ANNUAL REPORT 2001

OEM/ODM Manufacturing

Electronics Manufacturing Services

IT Solutions Provider

Registered Office:Registrar:Auditors:

Partner-in-charge:Company Secretaries:

31 Ubi Road 1, Aztech Building, Singapore 408694. Tel: (65) 6741 7211B.A.C.S. Pte Ltd, 63 Cantonment Road, Singapore 089758Arthur Andersen, 10 Hoe Chiang Road, #18-00 Keppel Towers, Singapore 089315Ms Ho Syan YanMs Pavani Nagarajah / Mr Pradeep Kumar Singh

CONTENTS

Corporate Overview ........................................................................................................

President’s Review ............................................................................................................

OEM/ODM Design and Manufacturing ...........................................................................

Electronics Manufacturing Services ..................................................................................

Internet Business ..............................................................................................................

Board of Directors ............................................................................................................

Corporate Governance ....................................................................................................

Financial Statements ........................................................................................................

Analysis of Shareholdings ................................................................................................

Notice of Annual General Meeting ..................................................................................

Notice of Nomination ......................................................................................................

Proxy Form .......................................................................................................................

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CORPORATE OVERVIEW

02 03

Technology today has become strongly intertwined with the very fabric of our

society. The pace of such interdependence grows almost daily with companies

constantly offering new and more innovative products and solutions to compete

in the global economy. Identifying this trend, Aztech Systems Limited has

positioned itself to ride the wave of technological progress and establish itself

firmly at the forefront of innovation and change.

Founded in 1986, Aztech is now a publicly listed company providing premium

services and solutions in three high-growth areas of OEM/ODM Design and

Manufacturing, Electronics Manufacturing Services (EMS) and Software

Development / IT Solutions.

In the area of OEM design and manufacturing, Aztech established a solid lineup

of successful products in the Customer Premises Equipment (CPE), Analog

Modem and MTU/MDU sectors, effectively helping its customers secure a wider

share of their respective markets. The company’s ODM clientele has also long

drawn on Aztech’s superb R&D facilities and engineering expertise to launch

revolutionary products and services.

Where clients preferred to retain product engineering and design internally,

Aztech together with its wholly owned subsidiary, Azuno Manufacturing, played

an important role as the outsourcer of the manufacturing function, helping

customers launch products with minimum time to market, yet of the highest

production standard.

With its ISO and BABT certified manufacturing plants in Indonesia and China,

cost effectiveness, speed and quality are the main priorities. A dedicated team

of manufacturing professionals and state-of-the-art SMT lines equipped with

BGA capabilities complete the Group’s commitment to innovation, modernization

and advancement.

To complement its hardware divisions and harness the fast growth of Internet

as a medium of communication, Aztech has two established players in the

software arena drawing on the latest technologies in its delivery of IT solutions

and services. Thatweb Solutions, a wholly owned subsidiary, has become the

leading player in the most rapidly growing mobile sector securing the clientele

of all mobile carriers in Singapore, as well as telecom firms in Malaysia, China

and Taiwan. It complements this expertise with turnkey solutions to private,

corporate and government customers in the areas that include web enablement

and workflow management, as well as a wide array of established software

products covering eCommerce, webCommunication, wireless and network

arenas. Establishing a powerful name in the hospitality industry, an affiliate

company, Net2Room.Com brings Internet and information technologies to a

premium international clientele of hotels, apartments and other establishments.

04 05

The demand for EMS has grown consistently on a global scale

over the past few years as increasingly more companies

outsource their production to draw on the economies of scale

and gain cost advantages. Aztech and its subsidiary, Azuno

Manufacturing, provide a wide variety of full and partial

turnkey Electronics Manufacturing Services at competitive

costs and fast turnaround time. This has enabled the Group

to penetrate different markets such as telecommunications,

computing, networking and instrumentation systems.

