known as of incorporation.Frontline.com Pte Ltd)

Frontline Technologies Currently dormant. Singapore and 100 100 10 10(P.R.C.) Pte Ltd People’s Republic

of Chinarespectively

Green House Group Providing business, Singapore 51 51 5,250,000 5,250,000Pte Ltd management and

consultancy services.

Frontline Investment holding. Malaysia 100 100 1,836,545 1TechnologiesCorporation (M)Sdn. Bhd.**

IT Holdings, Inc. *** Investment holding. Philippines 49a - 4,950,195 -

FTI, Inc. # Investment holding. Mauritius 100 - 4 -

19,065,782 12,279,039

67







2002 2001 2002 2001

% % $ $

Held by Green House Group Pte Ltd

Green House Providing design Singapore 51 51 - -

Exhibits Pte Ltd consultancy, project

management and

exhibitions. *

Green House Acting as professional Singapore 51 51 - -

Communications copywriters and

Pte Ltd script writers.

Green House Providing multi-media Singapore 51 51 - -

Multi-Media productions and other

Pte Ltd technical support

services. *

Green House Development of Singapore 51 51 - -

Learning Pte Ltd software and

multimedia works.*

Green House Dealing of products Malaysia 51 51 - -

Solution and services in

Sdn Bhd** connection with

Information Technology,

E-Commerce and computer

security systems.

Thunk Pte Ltd Providing motion Singapore - 26.52 - -

picture, video, television

post-production services

and development of

e-commerce applications.

Held by Frontline Technologies Corporation (M) Sdn. Bhd.

Frontline Sales, marketing and Malaysia 100 100 - -

Technologies support of internet-based

Malaysia infrastructure including

Sdn. Bhd.** computer systems,

software, storage,

networking and

security systems.

68







2002 2001 2002 2001

% % $ $

Held by IT Holdings, Inc.

Sun Microsystems Provide IT systems Philippines 24.94 - - -

Philippines, Inc.** and services.

Held by Sun Microsystems Philippines, Inc.

PSPI-Subic, Inc.** Currently dormant. Philippines 24.94 - - -

* These subsidiaries have remained dormant since the end of the previous financial year.

** Audited by an associated firm of Arthur Andersen, Singapore.

*** Audited by Punongbayan & Araullo, Ernst & Young member firm in Philippines.a IT Holdings, Inc. has been consolidated as a subsidiary of the Company as at 31 March 2002

as the Company exercises control over the Board of Directors of IT Holdings, Inc.

# Not required to be audited by the laws of the country of incorporation.

8. ASSOCIATED COMPANIES

(a) Investment in associated companies comprises:

Group Company

2002 2001 2002 2001

$ $ $ $

Unquoted equity shares, at cost 34,690,995 12,744,670 34,690,995 12,744,670

Goodwill on acquisition written

off to revenue reserves (11,328,838) (11,328,838) - -

Goodwill on acquisition capitalized

(Note 10) (11,427,015) - - -

11,935,142 1,415,832 34,690,995 12,744,670

Share of post acquisition profits 1,671,206 67,735 - -

Translation difference (43,755) 1,080 - -

13,562,593 1,484,647 34,690,995 12,744,670

Included in cost of investment of associated companies are amounts paid to auditors of the Company for due

diligence work amounting to approximately $115,200 (2001: $Nil).

69


8. ASSOCIATED COMPANIES (Continued)

(b) Details of the associated companies are as follows:Country of Percentage of




2002 2001 2002 2001

% % $ $

Logic Co., Ltd^ Provision of client-server Thailand 30 30 13,229,641 12,744,670

computing systems and

network-related in

frastructure products

and services.

MDCL – Frontline Investment holding. British Virgin 35 - 21,461,354 -

(China) Ltd# Islands

34,690,995 12,744,670

^ During the financial year, Logic Co., Ltd increased its share capital by 40 million Baht.

The Company paid an additional 12 million Baht ($484,971) to Logic Co., Ltd to

maintain its 30% equity interest.

# During the financial year, the Company acquired 35% equity interests in MDCL-

Frontline (China) Ltd (“MDCL”) amounting to 19,870,780 ordinary shares of par value

HK$1 for a consideration of $21,461,354 of which $4,436,250 was acquired by means of

share consideration of 15,843,750 ordinary shares in the Company of par value $0.05

each at a share premium of $0.23 per share. The remaining $17,025,104 was acquired

by means of cash payments.

70


9. OTHER INVESTMENTS

Group Company

2002 2001 2002 2001

$ $ $ $

Quoted investments 1,419,280 - 1,419,280 -

Unquoted investments

- convertible loan 2,720,000 3,600,000 2,720,000 3,600,000

- preference shares 999,992 999,992 999,992 999,992

- ordinary shares 2,794,204 2,565,000 2,565,000 2,565,000

Club membership 182,774 89,032 162,383 44,032

8,116,250 7,254,024 7,866,655 7,209,024

Less: provision for diminution in value (736,433) - (736,433) -

7,379,817 7,254,024 7,130,222 7,209,024

Market value of quoted investments 2,005,000 - 2,005,000 -

Main features of certain investments were as follows:

iASPire.net Pte Ltd (“iASPire”)

Pursuant to a subscription agreement dated 8 May 2000, the Company purchased $2,900,000

of convertible loan stock bearing interest at 6% per annum. The convertible loan stock is

convertible at the Company’s option into ordinary shares of iASPire. The loan matures on 31

December 2002 and the option also expires on that date. The $2,900,000 convertible loan

stock is convertible into ordinary shares representing 66.5% of the equity interest in iASPire.

The agreement also contains anti-dilution protection against the Company’s equity interest in

iASPire falling below 51%. As at 31 March 2002, the Company had converted $400,000

convertible loan stock into ordinary shares representing 9.2% of share equity of iASPire.

On 10 May 2002, the Company entered into an agreement with iASPire to extend the maturity

date for the convertible loan stocks to 31 December 2003 and the interest of 6% per annum to

be waived for the extended period until 31 December 2003. Pursuant to this agreement, the

maturity redemption amount shall be equal to the issue price until the extended maturity

date and the other terms and conditions of the first agreement remain unchanged.

iGine.com Pte Ltd (“iGine”)

Under the terms of subscription agreements dated 31 March 2000 and 5 September 2000, the

Company purchased 125,000 ordinary shares representing 10% equity interest of iGine for a

cash consideration of $500,000. The Company also previously purchased 114,678 redeemable

convertible preference shares (“RCPS”) in iGine for a cash consideration of $999,992. These

RCPS are convertible to one ordinary share in the capital of iGine.

