Expanding Our Intellectual Property Library

• THUMBDRIVE SMART • THUMBDRIVE SWIPE • SAKE • THUMBDRIVE TUNER • SWIFT • TOUCH • THUMBDRIVE SECURE

ANNUAL REPORT 2005 Contents

1 Trek’s Global Intellectual Property Coverage 2 A Message from the Chairman and CEO 7 Group Structure 8 Board of Directors 11 Key Management Team 12 Corporate Information 13 Financial Contents

Year 2005 – Key Events

7 March : Trek unveils fi rst of its kind solutions at CEBIT exhibition in Hanover, Germany, namely, ThumbDrive®Swipe Armour; ThumbDrive®Portable Operating System ; ThumbDrive®0.85-inch hard disk drive and A New High Speed ThumbDrive®

14 March: Strategic relationship agreement with Imation Corporation for USB Portable storage products

12 April : Trek Receives U.S. Recognition with patent approval

17 May : Completion of acquisition of shares by Imation Corporation

16 August : Trek receives Patent approvals for New Compression Technology

26 October : UK leads with Patent approval for Trek’s Anti-Piracy and encryption technology (SAKE).

11 November: Trek’s landmark victory on patent ownership over its USB Portable data storage device won fi nal judgment in Singapore.

19 December: Trek expands LENOVO relationship with the new higher-capacity storage device Trek’s Global Intellectual Property Coverage

Canada Eurasia Mongolia Europe Saudi Arabia South Korea Bahrain Japan Arctic Ocean

United Kingdom

China

Atlantic Ocean Taiwan

Pacifi c Nigeria Ocean UAE

IndiaIndia Namibia Thailand Malaysia Singapore Hong Kong USA Brunei Philippines South Africa Australia Brazil New Zealand

Trek 2000 R & D Centres

Trek’s Patented Core Technology Solutions: • Wireless • USB

• Anti-piracy

• Security

• Centralised Management System (CMS)

1 Trek 2000 International Ltd Annual Report 2005 Chairman’s Message To Shareholders

The measures implemented in FY2005, in a bid to reorganize its business are now yielding results. Having ignited our IP engine and having garnered the support of a globally renowned distributor for our solutions, we are confi dent that the mechanisms are well placed to fuel Trek’s future growth, barring any unforeseen circumstances.

The ThumbDrive® Swipe, a biometric enabled device, offers users a high level of security.

FY2005 was both a challenging and rewarding year for all of us at Trek 2000 (“Trek” or “the Group”). The highlight of the year surrounds our success in defending our ownership of our ThumbDrive® solution in Singapore in November 2005. Another key event was the vote of confi dence from Toshiba Corporation who raised their equity in Trek from 5.32 % to 10.32 % in January 2006. An option has also been extended to Toshiba to further increase their stake to 19.5% within a year.

Corresponding to our strategy to develop Trek into a global Research & Development (“R&D”) house with patenable solutions, Trek will forge strategic alliance with Technology leaders on joint developments and exchange programmes. On the marketing front, we will position Trek as a leading Original Equipment Manufacturer (“OEM”)/ Original Design Manufacturer solutions provider.

Over the years, Toshiba’s confi dence and support in Trek were among the catalytic drivers underlying the growth of our R&D activities. Our symbiotic relationship and the trust that we have forged over the years with Toshiba, a giant in the global IT industry, will stand us in good stead to jointly tap into the opportunities in the growing global IT industry.

2 Trek 2000 International Ltd Annual Report 2005 Chairman’s Message To Shareholders

On the business front, the Group registered higher sales as we received more orders from both our existing and new customers for our ThumbDrive® solutions. FY2005 saw sales rising by 21.8% to $171.0 million. This in turn boosted our net profi t after tax to $4.8 million representing an increase of 358.4%. Recently, we have registered more than 200 patents worldwide, of which more than 80 patents have been granted.

Operationally, our business strategy to focus our resources in the area of R&D will inevitably incur more expenses. In a bid to tap into the pool of creative talents in the region and plug into the regional R&D hub, our teams of engineers in India and Malaysia were expanded during the year. As we continue to increase our focus in R&D activities, we hope that we will be able to bring more solutions to the market based on our library of patent portfolio. Of particular emphasis will

The ThumbDrive® Tuner, Trek’s latest creation, allows users to receive digital broadcast through the convenience of their USB-enabled computers.

be in the area of Trek’s family of USB storage ThumbDrive® solutions; Security, Anti-piracy (SAKE), Wireless and Encryption. The growing awareness on the importance of information and data access and securitization will release many opportunities in the fi nancial, healthcare, educational, government and many other industries across the world. Our paradigm shift in FY2005 has placed us in an optimal position to tap into the vast opportunities ahead of us.

OPERATIONS AND FINANCIAL REVIEW

The Group’s turnover rose 21.8% to S$171.0 million in FY2005 from S$140.4 million in the previous fi nancial year (“FY2004”) due to the rising demand for its ThumbDrive® range of products and contributions from its Intellectual Property (“IP”) assets. The performance this year also refl ects the growing acceptance and confi dence among OEM customers of Trek’s engineering solutions and products, in particular, the Group’s renowned ThumbDrive® range of products.

The recent recognition of the Group’s patent ownership for its ThumbDrive® by the Court in Singapore in May 2005 further entrenched Trek’s position globally for this particular device. Setting a new paradigm in the R&D industry in Singapore, it further reinforces the validity and importance of respecting intellectual property rights.

3 Trek 2000 International Ltd Annual Report 2005 Chairman’s Message To Shareholders

The Group’s gross profi t dipped by 1.0% in FY2005 to S$10.5 million from S$10.6 million in FY2004 largely due to keen competition and being offset by the stronger contribution from licensing revenue, a growing business segment. Licensing registered the strongest contribution in FY2005 with revenue totaling approximately S$3.0 million as compared to S$0.7 million in FY 2004. Going forward, this business segment will become increasingly important as businesses begin to pay serious attention to intellectual property protection.

Net profi t after tax was higher by 358.4% rising to S$4.8 million from S$1.1 million. The higher net profi tability is largely due to the reduced litigation cost incurred this year pertaining to defending the Group’s IP. In FY2005, the Revenue by Business Segment Group litigation cost amounted to S$1.0 million compared to S$3.0 million in FY2004. The year also saw the incurrence of reduced marketing and distribution

2004 Digital Technology Turnover (S$million) Profi t Before Income Tax (S$million) Licensing 44.8% 0.5% 180 108.1 125.4 140.3 171.0 6.5 5.1 1.0 5.3 10 160 Customized Engineering 140 8 54.7% 120

100 6

80 4 60 2005 Digital 40 Technology 2 62.9% 20

Licensing 0 0 1.7% Customized 2002 2003 2004 2005 2002 2003 2004 2005 Engineering 35.4% expenses which declined 16.8% to S$2.8 million due to ongoing cost control measures.

Operationally, general and administration expenses were higher increasing by 3.7% to S$2.3 million compared to S$2.2 million in the previous fi nancial year. With the Group’s increasing focus on R&D activities and to ensure that it stays ahead of competition in the R&D business, higher expenses were incurred in this area. Total R&D expenses for the year, inclusive of the amortisation of intangibles, rose 30.7% in FY2005 to S$2.6 million from S$2.0 million in FY2004 due to increased activities and the additional costs for new patent fi lings. Included in the incremental expenses incurred by the Group’s R&D are the expenses arising from the expansion of the Group’s overseas R&D activities in India and Kuala Lumpur.

Included in the Group’s other operating income/(expenses) are interests earned on fi xed deposits and unrealised foreign exchange gain in FY2005. The unrealised foreign exchange gain is as a result of the depreciation of the Singapore dollar against the US dollar as the Group’s monetary assets were mainly denominated in US dollar.

4 Trek 2000 International Ltd Annual Report 2005 Chairman’s Message To Shareholders

We are pleased to present a stronger balance sheet this year. The key highlights of our balance sheet include the S$0.9 million increase in our intangible assets. Compared to the previous year, our intangible assets were higher rising from S$8.8 million in FY2004 to S$9.7 million in FY2005. This increase is due to the new patents fi led for solutions that relates to our core digital technology business. As a technology leader the Group will continue to place strong emphasis in R&D. In this regard, we expect to further expand our library of patents over the years.

The stronger business performance also resulted in an increase in the Group’s trade debtors which rose from S$20.0 million as at 31 December 2004 to S$40.0 million as at 31 December 2005. Trade debtors’ collection days for the abovementioned fi nancial years stood at 65 days and 52 days respectively. The

The OEM and ODM businesses are driven by customers’ specifi cations. This forms part of Trek’s Customised Engineering business.

acquisition of new key customers gave rise to extended credit terms during the year under review. With improved inventory management, inventory levels were lowered from S$6.6 million to S$4.8 million. Correspondingly, inventory turnover improved to 11 days from 16 days in the previous fi nancial year. Extended creditors’ terms resulted in an increase in the Group’s creditors balances which rose to S$47.8 million in FY2005 from S$15.7 million in FY2004.

The Group’s operating activities generated a cashfl ow of S$23.0 million this year compared to S$3.8 million net cash used in operating activities in the previous fi nancial year. Similarly, Cash & cash equivalents in FY2005 were higher rising to S$56.0 million compared to S$40.0 million in FY2004.

THE PROSPECTS AHEAD

Going forward, the Group’s digital technology division will be the main propellant for growth and the Group expects to remain profi table in FY2006. Contributions from our IP business will continue to grow as the businesses start to observe and respect IP rights seriously.

5 Trek 2000 International Ltd Annual Report 2005 Chairman’s Message To Shareholders

In the area of R&D, we will continue to explore synergistic partnerships with leading technological leaders in the industry to help bring in new competencies with new know-how and new technology, especially in the areas of security, wireless and compression technologies. Besides organic growth the group will be in the look out for mergers and acquisitions opportunities.

We remained optimistic about our prospects in FY2006 with growth driven by demands from both existing and new customers for our digital technology solutions. On our recent success at defending our patent ownership over our ThumbDrive® solution, we shall endeavour to keep our shareholders informed once our legal counsel have obtained Court approvals on the cost recovery and damages assessment.

Over the years, the ThumbDrive® has evolved from a basic storage media to a savy consumer lifestyle product. The latest ThumbDrive® Guard is equipped with Anti-virus and Anti-Adware capabilities.

The measures implemented in FY2005, in a bid to reorganize its business are now yielding results. Having ignited our IP engine and having garnered the support of a globally renowned distributor for our solutions, we are confi dent that the mechanisms are well placed to fuel Trek’s future growth, barring any unforeseen circumstances.

In closing, I would like to thank all our shareholders, customers, business associates and employees for their confi dence in Trek over the years. Your trust helped us stood by our belief in ourselves as we fought to defend our intellectual property ownership. Into the new fi nancial year, there will be more challenges ahead and we look forward to your support as we evolve ourselves into a leading R&D player in the region and the world.

For the fi nancial year ended 31 December 2005, the Board recommends a fi rst and fi nal dividend of 1 Singapore cent per ordinary share subject to the approval of the shareholders at the forthcoming Annual General Meeting.

Henn Tan Chairman and Chief Executive Offi cer

6 Trek 2000 International Ltd Annual Report 2005 Group Structure

100% Trek Technology (Singapore) Pte Ltd*

SINGAPORE 100% S-Com System (S) Pte Ltd

25% InfoWave Pte Ltd

MALAYSIA 100% Trek Systems (M) Sdn Bhd

USA 100% TrekStor USA Inc.

HONG KONG 100% Trek Technology (HK) Co., Ltd.

THE PEOPLE’S REPUBLIC OF CHINA 100% Trek Technology (Shanghai) Co., Ltd.

THE NETHERLANDS 100% Trek Technology Europe B.V.

39% Trek Technology (Thailand) Company Ltd THAILAND

33% UTrek International Co. Ltd

* Includes branch offi ces in India (Bangalore and New Delhi), the Philippines and Japan.

7 Trek 2000 International Ltd Annual Report 2005 Board of Directors

MR. HENN TAN Chairman, Chief Executive Offi cer and Executive Director

Member of Nominating and Remuneration Committees Aged 49, Singaporean Not subject to retirement and re-election at AGM

Mr. Tan is Chairman and Chief Executive Offi cer of the Company. Mr. Tan has been an Executive Director since the Company’s inception. As Chairman and CEO, he is responsible for leading Management in building and developing the Group’s operations as well as strengthening its management structure for future growth and expansion.

Mr. Tan has more than 20 years’ experience in the electronics industry and was awarded the Ernst & Young Emerging Entrepreneur of the Year in 2002. He is a holder and inventor of numerous patents.

He holds a Bachelor of Science degree from the University of Ireland and a Doctorate from Wisconsin University.

He does not hold any directorship or chairmanship in other listed companies presently and over the preceding three years.

MR. SEAH MOON MING Vice-Chairman and Independent, Non-Executive Director

Chairman of the Remuneration Committee and Member of the Audit and Nominating Committees Aged 49, Singaporean Last re-appointed: 23 May 2003 Proposed for re-appointment at the forthcoming AGM

Mr. Seah joined the Board on 3 June 2002 and assumed the role of Vice Chairman on 1 July 2004. He is also the chairman of the Remuneration Committee.

Mr. Seah is Deputy CEO of Singapore Technologies Engineering Ltd, overseeing the Electronics and Land Systems business sectors. He is concurrently President, Singapore Technologies Electronics Ltd, a position he has held since 8 December 1997 after serving as Managing Director from 1 July 1997. He is Chairman of iDirect, Inc, Guizhou Jonyang Kinetics Co., Ltd and Unicorn Pte Ltd. He also served as Vice Chairman of ECS Holdings Limited from 3 January 2005, which is listed on SGX-ST.

Mr. Seah is Adjunct Professor to the National University of Singapore’s Entrepreneurship Centre and Deputy Chairman of the Board of Governors of Temasek Polytechnic as well as a Fellow of the Institution of Engineers Singapore. He served as a member of the International Advisory Panel of the National Information & Communications Technology, Australia for two years from September 2003; an Executive Council member of the China Council for the Promotion of International Trade and the Network India Steering Committee of International Enterprise Singapore.

Mr Seah holds a Master of Science in Electrical Engineering, with distinction, from the Naval Postgraduate School, USA. He completed both the Program for Management Development and the Advanced Management Program at Harvard University, USA.

8 Trek 2000 International Ltd Annual Report 2005 Board of Directors

MR. FOO KOK WAH Chief Operating Offi cer and Executive Director

Aged 38, Singaporean Last re-appointed: 23 April 2004 Proposed for re-appointment at the forthcoming AGM

Mr. Foo joined Trek 2000 in 1991 as its General Manager (Sales & Marketing) and helped propelled the growth of its network of subsidiaries. In November 2001, he became the Chief Operations Offi cer and Executive Director and is responsible for the Group’s global operations. Mr. Foo has been involved in the electronics industry for more than 15 years and is also responsible for the overall performance of the Group’s operations.

He holds a Diploma in Mechanical Engineering.

He does not hold any directorship or chairmanship in other listed companies presently and over the preceding three years.

MR. GURCHARAN SINGH Chief Financial Offi cer and Executive Director

Aged 49, Singaporean Last re-appointed: 23 April 2004

Mr. Singh joined Trek 2000 in 1999. In November 2002, he became the Chief Financial Offi cer and has been a Director since its public listing in May 2000.

He has more than 20 years experience in the auditing/fi nance industry, including 5 years in the insurance industry.

He is a Certifi ed Public Accountant and a Fellow of Chartered Association of Certifi ed Accountants, United Kingdom and a member of the Institute of Certifi ed Accountants of Singapore (ICPAS).

He does not hold any directorship or chairmanship in other listed companies presently and over the preceding three years.

MR. CHAY YEE MENG Independent, Non-Executive Director

Chairman of Audit Committee Aged 49, Singaporean Last re-appointed: 22 April 2005

Mr. Chay joined the Board on 22 March 2001 and is also the Chairman of the Audit Committee.

He is a Director of ECS Holdings Limited, which is listed on SGX-ST. He is also CEO of Infowave Pte Ltd and; Director and Audit Committee member of the National Kidney Foundation. He was the Chief Financial Offi cer of Natsteel Electronics Ltd / Solectron Technology Asia Pacifi c Region from 1993 to 2002. He has more than 20 years’ experience in the electronics industry.

He graduated with a Bachelor of Accountancy degree from Nanyang University.

9 Trek 2000 International Ltd Annual Report 2005 Board of Directors

MR. CHEAH KIM TECK Independent, Non-Executive Director Chairman of Nominating Committee and member of the Remuneration Committee Aged 55, Singaporean Last re-appointed: 23 May 2003 Proposed for re-appointment at the forthcoming AGM

Mr. Cheah joined the Board on 22 March 2001 and is also the Chairman of the Nominating Committee.

He is currently the CEO, Group Motor Operations of Jardine Cycle & Carriage Limited (a listed company on the SGX-ST) excluding those held by Astra International. He is also a council member of the Singapore Sports Council, a member of the Management Committee of the Singapore Turf Club and sits on the board of Singapore Totalisator.

He holds a Master’s degree in Marketing from the University of Lancaster, United Kingdom.

MR. NOEL HON CHIA CHUN Independent, Non-Executive Director

Member of Audit Committee Aged 60, Singaporean Last re-appointed: 22 April 2005

Mr. Noel Hon joined the Board on 20 April 2004 and was appointed a member of the Audit Committee on 24 March 2005.

He is an Independent Director of Sembcorp Logistics Ltd, a listed company on SGX-ST, since 15 July 2004. He also sits on the Inland Revenue Authority of Singapore Board as an Independent Director, with effect from 1 September 2004.

Mr. Noel Hon plays an active role in public service and was awarded the Public Service Star (Bar) BBM (L) in August 2003. In May 2003, he was also appointed as a Justice of Peace by the President of the Republic of Singapore.

He graduated from the University of Singapore with a Bachelor of Science degree with Honours and a Post Graduate Diploma in Business Administration.

