ECS Annual Report 2009

ECS HOLDINGS LIMITED ANNUAL REPORT 2009

Co. Reg. No.: 199804760R

19 Kallang Avenue #07-153 Singapore 339410 Phone : +65 6299 9433 Fax : +65 6291 3912 Website : www.ecs.com.sg

THE QUEST FOR EXCELLENCE

ECS HOLDINGS LIMITED (Incorporated in The Republic of Singapore)

Vision

To be the leading provider of ICT products and value-added services. We strive for sustainable growth to achieve optimum returns to shareholders.

Mission

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

To sustain our entrepreneurial growth by expanding our business regionally.

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

Corporate Profile p.01 Chairman’s Statement p.08 CEO’s Statement p.12 Board of Directors p.16 Senior Management p.18 Group Structure p.20 Corporate Information p.21 Financial Highlights p.22 2009 Awards p.24 2009 Milestones p.25 Corporate Governance Statement p.26 Directors’ Report p.34 Statement by Directors p.40 Independent Auditors’ Report p.41 Financial Statements p.43 Shareholdings Statistics p.88 Notice of Annual General Meeting p.89

CORPORATE PROFILE page

ECS is a well-recognised provider of ICT products and services with three main businesses, namely Enterprise Systems, IT Services and Distribution. With a network of more than 21,000 active channel partners across China, Thailand, Malaysia, Singapore, Indonesia and the Philippines, ECS is well-positioned to be a regional partner of choice suitable for any global-leading MNC ICT brand vendor tapping Asia Pacific’s ICT spending growth.

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

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

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

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

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How do we stay on top?

By Leveraging Our strengths.

As the leading full-spectrum ICT distributor in Asia, we provide our channel partners and vendors with an unrivalled distribution network and a vast, diversified product range. As we continue to actively build on these competitive advantages, we scale greater heights of profit growth and shareholder returns.

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How do we reach further?

By Spreading our wings wider.

We drive profitable growth by strategically extending our distribution reach into new markets.

With an enlarged presence, we are able to deliver on our promises and respond to our partners and vendors ever more nimbly.

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How do we catch the next wave?

By Mastering the Tides of Change.

From improving our internal efficiencies to prudent financial management, we have fortified our fundamentals, hedging against the vagaries of a fast-changing environment and positioning ourselves for the next wave of success.

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Chairman’s Statement I am pleased to present the Annual Report for FY2009, a year which must surely rank as one of the most significant and eventful periods for ECS. In short, despite a global financial meltdown, ECS has been able to emerge leaner, stronger and a much more robust company delivering its best-ever revenue and net profit performance in history. And shareholders should note at the onset that we are proposing a highestever dividend in our history as a listed company.

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Dear sTAKeholders, Despite a year of exceptional challenges brought about by the global economic and financial crisis, our performance for FY2009 singularly demonstrates the success of the business strategies that ECS has been diligently pursuing for sustained growth and profitability for the past five years.

Through the first two subdued quarters and the last two quarters of pent-up demand, ECS has pursued growth with rigorous discipline, with the end result that net profit continued to outpace growth for a fifth consecutive year.

Strong cash flows lifted operating profit by 17.3% to $61.3 million from $$52.2 million while operating margin continued to climb to 1.9% from 1.8%.

Guided by an able and dedicated management team, ECS continued to show substantial growth at both net and operating levels, underscoring the flexibility of our ongoing margins-enhancement strategies.

Earnings per share (“EPS”), on a fully diluted basis, rose to a record 10.45 cents from 8.04 cents and net asset value (“NAV”) per share increasing to 71.03 cents from 65.09 cents a year ago.

Financial and Performance Scorecard

Our Distribution segment led growth in the top-line and bottomline for FY2009, riding on pent-up demand in IT spending with the gradual recovery in economic activity in the last two quarters of 2009, followed closely by Enterprise Systems.

Our net profit attributable to shareholders soared 29.9% to a record $38.2 million in FY 2009 from $29.4 million in FY2008 on higher revenue of $3.3 billion and $2.9 billion, respectively, a rise of 10.2%.

But beyond the top and bottom-line increases, shareholders should note the qualitative improvements which define ECS as a company which exhibits growth in areas that matter most.

In view of the spillover of the global financial crisis, the Group maintained its focus on cash management during the year under review. As at 31 December 2009, ECS generated a positive operating cash flow of $29.3 million, up from $16.4 million a year earlier.

Similarly, our emphasis on financial and operational efficiency allowed the Group to tighten credit control and shorten cash cycles despite experiencing one of the most volatile business periods. Working capital days were reduced to 35.9 days in FY2009 from 37.4 days a year earlier.

China maintained its lead in revenue and profitability as our largest geographical market while Indonesia and Malaysia emerged as our fastest-growing markets led by strong domestic demand.

Beyond the operational aspects outlined above, the Group has also made progress on the corporate front.

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In fact, the opportunities in markets such as these led us to propose the listing of our Malaysian subsidiary, ECS ICT Berhad, on Bursa Malaysia Main Board. Through this proposed listing (expected to be completed in FY 2010), ECS Malaysia will be able to further consolidate its market positioning in that country while concurrently the Group will gain access to fresh resources for supporting our ongoing growth plans.

Dividend Payment The Board of Directors has proposed a first and final dividend of 3.0 cents per share. This compares with 2.7 cents per share paid out for FY2008. If approved by shareholders, it will be the highest-ever dividend payment in the history of ECS. Leadership Transition And Special Thanks to Outgoing CEO Mr Tay Eng Hoe Before I proceed, I would like to make a sincere expression of gratitude to the person who has spearheaded our success in FY2009 and before - Mr Tay Eng Hoe, our Group CEO and also one of the founders of the Group who has retired from his position as at end February 2010.

Mr Tay who has nurtured ECS from its early days to its regional MNC status today, has been a prolific leader and an asset to the Group. We thank him for his relentless effort in taking ECS to increasing levels of business achievement year after year.

I am happy to inform you that Mr Tay will continue to be Vice Chairman and an Executive Director on our Board and I look forward to his continuing guidance and direction in steering ECS to new heights.

At the same time, I would like to extend a warm welcome to Mr Mervyn Mao who will take over as Acting Group CEO. As you may already be aware since July 2009, Mr Mao was the CEO of the Group’s 100%-owned China subsidiary, ECS Technology (China) Limited, ECS’ largest geographical contributor to the Group’s top and bottom-line. Anticipating that China will continue to be a key growth driver for ECS, as a 20-year veteran of China’s ICT industry, Mr Mao is the best choice for driving the Group’s performance in the years to come.

Outlook and Appreciation Our ongoing growth initiatives over the past five years have also successfully established a cost-effective operational framework across the Group, backed by a strong balance sheet. This has been integral to our performance during even challenging business conditions such as those over the past two years.

Notwithstanding the global financial crisis, our marginsaccretive business strategy also appears to be on the right track.

Over the last few months, there has been a visible increase in pent-up IT spending by governments and enterprises globally and this momentum is expected to continue into FY2010. Along with this, we continue to be encouraged by signs of economic recovery in the Asia Pacific region where we operate.

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As signs of improving business sentiment emerge particularly led by ICT investments, going forward, the Group will continue to harness this growth potential in the Asia Pacific region in which we operate, notably China and Indonesia by leveraging on continuing business initiatives there while concurrently looking at further developing existing markets and entering new ones.

At the same time, we will continue to exercise the cost and operational diligence which has paid off well over the years.

On behalf of my fellow Directors, I once again thank you, our shareholders, for your loyal support of the Group.

I would also like to express my sincere appreciation to our channel partners, vendors, technology partners and business associates without whom our success would not have been possible.

I would also like to thank the management and staff for their untiring determination and hard work.

Last but not the least, I would like to thank my fellow Directors for their strategic direction that has steered the Group onto the right track for future growth.

ECS is seizing opportunities to embark on a new threshold and we look forward to your continued support on that journey.

Mr Li Jia Lin Chairman 31 March 2010

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CEO’s Statement FY2009 was a year which clearly demonstrated the success of ECS’ efforts to execute a multiyear strategy and build a company that can continue to deliver value to stakeholders even in challenging times.

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Dear sTAKEholders, During the year under review, the Group delivered a solid performance despite a tough economic environment in the first two quarters due to the global economic crisis.

Concurrently, operating margins increased to 1.9% from 1.8% over the comparative periods, underscoring the efforts of our margin-enhancement strategy.

Efforts to lower cost and improve operational financial efficiencies in the face of the downturn allowed the Group to stay lean. With the improvement in demand in the second half, the Group was in a much better position to benefit from the recovery, resulting in a record high net profit of $38.2 million on revenue of $3.3 billion for the whole of FY2009.

In view of subdued financial conditions during most of the year, the Group retained focus on improving financial health by generating strong profit and margin growth as well as strong free cash flow.

As a result, FY2009 net profit growth outpaced revenue growth for the fifth consecutive quarter as part of a successful margin-enhancement strategy.

At the same time, gross bank borrowings fell by $18.1 million to $175.1 million as at 31 December 2009 from $193.2 million as at 31 December 2008.

Significantly, ECS also registered strong operating cash flows and continued to reduce working capital days, both key financial measures in the distribution industry.

As at 31 December 2009, ECS generated a positive operating cashflow of $29.3 million up from $16.4 million a year ago. We also continued to further reduce working capital days to 35.9 days from 37.4 days during the period under review.

Financial and Operations Review In FY2009, ECS’ net profit attributable to shareholders rose 29.9% to $38.2million from $29.4 million in FY2008. The strong bottom-line growth was achieved on a year-on-year revenue increase of 10.2% to $3.3 billion from $2.9 billion.

Beyond the top-line and bottom-line numbers, the key operating ratios demonstrate the rigorous efforts to improve efficiencies – a process which had begun a few years earlier but kicked in strongest during the recent financial downturn.

Operating profit increased 17.3% to $61.3 million from $52.2 million.

Consequently, net profit before interest and tax (“PBIT”) rose 18.5% to $62.5 million from $52.7 million.

Tighter credit control and shorter cash cycles also led to significant improvements in working capital.

Due to the improved operating cash flow and profitability, the net gearing ratio has also been reduced to 0.48 times from 0.60 times over the comparative period.

As at 31 December 2009, ECS’ cash and cash equivalents improved to $51.1 million from $49.5 million a year earlier.

As a result of these efforts, FY2009 earnings per share (“EPS”), on a fully diluted basis, correspondingly rose to 10.45 cents from 8.04 cents while net asset value (“NAV”) per share increased to 71.03 cents from 65.09 cents a year ago.

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Review By Business Segments

Southeast Asia

Distribution

During the year under review, sales of both consumer electronics especially notebooks and enterprise products particularly in newly emerging Southeast Asian markets rose 9.2% to $1.6 billion from $1.4 billion while PBIT grew 27.6% to $34.3 million from $26.9 million. Southeast Asia continues to be the major contributor to Group PBIT.

Riding on the recovery in consumer spending during the third and fourth quarters of FY2009, our Distribution segment emerged as the growth driver, growing 14.1% on strong sales in notebooks and desktops and contributing $2.0 billion of revenue, up from $1.8 billion. Distribution PBIT grew 27.9% to $30.6 million from $23.9 million a year earlier.

Enterprise Systems Enterprise Systems also grew well due to a strong surge in demand from corporations and government during the last two quarters of the year. By growing 4.8%, this segment contributed revenue of $1.2 billion in FY2009, up from $1.1 billion a year earlier. At the same time, PBIT grew 9.0% to $28.8 million from $26.4 million over the comparative periods.

Review By Geographical Markets Geographically both North Asia and Southeast Asia continued to grow in revenue and PBIT. North Asia As ECS’ largest geographical market, revenue for North Asia grew 11.2% to $1.7 billion from $1.5 billion and PBIT grew 6.4% to $27.0 million from $25.3 million over the comparative periods from better sales of notebooks, desktops and networking hardware products.

Proposed Listing Of ECS Malaysia On 29 September 2009, ECS received approval from the Securities Commision of Malaysia to list our Malaysian subsidiary, ECS ICT Berhad, on Bursa Malaysia Main Board.

This strategic corporate development is pivotal to ECS’ continued country-specific business strategy to position ECS Malaysia for continued growth and future expansion.

With this listing, ECS Malaysia will cease to be a subsidiary of ECS Holdings Limited. The listing will unlock the potential value of the Group’s investment in the ECS ICT Group and re-channel freed-up cash resources to support the Group’s growth.

New Acting Group CEO and CEO of ECS China Before I proceed further, I would like to extend a very warm welcome to Mr Mervyn Mao to whom I have relinquished my responsibilities as Group Chief Executive Officer (“CEO”) with effect from 1 March 2010. Also, as the CEO of the Group’s 100%-owned China subsidiary, ECS Technology (China) Limited (“ECS China”), his appointment underscores the Group’s ongoing efforts to build an ICT (“Info- Comm Technology’) superpower in the region.

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My heartfelt gratitude to you all - channel partners, business associates, vendors, fellow Directors and Management, staff and shareholders.

I thank channel partners, business associates, vendors, fellow directors, management, staff and shareholders for your support and devotion over the last ten years. I leave my position as Group CEO with a heavy heart, having steered it from its nascent stages as a relatively small company listed on the Singapore Exchange to its current reach, size and depth as a leading regional ICT solutions provider representing best-of-class global brand names. I will continue as Vice Chairman and Executive Director and look forward to continuing to accompany ECS in its continuing journey to become a leading ICT MNC in the region.

Outlook ECS believes that its concerted efforts over the last few years have culminated in the successful establishment of an efficient and cost-effective operational framework across the Group, backed by a strong balance sheet.

Going forward, the Group remains focused on harnessing the growth potential of the regional ICT industry over the long term, notably China and Indonesia. ECS China has recently commenced groundwork preparations to strengthen its infrastructure and market coverage within China and Indonesia to facilitate its future expansion.

Presently, there appears to be a return of business confidence and risk appetite on expectations that the worst of the global recession seems to be over.

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Against this background, ECS will continue to leverage on margin-enhancement opportunities to drive profitability.

Additionally the Group will work towards further improving its cost and operational efficiencies and working capital management initiatives.

At the same time, the Group is intent on enlarging its footprint both geographically and business wise. This would entail territorial growth in existing and new markets in the region, particularly Vietnam and India, as well as enhancing our portfolio of products.

Mr Tay Eng Hoe Former Group CEO and present Vice Chairman and Executive Director 31 March 2010

Board oF DIRECTORS page

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Mr Li Jia Lin

Mr Tay Eng Hoe

Mr Narong Intanate

Mr Foo Sen Chin

Mr Li Jia Lin was appointed as Chairman of the Board on 31 December 2007. Mr Li is also the Chairman and Chief Executive Officer and an Executive Director of VST Holdings Limited. Mr Li is also the Director of VST Group Limited (BVI) and VST Computers (H.K.) Limited respectively. He is responsible for the overall management and strategic positioning of the Group.

Mr Li graduated from Tsinghua University of the People’s Republic of China with a Degree of Bachelor of Engineering in 1983 and a Master Degree in Management Engineering in 1986.

Mr Tay Eng Hoe was appointed as the Executive Director of the Company on 1 April 2000 and he is also the Executive Vice Chairman of the Company. Mr Tay is the founder of the ECS Group and also ECS Computers (Asia) Pte Ltd, our Singapore subsidiary.

He brings with him more than 25 years of experience in the IT business. Mr Tay is an Executive Director of VST Holdings Limited.

In August 2005, he was conferred the Public Service Medal by the President of the Republic of Singapore in recognition for his public services to the country.

Mr Tay holds a Bachelor of Science (Honours) degree from the LaTrobe University and a Master of Business Administration from the University of Melbourne.

Mr Narong Intanate is the founder and Executive Chairman of The Value Systems Co., Ltd., our subsidiary, since 1988.

He is actively involved in the management of The Value Systems Co., Ltd. and plays a pivotal role in steering the strategic direction of The Value Systems. He was appointed as an Executive Director of the Company on 15 December 2000. On 18 March 2010, he was appointed as Executive Director for ASEAN region and also appointed to the Board of the ECS subsidiaries. He is currently an advisor of the Hatyai University.

He holds a Bachelor of Science in Business Administration and a Master of Business Administration from California State University.

Prior to forming The Value Systems Co., Ltd., he was the Marketing Manager of Sahaviriya Infortech Computers Co., Ltd. from 1982 to 1983 and the Marketing Director of Sahaviriya OA from 1983 to 1988.