71


9. OTHER INVESTMENTS (Continued)

PalmWindow Pte Ltd (“PalmWindow”)

Pursuant to a subscription agreement dated 19 June 2000, the Company purchased 150,000

ordinary shares of PalmWindow for a consideration of $660,000 and $220,000 of convertible

loan stock bearing zero interest or 7% per annum if not converted. The convertible loan stock

is convertible at the option of the Company into 50,000 ordinary shares of PalmWindow

representing 2% of its share capital. The loans mature on 31 December 2004 and the option

expires on that date as well. The Company had also previously acquired an additional 75,000

ordinary shares for a consideration of $330,000. As at 31 March 2002, the Company is

committed to subscribe for an additional 225,000 ordinary shares for a cash consideration of

$990,000.

During the financial year, the following investments were made:

Incall Systems Inc (“Incall”)

During the financial year, 1st Call Systems Pte Ltd (“1st Call“) was acquired by Incall and the

Company’s $880,000 convertible loan stock investment in 1st Call and short term loan of

$434,400 was converted to 334,926 ordinary shares of Incall. The Company also acquired an

additional 40,000 ordinary shares of Incall for a cash consideration of $104,880.

Movements in provision for diminution in value of the other investments during the financial

year are as follows:

Group Company

2002 2001 2002 2001

$ $ $ $

At beginning of year - - - -

Provision for the year 736,433 - 736,433 -

At end of year 736,433 - 736,433 -

10. GOODWILL ON ACQUISITION

Group

2002 2001

$ $

At beginning of year - -

Arising from the acquisition by a subsidiary 575,059 -

Arising from the acquisition by the Company 2,558,513 -

Arising from the acquisition of associated company (Note 8) 11,427,015 -

14,560,587

Less: accumulated amortisation, representing amortisation

for the year (547,501) -

14,013,086 -

72


11. STOCKS

Group

2002 2001

$ $

At cost

Finished goods 11,189,373 11,489,317

Goods-in-transit 2,919,732 5,449,586

14,109,105 16,938,903

Less provision for stock obsolescence (1,014,062) (361,500)

13,095,043 16,577,403

Movements in provision for stock obsolescence during the financial year are as follows:

At beginning of year 361,500 -

Balance attributable to subsidiary acquired during the year 613,562 -

Provision for the year 39,000 361,500

At end of year 1,014,062 361,500

Stocks carried at net realisable value for the Group were $8,528,671 (2001: $10,359,324).

12. WORK-IN-PROGRESS

Group

2002 2001

$ $

Work-in-progress, at cost 210,050 668,000

This relates to direct labour, materials and overheads incurred in connection with a project

undertaken by a subsidiary.

13. TRADE DEBTORS

Group

2002 2001

$ $

Trade debtors 50,160,581 44,143,098

Less provision for doubtful debts (1,700,044) (667,248)

48,460,537 43,475,850

73


13. TRADE DEBTORS (Continued)

Movements in provision for doubtful debts during the financial year are as follows:

Group

2002 2001

$ $

At beginning of year 667,248 77,263



Provision utilised (50,778) -

At end of year 1,700,044 667,248

14. OTHER DEBTORS, DEPOSITS AND PREPAYMENTS

Group Company

2002 2001 2002 2001

$ $ $ $

Deposits 153,311 495,483 800 -

Prepayments-maintenance costs 2,834,136 2,731,439 - -

- others 1,538,475 202,918 35,098 30,791

Advances to employees 237,735 311,974 21,570 7,500

Other debtors 772,385 301,608 137,942 73,130

Deposits for investment - 1,039,356 - 1,039,356

5,536,042 5,082,778 195,410 1,150,777

Less provision for doubtful non-trade

debts during the year (228,096) (118,375) - -

5,307,946 4,964,403 195,410 1,150,777

Movements in provision for doubtful debts during the financial year are as follows:

Group

2002 2001

$ $

At beginning of year 118,375 -



Translation difference 3,000 -

At end of year 228,096 118,375

74


15. DUE FROM (TO) SUBSIDIARIES/AFFILIATED COMPANIES/ASSOCIATED

COMPANY/MINORITY CORPORATE SHAREHOLDER OF A SUBSIDIARY/CORPORATE

SHAREHOLDER/ DIRECTORS (NON-TRADE), SHORT TERM LOAN TO AN AFFILIATED

COMPANY

The amounts are unsecured, interest-free and are repayable on demand.

16. TAX RECOVERABLE

Tax recoverable relates to advance tax payments made to frank dividend payments less tax payable

and the balance is available for offset against future tax payables.

17. FIXED DEPOSITS OF THE GROUP

Included in the fixed deposits of the Group is an amount of $109,383 (2001: $1,074,970) which

has been pledged to the banks for banking facilities granted (Note 31).

18. SHORT TERM INVESTMENTS

Group Company

2002 2001 2002 2001

$ $ $ $

At cost

Quoted bond investments 7,329,543 - 7,329,543 -

At market value

Quoted bond investments 7,343,151 - 7,343,151 -

The bonds mature within 4 to 6 months (2001: Nil) and have coupon rates ranging from 2.335%

to 6.375% (2001: Nil) per annum.

19. OTHER CREDITORS AND ACCRUALS

Group Company

2002 2001 2002 2001

$ $ $ $

Accrued operating expenses 6,982,990 3,579,359 582,173 1,363,479

Unearned revenue 4,567,677 4,264,951 - -

Other creditors 4,480,236 11,670,683 3,081,052 7,629,709

Customer deposits (Note A) 975,094 258,589 - -

Dividends payable 24,228 - - -

17,030,225 19,773,582 3,663,225 8,993,188

Note A: This includes deposit held in trust for future stock subscription of a subsidiary of approximately $376,000

(2001: $Nil).

75


20. PROVISION FOR PRODUCT WARRANTY

Movements in provision for product warranty during the financial year are as follows:

Group

2002 2001

$ $

At beginning of year 358,500 388,000

Write back of provision for the year (158,500) (29,500)

At end of year 200,000 358,500

21. NOTES PAYABLE

Group

2002 2001

$ $

Promissory notes issued to financial institutions 4,721,152 -

Short term loans from financial institutions 410,036 -

5,131,188 -

The promissory notes and short term loans are unsecured and mature within 1 year (2001: Nil)

and bear interest rates ranging from 4.40% to 14.00% (2001: Nil) per annum.