MR. YOSHIAKI SAKAI Independent, Non-Executive Director

Aged 59 , Japanese Last re-appointed : 22 April 2005

Mr. Sakai joined the Board on 1 July 2004 as a Non Executive and Independent Director.

He is the President of TEAC Corporation in Japan, a listed company on the Japan Stock Exchange. TEAC Corporation is a leading global company in recording / reproducing technology and Mr Sakai has been involved in the company for over the last fi ve decades.

Mr. Sakai holds a Bachelor of Science degree from Waseda University, Japan.

10 Trek 2000 International Ltd Annual Report 2005 Key Management Team

MR. KUAN MUN KWONG MR. CHAN KOON KEET Director, Business Development of the Digital Head of R&D, Kuala Lumpur, Malaysia Technology Division Mr. Chan is the Group’s Senior Engineer and Head of R&D in Mr. Kuan joined the Group in July 1999 and is currently Kuala Lumpur. He joined the Group on 1 August 2001 and Director, Business Development of the Digital Technology has over the years developed his capabilities to his current Division. Prior to joining the Group, he was a Development position. As Head of R&D, he is responsible for the overall Assistant at the French Singapore Institute from 1988 to project planning and execution, and also includes initial 1991. Thereafter, he joined Thomson Multimedia Asia Pte concept design right through to registration of patenable Ltd as a R&D Engineer from 1991 to June 1999 where products. he was involved in the concept and development of CD Mr. Chan holds a Degree in Electrical & Electronics products, CD servo analysis, digital audio and Application Engineering. Specifi c Integrated Circuits (ASIC) development. Mr. Kuan, a holder and inventor of a patent, holds a Diploma in Electronics Engineering. DR. SHEW PAUL WAIE Director, Business Development Dr. Shew joined the Group on 1 March 2006 and brings MR. POO TENG PIN with him 15 years of experience. He will oversee new Group’s Director of R&D business opportunities in the areas of security and strategic Mr. Poo is the Group’s Director of R&D, joined the Group collaboration, including mergers and acquisitions. Dr. Shew on 7 June 1999 and has over the years developed his was Assistant Director of the Infocomm Development capabilities in fi rmware and software architectures. As Head Authority of Singapore, where he was responsible for of R&D, he is responsible for the overall project planning and promoting infocomm security in the industry and IT security execution, which includes initial conceptualisation design evaluation standards. work right through to registration of patentable products Previously, he was Senior Manager of the National Computer and the adoption of emerging technologies applicable to Board, where he promoted the development of applications Trek’s future R&D roadmap. and services for Singapore’s broadband infrastructure. He Mr. Poo is a holder and inventor of numerous patents and also worked in Taiwan at Microelectronics Technology holds a Master in Engineering where he led a team to develop broadband over satellite technologies and at Aetex Biometric, he co-invented a number of fi ngerprint recognition technologies (two of MR. TAN BOON SIONG which were granted US patents). In addition, he also held Director of Trek Technology (Singapore) Pte Ltd technical positions at TriTech Microelectronics International (a former subsidiary of Chartered Semiconductor Mr. Tan joined the Group as a Director of Trek Technology Manufacturing). (Singapore) Pte Ltd, a wholly owned subsidiary of the Group. He has more than 18 years of sales experience and Dr. Shew received his Bachelor of Engineering degree and is currently Senior Manager of the Group’s Sales Division. Ph.D in Electrical Engineering from the National University of Singapore.

MR. FRANCIS WAN MUN KEEN Director of Trek Technology (Thailand) Co. Ltd Mr. Francis Wan joined the Group in 1992 and is currently the Senior Marketing Manager of Digital Technology Division. Prior to joining the Group, he was Sales Engineer at Sanyo where his experience widened in customsied engineering semiconductors, sub-module solutions and audio-based solutions. He holds a Diploma in Electronics Engineering.

11 Trek 2000 International Ltd Annual Report 2005 Corporate Information

BOARD OF DIRECTORS NOMINATING COMMITTEE SHARE REGISTRARS Cheah Kim Teck (Chairman) Lim Associates (Pte) Ltd Executive: Seah Moon Ming 10 Collyer Quay Henn Tan Henn Tan #19-08 Ocean Building (Chairman and Chief Executive Singapore 049315 Offi cer) Foo Kok Wah REMUNERATION COMMITTEE Gurcharan Singh Seah Moon Ming (Chairman) AUDITORS Cheah Kim Teck Ernst & Young Non-Executive and Independent: Henn Tan 10 Collyer Quay Seah Moon Ming #21-01 Ocean Building (Vice Chairman) Singapore 049315 Chay Yee Meng SECRETARY Cheah Kim Teck Yeo Poh Noi Caroline, FCIS Noel Hon Chia Chun AUDIT PARTNER-IN-CHARGE Yoshiaki Sakai Tham Chee Soon REGISTERED OFFICE Date of Appointment: 30 Loyang Way #07-13/14/15 Financial year ended 31 AUDIT COMMITTEE Loyang Industrial Estate December 2005 Chay Yee Meng (Chairman) Singapore 508769 Noel Hon Chia Chun Seah Moon Ming Telephone number : 6546 6088 Fax number : 6546 6066 www.trek2000.com.sg www.thumbdrive.com

STOCK LISTING Singapore Stock Exchange Ticker Symbol: TREK

12 Trek 2000 International Ltd Annual Report 2005 Financial Contents

14 Corporate Governance Statement 23 Directors’ Report 28 Statement By Directors 29 Auditors’ Report 30 Profi t and Loss Accounts 31 Balance Sheets 32 Statements of Changes in Equity 35 Consolidated Statement of Cash Flow 36 Notes to the Financial Statements 98 Shareholders’ Information 100 Notice of Annual General Meeting

13 Trek 2000 International Ltd Annual Report 2005 Corporate Governance Statement

for the fi nancial year ended 31 December 2005

The Board of Directors (‘the Board”) is committed to ensure that the highest standards of corporate governance are practiced throughout Trek 2000 International Ltd and its subsidiaries (“the Group”), as a fundamental part of discharging its responsibilities to protect and enhance shareholder value and the fi nancial performance of the Group. In view of this, the Board fully supports the Code of Corporate Governance (the “Code”), which forms part of the Continuing Obligations of the SGX-ST’s Listing Manual. The Board has also established various self-regulatory and monitoring mechanisms, where applicable, to ensure that effective corporate governance is practiced.

The Board confi rmed that the Group has tried to comply with the best practices of the Code throughout the fi nancial year ended 31 December 2005.

Board Matters

Board’s Conduct of its Affairs [Principle 1]

The Board meets to review the key activities and business strategies of the Group and carries out its functions effectively through the 3 Board committees (Audit, Nominating and Remuneration Committees), which have specifi c areas of responsibilities. Information on board members’ participation in the various Board committees is set out below.

The Board supervises the management of the business and the affairs of the Group. Apart from its statutory responsibilities, the Company has adopted internal guidelines setting forth matters that require Board approval. The types of material transactions that require the Board’s approval are as follows: a) Approval of quarterly results announcements; b) Approval of annual results and accounts; c) Declaration of interim dividends and proposal of fi nal dividends; d) Convening of shareholder’s meetings; e) Approval of corporate strategy; f) Authorisation of merger and acquisition transactions; and g) Authorisation of major transactions

The Board meets regularly on a quarterly basis and as warranted. Ad hoc meetings are also convened to deliberate on urgent substantive matters. Attendance via telephone conference is allowed at Board meetings pursuant to the Company’s Articles of Association. The number of Board and Board committees meetings held in the year and the attendance of each Board member at these meetings are disclosed below.

Board of Directors Audit Committee Remuneration Committee Nominating Committee Number of Number of Number of Number of Meetings Meetings Meetings Meetings Position Held Attended Position Held Attended Position Held Attended Position Held Attended Executive Directors Mr. Henn Tan C 4 4 M 2 2 M 1 1 Mr. Foo Kok Wah M 4 1 Mr. Gurcharan Singh M 4 4 Non-Executive Directors Mr. Chay Yee Meng M 4 4 C 4 4 Mr. Cheah Kim Teck M4 4 M4 1 M 2 2 C 1 1 Mr. Seah Moon Ming M 4 3 M 4 3 C 2 1 M 1 1 Mr. Noel Hon Chia Chun M4 2 M4 2 Mr. Yoshiaki Sakai M 4 0 Denotes: C – Chairman M – Member Note:- Mr Noel Hon was appointed as a Member of the Audit Committee in place of Mr Cheah on 24 March 2005.

14 Trek 2000 International Ltd Annual Report 2005 Corporate Governance Statement

for the fi nancial year ended 31 December 2005

From time to time, Board meetings are also held to update members on changes in regulations and accounting standards, especially where the changes have an important bearing on the Company’s or the Directors’ disclosure obligations. When prompt update of regulatory changes is required, the relevant information will be circulated to the Directors.

The Company will endeavour that future newly-appointed Directors are familiar with the Company’s business operations, governance practices and duties as a director.

Board Composition and Balance [Principle 2]

The Board comprises eight Directors, out of which three are Executive Directors and fi ve are Non-Executive, Independent Directors:-

Executive Directors

Henn Tan Chairman and Chief Executive Offi cer Foo Kok Wah Gurcharan Singh

Non-executive, Independent Directors

Seah Moon Ming Vice-Chairman Chay Yee Meng Cheah Kim Teck Noel Hon Chia Chun Yoshiaki Sakai

A brief description of the background of each Director is presented on “Board of Directors” section. The Board’s structure, size and composition is reviewed annually by the Nominating Committee (the “NC”). The NC is of the view that the current board size is adequate for its present operations.

As there are more Independent and Non-executive Directors than the Executive Directors, the NC is satisfi ed that no individual or group is able to dominate the Board’s decision-making process. The NC is also of the view that the multiple board representations held presently by the Directors do not hinder them from carrying out their duties to the Company.

The Company believes that contributions from each director can be refl ected in ways other than by reporting their attendance at the Board and Board Committee meetings. It thus has chosen not to focus solely on a director’s attendance at formal meetings, which may lead to a narrow view of his contribution.

The Company has benefi ted from Management’s access to its Directors for guidance and exchange of views both inside and outside the formal environment of Board and Board Committee meetings. The Board consists of high caliber members with a wealth of knowledge, expertise and experience. They contribute valuable direction and insight, drawing from their vast experience in matters relating to accounting, fi nance, business and general corporate matters.

Chairman and Chief Executive Offi cer [Principle 3]:

Since the incorporation of the Company, the Company has not adopt a dual leadership structure whereby there is a separate Chief Executive Offi cer and Chairman on the Board. The executive Directors are deeply involved in managing the daily operations of the Company and are expected to act in good faith and always in the interests of the Company. The working of the Board and the executive responsibility of the Company’s business are interconnected. The Executive Directors, including the Chairman, who understand the business of the Company and the Group thoroughly, will provide better guidance to the decisions and workings of the Board.

15 Trek 2000 International Ltd Annual Report 2005 Corporate Governance Statement

for the fi nancial year ended 31 December 2005

In addition, there is constant communication between Board members and key decisions require approval from all Directors prior to implementation.

Board Membership [Principle 4]

The NC comprises 3 members, the members of whom at the date of this report are:-

Cheah Kim Teck Chairman Henn Tan Seah Moon Ming

The role and responsibilities of the NC are set out in its written terms of reference. The primary function of the NC is to make recommendations to the Board on all appointments of directors and key management staff. This ensures that the Directors have an appropriate mix of core competencies such as accountancy or fi nance, business or management experience, legal, industry knowledge and strategic planning experience to fulfi ll its roles and responsibilities. It also determines the size of the Board after taking into consideration the scope and nature of operations of the Group.

The responsibilities of the NC also include the following:- a) Assessing annually the independence of directors, to ensure that the Board comprises of at least one-third independent directors; b) Developing and maintaining internal guidelines used to evaluate the Directors’ ability and performance for the purpose of submitting them for re-nomination and re-election; c) Reviewing annually the skills required by the Board, and the size of the Board; d) Evaluating whether or not a director is able to and has been adequately carrying out his duties as a director of the Company, when he has multiple board representations; e) Deciding on how the Board’s performance may be evaluated and proposing objective performance criteria to assess the Board’s effectiveness as a whole and the contribution of each director; f) Conducting a formal assessment of the effectiveness of the Board as a whole and each individual director; and g) Formulating a succession plan.

The retirement of directors is determined on a rotational basis. Directors due for retirement are required to submit themselves to the NC for re-nomination and re-election at regular intervals of at least every three years. Pursuant to Article 97 of the Company’s Articles of Association, new Directors appointed by the Board are subject to election by shareholders at the fi rst opportunity after their appointment. At the forthcoming annual general meeting (“AGM”), Messrs Seah Moon Ming, Cheah Kim Teck and Foo Kok Wah will be due for retirement and re-election pursuant to Article 91 of the Company’s Articles of Association.

Board Performance [Principle 5]

The NC conducts informal reviews of the Board’s performance periodically, with input from the other Directors. Board performance is ultimately refl ected in the performance of the Group, which in fact, is reviewed by the Directors periodically and discussed during Audit Committee and Board Meetings held when reviewing and approving the release of the fi nancial results of the Group to the SGX-ST.

The NC has set out its terms of reference and is mainly responsible for making recommendations to the Board on all board appointments and to carry out the process of re-nomination after reviewing the director’s contribution and performance. The criteria adopted in assessing the contribution of each individual director to the effectiveness of the Board are industry knowledge and/or functional expertise, contribution and workload responsibilities and requirements, sense of independence and attendance at the Board and committee meetings.

16 Trek 2000 International Ltd Annual Report 2005 Corporate Governance Statement

for the fi nancial year ended 31 December 2005

Access to Information [Principle 6]

Meeting papers are distributed to Board members prior to the various Board Committee and Board Meetings. In order to ensure that the Board is able to fulfi ll its responsibilities, Management provides the Board with a management report containing adequate and timely information. Such reports cover fi nancial updates with explanations of material variances over previous years’/periods’ actual results. In addition, Management will also update the Board on matters of the Company from time to time when necessary.

The Directors have separate and independent access to the Company’s senior management, who together with the Company Secretary, are responsible for ensuring that the board procedures are followed and that applicable rules and regulations are complied with. The Company Secretary attends and prepares minutes of all Board and Board committee meetings. She assists the Chairman in ensuring that board procedures are followed and regularly reviewed to ensure the effective functioning of the Board and that the Company’s Memorandum and Articles of Association and the relevant rules and regulations, including the requirements of the Companies Act and the Listing Manual of the SGX-ST, are complied with. She also assists the Chairman and the Board in implementing and strengthening corporate governance practices and processes with a view of enhancing long-term shareholder value.

The Board takes independent professional advice as and when necessary to enable it to discharge its responsibilities effectively. Subject to the approval of the Chairman, the Directors, whether as a group or individually, may seek and obtain independent professional advice to assist them in their duties, at the expense of the Company. Apart from keeping the Board informed of all relevant new laws and regulations, the Company has an orientation programme for new Directors in connection with their duties as directors.

Remuneration Matters

Procedures for Developing Remuneration Policies [Principle 7]

The Remuneration Committee (“RC”) comprises the following members Directors:-

Seah Moon Ming Chairman Cheah Kim Teck Henn Tan

The RC has access to expert advice in the fi eld of executive compensation outside the Company where required.

The members of the RC carried out their duties in accordance with the Terms of Reference, which include the following: a) Advising the Board on the framework of remuneration policies for executive and non-executive Directors and key executives of the Group; b) Reviewing and approving the granting of share options to the executive Directors; c) Reviewing and approving the aggregate variable cash bonuses and share options to the employees of the Group; and d) Oversee management development and succession planning in the Group.

17 Trek 2000 International Ltd Annual Report 2005 Corporate Governance Statement

for the fi nancial year ended 31 December 2005

The remuneration policy for Executive Directors and senior management staff consists of three key components, that is, fi xed cash, annual variable and long-term incentive. The fi xed component includes salary, pension fund contributions and other allowances. The variable component comprises a performance based bonus which forms a signifi cant proportion of the total remuneration package of the Executive Directors and is payable on the achievement of individual and corporate performance targets. The long-term incentive is granted based on the individual employee’s performance and contributions. The remuneration policy has been endorsed by the RC and the Board. The Trek 2000 International Ltd Share Option Scheme and other components of the remuneration package for Executive Directors and senior executives serve as a supplement, as the use of share options becomes less widespread and more restricted within the Group.

Generally, remuneration matters relating to the Directors and key executives are reviewed and recommended by the RC to the Board for approval, except for some standard components of the key executives’ remuneration, like annual salary review and company-wide bonus payment, which will be reviewed and authorised by the senior management of the Company.

The Chairman/CEO is provided with a service contract. Except for the Chairman/CEO, all the other Directors do not have a service contract with the Company and their terms are specifi ed in the Company’s Articles of Association.

Level and Mix of Remuneration [Principle 8]

Executive Directors do not receive directors’ fees. Their compensation consists of salary, pension fund contributions, allowances and bonuses and share options conditional upon meeting certain performance targets.

Non-executive Directors are paid a basic fee and an additional fee for serving any of the Committees and are also granted share options based on their respective contributions to the Board and Board Committees. In determining the quantum of such fees, factors such as frequency of meetings, time spent and responsibilities of directors are taken into account. All independent non-executive Directors, with the exception of Messrs. Seah Moon Ming and Yoshiaki Sakai, receive directors’ fees, which are subject to the approval of shareholders at the AGM.

The Board, through the delegation of its’ authority to the RC, has exerted its best efforts to ensure that no director will be involved in deciding his own remuneration and that the level of remuneration would be fair and appropriate. The Remuneration Framework recommended by the RC and adopted by the Board ensures that there is a formal and transparent procedure for fi xing the remuneration packages of individual Directors.

The RC also administers the Trek 2000 International Ltd Share Option Scheme and determines the grant of share options to eligible participants. During the year Mr. Noel Hon Chia Chun was granted 100,000 share options which was duly proposed by the RC and endorsed by the Board. Accordingly, to ensure the long-term commitment of the Directors, share options granted carry deferred remuneration through the adoption of the vesting schedule, whereby only a portion of the benefi ts can be exercised each year.

