We’ve almost doubled growth in net profit to $5.2 million ... · Corporate Profile. FRONTLINE...

We’ve almost doubled growth in net profit to $5.2 million.

We’ve enjoyed four consecutive half-years of growth since FY2004.

Our cash and cash equivalent position is a healthy $35.6 million.

Our net tangible assets improved 16% to $103.3 million.

Here’s how we did it.

FRONTLINE TECHNOLOGIES CORPORATION LTD ANNUAL REPORT 2005

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Board of DirectorsSteve Ting Tuan Toon Executive Chairman & FounderLim Chin HuPresident & Chief Executive Officer Shirley Wong Swee PingVice President & Co-FounderTay Swee SzeNon-Executive Independent DirectorHarrison Wang Hong SheNon-Executive Independent DirectorRobert Yap Min ChoyNon-Executive Independent DirectorPaul Andrew ThorleyNon-Executive DirectorNg Chee KeongNon-Executive Independent Director

Company SecretarySim Mei Ling

Registered Office750 Chai Chee Road #02-01/03, Technopark@Chai Chee Singapore 469000

Telephone+65 6773 7227

Facsimile+65 6779 4455

Corporate Websitewww.frontline.com.sg

Audit CommitteeTay Swee Sze ChairmanHarrison Wang Hong She Robert Yap Min Choy

Compensation CommitteeHarrison Wang Hong She Chairman Tay Swee Sze Steve Ting Tuan Toon

Nomination CommitteeHarrison Wang Hong She ChairmanTay Swee Sze Robert Yap Min Choy

AuditorsErnst & Young 10 Collyer Quay #21-01 Ocean Building Singapore 049215

Audit Partner-In-ChargeSteven Phan

Share RegistrarBarbinder & Co Pte Ltd 8 Cross Street #11-00 PWC Building Singapore 048424

Principal BankersDBS Bank LtdOversea-Chinese Banking Corporation LimitedCitibank, N.A.


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Corporate Information

Our VisionTo be the leading billion-dollar, pan-Asian technology solutions

company preferred by customers, partners and employees.

Our MissionWe enable the best business results through

ideas, people and technology.

Core ValuesFocus on the Customer

Embrace IntegrityAchieve Excellence Always

Respect the IndividualPlay as a Team

About FrontlineFrontline Technologies Corporation Ltd is a leading IT service provider of end-to-end services thatcomprise consulting, infrastructure, systems integration as well as outsourcing.

Established in 1993, we have the experience and a strong regional pool of close to 3,000professionals to meet customers’ business needs. Our regional footprint in Singapore, Malaysia,the Philippines, Thailand, China and India enables us to better respond to their unique challengesand opportunities.

Listed on the Singapore Exchange since March 2001, we serve companies across a broad spectrumof sectors that include the transportation and logistics, telecommunications, financial services, education, manufacturing, healthcare and public sectors.


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Corporate Profile


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Joint Message from the Chairman and President & Chief Executive Officer

Steve Ting Executive Chairman & Founder (left) and

Lim Chin Hu President & Chief Executive Officer


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Dear Shareholders,

A year ago we presented to you a healthy set of resultsthat showed a sharp reversal from losses due primarilyto write-downs and provisions incurred in FY2003. Weare pleased to deliver a second sterling report card forthe financial year ended 31 March 2005 (“FY2005”). This set of results has demonstrated the effectivenessof our strategy – first, an increased focus on servicesand second, to extend our footprint across Asia,particularly in the large growth markets of China and India. This strategy has enabled us to further createshareholder value as we continue to improve marginswhile maintaining a strong financial position.

During the year under review, net profit attributable to shareholders almost doubled to $5.2 million from$3.5 million in the previous year (“FY2004”). Profitbefore goodwill amortisation and taxation soared

47.8% to $10.2 million in FY2005 from $6.9 million inFY2004. This continued growth was achieved on theback of revenue of $147.5 million in FY2005, comparedwith $106.8 million in FY2004.

The FY2005 results are the culmination of fourconsecutive half-years of net profit and revenue growthsince the start of FY2004. Revenue contribution fromservices accounted for 35.0% or $51.6 million of thetotal Group revenue, compared to 28.9% in FY2004.Earnings per share rose 43.2% to 0.63 cent per sharethis year, compared to 0.44 cent per share in FY2004,while net asset per share rose 15.4% to 12.54 cents inFY2005 from 10.87 cents in the previous year. Nettangible assets also improved 15.9% to $103.3 millionin FY2005, from $89.1 million in FY2004.

#1Strong focus on our multi-facetedstrategy to pursue growth


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4 Half-Years of Growth in Revenue, Gross Margins and Net Profit


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Expansion in Asia – Anchored by China and India

China

Our joint-venture associate company, MDCL-Frontline(China) Limited (“MDCL-Frontline”), once again achievedstrong growth for FY2005, with turnover that rose by55.0% to $118.0 million compared to $76.0 million inFY2004. Staff strength grew from 300 to 450 staff.

To leverage on the strong growth in China, the Groupfurther increased our stake-holding in MDCL-Frontlinefrom 43.5% to 47.5% in January 2005. This gives us aneven greater operational involvement in MDCL-Frontline.

We have scaled up our software development centre inTianjin to be an offshore software development centre forclients in Japan. We have also set up branches in bothTaiwan and Hong Kong to cater to the outsourcing needsof customers in these regions. These developments,together with the establishment of a new support office inChongqing, will boost our presence in China.

In line with our strategy to widen our IT serviceofferings with more software- and solutions-drivenprojects, FY2005 saw greater demand for ourproprietary software, such as the Mocha Java/LotusOffice Automation, Business Intelligence and KnowledgeManagement solutions, which are widely deployed inthe telecommunications (“telco”) and financial servicesectors in China.

During the year under review, we strengthened ourfoothold in the telco sector with new contracts fromleading players such as China Network Corporation Ltd,China Unicom and China Mobile CommunicationsCorporation. We also made headway in the financialservice sector with significant service and software

contracts secured from major banks such as Bank ofCommunications and Bank of Shanghai. At the sametime, we grew our presence in the manufacturing sectorwith projects awarded from multinational corporations.

India

In FY2005, the Group consolidated 10 months of profitfrom Accel ICIM Frontline Limited (Accel ICIM Frontline).The Indian subsidiary recorded revenue of $46.0 millionin FY2005, of which services accounted for 40.0%. Thecontribution from services has increased, particularly inthe second half of the financial year, signalling astronger focus on services as the main growth driver.

We have continuously expanded our market coveragewith contracts won from new and major corporationsacross a broad spectrum of sectors, particularly in theprovision of IT infrastructure and integration, softwareand application development, as well as outsourcing. We also formed a key alliance with Skybridge Global, aleading consulting service company in the United States,to be its global offshore outsourcing partner. Newwarranty outsourcing contracts were signed with majorcorporations such as Kodak, a leader in imagingequipment manufacturing, and Fuji Xerox Corporation, a leading provider of imaging and printing equipment.We are looking to increase our software export businessin India in the near future.

During the year in review, we re-aligned our regionaloffice team in India in order to improve businessprocesses and control, and took measures to takebetter control of loans, working capital and financialexpenses. The re-alignment is expected to translate intogreater growth in one of the fastest growing economiesin Asia.


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Other achievements for the year include the attainmentof the Capability Maturity Model Integration (CMMi)Level 5 certification for our Enterprise SoftwareSolutions division in India, demonstrating ourcommitment to consistently deliver a high level ofproducts and services to customers. The CMMi Level 5is one of the highest quality certification that a softwareprovider can achieve. Our Indian subsidiary was alsoranked 10th in the Dataquest IDC Best IT EmployerSurvey and scored a sixth place in the DQCI SilverClub’s list of top solutions providers. This list is India’sfirst ranking of top distributors, solution providers aswell as system and network providers. These awardsand accolades serve to show the high standards ofservices provided and would definitely place us in astrategic position to scale greater heights.

Stable stronghold in Singapore, Malaysia and Thailand

The Group also recorded growth in its other regionaloperations, maintaining a stable stronghold inSingapore, Malaysia and Thailand.

In Singapore, we achieved a significant increase inservice revenue, particularly through providing moreprofessional services for infrastructure implementationand integration, enterprise application deployment,outsourcing and IT security. Growth, particularly in ourprofessional, maintenance and outsourcing services, wasrecorded across all sectors, with significant deals clinchedwith new and existing clients.

The Group’s wholly owned subsidiary in Malaysiaremained strong in the education sector withinfrastructure and storage projects undertaken for newclients such as Universiti Industri Selangor. We also madeheadway in the financial service sector with applications

infrastructure implemented for large corporations.In July 2004, the Group’s Thai associate company, G-AbleCompany Limited (“G-Able”), acquired three sistercompanies to become the largest privately ownedsystems integration company in Thailand. This fortifiedstrength has been instrumental in enlarging its serviceofferings and in penetrating the entertainment,broadcasting and healthcare sectors in Thailand duringthe past year. We also won IT infrastructure outsourcingbusinesses with major customers in the telco, bankingand retail sectors in Thailand. G-Able is now scaling upits professional services to provide more solutions andintegration for the financial service sector, and well asto extend its scope of IT security offerings.

New steps in the rest of Asia

The year also saw a turnaround of the Group’soperations in the Philippines. The Group’s subsidiary, IT Holdings Incorporated, reported profitability inFY2005, following three earlier years of losses, after astronger management team was put in place and at atime of improving sentiments on IT spending. Thesubsidiary is on track to achieve revenue targets andthe Group expects that it will continue to achievegrowth going forward.

Capitalising on new market opportunities in Brunei, theGroup secured a deal to build an e-library system in thecountry, and our affiliate company, Ecquaria, won amulti-million dollar project to build a portal for theMinistry of Communications.

Expansion of service offerings with outsourcing

In line with the Group’s focus on expanding its high-value service offerings, it formed a strategic alliance


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with Capgemini Asia Pacific (“Capgemini”) in October2004 to be Capgemini’s outsourcing delivery partner in Asia. Under this agreement, the Group also acquiredCapgemini’s $16.0 million outsourcing business andoperations in Singapore and Malaysia.

The successful integration of Capgemini’s business,operations and processes for existing customers inthese two countries has translated into a healthycontribution in revenue. The Group’s revenue due tooutsourcing accounted for 29.9% of its total revenue inFY2005, compared to 21.1% in FY2004.

This has enabled us to immediately leapfrog ouroutsourcing capabilities and services for the region.Within a short span of five months, we havesuccessfully renewed outsourcing contracts with threemajor clients in different industries.

Financial strength and shareholder value

The Group continues to maintain a strong financialposition with cash and cash equivalents of $35.6million, even after a dividend payment of $3.3 millionto shareholders on 31 December 2004 and a $13.2million investment in Accel ICIM Frontline.

We have consistently paid out dividends toshareholders for the past three years, with a finaldividend of 0.5 cent per share for FY2005 made inDecember 2004.

The road ahead

The strategy that we have just outlined – India, Chinaand outsourcing – positions us well to reap the benefitsfrom the positive outlook for demand in IT services inAsia for 2005. Independent market research firm, IDC,

has projected IT expenditure increases to be 15.0% and22.0% respectively for China and India, while IT spendingin Southeast Asia is projected to grow by over 10.0% in2005. The Group will continue to expand our regionalfootprint into possible areas such as Vietnam andIndonesia, and through increasing our stake-holdings inassociate companies.

We also look to leveraging on our alliance withCapgemini to further grow our outsourcing business,particularly in Singapore, Malaysia and Thailand. We will continue to further invest in building up ouroutsourcing knowledge base to grow our services andoutsourcing revenue.

Barring any unforeseen circumstances, Frontline isconfident that, with the continued economic recoveryand further IT spending, we will continue to maintainour growth momentum and see year-on-yearimprovement in the first half of the next financial year.

Appreciation

It has been a truly rewarding year for the Group; suchsuccess could not have been made possible withoutthe strong support of our valued customers, board ofdirectors, shareholders, business partners andemployees. We look forward to your continued supportas we continue to create value through greater growth.

Steve Ting Lim Chin HuExecutive Chairman President & & Founder Chief Executive OfficerFrontline Technologies Frontline TechnologiesCorporation Limited Corporation Limited


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Board of Directors

From top left to bottom right:Steve Ting Tuan Toon, Lim Chin Hu, Shirley Wong Swee Ping, Tay Swee Sze, Robert Yap Min Choy, Harrison Wang Hong She, Paul Andrew Thorley and Ng Chee Keong.

Steve Ting Tuan ToonExecutive Chairman, Founder and Director

Mr Steve Ting Tuan Toon is a veteran in the technologyindustry with more than 20 years of experience. He hasheld several management positions in Hewlett PackardSingapore and Mentor Graphics Corporation. He startedhis first company, Mentor Graphics Associates Pte Ltd,in 1993 and subsequently Frontline Technologies Pte Ltdin 1994. Mr Ting served in various committees in tertiaryinstitutions in Singapore and is also active in providingguidance in entrepreneurship via lectures and seminars.In recognition of his entrepreneurial achievements, Mr Ting was conferred the honorary title of Doctor ofPhilosophy in Business Administration from theWisconsin International University, USA, in 2002. He wasalso named Ernst and Young’s Entrepreneur of the Year(Business Services & Technology) in 2002. In 2005, Mr Ting was appointed a council member on TheEnterprise Challenge (TEC) panel by the Prime MinisterOffice for Public Service 21 (PS 21). Mr Ting holds aBachelor of Engineering degree from the NationalUniversity of Singapore, a postgraduate degree from the Institute of Marketing in the United Kingdom and agraduate diploma in Marketing Management from theSingapore Institute of Management.

Lim Chin HuPresident, Chief Executive Officer and Director

As the Group President and Chief Executive Officer, Mr Lim Chin Hu oversees the Frontline Group’sregionalisation and operations. He has held severalmanagement positions in Sun Microsystems and HewlettPackard Singapore, such as Managing Director of SunMicrosystems, Inc., Country Manager for SunMicrosystems in Thailand, the Philippines, Vietnam andIndonesia, and Director of e-business and Channels forSun Microsystems in the Asia Pacific. Mr Lim serves inseveral infocomm industry committees, including beinga council member with the Singapore InfocommTechnology Federation (SiTF), Singapore's InformationTechnology Standards Committee (iTSC) and theNational Infocomm Competency Council (NICC). He also serves as a board member of the InfocommDevelopment Authority of Singapore (IDA). Mr Lim holds a diploma in Electrical and Electronics Engineeringfrom Ngee Ann Polytechnic and a Bachelor of Computer Science degree from La Trobe University,Melbourne, Australia.


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Shirley Wong Swee PingVice President, Co-Founder and Director

Ms Shirley Wong Swee Ping is currently the ManagingDirector of Frontline Solutions Pte Ltd and has morethan 15 years of experience in the IT industry. Beforeco-founding Frontline, Ms Wong was Sales Director atMentor Graphics Associates Pte Ltd, Design Engineer at Chartered Electronics Industries Ltd, RegionalApplications Manager at Cadnetix Pte Ltd (formerlyknown as Dazix Pte Ltd and subsequently IntergraphPte Ltd) and Design Manager at Flextronics Pte Ltd. Ms Wong holds a diploma in Electrical and ElectronicsEngineering from City and Guilds in the United Kingdom.

Tay Swee SzeNon-Executive Independent Director

Mr Tay Swee Sze, a practising Certified PublicAccountant, is the Managing Director of TSS AdvisoryPte Ltd, which focuses on business financial advisoryservices. He is also an independent director with CNALimited. Up till June 2000, he was a partner at ArthurAndersen, Singapore and headed its Global CorporateFinance Division, primarily responsible for CorporateRecovery Services. Mr Tay also served as a partner inthe Audit and Business Advisory division, in itsEmerging Business group. Prior to re-joining ArthurAndersen, Mr Tay was the Deputy Regional FinancialController of Citibank Asia Pacific Consumer Bank from1989 to 1993. He is a member of the Institute ofCertified Public Accountants of Singapore. Mr Tay holdsa Bachelor of Accountancy (Hons) degree from the thenUniversity of Singapore, now known as the NationalUniversity of Singapore.

Robert Yap Min ChoyNon-Executive Independent Director

Mr Robert Yap Min Choy is the Group CIO and SeniorVice President of DFS Group LP. He concurrently servesin various voluntary welfare organisations, such asDeputy President of St Andrew’s Mission Hospital andas Chairman of St Andrew’s Autistic Centre. Mr Yap isalso the former Chief Executive Officer of PSACorporation Limited (Asia & Middle-East). Prior tojoining PSA Corporation, he was the Director of CorporateInformation Technology with PHILIPS Electronics AsiaPacific. Mr Yap holds a Bachelor of Mechanical Engineering(Hons) degree and a Master of Engineering Sciencedegree from the University of New South Wales, Australia.


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Harrison Wang Hong SheNon-Executive Independent Director

Dr Harrison Wang Hong She is the Managing Partner ofPine Tree Equity, which is a private equity fund set upby AIG in 2004 for investment in Asia. Dr Wang was theChief Executive Officer of the e-millennium Asia fund setup by Deutsche Bank in 2000 and he was ManagingDirector with Deutsche Bank. Previously, Dr Wang wasManaging Director for GE & GE Capital, responsible forits business development in Asia and various otherbusinesses including managing four countries for GECapital in Asia. Dr Wang has more than 10 years ofexperience in the Silicon Valley, covering industrialautomation technologies and venture capitalinvestments for institutions including Dyna Mechtronics,H&Q Asia Pacific, Adept Technology and StanfordArtificial Intelligence Laboratory. Dr Wang graduatedwith a Bachelor of Science degree in MechanicalEngineering from the National Taiwan University. He also holds a Master of Science degree in MechanicalEngineering and a Ph.D. in Robotics and IndustrialAutomation from Stanford University.

Paul Andrew ThorleyNon-Executive Director

Mr Paul Andrew Thorley is the Chief Executive Officer ofCapgemini in the Asia Pacific. He has 25 years ofexperience in the IT and outsourcing industries, havingpreviously served as Chief Operating Officer ofCapgemini United Kingdom, a €1.4 billion corporation, as managing partner of the Ernst & Young market groupsin the United Kingdom, and as head of IT Strategy atAndersen Consulting (Accenture). He currently holdsseveral board positions in Capgemini joint ventures. Mr Thorley holds a Bachelor of Science (Hons) degree in Chemistry and Physiology as well as a Diploma inManagement Studies from the University of London.

Ng Chee KeongNon-Executive Independent Director

Mr Ng Chee Keong is a member of the Board ofGovernors of SAFRA, a non-executive Director of STXPan Ocean and is Deputy Chairman of the Keppel Club.Formerly the President and Chief Executive Officer ofPSA Corporation Limited, he has held numerousmanagement positions during his 33 years with thecorporation. Mr Ng continues to act as Technical Advisorand Director on a part-time non-executive basis to PSACorporation. Mr Ng has also held various other keypositions, such as Chairman of PSA Marine from 1998 to2004 and Managing Director of CWT Distribution Ltdfrom 1988 to 1992. In recognition of his public service,Mr Ng was awarded the Public Administration Medal(Silver) in 1992 and the Public Administration Medal(Gold) in 1997. He graduated from the then University ofSingapore with an Economics (Upper Hons) degree andholds post-graduate qualifications in advancedmanagement from Stanford University and INSEAD.


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Financial HighlightsFY2005 FY2004 Change (%)

Consolidated profit & loss account ($’000)Turnover 147,464 106,786 38.09Profit before amortisation and taxation 10,210 6,906 47.84Net profit (loss) before taxation 8,766 5,261 66.62Profit (loss) attributable to shareholders 5,154 3,483 47.98

Consolidated balance sheets ($’000)Total assets 193,632 142,838 35.56Net assets 103,348 89,130 15.95Shareholders’ funds 86,965 84,787 2.57

Consolidated cash flow statement ($’000)Net cash from operating activities (5,292) 1,738 NMNet cash used in investing activities (11,818) (1,025) 1,071.51Net cash used in financing activities (2,325) (3,516) (33.87)Cash and cash equivalents (Note 1) 30,708 50,143 (38.76)

Dividend per share (cents) 0.50 0.50 _

Per share data (cents)Basic earnings (loss) 0.63 0.44 43.18Diluted earnings (loss) 0.63 0.44 43.18Net asset value 12.54 10.87 15.36Return on shareholders’ funds (%) (Note 2) 6.0 4.2 42.86

Note 1: Cash and cash equivalents comprise an unpledged portion of fixed deposits, unquoted bond investments and cash and bank balances.

Note 2: Return on shareholders’ funds is the profit after tax and minority interest expressed as a percentage of average shareholders’ funds.

Revenue by Business Segments ($’000)

2005 2005

2004 2004Investment Holdings

IT Infrastructure

IT Outsourcing

IT Consulting & Implementation

Singapore

Other Asean Countries

North Asia

Revenue by Geography ($’000)

2005 2004Investment – 167Holdings

IT Infrastructure 95,836 75,785

IT Outsourcing 44,022 22,480

IT Consulting & 7,605 8,354Implementation

Total 147,464 106,786

2005 2004Singapore 68,738 76,526

Other Asean 32,521 30,260countries

North Asia 46,205 –

Total 147,464 106,786


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Group Structure

SINGAPORE

Frontline Technologies Pte Ltd Frontline Solutions Pte Ltd100.00% equity 100.00% equity

Frontline Outsourcing (Asia) Pte Ltd Frontline Innovations Pte Ltd 100.00% equity 100.00% equity

iAspire.Net Pte Ltd Ecquaria Ltd17.10% equity 30.00% equity

MALAYSIA

Frontline Technologies Frontline Technologies Bizfront Frontline Outsourcing

Corp (M) Sdn Bhd (M) Sdn Bhd Sdn Bhd (Asia) Sdn Bhd

100.00% equity 100.00% equity 100.00% equity 100.00% equity

THE PHILIPPINES

IT Holdings, Inc Sun Microsystems

49.00% equity Philippines Ltd

51.00% equity

THAILAND

G-Able Co., Ltd20.50% equity

CHINA

MDCL-Frontline (China) Modern Devices

Limited (China) Ltd

47.47% equity 100.00% equity

INDIA

Accel ICIM Frontline ACL Systems & Accel Infotech ME

Limited Technologies Pte Ltd 100.00% equity

42.00% equity 99.99% equity

Frontline Technologies Corporation Limited


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Highlights of the Year

JUN –JUL04

AUG –SEP04 OCT04

NOV –DEC04

June 2004

The Group completed its

$13.2 million investment in

Accel ICIM Systems &

Services Ltd, a leading IT

company in India.

July 2004

The Group’s Thai-based

associate, G-Able Co Ltd,

acquired three sister

companies to become the

largest privately owned

systems integration

company in Thailand.

August 2004

Accel ICIM Frontline was

ranked in the top 10 of the

Dataquest IDC Best Indian

Employer survey.

September 2004

Accel ICIM was renamed

Accel ICIM Frontline Limited

to reflect its integrated

expertise and service

offerings.

The Group’s Chinese joint-

venture company, MDCL-

Frontline (China) Ltd, made

headway in China’s financial

service sector with over

$17.0 million worth of new

IT contracts secured.

The Group acquired

Capgemini’s outsourcing

businesses, operations and

service delivery teams in

Singapore and Malaysia.