The Internet Business Unit (IBU) of Aztech provides software

solutions, products and turnkey services that capitalize on the

expansion and benefits of Internet as a communication

medium. The unit’s strengths lie in many arenas of technological

and R&D experience, solid IP library, project management skills

and local presence with subsidiary development centers in

China and Hong Kong. Two companies have been formed

as part of this business unit, Thatweb Solutions being a wholly

owned subsidiary of Aztech, and Net2Room.com as a joint

venture with leading hospitality companies in Singapore.

Best of Innovations and Excellent Manufacturing

Since its establishment, Aztech has made a tremendous

progress to secure a prime position in several markets. We

believe this success can be attributed to our persistent

commitment to three areas – research and development

dedicated to progress and innovation, manufacturing capability

with unceasing drive for quality and value and our people

who contribute their hearts and minds to the achievement of

our success.

I would like to thank my colleagues, our customers and

partners for their contribution in the past year. I look forward

to their continued support as we work together towards

scaling even greater heights in the time to come.

PRESIDENT’S REVIEW

implemented a series of cost cutting measures in 2001 and

made all efforts to maintain a positive working capital with

a net positive cash position. In the early part of this year

we further strengthened our liquidity by restructuring our

banking facilities and raising S$10 million cash. The Group

is now better equipped to fund its operations and explore

new opportunities.

Prospects for 2002

This year will be both challenging and promising. Most

economic indicators are tending towards a possible recovery

by the third quarter. The challenge, and the opportunity,

will come from using our strengths in the rising market to

capitalise on the benefits it will provide. To this end we have

recently set up a new subsidiary in China to manufacture

digital telecommunication and multimedia systems,

equipments and products, speakers, sound systems,

telephones (including cordless telephones) and plastic

injection parts. Anticipating the potential of the Chinese

economy seen to be one of the driving forces in the global

economic recovery, the subsidiary has been also licensed to

sell its products in the domestic market.

Many technology players are faced with intense market

competition. Just to stay in the race, they need to

continuously innovate to launch up-to-date, reliable and

competitive products for their clientele. The OEM/ODM

team at Aztech caters to these technology players by offering

them a range of market-proven quality products and design

services. With our commitment to R&D and manufacturing

excellence, the team has built up a strong profile of products

including a complete range of Annex A, B and C ADSL

products, which have impressed major telecom companies

and DSLAM (Digital Subscriber Line Access Multiplexer)

providers around the world.

Whilst 2001 was a year of deep economic downturn lead

by weak consumer demand and compounded by the

adversity of September 11 terrorist attacks, it also proved

to be a year of consolidation with an unabated focus on

our customers and our long-term goals. In the face of

market adversity we have taken concrete steps to reduce

our cost structures, streamline our operations and consolidate

our financial position. We answered the weak technology

demand through aggressive pricing strategies, but maintained

a strong investment in R&D activities, plant modernization

and advancements in manufacturing capabilities. Whilst

these actions resulted in substantial fall in our 2001 revenues

and profits, they have allowed us to consolidate and position

ourselves to harness the expected economic upturn and

consequently our long-term performance.

Our Activities in 2001

In 2001, we maintained a strong focus on our three key

business areas of OEM/ODM design and manufacturing,

Electronics Manufacturing Services (EMS) and software

development / Internet solutions provision. Whilst keeping

our costs down, we spared no effort to upgrade our R&D

and manufacturing capabilities to ensure the delivery of

quality designs and solutions to our customers. We are

happy to report that our efforts have paid off. In OEM/ODM

design and manufacturing, we achieved several design

successes and secured the accounts of major players in the

PC and Data Communication markets around the world.

In EMS, we continued to offer high-end manufacturing

services to various industries, including the high-precision

instrumentation industry. In the IT solutions market we have

secured several landmark projects from public and private

sectors and have launched new and innovative software

products capturing important market share. To overcome

the extremely weak and uncertain environment, we

OEM/ODM DESIGN ANDMANUFACTURING

06 07

In today’s competitive technological environment, manufacturers must offer the

most advanced and highly reliable range of products to capture the forefront

of the market. This is done effectively by drawing on the expertise and designs

of established providers of original equipment manufacturing (OEM) and original

design manufacturing (ODM) services.