Remuneration [Principle 9]

The Remuneration Framework covers all aspects of remuneration for the Executive Directors, Non-executive Directors, Independent Directors and key executives of the Company. Generally, remuneration matters relating to Directors and key executives are reviewed and recommended by the RC to the Board for approval, except for some standard components of the key executives’ remuneration, like annual salary review and company wide bonus payment, which will be reviewed and authorised by the top management of the Company.

18 Trek 2000 International Ltd Annual Report 2005 Corporate Governance Statement

for the fi nancial year ended 31 December 2005

A breakdown, showing the level and mix of each individual Director’s remuneration and the top fi ve key executives (who are not Directors of the Company) for the fi nancial year ended 31 December 2005 is as follows:

Directors’ Remuneration Band Breakdown in % terms Name of Director Salary Bonus Fees $250,000 to $499,999 Mr. Henn Tan 93 7 0

Below $250,000 Mr. Foo Kok Wah 93 7 0 Mr. Gurcharan Singh 93 7 0 Mr. Chay Yee Meng 0 0 100 Mr. Cheah Kim Teck 0 0 100 Mr. Seah Moon Ming 0 0 0 Mr. Noel Hon Chia Chun 0 0 100 Mr. Yoshiaki Sakai 0 0 0

Details relating to the Trek 2000 International Ltd Share Option Scheme are given in the Report of the Directors.

Key Executives

Remuneration Band Name of Executives

Below $250,000 Kuan Mun Kwong – Director, Business Development of Digital Technology Division Tan Boon Siong – Director, Trek Technology (Singapore) Pte Ltd Francis Wan Mun Keen – Director, Trek Technology (Thailand) Co. Ltd Poo Teng Pin – Group Director, Research and Development Chan Koon Keet – Senior Engineer and Head of R&D, Kuala Lumpur, Malaysia.

Immediate Family Member of Director

There are no employees who are immediate family members of a director whose remuneration exceeds S$150,000 during the year.

Accountability and Audit

Accountability [Principle 10]

The Board provides shareholders with an assessment of the Group’s performance, fi nancial position and prospects on a quarterly basis via quarterly announcements of results and other material information on a timely basis. The Company’s Annual Report is sent to all shareholders and is also accessible at the Company’s website.

19 Trek 2000 International Ltd Annual Report 2005 Corporate Governance Statement

for the fi nancial year ended 31 December 2005

Audit Committee [Principle 11]

The Audit Committee (“AC”) comprises three Board members, all of whom are independent non-executive Directors. The members of the AC at the date of this report are:-

Chay Yee Meng Chairman Seah Moon Ming Noel Hon Chia Chun

The NC is of the view that the members of the AC have suffi cient fi nancial management expertise and experience to discharge the AC’s functions.

The AC convened four meetings during the fi nancial year with full attendance from all members, except for one where a member was absent. The AC has also met with the internal and external auditors, without the presence of the Company’s management, at least once a year.

The AC carried out its functions in accordance with Section 201B(5) of the Companies Act and its Terms of Reference, including the following:-

(i) reviews the audit plans of the internal and external auditors of the Company and ensures the adequacy of the Company’s system of accounting controls and the cooperation given by the Company’s management to the external and internal auditors; (ii) reviews the quarterly and annual fi nancial statements and the auditors’ report on the annual fi nancial statements of the Company before their submission to the Board of Directors; (iii) reviews effectiveness of the Company’s material internal controls, including fi nancial, operational, and compliance controls and risk management via reviews carried out by the internal auditors; (iv) meets with the external auditors, other committees, and management in separate executive sessions to discuss any matters that these groups believe should be discussed privately with the AC; (v) reviews legal and regulatory matters that may have a material impact on the fi nancial statements, related compliance policies and programmes and any reports received from regulators ; (vi) reviews the cost effectiveness and the independence and objectivity of the external auditors ; (vii) reviews the nature and extent of non-audit services provided by the external auditors; (viii) recommends to the Board of Directors the re-appointment of the external auditors, approves the external auditors’ fees, and reviews the scope and results of the audit; (ix) reports actions and minutes of the AC to the Board of Directors with such recommendations as the AC considers appropriate; and (x) reviews interested person transactions in accordance with the requirements of the SGX-ST’s Listing Manual.

The AC has power to conduct or authorise investigations into any matters within the scope of the AC’s scope of responsibilities and also conducted a review of interested person transactions.

The AC, having reviewed all non-audit services provided by the external auditors to the Group, is satisfi ed that the nature and extent of such services would not affect the independence of the external auditors. The AC is satisfi ed with the independence and objectivity of Ernst & Young as external auditors and has recommended to the Board of Directors their nomination for re-appointment as auditors of the Company at the forthcoming AGM.

20 Trek 2000 International Ltd Annual Report 2005 Corporate Governance Statement

for the fi nancial year ended 31 December 2005

Internal Controls [Principle 12]

The Board believes that, in the absence of any evidence to the contrary, the system of internal control maintained by the Company’s management that was in place throughout the fi nancial year and up to the date of this report, provides reasonable, but not absolute, assurance against material fi nancial misstatements or loss, and include the safeguarding of assets, the maintenance of proper accounting records, the reliability of fi nancial information, compliance with appropriate legislation, regulation and best practice, and the identifi cation and containment of business risk. The Board notes that no system of internal control could provide absolute assurance against the occurrence of material errors, poor judgment in decision-making, human error, losses, fraud or other irregularities.

Internal Audit [Principle 13]

The Company and the Group has established an internal audit function that is independent of the activities it audits. The internal auditors plan the audit scope and schedule in consultation with the Management, which is subject to the review and fi nal approval of the AC.

The AC has reviewed the scope and results of the internal audit and has ensured that the internal audit function is adequately resourced and that there is appropriate coordination between the internal and external auditors and Management.

The AC has reviewed the Company’s risk assessment and based on the internal audit reports and management controls in place, is satisfi ed that there are adequate internal controls in the Group.

Communication with Shareholders [Principle 14]

The Board is mindful of the obligations to provide regular, effective and fair communication with shareholders. Information is communicated to the shareholders on a timely basis. Where inadvertent disclosure has been made to a select group, the Company has made the same disclosure publicly to all as soon as practicable.

Other than the routine announcements made in accordance to the requirements of the Listing Manual, the Company has issued additional announcements and press releases to update shareholders on the activities and developments of the Company and the Group during the year.

Greater Shareholder Participation [Principle 15]

The Board welcomes the views of shareholders on matters affecting the Group, whether at shareholders’ meetings or on an ad hoc basis. Shareholders are informed of shareholders’ meetings through notices published in the newspapers and reports or circulars sent to all shareholders. Each item of special business included in the notice of the meeting is accompanied, where appropriate, by an explanation for the proposed resolution. Separate resolutions are proposed for substantially separate issues at the meeting. The Chairman of the Audit, Remuneration and Nominating Committees are normally available at the meeting to answer those questions relating to the work of these committees. The external auditors are also present to assist the Directors in addressing any relevant queries by shareholders.

The Company’s Articles of Association allow a member of the Company to appoint one or two proxies to attend and vote instead of the member. The Company is not implementing absentia-voting methods such as by mail, email, fax until security, integrity and other pertinent issues are satisfactorily resolved.

Financial and other communication are made available on the Group’s website at www.trek2000.com.sg and this is regularly updated.

21 Trek 2000 International Ltd Annual Report 2005 Corporate Governance Statement

for the fi nancial year ended 31 December 2005

DEALINGS IN SECURITIES

The Company has adopted and implemented the Best Practices Guide issued by the SGX-ST on dealing in securities. This has been made known to Directors, offi cers and staff of the company and the group. In particular, it has been highlighted that to deal in the company’s securities as well as securities of other listed companies when the offi cers (Directors and employees) are in possession of unpublished material price sensitive information in relation to those securities is an offence. The offi cers are also discouraged from dealing in the Company’s securities on short-term consideration. The Company, while having provided the window periods for dealing in the Company’s securities, has its own internal compliance code in providing guidance to its offi cers with regard to dealing in the company’s securities including reminders that the law on insider trading is applicable at all times.

INTERESTED PERSON TRANSACTIONS

The Company has adopted an internal policy in respect of any transactions with interested persons and has set out the procedures for review and approval of the Company’s interested person transactions. During the year under review, there were no interested person transactions.

MATERIAL CONTRACTS

No material contracts were entered between the Company or any of its subsidiaries with any director or controlling shareholder during the fi nancial year ended 31 December 2005.

RISK MANAGEMENT

Inherent Industry Risk

The Group is exposed to fast changing technology and industry development and faces technological obsolescence if it is not able to constantly upgrade itself; keep up with the latest technological and industry developments or innovate to produce new products. In the event that it is unable to continue upgrading its capabilities to keep abreast of rapid technological changes, there will be a negative impact on the turnover and profi tability. However, the capabilities and strength of the Group’s research and development have been able to meet to the changing demands, as revealed through its library of patents registered and granted by the Group.

Global shortage of key components

The Group relies heavily on certain key components used in its solutions, such as NAND fl ash memory and Microcontroller chips. At present, owing to the general market demand for such components, the Group may encounter shortages in the supply of such components from time to time. This may cause the prices of some or all of these components to increase, which will thereby have an adverse impact on our profi ts.

Dependence on Key Personnel

The continued success of the Group, to some extent, is dependent on its key management and technical personnel. The Company and the Group constantly look into the issue of attracting, retaining, training and recruiting suitably qualifi ed and talented managers for its operations. The Group has continued to undertake measures to strengthen the top management team and to re-structure its management team by the internal promotion of several managers to ensure that the Trek team continues to be driven and well-guided to pursue further challenges ahead. In addition, the Group is committed to providing vigorous training to its technical staff force to ensure that their skills measure up to and surpass the industries’ and customers’ requirements in order to retain its competitive edge.

22 Trek 2000 International Ltd Annual Report 2005 Directors’ Report

The directors are pleased to present their report to the members together with the audited consolidated financial statements of Trek 2000 International Ltd (the “Company”) and its subsidiary companies (the “Group”) and the profit and loss account, balance sheet and statement of changes in equity of the Company for the financial year ended 31 December 2005.

Directors

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

Henn Tan Chairman and Chief Executive Officer Seah Moon Ming Vice-Chairman Chay Yee Meng Cheah Kim Teck Foo Kok Wah Gurcharan Singh Hon Chia Chun Noel Yoshiaki Sakai

In accordance with Article 91 of the Company’s Articles of Association, Messrs Seah Moon Ming, Cheah Kim Teck and Foo Kok Wah retire by rotation and, being eligible, offer themselves for re- election.

Arrangement to enable directors to acquire shares and debentures

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

Directors’ interest in shares and debentures

The following directors, who held office at the end of the financial year, had, according to the register of directors’ shareholdings required to be kept under Section 164 of the Singapore Companies Act, Cap.50, an interest in shares and share options of the Company and related corporations as stated below: -

Registered in Director’s the name of director deemed interest Name of director At At At At At At 1.1.2005 31.12.2005 21.1.2006 1.1.2005 31.12.2005 21.1.2006 The Company Trek 2000 International Ltd Ordinary shares of $0.05 each

Henn Tan ííí 118,884,126 118,884,126 103,761,767 Cheah Kim Teck 150,000 150,000 150,000 ííí Chay Yee Meng íí í625,000 625,000 625,000 Gurcharan Singh íí í327,500 327,500 327,500 Foo Kok Wah íí í1,405,300 1,405,300 1,405,300

23 Trek 2000 International Ltd Annual Report 2005 Directors’ Report

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

Name of director At At At 1.1.2005 31.12.2005 21.1.2006 Options to subscribe for ordinary shares of $0.05 each in the Company

Henn Tan 650,000 650,000 650,000 Cheah Kim Teck 725,000 725,000 725,000 Chay Yee Meng 725,000 725,000 725,000 Gurcharan Singh 945,000 945,000 945,000 Foo Kok Wah 1,850,000 1,850,000 1,850,000 Seah Moon Ming 1,250,000 1,250,000 1,250,000 Hon Chia Chun Noel - 100,000 100,000

No. of shares Director Deemed interest held through: At 31.12.05 At 21.1.06

Henn Tan Wife, Ang Poh Tee 4,196,176 4,196,176 Kim Eng Securities Pte Ltd 51,687,950 36,565,591* Citibank Nominees Singapore Pte Ltd 43,000,000 43,000,000 UOB Kay Hian Pte Ltd 20,000,000 20,000,000

Chay Yee Meng Wife, Leong Wan Sing 625,000 625,000

Gurcharan Singh Hong Leong Finance Ltd 327,500 327,500

Foo Kok Wah Manban Nominees (S) Pte Ltd 1,405,300 1,405,300

* As announced on 10 January 2006, the Company entered into a share purchase agreement dated 5 January 2006 with Toshiba Corporation and Mr Henn Tan. Pursuant to the share purchase agreement, Toshiba Corporation acquired from Mr Henn Tan approximately 5% of the total share capital of the Company.

By virtue of section 7 of the Singapore Companies Act, Cap.50, Mr Henn Tan is deemed to be interested in all the shares held by the Company in its subsidiary companies.

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

Directors’ contractual benefits

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

24 Trek 2000 International Ltd Annual Report 2005 Directors’ Report

Options on shares in the Company

(i) The Trek 2000 International Ltd Share Option Scheme (the “ESOS”) was approved by shareholders at an extraordinary general meeting held on 8 November 2001.

(ii) The ESOS caters to participants, who are selected full-time employees, executive directors and non-executive directors of the Group.

Under the ESOS, all options to be issued will have a term no longer than ten years from the date of grant.

(iii) The ESOS is administered by the Remuneration Committee which comprises the following directors :-

Seah Moon Ming (Chairman) Cheah Kim Teck Henn Tan

(iv) The options granted by the Company do not entitle the holders of the options, by virtue of such holdings, to any rights to participate in any share issues of any other company in the Group.

(v) During the financial year ended 31 December 2005, 100,000 options were granted under the ESOS to subscribe for ordinary shares of $0.05 each.

(vi) During the financial year ended 31 December 2005, 33,000 options were exercised under the ESOS to subscribe for ordinary shares of $0.05 each.

(vii) During the financial year ended 31 December 2005, 1,222,500 options were cancelled due to resignation of a director and employees.

(viii) Details on outstanding options to subscribe for ordinary shares of $0.05 each as at 31 December 2005 are found in Note 23 of the notes to the financial statements.

25 Trek 2000 International Ltd Annual Report 2005 Directors’ Report

Options on shares in the Company

(ix) Directors which are granted options under the ESOS were as follows :-

Aggregate Aggregate options options Options exercised since Aggregate granted since granted commencement options commencement during the of the ESOS to outstanding of scheme to financial end of financial at end of the Exercise ESOS Grant beginning of year under year under year under price Directors number financial year review review review ($)

Henn Tan ESOS Grant No. 1 250,000 íí 250,000 0.28 ESOS Grant No. 7 400,000 íí 400,000 0.369 Gurcharan Singh ESOS Grant No. 2 625,000 íí 625,000 0.312 ESOS Grant No. 7 320,000 íí 320,000 0.369 Chay Yee Meng ESOS Grant No. 2 625,000 íí 625,000 0.312 ESOS Grant No. 7 100,000 íí 100,000 0.369 Cheah Kim Teck ESOS Grant No. 2 625,000 íí 625,000 0.312 ESOS Grant No. 7 100,000 íí 100,000 0.369 Foo Kok Wah ESOS Grant No. 2 1,250,000 íí 1,250,000 0.312 ESOS Grant No. 7 600,000 íí 600,000 0.369 Seah Moon Ming ESOS Grant No. 4 500,000 íí 500,000 0.643 ESOS Grant No. 5 500,000 íí 500,000 0.41 ESOS Grant No. 7 100,000 íí 100,000 0.369 ESOS Grant No. 8 150,000 íí 150,000 0.401 Hon Chia Chun Noel ESOS Grant No. 10 í 100,000 í 100,000 0.422

(x) Since the commencement of the ESOS till the end of the financial year:

ƒ No options have been granted to the controlling shareholders of the Company and their associated companies except as disclosed under (ix) above;

ƒ No participants received 5% or more of the total number of options available under ESOS;

ƒ No options that entitle the holder to participate, by virtue of the options, in any share issue of any other corporation have been granted; and

ƒ No options have been granted at a discount.

26 Trek 2000 International Ltd Annual Report 2005 Directors’ Report

Audit Committee

The Audit Committee performed the functions specified in the Companies Act. The functions performed are described in the Report on Corporate Governance.

Auditors

Ernst & Young have expressed their willingness to accept re-appointment as auditors.

On behalf of the Board,

Henn Tan Director

Gurcharan Singh Director

Singapore 3 April 2006

27 Trek 2000 International Ltd Annual Report 2005 Statement by Directors

We, Henn Tan and Gurcharan Singh, being two of the directors of Trek 2000 International Ltd, do hereby state that, in the opinion of the directors: -

(i) the accompanying balance sheets, profit and loss accounts, statements of changes in equity and consolidated statement of cash flow together with notes thereto are drawn up so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2005 and of the results and changes in equity of the Group and of the Company, and the cash flow of the Group for the year ended on that date, and

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

On behalf of the Board,

Henn Tan Director

Gurcharan Singh Director

Singapore 3 April 2006

28 Trek 2000 International Ltd Annual Report 2005 Auditors’ Report to Members of Trek 2000 International Ltd

We have audited the accompanying financial statements of Trek 2000 International Ltd (the “Company”) and its subsidiary companies (the “Group”) set out on pages 30 to 97 for the year ended 31 December 2005. These financial statements are the responsibility of the Company's directors. Our responsibility is to express an opinion on these financial statements based on our audit.