Frontline also forged an

alliance with Capgemini to

be its preferred service

delivery partner in selected

countries in Asia.

The Group’s associate

company, Ecquaria, was

awarded the second phase

of a project by the Ministry

of Trade and Industry to

enhance online business

license processing for

existing businesses with

new license update,

renewal and termination

functionality.

November 2004

The Group announced that

its first-half net profit for

FY2005 had jumped 42.4%

year-on-year, propelled by

strong growth in services

and revenue contribution

from overseas operations.

Mr Paul Andrew Thorley,

Chief Executive Officer of

Capgemini Asia Pacific, was

appointed to Frontline’s

Board of Directors as a

non-executive director.

Accel ICIM Frontline was

ranked 6th in the DQCI

Silver Club list of Top

Solution Providers, India’s

first listing of top

distributors, solution

providers as well as system

and network providers.

December 2004

The Group raised over

$50,000 in aid of MILK’s

support for disadvantaged

and disabled children in

Singapore.


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Awards and AccoladesAwarded the Sunshine Awards (Gold) by Sun Microsystems.

Won the Best Sun Field Service Unit (Bronze) Award from Sun Microsystems.

Named Premier System Provider by Sun Microsystems.

Won the Best Quality Achieved for FY04 award from Sun Microsystems for its educational services.

Awarded the Top Competitive Replacement Win for 2004 by VERITAS Software.

Won Best Quality Achieved for FY04 accolade from Sun Education Services, Singapore.

Named Premier Partner Singapore 2004/05 by Internet Security Systems.

JAN05 FEB05 MAR05 MAR05

MDCL-Frontline secured

$13.0 million worth of IT

contracts from the telco

and financial services

sectors in China.

The Group increased its

stake in MDCL-Frontline

from 43.5% to 47.5%.

Frontline Solutions signed

a memorandum of intent

with Alexandra Hospital

to deliver an integrated

healthcare service system.

Ecquaria was awarded a

$4.7 million contract to

build a service portal for

Brunei’s Ministry of

Communications.

Accel ICIM Frontline

successfully attained

Capability Maturity Model

Integration (CMMi) Level 5

certification for its

Enterprise Software

Solutions division.

Mr Ng Chee Keong, former

President and Chief

Executive Officer of PSA

Corporation Limited, was

appointed to Frontline’s

Board of Directors as a

non-executive, independent

director.


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#2New capabilities

and services to capture

new marketopportunities

Corporate Review


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Infrastructure and SecurityWhether it is enhancing operational efficiency, handlingexponential data growth, tackling security issues ormaximising performance to improve service availability,Frontline helps companies to assess, build and optimise their IT infrastructure to drive business growthcost effectively.

During the year in review, the Group secured severalnew contracts to provide IT infrastructure andintegration services to companies across a broadspectrum of industries in various countries. In line withour focus on increasing our service offerings, we scaledup our professional as well as maintenance and supportservices to better meet the needs of customers.

New growth in infrastructure demand

In Singapore, we worked with an institution of higherlearning to implement IT infrastructure for its new datacentre. In addition, we deployed a back-up cluster forhigh service availability and conducted load testing andperformance analysis to optimise performance of theclient’s IT systems. Our wholly owned subsidiary inMalaysia won new projects to implement infrastructureand storage projects for the campuses of UniversitiIndustri Selangor and Universiti Pendidikan Sultan Idris.New contracts were also clinched for the design andimplementation of a highly available and application-ready IT infrastructure for a leading local bank inSingapore, as well as with key players in the insuranceindustry. In early 2005, we secured a large contract from


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the Life Insurance Corporation of India to supply ITinfrastructure for its 18 divisional offices, 363 branchesand zonal training centre.

In addition, we won a contract from HimachalFuturistic Communications Ltd, a manufacturer oftelecommunications products and provider oftelecommunication services, to implement and integrateIT infrastructure for its billing and customer care systemin Mumbai and Delhi.

We also provided IT infrastructure and softwareupgrades for the Ministry of Finance’s Housing LoansDepartment in Malaysia.

During the year, we were awarded a contract toprovide IT infrastructure services for Sichuan Mobile, a subsidiary of China Mobile. We alsosecured new projects with multinational clients in the manufacturing sector.

At the same time, our Filipino operations continued towin new contracts with existing clients, such asproviding infrastructure and integration training for thePhilippine Health Insurance Corporation.

Enabling business recovery

Another expansion of our service offerings includeddisaster recovery consulting and services to helpcompanies be prepared for and ride out perplexingtimes should a system failure, fire, electrical outage,sabotage or any other disaster occur.

We are now working with an educational institution toimplement IT disaster recovery processes and proceduresfor its new data centre. During the year, we also wonanother contract to provide disaster recovery services fora leading property conglomerate in Singapore.

Large-scale IT security deployment

In FY2005, Frontline was commissioned to build large-scale Public Key Infrastructure (PKI) for majorgovernment and commercial establishments. PKIenables the implementation of the highest level ofsecurity for multiple applications using digitalcertificates with smart cards or tokens. One notableproject is our implementation of PKI technology for theSingapore Exchange’s new SGXNet, which enables fastertransmission of critical listed companies’ informationand user mobility while providing strong identityprotection and integrity of the information transmitted.


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With the increase in more sophisticated and organisedattack methodologies in the world today, the Group islooking to expand its security offerings to includemanaged security services in the next financial year.These new services will offer companies a completesuite of security safeguards to monitor and protect theirIT infrastructure against attacks, cyber threats,equipment failure and system vulnerability.

Extensive support for enterprises

Frontline provides maintenance and support for multi-vendor platforms. We work closely with leadingtechnology partners including Sun Microsystems, Oracle,VERITAS Software, Hitachi Data Systems, StorageTek,Mercury Interactive, Quest, 3Com, F5, Alcatel, Juniper,Activcard, McAfee, AirDefence, Computer Associates,Vignette and many more.

In FY2005, significant deals were clinched with aleading air carrier and the Office of the Controller ofCertifying Authorities, which is under India’s Ministry ofInformation Technology. We also bagged a contract toprovide support services for a leading Indian telcomobile operator.

Enterprise ApplicationSolutionsApplications are the lifeblood of any enterprise,supporting every aspect of how a business is planned,managed and executed. They enable companies toprovide data and services to customers and partnersmore promptly, enhance customer self-service and thusgain a competitive edge.

For the year in review, the Group secured severalchallenging and large-scale projects, demonstrating ourproven expertise and experience in applicationsdevelopment, customisation and integration to meetcompanies’ business needs.

Commitment to quality

Our Indian subsidiary has achieved Capability MaturityModel Integration (CMMi) Level 5 certification for itsEnterprise Software Solutions division, demonstrating itscommitment to consistently deliver a high level ofproducts and services to customers. The CMMi Level 5is one of the highest quality certification that a software

“Frontline has delivered high-quality and timely services inimplementing a secure infrastructure that provides identityprotection, confidentiality and integrity of information. This hashelped us to leverage on technological innovation to meet changingmarket needs via the successful launch of SGXNet.”

– Mr Chew Hong Gian, Chief Information Officer, SGX Technology Group


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provider can achieve. Moving ahead, the subsidiary is looking to increase exports of its locally developedsoftware.

Proactive patient care with integratedmedical record system

In February 2005, we signed a memorandum of intentwith Alexandra Hospital to help it deliver a patient-centric, seamless and cost-effective healthcare system.

This is part of the Healthcare.NET vision in advancingpatient care and integrated health service delivery for Singaporeans through the use of informationtechnology. We are now integrating the hospital’spatients’ medical records from various databases into asingle connected system, so as to deliver the rightinformation to the right users at the right time. As part of the project, we are also finetuning theClinical Digital Dashboard for easy retrieval of relevantinformation and will commercialise it for live productionin due course.

Enhancing customer care and efficiency with Web services

One notable project is the design and implementationof an integrated portal platform for MobileOne Ltd (M1),a leading mobile communications provider in Singapore.M1 needed a unified platform that could supportmultiple portlets while enabling its business users toeasily contribute and manage content right to thecustomers’ view for increased business agility. We worked closely with M1 to create a framework thatstreamlines and delivers information to users based ontheir Web or mobile device preferences, while gatheringcontent from third-party Web sites and hostingapplications with minimal programming required.

“Frontline’s expertise and experience in integrating disparate systemsand efficiently managing data to deliver the right information to theright users at the right time, together with their significant presencein Asia, can help us create a powerful healthcare system in Singaporeand in the region.”

– Mr Liak Teng Lit, Chief Executive Officer, Alexandra Hospital


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These helped to further boost M1’s operationalefficiency while reinforcing its “One Life, Live It”branding campaign.

Over in China, our strategy has been to garner moresolutions-driven projects using our proprietary software– Mocha Java and Mocha Lotus Office Automation,Knowledge Management and Business Intelligence. We have been helping the Beijing branch of ChinaNetwork Corporation Ltd (CNC) deliver superior end-userexperience by consolidating separate web service sitesinto a unified customer/subscriber web service portal.With this new portal, customers need only log on to asingle site for various services such as membership

application, bill enquiries, information on CNC’s telcoproducts and services and special sales promotions aswell as other customer care services.

At the same time, we are building an employee portalfor the Beijing branch of CNC. This will enableemployees to quickly and conveniently accessinformation and different applications such as payroll,leave, administrative workflow and enterprise data froma single point of access. The portal will further increaseefficiency by centralising user management and accessright control to the data and systems. Our proprietaryMocha Lotus software for office automation wasdeployed for the project.


25

We are also building an e-library system in Brunei, and our affiliate company, Ecquaria, has won a multi-million-dollar project to build a portal for theMinistry of Communications.

Knowledge management for better decision making

In another project for CNC’s Beijing branch, we willbuild a business intelligence system that can extractoperational and marketing data from multiple businesssystems and re-organise them into a multi-dimensionaldata structure, from which customer and product salesreports and analyses can be easily and quicklygenerated. This will enable the telco operator toshorten the decision-making window and better pursuegrowth opportunities.

In addition, we will build a knowledge managementsystem using our proprietary Mocha KnowledgeManagement tool for the Jiangsu branch of ChinaMobile, China’s largest mobile phone operator.

Office automation for China’s banking and telco industries

FY2005 also saw us clinch a multi-million dollar contractto automate the operations of all 86 branches of theBank of Communications (BoComm) nationwide usingour Mocha Lotus software. Widely deployed in China’stelecommunications sector since 1999, Mocha comprisesmore than 20 pre-built management modules, out ofwhich we are implementing the administrative workflowoperation, information publishing, documentmanagement system, as well as staff calendar,personalisation, configuration and maintenance toolsets for BoComm. Designed to streamline workflows,

optimise resources and enhance staff communication,the Mocha Lotus software is also being implemented for the office administration system of China UnitedTelecommunications Corporation (China Unicom) in a province.

“ The entire automation of all 86 of our branchesnationwide using Frontline’sMocha Lotus office automationsoftware is a very significantmilestone in our bank’s historyas it is the first time that such aproject of this scale is beingdeployed in the financial servicesector. Having Frontline as apartner gives us strongconfidence to accomplish thismassive project that will reap us benefits suchas higher levels of efficiency and cost savings.”

– Mr Zhang Lu, Manager of Information TechnologyDepartment, Bank of Communications


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OutsourcingEnlarged outsourcing offerings

Every outsourcing engagement is about improving andstreamlining processes so that we can do things better,faster and more cost efficiently without compromisingservice levels.

In FY2005, we set about expanding our outsourcingofferings through the acquisition of Capgemini’s $16million business, operations and processes for existingcustomers in Singapore and Malaysia in October 2004.This has immediately scaled up our capabilities withestablished practices in several areas, namely, financeand accounting, procurement, human resources,customer relationship management and applicationsmanagement for various industries. We are also able tooffer customers a much-needed flexibility for adaptingto the changing business climate, potentially withoutincurring major investment dollars.

Within a short span of five months, we have successfullyrenewed outsourcing contracts with three existingclients. We are now providing applications managementand additionally, helpdesk support, for Malaysia NationalInsurance Berhad, the largest insurance firm in Malaysia. At the same time, we are managing SAPapplications for Asia Netcom, a leading Asia-basedtelecommunications carrier. A third key contract renewalis to provide business process outsourcing for Infineum,a multinational fuels and lubricant additives company with its corporate centre in the United Kingdom.

During the year, we also clinched a deal to provideinfrastructure managed services to a major port. Inaddition, our Indian subsidiary signed a new warrantyoutsourcing contract with Kodak, a major maker ofimaging equipment, to be an authorised service

provider for its IT products. We also entered into an agreement with Fuji Xerox Corporation, aleading provider of imaging and printing equipment.

FY2005 also saw us form a strategic alliance withSkybridge Global Inc, a leading consulting servicecompany in the United States that specialises inenterprise resource planning (ERP) business solutions.Together, we will establish an offshore solution centre tooffer IT and business process solutions to clients acrossthe United States.

“Our outsourcing arrangementwith Frontline provides us withthe technology and processes

to enhance efficiency, andenables us to access a broader

range and greater depth ofskills. This arrangement will

release key MNI IT staff fromday-to-day operational issues

and enable us to focus onmore strategic IT activities to

support the business and respond faster to new

market opportunities.”

– Encik Mohd Najib haji Abdullah, Chief Executive,

Malaysia National Insurance Berhad


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28


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Developing our people

To address the competitive issues that our clients facetoday, the Group employs close to 3,000 IT professionalsand staff across six countries in Asia. Their diverse yetcomplementary skill sets and experience help us to caterto the increasingly complex and unique needs ofenterprises in today’s fast-paced world of digital wizardry.

While Frontliners are regularly trained to keep abreastof the latest technology, we encourage them to gainnew, market-value skills so as to be more flexible andadaptive in the rapidly changing and demandingbusiness environment that we operate in.

At Frontline, we have been investing three to four percentof our annual payroll in providing continuing educationfor our staff. This includes conventional, blended and e-learning courses. During the year, we started an e-learning programme with Universitas 21 Global, apremier online graduate school, for Frontliners to broadentheir knowledge and skills outside of their regular,professional IT service training. Total learning participationin online learning courses grew by some 23%.

Over in India, a high level of employee satisfactioncatapulted our Indian subsidiary to the league of the Top10 Best IT Employers in India. We were ranked in the 10thposition in the Dataquest IDC Best IT Employer Survey2004, and scored points as preferred employer as well.

Supporting the community

Despite the demanding requirements of the business,Frontliners came together to raise funds for the needy,banding together in a show of team spirit and supportfor the community.

Leading the way was our Chairman, Steve Ting, andfellow Frontliner Sim Hock Chuan, who ran the gruelling42.195-km Standard Chartered Singapore Marathon2004 last December to garner financial aid fordisadvantaged and disabled children in Singapore.Together with business associates, friends and employees,we raised over $50,000 in aid of MILK, or Mainly I LoveKids. This is a non-profit organisation run by volunteersthat provides for educational, therapeutical and medicaltreatment as well as other special needs of chronically illchildren and youth from low-income families.

When the tsunami disaster of December 2004 struckSouth Asia and South Africa, wreaking much damage,Frontliners quickly raised a total of $22,601 in less thantwo weeks for Red Cross to help the survivors.

Regular visits are also made to the Red Cross home forthe disabled. Last year, in bringing festive cheer tounderprivileged children and senior citizens, Frontlinersdonated Christmas gifts to the Red Cross home andTouch Community Services.

#3Renewed commitment to people and the community

Both the Board of Directors (“Board”) and the management are committed to high standards of corporategovernance to advance the Group’s mission to create value for its customers and shareholders. This Reportdescribes the Company’s corporate governance practices in place during FY2005, embodying the principles in the Code of Corporate Governance as a fundamental part of discharging its responsibilities to protect and enhanceshareholder value and the financial performance of the Group.

Principle 1: Board’s Conduct of Its Affairs

The Board’s primary role is to protect and enhance the shareholders’ long-term value. Besides setting the overallstrategic directions for the Group, the Board also establishes goals for the management and monitors theachievement of these goals.

The principal functions of the Board, apart from its statutory responsibilities, are: a) approving the Group’s corporate policies and authorisation matrix;b) approving annual budgets, key operational issues, major investment funding and

major restructuring of core businesses;c) setting overall strategies and supervising the Group’s businesses and affairs;d) reviewing the financial performance of the Group;e) approving the nominations of Board directors and appointments to the various Board Committees; and f ) assuming responsibility for corporate governance.

For the effective execution of its responsibilities, certain functions have been delegated by the Board to variousBoard Committees, namely, the Audit, Nomination and Compensation Committees. The Board Committees operateunder clearly defined terms of reference. The Chairmen of the respective committees will report the outcome of theCommittee meetings to the Board.

The Board meets at least three times a year and as warranted by circumstances. During FY2005, the Board met fourtimes. The attendance of the directors at meetings of the Board and Committees during the year are as follows:

Audit Compensation NominationName 0f Director Board Committee Committee Committee

Steve Ting Tuan Toon 4 3 3 3Lim Chin Hu 4 – – –Shirley Wong Swee Ping 4 – – –Tay Swee Sze 4 3 3 3Harrison Wang Hong She 4 3 3 3Robert Yap Min Choy 3 1 – 1Paul Andrew Thorley (appointed on 15 November 2004) 1 – – –Ng Chee Keong (appointed on 22 March 2005) – – – –


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Corporate Governance Report

The Board members are provided with regular management reports and information that highlight the Group’sperformance and business conditions including updates on changes in the relevant laws and regulations.

Principle 2: Board Composition and Balance

The Board currently comprises three executive directors and five non-executive directors. Of the non-executivedirectors, four are independent. The objective judgment of the independent and non-executive directors oncorporate affairs and their collective experience and contributions are valuable to the Group.

The Nomination Committee (“NC”) will review the independence of each director, Board structure, size and compositionannually. The NC is of the view that the current Board size and composition is adequate and appropriate, taking intoconsideration the nature and scope of the Group’s operations to facilitate effective decision making. The strong andindependent element of the Board ensures that it is able to exercise objective and independent judgment on corporateaffairs and that the Board’s decision making process is not dominated by any individual or small group of individuals.The NC is also of the view that the current Board comprises persons who, as a group, provide core competenciesnecessary to meet the Company’s performance targets.

Principle 3: Chairman and Chief Executive Officer

The Group’s Chairman and Chief Executive Officer (“CEO”) are Mr Steve Ting Tuan Toon and Mr Lim Chin Hurespectively. The role of the Chairman and the CEO are separate to ensure an appropriate balance of power,increased accountability and greater capacity of the Board for independent decision making. The Chairman is alsothe founder of the Group and continues to play a pivotal and significant role in developing the Group’s businesses.The Chairman prepares the meeting agenda in consultation with the CEO and exercises control over the quality andtimeliness of the flow of information between the management and the Board. The CEO bears executiveresponsibility for the Group’s businesses, oversees the daily running of the Group’s operations and is responsible forexecuting strategies and policies adopted by the Board. The Chairman and CEO are not related to each other.

Principle 4: Board MembershipPrinciple 5: Board Performance

All directors are required to submit themselves for re-election at regular intervals and as a best practice, at leastonce every three years.

The profiles of the Directors are disclosed on pages 10 to 13 (“Board of Directors”) of this Annual Report.


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The NC comprises the following members: Dr Harrison Wang Hong She (Chairman/Non-Executive Independent Director)Mr Tay Swee Sze (Member/Non-Executive Independent Director)Mr Robert Yap Min Choy (Member/Non-Executive Independent Director)

The principal functions of the NC are as follows: a) identifying, reviewing and recommending candidates for appointment as directors and

appointment to the Audit and Compensation Committees; b) re-nominating directors and determining annually the independence of directors; c) assessing the effectiveness of the Board as a whole; andd) recommending directors who are retiring by rotation to be put forward for re-election.

The NC evaluates the performance of the Board as a whole as well as each director’s contribution to the effectivenessof the Board. This assessment process takes into consideration, inter alia, frequency of meetings, directors’independence, quality of decision making and quality and timeliness of Board papers. The NC also considers otherperformance criteria as set out in the Code, including the performance of the share price of the Company. Individualdirectors were evaluated based on their attendance record at meetings, functional expertise and contributions.

Principle 6: Access to Information

The management provides the Board members with regular management reports so that the Board is able to fulfillits responsibilities. Relevant information on material events are circulated to the directors as and when they arise.

The agenda for board meetings is prepared in consultation with the Chairman and is circulated at least one week inadvance to each Board member. The Board members have separate and independent access to the CompanySecretary and to the management of the Company at all times in carrying out their duties. Should the directors,whether as a group or individually, require independent professional advice, the Company will bear the expensesincurred if such advice is required to enable the directors to discharge their duties professionally.

Principle 7: Procedure for Developing Remuneration PoliciesPrinciple 8: Level and Mix of RemunerationPrinciple 9: Disclosure of Remuneration

The Compensation Committee (“CC”) comprises the following members: Dr Harrison Wang Hong She (Chairman/Non-Executive Independent Director)Mr Tay Swee Sze (Member/Non-Executive Independent Director)Mr Steve Ting Tuan Toon (Member/Executive Director)


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The CC reviews and recommends to the Board for approval the remuneration packages of the executive directors.The remuneration package of each executive director is based on both the performance of the Group and theindividual. As part of its review, the CC will cover all aspects of remuneration including but not limited to directors’fees, salaries, allowances, bonus, share options and benefits-in-kind.

The Company has a formal and transparent process for fixing the directors’ fees for individual directors, which are subjectto shareholders’ approval at the Annual General Meeting (“AGM”) of the Company. No director is involved in deciding hisown remuneration. It is the Group’s policy to set a level of remuneration that is appropriate to attract, retain and motivatethe directors. The remuneration of executive directors includes a fixed as well as a variable component.

Remuneration of key executives (other than directors) are determined by the CEO based on individual performanceand the value added to the Group. The Group’s remuneration policies have always been to maintain a reasonablefixed salary and an emphasis on performance bonus.

Remuneration BandsBonuses/

Remuneration Band and Name of Director Base Salary (%) Commission (%) Fees (%)

$500,000 and above Nil$250,000 to below $500,000 NilSteve Ting Tuan Toon 245,100.00 76.16% 76,703.00 23.84% NilLim Chin Hu 234,465.00 71.51% 93,425.00 28.49% NilBelow $250,000Shirley Wong Swee Ping 127,875.00 75.32% 41,901.00 24.68% NilTay Swee Sze – – – 100Harrison Wang Hong She – – –Robert Yap Min Choy – – –Paul Andrew Thorley – – –Ng Chee Keong – – –

The CC and the Board are of the view that the remuneration of the directors are adequate but not excessive inorder to attract, retain and motivate them to operate the Company successfully.