Aztech is among the leading OEM/ODM manufacturers, with a proven track

record of providing customers from around the world a one-stop service in

electronics design and manufacturing.

By committing ourselves to innovation and advancement in the OEM/ODM

market, Aztech has built state-of-the-art R&D and manufacturing facilities to

provide high value added electronics design and manufacturing services to its

customers. The R&D facility, consisting of hardware design lab, software

development and test lab, PCB layout lab, ADSL test lab, mechanical design lab

and an EMC Shield Room allows us to support our clients with extensive design

and test capabilities.

Backed by more than 15 years of experience in harnessing new technologies

and meeting market demands, we are capable of designing products that meet

the exacting standards required by our customers throughout the world. We

have strong design capabilities in xDSL technologies, which include ADSL, SDSL,

VDSL, G.sHDSL; analog modems and wireless technologies such as the RF, 802.11

and Bluetooth. To expand our capabilities we have also established strong

partnerships with key chipset technology providers.

Our complete range of OEM/ODM products include DSL modems and routers

(Annex A, B and C), Analog modems, MTU/MDU products and CNR modem

cards. Our OEM/ODM products have received worldwide recognition for their

excellent performance and quality. This success has been widely acknowledged

by various accolades and awards granted to us. Between 1994 and 1995 we

were the second largest Sound card manufacturer and in 1997 we were the

third largest modem manufacturer in the world (source: Dataquest).

Aztech’s OEM/ODM business is vertically integrated with R&D, Manufacturing

and Logistics. We have solid and well-grounded experience in PCB assembly and

mechanical/final product assembly. We are supported by two of our large

manufacturing facilities in Indonesia (Batam) and China (Dongguan) that are ISO

and BABT certified.

The Future Strategy

Aztech will continue to excel in OEM/ODM design and manufacturing services

and deliver its products and services worldwide. It will accomplish this by

continuing its investments in R&D and manufacturing capabilities, and focusing

on developing its human and engineering resources. With this commitment,

Aztech is set to scale even greater heights in the global OEM/ODM market.

ELECTRONICSMANUFACTURING SERVICES

08 09

The pace of competition for technology players shows no signs of abating.

Technology companies have to continuously develop their winning strategies.

They not only have to constantly innovate but also be very cost competitive.

To meet this challenge, many companies have outsourced their manufacturing

activities to achieve cost efficiencies. This will not only allow them to produce

a competitive product but also a competitive operation cost structure by riding

on the economies of scale provided by their EMS partners. Outsourcing further

allows them to reduce their fixed operating expenditure and focus their internal

resources on product differentiation and market development.

Both directly and through its contract manufacturing arm, Azuno Manufacturing

Pte Ltd, Aztech has capitalized on this global outsourcing trend by providing

cost-effective, fast turnaround, high quality electronics manufacturing services.

The Aztech Group has more than ten years of experience in PCB and mechanical/

final product assembly. It has two high quality manufacturing plants located in

Indonesia (Batam) and China (Dongguan). Both plants are ISO 9002 and BABT

certified. They are staffed with dedicated manufacturing professionals and have

state-of-the-art equipment and SMT lines complete with BGA capabilities.

The Group’s widely acknowledged R&D capabilities are marshalled by a highly

experienced team that provides a comprehensive range of services that include:

- Hardware Design and PCB Layout

- Firmware and Software Development

- Mechanical Design and Development

- Product Integration and Testing

- Product Compliance and Certification

- Manufacturing Test Software Development

- Technical Documentation

The Aztech Group has positioned itself as a leading Electronics Manufacturing

services provider for the Computer Peripherals, Telecommunication, Networking,

Consumer Electronics and Healthcare industries. Products built by our factories

include DSL modems and routers, cable modems, analog modems, DECT phones,

Speakers, test motherboards, network cards, hubs and switches to name just a

few.

In addition to developing strong manufacturing and R&D capabilities, Aztech

has a highly skilled materials management team with strong experience in turnkey

as well as consigned projects to provide cost effective worldwide sourcing and

purchasing, logistics and RMA services.