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

In our opinion,

(a) the financial statements of the Group and the Company are properly drawn up in accordance with the provisions of the Singapore Companies Act, Cap.50 (the Act) and the Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2005 and the results and changes in equity of the Group and the Company and cash flows of the Group for the financial year ended on that date; and

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

ERNST & YOUNG Certified Public Accountants

Singapore 3 April 2006

29 Trek 2000 International Ltd Annual Report 2005 Profit and Loss Accounts

FOR THE YEAR ENDED 31 DECEMBER 2005

Group Company Note 2005 2004 2005 2004 $ $ $ $ (Restated) (Restated)

Revenue 3 171,021,881 140,359,710 3,307,239 3,730,982 Cost of sales (160,496,391) (129,724,104) (1,194,423) (815,002)

Gross profit 10,525,490 10,635,606 2,112,816 2,915,980

Research and development expenses (998,350) (854,078) í (304,527) Marketing and distribution expenses (2,827,597) (3,400,023) (32,439) (8,836) General administration expenses (2,337,530) (2,255,124) (851,913) (974,510)

Other operating income 4 1,812,758 509,225 904,245 1,059,407

Other operating expense 5 í (1,043,753) í (969,335)

Operating profit 6 6,174,771 3,591,853 2,132,709 1,718,179

Interest expense - hire purchase (4,695) (4,080) í – Share of profits of associated companies 96,813 412,757 í – Exceptional item 7 (990,517) (2,974,396) í – Profit before income tax 5,276,372 1,026,134 2,132,709 1,718,179 Income tax 8 (448,208) 27,184 (97,370) í

Profit for the financial year attributable to shareholders 4,828,164 1,053,318 2,035,339 1,718,179

Earnings per share 9 Basic (cents) 1.60 0.38

Diluted (cents) 1.57 0.37

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

30 Trek 2000 International Ltd Annual Report 2005 Balance Sheets

AS AT 31 DECEMBER 2005

Group Company Note 2005 2004 2005 2004 $ $ $ $ (Restated) (Restated)

Property and equipment 10 3,074,543 3,571,377 í 19,880 Intangibles 11 9,733,321 8,818,320 5,776,893 4,957,806 Investments Subsidiary companies 12 íí 6,014,393 6,014,393 Associated companies 13 6,331,332 6,484,519 6,405,029 6,655,029 Quoted investments 14 2,218,857 2,418,857 2,218,857 2,418,857 Unquoted investments 15 1,978,028 167,700 1,978,028 167,700 10,528,217 9,071,076 16,616,307 15,255,979

Current assets Trade debtors 16 39,971,582 19,962,216 í í Inventories 17 4,765,682 6,586,908 í í Amounts due from subsidiary companies 18 – – 14,421,905 11,276,729 Amounts due from associated companies 18 124,694 69,391 – í Other debtors 19 1,048,371 2,000,488 191,743 610,966 Fixed deposits 20,273,166 27,238,241 19,253,753 23,548,309 Cash and bank balances 35,774,591 12,714,407 312,777 1,392,823 101,958,086 68,571,651 34,180,178 36,828,827

Current liabilities Trade creditors and accruals 20 47,792,230 15,691,805 320,443 408,089 Other creditors 773,974 906,014 í í Hire purchase creditors 21 31,627 21,576 í í Provision for income tax 761,982 311,472 141,732 54,732 49,359,813 16,930,867 462,175 462,821

Net current assets 52,598,273 51,640,784 33,718,003 36,366,006

Non-current liabilities Hire purchase creditors 21 (48,160) (25,140) í í Deferred tax 8,22 (24,065) í (24,065) í 75,862,129 73,076,417 56,087,138 56,599,671

Share capital 23 15,122,359 15,120,709 15,122,359 15,120,709 Share premium 36,876,433 36,867,787 36,876,433 36,867,787 Capital reserve 24 4,542,638 4,542,638 í í Revaluation reserve 141,739 141,739 í í Other reserves 25 256,643 395,234 256,643 395,234 Revenue reserve 20,468,541 18,059,954 3,831,703 4,215,941 Translation reserve (1,546,224) (2,051,644) í í 75,862,129 73,076,417 56,087,138 56,599,671

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

31 Trek 2000 International Ltd Annual Report 2005 Statements of Changes in Equity

FOR THE YEAR ENDED 31 DECEMBER 2005 í 141,739 1,053,318 (2,196,901) (963,946) (2,559,825) 42,271,928 34,937,500 194,688 í (3) reserves Total Other (3) 197,916 197,916 197,318 42,271,928 197,318 íí íí í í íí reserve Revaluation (3) 141,739 ííí íí reserve Translation (963,946) – reserve Revenue (2,196,901) (197,318) (3) íííí í íííí í íííí í reserve Capital (2) Share premium (2,559,825) – – – 1,053,318 – ííííí ííí íííí íí íí í ííí (1)

$ $ $ $ $ $ capital Share f

attributable to shareholders, as restated income tax of 20% income $0.615 each for new placements $0.615 each for new placements 2,625,000 32,312,500 FRS 102 exercised 31,200 163,488 of $0.262 each in premium connection with share options exercised 31,200 previously reported previously (1,087,698) 19,400,855 12,464,509 6,951,624 4,542,638 at a weighted average premium o at a weighted average premium Profit for the financial year At 31 December 2004, as restated At 31 December 15,120,709 36,867,787 4,542,638 18,059,954 (2,051,644) 141,739 395,234 73,076,417 Revaluation of property Dividend of $0.01 per share, less Foreign currency translation At 1 January 2004 as restated At 1 January 12,464,509 6,951,624 4,542,638 19,203,537 (1,087,698) Cost of share-based payments Cost of share-based payments

Expenses relating to share issuance Issued 624,000 ordinary shares at a Cumulative effects of adopting Cumulative Issued 52,500,000 ordinary shares 2004 (Restated) Group 2003 as At 31 December

32 Trek 2000 International Ltd Annual Report 2005 Statements of Changes in Equity

FOR THE YEAR ENDED 31 DECEMBER 2005 í 4,828,164 (2,419,577) 505,420 10,296 73,076,417 (3) í reserves Total Other (3) 395,234 (200,000) (200,000) 96,263 96,263 (34,854) (34,854) íí reserve Revaluation (3) íí í íí í íí reserve Translation 505,420 reserve Revenue (395,234) 4,828,164 (2,419,577) (3) íííí í reserve Capital (2) Share premium ííí ííí íííí íííííí íííííí ííí íííííí

(1)

$ $ $ $ $ $ capital Share attributable to shareholders income tax of 20% income adjustment reserve adjustment restated 15,120,709 36,867,787 4,542,638 18,059,954 (2,051,644) 141,739 395,234 73,076,417 395,234 141,739 (2,051,644) 18,059,954 4,542,638 36,867,787 restated 15,120,709 FRS 102 previously reported previously 15,120,709 36,867,787 4,542,638 18,455,188 (2,051,644) 141,739 exercised 1,650 8,646 of $0.262 each in a premium connection with share options exercised 1,650 At 31 December 2005 At 31 December 15,122,359 36,876,433 4,542,638 20,468,541 (1,546,224) 141,739 256,643 75,862,129 Profit for the financial year Dividend of $0.01 per share, less Foreign currency translation Net change in fair value At 31 December 2004, as At 31 December Cost of share-based payments Cost of share-based payments 2005 Group Cumulative effects of adopting Cumulative 2004 as At 31 December Effect of adopting FRS 39 At 1 January 2005 as restated At 1 January 15,120,709 36,867,787 4,542,638 18,059,954 (2,051,644) 141,739 195,234 72,876,417 Issued 33,000 ordinary shares at to $601,683 (2004 : ($822,207)). non-owner sources excluding net profits amounted Net change in equity from The accompanying notes form an integral part of the financial statements.

33 Trek 2000 International Ltd Annual Report 2005 Statements of Changes in Equity

FOR THE YEAR ENDED 31 DECEMBER 2005

Share (1) Share (2) Revenue Other (3) capital premium reserve reserves Total $ $ $ $ $ Company At 31 December 2003 as previously reported 12,464,509 6,951,624 4,891,981 í 24,308,114 Cumulative effects of adopting FRS 102 íí (197,318) 197,318 í

At 1 January 2004 as restated 12,464,509 6,951,624 4,694,663 197,318 24,308,114 Issued 624,000 ordinary shares at a premium of $0.262 each in connection with share options exercised 31,200 163,488 íí 194,688 Issued 52,500,000 ordinary shares at a weighted average premium of $0.615 each for new placements 2,625,000 32,312,500 íí 34,937,500

Expense relating to share issuance í (2,559,825) íí (2,559,825) Cost of share-based payments íí í 197,916 197,916 Dividend of $0.01 per share, less income tax of 20% – – (2,196,901) í (2,196,901) Profit for the financial year attributable to shareholders, as restated íí 1,718,179 í 1,718,179 At 31 December 2004, as restated 15,120,709 36,867,787 4,215,941 395,234 56,599,671 Effect of adopting FRS 39 íí í (200,000) (200,000)

At 1 January 2005 as restated 15,120,709 36,867,787 4,215,941 195,234 56,399,671 Cost of share-based payments íí í (34,854) (34,854) Net change in fair value adjustment reserve íí í 96,263 96,263 Issued 33,000 ordinary shares at a premium of $0.262 each in connection with shares options exercised 1,650 8,646 íí 10,296 Dividend of $0.01 per share, less income tax of 20% íí (2,419,577) í (2,419,577) Profit for the financial year attributable to shareholders íí 2,035,339 í 2,035,339

At 31 December 2005 15,122,359 36,876,433 3,831,703 256,643 56,087,138

Net change in equity from non-owner sources excluding net profits amounted to $ 96,263 (2004 : $ nil).

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

(2) The share premium account may be applied only for the purpose specified in the Companies Act. The balance is not available for distributions of dividends except in the form of shares.

(3) These reserves are non-distributable.

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

34 Trek 2000 International Ltd Annual Report 2005 Consolidated Statement of Cash Flow

FOR THE YEAR ENDED 31 DECEMBER 2005

Note 2005 2004 $ $ (Restated) Cash flow from operating activities: - Operating profit before income tax 5,276,372 1,026,134 Adjustments for: - Amortisation of intangibles 1,559,976 1,102,725 Write off of intangibles 34,171 304,526 Depreciation of property and equipment 901,088 686,566 Share of profits of associated companies (96,813) (412,757) Allowance for impairment loss of an associated company 250,000 í Amortisation of goodwill í 48,980 Loss on disposal of investment í 44,452 Gain on disposal of property and equipment (74,800) í Loss on revaluation of property í 132,214 Share-based (recovery) / payments (34,854) 197,916 Interest income (990,311) (350,379) Interest expense 4,695 4,080 Currency realignment (233,948) (68,956) Operating profit before reinvestment in working capital 6,595,576 2,715,501 (Increase) /decrease in debtors (19,057,249) 8,080,650 Decrease in inventories 1,821,226 223,803 Increase / (decrease) in creditors 31,968,385 (14,311,183) Cash generated from / (used in) operating activities 21,327,938 (3,291,229) Interest received 990,311 350,379 Interest paid (4,695) (4,080) Income tax paid (1,506) (21,451) Net cash generated from / (used in) operating activities 22,312,048 (2,966,381)

Cash flow from investing activities Proceeds from disposal of property and equipment 157,303 í Proceeds from disposal of investments í 2,842,163 Purchase of property and equipment (407,430) (1,657,829) Purchase of shares in associated companies í (4,544,629) Government grants received 154,814 í Purchase of quoted investment í (2,418,857) Purchase of unquoted investment (1,684,000) (167,700) Payment for patent and trademark registration expenses (2,045,370) (3,581,659) Payment for development expenditures (601,688) (1,728,157) Net cash used in investing activities (4,426,371) (11,256,668)

Cash flow from financing activities Exercise of share options 10,296 194,688 Repayment of hire purchase instalments (25,653) (21,576) Increase in amounts due from associated companies (55,303) (34,326) Payment of dividend (2,419,577) (2,196,901) Proceeds from placement of shares í 34,937,500 Expenses relating to share issuance í (2,559,825) Net cash (used in) / provided by financing activities (2,490,237) 30,319,560

Net increase in cash and cash equivalents 15,395,440 16,096,511 Cash and cash equivalents at 1 January 39,952,648 24,722,224 Effect of foreign exchange difference 699,669 (866,087) Cash and cash equivalents at 31 December 27 56,047,757 39,952,648

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

35 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

1. Corporate information

Trek 2000 International Ltd (the “Company”) is a limited liability company incorporated in the Republic of Singapore, which is also the place of domicile. The Company is listed on the Singapore Exchange Securities Trading Limited.

Its registered office and principal place of business is located at 30, Loyang Way #07- 13/14/15, Loyang Industrial Estate, Singapore 508769.

During the year, the Company changed its principal activities from an investment holding company to include ownership of a portfolio of intellectual property. The principal activities of subsidiary and associated companies are stated in Note 12 and 13 respectively. Other than the change in the principal activities of the Company as mentioned above, there was no other change in the principal activities of the Company and the subsidiary and associated companies.

The Group operates in ten countries namely Singapore, Malaysia, India, Thailand, United States, Japan, Europe and others.

2. Significant accounting policies

2.1 Basis of preparation

The consolidated financial statements of the Group and the financial statements of the Company have been prepared in accordance with Singapore Financial Reporting Standards (FRS).

The financial statements have been prepared on a historical cost basis, except for leasehold and freehold properties and available-for-sale financial assets that have been measured at their fair values.

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

2.2 Changes in accounting policies

The accounting policies have been consistently applied by the Group and the Company and are consistent with those used in the previous financial year, except for the changes in accounting policies discussed below.

(a) Adoption of new FRS

On 1 January 2005, the Group and the Company adopted the following standards mandatory for annual financial periods beginning on or after 1 January 2005.

ƒ FRS 39, Financial Instruments: Recognition and Measurement ƒ FRS 102, Share-based Payment ƒ FRS 103, Business Combinations, including amendments to FRS 36 (revised), Impairment of Assets and FRS 38 (revised), Intangible Assets ƒ FRS 105, Non-Current Assets Held for Sale and Discontinued Operations

36 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

2. Significant accounting policies (cont’d)

2.2 Changes in accounting policies (cont’d)

(i) FRS 39, Financial Instruments: Recognition and Measurement

The Group and the Company adopted FRS 39 prospectively on 1 January 2005. At that date, financial assets within the scope of FRS 39 were classified as either financial assets at fair value through profit or loss, loans and receivables, held-to- maturity investments or available-for-sale financial assets, as appropriate. Financial assets that were classified as financial assets at fair value through profit or loss and available-for-sale financial assets were measured at fair value while loans and receivables and held-to-maturity investments were measured at amortised cost using the effective interest method. At 1 January 2005, differences between the carrying values and fair values of financial assets at fair value through profit or loss were recognised in revenue reserve while the differences between carrying values and fair values of available-for-sale financial assets were recognised in other reserves. For investments carried at amortised cost, any differences between the carrying values and amortised costs as at 1 January 2005 were recognised in revenue reserve.

At 1 January 2005, financial liabilities (other than derivative financial instruments) within the scope of FRS 39 were measured at amortised cost using the effective interest method. Differences between the carrying values and amortised costs as at 1 January 2005 were recognised in revenue reserve.

Under the transitional provisions of FRS 39, the change in accounting policy on 1 January 2005 resulted in a debit of $200,000 to both the Group’s and the Company’s other reserves at that date.

37 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

2. Significant accounting policies (cont’d)

2.2 Changes in accounting policies (cont’d)

(ii) FRS 102, Share-based Payment

The main impact of FRS 102 on the Group and the Company is the recognition of an expense and a corresponding entry to equity for share options granted to senior executives (including directors) and general employees.

The Group and the Company have applied FRS 102 retrospectively and have taken advantage of the transitional provisions of FRS 102 in respect of equity-settled awards. As a result, the Group and the Company have applied FRS 102 to awards granted after 22 November 2002 that had not vested on 1 January 2005.

Under the transitional provisions of FRS 102, the change in accounting policy has resulted in the following:

ƒ At 1 January 2005, increases / (decreases) in the Group’s and the Company’s: o Other reserves by $395,234 [2004: $197,616]; o Revenue reserve by ($395,234)[2004: ($197,616)]

ƒ For the year ended 31 December 2005, increase / (decrease) in the Group’s profit for the year by $34,854 [2004: ($197,916)] due to write back / (increase) in the employee benefits expense.

The effect of FRS 102 on the Group’s basic and diluted EPS for FY 2005 and FY 2004 is not significant.

(iii) FRS 103, Business Combinations, FRS 36 (revised), Impairment of Assets and FRS 38 (revised), Intangible Assets

FRS 103 has been applied for business combinations on or after 1 January 2005. The adoption of FRS 103 and revised FRS 36 has resulted in the Group ceasing annual amortisation of the goodwill included in its investments in associated companies. Beginning from 1 January 2005, the Group will test the entire carrying amount of an investment in an associated company for impairment, by comparing the recoverable amount with the carrying amount, whenever application of the requirements in FRS 39 indicates that the investment may be impaired. The transitional provisions of FRS 103 have required the Group to eliminate at 1 January 2005, the carrying amount of $48,980 of accumulated goodwill amortisation within its investments in associated companies, with a corresponding decrease in goodwill.

FRS 38 requires that the useful lives of intangible assets be assessed at the individual asset level as having either a finite or indefinite life. The Company has assessed all its intangible assets as having a finite life. Please refer to Note 2.8 for details on accounting policy for intangible assets.

(iv) FRS 105, Non-Current Assets Held for Sale and Discontinued Operations

The adoption of FRS 105 did not result in any significant change in accounting policy.

38 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

2. Significant accounting policies (cont’d)

2.2 Changes in accounting policies (cont’d)

(b) Adoption of revised FRS

The Group adopted the following revised standards mandatory for annual financial periods beginning on 1 January 2005. Comparative figures have been restated where required.