22. HIRE PURCHASE CREDITORS

Group

Payments Interest Principal

$ $ $

2002

Between 1 and 5 years 91,205 13,244 77,961

More than 5 years 1,178 187 991

92,383 13,431 78,952

Not later than 1 year 43,561 5,716 37,845

135,944 19,147 116,797

76


22. HIRE PURCHASE CREDITORS (Continued)

Group

Payments Interest Principal

$ $ $

2001Between 1 and 5 years 125,869 17,204 108,665More than 5 years 15,315 2,434 12,881

141,184 19,638 121,546Not later than 1 year 80,574 9,443 71,131

221,758 29,081 192,677

Hire purchase agreements range from 2 to 7 years. Hire purchase agreements do not containrestrictions concerning dividends, additional debt or further leasing.

23. BILLS PAYABLE TO A BANK

These are secured by letters of credit from a financial institution and bear interest ranging from5.50% to 7.40% (2001: 8.05%) per annum.

24. TURNOVER

Turnover represents contract revenue and invoiced value of sales, maintenance income,consultancy income, training income, commission, management fees and dividend incomerecognised in the normal course of business as follows:

Group Company

2002 2001 2002 2001

$ $ $ $

Contract revenue and sales of products 132,266,889 96,302,700 - -Maintenance income 16,788,686 10,384,912 - -Consultancy 11,791,804 2,878,808 - -Training income 1,446,388 1,305,466 - -Commission 549,677 214,790 - -Dividend income from subsidiaries - - - 342,953Management fee from subsidiaries - - 2,599,006 2,317,521Management fee from an associated

company 461,968 200,000 461,968 200,000Management fee from an investee

company - 5,000 - 5,000Other service income 1,488,989 - - -

164,794,401 111,291,676 3,060,974 2,865,474

Intra-group transactions have been excluded from Group turnover.

77


25. PROFIT FROM OPERATIONS

This is determined after charging (crediting) the following:

Group Company

2002 2001 2002 2001

$ $ $ $

Amortisation of goodwill on acquisition 547,501 - - -

Auditors’ remuneration

- auditors of the Company 96,500 102,500 23,000 19,000

- auditors of the Company,

non-audit services 70,800 - 34,450 -

- other auditors 24,351 8,156 - -

Compensation income from minority

shareholder of a subsidiary (442,639) - - -

Directors’ remuneration

- of the Company 1,398,181 759,775 423,520 298,319

- of the subsidiaries 38,694 175,350 - -

Directors’ fees 34,078 - 30,000 -

Depreciation of fixed assets 1,759,353 729,745 - -

Fixed assets written off - 21,473 - -

(Gain) loss on disposal of fixed assets (172) 39,178 - -

Loss on disposal of quoted investments - 7,971 - 7,971

Pre-operating expense written off - 9,922 - -

Write back of provision for product

warranty, net (158,500) (29,500) - -

Provision for doubtful debts

- trade debts 450,640 589,985 - -

- non-trade debts 24,275 118,375 - -

Provision for stock obsolescence 39,000 361,500 - -

Operating lease expenses 1,261,087 572,721 - 456

Personnel expenses* (Note 26) 21,793,183 12,969,831 1,778,065 1,435,294

Fixed assets expensed off 84,314 71,311 1,537 -

Stocks written off 485,950 - - -

Gain on disposal of a subsidiary (7,341) - - -

Bad debts written off (trade) 18,425 - - -

Provision for diminution in value of

other investments 736,433 - 736,433 -

* These expenses include directors remuneration as disclosed above.

78


26. PERSONNEL EXPENSESGroup Company

2002 2001 2002 2001

$ $ $ $

Wages and salaries 18,492,578 10,998,753 1,498,125 1,118,582Pension contribution 1,853,642 1,106,092 148,071 120,069Other social expenses 1,055,580 864,986 131,869 196,643Termination benefits 391,383 - - -

21,793,183 12,969,831 1,778,065 1,435,294

27. FINANCIAL INCOME, NETGroup Company

2002 2001 2002 2001

$ $ $ $

Interest expense- short term loan and overdraft (407,640) (2,308) - (177)- notes payable (194,679) (111,475) - -- hire purchase (8,261) (11,260) - -- bills payable (98,135) - - -

Bank charges (191,039) (155,124) (5,673) (2,898)Foreign exchange gain, net 427,820 138,038 517,593 73,929Interest income

- bank balances 258,344 93,566 56,623 35,381- fixed deposits 341,558 176,985 312,600 -- bonds 62,746 - 62,746 -

190,714 128,422 943,889 106,235

28. TAXATIONGroup Company

2002 2001 2002 2001

$ $ $ $

Current tax- current year 3,935,748 3,465,230 337,909 284,163- overprovision in prior year (245,765) (126,513) (70,834) -

Deferred tax- current year (1,189,242) 152,845 (16,000) 3,000- overprovision in prior year (59,708) (45,733) - -

Foreign representative officeCurrent tax

- current year 63,601 51,367 - -

Share of associated companies’ tax 533,075 56,631 - -

3,037,709 3,553,827 251,075 287,163

79


28. TAXATION (Continued)

The CompanyThe Company’s current year’s tax charge is higher than the amount obtained by applying thestatutory income tax rate on profit before taxation mainly due to certain non-deductible itemsadded back for tax purposes.

The GroupThe Group’s current year’s tax charge is higher than the amount obtained by applying the statutoryincome tax rate on profit before taxation mainly due to certain non-deductible items added backfor tax purposes. In addition, the losses of certain companies within the Group were not availablefor offset against the profits of other companies on a group basis.

The foreign representative offices tax expense for the Group arises from the tax payable relatingto the operations of representative offices in the People’s Republic of China.

The reconciliation of the tax expense and the amount obtained by applying the applicable taxrate on accounting profit is as follows:

Group Company

2002 2001 2002 2001

$ $ $ $

Accounting profit 11,397,866 12,704,685 1,171,150 727,248Consolidation adjustments/subsidiaries

reporting losses, net 2,521,892 1,039,557 - -

13,919,758 13,744,242 1,171,150 727,248

Tax at the weighted average tax rate forthe Group and Company of 24.9%and 24.5% (2001: 24.5% and 24.5%) 3,466,020 3,367,339 286,932 178,176Tax effect of expenses that are notdeductible in determining taxable profit

- Depreciation of non-qualifying assets 10,336 21,708 - -- Other non-deductible expenses 86,856 195,230 47,840 121,850

Tax effect of utilising tax losses brought forward (73,945) - - -Overprovision in prior year

- current tax (245,765) (126,513) (70,834) -- deferred tax (59,708) (45,733) - -

Tax rebate (6,318) (17,458) - -Tax relief (43,388) (47,127) (12,863) (12,863)Deferred tax not recognised in prior year - 98,383 - -Share of tax of associated companies 533,075 56,631 - -Foreign representative office’s tax 63,601 51,367 - -Tax credit from subsidiaries reporting losses (60,929) - - -Withholding tax credit (632,126) - - -

3,037,709 3,553,827 251,075 287,163

80


28. TAXATION (Continued)

The Group’s weighted average tax rate of 24.9% (2001: 24.5% ) has been calculated using the tax

rates applicable in the jurisdictions where the companies in the Group operate. The major

jurisdictions in which the Group operates are Singapore, Malaysia and Philippines (2001: Singapore

and Malaysia) where the current tax rate is 24.5%, 28% and 32% (2001: 24.5% and 28%)

respectively.