The range of gross remuneration received by the top five executives of the Group is as follows: Remuneration Bands No. of Executives*

$250,000 to $500,000 2Less than $250,000 3

* includes executives of overseas subsidiaries


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Key Management Staff

The background of the key management staff are as follows:

Steve Ting Tuan ToonExecutive Chairman, Founder and DirectorMr Steve Ting Tuan Toon is a veteran in the technology industry with more than 20 years of experience. He has heldseveral management positions in Hewlett Packard Singapore and Mentor Graphics Corporation. He started his firstcompany, Mentor Graphics Associates Pte Ltd, in 1993 and subsequently Frontline Technologies Pte Ltd in 1994. Mr Ting served in various committees in tertiary institutions in Singapore and is also active in providing guidance inentrepreneurship via lectures and seminars. In recognition of his entrepreneurial achievements, Mr Ting wasconferred the honorary title of Doctor of Philosophy in Business Administration from the Wisconsin InternationalUniversity, USA, in 2002. He was also named Ernst and Young’s Entrepreneur of the Year (Business Services &Technology) in 2002. In 2005, Mr Ting was appointed a council member on The Enterprise Challenge (TEC) panel bythe Prime Minister Office for Public Service 21 (PS 21). Mr Ting holds a Bachelor of Engineering degree from theNational University of Singapore, a postgraduate degree from the Institute of Marketing in the United Kingdom anda graduate diploma in Marketing Management from the Singapore Institute of Management.

Lim Chin HuPresident, Chief Executive Officer and DirectorAs the Group President and Chief Executive Officer, Mr Lim Chin Hu oversees the Frontline Group’s regionalisationand operations. He has held several management positions in Sun Microsystems and Hewlett Packard Singapore,such as Managing Director of Sun Microsystems, Inc, Country Manager for Sun Microsystems in Thailand, thePhilippines, Vietnam and Indonesia, and Director of e-business and Channels for Sun Microsystems in the AsiaPacific. Mr Lim serves in several infocomm industry committees, including being a council member with theSingapore Infocomm Technology Federation (SiTF), Singapore's Information Technology Standards Committee (iTSC)and the National Infocomm Competency Council (NICC). He also serves as a board member of the InfocommDevelopment Authority of Singapore (IDA). Mr Lim holds a diploma in Electrical and Electronics Engineering fromNgee Ann Polytechnic and a Bachelor of Computer Science degree from La Trobe University, Melbourne, Australia.

Shirley Wong Swee PingCo-Founder, Vice President, Director and Managing Director, Frontline Solutions Pte LtdMs Shirley Wong Swee Ping is currently the Managing Director of Frontline Solutions Pte Ltd and has more than 15years of experience in the IT industry. Before co-founding Frontline, Ms Wong was Sales Director at Mentor GraphicsAssociates Pte Ltd, Design Engineer at Chartered Electronics Industries Ltd, Regional Applications Manager atCadnetix Pte Ltd (formerly known as Dazix Pte Ltd and subsequently Intergraph Pte Ltd) and Design Manager atFlextronics Pte Ltd. Ms Wong holds a diploma in Electrical and Electronics Engineering from City and Guilds in theUnited Kingdom.


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Cheong Yen NiapManaging Director, Frontline Outsourcing (Asia) Pte LtdMr Cheong Yen Niap is the Managing Director of Frontline Outsourcing (Asia) Pte Ltd. He joined FrontlineTechnologies Pte Ltd as Managing Director in July 2000, and has more than 16 years of experience in the IT industry.Prior to joining Frontline, Mr Cheong was Regional Manager (Financial Services Industry) at Sun Microsystems PteLtd, and has held sales and marketing appointments at several other technology corporations, including IBMSingapore Pte Ltd, Sequent Computer Systems and Tandem Computers. He holds a Bachelor of Engineering degreefrom the Nanyang Technological University.

Wong Wai MengManaging Director, Frontline Technologies Pte LtdMr Wong Wai Meng is the Managing Director of Frontline Technologies Pte Ltd. Within the Frontline Group, he hasbeen instrumental in developing its professional e-service arm that serves numerous corporations in the private andgovernment sectors today. Prior to his current position, he was the Managing Director of iASPire, an affiliate companyof the Group, overseeing the company’s sales and marketing activities as well as its regionalisation strategies.Mr Wong has also been actively involved in the pioneering years of the ASP Alliance Chapter (AAC) under theSingapore Infocomm Technology Federation (SiTF) as Vice-Chairman of the Executive Committee and as FoundingMember. He was also the Vice-Chairman of the Asia Pacific ASP/IDC Alliance Organisation, leading regionalisationinitiatives for local service providers.

Chiam Heng Huat Chief Financial Officer, Frontline Technologies Corporation LtdMr Chiam Heng Huat is the Chief Financial Officer of Frontline Technologies Corporation Ltd. He has some 16 yearsof financial management and public accounting experience in large multinational corporations as well as public-listed organisations in Singapore. Prior to joining Frontline, he has had experience in various merger-and-acquisitiontransactions as well as due diligence exercises, both on the buy-side and sell-side. To his credit, he has led inPacific Internet’s acquisition of five Internet Service Providers in Australia and the Asia-Pacific region. He was alsoinstrumental in the financial and legal restructuring of these acquisitions. After his career stint with Pacific Internet,he joined Internet Capital Group Asia and Commerce Exchange Pte Ltd, holding similar positions. Mr Chiam holds aBachelor of Commerce and Administration degree from the Victoria University of Wellington.

Abd Rahman Mohd YusufChief Operating Officer, Frontline Technologies Corporation (M) Sdn BhdEncik Abd Rahman Mohd Yusuf is the Chief Operations Officer of Frontline Technologies Corporation (M) Sdn Bhdwith over 20 years of sales, marketing and management experience in the IT industry. Prior to joining Frontline in2001, he held the positions of Managing Director and Director of Operations with Accurate Network & SystemsIntegration (ANSI). Encik Rahman has also worked with IT companies such as Komputer Sistem Malaysia andMesiniaga Sdn Bhd. He holds a Bachelor of Science degree in Business Administration from the California StateUniversity, Chico and a Master of Business Administration degree from the University of Miami in the United States.


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Principle 11: Audit Committee Principle 12: Internal ControlsPrinciple 13: Internal Audit

The Audit Committee (“AC”) comprises three members, all of whom are non-executive independent directors. The AC members are: Mr Tay Swee Sze (Chairman) Dr Harrison Wang Hong She (Member)Mr Robert Yap Min Choy (Member)

The Board is of the view that the members of the AC are appropriately qualified, having accounting or relatedfinancial management expertise or experience to discharge their responsibilities. The Company has adopted theCode in relation to the roles and responsibilities of the AC.

As a sub-committee of the Board, the AC assists the Board in discharging its responsibility to safeguard assets,maintain adequate accounting records and develop and maintain an effective system of internal controls.

The responsibilities of the AC include: a) reviewing with the Group’s external auditors, their audit plan, evaluating the internal accounting controls,

audit report, and any matters which the external auditors wish to discuss;b) reviewing the Group’s financial reports to shareholders and the general public before making

recommendations to the Board for approval/adoption.c) reviewing with the internal auditors, the scope and results of internal audit procedures and their evaluation

of the internal control system; andd) evaluating the objectivity and independence of the external auditors annually and nominating external

auditors for appointment or re-appointment.

In performing its functions, the AC has explicit authority to investigate any matter within its terms of reference,having full access to and co-operation of the management and full discretion to invite any director or executiveofficer to attend its meetings, and reasonable resources to enable it to discharge its functions properly.

The AC meets with the external auditors without the presence of the Company’s management at least once a year toensure that there are no unresolved areas of concern.


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Save for the fees paid for tax services rendered, there are no other non-audit fees payable to the Company’sexternal auditors, Ernst & Young. The AC has also reviewed all non-audit services provided by Ernst & Young and itis of the view that such services would not affect the independence of the external auditors.

The AC has reviewed the Company’s risk assessment and based on the external auditors’ reports, is satisfied that there are adequate internal controls in the Company. The AC expects the risk assessment process to be acontinuing process as it recognises the importance of sound internal control and risk management practices forgood corporate governance.

Principle 10: Accountability and Audit Principle 14: Communication with ShareholdersPrinciple 15: Greater Shareholder Participation

The Group and the Company strive for timeliness and transparency in their disclosures to the shareholders and thepublic. In addition to the regular dissemination of information through SGXNET and the website of the Company, theCompany also responds to enquiries from investors, analysts, fund managers and the media. However, the Companydoes not practise selective disclosure as all price-sensitive information is released through SGXNET.

All shareholders of the Company receive a copy of the annual report and notice of Annual General Meeting (“AGM”).The notice of AGM is also advertised in the newspapers. At the AGM, shareholders are given the opportunity to airtheir views and ask Directors questions regarding the Company. To facilitate voting by shareholders, the Company’sarticles allow shareholders to vote by appointing one or more proxies. The Board of Directors (including theChairmen of the respective Board Committees), management, as well as the external auditors attend the Company’sAGM to address any questions that shareholders may have.

Dealing in Securities

The Company has adopted internal guidelines to provide guidance to key officers of the Company and itssubsidiaries with regard to dealings in the Company’s securities in compliance with the Best Practices Guide onDealings in Securities issued by the Singapore Exchange Securities Trading Limited.

In particular, the Group’s directors and officers are not permitted to deal in the Group’s shares whilst in possessionof price-sensitive information and during the period commencing one month before the announcement of theGroup’s half-yearly and full-year results, and ending on the day of announcement of the results.


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Statement of Compliance

The Board confirms that for the financial year ended 31 March 2005, the Company has complied with the principalcorporate governance recommendations set out in the Best Practices Guide issued by SGX-ST.

Material Contracts

Except as disclosed in the Report of the Directors and the Financial Statements, the Company and its subsidiariesdid not enter into any material contracts involving the interest of the directors or controlling shareholders since theend of the previous financial year and no such material contracts still subsist at the end of the financial year.

Interested Person Transactions

For FY2005, there were no interested person transactions.

Statistics of shareholders as at 12 July 2005: Authorised Share Capital $100,000,000Issued and Fully Paid-Up Capital $41,202,247.25Class of Share Ordinary shares of $0.05 each Voting Rights 1 vote per share

Analysis of shareholders by range of balances as at 12 July 2005: Size of Shareholdings No. of Shareholders % No. of Shares %

1 – 999 6 0.08 1,438 –1,000 – 10,000 3,198 40.75 19,949,281 2.4210,001 – 1,000,000 4,602 58.64 274,526,523 33.321,000,001 and above 42 0.53 529,567,703 64.26Total 7,848 100.00 824,044,945 100.00


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Substantial shareholders as at 21 June 2005: S/No Name of Direct Interest Deemed Interest

Substantial Shareholder (Ordinary Shares of $0.05) (Ordinary Shares of $0.05)

1. Steve Ting Tuan Toon 21,274,548 80,000,0002. e-millennium Limited 58,860,000 –3. CTI II Limited 56,250,252 –4. Portnet.com Pte Ltd 50,000,000 –5. Temasek Holdings Pte Ltd – 47,650,000

List of top 20 shareholders as at 12 July 2005: S/No Name of Shareholder No. of Shares % of Holdings

1. Steve Ting Tuan Toon 101,274,548 12.292. DBS Nominees Pte Ltd 86,248,000 10.473. CTI II Limited 56,250,252 6.834. Portnet.com Pte Ltd 46,650,000 5.665. Lim Chin Hu 39,025,000 4.746. Raffles Nominees Pte Ltd 31,966,298 3.887. Lorani Pte Ltd 29,972,796 3.648. EDB Ventures 2 Pte Ltd 26,054,431 3.169. Shirley Wong Swee Ping 21,263,570 2.5810. Merrill Lynch (Singapore) Pte Ltd 18,255,770 2.2111. Citibank Nominees Singapore Pte Ltd 12,950,184 1.5712. United Overseas Bank Nominees Pte Ltd 11,849,000 1.4413. HL Bank Nominees (Singapore) Pte Ltd 11,435,000 1.3915. OCBC Securities Private Ltd 11,044,000 1.3414. Citibank Consumer Nominees Pte Ltd 10,904,000 1.3216. UOB Kay Hian Pte Ltd 9,129,319 1.1117. Phillip Securities Pte Ltd 7,484,000 0.9118. DBS Vickers Securities (Singapore) Pte Ltd 7,149,000 0.8719. OCBC Nominees Singapore Pte Ltd 6,944,000 0.8420. Digital Zillion Sdn Bhd 5,950,000 0.72Total 551,799,168 66.95


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41 Directors’ Report

46 Statement by Directors Pursuant to Section 201 (15)

47 Auditors’ Report

48 Balance Sheet

50 Consolidated Profit and Loss Account

51 Consolidated Statement of Changes in Equity

52 Consolidated Cash Flow Statement

56 Notes to the Financial Statements

105 Notice of Annual General Meeting

123 Proxy Form


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Financial Review 2005

The directors are pleased to present their report to the members together with the audited consolidated financialstatements of Frontline Technologies Corporation Ltd (“the Company”) and its subsidiaries (“the Group”) for the financialyear ended 31 March 2005 and the balance sheet of the Company as at 31 March 2005.

Directors

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

Steve Ting Tuan ToonLim Chin HuShirley Wong Swee PingTay Swee SzeHarrison Wang Hong SheRobert Yap Min ChoyPaul Andrew ThorleyNg Chee Keong

Arrangements to enable directors to acquire shares and debentures

Save as disclosed under share options in this Directors’ Report and in the financial statements, neither at the end nor at anytime during the financial year was the Company a party to any arrangement whose object is to enable the directors of theCompany to acquire benefits by means of the acquisition of shares or debentures of the Company or any other body corporate.

Directors’ interests in shares and debentures

The interests of the directors who held office at the end of the financial year in the shares or debentures of the Companyand related corporations, according to the register kept by the Company for the purposes of Section 164 of the SingaporeCompanies Act, Cap. 50, were as follows:

Direct interest at Deemed interest at1 April 2004 1 April 2004

or date of 31 March 21 April or date of 31 March 21 April appointment 2005 2005 appointment 2005 2005

The CompanyOrdinary shares of $0.05 eachSteve Ting Tuan Toon 100,874,548 101,274,548 101,274,548 – – –Lim Chin Hu 39,025,000 39,025,000 39,025,000 – – –Shirley Wong Swee Ping 21,263,570 21,263,570 21,263,570 – – –Tay Swee Sze 1,282,000 1,282,000 1,282,000 – – –Ng Chee Keong – – – 400,000 400,000 400,000


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Directors’ Report Year ended 31 March 2005

Directors’ interests in shares and debentures (cont’d)

Except as disclosed above, no other directors had interests in the shares or debentures of any company in the Group eitherat the beginning or at the date of appointment if later, or the end of the financial year and on 21 April 2005.

Directors’ contractual benefits

Since the end of the previous financial year, no director has received or become entitled to receive a benefit (other than abenefit or any fixed salary of a full-time employee of the Company included in the aggregate amount of emoluments shownin the financial statements, or any emoluments received from related corporations) by reason of a contract made by theCompany or a related corporation with the director or with a firm of which the director is a member, or with a company inwhich the director has a substantial financial interest.

Share options

Frontline Technologies Corporation Ltd Share Option Scheme 2000 (“The Scheme”)

The Scheme was approved by the members of the Company at an Extraordinary General Meeting held on 19 September2000. The Scheme provides an opportunity for employees and executive and non-executive directors of the Group toparticipate in the share capital of the Company. The scheme serves to motivate employees to optimise their performancestandards, dedication and efficiency and promote the retention of employees.

The Scheme is administered by the Compensation Committee comprising the following directors:

Harrison Wang Hong She (Chairman)Tay Swee SzeSteve Ting Tuan Toon

On 28 January 2002, the Company issued 104,860,000 options to the employees of the Group to subscribe for ordinaryshares of the Company of $0.05 each at a price equivalent to the market price or up to 20% discount, to the average ofthe last dealt price per share, or to its nominal value, whichever is higher. The exercise period of the option is from 28January 2004, where up to 33% of options granted to the employees may be exercised, to 28 January 2006 where 100% ofthe options may be exercised. Options granted are cancelled when the option holder ceases to be in the full-timeemployment of the Company or any corporation in the Group.

No options were issued during the financial year and none were exercised.


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Directors’ Report (cont’d) Year ended 31 March 2005

Movement in the number of share options outstanding are as follows:Options

As at 28 January 2002 104,860,000Cancellation during the year (13,600,000)

As at 31 March 2002 91,260,000Cancellation during the year (15,596,000)


As at 31 March 2004 47,771,000Cancellation during the year (300,000)

As at 31 March 2005 47,471,000

As at 31 March 2005, no options have been granted to directors of the Company, controlling shareholders of the Company orassociates of the Company and no employees have received 5% or more of the total options available under the Scheme.

The options under the Scheme do not entitle the holder to participate in any share issue of any other corporation by virtueof the option. As at 31 March 2005, no options have been exercised under this Scheme in the Group.

Convertible bonds

Pursuant to a subscription agreement dated 12 September 2002 between the Company, PLE Investments Pte Ltd (“PLEI”)and a subsidiary, FTI Ventures Pte Ltd (“FTIV”), FTIV issued 1,375,000 convertible bonds at $1 each to the Company andPLEI, who took up 60% and 40% respectively.

The bondholders are entitled to declare one or more of the convertible bonds to be immediately payable, only upon theoccurrence of certain remote events as stipulated in the subscription agreement, with 6% interest per annum on the issueprice compounded annually from the issue date up to the redemption date.

The bondholders also have the option to convert the convertible bonds into ordinary shares of FTIV, commencing from theearlier of (i) the date following 36 months from the date of the agreement, and (ii) the date of any of the following events:

(a) receipt by FTIV of an approval in-principle for the listing or quotation of securities in FTIV on any stock exchange,over-the-counter market or organised securities marketplace; or

(b) the acceptance of any third-party offer or proposal for the sale, transfer or disposal of any shares or securities inFTIV; or

(c) suspension of the Company’s securities listed on SGX-ST for more than 30 consecutive business days.


43

Share options (cont’d)

In addition, PLEI has the right to swap any of the convertible bonds and/or conversion shares in FTIV into the Company’sshares, commencing from the earlier of:

(a) suspension of the Company’s securities listed on SGX-ST for more than 30 consecutive business days; and

(b) the date following 36 months from the date of the agreement up to but excluding the date falling 72 months fromthe date of the agreement.

The number of the Company’s shares to be issued upon the swap of the convertible bonds and/or the conversion sharesdepends on the valuation of the shares and bonds as at the date of the swap.

On 3 January 2005, the Company acquired 2 ordinary shares of $1.00 each and 550,000 convertible bonds owned by PLEIin the capital of FTIV for a consideration of $110,607.00. As a result of this acquisition, FTIV became a wholly-ownedsubsidiary of the Company. Accordingly, PLEI ceases to have any rights over FTIV, including the exercise of options, and theCompany has acquired all rights over all of the convertible bonds of FTIV.

Warrants

During the financial year ended 31 March 2001, the Company issued warrants (“CTI Warrants”) to a strategic investor, CTI IILimited (“CTI”), a wholly-owned subsidiary of Creative Technologies Limited, to subscribe for 6,000,000 ordinary shares of par value $0.05 each in the Company at an exercise price of $0.25 each. These CTI warrants are exercisable between 16 March 2002 and 15 March 2004. None of the warrants was exercised before the expiry date.


44

Directors’ Report (cont’d) Year ended 31 March 2005

Audit committee

The Audit Committee (“the Committee”) comprises three independent non-executive directors. The members of theCommittee are:

Tay Swee Sze (Chairman)Harrison Wang Hong SheRobert Yap Min Choy (appointed on 15 November 2004)Steve Ting Tuan Toon (resigned on 15 November 2004)

The Committee performs the functions set out in the Singapore Companies Act and the Code of Corporate Governance. In performing those functions, the Committee reviewed the overall scope of both internal and external audits and theassistance given by the Company’s officers to the auditors. The Committee met with the internal and external auditors todiscuss the results of their respective examinations and their evaluation of the systems of internal accounting controls. The Committee also reviewed the financial statements of the Company and the consolidated financial statements of theGroup for the year ended 31 March 2005, as well as the external auditors’ report thereon.

A full report of these functions performed is included in the Report on Corporate Governance.

Auditors

Ernst and Young have expressed their willingness to accept reappointment as auditors of the Company.

On behalf of the Board of Directors,

Steve Ting Tuan ToonDirector

Lim Chin HuDirector

Singapore1 July 2005


45

We, Steve Ting Tuan Toon and Lim Chin Hu, being two of the directors of Frontline Technologies Corporation Ltd, do herebystate that, in the opinion of the directors:

(a) the accompanying balance sheet, consolidated profit and loss account, consolidated statement of changes in equityand consolidated cash flow statement together with the notes thereto, are drawn up so as to give a true and fairview of the state of affairs of the Company and of the Group as at 31 March 2005 and of the results of thebusiness and changes in equity and cash flows of the Group for the financial year then ended; and

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

On behalf of the Board of Directors,

Steve Ting Tuan ToonDirector

Lim Chin HuDirector



46

Statement by Directors Pursuant to Section 201(15) Year ended 31 March 2005

We have audited the accompanying financial statements of Frontline Technologies Corporation Ltd (“the Company”) and itssubsidiaries (“the Group”) for the year ended 31 March 2005, set out on pages 48 to 104. These financial statements arethe responsibility of the Company’s directors. Our responsibility is to express an opinion on these financial statementsbased on our audit.

We conducted our audit in accordance with Singapore Standards on Auditing. Those Standards require that we plan andperform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the directors, as well asevaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion,

(a) the consolidated financial statements of the Group and the balance sheet of the Company are properly drawn up inaccordance with the provisions of the Singapore Companies Act, Cap. 50 (“the Act”) and Singapore FinancialReporting Standards so as to give a true and fair view of the state of affairs of the Group and of the Company asat 31 March 2005 and the results, changes in equity and cash flows of the Group for the financial year ended onthat date; and

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

ERNST & YOUNGCertified Public Accountants



47

Auditors’ Report to the Members of Frontline Technologies Corporation Ltd Year ended 31 March 2005

Note Group Company

2005 2004 2005 2004

$ $ $ $

Non-current assetsPlant and equipment 3 8,629,480 4,514,214 – –Subsidiaries 4 – – 36,974,476 14,220,716Associated companies 5 21,167,055 18,132,788 41,984,153 40,369,590Other investments 6 549,440 1,378,483 521,726 1,181,589Deferred tax assets 29 729,040 767,929 – –Goodwill on acquisition 7 17,770,928 13,690,662 – –Intangible assets 8 2,192,504 199,350 – –Finance lease receivable 9 3,797,416 – – –Other receivables 10 3,571,759 1,011,276 – –Fixed deposits 11 4,000,000 1,000,000 – –

62,407,622 40,694,702 79,480,355 55,771,895Current assetsInventories 12 13,555,857 5,052,687 – –Trade and other receivables 13 83,936,831 46,615,219 7,170,684 14,444,174Finance lease receivable 9 2,157,542 – – –Cash and cash equivalents 14 31,574,351 50,475,215 4,272,702 12,590,670

131,224,581 102,143,121 11,443,386 27,034,844


48

Balance Sheet As at 31 March 2005

Note Group Company

2005 2004 2005 2004

$ $ $ $

Current liabilitiesTrade and other payables 15 59,608,169 42,541,424 5,035,939 1,610,959Provisions 16 – 400,000 – –Provision for taxation 890,723 1,855,895 7,245 16,087Hire purchase creditors 17 567,110 465,004 – –Borrowings and loans 18 21,247,803 6,483,600 – –

82,313,805 51,745,923 5,043,184 1,627,046

Net current assets 48,910,776 50,397,198 6,400,202 25,407,798

Non-current liabilitiesDeferred tax liabilities 29 1,342,042 80,033 – –Hire purchase creditors 17 364,753 854,916 – –Unearned revenue 2,380,750 1,027,238 – –Long-term loans 19 3,882,563 – – –

7,970,108 1,962,187 – –

103,348,290 89,129,713 85,880,557 81,179,693

EquityShare capital 20 41,202,248 40,995,380 41,202,248 40,995,380Share premium 21 43,861,517 43,477,795 43,861,517 43,477,795Reserves 22 1,901,375 313,769 816,792 (3,293,482)

86,965,140 84,786,944 85,880,557 81,179,693Minority interest 16,383,150 4,342,769 – –

103,348,290 89,129,713 85,880,557 81,179,693

The accounting policies and explanatory notes on pages 56 to 104 form an integral part of the financial statements.