Mr Foo Sen Chin was appointed as an Executive Director on 15 December 2000 and is concurrently the Group Human Resource Director of the Company. He is also the Managing Director and founder of ECS ICT Berhad, our subsidiary. Mr Foo plays a pivotal role in steering the strategic direction of ECS ICT Berhad. His responsibilities include the development of its long term business goals, overall operation and administrative management of ECS ICT Berhad.

Prior to joining our Group, he was the General Manager of a computer bureau services company in Kuala Lumpur before forming ECS KU Sdn Bhd (formerly known as K.U. Sistems Sdn Bhd) in 1985. Mr Foo is an advisor to the current Council of PIKOM, Association of Computer and Multimedia Industry of Malaysia.

Mr Foo has a Bachelor of Science degree in Electrical and Electronic Engineering from the University of Birmingham, UK and he also holds a Master’s degree in Business Administration from the Cranfield School of Management in the United Kingdom.

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Mr Leong Horn Kee

Mr Tan Hup Foi

Mr Koh Soo Keong

Mr Leong Horn Kee was appointed as an Independent Director on 15 December 2000, and currently serves as the Chairman of the Audit Committee and a member of the Nominating and Compensation Committees. He is currently the Chairman/CEO of CapitalCorp Partners Pte Ltd. Mr Leong was a Member of Parliament for 22 years. He has wide work experience in the public sector in the Ministries of Finance and Trade & Industry, and in the private sector in venture capital, merchant banking, corporate investments, hotels and property development.

Mr Leong is currently Singapore’s Non-Resident Ambassador to Mexico and a member of the Security Industry Council. He holds a degree (Honours) in Production Engineering from Loughborough University, UK; a degree (Honours) in Economics from the University of London, UK; a degree in Chinese Language and Literature from Beijing Normal University, China; an MBA degree from Insead, France, and a Master in Business Research from University of Western Australia.

Mr Tan Hup Foi was appointed as an Independent Director on 7 February 2006, and currently serves as Chairman of the Nominating Committee and a member of the Audit and Compensation Committees. He was the Chief Executive of TransIsland Bus Services Ltd from 1994 to 2005 and also the Deputy President of SMRT Corporation Ltd from 2003 to 2005. Mr Tan is known internationally as the Honorary Vice President of the International Association of Public Transport (UITP) and Honorary Chairman of UITP Asia-Pacific Division. Mr Tan is the Chairman of Ngee Ann Polytechnic Council.

He was awarded the Bintang Bakti Masyarakat (Public Service Star) in 2008 and the Pingat Bakti Masyarakat (Public Service Medal) in 1996 by the President of Singapore. Mr Tan graduated from Monash University in Australia with a First Class Honours degree in Mechanical Engineering in 1974 and he obtained a Master of Science (Industrial Engineering) degree from University of Singapore in 1979.

Mr Koh Soo Keong was appointed as an Independent Director on 11 February 2008, and currently serves as Chairman of the Compensation Committee and a member of the Audit and Nominating Committees.

Mr Koh was, until April 2007, the Chief Executive Officer and President of Toll Asia Pte Ltd, formerly SembCorp Logistics Ltd (SembLog) which was acquired

by Toll in May 2006. Currently, he is the Managing Director of EcoSave Pte Ltd. With over 20 years of experience in the logistics industry, he has helmed SembLog and its preceding companies since 1986. He is a board member of five other publicly listed companies and the Chairman of the Agri-Food and Veterinary Authority of Singapore. He holds a Bachelor of Engineering (Honours), a Master of Business Administration and a Postgraduate Diploma in Business Law from the National University of Singapore.

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SENIOR MANAGEMENT page

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Mr Mervyn Mao Mr Mervyn Mao was appointed as Acting Group Chief Executive Officer of ECS Holdings Limited on 1 March 2010 and is concurrently the Chief Executive Officer of ECS Technology (China) Limited. He has more than twenty years experience in China’s ICT industry. Prior to joining the Group, Mr. Mao served as the Group Senior Vice President of Digital China Holdings Limited, one of China’s leading ICT distributors, and as a Director (Vice President) of Digital China Technology Limited. In Digital China, he was in charge of the distribution business. Prior to Digital China, Mr Mao spent ten years with the Lenovo Group.

Mr Mao holds a Bachelor of Science (Machine Building and Automation) degree and a Master of Science (Modal Analysis) from Tianjin University as well as an Executive MBA Degree from China Europe International Business School.

Mr Foong Kam Tho Mr Foong Kam Tho was appointed as Group Chief Operating Officer of ECS Holdings Limited with effect from 1 January 2008. He

is responsible for the overall operational management of the Group including setting business strategies and building longterm customers’ and partners’ relationships. Mr Foong was formerly the Chief Executive Officer of ECS China and prior to that, the President of ECS Computers (Asia) Pte Ltd. He joined ECS Computers (Asia) Pte Ltd in 1985. He has more than 20 years experience in the IT industry. Mr Foong holds a Bachelor of Science degree (Computer Science) from the National University of Singapore.

Mr Eddie Foo Mr Eddie Foo is the Group Chief Financial Officer of the Company and is concurrently the Group Company Secretary. Mr Foo is responsible for the corporate finance and treasury, reporting, accounts, tax, information technology and investor relations of ECS Holdings and is also a director on the boards of various ECS companies. Mr Foo has several years of financial management and audit experience in multinational and public accounting firms. Prior to serving

as Group Chief Financial Officer, Mr Foo was the Group Financial Controller of the Company. Mr Foo holds a Bachelor degree in Accountancy from the Nanyang Technological University and is a member of the Institute of Certified Public Accountants of Singapore.

Mr Lim Tow Cheng Mr Lim Tow Cheng was appointed as Senior Vice President, Business Development on 18 October 2005.

He is responsible for managing the regional expansion strategy and for identifying new business opportunities for the Group.

Mr Lim has more than 20 years of experience in senior management positions in the IT industry.

Prior to joining the Group, Mr Lim was the Director for South Asia of Western Digital and has previously worked with Digiland International Limited for more than 8 years, holding several senior management positions, including as Chief Executive Officer.

Mr Lim has an Honours Degree in Economics from the National University of Singapore.

Mr Eugene Tan Mr Eugene Tan was appointed as Group Financial Controller of the Company on 1 March 2008. He is responsible for the financial management of the Group, which covers accounting, treasury, tax, financial control and reporting.

Prior to his appointment as Group Financial Controller, Mr Tan was the Vice President, Finance of ECS Computers (Asia) Pte Ltd, the wholly-owned Singapore subsidiary of ECS Holdings Ltd. Prior to joining the Group, Mr Tan worked for KPMG Singapore as a senior auditor.

Mr Tan holds a Bachelor degree in Accountancy & Economics from the University of Reading.

Mr Newman Li Mr Newman Li is the Senior Manager, Group Internal Audit of the Company. He is a member of CPA China and has more than 10 years of financial and audit experience. Prior to joining the Group, he worked for Foshan Power Construction Group Co. Ltd in 1998 and Guangdong Telecom in 2004. Mr Li holds a Bachelor degree in Accountancy from the Tianjin University of Commerce

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and was appointed to his current position since May 2008.

Mr Somsak Pejthaveeporndej Mr Somsak Pejthaveeporndej was appointed as the President of The Value Systems Co., Ltd on 1 February 2009 and he is responsible for the overall management of The Value Systems.

He has been with our Group since 1988 and was formerly involved in managing the Enterprise Systems & ICT Services division. He has more than 20 years experience in the IT industry. Prior to joining our Group, he was employed as a technical manager by Sun Shine Co., Ltd. between 1981 to 1984, followed by Sahaviriya Telecom Co., Ltd. between 1984 to 1988.

He holds a Bachelor of Science degree majoring in electronics from Rajamangala University of Technology Krungthep, Thailand, and a Mini MBA from The Faculty of Commerce and Accountancy, Chulalongkorn University.

concurrently the Group Human Resource Director of the Company.

He is also the Managing Director and founder of ECS ICT Berhad, our subsidiary. Mr Foo plays a pivotal role in steering the strategic direction of ECS ICT Berhad.

His responsibilities include the development of its long term business goals, overall operation and administrative management of ECS ICT. Prior to joining our Group, he was the General Manager of a computer bureau services company in Kuala Lumpur before forming ECS KU Sdn Bhd (formerly known as K.U. Sistems Sdn Bhd) in 1985.

Mr Foo is an advisor to the current Council of PIKOM, Association of Computer and Multimedia Industry of Malaysia. Mr Foo has a Bachelor of Science degree in Electrical and Electronic Engineering from the University of Birmingham, UK and he also holds a Master’s degree in Business Administration from the Cranfield School of Management in the United Kingdom.

Mr Sebastian Chong

Mr Foo Sen Chin Mr Foo Sen Chin was appointed as an Executive Director on 15 December 2000 and is

Mr Sebastian Chong is the President of ECS Computers (Asia) Pte Ltd, the wholly-owned Singapore subsidiary of ECS

Holdings Ltd. Mr Chong joined ECS in 1990 and has 20 years of experience in the IT industry. He oversees the sales and operations of the commercial, consumer and retail segments of ECS Singapore.

Mr Chong is also responsible for business development, business strategy and building of long term relationships with vendors, channels and partners.

Ms Lina Choo Ms Lina Choo was appointed as Executive Director of PT ECS Indo Jaya in April 2009. She joined ECS in September 2007 and is responsible for overseeing the financial management of ECS Indonesia. Ms Choo has more than 15 years experience in financial management in various companies, of which over 10 years was in the IT industry. Prior to joining ECS Indonesia, she worked with Natsteel Electronics in Singapore as an accountant before returning to Indonesia to work as Finance Manager for Diebold Indonesia and subsequently, Datacraft Indonesia. Ms Choo holds a Bachelor degree in Accountancy from the University of HKBP Nommensen.

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

GROUP STRUCTURE page

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ECS HOLDINGS LIMITED CHINA

THAILAND

ECS Technology (China) Limited 100%

The Value Systems Co., Ltd 100%

MALAYSIA ECS ICT Berhad 60%

SINGAPORE

INDONESIA

PHILIPPINES

ECS Computers (Asia) Pte Ltd 100%

ECS Indo Pte Ltd 89%

ECS Infocom (Phils) Pte. Ltd. 100%

PT ECS Indo Jaya 100%

ECS Technology (Guangzhou) Co., Ltd 100%

ECS KU Sdn Bhd 100%

Pacific City (Asia Pacific) Pte Ltd 100%

ECS Technology Co., Ltd 100%

ECS Astar Sdn Bhd 100%

ECS Enterprise Solutions Pte Ltd 100%

ECS (Shanghai) Management Co., Ltd 100%

ECS KUSH Sdn Bhd 100%

ECS China Technology (Shanghai) Co., Limited 100%

ECS Pericomp Sdn Bhd 80%

EIT info-tech Limited 100% ECS Technology (HK) Co., Limited 100%

MSI-ECS Phils., Inc 49.99%

CORPORATE INFORMATION page

Board of Directors Mr Li Jia Lin (Chairman, Non-Executive Director) Mr Tay Eng Hoe (Vice Chairman, Executive Director) Mr Narong Intanate (Executive Director) Mr Foo Sen Chin (Executive Director) Mr Leong Horn Kee (Independent Director) Mr Tan Hup Foi (Independent Director) Mr Koh Soo Keong (Independent Director) Audit Committee Mr Leong Horn Kee (Chairman) Mr Tan Hup Foi Mr Koh Soo Keong

Registered Office 19 Kallang Avenue #07-153 Singapore 339410 Principal Bankers DBS Bank Ltd KBC Bank N.V. Malayan Banking Berhad Oversea-Chinese Banking Corporation Standard Chartered Bank Sumitomo Mitsui Banking Corporation United Overseas Bank Limited Company Secretary Mr Eddie Foo Toon Ee, CPA

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

ECS Offices ECS Holdings Limited 19 Kallang Avenue #07-153 Singapore 339410 Website : www.ecs.com.sg

Nominating Committee Mr Tan Hup Foi (Chairman) Mr Leong Horn Kee Mr Koh Soo Keong Mr Tay Eng Hoe

ECS Technology (China) Limited PCI Building, No. 50 Jianzhong Road Tianhe Software Park Guangzhou, P.R.C. (510665) Branches in Beijing, Chengdu, Guangzhou, Hong Kong, Shanghai, Shenyang, Shenzhen, Wuhan, Xi’an Website : www.ecschina.com

Senior Management at ECS Holdings Limited Mr Mervyn Mao Xiangqian (Acting Group Chief Executive Officer) Mr Foong Kam Tho (Group Chief Operating Officer) Mr Eddie Foo Toon Ee (Group Chief Financial Officer) Mr Narong Intanate (Executive Director of ASEAN) Mr Foo Sen Chin (Group Human Resource Director) Mr Lim Tow Cheng (Senior Vice President, Business Development) Mr Eugene Tan Teck Thye (Group Financial Controller) Mr Newman Li (Senior Internal Audit Manager) Senior Management at ECS Holdings Limited’s Subsidiaries Mr Mervyn Mao Xiangqian (Chief Executive Officer) ECS Technology (China) Limited Mr Somsak Pejthaveeporndej (President) The Value Systems Co., Ltd Mr Foo Sen Chin (Managing Director) ECS ICT Berhad Mr Sebastian Chong (President) ECS Computers (Asia) Pte Ltd Ms Lina Choo (Executive Director) PT ECS Indo Jaya Mr Jimmy Go (President) MSI-ECS Phils., Inc. Auditors KPMG LLP Certified Public Accountants 16 Raffles Quay #22-00 Hong Leong Building Singapore 048581 Partner-in-charge : Mr Tran Phuoc (Since FY2006) Registrar M&C Services Private Limited 138 Robinson Road #17-00 The Corporate Office Singapore 068906

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The Value Systems Co., Ltd. 34th Floor, Charn Issara Tower 2 2922/328-331 New Petchburi Road Bangkapi, Huay-Kwang Bangkok 10320, Thailand Branches in Bangkok, Chiang Mai, Hat Yai, Khon Kaen, Nakhon Ratchasima, Phitsanulok, Phuket, Rayong, Surat Thani Website : www.value.co.th ECS ICT Berhad Lot 3, Jalan Teknologi 3/5 Taman Sains Selangor, Kota Damansara Selangor, Malaysia Branches in Johor Bahru, Kota Kinabalu, Kuantan, Kuching, Penang, Petaling Jaya Websites : www.ecsm.com.my ECS Computers (Asia) Pte Ltd 19 Kallang Avenue #07-153 Singapore 339410 Website : www.ecs.com.sg ECS Indo Pte Ltd 19 Kallang Avenue #06-151 Singapore 339410 Branches in Bali, Bandung, Jakarta, Makassar, Medan, Palembang, Semarang, Surabaya, Yogyakarta Website : www.ecsindo.com MSI-ECS Phils., Inc. Topy II Bldg, #3 Economia St., Libis, Quezon City, Philippines 1110 Branches in Cebu, Manila Website : www.msi-ecs.com.ph

FINANCIAL HIGHLIGHTS page

22

REVENUE ($ million)

REVENUE BY BUSINESS SEGMENT ($ million) 4000

4000

3500

3,252.0

3500 3,252.0 29.9

2,949.9 3000

2,949.9 33.6

3000

2,789.4

2,789.4 32.2 2500

2500

2,339.3

2,339.3 23.2

2,036.3 2000

2000

2,036.3 22.0

2,034.2

1,783.0 1,792.9 1,416.0

1500

1500

1,233.2 1000

1000

500

500

FY 05

FY 06

FY 07

FY 08

FY 09

PROFITABILITY ($ million)

FY 05

FY 06

Total

IT Services

FY 07 Distribution

50 38.2

40

North Asia 1,685.2

29.4 23.4 20.1

20

Southeast Asia 1,566.8

17.3

10

FY 05

FY 06

FY 07

FY 08

FY 08

Net profit attributable to equity holders

FY 09

FY 09

Enterprise Systems

Revenue by geographical segment ($ million)

60

30

1,187.9

1,133.3

964.3

900.1

781.1

page

Dividends Per Share (cents)

SHAREHOLDERS’ EQUITY ($ million)