The weighted average tax rate is lower than the current tax rates in the above countries mainly

because of the tax credit recognised on the loss incurred for the companies operating in Philippines.

The effect of the reduction in the corporate tax rate from 24.5% to 22% as announced by the

Singapore Government on 3 May 2002 will apply from the year of assessment 2003. This will

reduce the total tax charge of the Group by approximately $348,000. However, given that the

announcement was made only after the balance sheet date of 31 March 2002, in compliance with

the reporting requirements of SAS 12 (Revised), no adjustment has been made to the 31 March

2002 financial statements of the Company to reflect the effect of the reduced corporate tax rate.

This reduction in tax charge will be recorded in the financial year ending 31 March 2003.

Deferred taxes as at 31 March related to the following:

Group Company

2002 2001 2002 2001

$ $ $ $

Deferred tax liability

Tax over book depre ciation (223,397) (162,132) - -

Foreign exchange difference (114,069) (19,794) - (16,000)

Other timing differences - (1,570) - -

(337,466) (183,496) - (16,000)

Deferred tax asset

Provisions 903,834 17,384 - -

Tax losses carried forward 512,810 - - -

O ther timing differences 3,660 - - -

1,420,304 17,384 - -

Net deferred tax asset (liability), net 1,082,838 (166,112) - (16,000)

29. EARNINGS PER SHARE

The calculations of earnings per share are based on the profits and numbers of shares shown below.

Basic Diluted

2002 2001 2002 2001

$ $ $ $

Profit attributable to shareholders 10,617,477 8,983,177 10,617,477 8,983,177

81


29. EARNINGS PER SHARE (Continued)

Weighted average number of shares

Year ended 31 March 2002

Issued ordinary shares at beginning of year 757,304,761

Weighted average number of ordinary shares issued during the year 12,241,122

Contingently issuable shares 5,618,545

Total for basic earnings per share 775,164,428

Exercise of share options and warrants 14,363,708

Total for diluted earnings per share 789,528,136

Year ended 31 March 2001

Ordinary shares of $1 each before share split 5,015,435

Adjustment for 1:20 per split 95,293,271

Adjustment for bonus shares 414,570,560

Issue of shares of $0.05 each 10,459,671

Contingently issuable shares of $0.05 each 741,250

Total for basic earnings per share 526,080,187

Exercise of share options and warrants 460,551

Total for diluted earnings per share 526,540,738

82


30. RELATED PARTY INFORMATION

Other than as disclosed elsewhere, the Group and the Company had significant transactions

with related parties on terms agreed between the parties as follows:

Group Company

2002 2001 2002 2001

$ $ $ $

Income

Sales to affiliated companies 894,463 2,900,968 - -

Sales to holding companies of corporate

shareholders 6,474,092 32,881 - -

Commission from a minority corporate

shareholder of a subsidiary 549,677 214,790 - -

Dividends from subsidiaries - - - 342,953

Management fee from subsidiaries - - 2,599,006 2,317,521

Management fee from an associated

company 461,968 200,000 461,968 200,000

Management fee from an investee

company - 5,000 - 5,000

Rental income from a subsidiary - - 163,143 -

Consultancy income from an associated

company 169,380 - 169,380 -

Compensation from a minority shareholder

of a subsidiary 442,639 - - -

Expenses

Purchases from a minority corporate

shareholder of a subsidiary 16,015,213 8,923,534 - -

Telecommunication charges from an

affiliated company 300,342 - 253,340 -

83


31. COMMITMENTS AND CONTINGENT LIABILITIES

Other than as disclosed elsewhere, the Group and the Company had the following commitments

and contingent liabilities:

(a) Non-cancellable operating lease commitments

As at 31 March 2002, the Group has non-cancellable operating lease commitments relating to

office premises payable as follows:

Group

2002 2001

$ $

Future minimum lease payments

- not later than 1 year 1,484,000 629,000

- 1 year through 5 years 3,282,000 653,000

4,766,000 1,282,000

Lease terms do not contain restrictions concerning dividends, additional debt or further leasing.

(b) Bank guarantees

Group

2002 2001

$ $

Contingent liabilities not provided for in the financial statements were:

Bank guarantees

- secured by fixed deposits (Note 17) 5,135,000 4,038,000

- secured by corporate guarantee 3,000,000 -

8,135,000 4,038,000

The bank guarantees secured by a corporate guarantee given by the Company relates to banking

facilities of approximately $3 million granted to an affiliated company.

(c) Share subscription commitment

As at 31 March 2002, the Company is committed for subscribe to an additional 225,000 ordinary

shares in PalmWindow Pte Ltd for a cash consideration of $990,000.

84


32. SEGMENT INFORMATION

(a) Business segments

The Group is organised into four main operating divisions, namely:

- Investment holdings

- Information Technology (“IT”) and Internet Infrastructure

- IT Consulting

- Systems Integration

Investment holdings relate mainly to investment activities undertaken by the corporate head

office of the Group. IT and Internet Infrastructure involves designing and implementing the

necessary technology infrastructure for the IT-business systems of customers. IT Consulting

comprises the provision of IT-business strategy and interactive marketing, consulting, as well as

brand management advice to customers. Systems Integration involves the integration of

customers’ IT-business systems with other corporate software and computer-based application.

Inter-segment pricing is on an arm’s length basis.