(i) Other revised FRSs adopted

The Group adopted the following revised standards which did not result in any significant change in accounting policies:

FRS 1 (revised), Presentation of Financial Statements FRS 2 (revised), Inventories FRS 8 (revised), Accounting Policies, Changes in Accounting Estimates and Errors FRS 10 (revised), Events after the Balance Sheet Date FRS 16 (revised), Property, Plant and Equipment FRS 17 (revised), Leases FRS 21 (revised), The Effects of Changes in Foreign Exchange Rates FRS 24 (revised), Related Party Disclosures FRS 27 (revised), Consolidated and Separate Financial Statements FRS 28 (revised), Investments in Associates FRS 31 (revised), Interests in Joint Ventures FRS 32 (revised), Financial Instruments: Disclosure and Presentation FRS 33 (revised), Earnings Per Share

(ii) FRS not yet effective

The Group has not applied the following FRS and INT FRS that have been issued but are only effective for annual financial periods beginning on or after 1 January 2006 (for part i to vii) and annual financial periods beginning on or after 1 January 2007 (for part viii):

(i) FRS 19 (revised), Employee Benefits (ii) FRS 106, Exploration for and Evaluation of Mineral Resources (iii) INT FRS 104, Determining Whether an Arrangement Contains a Lease (iv) INT FRS 105, Rights to Interest Arising from Decommissioning Restoration and Environmental Rehabilitation Funds (v) INT FRS 106, Liabilities Arising from Participating In a Specific Market — Waste Electrical and Electronic Equipment (vi) INT FRS 107, Applying the Restatement Approach under FRS 29 Financial Reporting in Hyperinflationary Economies (vii) FRS 107, Financial instruments: Disclosures (viii) FRS 40, Investment Property

39 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

2. Significant accounting policies (cont’d)

(b) Adoption of revised FRS (cont’d)

(iii) FRS not yet effective (cont’d)

The new FRS 107 deals with the revision and enhancement on the disclosures of an entity’s exposure to risks and how those risks are managed. The adoption of the standard is not expected to have significant impact on the financial statements of the Group. The Group has evaluated the adoption of the other FRS and INT FRS listed above and these FRS and INT FRS are not expected to be relevant to the activities of the Group with the exception of (i), (iii) and (viii). The adoption of these new pronouncements is not expected to have a significant impact on the financial statements in the period of initial application.

2.3 Significant accounting estimates and judgements

Estimates, assumptions concerning the future and judgements are made in the preparation of the financial statements. They affect the application of the Group’s accounting policies, reported amounts of assets, liabilities, income and expenses, and disclosures made. They are assessed on an on-going basis and are based on experience and relevant factors, including expectations of future events that are believed to be reasonable under the circumstances.

The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, as well as the critical judgements made by management in the process of applying the Group’s accounting policies, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

(i) Impairment of investment in associated companies

The Group will test its investments in associated companies for impairment whenever application of the requirements in FRS 39 indicates that the investments may be impaired. This is done by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount. In determining the value in use of the investment, the Company estimates its share of the present value of the estimated future cash flows expected to be generated by the associated company, including the cash flows from the operations of the associated company and the proceeds on the ultimate disposal of the investment.

The carrying amount of the Group’s investments in associated companies as at 31 December 2005 was $6,331,332 (2004: $6,484,519). More details are given in Note 13.

40 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

2. Significant accounting policies (cont’d)

(ii) Depreciation of property and equipment

The cost of property and equipment is depreciated on a straight-line basis over their useful lives. Management estimates the useful lives of these property and equipment to be between 3 to 50 years. The carrying amount of the Group’s property and equipment at 31 December 2005 was $3,074,543 (2004: $3,571,377). Changes in the expected level of usage and technological developments could impact the economic useful lives and the residual values of these assets, therefore, future depreciation charges could be revised.

(iii) Income taxes

The Group has exposure to income taxes in numerous jurisdictions. Significant judgement is involved in determining the Group-wide provision for income taxes. There are certain transactions and computations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for expected tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. The carrying amount of the Group’s tax payables at 31 December 2005 was $761,982 (2004: $311,472).

2.4 Functional and foreign currency

(a) Functional currency

Management has determined the currency of the primary economic environment in which the Company operates i.e. functional currency, to be SGD. Revenue and major costs of providing services including major operating expenses are primarily influenced by fluctuations in SGD.

(b) Foreign currency transactions

Transactions in foreign currencies are measured in the respective functional currencies of the Company and its subsidiary companies and are recorded on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the closing rate of exchange ruling at the balance sheet date. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

41 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

2. Significant accounting policies (cont’d)

2.4 Functional and foreign currency (cont’d)

(b) Foreign currency transactions (cont’d)

Exchange differences arising on the settlement of monetary items or on translating monetary items at the balance sheet date are recognised in the profit and loss account except for exchange differences arising on monetary items that form part of the Group’s net investment in foreign subsidiary companies, which are recognised initially in a separate component of equity as foreign currency translation reserve in the consolidated balance sheet and recognised in the consolidated profit and loss account on disposal of the subsidiary company. In the Company’s separate financial statements, such exchange differences are recognised in the profit and loss account.

(c) Foreign currency translation

The results and financial position of foreign operations are translated into SGD using the following procedures:

ƒ Assets and liabilities for each balance sheet presented are translated at the closing rate ruling at that balance sheet date; and

ƒ Income and expenses for each income statement are translated at average exchange rates for the year, which approximate the exchange rates at the dates of the transactions.

All resulting exchange differences are recognised in a separate component of equity as foreign currency translation reserve.

Goodwill and fair value adjustments arising on the acquisition of foreign operations on or after 1 January 2005 are treated as assets and liabilities of the foreign operations and are recorded in the functional currency of the foreign operations and translated at the closing rate at the balance sheet date.

On disposal of a foreign operation, the cumulative amount of exchange differences deferred in equity relating to that foreign operation is recognised in the profit and loss account as a component of the gain or loss on disposal.

2.5 Subsidiary companies and principles of consolidation

(a) Subsidiary companies

A subsidiary company is an entity over which the Group has the power to govern the financial and operating policies so as to obtain benefits from its activities. The Group generally has such power when, it directly or indirectly, holds more than 50% of the issued share capital, or controls more than half of the voting power, or controls the composition of the board of directors.

In the Company’s separate financial statements, investments in subsidiary companies are accounted for at cost less any impairment losses.

42 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

2. Significant accounting policies (cont’d)

2.5 Subsidiary companies and principles of consolidation (cont’d)

(b) Principles of consolidation

The consolidated financial statements comprise the financial statements of the Company and its subsidiary companies as at the balance sheet date. The financial statements of the subsidiary companies are prepared for the same reporting date as the parent company. Consistent accounting policies are applied for like transactions and events in similar circumstances.

All intra-group balances, transactions, income and expenses and profits and losses resulting from intra-group transactions are eliminated in full.

Subsidiary companies are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases.

Acquisitions of subsidiary companies are accounted for using the purchase method. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest.

Any excess of the cost of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities represents goodwill. The goodwill is accounted for in accordance with the accounting policy for goodwill stated in Note 2.8 below.

Any excess of the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of business combination is recognised in the profit and loss account on the date of acquisition.

43 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

2. Significant accounting policies (cont’d)

2.6 Associated companies

An associated company is an entity, not being a subsidiary or a joint venture, in which the Group has significant influence. This generally coincides with the Group having 20% or more of the voting power, or has representation on the board of directors.

The Group's investments in associated companies are accounted for using the equity method. Under the equity method, the investment in associated company is carried in the balance sheet at cost plus post-acquisition changes in the Group’s share of net assets of the associated company. The Group’s share of the profit or loss of the associated company is recognised in the consolidated profit and loss account. Where there has been a change recognised directly in the equity of the associated company, the Group recognises its share of such changes. After application of the equity method, the Group determines whether it is necessary to recognise any additional impairment loss with respect to the Group’s net investment in the associated company. The associated company is equity accounted for from the date the Group obtains significant influence until the date the Group ceases to have significant influence over the associated company.

Goodwill relating to an associated company is included in the carrying amount of the investment.

Any excess of the Group’s share of the net fair value of the associated company’s identifiable assets, liabilities and contingent liabilities over the cost of the investment is excluded from the carrying amount of the investment and is instead included as income in the determination of the Group’s share of the associated company’s profit or loss in the period in which the investment is acquired.

When the Group’s share of losses in an associated company equals or exceeds its interest in the associated company, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associated company.

The most recent available audited financial statements of the associated companies are used by the Group in applying the equity method. Where the dates of the audited financial statements used are not co-terminous with those of the Group, the share of results is arrived at from the last audited financial statements available and un-audited management financial statements to the end of the accounting period. Consistent accounting policies are applied for like transactions and events in similar circumstances.

In the Company’s separate financial statements, investments in associated companies are accounted for at cost less impairment losses.

44 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

2. Significant accounting policies (cont’d)

2.7 Property and equipment

All items of property and equipment are initially recorded at cost. Subsequent to recognition, property and equipment are stated at cost or valuation less accumulated depreciation and any accumulated impairment losses. Properties are subsequently revalued on an asset-by-asset basis, to their fair values. Fair value is determined from market-based evidence by appraisal that is undertaken by professionally qualified valuers. Revaluations are made based on an interval of not more than five years to ensure that their carrying amount does not differ materially from their fair value at the balance sheet date.

When an asset is revalued, any increase in the carrying amount is credited directly to the revaluation reserve. However, the increase is recognised in the profit and loss account to the extent that it reverses a revaluation decrease of the same asset previously recognised in the profit and loss account. When an asset’s carrying amount is decreased as a result of a revaluation, the decrease is recognised in the profit and loss account. However, the decrease is debited directly to the revaluation reserve to the extent of any credit balance existing in the reserve in respect of that asset.

Any accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. The revaluation surplus included in the revaluation reserve in respect of an asset, is transferred directly to revenue reserve on retirement or disposal of the asset.

Depreciation of an asset begins when it is available for use and is computed on a straight-line basis over the estimated useful life of the asset as follows:

Freehold property - 50 years Leasehold property - Over the term of the lease (30 years) Furniture and fittings - 8 years Office equipment - 6 years Computers - 3 years Motor vehicles - 6 years Plant and machinery - 3 years

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

The carrying values of property and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.

The residual values, useful life and depreciation method are reviewed at each financial year-end to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits embodied in the items of property and equipment.

45 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

2. Significant accounting policies (cont’d)

2.7 Property and equipment (cont’d)

An item of property and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset is included in the profit and loss account in the year the asset is derecognised.

2.8 Intangible assets

a) Goodwill Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or groups of units. Each unit or group of units to which the goodwill is so allocated: ƒ Represents the lowest level within the Group at which the goodwill is monitored for internal management purposes; and ƒ Is not larger than a segment based on either the Group’s primary or the Group’s secondary reporting format. A cash-generating unit (or group of cash-generating units) to which goodwill has been allocated is tested for impairment annually and whenever there is an indication that the unit may be impaired, by comparing the carrying amount of the unit, including the goodwill, with the recoverable amount of the unit. Where the recoverable amount of the cash-generating unit (or group of cash-generating units) is less than the carrying amount, an impairment loss is recognised. Where goodwill forms part of a cash-generating unit (or group of cash-generating units) and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained.

46 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

2. Significant accounting policies (cont’d)

2.8 Intangible assets (cont’d)

(b) Other intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets in a business combination is their fair values as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised on a straight-line basis over the estimated economic useful lives and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each financial year-end. The amortisation expense on intangible assets with finite lives is recognised in the profit and loss account through the ‘Research and development expenses’ line item.

The Group does not have intangible assets with indefinite useful lives.

(i) Research and development costs

Research costs are expensed as incurred. An intangible asset arising from development expenditure on an individual project is recognised only when the Group can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the availability of resources to complete and the ability to measure reliably the expenditure during the development.

The carrying value of development costs is reviewed for impairment annually when the asset is not yet in use or more frequently when an indication of impairment arises during the reporting year. Upon completion, the development costs are amortised over the estimated useful life and assessed for impairment whenever there is an indication that the intangible asset may be impaired.

(ii) Patents and trademarks

Patent and trademark costs relate to the costs of registering the invention and trademarks. These are stated at cost and amortised over the estimated useful lives up to a maximum of 5 years from the date of commercialisation, during which the benefits of the expenditure are expected to arise.

47 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

2. Significant accounting policies (cont’d)

2.8 Intangible assets (cont’d)

(b) Other intangible assets (cont’d)

A summary of the policies applied to deferred development costs, patents and trademarks is as follows:

Deferred development costs, Patents and Trademarks Internally generated or acquired Internally generated Useful lives and amortisation ƒ Finite (2004: Finite) method used ƒ Amortised over 5 years on straight line basis (2004 : 5 years) Impairment testing ƒ For assets not yet in use: Annually and more frequently when an indication of impairment exists. ƒ For assets in use: When an indication of impairment exists. Review of amortisation period Amortisation period and method are and method reviewed at each financial year-end.

Gain or loss from derecognition of an intangible asset is measured as the difference between the net disposal proceeds and the carrying amount of the asset and is recognised in the profit and loss account when the asset is derecognised.

2.9 Impairment of non-financial assets

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset (i.e. an intangible asset with an indefinite useful life, an intangible asset not yet available for use, or goodwill acquired in a business combination) is required, the Group makes an estimate of the asset’s recoverable amount.

An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Impairment losses of continuing operations are recognised in the profit and loss account as ‘impairment losses’ or treated as a revaluation decrease for assets carried at revalued amount to the extent that the impairment loss does not exceed the amount held in the asset revaluation reserve for that same asset.

48 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

2. Significant accounting policies (cont’d)

2.9 Impairment of non-financial assets (cont’d)

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses recognised for an asset other than goodwill may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Reversal of an impairment loss is recognised in the profit and loss account unless the asset is carried at revalued amount, in which case the reversal in excess of impairment loss previously recognised through the profit and loss account is treated as a revaluation increase. After such a reversal, the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.

The Group does not reverse in a subsequent period, any impairment loss recognised for goodwill.

2.10 Financial assets

Financial assets within the scope of FRS 39 are classified as either financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, or available-for-sale financial assets, as appropriate. Financial assets are recognised on the balance sheet when, and only when, the Group becomes a party to the contractual provisions of the financial instrument.

When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs. The Group determines the classification of its financial assets after initial recognition and, where allowed and appropriate, re- evaluates this designation at each financial year-end.

All regular way purchases and sales of financial assets are recognised on the trade date i.e. the date that the Group commits to purchase the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace concerned.

49 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

2. Significant accounting policies (cont’d)

2.10 Financial assets (cont’d)

(a) Financial assets at fair value through profit or loss

Financial assets classified as held for trading are included in the category ‘financial assets at fair value through profit or loss’. Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term. Gains or losses on investments held for trading are recognised in the profit and loss account.

The Group has not designated any financial assets as financial assets at fair value through profit or loss.

(b) Held-to-maturity investments

Non-derivative financial assets with fixed or determinable payments and fixed maturity are classified as held-to-maturity when the Group has the positive intention and ability to hold the assets to maturity. Investments intended to be held for an undefined period are not included in this classification. Other long-term investments that are intended to be held-to-maturity, such as bonds, are subsequently measured at amortised cost using the effective interest method. This cost is computed as the amount initially recognised minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between the initially recognised amount and the maturity amount and minus any reduction for impairment or uncollectibility. This calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums and discounts. For investments carried at amortised cost, gains and losses are recognised in the profit and loss account when the investments are derecognised or impaired, as well as through the amortisation process.

The Group has not designated any financial assets as held-to-maturity.

(c) Loans and receivables

Non-derivative financial assets with fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Such assets are carried at amortised cost using the effective interest method. Gains and losses are recognised in profit and loss account when the loans and receivables are derecognised or impaired, as well as through the amortisation process.

50 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

2. Significant accounting policies (cont’d)

2.10 Financial assets (cont’d)

(d) Available-for-sale financial assets

Available-for-sale financial assets are those non-derivative financial assets that are designated as available-for-sale or are not classified in any of the three preceding categories. After initial recognition, available-for sale financial assets are measured at fair value with gains or losses being recognised in the other reserves until the investment is derecognised or until the investment is determined to be impaired at which time the cumulative gain or loss previously reported in equity is included in the profit and loss account.

The fair value of investments that are actively traded in organised financial markets is determined by reference to the relevant Exchange’s quoted market bid prices at the close of business on the balance sheet date. For investments where there is no active market, fair value is determined using valuation techniques. Such techniques include using recent arm’s length market transactions; reference to the current market value of another instrument, which is substantially the same; discounted cash flow analysis and option pricing models.

2.11 Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

Cash and cash equivalents carried in the balance sheets are classified and accounted for as loans and receivables under FRS 39. The accounting policy for this category of financial assets is stated in Note 2.10.

2.12 Trade and other debtors

Trade and other debtors, including amounts due from subsidiary companies, associated companies, related companies and loans to related companies are classified and accounted for as loans and receivables under FRS 39. The accounting policy for this category of financial assets is stated in Note 2.10.

An allowance is made for uncollectible amounts when there is objective evidence that the Group will not be able to collect the debt. Bad debts are written off when identified. Further details on the accounting policy for impairment of financial assets are stated in Note 2.13 below.

51 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

2. Significant accounting policies (cont’d)

2.13 Impairment of financial assets

The Group assesses at each balance sheet date whether there is any objective evidence that a financial asset or group of financial assets is impaired.

(a) Assets carried at amortised cost

If there is objective evidence that an impairment loss on loans and receivables or held-to-maturity investments carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced through the use of an allowance account. The amount of the loss is recognised in the profit and loss account.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of an impairment loss is recognised in the profit and loss account, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date.

(b) Assets carried at cost

If there is objective evidence that an impairment loss on an unquoted equity instrument that is not carried at fair value because its fair value cannot be reliably measured, or on a derivative asset that is linked to and must be settled by delivery of such an unquoted equity instrument has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses are not reversed in subsequent periods.

(c) Available-for-sale financial assets

If an available-for-sale financial asset is impaired, an amount comprising the difference between its cost (net of any principal payment and amortisation) and its current fair value, less any impairment loss previously recognised in the profit and loss account, is transferred from equity to the profit and loss account. Reversals in respect of equity instruments classified as available-for-sale are not recognised in the profit and loss account. Reversals of impairment losses on debt instruments are reversed through the profit and loss account, if the increase in fair value of the instrument can be objectively related to an event occurring after the impairment loss was recognised in the profit and loss account.

52 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

2. Significant accounting policies (cont’d)

2.14 Inventories

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

Cost, which is determined on a first-in-first-out basis, includes purchase price and other incidental costs in bringing each product to its present location and condition.