3.0 3

300 259.5 237.8

250

2.7 2.5

212.7 200

190.1

2

174.2

150

1.5

100

1

50

0.5

FY 05

FY 06

FY 07

FY 08

1.4

FY 05

FY 09

1.5

1.5

FY 06

FY 07

FY 08

FY 09

RETURN ON CAPITAL EMPLOYED (%)

RETURN ON EQUITY (%)

18

18 15.4

15

15 13.0 12

11.0

12.2 11.7

12

11.6

10.4

9.1

9

9

6

6

3

3

FY 05

FY 06

FY 07

FY 08

FY 09

10.0

8.4

FY 05

FY 06

FY 07

FY 08

FY 09

23

2009 AWARDS page

24

Country

Awarded by

ECS Holdings DP Information ECS Holdings DP Information

ECS Holdings DP Information ECS Holdings DP Information

ECS Holdings DP Information

ECS Holdings DP Information

Award Ranked 113th by Sales Turnover in Singapore S1000 Companies Ranked 1st by Sales Turnover for Information & Communications Industry in Singapore S1000 Companies Ranked 22nd in Top Public-listed Companies by Sales Turnover Ranked 18th Overall by Singapore International 100 for Companies with Highest Overseas Revenue Ranked 5th by Singapore International 100 for Companies with Highest Overseas Revenue in China Ranked 8th by Singapore International 100 for Companies with Highest Overseas Revenue in Southeast Asia

ECS China CBI News ECS China China Computer Magazine

ECS China Hewlett-Packard ECS China China Software

ECS China awarded 2nd in Top 100 IT Distribution Firms by CBINEWS ECS China awarded 2nd in Top 100 Distribution Firms by China Computer Magazine Highest Increase in Sales for Peripherals China Software Channel Annual Prize 2009

ECS Thailand Symantec ECS Thailand D-Link ECS Thailand MIS Asia magazine

ECS Thailand Sun Microsystems

Value Distributor of the Year 2009 Top Wholesaler in 2009 MIS IT Excellence Awards 2009 in Category of Best Security Strategy (MIS Asia IT Summit & IT Excellence Awards) RISE! Award

ECS Malaysia ECS Malaysia ECS Malaysia ECS Malaysia ECS Malaysia

Top Wholesaler for Business Desktops in 2009 HP Services - Top Wholesaler HP Commercial Storage Works - Top Wholesaler HP Industry Standard Servers - Top Wholesaler HP Overall Performance - Top Wholesaler

Hewlett-Packard Hewlett-Packard Hewlett-Packard Hewlett-Packard Hewlett-Packard

ECS Singapore Oracle ECS Singapore IBM ECS Singapore DP Information

Value-added Distributor of the Year - 2009 Most Competitive Business Partner - 2009 Ranked 9th by Sales Turnover for Information & Communications Industry in Singapore S1000 Companies

ECS Indonesia ECS Indonesia ECS Indonesia

Cisco Cisco Cisco

Best Distributor 2009 Best System Engineer-Distributor 2009 Best Account Manager-Distributor 2009

ECS Philippines ECS Philippines

Oracle Hewlett-Packard

Value-added Distributor of the Year - 2009 Outstanding SWD Storage Distributor of the Year

2009 MILESTONES page

Country

ECS Singapore

Period

Highlights

Jan - Mar 09

ECS Singapore appointed as Distributor for Lenovo

25

ECS Thailand Apr - Jun 09

The Value Systems established the Corporate Social Responsibility campaign of “The Fairy Tale Project III” at Wat Bangtoeynok School, Sam Khok district, Pathum Thani province

ECS Thailand

The Value Systems appointed as Distributor for Intermec.

Apr - Jun 09

ECS Malaysia Apr - Jun 09

ECS Astar Sdn Bhd appointed as Distributor for Samsung Printers & Consumables

ECS Malaysia

Jul - Sep 09

ECS Astar Sdn Bhd appointed as Distributor for Huawei-Symantec

ECS Singapore

Jul - Sep 09

ECS Singapore appointed as Distributor for GE

ECS Thailand Oct - Dec 09

The Value Systems established the Corporate Social Responsibility campaign of “The Tree Planting Project III” at Suan Paket Nomklao Urban Community Forest, Phra Pradaeng district, Samut Prakan province.

ECS Singapore

ECS Singapore appointed as Distributor for VMware

Oct - Dec 09

Corporate Governance Statement page

26

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

(A) BOARD MATTERS The Board’s Conduct of its Affairs Principle 1 :

Every company should be headed by an effective Board to lead and control the company. The Board is collectively responsible for the success of the company. The Board works with Management to achieve this and the Management remains accountable to the Board.

The Board’s role is to: a)

b) c) d)

provide entrepreneurial leadership, set strategic aims, and ensure that the necessary financial and human resources are in place for the company to meet its objectives; establish a framework of prudent and effective controls which enables risk to be assessed and managed; review management performance; and set the company’s values and standards, and ensure that obligations to shareholders and others are understood and met.

The Board meets to consider the following, without limitation, corporate events and/or actions: a) b) c) d) e) f) g) h)

approval of quarterly results announcements; approval of annual report and accounts; declaration of interim dividend and proposal of final dividends; approval of corporate strategy; authorisation of major transactions; review and approval of annual budgets; compensation of senior management personnel; and convening of shareholders’ meetings.

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

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

the Nominating Committee; the Compensation Committee; and the Audit Committee.

Newly-appointed directors are given briefings by the Management on the Group’s activities and its strategic directions.

Changes to regulations and accounting standards are monitored closely by Management. To keep pace with regulatory changes, where these changes have an important bearing on the Company’s or directors’ disclosure obligations, directors are briefed either during Board meetings or at specially convened sessions conducted by professionals.

Corporate Governance Statement page

27

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

DIRECTORS’ ATTENDANCE AT BOARD MEETINGS

Board Member Li Jia Lin Tay Eng Hoe Narong Intanate Foo Sen Chin Leong Horn Kee Tan Hup Foi Koh Soo Keong

Board No. Of Meetings 4 4 4 4 4 4 4

Attended 4 4 3 4 4 4 4

Board Composition and Guidance Principle 2 :

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

The Board comprises seven directors of which four are non-executive directors (including three independent directors) and three executive directors. The Company places great importance on the quality of its Board of Directors. The Group achieves this by appointing to its Board highly respected individuals and prominent leaders in their respective professions. The Board comprises individuals with proven track record in the public and/or corporate sector, and each is a highly respected member of the business community. As a group, they provide core competencies such as accounting or finance, business or management experience, industry knowledge, strategic planning and customer-based experience or knowledge. Key information regarding the directors is given in the Board of Directors section on pages 16 to 17 of the annual report.

Chairman and Chief Executive Officer Principle 3 :

There should be a clear division of responsibilities at the top of the company - the working of the Board and the executive responsibility of the company’s business - which will ensure a balance of power and authority, such that no one individual represents a considerable concentration of power.

Mr Li Jia Lin, a non-executive director, is the Chairman of the Company. Mr Tay Eng Hoe stepped down as Group CEO with effect from 28 February 2010 and Mr Mervyn Mao is currently the Acting Group CEO. The Chairman and the Acting Group CEO each perform separate functions to ensure that there is an appropriate balance of power and authority, and that accountability and independent decision-making are not compromised. The Chairman is responsible for the functioning of the Board. The Acting Group CEO has full executive responsibilities over the running of the Group’s business, the business direction and operational decisions of the Group. No individual or small group of individuals dominate the Board’s decision making process.

Corporate Governance Statement page

28

Board Membership & Board Performance Principle 4 :

There should be a formal and transparent process for the appointment of new directors to the Board.

Principle 5 :

There should be a formal assessment of the effectiveness of the Board as a whole and the contribution by each director to the effectiveness of the Board.

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

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

c)

identifies and reviews all nominations for Board appointments and re-nominations of directors; assesses the effectiveness of the Board as a whole and the contribution by each individual director to the effectiveness of the Board; and determines whether or not a Director is independent.

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

Access to Information Principle 6 :

In order to fulfil their responsibilities, board members should be provided with complete, adequate and timely information prior to board meetings and on an on-going basis.

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

(B) REMUNERATION MATTERS Procedures for Developing Remuneration Policies Principle 7 :

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

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

Corporate Governance Statement page

29

Level and Mix of Remuneration; Disclosure of Remuneration Principle 8 :

The level of remuneration should be appropriate to attract, retain and motivate the directors needed to run the company successfully but companies should avoid paying more than is necessary for this purpose. A significant proportion of executive directors’ remuneration should be structured so as to link rewards to corporate and individual performance.

Principle 9 :

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

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

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

Non-executive directors have remuneration packages which consist of a directors’ fee component and a share option component pursuant to the Company’s Share Option Scheme. The directors’ fee policy is based on a scale of fees divided into basic retainer fees as a director and additional fees for serving on board committees. Directors’ fees for non-executive directors are subject to the approval of shareholders at the Annual General Meeting. The report on directors’ remuneration is given below: Summary compensation table for the year ended 31 December 2009

Allowances

and other

Salary Bonus Fees Benefits Name of Director % % % % $1,000,000 to below $1,500,000 Tay Eng Hoe 29 70 - 1 $500,000 to below $1,000,000 Foo Sen Chin 21 68 - 11 Narong Intanate 37 56 - 7 Below $500,000 Li Jia Lin - - 100 - Liu Wei - - 100 - Leong Horn Kee - - 100 - Tan Hup Foi - - 100 - Koh Soo Keong - - 100 -

Total % 100 100 100 100 100 100 100 100

Corporate Governance Statement page

30

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

NO. OF EXECUTIVES IN REMUNERATION BANDS

Total Compensation No. of Employees (S$) (Note 1) $100,000 to $249,999 10 $250,000 to $499,999 13 $500,000 to $749,999 - $750,000 to $1,000,000 1 Total 24

Total Fixed Compensation (Note 2) $ 835,222 $ 2,409,116 - $195,306 $3,439,644

Total Variable Compensation (Note 3) $511,867 $2,076,454 - $637,716 $3,226,038

Total Remuneration $1,347,090 $4,485,570 $833,022 $6,665,682

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

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

(C) ACCOUNTABILITY AND AUDIT Accountability Principle 10 :

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

In presenting the annual financial statements and quarterly announcements to shareholders, it is the aim of the Board to provide the shareholders with a detailed analysis, explanation and assessment of the Group’s financial position and prospects.

On a quarterly basis, Board members are provided with business and financial reports comparing actual performance with budget and with prior year comparisons with highlights on key business indicators and any significant business development.

In addition, the Group CEO communicates regularly with Board members through informal meetings and phone calls with appropriate updates on Company developments.

Audit Committee Principle 11 :

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

Corporate Governance Statement page

31

The Audit Committee comprises three members, of which all members, including the Chairman, are independent. The members of the Audit Committee at the date of this report are: Leong Horn Kee Tan Hup Foi Koh Soo Keong

Chairman Member Member

The Audit Committee meets periodically to perform the following functions:a)

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

b)

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

c)

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

d)

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

e)

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

f)

considering other matters as requested by the Board.

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

The Audit Committee held four meetings since the date of the last annual report. The Audit Committee reviewed the Interested Person Transactions for the year ended 31 December 2009 in accordance with the terms of the Shareholders’ Mandate for such transactions as were approved on 30 April 2009. Interested Person Transactions with a total value of $20.4 million were examined and the Audit Committee is of the opinion that the said transactions were carried out on prevailing commercial terms and did not prejudice the interest of the shareholders of the Company.

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

Corporate Governance Statement page

32

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

Meetings and attendance are as follows:

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

Audit Committee No. Of Meetings Attended 4 4 4 4 4 4

Internal Controls Principle 12 :

The Board should ensure that the Management maintains a sound system of internal controls to safeguard the shareholders’ investment and the company’s assets.

The Board acknowledges that it is responsible for the Group’s system of internal control. It believes that in the absence of any evidence to the contrary and from due enquiry, the system of internal controls that has been maintained by the Group throughout the financial year is adequate to meet the needs of the Group in its current business environment. However, the Board notes that the system of internal controls is designed to manage rather than eliminate the risk of failure to achieve business objectives, and can provide only reasonable and not absolute assurance against material misstatements or loss.

Internal Audit Principle 13 :

The Company should establish an internal audit function that is independent of the activities it audits.

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

The internal auditors are expected to meet or exceed the standards set by nationally or internationally recognised professional bodies including the Standards for the Professional Practice of Internal Auditing set by The Institute of Internal Auditors.

(D) COMMUNICATION WITH SHAREHOLDERS Principle 14 :

Companies should engage in regular, effective and fair communication with shareholders.

Principle 15 :

Companies should encourage greater shareholder participation at AGMs, and allow shareholders the opportunity to communicate their views on various matters affecting the company.

Corporate Governance Statement page

33

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

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

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

Aggregate value of all IPTs during the

financial year under review (excluding

transactions less than $100,000 and Name of Interested Person

transactions conducted under

shareholders’ mandate pursuant to

Rule 920 of Listing Manual of SGX-ST) (A) Transactions for the purchase - of goods and services with VST Computers (HK) Ltd and its subsidiaries (B) Transactions for the sale of goods - and services with Vnet Capital Co., Ltd and its subsidiaries (C) Transactions for the purchase $294,000 of goods and services with Vintcom Technology Co., Ltd and its subsidiaries (D) Transactions for the sale of goods $641,498 and services with Enrich Platinum Sdn. Bhd. and its subsidiaries

Aggregate value of all IPTs conducted under shareholders’ mandate pursuant to Rule 920 of Listing Manual of SGX-ST (excluding transactions less than $100,000) $7,541,236

$2,596,723

-

-

Directors’ report page

34

We are pleased to submit this annual report to the members of the Company together with the audited financial statements for the financial year ended 31 December 2009.

Directors The directors in office at the date of this report are as follows:Li Jia Lin (Chairman) Tay Eng Hoe (Vice-Chairman) Narong Intanate Foo Sen Chin Leong Horn Kee Tan Hup Foi Koh Soo Keong

Directors’ Interests According to the register kept by the Company for the purposes of Section 164 of the Companies Act, Chapter 50 (the Act), no director who held office at the end of the financial year had interests in shares, debentures, warrants or share options of the Company or of related corporations, either at the beginning or at the end of the financial year.

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

Since the end of the last financial year, no director has received or become entitled to receive a benefit by reason of a contract made by the Company or a related corporation with the director, or with a firm of which he is a member or with a company in which he has a substantial financial interest.

There were no changes in any of the above mentioned interests in the Company between the end of the financial year and 21 January 2010.

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

During the financial year, certain of its subsidiaries have, in the normal course of business entered into transactions with companies in which Mr Li Jia Lin, Mr Narong Intanate and Mr Liu Wei (resigned on 30 April 2009) have an interest.

These transactions include the purchase and sale of information technology products and services of $8,349,686 (2008: $15,231,472) and $11,784,004 (2008: $13,836,284) respectively and are carried out on normal commercial terms.

In addition, rental of office premises of $641,498 (2008: Nil) was paid during the year to a firm in which Mr Foo Sen Chin is a shareholder.

Directors’ report page

35

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

Except as disclosed above and in note 30 to the financial statements, since the end of the last financial year, no director has received or become entitled to receive a benefit by reason of a contract made by the Company or a related corporation with the director or with a firm of which he is a member or with a company in which he has a substantial financial interest.

Share Options The Company (a) Share Option Scheme

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

The above scheme is administered by the Compensation Committee (the “Committee”) which comprises the following directors: Koh Soo Keong (Chairman) Leong Horn Kee Tan Hup Foi Details of Scheme II were set out in the Directors’ Report for the year ended 31 December 2000. (b) Options Granted

During the financial year, no option was granted under Scheme II.

(c) Issue of Shares Under Option

During the financial year, there are no issuance of shares under the share option scheme of the Company.

(d) Unissued Shares under Option

At the end of the financial year, there are no unissued shares under the share option schemes of the Company.