2002 Investment IT and Internet Systems

Holdings Infrastructure IT Consulting Integration Eliminations Group

$’000 $’000 $’000 $’000 $’000 $’000

External sales 462 115,392 12,312 36,628 - 164,794

Inter-segmental sales 2,599 7,888 119 688 (11,294) -

164,794

Profit from operations 227 9,040 761 1,687 (508) 11,207

Financial income

(expense), net 944 (515) (3) (235) - 191

Profit before taxation 11,398

Share of associated

companies results - - - 2,137 - 2,137

Taxation (251) (1,956) (53) (778) - (3,038)

Profit after taxation 10,497

Minority interest - (75) (273) 468 - 120

Profit attributable to

shareholders 10,617

85


32. SEGMENT INFORMATION (Continued)



$’000 $’000 $’000 $’000 $’000 $’000

Segment assets 94,438 65,159 5,429 7,769 (70,442) 102,353

Unallocated assets 54,851

Consolidated total assets 157,204

Segment liabilities 14,922 40,557 2,255 4,339 (43,726) 18,347

Unallocated liabilities 44,749

Consolidated total liabilities 63,096

Capital expenditure - 669 168 542 - 1,379

Depreciation - 1,234 231 294 - 1,759

Other non-cashexpenses (income) 1,284 460 18 (143) - 1,619



$’000 $’000 $’000 $’000 $’000 $’000

External sales 292 78,902 4,848 27,337 (87) 111,292

Inter-segmental sales 2,573 7,552 1,007 4,409 (15,541) -

111,292

Profit from operations 621 7,376 503 4,832 (755) 12,577

Financial income, net 106 (80) 5 97 - 128

Profit before taxation 12,705

Share of associatedcompany results - 124 - - - 124

Taxation (287) (1,915) (228) (1,198) 74 (3,554)

Profit after taxation 9,275

Minority interest - (449) 157 - - (292)

Profit attributable to shareholders 8,983

86


32. SEGMENT INFORMATION (Continued)



$’000 $’000 $’000 $’000 $’000 $’000

Segment assets 83,102 48,780 4,048 23,498 (51,309) 108,119

Unallocated assets 19,534

Consolidated total assets 127,653

Segment liabilities 11,543 36,348 1,662 13,156 (27,727) 34,982

Unallocated liabilities 22,046

Consolidated total liabilities 57,028

Capital expenditure - 936 181 417 - 1,534

Depreciation - 465 173 94 (2) 730

Other non-cash expenses 8 596 94 382 - 1,080

(b) Geographical segments

The Group’s businesses segments are managed through three geographical areas, namely

Singapore, other ASEAN countries and North-Asia. Turnover is based on the location of customers.

Assets and additions to property, plant and equipment are based on the location of those assets.

Turnover Assets Capital expenditure

2002 2001 2002 2001 2002 2001

$’000 $’000 $’000 $’000 $’000 $’000

Singapore 112,209 93,422 111,708 115,788 863 1,209

North-Asia 20,639 16,019 15,256 9,814 8 142

Other ASEAN countries 31,946 1,851 30,240 2,051 508 183

164,794 111,292 157,204 127,653 1,379 1,534

87


33. DIRECTORS’ REMUNERATION

The number of directors in the various remuneration bands is as follows:

2002 2001

Executive Non-executive Executive Non-executive

directors directors Total directors directors Total

$500,000 and above - - - - - -

$250,000 to $499,999 3 - 3 2 - 2

$0 to $249,999 - 9 9 1 7 8

3 9 12 3 7 10

34. FINANCIAL INSTRUMENTS

Financial risk management objectives and policies

The main risks arising from the Group’s financial instruments are interest rate risk, liquidity risk,

foreign currency risk and credit risk. The Board reviews and agrees policies for managing each of

these risks and they are summarised below.

Interest rate risk

The Group obtains additional financing through bank borrowings and leasing arrangements.

The Group’s policy is to obtain the most favourable interest rates available without increasing its

foreign currency exposure.

Surplus funds are placed with reputable banks or invested in bonds to generate some interest

income for the Group.

Information relating to the Group’s interest rate exposure is also disclosed in the respective

notes to the financial statements.

Liquidity risk

The Group monitors and maintains a level of cash and cash equivalent deemed adequate by

management to finance the Group’s operations and mitigate the effects of fluctuation in cash

flows.

88


34. FINANCIAL INSTRUMENTS (Continued)

Foreign exchange risk

It is the Group’s policy not to enter into derivative foreign exchange contracts and to use foreign

currency borrowings to hedge its foreign currency risk.

Foreign currencies received are kept in a foreign currency account and converted to Singapore

dollars on a need-to basis so as to minimise the foreign exchange exposure. The Group also

manages foreign exchange risk by closely monitoring the timing of the inception and settlement

of transaction.

Credit risk

The carrying amount of cash and cash equivalents, trade receivables and other receivables

represent the Group’s maximum exposure to credit risk in relation to financial assets. No other

financial assets carrying a significant exposure to credit risk.

The Group has no significant concentrations of credit risk.

Fair values

Fair value is defined as the amount at which the financial instrument could be exchange in a

current transaction between knowledgeable willing parties in an arm’s length transaction, other

than in a forced or liquidation sale. Fair values are obtained from quoted market prices, discounted

cash flow models and option pricing models as appropriate.

The following methods and assumptions are used to estimate the fair value of each class of

financial instrument:

Cash and cash equivalents, other current receivables and payables

The carrying amounts approximate fair values due to the relatively short-term to maturity of

these financial instruments.

Quoted and unquoted investments

The fair values of quoted investments are estimated based on quoted market prices for these

investments. For unquoted investments, it is not practical to determine the fair values because

of the lack of quoted market prices and the assumptions used in valuation models to value these

investments cannot be reasonably determined.

89


34. FINANCIAL INSTRUMENTS (Continued)

Hire purchase creditors

The fair value of hire purchase creditors is determined by discounting the relevant cash flow

using current interest rates for similar instruments at balance sheet date.

As at 31 March 2002, the fair values of financial assets and financial liabilities which do not

approximate the carrying amounts in the balance sheet are presented in the following table:

2002

Carrying Estimated fair

Note amount value

$ $

Group

Assets

Quoted investments 9 1,419,280 2,005,000

Unquoted investment, net of provision for diminution in value 9 5,814,196 *

Club membership, net of provision for diminution in value 9 146,341 167,382

Quoted bond investments 18 7,329,543 7,343,151

Liabilities

Hire purchase creditors 22 116,797 120,411

Company

Assets

Quoted investments 9 1,419,280 2,005,000

Unquoted investment, net of provision for diminution in value 9 5,584,992 *

Club membership, net of provision for diminution in value 9 125,950 126,600

Quoted bond investments 18 7,329,543 7,343,151

* In the directors’ opinion, it is not practicable to determine the fair value of the unquoted

equity investments held as long-term investments and carried at net realisable value of $5,814,196

for the Group and $5,584,992 for the Company (2001: $7,164,992 for both the Group and

Company). The expected cash flows from these investments are believed to be in excess of the

carrying amount.

Disclosure of the nature of financial instruments and their significant terms and conditions that

could affect the amount, timing and certainty of future cash flow is presented in the respective

Notes to the financial statements, where applicable.