Net realisable value represents the estimated selling price in the ordinary course of business, less estimated costs of disposal.

2.15 Trade creditors and accruals

Liabilities for trade creditors and accruals, which are normally settled on 30-90 day terms, and payables to related parties are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method. Gains and losses are recognised in the profit and loss account when the liabilities are derecognised as well as through the amortisation process.

2.16 Derecognition of financial assets and liabilities

(a) Financial assets

A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised where:

ƒ The contractual rights to receive cash flows from the asset have expired;

ƒ The Group retains the contractual rights to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a ‘pass-through’ arrangement; or

ƒ The Group has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

Where the Group has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

53 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

2. Significant accounting policies (cont’d)

2.16 Derecognition of financial assets and liabilities (cont’d)

(a) Financial assets (cont’d)

On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of (a) the consideration received (including any new asset obtained less any new liability assumed) and (b) any cumulative gain or loss that has been recognised directly in equity is recognised in the profit and loss account.

(b) Financial liabilities

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expired.

Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the profit and loss account.

2.17 Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) where, as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Group expects some or all of a provision to be reimbursed, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the profit and loss account net of any reimbursement.

If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as finance costs.

Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed.

54 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

2. Significant accounting policies (cont’d)

2.18 Employee benefits

(a) Defined contribution plans

The Group participates in the national pension schemes as defined by the laws of the countries in which it has operations. In particular, the Singapore companies in the Group make contributions to the Central Provident Fund scheme in Singapore, a defined contribution pension scheme. Contributions to national pension schemes are recognised as an expense in the period in which the related service is performed.

(b) Employee share option plans

Employees (including senior executives) of the Group receive remuneration in the form of share-based payment transactions, whereby employees render services as consideration for share options (‘equity-settled transactions’). The Group has not granted share options that are settled only in cash (“cash-settled transactions”).

ƒ Equity-settled transactions

The cost of equity-settled transactions with employees is measured by reference to the fair value at the date on which the share options are granted. In valuing the share options, no account is taken of any performance conditions, other than conditions linked to the price of the shares of the Company (‘market conditions’), if applicable.

The cost of equity-settled transactions is recognised, together with a corresponding increase in the employee share option reserve, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (‘the vesting date’). The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group’s best estimate of the number of equity instruments that will ultimately vest. The profit or loss charge or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period.

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vested irrespective of whether or not the market condition is satisfied, provided that all other performance conditions are satisfied.

Where the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any modification, which increases the total fair value of the share-based payment arrangement, or is otherwise beneficial to the employee as measured at the date of modification.

55 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

2. Significant accounting policies (cont’d)

2.18 Employee benefits (cont’d)

ƒ Equity-settled transactions (cont’d)

Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph.

The Group has taken advantage of the transitional provisions of FRS 102 in respect of equity-settled awards and has applied FRS 102 only to equity-settled awards granted after 22 November 2002 that had not vested on or before 1 January 2005.

2.19 Leases

As lessee

Operating lease payments are recognised as an expense in the profit and loss account on a straight-line basis over the lease term. The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis.

2.20 Revenue

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:

(a) Sale of goods

Revenue is recognised upon the transfer of significant risk and rewards of ownership of the goods to the customer, which generally coincides with delivery and acceptance of the goods sold. Revenue is not recognised to the extent where there are significant uncertainties regarding recovery of the consideration due, associated costs or the possible return of goods.

56 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

2. Significant accounting policies (cont’d)

2.20 Revenue (cont’d)

(b) Licensing income

Where the licensing fees to be received are contingent on the occurrence of a future event, the licensing fees are recognised at their fair value where there is reasonable assurance that the licensing income will be received, which is normally when the event has occurred.

Licensing fees received upfront are recognised on a straight-line basis over the life of the agreement when the licensee has the right to use the technology for a specified period of time and the Group has remaining obligations to perform. In instances where the Group has no remaining obligations to perform, such licensing fees received upfront are recognised at the time of receipt.

(c) Interest income

Interest income is recognised as interest accrues (taking into account the effective interest method) unless collectibility is in doubt.

(d) Dividend income

Dividend income is recognised when the Group’s right to receive payment is established.

2.21 Government grants

Government grants are recognised at their fair value where there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. When the grant relates to an expense item, it is recognised in the profit and loss account over the period necessary to match them on a systematic basis to the costs that it is intended to compensate. Where the grant relates to an asset, the fair value is directly credited to the relevant asset and amortised to the profit and loss account over the expected useful life of the relevant asset by equal annual instalments.

2.22 Income taxes

(a) Current tax

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date.

57 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

2. Significant accounting policies (cont’d)

2.22 Income taxes (cont’d)

(b) Deferred tax

Deferred income tax is provided using the liability method on temporary differences at the balance sheet date 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, except:

ƒ Where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

ƒ In respect of taxable temporary differences associated with investments in subsidiary companies and associated companies, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax credits and unused tax losses can be utilised except:

ƒ Where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

ƒ In respect of deductible temporary differences associated with investments in subsidiary companies and associated companies, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

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

58 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

2. Significant accounting policies (cont’d)

2.22 Income taxes (cont’d)

(b) Deferred tax (cont’d)

Income tax relating to items recognised directly in equity is recognised in equity.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

(c) Sales tax

Revenues, expenses and assets are recognised net of the amount of sales tax except:

ƒ Where the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and

ƒ Receivables and payables that are stated with the amount of sales tax included. The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.

2.23 Non-current assets held for sale and discontinued operation

A component of the Group is classified as a discontinued operation when the criteria to be classified as held for sale have been met or it has been disposed of and such a component represents a separate major line of business or geographical area of operations, is part of a single co-ordinated major line of business or geographical area of operations or is a subsidiary acquired exclusively with a view to resale. A component is deemed to be held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use.

Immediately before the initial classification of the asset (or disposal group) as held for sale, the carrying amounts of the asset (or all the assets and liabilities in the group) are measured in accordance with the applicable FRSs. Upon classification as held for sale, non-current assets and disposal groups are measured at the lower of carrying amount and fair value less costs to sell. Any differences are recognised in the profit and loss account.

59 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

3. Revenue Revenue of the Group primarily comprises the invoiced value of goods supplied to external customers and licensing income. Revenue of the Company comprises dividend income and licensing income. Group Company 2005 2004 2005 2004 $ $ $ $ Revenue is analysed as follows: -

Sales of goods 168,003,935 139,636,796 íí

Licensing income 2,958,769 722,914 165,962 721,265 Dividend income from: - Subsidiary companies íí 3,082,100 3,009,717 - Other investments 59,177 í 59,177 í 171,021,881 140,359,710 3,307,239 3,730,982

4. Other operating income

Group Company 2005 2004 2005 2004 $ $ $ $ Disposal of property and equipment 74,800 ííí Freight income 242,981 51,727 í í Interest income 990,311 350,379 590,103 260,823 Exchange gain 411,188 í 298,242 í Gain on disposal of investments íí í 798,584 Others 93,478 107,119 15,900 í 1,812,758 509,225 904,245 1,059,407

5. Other operating expense

Group Company 2005 2004 2005 2004 $ $ $ $

Exchange loss í 992,584 í 962,618 Loss on disposal of investments í 44,452 íí Others í 6,717 í 6,717 í 1,043,753 í 969,335

60 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

6. Operating profit Operating profit is stated after charging the following: -

Group Company 2005 2004 2005 2004 $ $ $ $ (Restated) (Restated) Depreciation of property and equipment 901,088 686,566 19,880 39,038 Amortisation of intangibles 1,559,976 1,102,725 1,194,423 815,002 Research and development expenses not capitalised 1 498,129 597,467 – 304,527 Non-audit fees paid to: - Auditors of the Company 22,000 26,000 5,200 10,000 - Other auditors of subsidiary companies 4,979 24,000 – – Directors’ remuneration: - Directors of the Company 504,426 510,629 – – - Other directors of subsidiary companies 271,578 306,453 – – Directors’ fees 48,692 64,473 43,000 31,000

1 The Group’s research and development expenses not capitalised coupled with depreciation of patent moulds of $500,221 (2004: $256,611) totalled $998,350 (2004: $854,078) which represents the aggregate amount of research and development expenses shown in the profit and loss account for the year. In addition, amortisation of intangibles of $1,559,976 (2004: $1,102,725) has been included in cost of sales for the year.

7. Exceptional item

Group Company 2005 2004 2005 2004 $ $ $ $

Litigation costs on infringement of patent rights (Note 29) 990,517 2,974,396 í –

61 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

8. Income tax (a) Major components of income tax expense The major components of income tax expense for the years ended 31 December are:-

(i) Profit and loss account

Current income tax Group Company 2005 2004 2005 2004 $ $ $ $ Current income tax - Singapore 405,157 47,388 87,000 – - Foreign 44,812 – – –

(Over)/under provision in respect of previous year’s current income tax (1,761) (74,572) 10,370 – 448,208 (27,184) 97,370 –

(ii) Statement of changes in equity Deferred tax related to item credited directly to equity Group and Company 2005 2004 $ $

Net change in other reserves for principal-protected investment 24,065 í Income tax expense reported in equity 24,065 í

62 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

8. Income tax (cont’d) (b) Relationship between tax expense and net profit A reconciliation of the statutory tax rate to the effective tax rate applicable to profit / (loss) before income tax for the years ended 31 December is as follow: - Group Company 2005 2004 2005 2004 % % % % (Restated) (Restated) Tax at the domestic rates applicable to profits / (losses) in the countries where the Group operates1 20.0 20.0 20.0 20.0 Exempt pioneer profits (21.5) (102.2) – –

Withholding tax 0.8 – – –

Non taxable income (3.8) – (29.1) (44.9)

Expenses not deductible for tax purpose 10.9 61.8 14.3 24.9

(Over) / under provision in prior years (0.1) (7.3) 0.5 –

Utilisation of tax losses not previously recognised (1.7)

Deferred tax assets not recognised 4.7 25.1 – –

Tax exemption (0.8) – (1.1) – Effective tax rate 8.5 (2.6) 4.6 –

1 The Singapore corporate tax rate of 20% has been used as the applicable tax rate for this reconciliation as Singapore is the primary jurisdiction where the Group generates taxable profits.

A Malaysian subsidiary company was awarded the Multimedia Super Corridor status and pioneer status by the Government of Malaysia on 5 November 1998. The pioneer status took effect on 31 January 2000 and the award exempts the subsidiary company’s profits from income tax. On 21 February 2005, the award was extended for another five year period from the date of expiry to 31 January 2010.

63 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

9. Earnings per share (a) Basic earnings per share Basic earnings per share amounts are calculated by dividing the profit attributable to shareholders of the Company by the weighted average number of ordinary shares outstanding during the year. Group 2005 2004 $ $ (Restated) Profit attributable to ordinary shareholders for basic earnings per share 4,828,164 1,053,318

No. of shares

Weighted average number of ordinary shares 302,444,435 279,392,972

Earnings per share (Basic) 1.60¢ 0.38¢

(b) Diluted earnings per share Diluted earnings per share amounts are calculated by dividing the profit attributable to shareholders of the Company by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.

Profit attributable to ordinary shareholders for diluted earnings per share 4,828,164 1,053,318

Weighted average number of ordinary shares used to compute the basic earnings per share 302,444,435 279,392,972 Effect of dilutive share options 4,374,728 3,772,683 Weighted average number of ordinary shares used to compute diluted earnings per share 306,819,163 283,165,655 Earnings per share (Fully diluted) 1.57¢ 0.37¢

500,000 (2004: 1,810,000) of share options granted to employees under the existing Trek 2000 International Ltd Share Option Scheme have not been included in the calculation of diluted earning per share because they are anti-dilutive for the current and previous financial years presented.

Since the end of the year, employees have exercised the option to acquire 247,500 (2004: 33,000) ordinary shares. There have been no other transactions involving ordinary shares or potential ordinary shares since the reporting date and before the completion of these financial statements.

64 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005 466,341 (267,474) (349,977) 1,620,000 $ í í í 8,227 12,895 $ 34,218 33,311 Plant and machinery Total íí í í Motor vehicles

í (195) (267,060)

(348,000) (1,150) í í í Office equipment Computers

í and fittings Furniture Furniture (219) 19,577 (20,789) 5,880 533,998 246,588 412,303 712,984 1,883,005 3,788,878 (827) 304,011 145,108 322,594 500,467 415,646 1,687,826 34,027 63,961 21,398 346,955 28,508 (35,028) 5,613 í í í í í í í property property Leasehold

í í í í í í í $ $ $ $ $ $ $ $ $ $ $ $ property property Freehold Freehold Balance at 31 December 2005 Balance at 31 December 12,400 47,619 364,570 141,701 376,132 365,427 1,026,486 2,334,335 Disposals Charge for the year 12,400 47,619 41,201 17,382 47,853 132,020 602,613 901,088 Currency realignment Net book value At 31 December 2005 607,600 952,381 169,428 104,887 36,171 347,557 856,519 3,074,543 620,000 1,000,000 533,998 246,588 412,303 712,984 1,883,0055,408,878 712,984 412,303 246,588 533,998 1,000,000 2005 Balance at 31 December Representing Cost Valuation 620,000 620,000 1,000,000 533,998 246,588 620,000 412,303 1,000,000 712,984 1,883,005 5,408,878 Additions Disposals Accumulated depreciation Balance at 1 January 2005 2005 Group Cost or valuation valuation or Cost Balance at 1 January 2005 Currency realignment 620,000 1,000,000 472,290 217,655 386,442 714,029 1,848,787 5,259,203 10. Property and equipment

65 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005 9,525 (558,232) 1,620,000 $ (558,232) (6,228) (4,843) $ 1,604,439 1,657,829 Plant and machinery Total (2,721) (4,726) íí í íí íí í í Motor vehicles

í í í

í í í Office equipment Computers

í í íí í íí í and fittings Furniture Furniture 304,011 145,108 322,594 500,467 415,646 1,687,826 (5,857) 4,777 (925) 472,290 217,655 386,442 714,029 1,848,787 3,639,203 7,694 34,564 11,132 (4,747) 7,370 (1,238) í í í í í property property Leasehold

í í í í í $ $ $ $ $ $ $ $ $ $ $ $ property property Freehold Freehold Elimination of accumulated of accumulated Elimination depreciation on revaluation (140,514) (417,718) Balance at 31 December 2004 Balance at 31 December Net book value Charge for the year of accumulated Elimination depreciation on revaluation (140,514) 11,957 (417,718) 51,465 41,802 25,102 78,658 133,474 344,108 686,566 620,000 1,000,000 472,290 217,655 386,442 714,0291,848,787 5,259,203 386,442 217,655 472,290 1,000,000 620,000 Currency realignment Balance at 31 December 2004 Balance at 31 December 620,000 1,000,000 472,290 217,655 386,442 714,029 1,848,787 5,259,203 At 31 December 2004 620,000 1,000,000 168,279 72,547 63,848 213,562 1,433,141 3,571,377 Accumulated depreciation Balance at 1 January 2004 128,557 366,253 268,066 115,229 244,861 366,993 74,259 1,564,218 Valuation 620,000 1,000,000 Representing Cost Revaluation surplus/ (deficit) 141,739 (132,214) 2004 Group Additions Currency realignment Cost or valuation valuation or Cost Balance at 1 January 2004 618,775 1,549,932 469,343 175,721 376,548 714,029 250,576 4,154,924 10. Property and equipment (cont’d)

66 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

10. Property and equipment (cont’d) During the year, motor vehicles of $58,911 (2004: $nil) were acquired under hire purchase agreements. The net book values of motor vehicles under hire purchase agreements as at 31 December 2005 was $62,189 (2004: $41,961). Leased assets are pledged as security for the related hire purchase liabilities. The following properties are owned by the Group as of 31 December 2005 : - Location Type Title Built up Unexpired area lease

(a) 10, Jalan Besar Shop unit Freehold 31 sq.m. N.A. #03-46 Sim Lim Tower Singapore 208787

(b) 30, Loyang Way, Commercial Leasehold 800 sq.m. 21 years #07-13/14/15 office Loyang Industrial Estate Singapore 508769

The freehold property was valued by NAI GSK International Pte Ltd on an open market value basis as at 31 January 2005, and the revaluation surplus of $141,739 was taken to revaluation reserve for the financial year ended 31 December 2004.

The leasehold property was valued by NAI GSK International Pte Ltd on an open market value basis as at 31 January 2005 and a deficit of $132,214 was charged to the profit and loss account for the financial year ended 31 December 2004 as the impairment in value was deemed to have arisen in 2004 given the prevailing conditions in the property market at that time. If the revalued assets had been included in the financial statements at cost less accumulated depreciation, the net written down amounts of freehold property and leasehold property would have been $466,305 (2004: $478,261) and $1,080,750 (2004: $1,132,214) respectively.