49

Note 2005 2004

$ $

Revenue 23 147,463,591 106,786,301

Cost of sales (110,583,741) (84,613,010)

Gross profit 36,879,850 22,173,291

Other operating income 5,069,543 1,681,504Distribution and selling expenses (16,733,138) (11,042,977)Administrative expenses (16,851,433) (8,817,096)

Profit from operations 24 8,364,822 3,994,722Financial income 27 431,086 463,732Financial expenses 28 (2,720,088) (1,443,641)

Profit before share of results of associated companies 6,075,820 3,014,813Share of results of associated companies 2,689,829 2,246,247

Profit before tax 8,765,649 5,261,060Tax 29 (1,878,986) (1,952,358)

Profit after tax 6,886,663 3,308,702Minority interest (1,732,269) 173,929

Profit attributable to shareholders 5,154,394 3,482,631

Earnings per share (cents)Basic 30 0.63 0.44Diluted 30 0.63 0.44



50

Consolidated Profit and Loss Account Year ended 31 March 2005

CapitalShare Share Revenue redemption Translation

Note capital premium reserve reserve reserve Total

$ $ $ $ $ $

Balance at 31 March 2003as previously reported 39,371,485 39,624,675 1,216,236 50,000 (942,478) 79,319,918

Reclassification – (206,616) 206,616 – – –

Balance at 31 March 2003as restated 39,371,485 39,418,059 1,422,852 50,000 (942,478) 79,319,918

Net profit for the year – – 3,482,631 – – 3,482,631Issue of shares 20 1,623,895 4,059,736 – – – 5,683,631Dividend 31 – – (3,193,264) – – (3,193,264)Translation difference 22 – – – – (505,972) (505,972)

Balance at 31 March 2004 38 40,995,380 43,477,795 1,712,219 50,000 (1,448,450) 84,786,944Net profit for the year – – 5,154,394 – – 5,154,394Issue of shares 20 206,868 383,722 – – – 590,590Dividend 31 – – (3,279,630) – – (3,279,630)Translation difference 22 – – – – (287,158) (287,158)

Balance at 31 March 2005 41,202,248 43,861,517 3,586,983 50,000 (1,735,608) 86,965,140



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Consolidated Statement of Changes in Equity Year ended 31 March 2005

2005 2004

$ $

Cash flows from operating activitiesProfit before tax 8,765,649 5,261,060Adjustments for:

Amortisation of goodwill on acquisition 1,444,062 1,144,740Amortisation of intangible assets 333,307 22,742Depreciation of plant and equipment 3,398,888 2,003,917Provision for diminution in value of other investments 854,868 542,792Gain on disposal of plant and equipment (28,057) (24,303)Plant and equipment written off – 17,048Loss on disposal of a subsidiary – 237,735Loss on disposal of other investment – 249,999Interest income (431,086) (463,732)Interest expense 2,349,292 639,998(Write-back of ) provision for systems integration project (400,000) 400,000Gain on dilution of investment in associated company (396,431) –Gain on acquisition of additional investment in subsidiary (439,395) (124,764)Gain on acquisition of additional investment in associated company (644,110) –Share of results of associated companies (2,689,829) (2,246,247)

Operating profit before working capital changes 12,117,158 7,660,985(Increase) decrease in:

Inventories (709,248) 2,919,302Work-in-progress – 203,393Trade and other receivables (19,883,586) 1,024,493

Increase (decrease) in:Trade and other payables 7,543,768 (8,669,338)Translation difference (444,030) (336,773)

Cash (used in) generated from operations (1,375,938) 2,802,062Income taxes paid (1,997,493) (888,084)Interest received 431,086 463,732Interest paid (2,349,292) (639,998)

Net cash (used in) generated from operating activities (5,291,637) 1,737,712


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Consolidated Cash Flow Statement Year ended 31 March 2005

2005 2004

$ $

Cash flows from investing activitiesPurchase of plant and equipment (Note B) (4,165,460) (637,957)Proceeds from disposal of plant and equipment 135,836 130,355Proceeds from disposal of other investment – 168,144Purchase of unquoted equity bonds from minority interest (110,605) (71,184)Acquisition of business (Note B) (981,135) –Additional investment in associated company (1,023,972) –Acquisition of a subsidiary, net of cash acquired (Note C) (4,534,217) –Disposal of subsidiary, net of cash disposed (Note D) – 48,334Dividends received from an associated company 1,861,410 337,500Placement of long-term fixed deposits (3,000,000) (1,000,000)

Net cash used in investing activities (11,818,143) (1,024,808)

Cash flows from financing activitiesIncrease in fixed deposits pledged to banks (533,750) (258,731)Net payment to hire purchase creditors (465,005) (44,254)Dividends paid by the Company (3,279,630) (3,193,264)Increase in (repayments of ) borrowings 1,953,551 (19,568)

Net cash used in financing activities (2,324,834) (3,515,817)

Net decrease in cash and cash equivalents (19,434,614) (2,802,913)Cash and cash equivalents at the beginning of the year 50,142,965 52,945,878

Cash and cash equivalents at the end of the year (Note A) 30,708,351 50,142,965

Note A Cash and cash equivalents

Cash and cash equivalents included in the consolidated cash flow statement comprise the following:2005 2004

$ $

Fixed deposits (unpledged portion) 552,057 4,838,447Cash and bank balances 30,156,294 45,304,518

30,708,351 50,142,965


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Note B Analysis on acquisition of business

During the financial year, the Company acquired business with an aggregate cost of $2,092,000. The cash flow effect of theacquisition is shown below: 2005 2004

$ $

Plant and equipment 50,000 –Acquisition of intellectual property 1,200,000 –Goodwill arising from acquisition of business 242,000 –

Cash and bank balances 600,000 –

2,092,000 –Trade and other payables (1,110,865) –

Acquisition of business, net of cash acquired 981,135 –

Note C Analysis of acquisition of a subsidiary

On 1 June 2004, the Company acquired a 42% equity interest in Accel ICIM Systems & Services Limited (now renamed asAccel ICIM Frontline Limited). In connection with the acquisition, Accel ICIM Frontline Limited issued 4,333,330 ordinaryshares (valued at INR46.15 per share). The consideration to the acquisition was $13,251,853 and the acquisition wasaccounted for using the purchase method of accounting. The cash flow effect of the acquisition is as shown below.

2005 2004

$ $

Plant and equipment 3,411,125 –Intangibles 397,579 –Long-term receivables 383,927 –Inventories 7,793,922 –Trade and other receivables 25,569,540 –Cash and bank balances 8,717,636 –Trade and other payables (9,576,267) –Deferred tax liabilities (823,873) –Borrowings and loans (16,770,163) –

Net assets acquired 19,103,426 –Goodwill arising from acquisition of subsidiary 5,228,415 –Less: Minority interest (11,079,988) –

Total purchase consideration 13,251,853 –Less: Cash and bank balances (8,717,636) –

Acquisition of a subsidiary, net of cash acquired 4,534,217 –


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Consolidated Cash Flow Statement (cont’d) Year ended 31 March 2005

Note D Analysis of disposal of a subsidiary

On 31 October 2003, the Group disposed of 65% of Green House Design & Communications Pte Ltd (formerly known asGreen House Communications Pte Ltd) at cost. On 31 January 2004, there was an additional disposal of 16% of theinvestment for a consideration of $29,500. The equity interest in Green House Design & Communications Pte Ltd held bythe Group after these disposals is 19% and is classified as other investments.

2005 2004

$ $

Plant and equipment – 6,086Trade debtors – 367,159Other debtors, deposits and prepayments – 16,322Cash and bank balances – 10,666Trade creditors – (268,486)Due from immediate holding company, net – 60,172Other creditors and accruals – (18,202)Due from related companies, net – 126,994Finance lease obligations – (3,976)

Net assets disposed – 296,735Loss on disposal – (237,735)

Total sale consideration – 59,000Less: Cash and bank balances disposed – (10,666)

Disposal of subsidiary, net of cash disposed – 48,334



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1. Corporate information

Frontline Technologies Corporation Ltd is a public limited company incorporated and domiciled in Singapore. The registered office of the Company is located at 750 Chai Chee Road, #02-01/03 Technopark@Chai Chee,Singapore 469000.

Related companies in these financial statements refer to members of the Company’s group of companies.

The principal activity of the Company is that of investment holding. The principal activities of the subsidiaries areas shown in Note 4 to the financial statements. There were no significant changes in the nature of these activitiesduring the financial year.

The total number of employees in the Company and the Group at the end of the financial year was 26 and 1,883(2004: 26 and 314) respectively.

2. Significant accounting policies

(a) Basis of preparation

The financial statements have been prepared in accordance with Singapore Financial Reporting Standards (FRS)as required by the Singapore Companies Act.

The financial statements have been prepared on a historical cost basis.

The accounting policies have been consistently applied by the Group and the Company and are consistent withthose used in the previous financial year.

The financial statements are presented in Singapore Dollars (SGD or $).

(b) Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group andthe revenue can be reliably measured;

(i) Revenue from short-term projects/contracts is recognised using the completed contract method. A project/contract is considered completed when all costs except insignificant items have been incurredand the installation is operating according to specifications. Revenue from long-term projects/contracts, asdefined by management to be more than six months, are recognised using the percentage-of-completionmethod. The percentage-of-completion for a given project/contract is determined after considering therelationship of value of work done to-date to total project/contract revenue for the project/contract;


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Notes to the Financial Statements Year ended 31 March 2005

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

(iii) Maintenance service revenue billed in advance is recorded as unearned revenue and is pro-rated over thecontractual period;

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

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

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

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

(viii) Management fee is recognised on an accrual basis; and

(ix) Interest income is recognised on a time-proportion basis unless collectibility is in doubt.

(c) Basis of consolidation

The Group financial statements include the financial statements of the Company and its subsidiaries. Theresults of subsidiaries acquired or disposed of during the financial year are included in or excluded from theGroup financial statements with effect from the respective dates of acquisition or disposal. Significant inter-company balances and transactions have been eliminated upon consolidation.

Acquisitions of subsidiaries are accounted using the purchase method of accounting. Any difference betweenthe consideration paid and the fair values of the net assets acquired represent goodwill on acquisition. This isaccounted for in accordance with note 2(i).

The results of foreign subsidiaries are translated into SGD at the average exchange rates for the financial yearand balance sheet items are translated at exchange rates ruling at the balance sheet date except for sharecapital and reserves which are translated at historical exchange rates. Exchange differences arising from theabove translation are taken directly to the translation reserve until the disposal of the subsidiary.

(d) Subsidiaries

A subsidiary is a company in which the Group, directly or indirectly, holds more than half of the issued sharecapital, or controls more than half of the voting power, or controls the composition of the Board of Directors.

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


57

2. Significant accounting policies (cont’d)

(e) Associated company

An associated company is defined as a company, not being a subsidiary, in which the Group has a long-terminterest of not less than 20% of the equity and in whose financial and operating policy decisions the Groupexercises significant influence.

Investments in associated companies are stated in the financial statements of the Company at cost lessimpairment losses. Provision for diminution in investment in associated companies is made when, in theopinion of the directors, there has been a decline in value of the investment that is other than temporary.

At the Group level, the investments in associated companies are accounted for under the equity methodwhereby the Group’s share of the results of the associated companies is included in the consolidated profit andloss account and the Group’s share of the post-acquisition reserves of associated companies is adjustedagainst the cost of investment in the consolidated balance sheet.

The excess of the purchase consideration over the Group’s share of the fair value of the associated company atthe point of acquisition represents goodwill on acquisition. This is accounted in accordance with note 2(i).

(f ) Affiliated companies

An affiliated company is defined as a company, not being a subsidiary or an associated company, in which theshareholders and/or directors of the Company have significant equity interests or exercise significant influence.

(g) Other investments

Quoted, unquoted and other investments held for the long term are stated at cost. Provision is made for anydecline in value that is other than temporary.

(h) Plant and equipment

Plant and equipment are stated at cost less accumulated depreciation and any impairment in value. The costof an asset comprises its purchase price including import duties and non-refundable purchase taxes and anydirectly attributable costs of bringing the asset to its working condition and location for its intended use.Expenditure incurred after the assets have been put into operation, such as repairs and maintenance andoverhaul costs, are normally charged to the profit and loss account in the period in which the costs areincurred. In situations where it can be clearly demonstrated that the expenditures have resulted in an increasein the future economic benefits expected to be obtained from the use of an item of plant and equipmentbeyond its originally assessed standard of performance, the expenditures are capitalised as an additional costof assets.


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Notes to the Financial Statements (cont’d) Year ended 31 March 2005

Depreciation is provided for all plant and equipment at rates calculated to write off the cost, less estimatedresidual value, of each asset on a straight-line basis over its estimated useful life as follows:

Leasehold improvements 6 yearsPlant and machinery 21 yearsFurniture and fittings 3 – 5 yearsOffice equipment 3 – 5 yearsDemonstration equipment 3 yearsComputer hardware and software 3 yearsMotor vehicles 7 yearsRenovation 5 years

No depreciation is charged for work-in-progress.

(i) Goodwill on consolidation

Goodwill represents the excess of the cost of the acquisition over the fair value of the net underlying assets ofthe subsidiary or associated company acquired at the date of the acquisition. Goodwill is amortised using thestraight-line method over a period of 15 years that the benefits are expected to be received. Goodwill is statedat cost less accumulated amortisation and any impairment losses.

(j) Intangible assets

Computer software

Computer software relates to development cost capitalised at cost during the year. It has been assessed ashaving a finite life and is amortised under the straight-line method over a period of three years. The asset istested for impairment where an indication on impairment arises.

Licence fee

The intangible asset relates to the cost of licence fee paid under an agreement entered into by a subsidiarycompany with its director, whereby the latter has agreed to make available its intellectual proprietary rights (itsownership of the web portal (Unimas) and Share Trading System II (STS II)) to the subsidiary company.

The cost of licence fee is amortised on a straight-line basis, through the profit and loss account over the usefullife of the licences up to a maximum of 10 years. Where the licence is assessed as having no continuingeconomic value, the licence fee is written off to the profit and loss account.

Research and development costs

Research costs are expensed as incurred. Development expenditure incurred on an individual project isrecognised as an asset to the extent that it is expected that such an asset will generate future economicbenefits. Following the initial recognition of the development expenditure, the cost model is applied requiringthe asset to be carried at cost less any accumulated amortisation and accumulated impairment losses. Any expenditure recognised as an asset is amortised over the period of expected future sales from the related project.


59


(j) Intangible assets (cont’d)

Intellectual property

Intellectual property relates to the tools, methodologies and know-how purchased in business acquisitions. It is recognised at its fair value of the future net cash flows and amortised over the estimated useful life of up to 10 years.

Client contracts

Client contracts relate to existing contracts with third-party customers purchased in a business acquisition with a fixed stream of revenues. They are recognised at their fair value, representing net cash flows to bederived during the existing contractual period and amortised over the remaining useful life of the contracts(not exceeding three years).

Software under development

No amortisation is charged for software under development.

(k) Impairment of assets

Plant and equipment, goodwill on acquisition, long-term investments, intangible assets and other non-currentassets are reviewed for impairment whenever events or changes in circumstances indicate that the carryingamount of the asset may not be recoverable. Whenever the carrying amount of an asset exceeds itsrecoverable amount, an impairment loss is recognised in the profit and loss account for items of plant andequipment, goodwill on acquisition, long-term investments, intangible assets and other non-current assetscarried at cost. The recoverable amount is the higher of an asset’s net selling price and value in use. The netselling price is the amount obtainable from the sale of an asset in an arm’s length transaction. Value in use isthe present value of estimated future cash flows expected to arise from the continuing use of an asset andfrom its disposal at the end of its useful life. Recoverable amounts are estimated for individual assets or, if this is not possible, for the cash-generating unit.

Reversal of an impairment loss recognised in prior years is recorded when there is an indication that theimpairment loss recognised for an asset no longer exists or has decreased. The reversal is recorded in theprofit and loss account.

(l) Inventories

Inventories, consisting of computer software and hardware, are stated at the lower of cost and net realisablevalue, with the cost being generally determined using the weighted-average method. Net realisable value is theestimated selling price in the ordinary course of business, less estimated costs necessary to make the sale.Provision is made for deteriorated, damaged, obsolete and slow-moving inventories.


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(m) Project work-in-progress/Progress billings

Project work-in-progress for longer term contracts of more than six months is stated at cost plus attributableprofit to date net of progress billing and provision for foreseeable losses. Costs include direct labour, materialand overheads incurred in connection with the project. Provision for anticipated losses on uncompletedcontracts are made in the period in which such losses are determined.

(n) Trade and other receivables

Trade and other receivables, which generally have 30- to 90-day terms, are recognised and carried at theoriginal invoiced amount less provision for doubtful debts. An estimate for doubtful debts is made whencollection of the full amount is no longer probable. Bad debts are written off as incurred.

Receivables from related companies are recognised and carried at cost less any allowances for uncollectible amounts.

(o) Cash and cash equivalents

Cash consists of cash on hand and cash with banks, including fixed deposits and bank overdraft. Cashequivalents are short-term, highly liquid investments that are readily convertible to known amounts of cashand that are subject to an insignificant risk of changes in value.

Short-term deposits, which are held to maturity, are carried at cost.

(p) Trade and other payables

Trade and other payables, which are normally settled on 30- to 90-day terms, are carried at cost which is thefair value of the consideration to be paid in the future for goods and services received.

Payables to related companies are recognised at cost.

(q) Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of pastevents; it is probable that an outflow of resources embodying economic benefits will be required to settle theobligation and a reliable estimate can be made of the amount of the obligation.

Provision for warranty is made on products sold for a period of up to one year from the date of installation.Provision for product warranty cost is made at the time of sale by the Group based on the estimated productreturns and costs to be incurred in providing the warranty.


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(r) Employee benefits

Equity compensation benefits

The Company has an employee share option scheme whereby employees are granted non-transferable optionsto purchase the Company’s shares. There are no charges to earnings upon the grant or exercise of theseoptions. When the options are exercised, the proceeds received net of transaction costs are credited to sharecapital and share premium accordingly.

Defined contribution plans

As required by law, the Group makes contribution to the state pension scheme, the Central Provident Fund(“CPF”) for Singapore companies, the Employees Provident Fund (“EPF”) for Malaysia companies and Providentfund for India companies. CPF, EPF and Provident fund contributions are recognised as compensation expensein the same period as the employment that gives rise to the contributions. Eligible employees and the Groupmakes monthly contributions based on a percentage of the employee’s basic salary.

Employee leave entitlement

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

Gratuity fund for a subsidiary

In India, the liability for gratuity is determined actuarially by the Life Insurance Corporation of India (LIC). The subsidiary makes periodic contributions for all eligible employees to a gratuity fund maintained andadministered by the LIC.

Superannuation fund for a subsidiary

In India, a subsidiary makes periodic contributions to a superannuation fund maintained and administeredjointly by the LIC and the trust formed by the subsidiary for this purpose, based on a specific percentage ofthe salary of the eligible employees.


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(s) Leases

Operating leases

Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leasedassets are classified as operating leases. Operating lease payments are recognised as an expense in the profitand loss account on a straight-line basis over the lease term.

Hire purchase

Where assets are financed by hire purchase contracts that give rights approximating to ownership, the assetsare capitalised as if they had been purchased outright at the values equivalent to the present value of thetotal rental payable during the periods of the hire purchase and the corresponding hire purchase commitmentsare included under liabilities. The excess of the hire purchase payments over the recorded hire purchaseobligations is treated as finance charges which are allocated over each hire purchase term to give a constantrate of interest on the outstanding balance at the end of each period.

Finance lease

When assets are leased out under a finance lease, the present value of the lease payments is recognized as areceivable. The difference between the gross receivable and the present value of the receivable is recognisedas unearned finance income. Lease income is recognized in the profit and loss account over the term of thelease using the net investment method, which reflects a constant periodic rate of return. Initial direct costs arecharged to the profit and loss account as an expense at the commencement of the lease period.

(t) Borrowings and loans

Borrowing costs are generally expensed as incurred. Borrowing costs are capitalised if they are directlyattributable to the acquisition, construction or production of a qualifying asset. Capitalisation of borrowingcosts commences when the activities to prepare the asset for its intended use or sale are in progress and theexpenditures and borrowing costs are being incurred. Borrowing costs are capitalised until the assets are readyfor their intended use. If the resulting carrying amount of the asset exceeds its recoverable amount, animpairment loss is recorded.

Loans and borrowings are initially recognised at cost and subsequently measured at amortised cost using theeffective interest rate method. The difference between net proceeds and redemption value is recognised in theprofit and loss account in the period over the life of the borrowings.


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(u) Convertible bonds

Financial liabilities and equity instruments are classified according to the substance of the contractualagreements entered into. Convertible bonds issued which carry a right to convert to equity, with no redemptionpermitted, except for the occurrence of extreme circumstances which are remote, are classified as equity.

(v) Income tax

Deferred income tax is provided, using the liability method, on all temporary differences at the balance sheetdate between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognised for all taxable temporary differences unless the deferred tax liabilityarises from goodwill for which amortisation is not deductible for tax purposes.

Deferred tax assets are recognised for all deductible temporary differences and carry-forward of unused taxlosses, to the extent that it is probable that taxable profit will be available against which the deductibletemporary differences and carry-forward of unused tax losses can be utilised. For deductible temporarydifferences associated with investments in subsidiaries and associates, deferred tax assets are only recognisedto the extent that it is probable that the temporary differences will reverse in the foreseeable future andtaxable profit will be available against which the temporary difference can be utilised.

Deferred tax liabilities are not provided on undistributed earnings of foreign subsidiaries to the extent that theearnings are intended to remain indefinitely invested in those entities.

The carrying amount of a deferred tax asset is reviewed at each balance sheet date and reduced to the extentthat it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all ofthe deferred tax asset to be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period whenthe asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted orsubstantially enacted at the balance sheet date.


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(w) Foreign currency transactions and balances

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

Transactions in foreign currencies during the financial year are recorded in their respective measurementcurrencies using exchange rates approximating those ruling at transaction dates. Foreign currency monetaryassets and liabilities at the balance sheet date are translated into respective measurement currencies atexchange rates approximating those ruling at that date. All resultant exchange differences are dealt withthrough the profit and loss account.

(x) Segment reporting

A segment is a distinguishable component of the Group within a particular industry (business segment) and toa particular economic environment (geographical segment) which is subject to risks and rewards that aredifferent from those of other segments.

Inter-segment pricing is determined on an arm’s length basis. Segment results, assets and liabilities includeitems directly attributable to a segment as well as those that can be allocated on a reasonable basis.Unallocated items mainly comprise income-earning assets and revenue, interest-bearing loans, borrowings andexpenses, and corporate assets and expenses.