Directors’ report page

36 The details of options granted and exercised are as follows:-

Aggregate Aggregate

Name of Options Options Options

Participants Granted Granted Exercised

[1] [2] [3]

Executive directors

- Tay Eng Hoe - 4,976,000 (2,226,000)

- Narong Intanate - 9,506,000 (8,906,000)

- Foo Sen Chin - 3,860,000 (3,340,000)

Aggregate Options Forfeited/ Lapsed [4]

Aggregate Options Outstanding [5]

(2,750,000) (600,000) (520,000)

- -

Non-executive directors - Leong Horn Kee - Koh Soo Keong

- -

278,000 120,000

- -

(278,000) (120,000)

-

Former directors - Wong Heng Chong - Lin Chien - Chay Yee Meng - Teo Ek Tor - Wang Fangmin - Hsieh Fu Hua - Lee Suet Fern

- - - - - - -

1,713,000 128,000 188,000 130,000 50,000 88,000 258,000

(1,113,000) - - - - - -

(600,000) (128,000) (188,000) (130,000) (50,000) (88,000) (258,000)

-

- - -

8,629,000 23,292,000 53,216,000

(6,679,000) (1,950,000) - (23,292,000) (22,264,000) (30,952,000)

-

Employees (including executive officers)

- Foong Kam Tho

- Other employees

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

Options granted during the financial year under review.

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

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

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

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

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

(i)

no option has been granted to the controlling shareholders of the Company or their associates;

(ii)

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

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

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

Directors’ report page

37

ECS Indo Pte Ltd (a) Options Granted

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

During the financial year, the company issued a total of 24,785 ordinary shares of US$1.8156 each fully paid for cash upon the exercise of options.

(c) Unissued Shares Under Option

Exercise

Date of grant price per

of options share Exercise period

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

Except as disclosed above, there were:-

Number of option holders at 31 December 2009

Options outstanding at 31 December 2009

5

425,215

(i) no options granted by the Company or its subsidiaries to any person to take up unissued shares in the Company or its subsidiaries; (ii) no shares issued by virtue of any exercise of option to take up unissued shares of the Company or its subsidiaries; and (iii) no unissued shares of the Company or its subsidiaries under option at the end of the financial year.

ECS Performance Share Scheme The ECS Performance Share Scheme (the “Scheme”) was approved at the Company’s Extraordinary General Meeting held on 1 December 2006. The Scheme is administered by the Compensation Committee which comprises the Non-Executive Directors Messrs Koh Soo Keong, Leong Horn Kee and Tan Hup Foi. Group Executives who have attained the age of 21 years on or before the date of grant of the Award (as defined below), Group Executive Directors and Non-Executive Directors are eligible to participate in the Scheme (“Participants”). The Scheme is to reward Participants by award of existing Shares held as treasury shares in the Company (“Awards”), which are given free of charge to the Participants according to the extent to which their performance targets set under the Scheme are achieved at the end of a specified performance period.

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

Directors’ report page

38

Audit Committee The members of the Audit Committee during the year and at the date of this report are:Leong Horn Kee Tan Hup Foi Koh Soo Keong

(Chairman, Independent director) (Independent director) (Independent director)

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

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

The Audit Committee also reviewed the following:•

Assistance provided by the Company’s officers to the internal and external auditors;

•

Quarterly financial information and annual financial statements of the Group and the Company prior to their submission to the directors of the Company for adoption; and

•

Interested person transactions (as defined in Chapter 9 of the Listing Manual of the Singapore Exchange).

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

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

Directors’ report page

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

On behalf of the Board of Directors

Li Jia Lin Director

Tay Eng Hoe Director

25 February 2010

39

STATEMENT BY Directors page

40

In our opinion: (a) the financial statements set out on pages 43 to 87 are drawn up so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2009 and of the results, changes in equity and cash flows of the Group for the year ended on that date in accordance with the provisions of the Singapore Companies Act, Chapter 50 and Singapore Financial Reporting Standards; and

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

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

On behalf of the Board of Directors

Li Jia Lin Director

Tay Eng Hoe Director

25 February 2010

INDEPENDENT AUDITORS’ REPORT page

41

Members of the Company ECS Holdings Limited We have audited the financial statements of ECS Holdings Limited (the Company) and its subsidiaries (the Group), which comprise the statements of financial position of the Group and the Company as at 31 December 2009, statement of comprehensive income, statement of changes in equity and statement of cash flows of the Group for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 43 to 87.

Management’s responsibility for the financial statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with the provisions of the Singapore Companies Act, Chapter 50 (the Act) and Singapore Financial Reporting Standards. This responsibility includes: (a) devising and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair profit and loss accounts and balance sheets and to maintain accountability of assets; (b) selecting and applying appropriate accounting policies; and (c) making accounting estimates that are reasonable in the circumstances.

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

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

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

INDEPENDENT AUDITORS’ REPORT page

42

Opinion In our opinion: (a) the consolidated financial statements of the Group and the financial position of the Company are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2009 and the results, changes in equity and cash flows of the Group for the year ended on that date; and (b) the accounting and other records required by the Act to be kept by the Company and by those subsidiaries incorporated in Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act.

KPMG LLP Public Accountants and Certified Public Accountants

Singapore 25 February 2010

FINANCIAL STATEMENTS page

43

Statements of Financial Position As at 31 December 2009

Group Company

Note 2009 2008 2009 2008

$’000 $’000 $’000 $’000 Non-Current Assets Property, plant and equipment 3 8,284 10,918 225 225 Intangible assets 4 33,522 33,522 - Subsidiaries 5 - - 170,999 174,374 Interest in associate 6 7,323 7,284 - Club memberships 290 303 140 151 Deferred tax assets 7 6,619 4,257 -

56,038 56,284 171,364 174,750 Current Assets Inventories 8 217,718 175,292 - Trade and other receivables 9 548,542 444,662 53,526 46,697 Cash and cash equivalents 12 51,117 50,518 2,354 2,087

817,377 670,472 55,880 48,784

Total Assets 873,415 726,756 227,244 223,534

Equity Attributable to

Equity Holders of the Company Share capital 13 112,815 112,815 112,815 112,815 Reserves 14 146,713 124,986 25,889 20,741

259,528 237,801 138,704 133,556 Minority Interests 17,185 14,285 - Total Equity 276,713 252,086 138,704 133,556

Non-Current Liabilities Financial liabilities 16 63,373 66,818 63,225 66,600 Deferred income 17 840 978 - Deferred tax liabilities 7 1,880 886 27 27

66,093 68,682 63,252 66,627 Current Liabilities Financial liabilities 16 113,841 126,596 17,377 20,660 Deferred income 17 358 556 - Trade and other payables 18 409,706 275,424 7,786 2,594 Current tax payable 6,704 3,412 125 97

530,609 405,988 25,288 23,351 Total Liabilities 596,702 474,670 88,540 89,978

Total Equity and Liabilities 873,415 726,756 227,244 223,534

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

FINANCIAL STATEMENTS page

44

Consolidated Statement of Comprehensive Income Year Ended 31 December 2009

Note

2009 $’000

2008 $’000

Revenue 20 3,252,024 Cost of sales (3,093,367) Gross profit 158,657 Other income 6,083 Selling and distribution expenses (63,750) General and administrative expenses (39,705) Profit from operations 21 61,285 Finance costs 22 (5,307) Share of profit of associate, net of tax 1,195 Profit before income tax 57,173 Income tax expense 23 (14,049) Profit for the year 43,124 Other comprehensive income Exchange gain/(loss) on translation of net assets of foreign subsidiaries (7,385) Other comprehensive income, net of tax (7,385) Total comprehensive income for the year 35,739

Profit attributable to: Owners of the Company 38,181 Minority interests 4,943 Profit for the year 43,124

Total comprehensive income attributable to: Owners of the Company 31,223 Minority interests 4,516 Total comprehensive income for the year 35,739

Earnings per share 24 - Basic 10.5 cents - Fully diluted 10.5 cents

2,949,871 (2,800,395) 149,476 4,915 (60,057) (42,090) 52,244 (11,350) 492 41,386 (8,115) 33,271

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

659 659 33,930

29,386 3,885 33,271

30,628 3,302 33,930

8.0 cents 8.0 cents

(5,480) 252,086

-

(5,480)

-

33,271 659 33,930

223,636

Total equity $’000

page

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

Year Ended 31 December 2009

Total

Currency attributable to

Share Dividend General translation Accumulated equity holders Minority

capital reserve reserve reserve profits of the Company interests

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

2008 At 1 January 2008 112,815 5,679 669 (1,720) 95,210 212,653 10,983 Total comprehensive income for the year Profit for the year - - - - 29,386 29,386 3,885 Effects of translation foreign operations - - - 1,250 (8) 1,242 (583) Total comprehensive income for the year - - - 1,250 29,378 30,628 3,302

Transactions with owners, recorded

directly in equity Contributions by and distributions

to owners Transfer to general reserve - - 1,754 (7) (1,747) - - Reversal of dividend reserve - (199) - - 199 - - Final tax-exempt one-tier dividends

paid at 1.50 cents per share for 2007 - (5,480) - - - (5,480) - Proposed tax-exempt one-tier dividends of

2.70 cents per share for 2008 - 9,865 - - (9,865) - - Total contributions by and distributions

to owners - 4,186 1,754 (7) (11,413) (5,480) - At 31 December 2008 112,815 9,865 2,423 (477) 113,175 237,801 14,285

Consolidated Statement of Changes in Equity

FINANCIAL STATEMENTS 45

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

(11,112) 276,713

(1,878)

(9,865)

410 221

-

43,124 (7,385) 35,739

252,086

Total equity $’000

page

Year Ended 31 December 2009

Total

Currency attributable to

Share Dividend General translation Accumulated equity holders Minority

capital reserve reserve reserve profits of the Company interests Group $’000 $’000 $’000 $’000 $’000 $’000 $’000

2009 At 1 January 2009 112,815 9,865 2,423 (477) 113,175 237,801 14,285 Total comprehensive income for the year Profit for the year - - - - 38,181 38,181 4,943 Effects of translation foreign operations - - - (6,958) - (6,958) (427) Total comprehensive income for the year - - - (6,958) 38,181 31,223 4,516

Transactions with owners, recorded

directly in equity - - - - - - - Contributions by and distributions

to owners - - - - - - - Transfer to general reserve - - 1,352 - (1,352) - - Share-based payment transactions - - - - 369 369 41 Issue of shares to minority shareholders - - - - - - 221 Final tax-exempt one-tier dividends

paid at 2.7 cents per share for 2008 - (9,865) - - - (9,865) - Proposed tax-exempt one-tier dividends of

3.0 cents per share for 2009 - 10,961 - - (10,961) - - Dividend payable to minority shareholders - - - - - - (1,878) Total contributions by and distributions

to owners - 1,096 1,352 - (11,944) (9,496) (1,616) At 31 December 2009 112,815 10,961 3,775 (7,435) 139,412 259,528 17,185

Consolidated Statement of Changes in Equity

FINANCIAL STATEMENTS 46

FINANCIAL STATEMENTS page

47

Consolidated Statement of Cash Flows Year Ended 31 December 2009

Note 2009

$’000 Operating Activities Profit before income tax 57,173

Adjustments for: Share of profit of associate (1,195) Net fair value loss on financial instruments 1,880 Depreciation of property, plant and equipment 2,828 Property, plant and equipment written off 6 Other assets written off 13 (Gain)/loss on disposal of property, plant and equipment (45) Gain on disposal of other assets - Finance costs 5,307 Interest income (646) Equity-settled share-based payment by a subsidiary 410 Operating profit before working capital changes 65,731

Changes in working capital: Inventories (49,152) Trade and other receivables (120,291) Trade and other payables 145,150 Cash generated from operations 41,438 Income taxes paid (12,149) Cash flows from operating activities 29,289

Investing Activities Interest received 646 Purchases of property, plant and equipment (1,854) Proceeds from disposal of property, plant and equipment 1,534 Purchase of other assets - Proceeds from sale of other assets - Cash flows generated from/(used in) investing activities 326

Financing Activities Interest paid (6,357) Proceeds from bank loans/trade financing 577,377 Repayment of bank loans/trade financing (587,933) Payment of finance lease instalments (69) Dividends paid to equity holders of the Company (9,865) Issue of shares to minority shareholders 221 Dividend paid to minority shareholders of a subsidiary (68) Repayment of loan from associate - Cash flows used in financing activities (26,694)

Net increase in cash and cash equivalents 2,921 Cash and cash equivalents at beginning of the year 49,502 Effect of exchange rate changes on balances held in foreign currencies (1,306) Cash and cash equivalents at end of the year 12 51,117 The accompanying notes form an integral part of these financial statements.

2008 $’000 41,386

(492) 102 2,915 171 (286) 11,350 (272) 54,874

(14,050) (21,386) 5,871 25,309 (8,944) 16,365

272 (3,514) 29 (17) 674 (2,556)

(11,430) 697,339 (684,782) (43) (5,480) (13) 1,253 (3,156) 10,653 39,425 (576) 49,502

FINANCIAL STATEMENTS page

48

NOTES TO THE FINANCIAL STATEMENTS These notes form an integral part of the financial statements.

The financial statements were authorised for issue by the directors on 25 February 2010.

1 Domicile and Activities

ECS Holdings Limited (the “Company”) is incorporated in the Republic of Singapore and has its registered office at 19 Kallang Avenue, #07-153, Singapore 339410.

The principal activities of the Company are those relating to investment holding and the distribution of information technology products. The principal activities of the subsidiaries are set out in note 5 to the financial statements.

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

The consolidated financial statements relate to the Company and its subsidiaries (together referred to as the “Group”) and the Group’s interests in associate.

2 Summary of Significant Accounting Policies

2.1 Basis of Preparation

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

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

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

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

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

In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements is described in note 4 on the assumptions relating to recoverable amount of goodwill.

Management discussed with the Audit Committee the development, selection and disclosure of the Group’s and the Company’s critical accounting policies and estimates and the application of these policies and estimates.

Starting as of 1 January 2009 on adoption of new/revised FRSs, the Group has changed its accounting policies in the following areas:

• •

Determination and presentation of operating segments Presentation of financial statements

FINANCIAL STATEMENTS page

49

2.1 Basis of Preparation (Cont’d)

Determination and presentation of operating segments

As of 1 January 2009, the Group determines and presents operating segments based on the information that is provided to the Chief Executive Officer (CEO), who is the Group’s chief operating decision maker (CODM). This change in accounting policy is due to the adoption of FRS 108 Operating Segments. Previously operating segments were determined and presented in accordance with FRS 14 Segment Reporting. The new accounting policy in respect of operating segment disclosures is presented as follows:

Comparative segment information has been re-presented in conformity with the transitional requirements of such standard. Since the change in accounting policy only impacts presentation and disclosure aspects, there is no impact on earnings per share. An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. An operating segment’s operating results are reviewed regularly by the CEO to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.

Segment results that are reported to the CEO include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly financial liabilities and income tax assets and liabilities.

Presentation of financial statements

The Group applies revised FRS 1 Presentation of Financial Statements (2008), which became effective as of 1 January 2009. As a result, the Group presents in the consolidated statement of changes in equity all owner changes in equity, whereas all non-owner changes in equity are presented in the consolidated statement of comprehensive income.

Comparative information has been re-presented so that it also is in conformity with the revised standard. Since the change in accounting policy only impacts presentation aspects, there is no impact on earnings per share.

The accounting policies set out below have been applied consistently to all periods presented in these financial statements, and have been applied consistently by Group entities.

2.2 Consolidation

Business combinations

Business combinations are accounted for under the purchase method. The cost of an acquisition is measured at the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition.

The excess of the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition is credited to the income statement in the period of the acquisition.

Subsidiaries

Subsidiaries are entities controlled by the Group. Control exists when the power to govern, directly or indirectly, the financial and operating policies of a company so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

FINANCIAL STATEMENTS page

50

Subsidiaries (Cont’d)

Minority interests represent the portion of the net assets of subsidiaries attributable to interests that are not owned by the Company, whether directly or indirectly through subsidiaries. Minority interests are presented in the consolidated statement of financial position within statement of comprehensive income, separately from statement of comprehensive income attributable to the statement of comprehensive income shareholders of the Company. Minority interests in the results of the Group are presented on the face of the consolidated income statement as an allocation of the total profit or loss for the year between minority interests and the equity shareholders of the Company.

Where losses applicable to the minority exceed the minority’s interest in the statement of comprehensive income of a subsidiary, the excess, and any further losses applicable to the minority, are charged against the Group’s interest except to the extent that the minority has a binding obligation to, and is able to, make additional investment to cover the losses. If the subsidiary subsequently reports profits, the Group’s interest is allocated all such profits until the minority share of losses previously absorbed by the Group has been recovered.