67 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

10. Property and equipment (cont’d)

Company 2005 2004 $ $ Computers Cost Balance at 1 January 114,980 121,389 Grant received í (6,409) Balance at 31 December 114,980 114,980

Accumulated depreciation Balance at 1 January 95,100 56,062 Charge for the year 19,880 39,038 Balance at 31 December 114,980 95,100

Net book value At 31 December í 19,880

11. Intangibles

Development Group Patents Trademarks costs Total $ $ $ $ Cost Balance at 1 January 2005 7,074,823 73,446 3,494,594 10,642,863 Currency realignment 1,794 í 14,966 16,760 Additions- internal development 2,027,539 17,831 601,688 2,647,058 Government grants received íí(154,814) (154,814) Patents written off (34,171) íí (34,171) Balance at 31 December 2005 9,069,985 91,277 3,956,434 13,117,696

Accumulated amortisation Balance at 1 January 2005 1,527,519 36,829 260,195 1,824,543 Currency realignment 690 í (834) (144) Charge for the year 1,337,231 14,084 208,661 1,559,976 Balance at 31 December 2005 2,865,440 50,913 468,022 3,384,375

Net book value At 31 December 2005 6,204,545 40,364 3,488,412 9,733,321

68 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

11. Intangibles (cont’d)

Development Patents Trademarks costs Total Group $ $ $ $ Cost Balance at 1 January 2004 3,875,567 60,001 1,777,008 5,712,576 Currency realignment (2,242) í (10,571) (12,813) Additions- internal development 3,568,214 13,445 1,728,157 5,309,816 Patents written off (366,716) íí (366,716) Balance at 31 December 2004 7,074,823 73,446 3,494,594 10,642,863

Accumulated amortisation Balance at 1 January 2004 631,812 21,770 131,535 785,117 Currency realignment (1,074) í (35) (1,109) Charge for the year 958,971 15,059 128,695 1,102,725 Patents written off (62,190) íí (62,190) Balance at 31 December 2004 1,527,519 36,829 260,195 1,824,543

Net book value At 31 December 2004 5,547,304 36,617 3,234,399 8,818,320

Patents Company 2005 2004 $ $

Cost Balance at 1 January 6,203,033 3,257,062 Additions 2,013,510 3,312,687 Patents written off í (366,716) Balance at 31 December 8,216,543 6,203,033

Accumulated amortisation Balance at 1 January 1,245,227 492,415 Charge for the year 1,194,423 815,002 Patents written off í (62,190) Balance at 31 December 2,439,650 1,245,227

Net book value At 31 December 5,776,893 4,957,806

69 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

12. Subsidiary companies Company 2005 2004 $ $

Shares, at cost 6,014,393 6,014,393

Name of company Percentage (Country of Principal activities of equity held by the incorporation) (Place of business) Cost Company 2005 2004 2005 2004 $ $ % %

* Trek Technology Research, design, development 2,676,509 2,676,509 100 100 (Singapore) Pte Ltd and dealing in computer (Singapore) hardware, software, electronic components and other related products (Singapore)

* S-Com System (S) Research, design, development 2,941,136 2,941,136 100 100 Pte Ltd and dealing in computer (Singapore) hardware, software, electronic components and other related products (Singapore)

* Trek Systems (M) Research, design, development 2 2 100 100 Sdn Bhd and dealing in computer (Malaysia) hardware, software, electronic components and other related products (Malaysia)

* Trek Technology Marketing and distribution 1 1 100 100 (HK) Co. Ltd (Hong Kong) (Hong Kong)

# Trekstor USA Inc. Marketing and distribution 1,740 1,740 100 100 (United States of (Unites States of America) America)

** Trek Technology Marketing and distribution 364,901 364,901 100 100 (Shanghai) Co. Ltd (People’s Republic of China) (People’s Republic of China)

*** Trek Technology Marketing and distribution 30,104 30,104 100 100 Europe B.V. (The Netherlands) (The Netherlands) 6,014,3936,014,393

* Audited by member firms of Ernst & Young Global ** Audited by Shanghai Da Long Certified Public Accountants Co. Ltd *** Audited by Vola & Leinders Registered Accountants # No statutory audit requirement in the country of incorporation

70 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

13. Associated companies Group Company 2005 2004 2005 2004 $ $ $ $

Shares, at cost 3,716,214 3,716,214 6,655,029 6,655,029 Goodwill on acquisition 2,889,835 2,938,815 í í Amortisation of goodwill í (48,980) í í Impairment loss (250,000) í (250,000) í Share of net post-acquisition í losses (25,565) (126,262) í Currency realignment 848 4,732 í í Carrying amount of investments 6,331,332 6,484,519 6,405,029 6,655,029

Name of company Percentage (Country of Principal activities of equity held by incorporation) (Place of business) Cost the Company 2005 2004 2005 2004 $ $ % %

* Trek Technology Marketing of computer, 9,138 9,138 39 39 (Thailand) Company hardware, software, Ltd electronic components and (Thailand) other related products (Thailand)

* UTrek International Research, design, 4,895,891 4,895,891 33 33 Co. Ltd (formerly development of computer known as Data hardware, software, Computer (2003) Co electronic components and Ltd. (Thailand)) other related products. (Thailand)

** InfoWave Pte Ltd Design, development and 1,750,000 1,750,000 25 25 (Singapore) supply of mobile computing and wireless communication products and solutions (Singapore) 6,655,0296,655,029

* Audited by S. K. Accountant Services Co. Ltd ** Audited by Lee Seng Chan & Co

71 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

13. Associated companies (cont’d) The summarised financial information of the associated companies is as follows: Group 2005 2004 $ $

Assets and liabilities: Current assets 14,105,755 20,035,017 Non-current assets 6,940,841 2,796,921

Total assets 21,046,596 22,831,938

Current liabilities 6,444,950 10,810,066 Non-current liabilities 1,386,725 1,476,697

Total liabilities 7,831,675 12,286,763

Results: Revenue 11,450,602 23,671,840 Profit for the year 415,621 1,376,573

Goodwill amortisation

Upon the adoption of FRS 103, the Group has ceased amortisation of goodwill. Instead, the Group tests its investments in associated companies for impairment whenever application of the requirements in FRS 39 indicates that the investments may be impaired.

Impairment loss

The recoverable amount of one of the associated companies has been determined based on a value in use calculation using cash flow projections based on financial budgets approved by senior management covering a five-year period. The discount rate applied to cash flow projections is 10.6% (2004: nil%) and cash flows beyond the 5-year period are extrapolated using an 4.6% growth rate (2004: nil%). The growth rate is obtained from a publicly available economic report. Based on the value-in-use assessment of the associated company, an impairment loss of S$250,000 (2004: nil) has been taken up in the current year’s profit and loss account. The following describes the key assumptions on which management has based its cash flow projections to undertake impairment testing of the associated company:

ƒ Budgeted gross margins - the basis used to determine the value assigned to the budgeted gross margins is the average product gross margins achieved to date.

ƒ Weighted average cost of capital (“WACC”) rates is derived based on the Company’s average WACC as reported by a reputable rating agency and a security house. Values assigned to key assumptions are consistent with external information sources.

72 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

14. Quoted investments

Group and Company 2005 2004 $ $ Available-for-sale financial assets Quoted equity investment in a corporation1 2,218,857 2,418,857

Market value of quoted equity investment 2,218,857 2,219,135

1 In 2004, this investment was carried at cost less permanent diminution in value.

During the year, the Company received a tax exempt dividend of 0.8 cents (2004: nil) per share, from the above quoted investment, amounting to $59,177 (2004: $nil).

15. Unquoted investments

Group and Company 2005 2004 $ $ Available-for-sale financial assets Unquoted equity investment in a corporation1 167,700 167,700

Unquoted principal-protected investment 1,810,328 -

1,978,028 167,700

1 In 2004, this investment was carried at cost less permanent diminution in value.

Unquoted equity investment in a corporation The unquoted investment is denominated in United States Dollar (“USD”) and stated at cost as it is impractical to determine its fair value. Unquoted principal-protected investment

This is a USD-denominated principal-protected investment in a structured product marketed by a financial institution. This investment matures on 13 May 2008. The return on the investment is linked to the underlying performance of the portfolio, with a minimum return of a guaranteed 1.5% per annum interest payable on each Payment Date, 15 May 2006, 2007 and 2008.

This investment is measured at fair value based on quote obtained from the financial institution.

Subsequent to year-end, the investment was disposed of, for a consideration of US$1,050,000 (approximately S$1.8m).

73 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

16. Trade debtors Group 2005 2004 $ $ Trade debtors: - Third parties 30,680,269 16,543,765 - Related parties* 9,867,671 3,917,075 40,547,940 20,460,840

Allowance for doubtful debts ( 576,358) (498,624)

39,971,582 19,962,216

* Related parties relate to companies who have common directors as the Group.

Trade debtors Trade debtors are non-interest bearing and are generally on 30 to 90 days’ terms. They are recognised at their original invoice amounts which represent their fair values on initial recognition.

As at 31 December 2005, included in trade debtors for the Group is $39,831,340 (2004: $19,780,994) denominated in USD.

Allowance for doubtful debts

For the year ended 31 December 2005, an impairment loss of $461,132 (2004: $347,092) was recognised in the profit and loss account subsequent to a debt recovery assessment performed on trade debtors as at 31 December 2005.

17. Inventories Group 2005 2004 $ $ Raw Materials: - At cost 1,767,940 2,957,683 - At net realisable value 1,452,251 879,591 3,220,191 3,837,274 Finished goods: - At cost 1,248,960 2,254,624 - At net realisable value 296,531 495,010 1,545,491 2,749,634

4,765,682 6,586,908

During the financial year, the Group wrote-down $1,172,943 (2004: $96,755) of inventories which are recognised as expense in the profit and loss account.

74 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

18. Amounts due from subsidiary companies and associated companies The amounts due from subsidiary companies are non-trade related, unsecured, non-interest bearing, repayable on demand and are to be settled in cash.

As at 31 December 2005, included in amounts due from subsidiary companies are $7,009,288 (2004: $7,184,254) denominated in USD.

The amounts due from associated companies are non-trade related, unsecured, non-interest bearing, repayable on demand and are to be settled in cash.

As at 31 December 2005, included in amounts due from associated companies is $105,224 (2004: $69,391) denominated in USD.

19. Other debtors Group Company 2005 2004 ` 2005 2004 $ $ $ $

Income tax recoverable 486,433 416,583 í í Amounts due from related parties 58,681 99,220 í í Prepayments 130,653 66,185 59,653 5,639 Deposits 585,377 1,016,535 101,650 115,000 Sundry debtors 273,660 332,115 30,440 73,744 1,048,371 2,000,488 191,743 610,966

Related parties relate to companies who have common directors as the Group. The amounts due from the related parties are unsecured, interest free and repayable on demand.

20. Trade creditors and accruals Group Company 2005 2004 2005 2004 $ $ $ $ Trade creditors and accruals: - Third parties 38,513,665 10,645,709 320,443 408,089 - Related parties* 9,278,565 5,046,096 íí 47,792,230 15,691,805 320,443 408,089

* Related parties relate to companies who have common directors as the Group.

75 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

20. Trade creditors and accruals (cont’d) Trade creditors and accruals

Trade creditors and accruals are non-interest bearing and are normally settled on 60-day terms.

Included in trade creditors and accruals of the Group and of the Company are amounts of $47,554,065 (2004: $15,687,560) and $83,335 (2004: nil) respectively denominated in USD.

21. Hire purchase creditors The Group leases certain motor vehicles under hire purchase. The leases will expire over the next 5 years and 7 months (2004: 2 years and 2 months). The interest rates implicit in the hire purchases range from 4.715% to 5.046% (2004: 5.046%). Future minimum lease payments under hire purchase together with the present value of the net minimum lease payments are as follows: -

Group 2005 2004 Present Present Minimum value of Minimum value of payment payment payment payment $ $ $ $

Within one year 36,821 31,627 25,656 21,576

After one year but not more than five years 55,980 48,160 29,879 25,140

Total future minimum lease payments 92,801 79,787 55,535 46,716

Less: Amounts representing finance charges (13,014) í (8,819) í

Present value of net minimum lease payments 79,787 79,787 46,716 46,716

76 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

22. Deferred taxation Group Company 2005 2004 2005 2004 $ $ $ $

Deferred tax arises as a result of :-

Deferred tax liabilities :- Differences in depreciation 67,268 24,806 íí

Deferred tax assets :- Unutilised tax losses (1,022,838) (633,126) íí Other temporary differences (127,190) (400) íí (1,150,028) (633,526) íí (1,082,760) (608,720) íí

The net deferred tax assets of the Group of $1,082,760 (2004: $608,720) were not recognised as there is uncertainty surrounding their realisation.

Unrecognised tax losses

The Group has tax losses of approximately $3,451,733 (2004: $3,165,630) that are available for offset against future taxable profits of the companies in which the losses arose. No deferred tax asset has been recognised due to uncertainty of its recoverability. The use of these tax losses is subject to the agreement of the tax authorities and compliance with certain provisions of the tax legislation of the respective countries in which the companies operate.

23. Share capital

Group and Company 2005 2004 $ $ Authorised :- 1,000,000,000 ordinary shares of $0.05 each 50,000,000 50,000,000 Issued and fully paid up ordinary shares :- Balance at 1 January 302,414,175 (2004 : 249,290,175) shares of $0.05 each 15,120,709 12,464,509

Issued during the year

52,500,000 ordinary shares at a weighted average premium of $0.615 each in connection with new placements í 2,625,000

33,000 (2004 : 624,000) ordinary shares at a premium of $0.262 (2004: $0.262) each in connection with share options being exercised 1,650 31,200

Balance at 31 December 302,447,175 (2004 : 302,414,175) shares of $0.05 each 15,122,359 15,120,709

77 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

23. Share capital (cont’d)

The options granted, exercised and cancelled under the ESOS during the year and options outstanding at the end of the year are as follows :-

2001 2001 2001 2001 2002 2002 2002 2002 Options Options Options Options Options Options Options Options Date options granted 9 Nov 2001 9 Nov 2001 9 Nov 2001 9 Nov 2001 16 Aug 2002 16 Aug 2002 24 Oct 2002 24 Oct 2002

Grant option number 1 2 2 2 4 4 5 5

Option exercise period

From 9 Nov 2002 9 Nov 2002 9 Nov 2003 9 Nov 2004 16 Aug 2003 16 Aug 2004 24 Oct 2003 24 Oct 2004

To 9 Nov 2011 9 Nov 2011 9 Nov 2011 9 Nov 2011 16 Aug 2012 16 Aug 2012 24 Oct 2012 24 Oct 2012

Number of holders at 31 December 2005 3 21 16 3 1 1 1 1

Exercise price per option $0.280 $0.312 $0.312 $0.312 $0.643 $0.643 $0.410 $0.410

Number of options outstanding

At 1 January 2005 397,500 2,995,500 2,777,500 450,000 300,000 200,000 300,000 200,000

Options cancelled í (71,250) (71,250) ííííí

Options exercised í (500) (32,500) ííííí

Options granted íííí í ííí

At 31 December 2005 397,500 2,923,750 2,673,750 450,000 300,000 200,000 300,000 200,000

The details of the ESOS, which was started in 2001, were set out in the financial statements of that year.

78 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

2002 2002 2003 2003 2003 2003 2003 2003 2005 2005 Options Options Options Options Options Options Options Options Options Options 31 Dec 2002 31 Dec 2002 9 Jan 2003 9 Jan 2003 28 Mar 2003 28 Mar 2003 28 May 2003 28 May 2003 10 Nov 2005 10 Nov 2005 Total

6 6 7 7 8 8 9 9 10 10

31 Dec 2003 31 Dec 2004 9 Jan 2004 9 Jan 2005 28 Mar 2004 28 Mar 2005 28 May 2004 28 May 2005 10 Nov 2006 10 Nov 2007

31 Dec 2012 31 Dec 2012 9 Jan 2013 9 Jan 2013 28 Mar 2013 28 Mar 2013 28 May 2013 28 May 2013 10 Nov 2015 10 Nov 2015

0 0 17 20 2 2 9 7 1 1

$0.343 $0.343 $0.369 $0.369 $0.401 $0.401 $0.432 $0.432 $0.422 $0.422

25,000 25,000 1,740,000 2,770,000 125,000 125,000 480,000 330,000 íí 13,240,500

(25,000) (25,000) (410,000) (480,000) íí (70,000) (70,000) íí (1,222,500)

ííííííí í íí (33,000)

ííííííí í 50,000 50,000 100,000

íí 1,330,000 2,290,000 125,000 125,000 410,000 260,000 50,000 50,000 12,085,000

79 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

24. Capital reserve

The capital reserve arose from the acquisition of assets and liabilities pursuant to the restructuring exercise carried out in financial year 2000.

25. Other reserves

Other reserves comprise:

Group and Company 2005 2004 $ $ (Restated) Fair value adjustment reserve (103,737) - Employee share option reserve 360,380 395,234 Total other reserves 256,643 395,234

(a) Fair value adjustment reserve

Fair value adjustment reserve records the cumulative fair value changes of available-for- sale financial assets until they are derecognised or impaired.

Group and Company 2005 2004 $ $ Opening balance at 1 January as previously reported - - Effects of adopting FRS 39 (200,000) - Opening balance at 1 January as restated (200,000) - Net change in the reserve due to fair value changes during the year 96,263 - Closing balance at 31 December (103,737) -

80 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

25. Other reserves (cont’d)

(b) Employee share option reserve

Employee share option reserve represents equity-settled share options granted to employees. The reserve is made up of the cumulative value of services received from employees recorded on grant of equity-settled share options.

Group and Company 2005 2004 $ $ Opening balance at 1 January as previously reported -- Cumulative effects of adopting FRS 102 395,234 197,318 Opening balance at 1 January as restated 395,234 197,318 Grant of equity-settled share options - 197,916 Expiry of share options (34,854) - Closing balance at 31 December 360,380 395,234

26. Dividend paid and proposed Group and Company 2005 2004 $ $

Dividend paid of $0.01 (2004 : $0.01) per ordinary share less income tax of 20% (2004 : 20%) 2,419,577 2,196,901

The directors have proposed a net dividend of $2,419,577 for 2005 (2004 : $2,419,313) representing a final dividend of $0.01 per ordinary share, less income tax of 20% (2004 : $0.01 per ordinary share, less income tax of 20%). This proposed dividend has not been recognised as a liability as at year-end and is subject to shareholders’ approval at the AGM.