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


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3. Plant and equipment

CLeasehold Plant and Furniture Office

improvements machinery and fittings equipment

Group $ $ $ $ $ $ $ $ $ $

CostAt 1 April 2004 1,126,692 – 567,720 2,789,341Additions 146,017 – 45,477 195,454Arising from

acquisition of subsidiaries 403,777 372,068 858,462 501,234 –Disposals – – – (16,380) –Exchange difference – – (2,082) (1,838) –

As at 31 March 2005 1,676,486 372,068 1,469,577 3,467,811

Accumulated depreciationAt 1 April 2004 573,951 – 435,479 2,531,246Charge for the year 285,147 14,591 134,091 185,593Arising from

acquisition of subsidiaries 93,603 31,835 197,291 67,221 –Disposals – – – (14,773) –Exchange difference 379 (1,498) (3,988) (2,321)

As at 31 March 2005 953,080 44,928 762,873 2,766,966

Depreciation charge for 2004 184,432 – 102,150 387,813

Net book valueAs at 31 March 2005 723,406 327,140 706,704 700,845

As at 31 March 2004 552,741 – 132,241 258,095


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In the financial year ended 31 March 2004, the Group acquired plant and equipment with an aggregate cost of$1,921,216, of which $1,283,259 was acquired by means of hire purchase. Cash payments were made to purchasethe plant and equipment. There were no plant and equipment acquired by means of hire purchase in the financialyear ended 31 March 2005.

Included in the plant and machinery of the Group are motor vehicles under hire purchase with a net book value ofapproximately $30,000 (2004: $47,000) and demonstration equipment under hire purchase with a net book valueof approximately $Nil (2004: $1,350,000).


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ComputerDemonstration hardware Motor Work-in-

equipment and software vehicles Renovation progress Total

$ $ $ $ $ $

4,497,892 2,150,318 147,509 1,253,792 – 12,533,2642,879,222 655,468 43,516 194,435 55,871 4,215,460

– 4,571,174 239,068 – – 6,945,783– (91,757) (3,681) (89,379) – (201,197)– (5,334) (38) (1,955) – (11,247)

7,377,114 7,279,869 426,374 1,356,893 55,871 23,482,063

2,163,326 1,855,670 99,342 360,036 – 8,019,0501,624,521 861,428 37,863 255,654 – 3,398,888

– 3,110,370 34,337 – – 3,534,657– (78,645) – – – (93,418)

4,487 (2,784) (167) (702) – (6,594)

3,792,334 5,746,039 171,375 614,988 – 14,852,583

717,736 341,987 34,465 235,334 – 2,003,917

3,584,780 1,533,830 254,999 741,905 55,871 8,629,480

2,334,566 294,648 48,167 893,756 – 4,514,214

4. Subsidiaries

(a) Investments in subsidiaries comprise:Company

2005 2004

$ $

Unquoted equity shares, at cost 42,024,871 19,381,716Unquoted convertible bonds, at cost (Note 20) 935,605 825,000

42,960,476 20,206,716Less: Provision for impairment lossUnquoted equity shares (5,328,000) (5,328,000)Unquoted convertible bonds (658,000) (658,000)

(5,986,000) (5,986,000)

36,974,476 14,220,716

(b) Details of the subsidiaries are as follows:Country ofincorporation Percentage of Cost ofand place of equity held investment

Name Principal activities business by the Group by the Company

2005 2004 2005 2004

% % $ $

Held by the CompanyFrontline Sales, marketing, and Singapore 100 100 2,834,000 2,834,000Technologies support of Internet-basedPte Ltd* infrastructure, including

computer systems, software,storage, networking andand security systems

Frontline Outsourcing Provision of business Singapore 100 100 4,441,616 991,616(Asia) Pte Ltd management and(formerly known as consultancy servicesStor.H Pte Ltd)*

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

systems integration and other IT services


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Country ofincorporation Percentage of Cost ofand place of equity held investment


2005 2004 2005 2004

% % $ $

Held by the Company (cont’d)Frontline Innovations Currently dormant Singapore and 100 100 4,820,432 1,520,432Pte Ltd* the People’s

Republic ofChina respectively

Asia-Pacific Science Currently dormant Singapore 100 100 2 2Technology Partnership Pte Ltd (formerly known as Frontline SystemsDesign Pte Ltd)*

FTI Ventures Investment holding Singapore 100 60 5 3Pte Ltd*

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

China respectively

Green House Group Provision of business Singapore 100 100 5,250,001 5,250,001Pte Ltd* management and

consultancy services

Frontline Investment holding Malaysia 100 100 4,477,844 1,836,545TechnologiesCorporation (M)Sdn Bhd**

IT Holdings, Inc.### Investment holding The Philippines 49a 49a 4,950,195 4,950,195

FTI, Inc.# Currently dormant Mauritius 100 100 4 4

Accel ICIM Sale of computer hardware India 42a – 13,251,854 –Frontline and peripherals, provision ofLimited (formerly system integration solutionsknown as Accel and implementation ofICIM Systems & customised and tradedServices Limited)## software products

42,024,871 19,381,716


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4. Subsidiaries (cont’d)Country ofincorporation Percentage of Cost ofand place of equity held investment


2005 2004 2005 2004

% % $ $

Held by Green House Group Pte LtdGreen House Exhibits Currently dormant Singapore 100 100 – –Pte Ltd*

Frontline Practice Currently dormant Singapore 100 100 – –Pte Ltd*

Green House Learning Currently dormant Singapore 100 100 – –Pte Ltd*

Green House Solution Currently dormant Malaysia 100 100 – –Sdn Bhd**@@@

Held by Frontline Technologies Corporation (M) Sdn BhdFrontline Technologies Sales, marketing and Malaysia 100 100 – –Malaysia Sdn Bhd** support of Internet-based

infrastructure including computer systems, software, storage, networkingand security systems

BizFront Provision of end-to-end Malaysia 100 100 – –Sdn Bhd** software solutions and

training, and support and maintenance of computer software systems andapplications

Frontline Outsourcing Currently dormant Malaysia 100 100 – –(Asia) Sdn Bhd(formally Excite Symphony Sdn Bhd)**

Held by IT Holdings, Inc.Sun Microsystems Provision of IT systems The Philippines 24.94a 24.94a – –Philippines, Inc.*** and services

Held by Sun Microsystems Philippines, Inc.PSPI-Subic, Inc.*** Dormant The Philippines 24.94a 24.94a – –


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2005 2004 2005 2004

% % $ $

Held by Accel ICIM Frontline Limited

Accel Infotech Trading of computers and Dubai 100 – – –ME Dubai@ associated peripherals,

application software andpackaged software, maintenance of hardwareand software andoutsourcing activities

ACL Systems & Trading of computers and Singapore 100 – – –Technologies associated peripherals,Pte Ltd@@ application software and

packaged software,maintenance of hardwareand software andoutsourcing activities

* Audited by Ernst & Young, Singapore** Audited by Ernst & Young, Malaysia, an associated firm of Ernst & Young Global.*** Audited by SyCip Gorres Velayo & Company, an associated firm of Ernst & Young Global.# Audited by Ernst & Young, Mauritius, an associated firm of Ernst & Young Global.## Audited by Ernst & Young Chennai, India, an associated firm of Ernst & Young Global.### Audited by Punongayan & Araullo in the Philippines.@ Audited by SK Ram Associates.@@ Audited by Mgi N Rajan Associates.@@@ Shares held in trust by trustees.a These companies have been consolidated as subsidiaries of the Company or their respective immediate holding company

as the Company or the immediate holding company exercises control over the Board of Directors of these companies.

(c) Acquisition of subsidiaries

During the financial year, the Company acquired additional equity interest from minority shareholders in thefollowing subsidiaries:

Date of transfer Subsidiary Interest acquired Consideration Attributable net assets% $ $

1 June 2004 Accel ICIM Frontline Limited 42 13,251,853 8,023,4393 January 2005 FTI Ventures Pte Ltd 40 110,605 110,605


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5. Associated companies

(a) Investments in associated companies comprise:Group Company

2005 2004 2005 2004

$ $ $ $

Unquoted equity shares, at cost 42,028,894 40,414,331 41,984,153 40,369,590Goodwill on acquisition written off to

revenue reserves in previous years (11,328,838) (11,328,838) – –Goodwill on acquisition (12,248,702) (13,289,243) – –

18,451,354 15,796,250 41,984,153 40,369,590Share of post-acquisition profits 3,794,288 3,335,497 – –Translation difference (1,078,587) (998,959) – –

21,167,055 18,132,788 41,984,153 40,369,590

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



2005 2004 2005 2004

% % $ $

G-Able Co., Limited** Provision of client-server Thailand 20.5 30 14,253,614 13,229,641computing systems andnetwork-related infrastructureproducts and services

MDCL–Frontline Investment holding British 47 43 22,041,909 21,451,319(China) Ltd***^ Virgin Islands

Ecquaria Ltd* License of software British 30 30 5,688,630 5,688,630applications and Virgin Islandsinvestment holding

41,984,153 40,369,590

* Audited by Ernst & Young, Singapore** Audited by Ernst & Young Office Ltd, Bangkok, an associated firm of Ernst & Young Global.*** Audited by Deloitte Touche Tohmatsu, Beijing.^ Pursuant to the additional 4.01% acquisition in the issued and paid-up share capital of MDCL-Frontline (China) Ltd

(“MDCL”) on 28 January 2005, the Company issued 4,137,353 new ordinary shares as full purchase consideration of the2,616,432 ordinary shares of HK$1.00 each from an MDCL shareholder, Wellchosen Technology Ltd.


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6. Other investmentsGroup Company

2005 2004 2005 2004

$ $ $ $

Quoted investments – 1,419,280 – 1,419,280Unquoted investments– convertible bonds 245,453 245,453 – –– convertible loan 2,500,000 2,720,000 2,500,000 2,720,000– preference shares 999,992 999,992 999,992 999,992– ordinary shares 1,982,559 3,332,542 1,430,000 2,788,900Club membership 302,845 302,845 285,825 285,825

6,030,849 9,020,112 5,215,817 8,213,997Less: provision for diminution in valueQuoted investments – 1,419,280 – 1,419,280Unquoted investments– preference shares 677,266 – 677,266 –– convertible bonds 245,453 245,453 – –– convertible loan 2,500,000 2,720,000 2,500,000 2,720,000– ordinary shares 1,971,865 3,170,071 1,430,000 2,806,303Club membership 86,825 86,825 86,825 86,825

5,481,409 7,641,629 4,694,091 7,032,408

549,440 1,378,483 521,726 1,181,589

Market value of quoted investments – 51,230 – 51,230

Main features of certain investments were as follows:

iASPire.net Pte Ltd (“iASPire”)

Pursuant to a subscription agreement dated 8 May 2000, the Company purchased $2,900,000 of convertible loanstock bearing interest at 6% per annum. The convertible loan stock is convertible at the Company’s option intoordinary shares of iASPire. The loan matured on 31 December 2002 and the option also expired on that date. The$2,900,000 convertible loan stock is convertible into ordinary shares representing 66.5% of the equity interest iniASPire. The agreement also contains anti-dilution protection against the Company’s equity interest in iASPire fallingbelow 51%.

On 10 May 2002, the Company entered into an agreement with iASPire to extend the maturity date for the convertibleloan stocks to 31 December 2003 and the interest of 6% per annum to be waived for the extended period until 31 December 2003. Pursuant to this agreement, the maturity redemption amount shall be equal to the issue priceuntil the extended maturity date and the other terms and conditions of the first agreement remain unchanged.


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6. Other investments (cont’d)

iASPire.net Pte Ltd (“iASPire”) (cont’d)

As at 31 March 2005, the Company had converted $400,000 convertible loan stock into ordinary shares. The Companyhad also invested an additional $530,000 in the form of ordinary stocks by capitalising the debts owed by iASPire.The Company’s total investment of $930,000 represents a 17.10% equity share in iASPire. This remained unchangedas of 31 March 2005.

iGine.com Pte Ltd (“iGine”)

Under the terms of subscription agreements dated 31 March 2000 and 5 September 2000, the Company purchased125,000 ordinary shares representing a 10% equity interest in iGine for a cash consideration of $500,000. TheCompany also previously purchased 114,678 redeemable convertible preference shares (“RCPS”) in iGine for a cashconsideration of $999,992. These RCPS are convertible to one ordinary share in the capital of iGine.

PalmWindow Pte Ltd (“PalmWindow”)

Pursuant to a subscription agreement dated 19 June 2000, the Company purchased 150,000 ordinary shares ofPalmWindow for a consideration of $660,000 and $220,000 of convertible loan stock bearing zero interest or 7%per annum if not converted. The convertible loan stock is convertible at the option of the Company into 50,000ordinary shares of PalmWindow representing 2% of its share capital. The loans matured on 31 December 2004 andthe option expired on that date as well. The Company had also previously acquired an additional 75,000 ordinaryshares for a consideration of $330,000.

Incall Systems Inc (“Incall”)

In the year 2002, 1st Call Systems Pte Ltd (“1st Call”) was acquired by Incall and the Company’s $880,000convertible loan stock investment in 1st Call and short-term loan of $434,400 was converted to 334,926 ordinaryshares of Incall. In year 2002, the Company also acquired an additional 40,000 ordinary shares of Incall for a cashconsideration of $104,880. Incall underwent a share split exercise. Consequently, the Company held 749,852ordinary shares in Incall.

Beacon Frontline Solutions, Inc. (“Beacon”)

Pursuant to an investment agreement dated 1 August 2002, FTI Ventures Pte Ltd (“FTIV”), a subsidiary, purchasedUS$133,333 (equivalent to $245,453) of convertible bonds of Beacon. The convertible bonds are non-interestbearing. The bonds are convertible into 6,666,667 new common shares of Peso 1 each in the capital of Beacon, orsuch higher number of shares comprising no less than 25% of the total enlarged capital stock of Beacon as at thedate of conversion. The conversion period for the bonds expires on 31 July 2005.


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Movements in provision for diminution in value of the other investments during the financial year are as follows:

Group Company

2005 2004 2005 2004

$ $ $ $

At the beginning of the year 7,641,629 7,406,190 7,032,408 6,795,716Provision for the year 854,868 542,792 677,266 542,792Write-off against provision during the year (3,015,583) (306,100) (3,015,583) (306,100)Translation difference 495 (1,253) – –

5,481,409 7,641,629 4,694,091 7,032,408

7. Goodwill on acquisitionGroup

2005 2004

$ $

At the beginning of the year 16,306,931 14,489,870Acquisition of a subsidiary 5,228,415 –Arising from acquisition of a subsidiary 98,808 –Acquisition of business 242,000 –Acquisition of an associated company – 4,287,671Adjustment of goodwill relating to an associated company – (2,425,443)Translation difference (1,388) (45,167)

21,874,766 16,306,931Less: Accumulated amortisation (4,103,838) (2,616,269)

17,770,928 13,690,662

Movements in accumulated amortisation of goodwill on acquisition during the financial year are as follows:

At the beginning of the year 2,616,269 1,485,056Amortisation for the year 1,444,062 1,144,740Arising from acquisition of a subsidiary 43,217 –Translation difference 290 (13,527)

At the end of the year 4,103,838 2,616,269


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8. Intangible assetsSoftware

Computer License Intellectual Client undersoftware fee property contracts development Total

$ $ $ $ $ $

CostAt 1 April 2004 – 222,092 – – – 222,092Additions 108,699 – 1,200,000 600,000 80,658 1,989,357Arising from acquisition

of subsidiary 648,721 – – – – 648,721Translation difference (767) (4,709) – – – (5,476)

At 31 March 2005 756,653 217,383 1,200,000 600,000 80,658 2,854,694

Accumulated amortisationAt 1 April 2004 – 22,742 – – – 22,742Charge for the year 177,941 22,033 50,000 83,333 – 333,307Arising from acquisition

of subsidiary 306,733 – – – – 306,733Translation difference – (592) – – – (592)

At 31 March 2005 484,674 44,183 50,000 83,333 – 662,190

Charge for 2004 – 22,742 – – – 22,742

Net book valueAt 31 March 2005 271,979 173,200 1,150,000 516,667 80,658 2,192,504

At 31 March 2004 – 199,350 – – – 199,350

Computer software includes development costs of $99,675 (net carrying amount $92,658) capitalised during theyear, at cost.

During the financial year, the Group acquired a business with an aggregate cost of $2,092,000, of which $1,200,000and $600,000 represent intellectual property and client contracts respectively.


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9. Finance lease receivable

Finance leases include the non-cancellable lease of computers, peripherals and accessories. The terms of the leaseagreements do not provide for any non-guaranteed residual value or contingent rents.

The reconciliation between the gross investment and the present value of the minimum lease payment receivable isas follows:

Group

2005 2004

Minimum Present value Minimum Present valuepayments payments payments payments

$ $ $ $

Not later than 1 year 2,823,701 2,157,542 – –Between 1 year to 5 years 4,288,251 3,797,416 – –

Total minimum lease payments 7,111,952 5,954,958 – –Less: Amounts representing finance charge (1,156,994) – – –

Present value of minimum lease payments 5,954,958 5,954,958 – –

10. Other receivablesGroup

2005 2004

$ $

Prepayments – maintenance costs 1,036,764 358,269Deposits 1,920,809 550,188Loans to a related party 383,927 –Deferred charges 230,259 102,819

3,571,759 1,011,276

Loans to a related party are repayable by July 2010. Interest is earned at the borrowing rate of 7% per annum.

Deposits mainly relate to rental deposits with lessors, third-party suppliers and refundable deposits with service providers.

Deferred charges relate to various cash performance bonds paid by a subsidiary prior to the start of a certainproject or before joining a bid.


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11. Fixed deposits

Fixed deposits which are withdrawable only upon maturity on 3 March 2008 earn interest of up to 1.75% (2004:2%) per annum.

12. InventoriesGroup

2005 2004

$ $

Finished goods– at cost 12,871,946 3,612,357– at net realisable value 186,130 166,583Goods-in-transit, at cost 497,781 1,273,747

13,555,857 5,052,687

Finished goods are stated after deducting a provision for inventory obsolescence 884,138 965,309

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

At the beginning of the year 965,309 1,138,340Translation difference – (52,531)Write-back of provision during the year (81,171) (120,500)

884,138 965,309


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13. Trade and other receivablesGroup Company

2005 2004 2005 2004

$ $ $ $

Trade receivables– affiliated companies 836,956 5,976 – –– corporate shareholders 2,629,206 2,115,437 – –– third party 71,057,902 39,055,514 – –Less provision for doubtful trade debts (2,151,805) (1,289,750) – –

Trade receivables, net 72,372,259 39,887,177 – –Deposits 73,391 71,417 15,888 4,720Prepayments– maintenance cost 5,015,660 4,481,508 – –– others 2,424,368 381,871 41,944 301,818Advances to employees 45,542 33,617 – 199Loan to a subsidiary – – 370,111 370,111Loan to affiliated companies 390,337 874,851 390,337 874,851Tax recoverable 67,377 46,884 – –Other receivables 3,874,015 871,898 94,155 170,312Non-trade receivables from– subsidiaries – – 6,090,700 12,645,999– associated companies 167,229 76,184 166,105 76,164– affiliated companies 14,905 92,967 1,444 –Less provision for doubtful non-trade debts (508,252) (203,155) –

83,936,831 46,615,219 7,170,684 14,444,174

Prepaid maintenance costs relate to maintenance fees paid in advance to a third party for the contracted periodand are charged to the profit and loss account over the contractual period as the services are performed by thethird party.

The non-trade receivables from associated, affiliated companies and subsidiaries of the Company are unsecured,interest-free and repayable on demand.

Short-term loans to affiliated companies and amounts due from affiliated companies are stated after provision fordoubtful debts of $93,120 (2004: $93,120) and Nil (2004: $Nil) respectively.


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13. Trade and other receivables (cont’d)

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

2005 2004

$ $

At the beginning of the year 1,289,750 3,025,116Provision for the year 1,224,604 224,595Write-off against provision (128,369) (1,339,832)Translation difference – (80,299)Write-back of provision (234,180) (539,830)

At the end of the year 2,151,805 1,289,750

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

At the beginning of the year 203,155 318,355Provision for the year 227,278 (102,575)Translation difference 77,819 (12,625)

At the end of the year 508,252 203,155

14. Cash and cash equivalentsGroup Company

2005 2004 2005 2004

$ $ $ $

Cash and bank balances 30,156,294 45,304,518 4,272,702 8,831,852Fixed deposits (unpledged portion) 552,057 4,838,447 – 3,758,818Fixed deposits (pledged portion) 866,000 332,250 – –

31,574,351 50,475,215 4,272,702 12,590,670

Fixed deposits mature within 1 to 12 months (2004: 1 to 12 months) and have interest rates ranging from 2.60% to5.00% (2004: 0.45% to 3.50%) per annum.

The Group has pledged its fixed deposits to the banks for banking facilities granted (Note 33(b)).


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15. Trade and other payablesGroup Company

2005 2004 2005 2004

$ $ $ $

Trade payables– associated companies 31,500 59,191 – –– affiliated companies 50,227 98,149 – –– third party 31,188,261 23,843,439 – –Other payables 3,388,817 1,435,116 155,202 254,919Accrued operating expenses 10,714,081 5,139,031 469,792 389,050Unearned revenue 10,295,852 10,569,560 – –Deposits for future stock subscription 614,000 614,000 – –Customer deposits 3,030,008 277,189 – –Non-trade payables to– affiliated companies 265,423 400,439 87,893 67,429– directors 30,000 30,000 30,000 30,000– directors of subsidiaries – 75,310 – –– subsidiaries – – 4,293,052 869,561

59,608,169 42,541,424 5,035,939 1,610,959

The non-trade payables to affiliated companies, director, directors of subsidiaries and subsidiaries of the Companyare unsecured, interest-free and repayable on demand.


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16. Provisions

Movements in provisions during the financial year are as follows:Group

2005 2004

$ $

Provision for restructuring costsAt the beginning of the year – 850,000Write-off against provision – (850,000)

At the end of the year – –

Provision for systems integration projectAt the beginning of the year 400,000 –Provision for the year – 400,000Write-back of provision during the year (400,000) –

At the end of the year – 400,000

Provision for restructuring costs pertained to planned restructuring of businesses in Malaysia.

Provision for a systems integration project in the financial year ended 31 March 2004 relates to potentialobligations under the systems integration project.


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17. Hire purchase creditorsGroup

Payments Interest Principal

$ $ $

2005Not later than 1 year 648,792 81,682 567,110Between 1 year to 5 years 413,524 48,771 364,753

1,062,316 130,453 931,863

2004Not later than 1 year 543,966 78,962 465,004Between 1 year to 5 years 1,000,146 145,230 854,916

1,544,112 224,192 1,319,920

Hire purchase agreements range from 2 to 7 years. Hire purchase agreements do not contain restrictions concerningdividends, additional debt or further leasing.

18. Borrowings and loansGroup

2005 2004

$ $

Promissory notes issued to financial institutions (unsecured) 3,662,511 2,645,772Short-term loans from financial institutions (unsecured) 5,301,371 –Bills payable to a bank (secured) 12,283,921 3,837,828

21,247,803 6,483,600

The promissory notes and short-term loans are unsecured and mature within 1 year (2004: within 1 year) and bearinterest rates ranging from 7.50% to 16.75% (2004: 4.80% to 12.40%) per annum.