90

35. SUBSEQUENT EVENTS

(a) On 5 April 2002, the Company extended a loan of US$133,333 ($245,973) to Beacon

Frontline Solutions, Inc. (“BFSI“), pursuant to a loan agreement with BFSI dated 27 March

2002. The loan was advanced in anticipation of the Company‘s 25% equity investment in

BFSI, which is expected to be completed by financial year ending 31 March 2003. The

BFSI stake is expected to be taken up through FTI Ventures Pte Ltd (“FTIV”).

The loan is repayable by BFSI to the Company if the definitive legal agreements are not

completed by 31 March 2003.

(b) A subsidiary, Frontline Technologies Corporation (M) Sdn. Bhd. (“Plaintiff”) has

commenced legal proceedings against Frontline Solutions (M) Sdn Bhd (formerly known

as Performance Alliance Sdn Bhd), Goh Lee Sim, Poh Ye Huat and Eugene Ho Chee Chew

(collectively known as “Defendants”) in the Malaysia High Court, claiming inter alia:

(i) damages totaling approximately RM683,000; and

(ii) an order for Defendants to cease and desist from using the company name of

Frontline Solutions (M) Sdn Bhd and the domain name of www.frontline.com.my.

The Defendants have filed a defence and counterclaim against the plaintiff for an

amount of approximately RM1,483,000, to which the Plaintiff has replied and filed a

reply and defence to counterclaim. On the basis of the information available to-date, the

directors are of the view that the Defendants‘ counterclaim holds little merit and no

provision for claim is required at this juncture.

This claim is in relation to certain disputed amounts arising from the plaintiff‘s aborted

investment in the Defendants.

(c) The Company acquired a 60% equity interest in ESP Management & Consulting Services

Pte Ltd (“ESP“), a company incorporated in Singapore, on 1 June 2002. ESP has an

authorised share capital of $500,000 ordinary shares of $1 each, of which 299,000

ordinary shares are issused and paid up. The investment was made through the

Company‘s wholly-owned subsidiary, FTI Ventures Pte Ltd (“FTIV“). FTIV‘s stake in ESP

comprises a total of 179,375 ordinary shares, for a total targeted consideration of $1.65

million, of which $275,000 is payable for the acquistion of existing vendor shares, while

$1, 375,000 is expected to be payable to ESP for new ordinary shares.

$1.1 million has been paid upfront, while a sum of $0.55 million will be payable to ESP,

provided ESP achieves an average Net Profit After Tax (“NPAT“) of no less than $550,000

for FY2001-2003**. The final amount payable to ESP will be based on an earn-out model

that is computed with reference to ESP‘s actual average NPAT for FY2001-2003**.

**FY2001-2003 refer to ESP‘s 3 consecutive financial years from 1 Oct 2000-30 Sep 2001,

1 Oct 2001-30 Sep 2002 and 1 Oct 2002-30 Sep 2003.

36. COMPARATIVE FIGURES

Where necessary, prior year financial statements have been restated to conform with current

year’s presentation in accordance with the new presentation requirements of Statement of

Accounting Standard No. 31(Revised), Provisions, Contingent Liabilities and Contingent Assets.

The comparative amount of provision for warranty of $358,500 has been reclassified out of

other creditors and accruals and reflected on the face of the balance sheet.

91

STATISTICS OF SHAREHOLDERS AS AT 18 JULY 2002

Authorised Share Capital S$100,000,000Issued & Fully Paid-up Capital S$39,251,485.10Class of Share Ordinary Shares of S$0.05 each

Distribution of Shareholders by Size of Shareholdings

Size of Holdings No. of Holders % No. of Shares %

1- 999 0 0.00 0 0.00 1,000 - 10,000 3,744 51.94 23,022,000 2.93

10,001-1,000,000 3,410 47.30 152,546,839 19.431,000,001 and Above 55 0.76 609,460,863 77.64

Total 7,209 100.00 785,029,702 100.00

Substantial ShareholdersDEEMED

S/No NAME OF SHAREHOLDERS NO. OF SHARES INTEREST

1 STEVE TING TUAN TOON 100,524,548 -2 E-MILLENNIUM ASIA FUND, LP 58,886,000 -3 CTI II LIMITED 56,250,252 -4 DB NOMINEES (S) PTE LTD 51,869,000 -5 PORTNET. COM PTE LTD 50,000,000 -7 TEMASEK HOLDINGS PTE LTD -

List of Top 20 Shareholders PERCENTAGE

S/No NAME OF SHAREHOLDERS NO. OF SHARES OF HOLDINGS

1 STEVE TING TUAN TOON 100,524,548 12.812 E-MILLENNIUM ASIA FUND, LP 58,886,000 7.503 LORANI PTE LTD 58,164,000 7.414 CTI II LIMITED 56,250,252 7.175 PORTNET. COM PTE LTD 50,000,000 6.376 LIM CHIN HU 38,825,000 4.957 CREDIT SUISSE (S) NOMINEES PTE LTD 30,000,000 3.828 EDB VENTURES 2 PTE LTD 26,654,431 3.409 PHILLIP SECURITIES PTE LTD 24,443,514 3.1110 WONG SWEE PING SHIRLEY 21,263,570 2.7111 DB NOMINEES (S) PTE LTD* 13,233,000 1.6812 CITIBANK NOMINEES S’PORE PTE LTD* 11,844,385 1.5113 RAFFLES NOMINEES PTE LTD* 10,938,828 1.3914 DBS NOMINEES PTE LTD 10,840,000 1.3815 EUROPEAN PACIFIC TRADERS LTD 8,539,015 1.0916 TAN HOON CHYE 7,532,364 0.9617 JONATHAN SIM KAY LEONG 7,201,000 0.9218 UNITED OVERSEAS BANK NOMINEES PTE LTD 7,087,000 0.9019 UOB KAY HIAN PTE LTD 6,871,000 0.8820 WONG WAI MENG 6,279,000 0.80

Total 555,376,907 70.74

*excludes declared beneficial interests of other Top 20 Shareholders

52,779,000

On the basis of the information available to the Company, approximately 50.53 % of the equity securities of

the Company (excluding preference shares & convertible equity securities) are held in the hands of the public.

This is in compliance with Rule 723 of the Listing Manual of the SGX-ST, which requires at least 10% of a listed

issuer’s equity securities to be held by the public.