Ensuring Customer Satisfaction

The growth projections for the EMS market remain bullish for the foreseeable

future. The Aztech Group plans to ride the crest of this growth wave to increase

its market share by focusing on strengthening its manufacturing expertise and

ensuring total customer satisfaction through the delivery of responsive, high

quality and cost effective services.

10 11

The Internet Business Unit (IBU) of Aztech is instrumental in providing software solutions that harness

this rapidly growing medium of communication. The unit’s strength in terms of innovation, technical

know-how and consultancy has produced a comprehensive range of wireless and web-based applications

for corporations, governments and individuals. Two companies have been formed as part of this business

unit, Thatweb Solutions Pte Ltd and Net2Room.com Pte Ltd.

THATWEB SOLUTIONS PTE LTD

The company has strengthened its strategic focus on the areas of software development, IT solutions

consulting and provision of high end Internet applications. From multi-million dollar projects such as the

Emergency Public and Information Centre for the Ministry of Home Affairs, through wireless solutions

including the Personal Information Management System for Singapore Telecom, up to the state-of-the-

art Performance Management workflow solution for the iDA of Singapore, Thatweb has established

itself as a key market player in the targeted IT sectors. Supplementing its success in the solutions

development, Thatweb has also strengthened its line-up of software products, distributed across four

key areas:

Wireless Solutions – Complete WAP and GPRS suite of application software and servers, Mobile

Commerce with inroads into 3G

Web Solutions – Email Retrieval, Instant Messaging and Kiosk Applications

Corporate Solutions – eCRM tools and Corporate Communication Solutions

Network Solutions – Plug-n-Surf Broadband Internet Access, Load Balancing and Server Monitoring

The company’s commitment to innovation and expansion of IP capital has been recognised in a significant

financial award by the iDA for the development of a pioneering Java-based Web, WAP and GPRS enabled

email product.

In 2001 Thatweb Solutions completed the formation of its subsidiary in Shanghai, China to capitalise

on its momentum in this region. In addition, a Hong Kong based hub will be commissioned in the later

part of this year, linking north and south east Asian markets, and providing a strong base for international

expansion and business development.

Building on its penetration of the key target markets, Thatweb Solutions has forged several strategic

alliances with firms including the Parametric Technology Corporation and the HR Online. It has tied up

important partnerships with Hewlett Packard Corporation, Mobile One and Motorola to support its

consulting and R&D efforts. Over the last year the company has become a key player in the fast expanding

wireless sector, linking with SingTel, Mobile One and Starhub mobile carriers in Singapore, TCC in Taiwan

as well as China Unicom to offer its range of services. Further partnerships and alliances will be formed

with leading global players propelling Thatweb Solutions as a formidable force in software development

and IT solutions beyond Singapore and the region.

NET2ROOM.COM PTE LTD

Despite a weak economy, Net2Room continued to innovate and was proud to launch Virtual Private

Network (VPN) to meet the demands of corporate travellers. VPN is a service that enables corporate

travellers to connect remotely to their corporate networks and colleagues. VPN provided by Net2Room

ensures security and ease of connection at a fraction of the cost of traditional methods.

Moving forward, Net2Room has identified new streams of revenue to strengthen its current financial

position. Net2Room has been officially appointed by Starhub as the reseller for all Starhub’s services

ranging from IDD calls to sales of lease lines.

As a preview of things to come, Net2Room is also set to introduce yet another service commanding high

demand in the hospitality industry: Video-On-Demand (VOD). Like cable television, VOD eradicates the

need to put up with repeated shows by putting the control in the user’s hands. It allows viewers to

choose whichever show they desire at whatever time they choose. The VOD service is possible through

high speed broadband that supports large applications and equipments such as the set-top box that

allows users to utilise the TV set for Internet surfing purposes.

INTERNET AND SOFTWAREDEVELOPMENT

BOARD OF DIRECTORS

Michael Mun Hong Yew

Patricia Ng Sok Cheng

Philip Tan Tee Yong

Colin Ng Teck Sim