Bills payable to a bank are secured by letters of credit from financial institutions, fixed deposits pledged (Note 14) and corporate guarantees (Note 33(b)) and bear interest ranging from 4.00% to 15.50% (2004: 4.00% to 14.00%) per annum.


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19. Long-term loans

Long-term loans which bear interest at a rate of 7.42% per annum are secured by finance lease receivables (Note9) and will mature in October 2009.

20. Share capitalGroup and Company

2005 2004

$ $

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

Issued and fully paidAt the beginning of the financial year

819,907,592 (2004: 787,429,702) ordinary shares of $0.05 each 40,995,380 39,371,485Issuance of shares

4,137,353 (2004: 32,477,890) ordinary shares of $0.05 each 206,868 1,623,895

At the end of the financial year824,044,945 (2004: 819,907,592) ordinary shares of $0.05 each 41,202,248 40,995,380

The holders of ordinary shares are entitled to receive dividends as and when declared by the Company. All ordinaryshares carry one vote per share without restriction.

Pursuant to the additional 4.01% acquisition in the issued and paid-up share capital of MDCL–Frontline (China) Ltd(“MDCL”) on 28 January 2005, the Company issued 4,137,353 new ordinary shares as full purchase consideration ofthe 2,616,432 ordinary shares of HK$1.00 each from an MDCL shareholder, Wellchosen Technology Ltd.

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

On 28 January 2002, the Company issued 104,860,000 options to the employees of the Group to subscribe forordinary shares of the Company of $0.05 each at a price equivalent to the market price or up to 20% discount, tothe average of the last dealt price per share, or to its nominal value, whichever is higher. The exercise period ofthe option is from 28 January 2004, where up to 33% of options granted to the employees may be exercised, to28 January 2006 where 100% of the options may be exercised. Options granted are cancelled when the optionholder ceases to be in the full-time employment of the Company or any corporation in the Group.


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Movement in the number of share options outstanding are as follows:Options

As at 28 January 2002 104,860,000Cancellation during the year (13,600,000)



As at 31 March 2004 47,771,000Cancellation during the year (300,000)

As at 31 March 2005 47,471,000

As at 31 March 2005, no options have been granted to directors of the Company, controlling shareholders of theCompany or associates of the Company and no employees have received 5% or more of the total options availableunder the Scheme.

The options under the Scheme do not entitle the holder to participate in any share issue of any other corporationby virtue of the option. As at 31 March 2005, no options have been exercised under this Scheme in the Group.

Convertible bonds

Pursuant to a subscription agreement dated 12 September 2002 between the Company, PLE Investments Pte Ltd(“PLEI”) and a subsidiary, FTI Ventures Pte Ltd (“FTIV”), FTIV issued 1,375,000 convertible bonds at $1 each to theCompany and PLEI, who took up 60% and 40% respectively.

The bondholders are entitled to declare one or more of the convertible bonds to be immediately payable, onlyupon the occurrence of certain remote events as stipulated in the subscription agreement, with 6% interest perannum on the issue price compounded annually from the issue date up to the redemption date.

The bondholders also have the option to convert the convertible bonds into ordinary shares of FTIV, commencingfrom the earlier of (i) the date following 36 months from the date of the agreement, and (ii) the date of any of thefollowing events:

(a) receipt by FTIV of any approval in-principle for the listing or quotation of securities in FTIV on any stockexchange, over-the-counter market or organised securities marketplace; or

(b) the acceptance of any third-party offer or proposal for the sale, transfer or disposal of any shares or securitiesin FTIV; or

(c) suspension of the Company’s securities listed on SGX-ST for more than 30 consecutive business days.


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20. Share capital (cont’d)

In addition, PLEI has the right to swap any of the convertible bonds and/or conversion shares in FTIV into theCompany’s shares, commencing from the earlier of:

(a) suspension of the Company’s securities listed on SGX-ST for more than 30 consecutive business days; and

(b) the date following 36 months from the date of the agreement up to but excluding the date falling 72 monthsfrom the date of the agreement.

The number of the Company’s shares to be issued upon the swap of the convertible bonds and/or the conversionof shares depends on the valuation of the shares and bonds as at the date of the swap.

On 3 January 2005, the Company acquired 2 ordinary shares of $1.00 each and 550,000 convertible bonds ownedby PLEI in the capital of FTIV for a consideration of $110,605.00. As a result of this acquisition, FTIV became awholly-owned subsidiary of the Company. Accordingly, PLEI ceases to have any rights over FTIV, including theexercise of options, and the Company has acquired all rights over all of the convertible bonds of FTIV.

21. Share premiumGroup Company

2005 2004 2005 2004

$ $ $ $

At the beginning of the year, as previously reported 43,684,411 39,624,675 43,477,795 39,418,059

Reclassification (206,616) (206,616) – –

At the beginning of the year, as restated (Note 38) 43,477,795 39,418,059 43,477,795 39,418,059Arising from the issue of ordinary shares– 4,137,353 (2004: 32,477,890) ordinary

shares of $0.05 each at a premium of$0.093 (2004: $0.17) per share 383,722 4,059,736 383,722 4,059,736

At the end of the year 43,861,517 43,477,795 43,861,517 43,477,795

The share premium account may be applied only for the purposes specified in the Companies Act. The balance isnot available for the distribution of dividends except in the form of shares.


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22. Reserves

(a) Revenue reservesGroup Company

2005 2004 2005 2004

$ $ $ $

At the beginning of the year, as previously reported 1,505,603 1,216,236 (3,343,482) (2,938,589)

Reclassification 206,616 206,616 – –

At the beginning of the year, as restated (Note 38) 1,712,219 1,422,852 (3,343,482) (2,938,589)

Net profit for the year 5,154,394 3,482,631 7,389,904 2,788,371Dividend (Note 31) (3,279,630) (3,193,264) (3,279,630) (3,193,264)

At the end of the year 3,586,983 1,712,219 766,792 (3,343,482)

Group

2005 2004

$ $

Retained by:Company 766,792 (3,343,482)Subsidiaries 16,055,719 18,365,335Associated companies 3,405,603 3,335,497Net goodwill arising from acquisition of subsidiaries,

associated company and business taken directlyto revenue reserves in previous years (16,645,131) (16,645,131)

3,586,983 1,712,219

(b) Capital redemption reserveGroup and Company

2005 2004

$ $

Capital redemption reserve 50,000 50,000

The capital redemption reserve is not available for distribution as dividends. This will be applied in paying upunissued shares to be issued as bonus shares in accordance with Section 70(7) of the Singapore CompaniesAct, Cap. 50.


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22. Reserves (cont’d)

(c) Translation reserveGroup Company

2005 2004 2005 2004

$ $ $ $

Translation reserve:At the beginning of the year (1,448,450) (942,478) – –Translation difference (287,158) (505,972) – –

(1,735,608) (1,448,450) – –

Total reserves 1,901,375 313,769 816,792 (3,293,482)

23. Revenue

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

Group

2005 2004

$ $

Contract revenue and sales of products 93,136,987 72,317,814Maintenance income 40,163,961 21,234,155Consultancy 5,661,214 8,059,416Training income 1,258,618 1,246,281Commission 123,825 294,661Management fee from an associated company – 166,800Other service income 7,118,986 3,467,174

147,463,591 106,786,301

Intra-group transactions have been excluded from Group turnover.


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24. Profit from operationsThis is determined after charging (crediting) the following:

Group

2005 2004

$ $

Amortisation of goodwill on acquisition 1,444,062 1,144,740Amortisation of intangible assets 333,307 22,742Auditors’ remuneration– auditors of the Company and Singapore subsidiaries 110,000 105,000– auditors of the Company, non-audit services 3,000 3,000– overseas auditors 42,775 16,109– other auditors 95,935 –Bad debts recovered (39,476) –Bad trade debts written off 526,795 47,448Depreciation of plant and equipment 3,398,888 2,003,917Directors’ fees 30,000 30,000Directors’ remuneration– of the Company 934,707 657,985– of the subsidiaries 422,250 391,908Gain on acquisition of additional investment in:– subsidiary (439,395) (124,764)– associated company (644,110) –Gain on dilution of investment in associated company (396,431) –Gain on disposal of plant and equipment (28,057) (24,303)Loss on disposal of a subsidiary – 237,735Loss on disposal of other investment – 249,999Operating lease expenses 2,943,279 1,278,516Personnel expenses* (Note 25) 25,605,468 16,478,655Plant and equipment written off – 17,048Provision for diminution in value of other investment 854,868 542,792Provision for doubtful debts– trade debts 1,224,604 224,595– non-trade debts 227,278 (102,575)– due from affiliated companies – 13,070Provision for inventory obsolescence 177,602 –Inventories written off 67,170 248,805Write-off of loans by ex-directors and directors of subsidiaries – (360,945)Write-back of provision for doubtful debts– due from affiliated companies – (124,749)– trade debts (234,180) (539,830)Write-back of provision for inventory obsolescence (258,685) (120,500)(Write-back of provision) provision for systems integration project (400,000) 400,000

* These expenses include directors’ fees and remuneration as disclosed in Note 25.


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25. Personnel expensesGroup

2005 2004

$ $

Directors’ fees and remuneration 1,386,957 1,079,893Executive officers 786,128 811,042Staff wages and salaries 20,524,378 12,510,520Pension contribution* 2,060,410 1,495,593Other social expenses 847,595 581,607

25,605,468 16,478,655

* Inclusive of pension contribution by a subsidiary in India (Note 26).

26. Gratuity fund for a subsidiary

The subsidiary in India has a funded non-contributory defined benefit gratuity fund covering all regular and full-time permanent employees with at least five years of continuous service. The benefits are based on a percentageof the final covered compensation for every year of continuous service. The plan also provides for involuntaryseparation benefits to its members. Pension contribution charged to the profit and loss account amounted to$185,952 for the year ended 31 March 2005.

Based on the latest actuarial valuation report as of 20 January 2005, the actuarial present value of retirementbenefits amounted to $263,874. The fair value of the plan assets amounted to $77,922 while the present value ofthe unfunded benefits amounted to $185,952. The principal actuarial assumptions used to determine retirementbenefits were a discount rate of 7.5% per year, a salary increase of 3% per year, and an expected rate of return onplan assets of 10% per year. Actuarial valuations are updated periodically. The subsidiary’s accrual for the gratuityfund for the year consists of the current service cost and the amortisation of past service cost liability.


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27. Financial incomeGroup

2005 2004

$ $

Interest income– bank balances 156,887 145,307– fixed deposits 71,897 180,128– bonds – 90,242– others 202,302 48,055

431,086 463,732

28. Financial expensesGroup

2005 2004

$ $

Interest expense– short-term loans and overdraft 1,884,803 29,743– notes payable 324,189 550,517– hire purchase 9,783 6,745– bills payable 130,517 52,993Bank charges 195,056 96,874Foreign exchange loss, net 175,740 706,769

2,720,088 1,443,641


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29. TaxGroup

2005 2004

$ $

Current tax– current year 857,583 1,137,917– over provision in prior year (31,531) (26,081)Deferred tax– current year 688,460 213,678– over provision in prior year (191,305) (2,052)Share of associated companies’ tax 555,779 628,896

1,878,986 1,952,358

Group

A loss-transfer system of group relief (“group relief system”) for companies was introduced in Singapore with effectfrom the year of assessment 2004. Under the group relief system, a company belonging to a group may transfer itscurrent year unabsorbed capital allowances, current year unabsorbed trade losses and current year unabsorbeddonations (loss items) to another company belonging to the same group, to be deducted against the assessableincome of the latter company.

The Group has un-utilised tax losses of approximately $3,480,000 (2004: $5,900,000) available for offset againstfuture taxable income subject to the agreement by tax authorities and compliance with certain tax regulations inthe respective countries in which certain subsidiaries operate. The potential deferred tax asset arising from theunabsorbed tax losses of certain subsidiaries have not been recognised in the financial statements due touncertainty in its realisation.


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The reconciliation of the tax expense and the amount obtained by applying the applicable tax rate on accountingprofit before tax is as follows:

Group

2005 2004

$ $

Profit before tax 8,765,649 5,261,060

Tax at the domestic tax rate of 20% (2004: 20%) 1,753,130 1,052,212Tax effect of income that is not taxable (221,095) (75,290)Tax effect of expenses that are not deductible in determining taxable profit 301,062 484,669Leasing income recognised only for tax purposes 728,105 –Tax effect of utilising tax losses brought forward (527,885) (8,228)Tax effect of utilising capital allowance brought forward (1,165,474) (4,738)Over provision in prior year– current tax (231,421) (22,337)– deferred tax (28,732) –Tax relief (24,918) (49,117)Deferred tax assets not recognised 340,749 205,902Partial tax exemption (13,159) –Change in tax rates 116,551 (26,691)Tax effect of different tax rates in other countries 650,179 414,663Deferred tax assets recognised – (8,593)Others 201,894 (10,094)

1,878,986 1,952,358

Deferred taxes as at 31 March related to the following:

Deferred tax assetProvisions 874,427 517,167Deferred gain on sale and lease back 35,944 59,907Tax losses carried forward 19,079 152,810Foreign exchange difference (40,830) 1,806Book over tax depreciation (159,580) 40,050Others – 7,036Deferred tax asset not recognised – (10,847)

729,040 767,929


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29. Tax (cont’d)Group

2005 2004

$ $

Deferred tax liabilityTax over book depreciation (441,637) (24,615)Foreign exchange difference (1,281,481) (55,418)Provisions 381,076 –

(1,342,042) (80,033)

Net deferred tax (liability) asset (613,002) 687,896

30. Earnings per share

The calculation of earnings per share is based on the profit and number of shares shown below.

Group

Basic Diluted

2005 2004 2005 2004

$ $ $ $

Profit attributable to shareholders 5,154,394 3,482,631 5,154,394 3,482,631

Group

Weighted Weighted

averagenumber average number

of shares of shares

Year ended 31 March 2005 2005 2004

Issued ordinary shares at the beginning of the year 819,907,592 787,429,702Weighted average number of ordinary shares issued during the year 668,778 10,566,698

Total for basic earnings per share 820,576,370 797,996,400


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When calculating diluted earnings per share, the weighted average number of shares is adjusted for the effect ofall dilutive potential ordinary shares.

The basic and diluted earnings per share are the same, as the warrants and options are considered anti-dilutiveand ignored in the computation of diluted earnings per share.

31. DividendGroup

2005 2004

$ $

An interim dividend of 0.50 cent (2004: 0.50 cent) per ordinary share,less tax at 20%, paid in respect for the year ended 31 March 2005 3,279,630 3,193,264

32. Related party disclosures

Other than as disclosed elsewhere, the Group had significant transactions with related parties on terms agreedbetween the parties as follows:

Group

2005 2004

$ $

IncomeSales to affiliated companies – 62,201Sales to related companies of the Company’s corporate shareholders 4,397,081 6,448,021Management fee from an associated company – 163,800Management fee from affiliated companies – 314,674Rental income from an affiliated company – 20,000Consultancy income from an associated company – 44,386

ExpensesPurchases from a minority corporate shareholder of a subsidiary – –Telecommunication charges from an affiliated company 217,370 225,600Purchases from an affiliated company – 254,387


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33. Commitments and contingent liabilities

(a) Non-cancellable operating lease commitmentsGroup

2005 2004

$ $

Future minimum lease payments– not later than 1 year 2,672,109 1,833,864– 1 year through 5 years 3,544,232 2,978,402

6,216,341 4,812,266

Lease terms do not contain restrictions concerning dividends, additional debt or further leasing.

(b) Bank guarantees

Contingent liabilities not provided for in the financial statements were:Group

2005 2004

$ $

Bank guarantees– secured by fixed deposits (Note 14) 866,000 332,250– secured by corporate guarantee 34,473,603 10,402,715

35,339,603 10,734,965

The bank guarantees are given by the Company and the Group for banking facilities granted to the Company,the Group and an affiliated company.

(c) Other contingent liabilities

On 12 September 2002, the Company entered into a deed of indemnity to indemnify Lorani Pte Ltd, a companyacting as the trustee of the Founders’ Share Scheme of the Company from and against any loss or liabilityincurred in connection with Lorani Pte Ltd’s undertaking to vote in favour of all resolutions to approve ofmatters facilitating an exercise by PLEI of the share swap option (Note 20).

In the ordinary course of business, a subsidiary in India has an unresolved dispute with local taxationauthorities amounting to $459,173 as at 31 March 2005. Management has not accrued for this amount in thebalance sheets as at 31 March 2005 as management does not expect a liability to arise from this dispute.


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(d) Forward currency contract

As of 31 March 2005, the Group has an outstanding forward contract that gives DBS Bank Ltd the option toswap $Nil (2004: SGD13.46 million to USD8 million) at agreed fixed rates.

(e) The Company

The Company has undertaken to provide continuing financial support to certain subsidiaries and an affiliatedcompany which have a deficit of shareholders’ funds as at 31 March 2005 of approximately $4,996,000 (2004:$4,450,000). The financial support is to enable these companies to operate as a going concern and to meettheir obligations, for at least 12 months from the date of their latest audited reports.

34. Segment information

(a) Business segments

The Group’s business is categorised into four main areas, namely:

1. Investment Holdings2. Information Technology (“IT”) Infrastructure3. IT Outsourcing4. IT Consulting and Implementation Services

Investment holdings relate to investment activities undertaken by the corporate head office of the Group.

The IT infrastructure business relates to the implementation of services, storage, desktop, networking systems aswell as software licence sales from our technology partners.

IT outsourcing comprises the provision of IT services related to systems maintenance, 24x7 support, systemsinstallation and commissioning, warranty, IT facilities management, managed IT services, disaster recovery andrelated professional services.

IT consulting and implementation services encompass the provision of IT strategy consulting services, softwareapplications consulting, development and implementation, systems migration services, IT security risk andmanagement consulting, development and implementation.

Inter-segment pricing is on an arm’s length basis.


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34. Segment information (cont’d)IT consulting &

Investment IT implementationholdings infrastructure IT outsourcing services Elimination Group

2005 $’000 $’000 $’000 $’000 $’000 $’000

External sales – 95,836 44,022 7,606 – 147,464Inter-segmental sales 12,850 451 75 – (13,376) –

147,464

Profit (loss) from operations 8,009 4,996 2,492 981 (8,114) 8,364Financial income 431Financial expenses (2,720)

Profit before share of resultsof associated companies 6,075

Share of results of associated companies 2,690

Profit before tax 8,765Tax (1,879)

Profit after tax 6,886Minority interest (1,732)

Profit attributable to shareholders 5,154

Segment assets 53,949 61,139 21,789 4,992 (22,707) 119,162Unallocated assets 74,470

Consolidated total assets 193,632

Segment liabilities 5,043 26,750 13,690 3,640 (20,061) 29,062Unallocated liabilities 61,222

Consolidated total liabilities 90,284

Capital expenditure – 2,182 1,531 502 – 4,215Depreciation and amortisation 1,255 2,039 1,490 392 – 5,176Other non-cash expenses 782 1,272 908 278 – 3,240


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IT consulting &Investment IT implementation

holdings infrastructure IT outsourcing services Elimination Group

2004 $’000 $’000 $’000 $’000 $’000 $’000

External sales 167 75,785 22,480 8,354 – 106,786Inter-segmental sales 14,250 701 131 – (15,082) –

106,786

Profit (loss) from operations 3,899 2,983 2,468 (237) (5,118) 3,995Financial income 464Financial expenses (1,444)

Profit before share of results of associated companies 3,015

Share of results of associated companies 2,246

Profit before tax 5,261Tax (1,952)

Profit after tax 3,309Minority interest 174

Profit attributableto shareholders 3,483

Segment assets 68,586 41,144 8,040 4,238 (35,619) 86,389Unallocated assets 56,369

Consolidated total assets 142,758

Segment liabilities 1,627 29,767 9,246 3,620 (26,828) 17,432Unallocated liabilities 36,276

Consolidated total liabilities 53,708

Capital expenditure – 1,143 526 252 – 1,921Depreciation and amortisation 956 1,301 600 314 – 3,171Other non-cash expenses (income) 1,292 (624) 49 317 – 1,034


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34. Segment information (cont’d)

(b) Geographical segments

The Group’s business segments are managed through three geographical areas, namely Singapore, North Asiaand other Asean countries. Turnover is based on the location of customers. Assets and additions to plant andequipment are based on the location of those assets.

Turnover Assets Capital expenditure

2005 2004 2005 2004 2005 2004

$’000 $’000 $’000 $’000 $’000 $’000

Singapore 68,737 76,526 108,109 111,723 581 162North Asia 46,205 – 46,341 – 582 –Other Asean countries 32,522 30,260 39,182 31,035 2,997 1,759

147,464 106,786 193,632 142,758 4,160 1,921

35. Directors’ remuneration

The number of directors (including two non-executive directors who resigned during the year) in the variousremuneration bands is as follows:

2005 2004

Non- Non-Executive executive Executive executivedirectors directors Total directors directors Total

$500,000 and above – – – – – –$250,000 to $499,999 2 – 2 1 – 1$0 to $249,999 1 7 8 2 8 10

3 7 10 3 8 11


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36. Financial instruments

Financial risk management objectives and policies

The main risks arising from the Group’s financial instruments are interest rate risk, liquidity risk, foreign currencyrisk and credit risk. The Board reviews and agrees on policies for managing each of these risks and they aresummarised below.

Interest rate risk

The Group obtains additional financing through bank borrowings and leasing arrangements. The Group’s policy is toobtain the most favourable interest rates available without increasing its foreign currency exposure.

Surplus funds are placed with reputable banks or invested in bonds to generate some interest income for the Group.

Information relating to the Group’s interest rate exposure is also disclosed in the respective notes to the financial statements.

Liquidity risk

The Group monitors and maintains a level of cash and cash equivalents deemed adequate by management tofinance the Group’s operations and mitigate the effects of fluctuation in cash flows.

Foreign exchange risk

The Group incurs foreign exchange risk on sales and purchases that are denominated in currencies other thanSingapore dollars. The Group also has exposure to foreign currency risk as a result of its operations in severalAsian countries. The primary currencies giving rise to this risk are United States dollars, Malaysian Ringgit,Philippine Pesos, Thai Baht and Indian Rupees.

It is the Group’s policy not to normally enter into derivative foreign exchange contracts and foreign currencyborrowings to hedge its foreign currency risk.

Foreign currencies received are kept in foreign currency bank accounts and converted to SGD on a need-to basis soas to minimise the foreign exchange exposure. The Group also manages foreign exchange risk by closelymonitoring the timing of the inception and settlement of transactions.


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36. Financial instruments (cont’d)

Credit risk

The carrying amount of cash and cash equivalents and trade and other receivables represent the Group’s maximumexposure to credit risk in relation to financial assets. No other financial assets carry a significant exposure to credit risk.

Cash and cash equivalents are placed with reputable financial institutions.

The Group has no significant concentrations of credit risk.

Fair values

Fair value is defined as the amount at which the financial instrument could be exchanged in a current transactionbetween knowledgeable willing parties in an arm’s length transaction, other than in a forced or liquidation sale.Fair values are obtained from quoted market prices, discounted cash flow models and option pricing models asappropriate.