Associates

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

Associates are accounted for using the equity method. The consolidated financial statements include the Group’s share of income, expenses and equity movements of associates after adjustments to align the accounting policies with those of the Group, from the date that significant influence commences until the date that significant influence ceases. When the Group’s share of losses exceeds its interest in an associate, the carrying amount of that interest (including any long-term investments) is reduced to zero and the recognition of further losses is discontinued except to the extent that the Group has an obligation or made payments on behalf of the associate.

Transactions eliminated on consolidation

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

Accounting for subsidiaries and associates by the Company

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

2.3 Foreign Currencies

Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of Group entities at the exchange rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at the reporting date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date on which the fair value was determined.

FINANCIAL STATEMENTS page

51

Foreign currency transactions (Cont’d)

Foreign operations

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

Foreign currency differences are recognised in the foreign currency translation reserve. When a foreign operation is disposed of, in part or in full, the relevant amount in the foreign exchange translation reserve is transferred to the income statement.

Net investment in foreign subsidiaries and associates

Exchange differences arising from monetary items that in substance form part of the Company’s net investment in foreign operations are recognised in the Company’s income statement. Such exchange differences are reclassified to equity in the consolidated financial statements. When the foreign operation is disposed of, the cumulative amount in equity is transferred to the income statement.

Foreign currency differences arising on retranslation are recognised in the income statement, except for differences arising on the retranslation of monetary items that in substance form part of the Group’s net investment in a foreign operation (see below).

2.4 Property, Plant and Equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.

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

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

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

Gains or losses arising from the retirement or disposal of an item of property, plant and equipment are determined as the differences between the net disposal proceeds and the carrying amount of the item and are recognised in the income statement on the date of retirement or disposal.

FINANCIAL STATEMENTS page

52

2.4 Property, Plant and Equipment (Cont’d)

Except for assets under construction, depreciation is recognised in the income statement on a straight-line basis over the estimated useful lives (or lease term, if shorter) of each part of an item of property, plant and equipment.

The estimated useful lives are as follows: -

Freehold building Leasehold improvements Office equipment Furniture and fittings Computers Motor vehicles

Depreciation methods, useful lives and residual values are reviewed, and adjusted as appropriate, at each reporting date.

Fully depreciated assets are retained in the financial statements until they are no longer in use.

- - - - - -

50 years 10 years 5 years 5 years 5 years 5 years

2.5 Intangible Assets

Goodwill

Acquisitions occurring between 1 January 2001 and 31 December 2004

Goodwill represents the excess of the cost of the acquisition over the Group’s interest in the net fair value of the identifiable assets and liabilities of the acquiree. Goodwill arising on the acquisition of subsidiaries is presented in intangible assets.

Goodwill was stated at cost from the date of initial recognition and amortised over its estimated useful life of not more than 20 years. On 1 January 2005, the Group discontinued amortisation of this goodwill. The remaining goodwill balance is subject to testing for impairment, as described in note 2.8.

Acquisitions on or after 1 January 2005

Goodwill represents the excess of the cost of the acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree. Goodwill arising on the acquisition of subsidiaries is presented in intangible assets.

Goodwill is measured at cost less accumulated impairment losses. Goodwill is tested for impairment as described in note 2.8.

FINANCIAL STATEMENTS page

53

Goodwill (Cont’d)

-

for acquisitions before 1 January 2005, negative goodwill is credited to a capital reserve;

-

on 1 January 2005, the negative goodwill in the capital reserve was derecognised by crediting accumulated profits; and

-

for acquisitions on or after 1 January 2005, to the extent that negative goodwill relates to an expectation of future losses and expenses that are identified in the plan of acquisition and can be measured reliably, but which have not yet been recognised, it is recognised in the consolidated income statement when the future losses and expenses are recognised. Any remaining negative goodwill is recognised immediately in the consolidated income statement.

Acquisitions of minority interest

Goodwill arising on the acquisition of a minority interest in a subsidiary represents the excess of the cost of the additional investment over the carrying amount of the net assets acquired at the date of exchange.

Negative goodwill arising on the acquisition of controlled subsidiaries and associates represents the excess of the Group’s share of the fair value of identifiable assets and liabilities acquired over the cost of the acquisition. Negative goodwill is accounted for as follows:

2.6 Financial Instruments

Non-derivative financial instruments

Non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents, financial liabilities and trade and other payables.

Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transaction costs. Subsequent to initial recognition, non-derivative financial instruments are measured at amortised cost using the effective interest method, less any impairment losses.

A financial instrument is recognised if the Group becomes a party to the contractual provisions of the instrument.

Financial assets are derecognised if the Group’s contractual rights to the cash flows from the financial assets expire or if the Group transfers the financial asset to another party without retaining control or transfers substantially all the risks and rewards of the asset. Regular way purchases and sales of financial assets are accounted for at trade date, i.e., the date that the Group commits itself to purchase or sell the asset. Financial liabilities are derecognised if the Group’s obligations specified in the contract expire or are discharged or cancelled.

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

Derivative financial instruments and hedging activities

The Group holds derivative financial instruments to hedge its foreign currency and interest rate risk exposures.

Embedded derivatives are separated from the host contract and accounted for separately if the economic characteristics and risks of the host contract and the embedded derivates are not closely related, a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative, and the combined instrument is not measured at fair value through profit or loss.

FINANCIAL STATEMENTS page

54

Derivative financial instruments and hedging activities (Cont’d)

Derivative financial instruments are recognised initially at fair value; attributable transaction costs are recognised in the income statement when incurred. Subsequent to initial recognition, derivative financial instruments are measured at fair value. The gain or loss on remeasurement to fair value is recognised immediately in the income statement.

However, where derivatives qualify for hedge accounting, recognition of any resultant gain or loss depends on the nature of the item being hedged as described below.

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

Impairment of financial assets (including receivables)

A financial asset is assessed at each reporting date to determine whether there is objective evidence that it is impaired.

A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.

Objective evidence that financial assets are impaired can include default or delinquency by a debtor, restructuring of an amount due to the Group on terms that the Group would not consider otherwise, indications that a debtor or issuer will enter bankruptcy.

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

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

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

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

Share capital

Ordinary shares are classified as equity.

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

Where share capital recognised as equity is repurchased (treasury shares), the amount of the consideration paid, including directly attributable costs, is presented as a deduction from equity. Where such shares are subsequently reissued, sold or cancelled, the consideration received is recognised as a change in equity. No gain or loss is recognised in the income statement.

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55

2.7 Leased Assets

When entities within the group are lessees of a finance lease

Leased assets in which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition, property, plant and equipment acquired through finance leases are capitalised at the lower of their fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the assets are accounted for in accordance with the accounting policy applicable to that asset.

Leased assets are depreciated over the shorter of the lease term and their useful lives. Lease payments are apportioned between finance expense and reduction of the lease liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

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

At inception, an arrangement that contains a lease is accounted for as such based on the terms and conditions even though the arrangement is not in the legal form of a lease.

When entities within the group are lessees of an operating lease

Where the Group has the use of assets under operating leases, payments made under the leases are recognised in the income statement on a straight-line basis over the term of the lease. Lease incentives received are recognised in the income statement as an integral part of the total lease payments made. Contingent rentals are charged to the income statement in the accounting period in which they are incurred.

2.8 Impairment – non-financial assets

The carrying amounts of the Group’s non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the assets’ recoverable amounts are estimated. For goodwill, recoverable amount is estimated at each reporting date, and as when indicators of impairment are identified.

An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. A cash-generating unit is the smallest identifiable asset group that generates cash flows that largely are independent from other assets and groups. Impairment losses are recognised in the income statement. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis.

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

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

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56

2.9 Inventories

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

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

Work-in-progress is stated at cost incurred plus attributable profits. Cost includes direct materials, sub-contracted costs, an appropriate share of production overheads based on normal operating capacity and other related costs incurred. Progress billings received and receivable are shown as a deduction from the value of work-in-progress.

Provision is made for anticipated losses on uncompleted projects when foreseeable.

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

2.10 Dividends

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

2.11 Employee Benefits

Defined contribution plans

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

Short-term employee benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.

A provision is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

Share-based payments

The fair value of options granted is recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and spread over the vesting period.

The proceeds received net of any directly attributable transaction costs are credited to share capital when the options are exercised.

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57

2.12 Financial Guarantee Contracts

Financial guarantee contracts are regarded as insurance contracts under which the Group accepts significant insurance risk from a third party by agreeing to compensate that party on the occurrence of a specified uncertain future event.

Provisions are recognised when it is probable that the guarantee will be called upon and an outflow of resources embodying economic benefits will be required to settle the obligations.

2.13 Revenue Recognition

Sale of goods

Revenue from the sale of goods which encompasses distribution of e-enabling infrastructure and IT products is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates. Revenue is recognised when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, and there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably.

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

Service fees

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

2.14 Government Grants – Jobs Credit Scheme

Cash grants received from the government in relation to the Jobs Credit Scheme are recognised upon receipt. Such grants are provided to defray the wage costs incurred by the Group and are offset against staff costs in the financial statements.

2.15 Finance Expenses

Finance expenses comprise interest expense on borrowings that are recognised in the income statement. All borrowing costs are recognised in the income statement using the effective interest method, except to the extent that they are capitalised as being directly attributable to the acquisition, construction or production of an asset which necessarily takes a substantial period of time to be prepared for its intended use or sale.

2.16 Income Tax Expense

Income tax expense comprises current and deferred tax recognised in the income statement.

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

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58

2.16 Income Tax Expense (Cont’d) Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of goodwill, the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit, and differences relating to investments in subsidiaries to the extent that it is probable that they will not reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

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

Deferred tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not be reversed in the foreseeable future.

The net carrying amount of property, plant and equipment under finance leases as at 31 December 2009 was $286,000 (2008: $269,000).

10,599 10,918 8,284

15,594 2,915 (2,974) (183) 15,352 2,828 (2,682) (548) 14,950

26,193 3,753 (3,174) (502) 26,270 1,940 (4,177) (799) 23,234

Total $’000

page

Freehold Leasehold Office Furniture Motor Assets under

building improvements equipment and fittings Computers vehicles construction

Group $’000 $’000 $’000 $’000 $’000 $’000 $’000

Cost At 1 January 2008 1,627 2,288 1,761 1,847 16,307 1,508 855 Additions 102 148 401 384 2,093 346 279 Disposals - - (246) (243) (2,662) (23) - Transfers/Reclassifications - - - - 58 - (58) Translation adjustment (86) 130 (123) (175) (161) 1 (88) At 31 December 2008 1,643 2,566 1,793 1,813 15,635 1,832 988 Additions - 12 298 404 878 233 115 Disposals/written off (1,449) (95) (349) (190) (1,747) (347) - Transfers/Reclassifications (47) 2 (2) 390 (312) 69 (100) Translation adjustment (48) (64) (36) (54) (522) (54) (21) At 31 December 2009 99 2,421 1,704 2,363 13,932 1,733 982

Accumulated depreciation At 1 January 2008 254 1,156 1,355 1,000 10,962 867 - Depreciation charge for the year 50 269 152 256 1,921 267 - Disposals - - (246) (141) (2,577) (10) - Translation adjustment (26) 95 (98) (115) (40) 1 - At 31 December 2008 278 1,520 1,163 1,000 10,266 1,125 - Depreciation charge for the year 35 308 235 367 1,643 240 - Disposals/written off (266) (25) (328) (168) (1,678) (217) - Transfers/Reclassifications (27) 2 (2) 36 (33) 24 - Translation adjustment (14) (48) (26) (40) (386) (34) - At 31 December 2009 6 1,757 1,042 1,195 9,812 1,138 -

Carrying amount At 1 January 2008 1,373 1,132 406 847 5,345 641 855 At 31 December 2008 1,365 1,046 630 813 5,369 707 988 At 31 December 2009 93 664 662 1,168 4,120 595 982

3 Property, Plant and Equipment

FINANCIAL STATEMENTS 59

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60

3 Property, Plant and Equipment (Cont’d)

Leasehold Office Furniture

improvements equipment and fittings Computers

Company $’000 $’000 $’000 $’000

Cost

At 1 January 2008 191 10 22 190

Additions - 1 - 83

At 31 December 2008 191 11 22 273

Additions - - - 70

At 31 December 2009 191 11 22 343

Accumulated depreciation

At 1 January 2008 113 10 22 70

Depreciation charge for the year 19 - - 38

At 31 December 2008 132 10 22 108

Depreciation charge for the year 19 1 - 50

At 31 December 2009 151 11 22 158

Carrying amount

At 1 January 2008 78 - - 120

At 31 December 2008 59 1 - 165

At 31 December 2009 40 - - 185

Total $’000

413 84 497 70 567

215 57 272 70 342

198 225 225

4 Intangible Assets Group

2009 2008

$’000 $’000

Goodwill on consolidation 33,522 33,522

Impairment testing for goodwill

For the purpose of impairment testing, goodwill is allocated to the Group’s cash-generating unit (CGU) in a group of subsidiaries in the same geographical location with similar principal activities.

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

•

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

•

The anticipated annual revenue growth included in the cash flow projections ranges from 8.6% to 13.1% (2008: 9.7% to 13.5%) per annum for the years 2010 to 2014 (2008: 2009 to 2013), giving an average annual growth in revenue of 11.8% (2008: 11.4%).

•

A pre-tax discount rate of 7.2% (2008: 7.8%) per annum was used. The discount rate used reflects the risk-free rate and the premium for specific risks relating to the business unit.

•

Terminal value was not considered.

FINANCIAL STATEMENTS page

61

4 Intangible Assets (Cont’d)

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

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

5 Subsidiaries

Company

Note 2009 2008

$’000 $’000

Unquoted equity shares, at cost 100,258 100,258

Quasi-equity loans to subsidiaries, at cost

(a) 7,516 7,516

Loan to a subsidiary (b) 63,225 66,600

170,999 174,374

(a)

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

(b) The loan to a subsidiary is unsecured, repayable on 17 January 2011 and bears interest at rates ranging from 2.29% to 4.50% (2008: 4.17% to 4.55%) per annum.

Details of the subsidiaries held directly by the Company are set out below.

Country of Group’s Effective

Incorporation/ Equity Interest

Name of Company Principal Activities Business 2009 2008

% %

ECS Computers Provider of information technology products Singapore 100 100

(Asia) Pte Ltd and services for IT infrastructure

ECS Indo Pte Ltd Distributor of information technology products Singapore 89.12 90

The Value Systems Provider of information technology products Thailand 100 100

Co., Ltd and services for IT infrastructure

ECS KUSH Sdn Bhd Investment holding Malaysia - 60

ECS ICT Sdn Bhd Investment holding Malaysia 60

ECS Technology Investment holding, provider of information Hong Kong 100 100

(China) Limited technology products and services for

IT infrastructure

EC Sure Holdings Investment holding Thailand 99.9 99.9

(Thailand) Co., Ltd

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

FINANCIAL STATEMENTS page

62

5 Subsidiaries (Cont’d)

Details of the significant subsidiaries held by the direct subsidiaries of the Company are set out below.

Name of Company Principal Activities

Country of Incorporation/ Business

Group’s Effective Equity Interest 2009 2008

Subsidiaries of ECS Computers (Asia) Pte Ltd

Pacific City (Asia Pacific) Retail of information technology products, Singapore 100 100 Pte Ltd IT equipment and accessories

ECS Enterprise Solutions Provider of information technology products Singapore 100 Pte Ltd and services for IT infrastructure

Subsidiary of ECS Indo Pte Ltd

PT ECS Indo Jaya Distributor of information technology products Indonesia 89.12 90

Subsidiaries of ECS KUSH Sdn Bhd

ECS Pericomp Sdn Bhd ) Provider of information technology products Malaysia - 48

) and services for IT infrastructure

ECS Astar Sdn Bhd ) Malaysia - 60

Subsidiaries of ECS ICT Sdn Bhd

ECS Pericomp Sdn Bhd ) Provider of information technology products Malaysia 48

) and services for IT infrastructure

ECS Astar Sdn Bhd ) Malaysia 60

Subsidiaries of ECS Technology (China) Limited

ECS (Shanghai) ) Provider of information technology products People’s 100 100

Management Co., Ltd ) and services for IT infrastructure Republic

(formerly ECS International of China

Trading (Shanghai) Co., Ltd)(a)

ECS China Technology ) People’s 100 100

(Shanghai) Co., Ltd(a) ) Republic

) of China

EIT info-tech Limited(a) ) Hong Kong 100

ECS Technology (HK)(a) ) Hong Kong 100

Co., Limited )

(a)

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

KPMG LLP Singapore is the auditor of all the Singapore incorporated subsidiaries. Other member firms of KPMG International are auditors of the significant foreign-incorporated subsidiaries.