92

Registered Address

57 Science Park Drive, The Faraday

Singapore Science Park I

Singapore 118237

13 August 2002

Board of Directors


Lim Chin Hu

Shirley Wong Swee Ping

Tay Swee Sze

Daniel Yu

Liow Voon Kheong

Robert Yap Min Choy

Tang Chun Choy

Robert Michael Stein

Sim Wong Hoo

Harrison Wang Hong She (alternate to Robert Michael Stein)

Ng Keh Long (alternate to Sim Wong Hoo)

To : The Shareholders of Frontline Technologies Corporation Ltd

Dear Sir / Madam

NOTICE OF NOMINATION OF NEW AUDITORS

Messrs Arthur Andersen will not be seeking re-appointment as auditors of the Company at the

forthcoming Annual General Meeting to be held on 27 August 2002 (“AGM”). The Directors

wish to express their appreciation for the services rendered by Messrs Arthur Andersen.

We have received a nomination from Mr Steve Ting Tuan Toon, a member of the Company,

nominating Messrs Ernst & Young as auditors of the Company in place of Messrs Arthur Andersen

for the financial year ending 31 March 2003 at the forthcoming AGM. Pursuant to Section 205(12)

of the Companies Act, Cap. 50, a copy of the Notice is enclosed herewith for your attention.

Yours faithfully

By Order of the Board

Dennis Chia Choon Hwee

Company Secretary

FRONTLINE TECHNOLOGIES CORPORATION LTD(Incorporated in the Republic of Singapore)

NOTICE OF NOMINATION OF NEW AUDITORS

93


NOTICE OF NOMINATION

8 July 2002

The Board of Directors

Frontline Technologies Corporation Ltd



Singapore 118237

Dear Sirs,

Pursuant to section 205 of the Companies Act, Chapter 50, I, Steve Ting Tuan Toon, c/o 57 Science

Park Drive, The Faraday Singapore Science Park I, Singapore 118237, being a shareholder of the

Company, hereby nominate Messrs Ernst & Young of 10 Collyer Quay #21-01 Ocean Building

Singapore 049315 for appointment as auditors of the Company, in place of the retiring auditors

Messrs Arthur Andersen, at the Company’s forthcoming Annual General Meeting.

Yours faithfully


cc. Ernst & Young

10 Collyer Quay

#21-01 Ocean Building

Singapore 049315

94


NOTICE OF ANNUAL GENERAL MEETINGNOTICE IS HEREBY GIVEN that the Annual General Meeting of the Company will be held at 31International Business Park, Creative Resource, Singapore 609921 on 27 August 2002 at 10.30 amto transact the following business:

AS ORDINARY BUSINESS1. To receive and adopt the Audited Accounts for the year ended Resolution 1

31 March 2002 and the Directors’ and Auditors’ Report thereon.

2. To re-elect the following Directors who are retiring in Resolution 2accordance with Article 104 of the Company’s Articles of Association:(a) Steve Ting Tuan Toon(b) Tang Chun Choy(c) Liow Voon Kheong

3. To approve Directors’ Fees of $30,000 (FY2000-2001:nil) Resolution 3

4. To appoint Messrs Ernst & Young as auditors of the Company Resolution 4and to authorize the Directors to fix their remuneration,in place of the retiring auditors, Messrs Arthur Andersen.See Explanatory Note (a)

AS SPECIAL BUSINESSTo consider and, if thought fit, to pass the following resolutions as Ordinary Resolutions

5. Authority to issue shares (General) :That, pursuant to Section 161 of the Companies Act (Cap.50), and the Resolution 5listing rules of the Singapore Exchange Securities Trading Limited (“ListingRules”), approval be and is hereby given to the Directors to issue shares inthe capital of the Company at any time, upon such terms and conditions andfor such purposes and to such persons as the Directors may in their absolutediscretion deem fit, provided always that (i)the aggregate number of sharesto be issued pursuant to this Resolution shall not exceed 50% of the issuedshare capital of the Company for the time being, as determined in accordancewith the Listing Rules, of which the total number of shares to be issued otherthan on a pro rata basis to shareholders of the Company does not exceed20% of the issued share capital of the Company for the time being, asdetermined in accordance with the Listing Rules, and (ii)that such authorityshall continue to be in force until the conclusion of the Company’s nextAnnual General Meeting.See Explanatory Note (b)

6. Authority to grant options and issue shares under Frontline Technologies Corporation LtdShare Option Scheme 2000That authority be and is hereby given to the Directors to offer and grant Resolution 6options in accordance with the rules and terms of Frontline TechnologiesCorporation Ltd Share Option Scheme 2000 (“the Scheme”) and to allotand issue from time to time such number of shares in the Company as maybe required to be allotted and issued pursuant to the exercise of optionsunder the Scheme, provided that the aggregate number of shares to beissued pursuant to the Scheme does not exceed 15% of the issued sharecapital of the Company from time to time.See Explanatory Note (c)

95

7. Renewal of the Shareholders’ Mandate for Interested Person Transactions Resolution 7

(a) That approval be and is hereby given for the purposes of Chapter 9

of the Listing Manual of the Singapore Exchange Securities Trading

Limited, for the Company, its subsidiaries and associated companies

or any of them to enter into any of the transactions falling within

the types of Interested Person Transactions, particulars of which are

set out on pages 111 to 113 of the Company’s Prospectus dated

5 March 2001 (“the Prospectus”) with the related parties described in

the Prospectus; and

(b) That such approval shall, unless revoked or varied by the Company in

general meeting, continue in force until the conclusion of the next

Annual General Meeting and that authority be given to the Directors

to complete and do all such acts and things (including executing all

such documents as may be required) as they may consider necessary,

desirable or expedient to give effect to this resolution as they may

think fit.

See Explanatory Note (d)

OTHER BUSINESS

8. To transact any other business that may properly be transacted at an Annual General

Meeting of the Company.

Dated this 13th day of August 2002

By Order of the Board

Dennis Chia Choon Hwee

Company Secretary

96

Note:

1) A member of the Company entitled to attend and vote at the Meeting is entitled to

appoint a proxy to vote in his stead.

2) A proxy need not be a member of the Company.

3) The instrument appointing a proxy must be deposited at the registered office of the Company

at 57 Science Park Drive, The Faraday, Singapore Science Park I, Singapore 118237 not later

than 48 hours before the time appointed for the Meeting.

EXPLANATORY NOTES

(a) Ordinary Resolution No. 4 is to approve the appointment of Ernst & Young as Auditors of

the Company. Arthur Andersen have expressed their intention not to seek re-appointment

as Auditors of the Company. The Company has received a Notice from a member, Mr Steve

Ting Tuan Toon, nominating Ernst & Young as Auditors of the Company in place of the

retiring Auditors, Arthur Andersen. Ernst & Young have expressed their willingness to accept

the appointment.