The following methods and assumptions are used to estimate the fair value of each class of financial instrument:

Cash and cash equivalents, other current receivables and payables

The carrying amounts approximate fair values due to the relatively short-term maturity of these financialinstruments.

Quoted and unquoted investments

The fair values of quoted investments are estimated based on quoted market prices for these investments. Forunquoted investments, it is not practical to determine the fair values because of the lack of quoted market pricesand the assumptions used in valuation models to value these investments cannot be reasonably determined.

Hire purchase creditors

The fair value of hire purchase creditors is determined by discounting the relevant cash flows using current interestrates for similar instruments at balance sheet date. The year-end balance sheet carrying values of these liabilitiesapproximate fair values.

Forward currency contract

The fair value of the forward currency contract (Note 33(d)) is a loss of $Nil (2004: $4,000), being the differencebetween the contracted forward rates and the prevailing exchange rate as at the year end.


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As at 31 March 2005, the fair values and carrying amounts of financial assets and financial liabilities in the balancesheets are presented in the following table:

Note 2005 2004

Carrying Estimated Carrying Estimatedamount fair value amount fair value

$ $ $ $

Group

AssetsUnquoted investment, net of provision

for diminution in value 6 333,420 * 1,207,204 *Club membership, net of provision

for diminution in value 6 216,020 216,020 216,020 216,020

Company

AssetsUnquoted investment, net of provision

for diminution in value 6 322,726 * 982,589 *Club membership, net of provision

for diminution in value 6 199,000 199,000 199,000 199,000Unquoted convertible bonds 4 276,634 * 167,000 *

* In the directors' opinion, it is not practicable to determine the fair value of the unquoted investment andunquoted convertible bonds which are carried at the net realisable value of $333,420 for the Group and$599,360 for the Company (2004: $1,207,204 and $1,149,589 for both the Group and the Company respectively).

37. Events occurring after balance sheet date

(a) On 30 May 2005, the Company redeemed all of its 114,678 Redeemable Convertible Preference Shares (“RCPS”)in iGINE Pte Ltd (“iGINE”) for a redemption amount of $322,725.74 and an additional 22,727 ordinary sharesin iGINE. By the redemption of the RCPS, the Company has increased its equity interest in iGINE from 10.20%to 11.00%.

(b) On 8 June 2005, the Company increased its investment in one of its subsidiaries, Frontline Solutions Pte Ltd (FSPL)through conversion of an inter-company debt due from FSPL to the Company. FSPL increased its authorisedand issued share capital from $2,000,000 to $5,000,000 and from $2,000,000 to $3,000,000 respectively.

(c) On 8 June 2005, the Company converted the 550,000 convertible bonds of $1.00 each in FTIV into 1,375,000ordinary shares. The issued and paid-up capital of FTIV was thus increased to 1,375,005 ordinary shares of$1.00 each.


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38. Comparative figures

Certain comparative figures have been reclassified to conform with the current year’s presentation.

Group Company

Restated Reported Restated Reported

2005 2004 2005 2004

$ $ $ $

Balance sheetAssociated companies – – 40,369,590 40,414,331Other investments – – 1,181,589 1,136,848Deferred tax assets 767,929 687,896 – –Deferred tax liabilities 80,033 – – –Share premium 43,477,795 43,684,411 – –Reserves 313,769 107,153 – –

Profit and lossAdministrative expenses 8,817,096 8,317,096 – –Exceptional item – 500,000 – –

39. Authorisation of financial statements

The financial statements for the year ended 31 March 2005 were authorised for issue in accordance with aresolution of the directors on 1 July 2005.

FRONTLINE TECHNOLOGIES CORPORATION LTDCompany Registration No. 199801489G

(Incorporated in the Republic of Singapore)

NOTICE IS HEREBY GIVEN that the Annual General Meeting of the Company will be held at The Function Room, Tanah MerahCountry Club, 25 Changi Coast Road, Singapore 499803 on 12 August 2005 at 10.30am to transact the following business:

AS ORDINARY BUSINESS1. To receive and adopt the Audited Accounts for the year ended 31 March 2005, the Directors’

Report and the Auditors’ Report thereon.

2. To re-elect Mr Steve Ting Tuan Toon, who is retiring by rotation as a director of the Company inaccordance with Article 104 of the Company’s Articles of Association and who being eligible,offers himself for re-election.

3. To approve the payment of Directors’ Fees of $36,000 for the year ended 31 March 2005 (2004: $30,000).

4. To appoint Auditors and to authorise the Directors to fix their remuneration.

AS SPECIAL BUSINESSTo consider and, if thought fit, to pass the following resolution as Ordinary Resolution:

5. Authority to Grant Options and Issue Shares Under Frontline Technologies Corporation LtdShare Option Scheme 2000That authority be and is hereby given to the Directors to offer and grant options in accordancewith the rules and terms of Frontline Technologies Corporation Ltd Share Option Scheme 2000(“the Scheme”) and to allot and issue from time to time such number of shares in the Companyas may be required to be allotted and issued pursuant to the exercise of options under theScheme, provided that the aggregate number of shares to be issued pursuant to the Schemedoes not exceed 15% of the issued share capital of the Company from time to time.

6. The Proposed Renewal of the Shares Purchase MandateThat, pursuant to Article 54(2) of the Articles of Association of the Company, the Directors ofthe Company be and are hereby authorised to make purchases of Shares from time to time(whether by way of market purchases or off-market purchases on an equal access scheme) ofup to 10 per cent of the issued ordinary share capital of the Company ascertained as at thedate of this annual general meeting of the Company at the price of up to but not exceedingthe Maximum Price, in accordance with the “Guidelines on Shares Purchases” set out inAppendix 1 of this Notice and this mandate shall, unless revoked or varied by the Company ingeneral meeting, continue in force until the date that the next annual general meeting of theCompany is held or is required by law to be held, whichever is the earlier.


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Notice of Annual General Meeting

Resolution 1

Resolution 2

Resolution 3

Resolution 4

Resolution 5

Resolution 6

AS SPECIAL BUSINESS (cont’d)

7. The Proposed Shares Issue Mandate Resolution 7That authority be and is hereby given to the Directors of the Company to:

(a) (i) issue shares in the capital of the Company (“shares”) whether by way of rights, bonusor 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 limitedto the creation and issue of (as well as adjustments to) warrants, debentures or otherinstruments convertible into shares, at any time and upon such terms and conditions andfor such purposes and to such persons as the Directors may in their absolute discretiondeem fit; and

(b) 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 thisResolution was in force,

Provided that:

(1) the aggregate number of shares to be issued pursuant to this Resolution (including shares to be issued inpursuance of Instruments made or granted pursuant to this Resolution) does not exceed 50 per cent of theissued share capital of the Company (as calculated in accordance with sub-paragraph (2) below), of which theaggregate number of shares to be issued other than on a pro rata basis to shareholders of the Company(including shares to be issued in pursuance of Instruments made or granted pursuant to this Resolution) doesnot exceed 20 per cent of the issued share capital of the Company (as calculated in accordance with sub-paragraph (2) below);

(2) subject to such manner of calculation as may be prescribed by the SGX-ST for the purpose of determining theaggregate number of shares that may be issued under sub-paragraph (1) above, the percentage of issued sharecapital shall be based on the issued share capital of the Company at the time this Resolution is passed, afteradjusting for: (i) new shares arising from the conversion or exercise of any convertible securities or shareoptions or vesting of share awards which are outstanding or subsisting at the time this Resolution is passed;and (ii) any subsequent consolidation or subdivision of shares;

(3) in exercising the authority conferred by this Resolution, the Company shall comply with the provisions of theListing Manual of the SGX-ST 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 shallcontinue in force until the conclusion of the next Annual General Meeting of the Company or the date by whichthe next Annual General Meeting of the Company is required by law to be held, whichever is the earlier.


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OTHER BUSINESS

8. To transact any other business that may properly be transacted at an Annual General Meeting of the Company.

Dated this 28th day of July 2005

For and on behalf of the Board

Sim Mei Ling Company SecretarySingapore

Note:

1. A member of the Company entitled to attend and vote at the Meeting is entitled to appoint a proxy to vote in his/her stead.

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

3. The instrument appointing a proxy must be deposited at the registered office of the Company at 750 Chai Chee Road

#02-01/03 The Oasis, Technopark@Chai Chee, Singapore 469000, not later than 48 hours before the time appointed for the

Meeting.


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1. Definitions and Interpretation

1.1 For the purpose of this Notice, the following definitions have, where appropriate, been used:

“2002 Circular” The Company’s circular to Shareholders dated 13 August 2002 regarding inter alia theShares Purchase Mandate.

“2002 EGM” The extraordinary general meeting of Frontline held on 27 August 2002.

“2004 EGM” The extraordinary general meeting of Frontline held on 30 August 2004.

“Shares Purchase The mandate for Frontline to purchase or otherwise acquire its Shares.Mandate”

“AGM” Annual General Meeting of the Company.

“Act” or Companies Act (Cap.50) of Singapore.“Companies Act”

“Board” The Board of Directors of the Company.

“CDP” The Central Depository (Pte) Limited.

“Company” or Frontline Technologies Corporation Ltd.“Frontline”

“Council” or “SIC” The Securities Industry Council.

“Directors” Directors of the Company as at the date of this Notice.

“Frontline Technologies The share option scheme adopted at an Extraordinary General Meeting Corporation Ltd Share of the Company on 19 September 2000.Option Scheme 2000”

“Group” The Company and its subsidiaries.

“Latest Practicable 13 July 2005, being the latest practicable date prior to the printing of this Notice.Date”

“Market Day” A day on which the SGX-ST is open for trading in securities.


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Explanatory Notes to Notice of Annual General Meeting (“Notice”)

“Market Purchases” Market acquisitions of Shares on the SGX-ST undertaken by the Company during theRelevant Period in accordance with the Act and, a “Market Purchase” shall be construedaccordingly. For the purposes of this definition, a market acquisition means a purchasetransacted through the Central Limit Order Book trading system.

“Maximum Price” The maximum price at which (i) the Shares can be purchased pursuant to the SharesPurchase Mandate (ii) deemed to be adjusted for any corporate action that occurs after the relevant five-day period; and in the case of an Off-Market Purchase, immediatelypreceding the date of offer by the Company, as the case may be.

“Month” Calendar month.

“New Listing Manual” The new listing manual of the SGX-ST, which became effective on 1 July 2002,or “Listing Manual” including any amendments made thereto up to the date of this Notice.

“NTA” Net tangible assets.

“Off-Market Purchases” Off-market acquisitions of Shares undertaken by the Company during the Relevant Periodin accordance with an equal access scheme as defined in Section 76C(6) of the Act byissuing an offer document to all shareholders in compliance with rule 885 of the ListingManual.

“Offeree Shareholders” Shareholders holding Shares at the time of an offer of Shares Purchase, and an “OffereeShareholder” shall be construed accordingly.

“Relevant Period” The period commencing from the date the Shares Purchase Mandate is conferred by theCompany in general meeting at this AGM and expiring on the earlier of the date the nextannual general meeting of the Company is held or is required by law to be held, or the date the said mandate is revoked or varied by the Company in general meeting.

“Required Price” In relation to the offer required to be made under the provisions of Rule 14.1 of the Take-Over Code, the offer shall be in cash or be accompanied by a cash alternative at a price inaccordance with Rule 14.3 which is the highest of the highest price paid by the offerersand/or person(s) acting in concert with them for the Company’s Shares (i) during the offerperiod and within the preceding 6 months, (ii) acquired through the exercise of instrumentsconvertible into securities which carry voting rights within 6 months of the offer and duringthe offer period, or (iii) acquired through the exercise of rights to subscribe for, and optionsin respect of, securities which carry voting rights within 6 months of the offer or during theoffer period; or at such price as determined by Council under 14.3 of the Take-Over Code.

“Securities Account” A securities account maintained by a depositor with CDP but does not include a securitiessub-account.


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1. Definitions and Interpretation (cont’d)

“SGX-ST” Singapore Exchange Securities Trading Limited.

“Shares” Ordinary shares of $0.05 each in the capital of the Company.

“Shareholders” Persons who are registered as holders of the Shares except where the registered holder isCDP, in which case the term “Shareholders” shall in relation to such Shares mean theDepositors whose securities accounts with CDP are credited with the Shares.

“Shares Issue The mandate to empower the Directors to issue Shares in the terms set out inMandate” Ordinary Resolution 7 and below.

“Shares Purchases” Off-Market Purchases or Market Purchases undertaken by the Company during the RelevantPeriod in accordance with the Act and, a “Shares Purchase” shall be construed accordingly.

“Shares Purchase The mandate to empower the Directors to make Shares Purchases within the RelevantMandate” Period of up to 10 per cent of the issued ordinary share capital of the Company

(ascertained as at the date of the last annual general meeting of the Company or the dateof the EGM, whichever is the higher) at the price of up to but not exceeding the MaximumPrice, in accordance with the “Guidelines on Shares Purchases” set out in Appendix 1 ofthis Notice and the rules of the SGX-ST.

“Subsidiaries” The subsidiaries of the Company (as defined in Section 5 of the Act) and “Subsidiary”shall be construed accordingly.

“Substantial A person who has an interest in the Shares the nominal amount of which is not Shareholder” less than five per cent of the nominal amount of all the voting shares of the Company.

“Take-Over Code” Singapore Code on Take-Over and Mergers Revised Edition, effective 1 January 2002, as thesame may be modified, supplemented or amended from time to time.

“$” or “cents” Singapore dollars and cents respectively, unless otherwise stated.

“%” or “per cent.” Per centum or percentage.

1.2 The terms “Depositor” and “Depository Register” shall have the meanings ascribed to them respectively by Section130A of the Act.

1.3 Words importing the singular shall, where applicable, include the plural and vice versa and words importing themasculine gender shall, where applicable, include the feminine and neuter genders.


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Explanatory Notes to Notice of Annual General Meeting (“Notice”) (cont’d)

1.4 Any reference in this Notice to any enactment is a reference to that enactment as for the time being amended orre-enacted. Any word defined under the Act or any statutory modification thereof and used in this Notice shall havethe meaning assigned to it under the said Act.

1.5 Any reference to a time of a day in this Notice is a reference to Singapore Standard Time.

2. Ordinary Resolution No. 2: Re-Election of Director

2.1 Mr Steve Ting Tuan Toon retires as a Director under Article 104 of the Company’s Articles of Association. Mr Steve Ting Tuan Toon is offering himself for re-election. If re-elected as a Director of the Company, Mr Steve TingTuan Toon shall remain as the Executive Chairman and Director of the Company.

3. Ordinary Resolution No. 5: Authority to Grant Options and Issue Shares Under Frontline Technologies CorporationLtd Share Option Scheme 2000

3.1 This resolution is to empower the Directors of the Company to allot and issue shares in the Company pursuant tothe exercise of options granted or to be granted under Frontline Technologies Corporation Ltd Share OptionScheme 2000.

3.2 There were no such options exercised during the financial year ended 31 March 2005.

4. Ordinary Resolution No. 6: The Proposed Renewal of the Shares Purchase Mandate

4.1 BackgroundThe Shareholders had, at the 2002 EGM, inter alia approved the Shares Purchase Mandate to enable Frontline topurchase or otherwise acquire its Shares. The authority and limitations on the Shares Purchase Mandate were setout in the 2002 Circular and the Ordinary Resolution set out in the Notice of the 2002 EGM. The Shares PurchaseMandate was last renewed upon the passing of the Ordinary Resolution at the 2004 EGM and expires upon thisAGM. Accordingly, the Directors propose that the Share Purchase Mandate be renewed at this AGM.

4.2 Authority and LimitsThe authority and limitations placed on the Shares Purchase Mandate, if renewed at this AGM, are similar to thosepreviously approved by Shareholders at the 2004 EGM.

4.3 Approval SoughtShareholders’ approval is sought to renew the mandate for the Directors to make Shares Purchases from time totime within the Relevant Period in accordance with the Companies Act (Cap 50) of up to 10 per cent of the issuedordinary share capital of the Company ascertained as at the date of this AGM at the price of up to but notexceeding the Maximum Price in accordance with the “Guidelines on Shares Purchases” set out in Appendix 1 ofthis Notice and the rules of the SGX-ST. The authority conferred on the Directors by the proposed Shares PurchaseMandate to purchase Shares shall continue in force for the Relevant Period.


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4. Ordinary Resolution No. 6: The Proposed Renewal of the Shares Purchase Mandate (cont’d)

4.4 Regulatory UpdatesThe Company may purchase Shares by way of Off-Market Purchases and/or Market Purchases, as described in the“Guidelines on Share Purchases’’ ‘set out in Appendix 1. In the event that subsequent to the EGM, there are newrules, regulations, directives or laws enacted or promulgated by the relevant competent authorities including butnot limited to the SGX-ST and the Council (hereinafter, collectively referred to as the “Further Rules”) that augment,supplement or vary the existing provisions governing provisions set out in the Companies Act and/or the ListingManual, the Company shall, to the extent that the Further Rules impact on the Shares Purchase Mandate,disseminate to the public by announcements), a Memorandum setting out such Further Rules and the extent towhich the Shares Purchase Mandate is affected by such Further Rules. In such an event, the Company shall notundertake any purchase of Shares until such a Memorandum has been publicly disseminated. The Company doesnot intend to set up a special trading counter for the purpose of the Shares Purchases.

4.5 RationaleAs previously stated in the 2002 Circular, the proposed Shares Purchase Mandate will:

(a) provide Directors with the flexibility to purchase Shares when circumstances permit, with the objective ofenhancing the earnings per share of the Company and its Subsidiaries. Such flexibility will also allow theDirectors to better manage the Company’s capital structure and cash reserves, and to return surplus cash inexcess of the Group’s needs;

(b) provide Directors with the opportunity to purchase Shares when the Shares are under-valued, and help buffershort-term share price volatility and off-set the effects of short-term speculators and investors. This will, inturn, bolster shareholder confidence;

(c) provide the Company with an efficient mechanism to enhance returns to Shareholders (including the earningsper share of the Group) when circumstances permit. Shares Purchases will only be made when the Directorsbelieve that they are beneficial to and in the best interests of the Company and its Shareholders.

4.6 Manner of Purchases or Acquisitions of SharesPurchases or acquisitions of Shares may be made by way of:

(a) Market Purchases transacted on the SGX-ST or any other stock exchange on which the Shares may for the timebeing be listed and quoted (“Other Exchange”) through one or more duly licensed dealers appointed by theCompany for the purpose; and/or

(b) Off-Market Purchases effected pursuant to an equal access scheme.


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The Directors may impose such terms and conditions which are not inconsistent with the Shares Purchase Mandate,the New Listing Manual and the Act, as they consider fit in the interests of the Company in connection with or inrelation to any equal access scheme or schemes. An Off-Market Purchase must, however, satisfy all the followingconditions:

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

(ii) all of those persons shall be given a reasonable opportunity to accept the offers made; and(ii) the terms of all the offers shall be the same, except that there shall be disregarded (1) differences in

consideration attributable to the fact that offers may relate to Shares with different accrued dividendentitlements and (2) differences in the offers introduced solely to ensure that each person is left with a wholenumber of Shares.

If the Company wishes to make an Off-Market Purchase in accordance with an equal access scheme, it will issue anoffer document containing at least the following information:

(i) the terms and conditions of the offer;(ii) the period and procedures for acceptances; and(iii) the information required under Rule 883(2), (3), (4) and (5) of the New Listing Manual. For the avoidance of

doubt, there shall be no use of contingent purchase contracts.

4.7 Source of FundsIn purchasing Shares, the Company may only apply funds legally available for such purchase in accordance with itsArticles of Association and the applicable laws in Singapore. The Company may not purchase Shares for aconsideration other than cash or for settlement otherwise in accordance with the trading rules of the SGX-ST. AnyShares Purchase undertaken by the Company shall be made out of profits that are available for distribution asdividends but not from amounts standing in the Company’s share premium account and capital redemption reserve.The Company will use its internal sources of funds (comprising cash and fixed deposits) for the Shares Purchases.The Company has not obtained or incurred nor does it intend to obtain or incur any borrowings to finance theShares Purchases.

4.8 Status of Purchased SharesThe listing of all purchased Shares on SGX-ST will be automatically cancelled and the relevant certificates for theseShares shall be cancelled and destroyed. Subject to the requirements of the Companies Act, (i) the Company’spurchased Shares shall be treated as cancelled and the issued share capital of the Company shall be diminished bythe nominal value of these cancelled Shares accordingly and (ii) the amount by which the Company’s issued sharecapital is diminished on the cancellation of the purchased Shares shall be transferred to the Company’s capitalredemption reserve.


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4.9 Financial EffectsThe impact of the Shares Purchases by the Company pursuant to the proposed Shares Purchase Mandate on theGroup’s and the Company’s financial positions is illustrated below:

(a) As of the Latest Practicable Date, the Company’s issued share capital comprises 824,044,945 Shares, and theexercise in full of the Shares Purchase Mandate would result in the purchase of up to 82,404,495 Shares.Assuming that the Maximum Price is $0.126, which is five per cent (5%) above the average of the closingprices of the Shares $0.12 over the five (5) trading days preceding the Latest Practicable Date on whichtransactions in the Shares were recorded, the maximum amount of funds required for the purchase of up to82,404,495 Shares is $10,382,966. On this assumption, the impact of the Shares Purchases by the Companyundertaken in accordance with the proposed Shares Purchase Mandate on the Company’s and the Group’saudited financial statements for the financial year ended 31 March 2005 is illustrated as follows:

Group CompanyBefore Shares After Shares Before Shares After Shares

Purchase ($’000) Purchase ($’000) Purchase ($’000) Purchase ($’000)

As at 31 March 2005Shareholders’ funds 86,965 86,965 85,881 85,881NTA (1) 67,002 56,619 85,881 75,498Current assets 131,225 120,842 8,143 -Current liabilities 82,314 82,314 5,043 7,283Working capital 48,911 38,528 6,400 (7,283)Total liabilities 91,284 91,284 5,043 7,283

Number of Shares as at 31 March 2005

Financial Ratios 824,044,945 741,640,450 824,044,945 741,640,450NTA per share (cents) (1) 8.13 7.63 10.42 10.18Earnings per share (cents) (2) 0.63 0.69 NA NAGearing (3) 0.30 0.30 NA NACurrent ratio (4) 1.60 1.47 1.61 NM

Notes:

(1) NTA equals shareholders’ funds less intangible assets.

(2) Earnings per share is computed based on the number of shares in issue as at 31 March 2005.

(3) Gearing equals total bank borrowings and hire purchase creditors of $26,062,000 and $Nil for the Group and Company

respectively, divided by shareholders’ funds.

(4) Current ratio equals current assets divided by current liabilities.


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(b) As at 31 March 2005, the Group and the Company had cash and cash equivalents of $31,574,351 and$4,272,702 respectively. In order to effect a purchase of up to 82,404,495 Shares at the Maximum Pricecomputed at the Latest Practicable Date, cash reserves and cash equivalents by the Company of $10,382,966will be required. Any shortfall in the cash reserve by the Company to effect the purchase of Shares will bemade up by utilisation of other excess cash reserves available within the Group. As illustrated above, thepurchase of Shares will have the effect of reducing the working capital and the net tangible assets of theCompany and Group by the dollar value of the Shares purchased. The consolidated NTA per Share as at 31March 2005 will decrease from 8.13 cents to 7.63 cents.