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63

6 Interest in Associate

Group

2009 2008

$’000 $’000

Investment in associate, at equity-accounted value 6,691 6,618

Loan to associate 632 666

7,323 7,284

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

Details of the associate, which is audited by Pelayo Teodoro Santamaria & Co., are as follows:

Country of

Incorporation

Name of Associate

Effective Equity held by the Group 2009 2008

MSI-ECS Phils., Inc. Philippines 49.99% 49.99%

The summarised financial information below relating to the associate is not adjusted for the percentage of ownership held by the Group.

Revenue

Profit after taxation

Total assets

Total liabilities

2009 $’000

2008 $’000

171,650 1,838 54,006 40,953

126,911 695 44,451 31,257

Recognised Recognised

Over in income Over in income

At provided in statement Translation At provided in statement Translation At

1/1/2008 prior years (note 23) adjustment 31/12/2008 prior years (note 23) adjustment 31/12/2009

Group $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Deferred Tax Assets

Provisions 2,314 (39) 2,122 (140) 4,257 36 2,445 (119) 6,619

Deferred Tax

Liabilities

Accelerated tax

depreciation (308) 47 (538) (87) (886) 31 (1,054) 29 (1,880)

Company

Deferred Tax

Liabilities

Accelerated tax

depreciation (27) - - - (27) - - - (27)

Movements in deferred tax assets and liabilities during the year are as follows:-

page

7 Deferred Tax

FINANCIAL STATEMENTS 64

FINANCIAL STATEMENTS page

65

8 Inventories

Group

2009 2008

$’000 $’000

Trading inventories 195,314 161,816

Goods in transit 30,308 21,214

225,622 183,030 Allowance for obsolete inventories (7,904) (7,738)

217,718 175,292

Comprises:-

Inventories, at cost 30,308 21,214

Inventories, at net realisable value 187,410 154,078

217,718 175,292

Cost of sales amounted to $3,177,793,000 (2008: $2,908,663,000) represent trading inventories recognised in profit for the year.

9 Trade and Other Receivables

Note

Trade receivables

Bills receivable

Amounts due from affiliated companies

Allowance for doubtful receivables

Amount due from related corporations 10

Deposits and other receivables 11

Total loans and receivables

Prepayments 11

Total trade and other receivables

2009 $’000

Group 2008 $’000

2009 $’000

Company 2008 $’000

484,190 5,208 21,463 510,861 (11,812) 499,049 1,472 500,521 10,948 511,469 37,073 548,542

374,721 - 21,116 395,837 (11,165) 384,672 323 384,995 6,321 391,316 53,346 444,662

- - - - - - 53,416 53,416 31 53,447 79 53,526

46,628 46,628 10 46,638 59 46,697

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

FINANCIAL STATEMENTS page

66

9 Trade and Other Receivables (Cont’d)

The maximum exposure credit risk for trade receivables and amounts due from related corporations at the reporting date by geographic region is:

China

Thailand

Malaysia

Singapore

Indonesia

2009 $’000

Group 2008 $’000

2009 $’000

Company 2008 $’000

250,308 90,112 66,524 43,906 49,671 500,521

210,845 65,628 50,890 32,750 24,882 384,995

- - - 53,416 - 53,416

46,628 46,628

The maximum exposure credit risk for trade receivables and amounts due from related corporations at the statement of financial position date by type of customer is:

Group Company

2009 2008 2009 2008

$’000 $’000 $’000 $’000

Value added resellers 125,115 120,549 -

System integrators 54,351 45,105 -

Direct accounts 176,021 171,236 -

Retailers 101,980 41,508 -

Others 43,054 6,597 53,416 46,628

500,521 384,995 53,416 46,628

Impairment losses

The aging of trade receivables and amounts due from related corporations at the statement of financial position date is:

Group Company

2009 2008 2009 2008

$’000 $’000 $’000 $’000

Gross

Not past due 381,085 281,319 53,416 46,628

Past due 0 – 30 days 90,487 71,061 -

Past due 31 – 120 days 25,746 31,906 -

Past due 121 – 365 days 3,637 5,596 -

More than one year 11,378 6,278 -

512,333 396,160 53,416 46,628

Impairment losses

Not past due - (4) -

Past due 0 – 30 days - (233) -

Past due 31 – 120 days (1,161) (663) -

Past due 121 – 365 days (1,683) (3,987) -

More than one year (8,968) (6,278) -

(11,812) (11,165) -

FINANCIAL STATEMENTS page

67

9 Trade and Other Receivables (Cont’d)

The change in impairment losses in respect of trade receivables and amounts due from related corporations during the year is as follows:

Note

2009 $’000

Group 2008 $’000

2009 $’000

Company 2008 $’000

At 1 January Utilised during the year Impairment loss recognised 21(b) Translation differences on consolidation At 31 December

11,165 (1,358) 2,530 (525) 11,812

8,272 (1,547) 4,773 (333) 11,165

- - - - -

-

Based on historical default rates, the Group believes that no further impairment allowance is necessary in respect of trade receivables and amounts due from related corporations not past due as at 31 December 2009 and 2008. These receivables are mainly arising with customers that have a good record with the Group.

The Group and the Company’s exposure to currency and interest rate risks are disclosed in note 27.

10 Amounts Due from/to Related Corporations

Note

Group 2009 $’000

2008 $’000

2009 $’000

Amounts due from subsidiaries -

Dividend receivable - - 17,913

Non-trade receivables - - 4,478

Loans receivable (current) - - 30,399

- - 52,790

Amounts due from associate -

Dividend receivable 846 - -

Non-trade receivables 626 323 626

1,472 323 626

9 1,472 323 53,416

Amounts due to subsidiaries -

Non-trade payables - - 1,959

Loans payable - - 1,405

18 - - 3,364

Company 2008 $’000

2,481 43,824 46,305 323 323 46,628

478 478

The loans due from subsidiaries are unsecured, repayable on demand and bear interest at rates ranging from 2.04% to 5.5% (2008: 1.96% to 6.73%) per annum.

The non-trade balances are unsecured, interest-free and repayable on demand. The loans payable are unsecured, bear interest at 3.90% to 3.95% per annum and are repayable on demand.

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

FINANCIAL STATEMENTS page

68

11 Deposits, Prepayments and Other Receivables

Note

Deposits

Recoverables

Tax recoverables

Other receivables

Call option (a) Deposits and other receivables 10

Prepayments 10

Total deposits, prepayments and

other receivables

2009 $’000

Group 2008 $’000

2009 $’000

Company 2008 $’000

1,586 4,908 2,362 1,419 673 10,948 37,073

1,620 2,563 33 1,452 653 6,321 53,346

- - 15 16 - 31 79

10 10 59

48,021

59,667

110

69

(a) On 4 January 2006, a subsidiary entered into a call option agreement with a shareholder of the associate for US$1 cash consideration which will entitle the subsidiary to acquire additional 10% equity interest in the associate.

The call option is exercisable beginning 4 July 2008 and ending on the date falling three years thereafter, unless otherwise further extended by the shareholder in writing, at an option price equivalent to US$450,000. The fair value of the call option as at statement of financial position date has been recognised as an option asset with its corresponding change in fair value during the year recognised in the income statement.

12 Cash and Cash Equivalents

Cash at bank and in hand

Bank overdrafts used for cash management purposes

Cash and cash equivalents in cash flow statement

2009 $’000

Group 2008 $’000

2009 $’000

Company 2008 $’000

51,117 - 51,117

50,518 (1,016) 49,502

2,354 - 2,354

2,087 2,087

The weighted average effective interest rates per annum relating to cash and cash equivalents, excluding bank overdrafts, at the statement of financial position date for the Group range from 0.1% to 1.17% (2008: 0.3% to 3.0%) per annum. Interest rates reprice at monthly intervals.

The Group and the Company’s exposure to currency risks are disclosed in note 27.

13 Share Capital

Group and Company

No. of shares

2009 2008

’000 ’000

Issued and fully paid:

At 1 January and 31 December 365,360 365,360

FINANCIAL STATEMENTS page

69

13 Share Capital (Cont’d)

Capital management

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

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

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

14 Reserves

Note

Group 2009 $’000

2008 $’000

2009 $’000

Company 2008 $’000

Currency translation reserve (a) (7,435) (477) -

Dividend reserve (b) 10,961 9,865 10,961 9,865

General reserve (c) 3,775 2,423 -

Accumulated profits 139,412 113,175 14,928 10,876

146,713 124,986 25,889 20,741

(a) Currency translation reserve

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

(b) Dividend reserve

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

(c) General reserve

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

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

FINANCIAL STATEMENTS page

70

15 Equity Compensation Benefits

The Company

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

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

Koh Soo Keong (Chairman)

Leong Horn Kee

Tan Hup Foi

Information regarding the scheme is set out below:

Scheme II

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

- a price equal to the average of the last dealt price for the three consecutive trading days immediately

preceding the grant of the option; or

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

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

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

At 31 December 2009, there are no options granted under the Company’s option schemes for unissued ordinary shares

of the Company.

ECS Indo Pte Ltd

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

At 31 December 2009, details of the options granted to senior employees were as follows: Options Options

Date of Exercise outstanding Options outstanding grant of price per at 1 January Options Options forfeited at 31 December options share 2009 granted exercised or lapsed 2009 Exercise period

16/10/2009 US$1.8156 - 120,000 6,608 - 113,392 16/10/2009 to 16/10/2012

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

FINANCIAL STATEMENTS page

71

16 Financial Liabilities

Note

Group 2009 $’000

2008 $’000

2009 $’000

Company 2008 $’000

Non-current liabilities

Unsecured bank loans 63,225 66,600 63,225 66,600

Finance lease liabilities 148 218 -

63,373 66,818 63,225 66,600

Current liabilities

Unsecured bank overdrafts 12 - 1,016 - Unsecured trade financing 26,027 25,621 -

Unsecured bank loans (a) 85,828 99,955 15,550 20,660

Finance lease liabilities 81 4 -

Derivative liabilities 1,905 - 1,827

113,841 126,596 17,377 20,660

Total financial liabilities 177,214 193,414 80,602 87,260

(a) A negative pledge has been given in respect of all of the assets of certain subsidiaries with a total net book value

at 31 December 2009 of $245,541,073 (2008: $220,546,617).

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

2009

Repayable within 1 year

Repayable after 1 year but within 5 years

2008

Repayable within 1 year

Repayable after 1 year but within 5 years

Principal $’000

Interest $’000

Payments $’000

81 148 229

25 43 68

106 191 297

4 218 222

- 79 79

4 297 301

FINANCIAL STATEMENTS page

72

16 Financial Liabilities (Cont’d)

Terms and debt repayment schedule

Terms and conditions of all other interest-bearing liabilities are as follows:

Nominal 31 December 2009 31 December 2008

interest Year of Face Carrying Face Carrying

Currency rate maturity value amount value amount

$’000 $’000 $’000 $’000

Group

Unsecured bank loans

and trade financing

- floating rate SGD 1.97% - 5.12% 2010 9,200 9,200 14,500 14,500

- floating rate USD 2.20% - 4.50% 2010 - 2011 96,577 96,577 99,938 99,938

- floating rate RMB 2.50% - 4.86% 2010 25,720 25,720 28,604 28,604

- fixed rate THB 1.75% - 4.95% 2010 22,386 22,386 23,220 23,220

- floating rate RM 2.72% - 3.78% 2010 21,197 21,197 25,914 25,914

175,080 175,080 192,176 192,176

Unsecured bank overdrafts - - - - - 1,016 1,016

Finance lease liabilities USD 8.00% 2010 - 2013 229 229 222 222

Derivative liabilities - - - 1,905 1,905 -

177,214 177,214 193,414 193,414

Company

Unsecured bank loans

- floating rate loans SGD 1.97% - 2.19% 2010 1,500 1,500 2,500 2,500

- floating rate loans USD 2.29% - 4.50% 2010 77,275 77,275 84,760 84,760

78,775 78,775 87,260 87,260

Derivative liabilities - - - 1,827 1,827 -

80,602 80,602 87,260 87,260

FINANCIAL STATEMENTS page

73

16 Financial Liabilities (Cont’d)

Liquidity risk

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

Cash flows

Carrying Contractual Within Between

amount cash flows 1 year 1 to 5 years

Group $’000 $’000 $’000 $’000

2009

Unsecured trade financing 26,027 (26,027) (26,027)

Unsecured bank loans 149,053 (150,183) (86,243) (63,940)

Finance lease liabilities 229 (229) (81) (148)

Derivative liabilities

- Inflow - 33,967 33,967

- Outflow 1,905 (35,872) (35,872)

Trade and other payables 409,706 (409,706) (409,706)

586,920 (588,050) (523,962) (64,088)

2008

Non-derivative financial liabilities

Unsecured bank overdrafts 1,016 (1,016) (1,016)

Unsecured trade financing 25,621 (25,621) (25,621)

Unsecured bank loans 166,555 (171,505) (102,052) (69,453)

Finance lease liabilities 222 (222) (4) (218)

Trade and other payables 275,424 (275,424) (275,424)

468,838 (473,788) (404,117) (69,671)

Carrying Contractual

amount cash flows

Company $’000 $’000

2009

Unsecured bank loans 78,775 (79,594)

Derivative liabilities

- Outflow 1,827 (1,827)

Trade and other payables 7,786 (7,786)

88,388 (89,207)

2008

Non-derivative financial liabilities

Unsecured bank loans 87,260 (92,269)

Trade and other payables 2,594 (2,594)

89,854 (94,863)

Cash flows Within Between 1 year 1 to 5 years $’000 $’000

(15,654)

(63,940)

(1,827) (7,786) (25,267)

(63,940)

(22,816) (2,594) (25,410)

(69,453) (69,453)

FINANCIAL STATEMENTS page

74

17 Deferred Income

Deferred income relates to fees billed in advance on service maintenance contracts and consists of:

Current portion

Non-current portion

Group 2009 $’000

2008 $’000

358 840 1,198

556 978 1,534

18 Trade and Other Payables

Note

Trade payables

Accruals and other payables 19

Amounts due to subsidiaries 10

2009 $’000

Group 2008 $’000

2009 $’000

Company 2008 $’000

359,400 50,306 - 409,706

230,638 44,786 - 275,424

- 4,422 3,364 7,786

2,116 478 2,594

The Group and the Company’s exposure to liquidity and currency risk related to trade and other payables are disclosed in note 16 and 27 respectively.

19 Accruals and Other Payables

2009 $’000

Group 2008 $’000

2009 $’000

Company 2008 $’000

Accrued operating expenses

Deposits received

Dividend payable to minority shareholders

Other payables

Interest payables

37,078 5,655 1,810 5,216 547 50,306

32,000 5,851 - 5,338 1,597 44,786

4,273 - - 149 - 4,422

2,116 2,116

20 Revenue

Sale of IT products

IT services

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

Group 2009 $’000

2008 $’000

3,222,173 29,851 3,252,024

2,916,291 33,580 2,949,871

FINANCIAL STATEMENTS page

75

21 Profit from Operations

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

(a) Staff costs

Wages and salaries

Contributions to defined contribution plans

Group 2009 $’000

2008 $’000

55,551 6,577 62,128

52,321 4,096 56,417

(b) Other expenses/(income)

Exchange loss/(gains) (net)

Interest income

- banks

- associate

Allowances made for

- obsolete inventories

- doubtful trade receivables

Directors’ fees

Government grants – Jobs Credit Scheme, offset against wages and salaries

Inventories written off/(written back)

Bad debts written (back)/off, net

(Gain)/loss on disposal of property, plant and equipment

Gain on disposal of other assets

Equity-settled share-based payment by a subsidiary

Property, plant and equipment written-off

Non-audit fees to auditors of the Company

Net fair value loss on financial instruments

Operating lease expenses

Group 2009 $’000

2008 $’000

879

(987)

(344) (302)

(272) -

763 2,530 257 (567) 1,017 (284) (45) - 410 6 25 1,880 5,927

4,225 4,773 207 (466) 127 171 (286) 23 102 5,163

22 Finance Costs

Recognised in profit for the year

Interest paid and payable on

- bank overdrafts

- finance leases

- short-term loans

Group 2009 $’000

2008 $’000

9 25 5,273 5,307

29 10 11,311 11,350

FINANCIAL STATEMENTS page

76

23 Income Tax Expense

Group

2009

$’000

Tax expense

Current tax expense

- Current year 15,303

- Under/(over) provided in prior years 204

15,507

Deferred tax expense

- Movements in temporary differences (1,306)

- Changes in tax rates (85)

- Overprovided in prior years (67)

(1,458)

Income tax expense for the year 14,049

2008 $’000

9,881 (96) 9,785 (1,584) (86) (1,670) 8,115

Reconciliation of effective tax rate

Profit before tax 57,173 41,386

Income tax at 17% (2008: 18%) 9,719 7,450

Non-deductible expenses 1,209 344

Income not subject to tax (1,127) (84)

Effect of different tax rates in foreign jurisdictions 3,180 804

Changes in tax rates (85)

(Over)/under provided in prior years 137 (182)

Utilisation of previously unrecognised tax losses (133) (528)

Withholding taxes on profits from PRC subsidiaries 1,208 460

Others (59) 147

Income tax expense for the year 14,049 8,115

The Singapore corporate tax rate has been reduced from 18% to 17% with effect from 22 January 2009 for the Year of Assessment 2010.