(b) Ordinary Resolution No. 5 is to authorise the Directors of the Company from the date of the

above Meeting until the next Annual General Meeting to issue shares in the Company up

to an amount not exceeding in aggregate 50 percent of the issued share capital of the

Company for the time being of which the total number of shares issued other than on a

pro rata basis to existing shareholders shall not exceed 20 percent of the issued share

capital of the Company for the time being for such purposes as they consider would be

in the interest of the Company. Rule 806 (3) of the Listing Manual of the Singapore

Exchange Securities Trading Limited currently provides for the percentage of issued share

capital to be calculated on the basis of the maximum potential share capital at the time

that the resolution is passed (taking into account the conversion or exercise of any convertible

securities and employee share options on issue at the time that the resolution is passed,

which were issued pursuant to previous shareholder approval), adjusted for any subsequent

consolidation or subdivision of shares. This authority will, unless revoked or varied at a

general meeting, expire at the next Annual General Meeting of the Company.

(c) Ordinary Resolution No. 6 is to authorize the Directors of the Company to allot and issue

shares in the Company pursuant to the exercise of options granted or to be granted under

Frontline Technologies Corporation Ltd Share Option Scheme 2000 (“the Scheme”). The

Scheme was adopted at an Extraordinary General Meeting of the Company on 19 September

2000.

(d) Ordinary Resolution No. 7 is to authorise the Company, through its Board of Directors,

its subsidiaries and associated companies or any of them to enter into any of the above

mentioned interested person transactions. Such approval shall, unless revoked or varied by

the Company in general meeting, continue in force until the date that the next Annual

General Meeting of the Company is held.

97

FRONTLINE TECHNOLOGIES CORPORATION LTD

(Incorporated in the Republic of Singapore)

PROXY FORM

I,We of

being * a member/members of Frontline Technologies Corporation Ltd ( the “Company” ),

hereby appoint

Name Address NRIC/ Proportion of shareholdingsPassport No. to be represented by proxy

(%)

*and/or

as *my/our *proxy/proxies to vote for *me/us on *my/our behalf and, if necessary, to demand apoll, at the Annual General Meeting of the Company to be held at 31 International BusinessPark, Creative Resource, Singapore 609921 on 27 August 2002 at 10.30 am and at anyadjournment thereof.*I/we direct *my/our proxy/proxies to vote for or against the Ordinary Resolutions to be proposedat the Annual General Meeting as indicated with an “X” in the spaces provided hereunder. If nospecified directions as to voting are given, the *proxy/proxies will vote or abstain from voting at*his/their discretion.

No. Ordinary Resolutions For Against

1. To receive and adopt the Accounts for the year ended 31 March2002 and the Report of Directors and Auditors thereon

2. To re-elect Mr Steve Ting Tuan Toon who is retiring in accordancewith the Company’s Articles of Association

3. To re-elect Mr Tang Chun Choy who is retiring in accordance withthe Company’s Articles of Association

4. To re-elect Mr Liow Voon Kheong who is retiring in accordancewith the Company’s Articles of Association

5. To approve Directors’ fees for the year ended 31 March 20026. To appoint Ernst & Young as auditors of the Company and to

authorise the Directors to fix their remuneration7. To authorise Directors to issue shares pursuant to Section 161 of

the Companies Act, Cap. 508. To authorise Directors to grant options and issue shares under

the Company’s Share Option Scheme 20009. To approve the renewal of the shareholders’ mandate for

interested person transaction10. Any other business

Dated this day of 2002 Total Number of Shares Held

Signature(s) of Member(s)/Common Seal

* Delete accordingly

IMPORTANT

Please read notes overleaf

1 For investors who have used their CPFmonies to buy their shares, this circularis forwarded to them at the request oftheir CPF Approved Nominees solelyFOR INFORMATION ONLY.

2 This proxy form is not valid for use byCPF investors and shall be ineffectivefor all intent and purposes if used orpurported to be used by them.

98

Notes:-1. A member of the Company entitled to attend and vote at the Annual General Meeting is

entitled to appoint not more than two proxies to attend and vote in his stead. Such proxyneed not be a member of the Company.

2. Where a member of the Company appoints two proxies, he shall specify the proportion ofhis shareholding (expressed as a percentage of the whole) to be represented by each suchproxy.

3. The instrument appointing a proxy or proxies must be under the hand of the appointor orhis attorney duly authorised in writing. Where the instrument appointing a proxy or proxiesis executed by a corporation, it must be executed under its common seal or under the handof its attorney or duly authorised officer.

4. A corporation which is a member of the Company may authorise by resolution of its directorsor other governing body such person as it thinks fit to act as its representative at the AnnualGeneral Meeting, in accordance with its Articles of Association and Section 179 of theCompanies Act, Chapter 50 of Singapore .

5. The instrument appointing proxy or proxies, together with the power of attorney or otherauthority (if any) under which it is signed, or notarially certified copy thereof, must bedeposited at the registered office of the Company at 57 Science Park Drive, The Faraday,Singapore Science Park I, Singapore 118237 not later than 48 hours before the time set forthe Annual General Meeting.

6. A member should insert the total number of shares held. If the member has shares enteredagainst his name in the Depository Register (as defined in Section 130A of the CompaniesAct, Chapter 50 of Singapore), he should insert that number of shares. If the member hasshares registered in his name in the Register of Members of the Company, he should insertthe number of shares. If the member has shares entered against his name in the DepositoryRegister and shares registered in his name in the Register of Members of the Company, heshould insert the aggregate number of shares. If no number is inserted, this form of proxywill be deemed to relate to all the shares held by the member of the Company.

7. The Company shall be entitled to reject the instrument appointing a proxy or proxies if it isincomplete, improperly completed or illegible or where the true intentions of the appointorare not ascertainable from the instructions of the appointor specified in the instrumentappointing a proxy or proxies. In addition, in the case of members of the Company whoseshares are entered against their names in the Depository Register, the Company may rejectany instrument appointing a proxy or proxies lodged if such members are not shown tohave shares entered against their names in the Depository Register 48 hours before thetime appointed for holding the Annual General Meeting as certified by The Central Depository(Pte) Limited to the Company.

8. A Depositor shall not be regarded as a member of the Company entitled to attend theAnnual General Meeting and to speak and vote thereat unless his name appears on theDepository Register 48 hours before the time set for the Annual General Meeting.

AFFIX

STAMP

The Company Secretary

FRONTLINE TECHNOLOGIES CORPORATION LTD



Singapore 118237

Frontline Technologies Corporation Ltd 57 Science Park Drive, The Faraday, Singapore Science Park, Singapore 118237 Tel +65 6773 7227 Fax +65 6779 4455 www.frontline.com.sg

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