(c) Assuming that the Shares Purchases had taken place on 31 March 2005, the consolidated basic earnings perShare of the Group for the financial year ended 31 March 2005 would be increased from 0.63 cents per Shareto 0.69 cents per Share as a result of the reduction in the number of issued Shares.

SHAREHOLDERS SHOULD NOTE THAT THE FINANCIAL EFFECTS SET OUT ABOVE, BASED ON THE RESPECTIVEAFOREMENTIONED ASSUMPTIONS, ARE FOR ILLUSTRATION PURPOSES ONLY. IN PARTICULAR, IT IS IMPORTANTTO NOTE THAT THE ABOVE ILLUSTRATION IS BASED ON HISTORICAL FY2005 NUMBERS AND IS NOTNECESSARILY REPRESENTATIVE OF FUTURE FINANCIAL PERFORMANCE.

(d) Any Shares Purchase will reduce the Company’s retained earnings by the aggregate sum of the purchase price.As the Shares Purchase will reduce the cash reserves of the Group and the Company, there will be acorresponding reduction in the current assets and the Shareholders’ funds of the Group and the Company. The gearing ratios of the Group and the Company will thus be increased and the current ratios of the Groupand the Company will decline. The actual impact of the gearing and current ratios will depend on the numberof Shares purchased and the prices at which the Shares were purchased.

(e) As at the Latest Practicable Date, the cash and cash equivalents, including fixed deposits and short-terminvestments, of the Company and the Group were approximately $3,480,000 and $31,100,000 respectively.When undertaking any Shares Purchase, the Directors will ensure that:

(i) the Company and the Group will at all times have adequate working capital to meet their operationalrequirements;

(ii) any Shares Purchase will be financed by the Company’s distributable profits; and (iii) the Group will not obtain nor incur any borrowings to finance any Shares Purchase.


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4.10 Tax ImplicationsUnder Section 10J of the Income Tax Act and the Interpretation & Practice Note No. 34 published on 31 December1998 by the Inland Revenue Authority of Singapore, a company which buys back its own shares using itsdistributable profits will be regarded as having paid a dividend to the shareholders from whom the shares areacquired. The Company will thus have to provide for franking of the shares purchased at either the prevailingcorporate tax rate of 20% (with effect from the Year of Assessment 2005) in the same manner as paying a taxeddividend, the amount paid for the shares purchased being the deemed net dividend, or out of its exempt profits,the amount paid for the shares purchased being the gross tax exempt dividend. Currently, the Company hasexempt profits, but if such exempt profits are insufficient for the purposes of the Shares Purchase, then theCompany will have to ensure tax is paid in respect of funds used to purchase Shares, as if for a taxable dividend.Notwithstanding the fact that the Company will be regarded as paying a dividend, the nature of the payment in thehands of Shareholders and whether tax credits, if applicable, can be passed to Shareholders will depend on howthe Shares Purchase is effected by the Company. The Shares purchased will not have any effect on the income taxstatus of the Company as the Company has sufficient tax-exempt profits to support the Share Purchases.

SHAREHOLDERS SHOULD NOTE THAT THE FOREGOING IS NOT TO BE REGARDED AS ADVICE ON THE TAX POSITIONOF ANY SHAREHOLDER. SHAREHOLDERS WHO ARE IN DOUBT AS TO THEIR RESPECTIVE TAX POSITIONS OR THETAX IMPLICATIONS OF THE SHARES PURCHASED BY THE COMPANY, OR WHO MAY BE SUBJECT TO TAX WHETHER INOR OUTSIDE SINGAPORE, SHOULD CONSULT THEIR OWN PROFESSIONAL ADVISORS.

4.11 Take-Over ImplicationsAppendix 2 to the Take-Over Code contains the Share Buy-Back Guidance Note. The take-over implications arisingfrom any purchase or acquisition by the Company of its Shares are set out below.

4.11.1 Obligation to Make A Take-Over OfferIf, as a result of any purchase or acquisition by the Company of the Shares, the proportionate interest in the votingcapital of the Company of a Shareholder and persons acting in concert with him increases, such increase will betreated as an acquisition for the purposes of Rule 14 of the Take-Over Code. Consequently, a Shareholder or agroup of Shareholders acting in concert with a Director would obtain or consolidate effective control of theCompany and become obliged to make an offer under Rule 14 of the Take-Over Code.

4.11.2 Persons Acting in ConcertUnder the Take-Over Code, persons acting in concert comprise individuals or companies who, pursuant to an agreementor understanding (whether formal or informal), co-operate, through the acquisition by any of them of shares in acompany to obtain or consolidate effective control of that company. Unless the contrary is established, the Take-OverCode presumes, inter alia, the following individuals and companies to be persons acting in concert with each other:

(a) the following companies(i) a company;(ii) the parent company of (i);(iii) the subsidiaries of (i);(iv) the fellow subsidiaries of (i);


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(v) the associated companies of any of (i), (ii), (iii) or (iv); and (vi) companies whose associated companiesincluded any of (i), (ii), (iii), (iv) or (v); and

(b) a company with any of its directors (together with their close relatives, related trusts as well as companiescontrolled by any of the directors, their close relatives and related trusts).

The circumstances under which Shareholders, including Directors and persons acting in concert with themrespectively, will incur an obligation to make a take-over offer under Rule 14 of the Take-Over Code after apurchase or acquisition of Shares by the Company are set out in Appendix 2 to the Take-Over Code.

4.11.3 Effect of Rule 14 and Appendix 2In general terms, the effect of Rule 14 and Appendix 2 to the Take-Over Code is that, unless exempted, Directorsand persons acting in concert with them will incur an obligation to make a take-over offer under Rule 14 if, as aresult of the Company purchasing or acquiring its Shares, the voting rights of such Directors and their concertparties would increase to 30 per cent or more, or in the event that such Directors and their concert parties holdbetween 30 per cent and 50 per cent of the Company’s voting rights, if the voting rights of such Directors andtheir concert parties would increase by more than one per cent in any period of six months.

Under Appendix 2 to the Take-Over Code, a Shareholder not acting in concert with the Directors will not be requiredto make a take-over offer under Rule 14 if, as a result of the Company purchasing or acquiring its Shares, thevoting rights of such Shareholder would increase to 30 per cent or more, or, if such Shareholder holds between 30 per cent and 50 per cent of the Company’s voting rights, the voting rights of such Shareholders would increaseby more than one per cent in any period of six months. Such a Shareholder need not abstain form voting inrespect of the resolution authorising the Shares Purchase Mandate.

Shareholders who are in doubt as to their obligations, if any, to make a mandatory take-over offer under the Take-Over Code as a result of any Share Purchase by the Company, should consult the Securities Industry Council and/ortheir professional advisers at the earliest opportunity.

Taking into account the Directors’ and Substantial Shareholders’ Interests disclosed in the Annual Report accompanyingthis Notice, the Directors are not aware of any fact(s) of factor(s) which suggest or imply that any particular person(s)and/or Shareholders) are, or may be regarded as, parties acting in concert such that their respective interests in votingshares in the capital of the Company should or ought to be consolidated, and consequences under the Take-Over Codewould ensue as a result of a purchase of Shares by the Company pursuant to the Shares Purchase Mandate.

The Company is presently not aware of the possibility of any Shareholder(s) becoming a Substantial Shareholder byreason of or in consequence of the Shares Purchases pursuant to this Shares Purchase Mandate. However, shouldsuch a situation arise in relation to any particular Shareholder(s) due to the Shares Purchases, the Company shallimmediately notify such Shareholder of the same. IN SUCH AN EVENT, SHAREHOLDERS ARE ADVISED TOCONSULT THEIR OWN PROFESSIONAL ADVISERS AS TO THE IMPLICATIONS AND OBLIGATIONS IN RELATION TOA SUBSTANTIAL SHAREHOLDER PURSUANT TO PART IV, DIVISION 4, SECTIONS 82-85 OF THE ACT.

4.12 Previous Share PurchasesSince the 2004 EGM and as of the Latest Practicable Date, the Company has not made any purchase of Shares.


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5. Ordinary Resolution No. 7: The Proposed Shares Issue Mandate

5.1 Proposed Shares Issue MandateThe Company is seeking approval of Shareholders at this AGM for the Shares Issue Mandate to be given to theDirectors to:

(a) issue shares whether by way of rights, bonus or otherwise; and/or

(b) make or grant Instruments that might or would require shares to be issued, including but not limited to thecreation and issue of (as well as adjustments to) warrants, debentures or other instruments convertible intoshares, and (notwithstanding that the authority so conferred may have ceased to be in force) issue shares inpursuance of any Instrument made or granted by the Directors while the authority was in force.

5.2 Limit on SharesThe aggregate number of shares to be issued pursuant to the Shares Issue Mandate, including shares to be issuedin pursuance of Instruments made or granted pursuant thereto, will still be subject to the 50 per cent Limit andthe 20 per cent Sub-Limit. The 50 per cent Limit and the 20 per cent Sub-Limit will be calculated based on theissued share capital of the Company at the time of the passing of the Shares Issue Mandate, after adjusting for:

(a) new shares arising upon the conversion or exercise of any convertible securities or share options or vesting ofshare awards which are outstanding or subsisting at the time of the passing of the Shares Issue Mandate; and

(b) any subsequent consolidation or subdivision of shares. The share options and share awards referred to in sub-paragraph (a) above are those granted by the Company pursuant to share plans governed by Part VIII ofChapter 8 of the New Listing Manual.

(c) In exercising the authority conferred under the Shares Issue Mandate, the Company will comply with theprovisions of the New Listing Manual, unless such compliance has been waived by the SGX-ST.

5.3 Duration of Shares Issue MandateThe Shares Issue Mandate will take effect from the passing of the resolution approving the Shares Issue Mandateat this AGM and will continue to be in force until the next AGM of the Company unless prior thereto, issues ofshares are made to the full extent permitted by the Shares Issue Mandate or the Shares Issue Mandate is revokedor varied by the Company in general meeting. The Shares Issue Mandate, in the form proposed, is intended to beplaced before Shareholders for renewal at each subsequent AGM of the Company.

5.4 Rationale for Shares Issue MandateIf approved, the Shares Issue Mandate will, in addition to the usual authority to issue shares, enable the Companyto make or grant Instruments during the validity period of the Shares Issue Mandate, and to issue shares inpursuance of such Instruments subject to the specified limits. A general (as opposed to specific) approval for theDirectors to make or grant Instruments will also enable the Company to act quickly and take advantage of marketconditions. The expense and delay of otherwise having to convene general meetings of the Company to approvethe making or granting of each specific Instrument would thus be avoided.


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It is for the above reasons that the Directors believe that the Shares Issue Mandate in the extended form, asproposed, would be in the best interests of the Company and its Shareholders.

6. Directors’ Recommendations

6.1 Authority to grant options and issue shares under Frontline Technologies Corporation Ltd Share Option Scheme 2000The Directors are of the opinion that the proposed renewal of the Shares Purchase Mandate is in the best interestsof the Company. Accordingly, they recommend that Shareholders vote in favour of Resolution 5, being the OrdinaryResolution relating to the proposed grant of authority to grant options and issue shares under FrontlineTechnologies Corporation Ltd Share Option Scheme 2000.

6.2 Shares Purchase MandateThe Directors are of the opinion that the proposed renewal of the Shares Purchase Mandate is the best interest ofthe Company. Accordingly, they recommend that Shareholders vote in favour of Resolution 6, being the OrdinaryResolution relating to the proposed Share Purchase Mandate.

6.3 Shares Issue MandateThe Directors are of the opinion that the proposed Shares Issue Mandate is in the best interest of the Company.Accordingly, they recommend that Shareholders vote in favour of Resolution 7 being the Ordinary Resolutionrelating to the proposed Shares Issue Mandate.

7. Directors’ Responsibility Statement

The Directors collectively and individually accept responsibility for the accuracy of the information given in thisNotice and confirm, having made all reasonable inquiries, that to the best of their knowledge and belief, the factsstated and the opinions expressed in this Notice are fair and accurate and that there are no material facts theomission of which would make any statement in this Notice misleading.

8. Documents For Inspection

The following documents are available for inspection at the registered office of the Company at 750 Chai CheeRoad #02-01/03 The Oasis, Technopark@Chai Chee Singapore 469000, during normal business hours from the dateof this Notice up to and including the date of the AGM:

(a) the 2002 Circular; and

(b) Frontline Technologies Corporation Ltd Share Option Scheme 2000.


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1. Shareholders’ Approval

(a) Purchases of Shares by the Company must be approved in advance by the Shareholders at a general meetingof the Company, by way of a general mandate.

(b) A general mandate authorising the purchase of Shares by the Company representing up to 10 per cent of theCompany’s issued ordinary share capital will expire on the earlier of:(i) the conclusion of the next annual general meeting of the Company;(ii) the expiration of the period within which the next annual general meeting of the Company is required by

law to be held; or(iii) the time when such mandate is revoked or varied by an ordinary resolution of the Shareholders of the

Company in general meeting.

(c) The authority conferred on the Directors by the Shares Purchase Mandate to purchase Shares shall be renewedat the next annual general meeting of the Company.

(d) When seeking Shareholders’ approval for the renewal of the Shares Purchase Mandate, the Company shalldisclose details pertaining to the purchases of Shares made during the previous 12 months, including the totalnumber of Shares purchased, the purchase price per Share or the highest and lowest price for such purchasesof Shares, where relevant, and the total consideration paid for such purchases.

2. Mode of Purchase

Shares Purchases can be effected by the Company in either one of the following two ways or both:

(a) by way of Market Purchases of Shares on the Official List of SGX-ST, which means a purchase transactedthrough the Central Limit Order Book trading system; or

(b) by way of off-market acquisitions on an equal access scheme in accordance with section 76C of the CompaniesAct.

3. Funding of Shares Purchases

(a) In purchasing the Shares, the Company may only apply funds legally permitted for such purchase in accordancewith its Articles of Association, and the relevant laws and regulations enacted or prescribed by the relevantcompetent authorities in Singapore.

(b) Any purchase by the Company may be made out of profits that are available for distribution as dividends butnot from amounts standing in the Company’s share premium account and capital redemption reserve.

(c) The Company may not purchase its Shares on the Official List of SGX-ST for a consideration other than cash orfor settlement otherwise than in accordance with the trading rules of the SGX-ST.


120

Appendix 1 — Guidelines on Shares Purchases

4. Trading Restrictions

The number of Shares which can be purchased pursuant to the Shares Purchase Mandate is such number of Shareswhich represents up to a maximum of 10 per cent of the issued ordinary share capital of the Company as at thedate of the last annual general meeting of the Company or at the date of the EGM, whichever is the higher.

5. Price Restrictions

Any Shares Purchase undertaken by the Company shall be at the price of up to but not exceeding the MaximumPrice.

6. Off-Market Purchases

(a) For purchases of Shares made by way of an Off-Market Purchase, the Company shall issue an offer documentto all Shareholders. The offer document shall contain, inter alia, the following information:

(i) the terms and conditions of the offer;(ii) the period and procedures for acceptances;(iii) the reasons for the proposed Shares Purchase;(iv) the consequences, if any, of Shares Purchase by the Company that will arise under the Code on Take-Overs

and Mergers or any other applicable take-over rules;(v) whether the purchase of Shares, if made, would have any effect on the listing of the Company’s securities

on the Official List of SGX-ST; and(vi) details of any purchase of Shares made by the Company in the previous 12 months whether through

Market Purchases or Off-Market Purchases, including the total number of Shares purchased, the purchaseprice per Share or the highest and lowest prices paid for such purchases of Shares, where relevant, andthe total consideration paid for such purchases.

(b) All Offeree Shareholders shall be given a reasonable opportunity to accept any offer made by the Company topurchase their Shares under the Shares Purchase Mandate.

(c) The Company may offer to purchase Shares from time to time under the Shares Purchase Mandate subject tothe requirement that the terms of any offer to purchase Shares by the Company shall be pari passu in respectof all Offeree Shareholders save under the following circumstances:

(i) where there are differences in consideration attributable to the fact that an offer relates to Shares withdifferent dividend entitlements;

(ii) where there are differences in consideration attributable to the fact that an offer relates to Shares withdifferent amounts remaining unpaid; and

(iii) where there are differences in an offer introduced solely to ensure that every Shareholder is left with awhole number of Shares in broad lots of 1000 Shares after the Shares Purchases, in the event there areOfferee Shareholders holding odd numbers of Shares.


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7. Status of Purchased Shares

Subject to the requirements of the Companies Act,

(a) the listing of all purchased Shares on SGX-ST will be automatically cancelled and the respective certificates forthese Shares shall be cancelled and destroyed. The Company’s purchased Shares shall be treated as cancelledand the issued share capital of the Company shall be diminished by the nominal value of these cancelledShares accordingly; and

(b) the amount by which the Company’s issued share capital is diminished on the cancellation of the purchasedShares shall be transferred to the Company’s capital redemption reserve.

8. Notification to the Registrar of Companies and Businesses

(a) Within thirty (30) days of the passing of Shareholders’ resolution to approve any purchase of Shares, theCompany shall lodge a copy of such resolution with the Registrar of Companies and Businesses.

(b) The Company shall notify the Registrar of Companies and Businesses within thirty (30) days of a purchase ofShares. Such notification shall include details of the date of the purchase, the total number and nominal valueof Shares purchased by the Company, the Company’s issued share capital as at the date of the Shareholders’resolution approving the purchase, the Company’s issued share capital after the purchase and the amount ofconsideration paid by the Company for the purchase.

9. Notification to the SGX-ST

(a) For purchases of Shares made by way of an Off-Market Purchase, the Company shall notify the SGX-ST inrespect of any acquisition or purchase of Shares in the relevant form prescribed by the SGX-ST from time totime, not later than 9.00 a.m. on the second trading day after the close of acceptance of an offer, or withinsuch time period that may be prescribed by the SGX-ST from time to time.

(b) For purchases of Shares made by way of a Market Purchase, the Company shall notify the SGX-ST in respect ofany acquisition or purchase of Shares in the relevant form prescribed by the SGX-ST from time to time, notlater than 9.00 a.m. on the trading day following the date of market acquisition by the Company, or withinsuch time period that may be prescribed by the SGX-ST from time to time.

10. Suspension of Purchase

(a) The Company may not undertake any Shares Purchase prior to the announcement of any price-sensitiveinformation by the Company, until such time as the price-sensitive information has been publicly announced ordisseminated in accordance with the requirements of the New Listing Manual.

(b) The Company may not effect any Shares Purchases on the Official List of SGX-ST during the period commencingone month before the announcement of the Company’s annual or half-year results, as the case may be, andending on the date of announcement of the relevant results.


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Appendix 1 — Guidelines on Shares Purchases (cont’d)

FRONTLINE TECHNOLOGIES CORPORATION LTDCompany Registration No. 199801489G

(Incorporated in the Republic of Singapore)

PROXY FORMIMPORTANT1. For investors who have used their CPF monies to buy Frontline Technologies Corporation Ltd shares, the Annual Report is forwarded to

them at the request of their CPF Approved Nominees and is sent 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.

I/We __________________________________ of _________________________________________ being *a member/membersof Frontline Technologies Corporation Ltd (“Company”), hereby appoint

Proportion ofShareholdings to be

Name Address NRIC/Passport No. Represented by Proxy (%)

*and/or

as *my/our *proxy/proxies to vote for *me/us on *my/our behalf and, if necessary, to demand a poll, at the Annual GeneralMeeting of the Company to be held at the Function Room, Tanah Merah Country Club, 25 Changi Coast Road, Singapore499803, on 12 August 2005 at 10.30am and at any adjournment thereof.

*I/we direct *my/our *proxy/proxies to vote for or against the Ordinary Resolutions to be proposed at the Annual GeneralMeeting as indicated with an “X” in the spaces provided hereunder. If no specified directions as to voting are given, the*proxy/proxies will vote or abstain from voting at *his/their discretion.

No. Ordinary Resolutions For Against

1. To receive and adopt the Accounts for the year ended 31 March 2005, the Directors’ Report andthe Auditors’ Report thereon.

2. To re-elect Mr Steve Ting Tuan Toon who is retiring in accordance with the Company’s Articlesof Association.

3. To approve Directors’ fees for the year ended 31 March 2005.

4. To appoint Auditors and to authorise the Directors to fix their remuneration.

5. To authorise the Directors to grant options and to issue shares under the Company’s ShareOption Scheme 2000.

6. To renew the Shares Purchase Mandate.

7. To renew the Shares Issue Mandate.

Signature(s) of Member(s)/Common Seal

Total Number of Shares Held:

Dated this day of August 2005

* Delete accordingly IMPORTANT: Please read notes overleaf

The Company Secretary

FRONTLINE TECHNOLOGIES CORPORATION LTD

750 Chai Chee Road #02-01/03 The OasisTechnopark@Chai Chee

Singapore 469000

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AffixStampHere

Notes1. A member of the Company entitled to attend and vote at the Annual General Meeting is entitled to appoint not more

than two proxies to attend and vote in his/her stead. Such a proxy need not be a member of the Company.

2. Where a member of the Company appoints two proxies, he shall specify the proportion of his shareholding (expressedas a percentage of the whole) to be represented by each such proxy.

3. The instrument appointing a proxy or proxies must be under the hand of the appointor or his attorney duly authorisedin writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed underits common seal or under the hand of its attorney or duly authorised officer.

4. A corporation which is a member of the Company may authorise by resolution of its directors or other governing body,such person as it thinks fit to act as its representative at the Annual General Meeting, in accordance with its Articles ofAssociation and Section 179 of the Companies Act, Chapter 50 of Singapore.

5. The instrument appointing proxy or proxies, together with the power of attorney or other authority (if any) under whichit is signed, or notarially certified copy thereof, must be deposited at the registered office of the Company at 750 ChaiChee Road #02-01/03, Technopark@Chai Chee, Singapore 469000, not later than 48 hours before the time set for theAnnual General Meeting.

6. A member should insert the total number of shares held. If the member has shares entered against his name in theDepository Register (as defined in Section 130A of the Companies Act, Chapter 50 of Singapore), he should insert thatnumber of shares. If the member has shares registered in his name in the Register of Members of the Company, heshould insert that number of shares. If the member has shares entered against his name in the Depository Register andshares registered in his name in the Register of Members of the Company, he should insert the aggregate number ofshares. If no number is inserted, this form of proxy will be deemed to relate to all the shares held by the member ofthe Company.

7. The Company shall be entitled to reject the instrument appointing a proxy or proxies if it is incomplete, improperlycompleted or illegible or where the true intentions of the appointor are not ascertainable from the instructions of theappointor specified in the instrument appointing a proxy or proxies. In addition, in the case of members of theCompany whose shares are entered against their names in the Depository Register, the Company may reject anyinstrument appointing a proxy or proxies lodged if such members are not shown to have shares entered against theirnames in the Depository Register 48 hours before the time appointed for holding the Annual General Meeting ascertified by The Central Depository (Pte) Limited to the Company.

8. A Depositor shall not be regarded as a member of the Company entitled to attend the Annual General Meeting and tospeak and vote thereat unless his name appears on the Depository Register 48 hours before the time set for theAnnual General Meeting.

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