24 Earnings per Share

Group

2009 2008

Basic earnings per share is based on:-

Net profit for the year ($’000) 38,181 29,386

Number of shares outstanding at the beginning of the year (’000) 365,360 365,360

Weighted average number of shares issued during the year (’000) -

Weighted average number of shares in issue during the year (’000) 365,360 365,360

FINANCIAL STATEMENTS page

77

24 Earnings per Share (Cont’d)

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

Weighted average number of shares used in calculation of basic earnings per share

Weighted average number of dilutive potential ordinary shares

Number of shares that would have been issued at fair value Weighted average number of ordinary shares (diluted)

Number of Shares 2009 2008 ’000 ’000 365,360 - - 365,360

365,360 365,360

25 Operating Segments

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

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

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

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

The main business segments of the Group are the following:-

Segments

Principal Activities

Enterprise systems

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

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

IT services

Distribution

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

FINANCIAL STATEMENTS page

78

25 Operating Segments (Cont’d)

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

Enterprise Systems IT Services Distribution Consolidated

2009 2008 2009 2008 2009 2008 2009 2008

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

External revenue 1,187,926 1,133,338 29,851 33,580 2,034,247 1,782,953 3,252,024 2,949,871

Depreciation and

amortisation (1,033) (1,120) (26) (33) (1,769) (1,762) (2,828) (2,915)

Reportable segment

profit before

interest and tax 28,816 26,437 1,848 1,874 30,621 23,933 61,285 52,244

Reportable segment

assets 273,463 223,604 6,550 26,194 478,559 354,606 758,572 604,404

Capital expenditure 633 1,308 31 56 1,276 2,389 1,940 3,753 Reportable segment

liabilities 148,793 113,898 3,014 2,760 259,096 160,300 410,903 276,958

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

Profit or loss

Total profit for reportable segments

Unallocated amounts:

- Finance costs

Share of profit of associate

Consolidated profit before tax

Assets

Total assets for reportable segments

Other assets

Investments in associate

Other unallocated amounts

Consolidated total assets

Liabilities

Total liabilities for reportable segments

Other unallocated amounts

Consolidated total liabilities

2009 $’000

2008 $’000

61,285

52,244

(5,307) 1,195 57,173

(11,350) 492 41,386

758,572 290 7,323 107,230 873,415

604,404 303 7,284 114,765 726,756

410,903 185,799 596,702

276,958 197,712 474,670

FINANCIAL STATEMENTS page

79

26 Geographical Segments

The Group operates principally in Singapore, Malaysia, China, Thailand and Indonesia. In presenting information on the basis of geographic segments, segment revenue is based on the geographic location of operations. Segment assets are based on the geographic location of the assets.

China

Thailand

Malaysia

Singapore

Indonesia

2009 $’000

Revenue 2008 $’000

1,685,235 505,912 559,070 281,462 220,345 3,252,024

1,515,564 494,149 498,417 287,833 153,908 2,949,871

Non-current assets 2009 2008 $’000 $’000 35,906 2,624 1,551 1,564 451 42,096

36,432 3,412 2,763 1,686 450 44,743

27 Financial Risk Management

Overview

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

The Audit Committee oversees how management monitors compliance with the Group’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group.

The Audit Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.

Credit risk

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

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

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

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

The carrying amount of financial assets represents the maximum credit exposure at the reporting date as disclosed in note 9 to the financial statements.

FINANCIAL STATEMENTS page

80

27 Financial Risk Management (Cont’d)

Liquidity risk

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

In addition, as at the reporting date, the Group maintains various lines of credit, amounting to $410 million (2008: $434 million), of which $333million (2008: $353million) are unsecured.

Market risk

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

Foreign currency risk

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

The Group recognises that any significant fluctuations in the USD dollar may affect the Group’s foreign currency risk.

As a result, the Group actively monitors its exposure and uses forward foreign exchange contracts and hybrid swaps to hedge against USD dollar exposures, as and when necessary and where possible.

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

At 31 December, the Group has outstanding forward exchange contracts and hybrid swaps with a total notional amount of approximately $110,115,000 (2008: Nil).

FINANCIAL STATEMENTS page

81

27 Financial Risk Management (Cont’d)

Exposure to currency risk

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

USD

$’000

Group

31 December 2009 Trade and loan receivables 12,455

Cash and cash equivalents 8,157

Unsecured bank loans/trade financing (85,424)

Trade payables (42,232)

Forward exchange contracts and hybrid swaps 110,115

3,071

31 December 2008

Trade and loan receivables 6,277

Cash and cash equivalents 6,241

Unsecured bank loans/trade financing (88,904)

Trade payables (17,426)

(93,812)

Company

31 December 2009

Loan receivables

- non-current

- current

Cash and cash equivalents

Unsecured bank loans/trade financing

Forward exchange contracts and hybrid swaps

31 December 2008

Loan to subsidiary

- non-current

- current

Cash and cash equivalents

Unsecured bank loans/trade financing

IDR $’000

2,861 157 (56) 2,962

199 138 (17) 320 USD $’000

63,225 27,401 2,154 (77,275) 77,275 92,780

66,600 36,628 1,991 (84,760) 20,459

FINANCIAL STATEMENTS page

82

27 Financial Risk Management (Cont’d)

Sensitivity analysis

A 1% strengthening of the Singapore dollar against financial assets and liabilities denominated in the following currencies other than the functional currencies of Group entities at 31 December would have increased/(decreased) profit before tax by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant.

Group Company

Profit or Loss Profit or Loss

2009 2008 2009 2008

$’000 $’000 $’000 $’000

USD 742 938 (15) (205)

IDR (30) (3) -

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

Group Company

Profit or Loss Profit or Loss

2009 2008 2009 2008

$’000 $’000 $’000 $’000

USD IDR

31 30

(938) 3

928 -

205 -

Interest rate risk

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

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

Group

Carrying amount

2009 2008

$’000 $’000

Company Carrying amount 2009 2008 $’000 $’000

Fixed rate instruments Financial liabilities (22,615) (23,442) -

Variable rate instruments Financial assets - - 30,399

Financial liabilities (154,599) (169,972) (82,007)

(154,599) (169,972) (51,608)

-

43,824 (87,260) (43,436)

FINANCIAL STATEMENTS page

83

27 Financial Risk Management (Cont’d)

Fair value sensitivity analysis for fixed rate instruments

The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss, and the Group does not hedge such fixed rate exposure. Therefore a change in interest rates at the reporting date would not affect profit or loss.

Cash flow sensitivity analysis for variable rate instruments

A change of 100 basis points in interest rates at the reporting date would have increase/ (decreased) profit or loss before tax by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. The analysis is performed on the same basis for 2008.

Group Company

Profit or Loss Profit or Loss

100 bp 100 bp 100 bp 100 bp

increase decrease increase decrease

Group $’000 $’000 $’000 $’000

31 December 2009

Variable rate instruments (1,546) 1,546 (516) 516

Interest rate swaps and hybrid swaps 984 (984) 984 (984)

Cash flow sensitivity (net) (562) 562 468 (468)

31 December 2008

Variable rate instruments (1,700) 1,700 (434) 434

Cash flow sensitivity (net) (1,700) 1,700 (434) 434

Fair values

The following summarises the significant methods and assumptions used in estimating the fair values of financial instruments of the Group and Company.

Derivatives

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

Other short term financial assets and liabilities

The carrying amounts of financial assets and liabilities with a maturity of less than one year (including trade and other receivables, cash and cash equivalents, and trade and other payables) approximate their fair values because of the short period to maturity. All other financial assets and liabilities are discounted to determine their fair values.

FINANCIAL STATEMENTS page

84

27 Financial Risk Management (Cont’d)

Fair values versus carrying amounts

The carrying amounts of the Group and the Company’s financial instruments carried at cost or amortised cost are not materially different from their fair values as at 31 December 2009.

Fair value hierarchy

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

•

Level 1 : quoted prices (unadjusted) in active markets for identical assets or liabilities

• Level 2 : inputs other than quoted prices included within Level 1 that are observable for the asset or liability,

either directly (i.e., as prices) or indirectly (i.e., derived from prices)

• Level 3 : inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Level 1 Level 2 Level 3 Total

$’000 $’000 $’000 $’000

Group

31 December 2009

Derivative liabilities - (1,905) - (1,905)

Company

31 December 2009

Derivative liabilities - (1,827) - (1,827)

28 Commitments

Operating lease commitments

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

Payable:

Within 1 year

After 1 year but within 5 years

Group 2009 $’000

2008 $’000

4,637 3,393 8,030

4,723 4,951 9,674

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

FINANCIAL STATEMENTS page

85

29 Contingent Liabilities (Unsecured)

Guarantees issued

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

(a) Guarantees given to suppliers by the Company in respect of credit facilities extended to certain subsidiaries amounted to $203,064,000 (2008: $187,084,000), of which the amount utilised was $90,777,000 (2008: $56,174,000). The guarantees are renewed on a yearly basis;

(b) Guarantees given to financial institutions by the Company in respect of credit facilities extended to certain subsidiaries amounted to $177,017,000 (2008: $199,746,000), of which the amount utilised was $75,135,000 (2008: $74,494,000). The guarantees are renewed on a yearly basis;

(c) Guarantees given to financial institutions by the subsidiaries in respect of credit facilities extended to the Company amounted to $77,275,000 (2008: $81,400,000), of which $77,275,000 (2008: $81,400,000) had been utilised; and

(d) A claim was made on a subsidiary, The Value Systems Co., Ltd, which was named as a second defendant in a law suit for copyright infringement amounting to Baht 170 million (equivalent to $7,000,000). The Central Intellectual Property and International Trade Court of Thailand has ruled that the company was not liable for the damages claimed by the plaintiff. The plaintiff filed an appeal to the Supreme Court but in 2009 the Supreme Court upheld the lower court’s original ruling and the case is now considered to be closed.

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

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

FINANCIAL STATEMENTS page

86

30 Related Parties

Transactions with directors and other key management personnel

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

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

Group 2009 $’000

2008 $’000

2009 $’000

Company 2008 $’000

Directors of the Company

- Short-term employment benefits 2,883 2,271 1,493

- Other long-term benefits 102 94 6

Directors of the subsidiaries

- Short-term employment benefits 2,465 2,379 732

- Other long-term benefits 121 121 19

Executive officers

- Short-term employment benefits 2,989 1,387 316

- Other long-term benefits 57 23 8

8,617 6,275 2,574

-

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

Purchase of information technology products and services

Sales of information technology products and services

Rental of office premises

-

Group 2009 $’000

2008 $’000

8,350 11,784 641

15,231 13,836 -

The directors and other key management personnel participate in the Company’s share option plans, the terms and conditions of which are stated in note 15. There are no options granted or exercised for the year ended 31 December 2009. As at 31 December 2009, the Company has no outstanding options.

FINANCIAL STATEMENTS page

87

30 Related Parties (Cont’d)

Other related party transactions

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

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

Group 2009 $’000

2008 $’000

Subsidiaries - interest expense - - - interest income - - - management fee income - - - dividend income - - Affiliates - sales 78,771 110,770 Associate - service fee income 552 298

2009 $’000

Company 2008 $’000

(1,009) 3,764 2,678 18,527

(369) 4,704 14,778

-

-

552

298

31 New Accounting Standards and Interpretations Not Yet Adopted

The Group has not applied the following accounting standards and interpretations that have been issued as of 31 December 2009 but are not yet effective:

FRS 27 (revised) FRS 101 (revised) FRS 103 (revised) Amendments to FRS 39 INT FRS 117 INT FRS 118 Improvements to FRSs 2009

Management is currently assessing the initial application of these standards and interpretations. The Group has not considered the impact of accounting standards issued after 31 December 2009.

Consolidated and Separate Financial Statements First-time adoption of FRS (improved structure) Business Combinations Financial Instruments: Recognition and Measurement -Eligible Hedged Items Distributions of Non-cash Assets to Owners Transfer of Assets from Customers Improvements to FRSs 2009

Shareholdings Statistics as at 15 March 2010

page

88

Class of shares - Voting rights -

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

ANALYSIS OF SHAREHOLDINGS Range of Shareholdings

1 - 999

1,000 - 10,000

10,001 - 1,000,000

1,000,001 and above

No. of Shareholders 6 369 217 5 597

% 1.00 61.81 36.35 0.84 100.00

No. of Shares 2,081 2,013,000 15,642,000 347,703,093 365,360,174

% 0.00 0.55 4.28 95.17 100.00

Based on information available to the Company as at 15 March 2010, 10.34% of the issued ordinary shares of the Company are held by the public and therefore Rule 723 of the Listing Manual is complied with.

TOP 21 SHAREHOLDERS

No. Name of Shareholder No. of Shares 1 Raffles Nominees (Pte) Ltd 328,244,093 2 Citibank Nominees Singapore Pte Ltd 10,906,000 3 DBS Nominees Pte Ltd 5,930,000 4 OCBC Securities Private Ltd 1,370,000 5 United Overseas Bank Nominees Pte Ltd 1,253,000 6 UOB Kay Hian Pte Ltd 873,000 7 Ng Chwee Cheng 839,000 8 Mayban Nominees (S) Pte Ltd 750,000 9 DBSN Services Pte Ltd 673,000 10 Db Nominees (S) Pte Ltd 666,000 11 Pang Heng Kwee 649,000 12 Chew Beng Hock Peter 647,000 13 HSBC (S) Nominees Pte Ltd 646,000 14 Kim Eng Securities Pte. Ltd. 500,000 15 Vision Capital Private Limited 500,000 16 Tat Hong Capital Pte Ltd 438,000 17 Koh Seng Chuah 250,000 18 Lim & Tan Securities Pte Ltd 216,000 19 Lim Siu Horng 200,000 20 Ramesh S/O Pritamdas Chandiramani 200,000 21 Sim Siok Koon 200,000

355,950,093

% 89.84 2.98 1.62 0.37 0.34 0.24 0.23 0.21 0.18 0.18 0.18 0.18 0.18 0.14 0.14 0.12 0.07 0.06 0.05 0.05 0.05 97.41

SUBSTANTIAL SHAREHOLDERS

Number of shares

Name of substantial registered in the name of

shareholder substantial Shareholder

VST Holdings Limited L&L Limited

- -

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

Number of shares in which substantial shareholder is deemed to have an interest Total 327,580,093(1) 327,580,093(1)

327,580,093 327,580,093

Percentage (%) 89.66 89.66

Notice of Annual General Meeting page

89

ECS HOLDINGS LIMITED (Incorporated in the Republic of Singapore) Company Registration No. 199804760R NOTICE IS HEREBY GIVEN that the Twelfth Annual General Meeting of the Company will be held at 19 Kallang Avenue #07-153 Singapore 339410 on Friday, 30 April 2010 at 4.00 p.m. to transact the following business :ORDINARY BUSINESS 1

To receive and adopt the Directors’ Report and Audited Accounts for the financial year ended 31 December 2009 and the Auditors’ Report thereon.

2

To declare a one-tier tax exempt first and final dividend of 3.0 cents per ordinary share for the year ended 31 December 2009.

[Resolution 2]

3

(a) To re-elect Mr Leong Horn Kee who is retiring in accordance with Article 91 of the Company’s Articles of Association, as Director of the Company.

[Resolution 3(a)]

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

(b) To re-elect Mr Foo Sen Chin who is retiring in accordance with Article 91 of the Company’s Articles of Association, as Director of the Company.

[Resolution 3(b)]

4

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

[Resolution 4]

5

To approve the payment of Directors’ Fees of $190,000.00 for the year ended 31 December 2009.

(2008: $189,000.00).

[Resolution 5]

[Resolution 1]

SPECIAL BUSINESS 6

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

(a) THAT pursuant to Section 161 of the Companies Act, Cap. 50 (the “Act”) and the listing rules of the Singapore

Exchange Securities Trading Limited (the “SGX-ST”), authority be and is hereby given to the Directors to:

(i)

issue shares in the capital of the Company whether by way of bonus issue, rights issue or otherwise; and/or

(ii) make or grant offers, agreements or options (collectively “Instruments”) that might or would require shares

to be issued, including but not limited to the creation and issue of (as well as adjustments to) warrants,

debentures or other instruments convertible into shares; and/or

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

Instruments;

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

Notice of Annual General Meeting page

90

provided that:

(1) the aggregate number of shares to be issued pursuant to this Resolution (including shares to be issued in

pursuance of any Instruments made or granted pursuant to this Resolution):

(A) shall not exceed 50% of the total number of issued shares in the capital of the Company excluding treasury shares (as calculated in accordance with sub-paragraph (2) below), of which the aggregate number of shares to be issued other than on a pro rata basis to shareholders of the Company shall not exceed 20% of the total number of issued shares in the capital of the Company excluding treasury shares (as calculated in accordance with sub-paragraph (2) below); and

(B) the 50% limit in sub-paragraph (A) above may be increased to 100% for issues of shares and/or Instruments by way of renounceable rights issue where shareholders of the Company are entitled to participate in the same on a pro rata basis;

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

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

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

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

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

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

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

(b) THAT, subject to the grant of the share issue mandate proposed to be tabled as Resolution 6(a) above and pursuant to the terms and conditions of the share issue mandate, notwithstanding Rule 811 of the Listing Manual, the Directors of the Company be and are hereby authorised to issue new shares of the Company to subscribers or placees under a share placement, undertaken on a non pro rata basis, at a discount of up to 20% to the weighted average price for trades done on the SGX-ST for the full market day on which the placement agreement or subscription agreement is signed, PROVIDED THAT, if trading in the Company’s shares is not available for a full market day, the weighted average price shall be based on trades done on the preceding market day up to the time the placement agreement or subscription agreement is signed.

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

Notice of Annual General Meeting page

91

(c) That the Directors be and are hereby authorised to offer and grant options in accordance with the provisions of the ECS Share Option Scheme II (the “ECS Share Option Scheme II”), and to allot and issue from time to time such number of shares in the capital of the Company as may be required to be issued pursuant to the exercise of the options under the ECS Share Option Scheme II provided always that the aggregate number of ordinary shares to be issued pursuant to the ECS Share Option Scheme II shall not exceed fifteen per cent of the total number of issued shares in the capital of the Company from time to time.

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

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

(i)

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

(iii) the Directors of the Company and/or any of them be and are hereby authorised to complete and do all such acts and things (including, without limitation, executing all such documents and approving any amendment, alteration or modification to any document) as they may consider desirable, expedient or necessary or in the interests of the Company to give effect to the aforesaid Shareholders’ General Mandate and/or this Resolution 6(d).

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

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

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

(i)

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

(iii) the Directors of the Company and/or any of them be and are hereby authorised to complete and do all such acts and things (including, without limitation, executing all such documents and approving any amendment, alteration or modification to any document) as they may consider desirable, expedient or necessary or in the interests of the Company to give effect to the aforesaid Shareholders’ General Mandate and/or this Resolution 6(e).

[See Explanatory Note (iv)] [Resolution 6(e)]

the Shareholders’ General Mandate for the Company, its subsidiaries and associated companies or any of them to enter into any of the transactions falling within the types or categories of interested person transactions as described in section 3.1 (Interested Person Transactions) of Appendix A with Netband Consulting Co., Ltd, Vnet Capital Co., Ltd, Vnet Capital International Co., Ltd., Thai Incubator Dot Com Co., Ltd, Vintcom Technology Co., Ltd. and/or other associates of Mr. Narong Intanate, a Director of the Company (as the case may be), be and is hereby approved, provided that such transactions are entered into on an arm’s length basis, on normal commercial terms and in accordance with the guidelines for interested person transactions as set out in section 3.5 (Review Procedures) of Appendix A;

Notice of Annual General Meeting page

92 (f)

That: (i)

for the purposes of the Companies Act, the exercise by the Directors of the Company of all the powers of the Company to purchase or otherwise acquire the ordinary shares in the capital of the Company not exceeding in aggregate the Prescribed Limit (as hereafter defined), at such price(s) as may be determined by the Directors of the Company from time to time up to the Maximum Price (as hereafter defined), whether by way of:

(a) market purchases (each a “Market Purchase”) on the Singapore Exchange Securities Trading Limited

(“SGX-ST”); and/or

(b) off-market purchases (each an “Off-Market Purchase”) effected otherwise than on the SGX-ST in accordance with any equal access schemes as may be determined or formulated by the Directors of the Company as they consider fit, which schemes shall satisfy all the conditions prescribed by the Companies Act, and otherwise in accordance with all other provisions of the Companies Act and listing rules of the SGX-ST as may for the time being be applicable, be and is hereby authorised and approved generally and unconditionally (the “Share Buyback Mandate”);

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

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

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

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

(iii) in this Resolution:

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

“Relevant Period” means the period commencing from the date on which this AGM is held and expiring on the date the next AGM is held or is required by law to be held, whichever is the earlier, after the date of this Resolution; and

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

(i)

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

where:

“Average Closing Price” means the average of the closing market prices of a share over the last five market days, on which transactions in the shares were recorded, preceding the day of the Market Purchase, and deemed to be adjusted for any corporate action that occurs after the relevant 5-day period;

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

Notice of Annual General Meeting page

93

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

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

7

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

[See Explanatory Note (v)] [Resolution 6(f)]

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

[Resolution 7]

By Order of the Board Eddie Foo Toon Ee Company Secretary Singapore 14 April 2010 Explanatory Notes : (i)

Resolution 6(a), if passed, will authorise the Directors to issue shares in the capital of the Company and to make or grant Instruments (such as warrants or debentures) convertible into shares, and to issue shares in pursuance of such Instruments, up to a number not exceeding (i) 50% of the total number of issued shares in the capital of the Company, of which up to 20% may be issued other than on a pro rata basis to shareholders and (ii) the aforesaid limit of 50% may be increased to 100% for issue of shares and/or Instruments by way of renounceable rights issue where shareholders of the Company are entitled to participate in the same on a pro rata basis. For the purpose of determining the aggregate number of shares that may be issued, the percentage of issued shares shall be based on the total number of issued shares excluding treasury shares in the capital of the Company at the time that Resolution 6(a) is passed, after adjusting for (a) new shares arising from the conversion or exercise of any convertible securities, (b) new shares arising from the exercise of share options or vesting of share awards which are outstanding or subsisting at the time that Resolution 6(a) is passed, provided that the aforesaid share options or share awards were granted in compliance with Part VIII of Chapter 8 of the Listing Manual, (c) any subsequent bonus issue or consolidation or subdivision or shares.

The authority for undertaking pro rata renounceable rights issues of up to 100% of the Company’s issued share capital is proposed pursuant to the SGX-ST’s news release of 19 February 2009 which, inter alia, introduced further measures to accelerate and facilitate the fund raising efforts of listed issuers. If Resolution 6(a) is approved, a renounceable rights issue made pursuant to the mandate is conditional upon the Company:-

•

making periodic announcements on the use of the proceeds as and when the funds are materially disbursed; and

•

providing a status report on the use of proceeds in the annual report.

Notice of Annual General Meeting page

94 Resolution 6(a), if passed, will provide the Directors with an opportunity to raise funds and avoid prolonged market exposure by reducing the time taken for shareholders’ approval, in the event such need arises. The risk to minority shareholders’ interests are mitigated as all shareholders have equal opportunities to participate and can dispose of their entitlements through trading of nil-paid rights if they do not wish to subscribe for their rights shares pursuant to any renounceable rights issue.

(ii) Resolution 6(b), if passed, will authorise the Directors to issue new shares in pursuance of the share issue mandate granted under Resolution 6(a), to subscribers or placees, on a non pro rata basis, at a discount of not more than 20% to the weighted average price for trades done on the SGX-ST for the full market day on which the placement or subscription agreement is signed.

The maximum discount of 20% is proposed pursuant to the SGX-ST’s news release of 19 February 2009 which, inter alia, introduced further measures to accelerate and facilitate the fund raising efforts of listed issuers.

(iii) Resolution 6(c), if passed, will authorise the Directors to offer and grant options and to allot and issue shares pursuant to the ECS Share Option Scheme II, provided that the aggregate number of shares issued pursuant to the ECS Share Option Scheme II shall not exceed fifteen (15) per cent of the total number of issued shares in the capital of the Company from time to time. (iv) Resolutions 6(d) and 6(e), if passed, will authorise the Company, its subsidiaries and associated companies, from the date of the annual general meeting until the conclusion of the next annual general meeting, to enter into interested person transactions with certain interested persons of the Company, its subsidiaries and/or associated companies. Each of such mandates shall, unless revoked or varied by the Company in general meeting, continue in force until the next annual general meeting of the Company. For further details on the interested person transactions and interested persons referred to, please see Appendix A to this Notice. (v) Resolution 6(f), if passed, will renew effective up to the next annual general meeting (unless earlier revoked or varied by the Company in general meeting) the Share Buyback Mandate for the Company to purchase or acquire its ordinary shares. The amount of financing required for the Company to purchase or acquire its ordinary shares, and the impact on the Company’s financial position, cannot be ascertained as at the date of the Notice of Annual General Meeting as these will depend on the number of ordinary shares purchased or acquired and the price at which such ordinary shares were purchased or acquired. For further details on the Share Buyback Mandate, please see Appendix B to this Notice.

Proxies : A member entitled to attend and vote at the annual general meeting may appoint not more than two proxies to attend and vote on his behalf and where a member appoints more than one proxy, the proportion of the shareholding concerned to be represented by each proxy shall be specified in the form of proxy. A proxy need not be a member of the Company. The instrument appointing a proxy must be deposited at the office of the Company’s Share Registrar, M & C Services Private Limited, 138 Robinson Road #17-00, The Corporate Office, Singapore 068906, not less than forty-eight hours before the time set for the holding of the annual general meeting.

NOTICE OF BOOKS CLOSURE AND DIVIDEND PAYMENT DATE NOTICE IS ALSO HEREBY GIVEN that the Share Transfer Books and Register of Members of the Company will be closed on 8 May 2010, for the purpose of determining the members’ entitlements to the dividend to be proposed at the Annual General Meeting of the Company to be held on 30 April 2010. Duly completed registrable transfers in respect of shares in the Company received up to the close of business at 5.00 p.m. on 7 May 2010 by the Company’s Share Registrar, M & C Services Private Limited, will be registered to determine members’ entitlements to such dividend. Members whose securities accounts with The Central Depository (Pte) Ltd are credited with shares in the Company as at 5.00 p.m. on 7 May 2010 will be entitled to such proposed dividend.

The proposed dividend, if approved at the Annual General Meeting, will be paid on 21 May 2010.

PROXY FORM

Important: 1. For investors who have used their CPF monies to buy the Company’s shares, the Annual Report is forwarded to them at the request of their CPF Approved Nominees and is sent solely FOR INFORMATION ONLY. 2. This Proxy Form is not valid for use by CPF investors and shall be ineffective for all intents and purposes if used or purported to be used by them.

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

Annual General Meeting ECS HOLDINGS LIMITED (Incorporated in the Republic of Singapore) Company Registration No. 199804760R

page

I/We

of being a member/members of ECS HOLDINGS LIMITED hereby appoint

Name

Address

NRIC/Passport Number

95

Proportion of Shareholdings (%)

and/or (delete as appropriate)

as my/our proxy/proxies to vote for me/us on my/our behalf and, if necessary, to demand a poll, at the Annual General Meeting of ECS HOLDINGS LIMITED to be held at 19 Kallang Avenue #07-153 Singapore 339410 on 30 April 2010 at 4.00 p.m. and at any adjournment thereof.

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

NO ORDINARY RESOLUTIONS

Ordinary Business :

1.

Adoption of Reports and Accounts

2.

Declaration of a one–tier tax exempt first and final dividend of 3 cents per ordinary share for the year ended 31 December 2009

3.

Re-election of Directors : (a) Mr Leong Horn Kee (b) Mr Foo Sen Chin

4.

Re-appointment of Auditors

5.

Approval of Directors’ Fees of S$190,000/- for the year ended 31 December 2009

Special Business :

6

(a) Authority for Directors to issue shares pursuant to Section 161 of the Companies Act, Cap. 50

(b) Authority to issue shares priced at a discount of up to 20% for placement exercise

FOR

AGAINST

(c) Authority for Directors to offer and grant options and allot shares pursuant to the ECS Share

Option Scheme II

(d) To approve the proposed renewal of the Shareholders’ General Mandate for Interested Person

Transactions with VST Holdings Limited, its subsidiaries and/or associates

(e)

To approve the proposed renewal of the Shareholders’ General Mandate for Interested Person Transactions with Netband Consulting Co Ltd., Vnet Capital Co., Ltd, Vnet Capital International Co., Ltd, Thai Incubator Dot Com Co., Ltd, Vintcom Technology Co., Ltd and/or other associates of Mr Narong Intanate, a Director of the Company

(f) To approve the proposed renewal of the Share Buy-back Mandate

7.

Any other ordinary business

Dated this

day of

Signature(s) of member(s) or Common Seal IMPORTANT : PLEASE READ NOTES OVERLEAF

2010.

Total Number of Shares Held:

Notes: 1.

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

96 2

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

3

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

4

The instrument appointing a proxy must be deposited at the office of the Share Registrar of the Company, M&C Services Private Limited at 138 Robinson Road #17-00, The Corporate Office, Singapore 068906, not less than forty-eight (48) hours before the time appointed for the holding of the Annual General Meeting.

5

The instrument appointing a proxy must be signed by the appointor or his attorney. Where the instrument appointing a proxy is given by a corporation, it must be given either under its common seal or signed on its behalf by an attorney or a duly authorised officer of the corporation.

6.

Where an instrument appointing a proxy is signed on behalf of the appointor by an attorney, the letter or power of attorney or a duly certified copy thereof must (failing previous registration with the Company) be lodged with the instrument of proxy, failing which the instrument may be treated as invalid.

7.

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

General: The Company shall be entitled to reject an instrument of proxy if it is incomplete, improperly completed or illegible or where the true intentions of the appointor are not ascertainable from the instructions of the appointor specified in the instrument of proxy. In addition, in the case of shares entered in the Depository Register, the Company may reject an instrument of proxy lodged if the member, being the appointor, is not shown to have shares entered against his name in the Depository Register as at forty-eight (48) hours before the time appointed for the holding of the Annual General Meeting, as certified by The Central Depository (Pte) Limited to the Company.

Vision

To be the leading provider of ICT products and value-added services. We strive for sustainable growth to achieve optimum returns to shareholders.

Mission

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

To sustain our entrepreneurial growth by expanding our business regionally.

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

Corporate Profile p.01 Chairman’s Statement p.08 CEO’s Statement p.12 Board of Directors p.16 Senior Management p.18 Group Structure p.20 Corporate Information p.21 Financial Highlights p.22 2009 Awards p.24 2009 Milestones p.25 Corporate Governance Statement p.26 Directors’ Report p.34 Statement by Directors p.40 Independent Auditors’ Report p.41 Financial Statements p.43 Shareholdings Statistics p.88 Notice of Annual General Meeting p.89

ECS HOLDINGS LIMITED ANNUAL REPORT 2009

Co. Reg. No.: 199804760R

19 Kallang Avenue #07-153 Singapore 339410 Phone : +65 6299 9433 Fax : +65 6291 3912 Website : www.ecs.com.sg

THE QUEST FOR EXCELLENCE

ECS HOLDINGS LIMITED (Incorporated in The Republic of Singapore)