27. Cash and cash equivalents Cash and cash equivalents included in the consolidated statement of cash flow comprise the following balance sheet amounts: -

Group 2005 2004 $ $

Fixed deposits 20,273,166 27,238,241 Cash and bank balances 35,774,591 12,714,407 56,047,757 39,952,648

81 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

27. Cash and cash equivalents (cont’d) Fixed deposits Short-term deposits are made for varying periods of between one week and three months depending on the immediate cash requirements of the Group, and earn interests at the respective short-term deposit rates, ranging from 1.80% to 4.25% (2004: 0.10% to 2.28%) per annum. . Cash and bank balances As at 31 December 2005, included in cash and cash equivalents is $51,870,666 (2004: $37,479,994) denominated in USD. . 28. Commitments The Group has entered into a commercial lease for the rental of the office space with no renewal option or escalation clauses included in the contract. There are no restrictions placed upon the Group by entering into the lease. Operating lease payments recognised in the consolidated profit and loss account during the year amount to $15,760 (2004: $20,966). Future minimum lease rentals under non-cancellable lease are as follows: - Group 2005 2004 $ $ Payable within 1 year 9,561 12,748 Payable within 2 to 5 years – 9,561 9,561 22,309

29. Contingency The Group, through one of its subsidiary companies, instituted a legal action in Singapore against M-System Inc, a company incorporated in Israel, and FE Global Electronics Pte Ltd and Ritronics Components (Singapore) Pte Ltd, both companies incorporated in Singapore, for patent infringement. These parties had counter-claimed against the Company for alleged groundless threat. In May 2005, the High Court of Singapore held that the defendants had infringed Trek’s Patent and awarded damages of a quantum to be assessed. The High Court also held that Trek’s Patent was novel and inventive and dismissed the counterclaims filed by the defendants.

In November 2005, the Court of Appeal of Singapore dismissed the appeals brought about by the defendants and confirmed that Trek’s Patent, the commercial embodiment of which is Trek’s ThumbDrive® device, is held to be valid and that the defendants’ have infringed Trek’s Patent.

The Group’s legal counsel is currently seeking the High Court’s approval on the cost recovery and damages assessment.

82 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

30. Employee benefits Group 2005 2004 Employee benefits (including executive $ $ directors): Salaries 1,919,412 2,199,752 Bonuses 195,031 40,072 Central Provident Fund contributions 206,693 204,963 Expense of share-based payments (34,854) 197,916 2,286,282 2,642,703

ƒ The Trek 2000 International Ltd Share Option Scheme

Group Executives, including directors, are granted options based on quantitative and non-quantitative performance indicators, including past performance, expertise, and potential for greater achievements and contributions to the Group. The option will vest two years after the date of grant. The options, once vested, remain exercisable as long as the employee (including directors) remains in service. The exercise price shall be equal to the average of the last dealt price for a share for the five consecutive trading days immediately preceding the date of grant. The exercise price, shall in no event, be less than the nominal value of a share. The options granted to Group Executives and Group Directors who do not hold executive functions in the Group, have contractual lives of ten and five years respectively.

The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options during the year.

2005 2004 WAEP WAEP No. ($) No. ($) Outstanding at beginning of year1 13,240,500 0.356 14,462,000 0.355 Granted during the year2 100,000 0.422 - - Exercised during the year3 (33,000) 0.312 (624,000) 0.312 Expired during the year (1,222,500) 0.374 (597,500) 0.393 Outstanding at end of year1,4 12,085,000 0.355 13,240,5000.356 Exercisable at end of year 11,985,000 0.355 10,015,500 0.349

1 Included within these balances are equity-settled options that have not been recognised in accordance with FRS 102 as these equity-settled options were granted on or before 22 November 2002. These options have not been subsequently modified and therefore do not need to be accounted for in accordance with FRS 102.

2 The weighted average fair value of options granted during the year was $0.422 (2004: $nil).

3 The weighted average share price at the date of exercise for the options exercised was $0.453 (2004: $0.642).

83 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

30. Employee Benefits (cont’d)

ƒ The Trek 2000 International Ltd Share Option Scheme (cont’d)

4 The range of exercise prices for options outstanding at the end of the year was $0.28 to $0.643 (2004: $0.28 to $0.643). The weighted average remaining contractual life for these options is 7.29 years (2004: 7.88 years).

The fair value of share options as at the date of grant, is estimated by an external valuer using a trinomial option pricing model in the Bloomberg Executive Option Valuation Module, taking into account the terms and conditions upon which the options were granted. The inputs to the model used for the years ended 31 December 2005 and 31 December 2004 are shown below:

2005 2004 Dividend yield 1 (%) 2.198 2.198-2.598 Expected volatility 2 (%) 45 45 Historical volatility 3 45 45 Risk-free interest rate 4 (%) 1.230 1.238-1.784 Expected life of option 5 (years) 4.2 4.2 Weighted average share price 6 ($) 0.422 0.38-0.45

1 Dividend yield was estimated based on historical dividend share of 1 cent for FY 2003 and FY 2004 and future dividend streams projected by management. 2 Expected volatility was determined after considering the historical volatility of the share price that is generally commensurate with the expected term of the option, and after considering the effects of the Company’s market profile and major corporate transactions 3Historical volatility was estimated based on the analysis of the historical volatility of the shares of the Company. 4 Risk-free interest rate used was the annual yield of a Singapore Government Securities Bond, based on the Singapore Sovereign yield curve, with maturity comparable to the expected term of the grants. 5 Expected life of option was estimated based on the expected exercise trends of the employees under the scheme, having considered the expected share price performance in the future. 6 Weighted average share price used was the last traded price as at each date of grant.

84 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

31. Related Party Disclosures An entity or individual is considered a related party of the Group for the purposes of the financial statements if: i) it possesses the ability (directly or indirectly) to control or exercise significant influence over the operating and financial decisions of the Group or vice versa; or ii) it is subject to common control or common significant influence. (a) Sale and purchase of goods and services In addition to the related party information disclosed elsewhere in the financial statements, the following significant transactions between the Group and related parties who are not members of the Group took place during the year at terms agreed between the parties.

Group Company 2005 2004 2005 2004 $ $ $ $ Related parties* Sale of goods 41,568,355 20,378,102 – – Purchase of goods 44,758,178 18,825,170 – –

Associated companies Sale of goods 1,620,546 3,721,339 – – Purchase of goods 730,036 – – –

* Related parties relate to companies who have common directors as the Group.

(b) Compensation of key management personnel

Group 2005 2004 $ $ Short-term employee benefits 854,225 752,141 Pension costs 71,116 70,371 Share-based payments (25,253) 134,708 Total compensation paid to key management personnel 900,088 957,220

Comprise amounts paid to: ƒ Directors of the Group 824,696 881,555 ƒ Other key management personnel 75,392 75,665 900,088 957,220

The remuneration of key management personnel is determined by the remuneration committee having regard to the performance of individuals and market trends.

85 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

31. Related Party Disclosures (cont’d) (b) Compensation of key management personnel (cont’d)

Key management personnel’s (including directors) interests in the Trek 2000 International Share Option Scheme

As at 1 January 2005, key management personnel (including directors) held options to purchase ordinary shares of the Company under the Trek 2000 International Ltd Share Option Scheme as follows:

ƒ 397,500 ordinary shares at a price of S$0.28 each, exercisable between 9 November 2002 and 9 November 2011

ƒ 4,905,000 ordinary shares at a price of S$0.312 each, exercisable between 9 November 2002 and 9 November 2011

ƒ 500,000 ordinary shares at a price of S$0.643 each, exercisable between 16 August 2003 and 16 August 2012

ƒ 500,000 ordinary shares at a price of S$0.41 each, exercisable between 24 October 2003 and 24 October 2012

ƒ 2,640,000 ordinary shares at a price of S$0.369 each, exercisable between 9 January 2004 and 9 January 2013

ƒ 250,000 ordinary shares at a price of S$0.401 each, exercisable between 28 March 2004 and 28 March 2013

ƒ 400,000 ordinary shares at a price of S$0.432 each, exercisable between 28 May 2004 and 28 May 2013

During the year ended 31 December 2005:

ƒ Options were granted to a non-executive director over 100,000 ordinary shares at a price of S$0.442 each, exercisable between 10 November 2006 and 9 November 2015.

ƒ None of the key management personnel or directors exercised their share options.

Share options granted to the Company’s directors, including non-executive directors, are appropriately disclosed in the directors’ report.

86 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

32. Information by segment on the Group’s operations

Reporting format

The primary segment reporting format is determined to be business segments as the Group’s risks and rates of return are affected predominantly by differences in the products and services produced. Secondary information is reported geographically. The operating businesses are organised and managed separately according to the nature of the products and services provided, with each segment representing a strategic business unit that offers different products and serves different markets.

Business segments

The Customised Engineering segment is driven by customers’ specification. The Group will provide our expertise in the area of design solutions that incorporate its hardware and firmware. Customers are required to purchase the complete design-in module or sub- modules thus providing the Group with a recurring business.

The Digital Technology business segment is driven by the innovativeness and ingenuity from the Group’s core Research and Development division. It specialises in patentable solutions and demand creation. The core technologies are as follows: ƒ Wireless ƒ USB ƒ Anti-piracy ƒ Security ƒ Centralised Management System (CMS)

The Licensing business segment involves the provision of licensees based on the Group library of patents and trade marks.

Geographical segments

The Group’s geographical segments are based on the location of the Group’s assets. Sales to external customers disclosed in geographical segments are based on the geographical location of its customers.

Allocation basis and transfer pricing

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets, liabilities and expenses. Transfer prices between business segments are set in a manner similar to transactions with third parties. Segment revenue, expenses and results include transfers between business segments. These transfers are eliminated on consolidation.

New business segment

Congruent with the growth of the Group’s library of Intellectual Property, licensing segment is a newly established business unit during the year. This business segment is gaining significance especially from the recent legal recognition of the Group’s intellectual property ownership rights.

87 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

32. Information by segment on the Group’s operations (cont’d) (a) Business segments The following tables present the revenue and profit information by business segments of the Group for the years ended 31 December 2005 and 2004, and certain assets, liabilities and other information by business segments as at that date.

Customised engineering Digital 2005 2004 2005 $ $ $ Segment revenue 1 (Restated) Sales to external customers 60,481,417 76,800,238 107,581,695

Segment results Segment operating profit 764,156 1,350,366 3 4,011,822

Share of profits of associated companies íí 96,813 Finance costs Exceptional item Profit before income tax Income tax

Profit for the financial year attributable to shareholders

1 There were no inter-segment sales during the year.

2 Costs associated with the licensing segment comprise the amortisation of research and development expenses.

3 Restatement made to reflect the newly established licensing segment.

88 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

technology Licensing Consolidated 2004 2005 2004 2005 2004 $ $ $ $ $ (Restated) (Restated) 3 (Restated) 3 62,836,558 2,958,769 722,914 171,021,881 140,359,710

2,621,298 3 1,398,793 2 (379,811) 2 6,174,771 3,591,853

412,757 íí96,813 412,757 (4,695) (4,080) (990,517) (2,974,396) 5,276,372 1,026,134 (448,208) 27,184

4,828,164 1,053,318

89 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

32. Information by segment on the Group’s operations (cont’d)

(a) Business segments

Customised engineering Digital 2005 2004 2005 $ $ $ (Restated) 1 Segment assets 37,811,746 39,678,665 67,220,883 Investment in associated companies íí6,331,332 37,811,746 39,678,665 73,552,215

Unallocated assets Total assets

Segment liabilities 17,483,833 9,128,800 31,082,371

Unallocated liabilities

Other segment information Capital expenditure - Property and equipment 74,615 563,662 391,726 - Intangibles í – í Depreciation of property and equipment 324,392 377,611 576,696 Amortisation of intangibles í – í

1 Restatement made to reflect the newly established licensing segment.

90 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

technology Licensing Consolidated 2004 2005 2004 2005 2004 $ $ $ $ $ (Restated) 1 (Restated) 1 (Restated) 1 32,464,363 9,733,321 8,818,320 114,765,950 80,961,348 6,484,519 íí6,331,332 6,484,519 38,948,882 9,733,321 8,818,320 121,097,282 87,445,867

4,196,885 2,586,557 125,294,167 90,032,424

7,469,019 íí48,566,204 16,597,819

865,834 358,188 49,432,038 16,956,007

1,094,167 í – 466,341 1,657,829 í 2,647,058 5,309,816 2,647,058 5,309,816 308,955 íí901,088 686,566 í 1,559,976 1,102,725 1,559,976 1,102,725

91 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

32. Information by segment on the Group’s operations (cont’d) (b) Geographical segments The following table presents revenue, capital expenditure and certain asset information regarding the Group’s geographical segments for the years ended 31 December 2005 and 2004: -

Singapore Malaysia India Thailand United 2005 2004 2005 2004 2005 2004 2005 2004 2005 Segment revenue $ $ $ $ $ $ $ $ $

Sales to external customers 72,855,731 67,872,739 16,092,200 15,603,992 6,313,427 5,750,880 6,102,709 5,194,702 33,874,076

Inter-segment sales 68,421,686 31,922,776 59,959,010 18,487,663 íí íí 29,126,128

Total revenue 141,277,417 99,795,515 76,051,210 34,091,655 6,313,427 5,750,880 6,102,709 5,194,702 63,000,204

Other geographical segments information

Carrying amount of segment assets 80,807,922 65,747,757 33,083,249 19,858,620 83,573 75,000 17,920 6,000 8,007,863

Capital expenditure - Property and equipment 329,885 13,649 121,092 57,077 í 7,428 íí6,130

- Intangibles 2,521,470 4,889,127 125,588 420,689 ííí íí

The Group’s assets are primarily located in the various marketing sites in Singapore, Malaysia, India, Thailand, United States of America, Japan and Europe. The turnover generated from each specific geographical market is tracked based on the location of the Group’s customers. 1 Sales to Japan customers for FY2004 included licensing income of $722,914 reclassified from other operating income.

92 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

States Japan Europe Others Eliminations Consolidated 2004 2005 2004 2005 2004 2005 2004 2005 2004 2005 2004 $ $ $ $ $ $ $ $ $ $ $ (Reclassified) 1 (Reclassified)1

32,063,726 5,690,810 2,394,491 655,809 332,770 29,437,119 11,146,410 íí171,021,881 140,359,710

1,170,522 ííí 1,008,540 82,366 (158,515,364) (51,663,327) íí

33,234,248 5,690,810 2,394,491 655,809 332,770 30,445,659 11,228,776 (158,515,364) (51,663,327) 171,021,881 140,359,710

2,626,013 íí 16,213 102,629 3,277,427 1,616,405 íí 125,294,167 90,032,424

1,325,474 ííí6,998 9,234 247,203 466,341 1,657,829

íí í íí íí 2,647,058 5,309,816

93 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

33. Financial risk management objectives and policies The Company’s board of directors meets periodically to analyse and formulate measures to manage the Group’s exposure to market risk. Generally, the Group adopts a conservative approach to its risk management. It is, and has been throughout the year under review, the Group’s policy that no trading in derivative financial instruments shall be undertaken. The main risks arising from the Group’s financial instruments are credit risk and foreign exchange risk. The management reviews and agrees policies for managing these risks, and they are summarised below: - Credit risk The carrying amount of trade and other debtors, and cash and cash equivalents placed with banks represent the Group’s maximum exposure to credit risk in relation to financial assets. No other financial assets carry a significant exposure to credit risk. Credit risk in respect of trade debtors is limited to the risk arising from the inability of a debtor to make payment when due. It is the Group’s policy to provide credit terms to diverse creditworthy customers. These debts are continually being monitored and therefore, the Group does not expect to incur material credit losses. The Group has no significant concentration of credit risk with any single customer except for trade debt relating to one major customer which accounts for 10% (2004: 0.32%) of its sales for the year and 15% (2004: 1.6%) of its total trade debts as at 31 December 2005. Cash and cash equivalents are placed with established financial institutions. Foreign exchange risk The Group purchases and sells its products in several countries and, as a result, is exposed to movements in foreign currency exchange rates. The Group currently does not enter into foreign currency hedging activities to protect against volatility associated with foreign currency sales and purchases. Such risks are managed through matching sales with corresponding purchases, and assets with liabilities of the same currencies and amounts.

94 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

34. Fair value of financial instruments The following methods and assumptions are used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value. (a) Financial instruments carried at fair value The Group and Company has carried its investments that are classified as available-for-sale financial assets at their fair values as required by FRS 39. (b) Financial instruments whose carrying amount approximates fair value

Cash and cash equivalents, other debtors and other creditors The carrying amounts approximate fair value due to the short-term nature of these balances. Trade debtors and trade creditors The carrying amounts of these debtors and creditors approximate their fair values as they are subject to normal trade credit terms. Related party balances The carrying amounts of these non-trade balances due from/to subsidiary and associated companies approximate their fair values as they are repayable upon demand. Unquoted equity investments It is not practicable to determine, with sufficient reliability without incurring excessive costs, the fair value of the unquoted equity investments due to the absence of quoted market price.

35. Events after the balance sheet date

Strengthened relationship with Toshiba

On 5 January 2006, the Group secured approximately 50% to 60% of the Group’s requirement for NAND flash memory over the next five years with Toshiba Corporation (“Toshiba”). Under the business collaboration, the Group will also supply Toshiba specified minimum quantities of semi-finished USB devices and both parties will cross license for each other’s patents for controller technology. As announced, the above development will contribute positively to the financial performance of the Group in FY 2006.

The financial effect of this event has not been recognised in the financial statements.

95 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

36. Comparative figures Comparatives in the financial statements have been changed from the previous year mainly due to the following: (a) The change in accounting policy as described in Note 2.2 (ii); and (b) Reclassifying licensing income of $722,914 and $721,265 from other operating income to revenue and its associated costs of $1,102,725 and $815,002 from research and development expenses to cost of sales for the Group and Company respectively to reflect the Group’s growth in the newly established licensing segment. Group Company 2004 2004 2004 2004 $ $ $ $ (Reclassified) (As previously (Reclassified) (As previously reported) reported) Profit and loss account Revenue 140,359,710 139,636,796 3,730,982 3,009,717 Cost of sales (129,724,104) (128,621,379) (815,002) í Research and development expenses (854,078) (1,956,803) (304,527) (1,119,529) Other operating income 509,225 188,386 1,059,407 811,337 Other operating expenses (1,043,753) í (969,335) í

Consolidated statement of cash flow Currency realignment (68,956) íí í Foreign exchange difference í 866,087 íí Translation difference arising on consolidation í (935,043) íí Proceeds from placement of shares 34,937,500 32,377,675 íí Expenses relating to share issuance (2,559,825) íí í

(Restated) (As previously (Restated) (As previously reported) reported) Profit and loss account General administrative expenses (2,255,124) (2,057,208) (974,510) (776,594)

Balance sheet Other reserves 395,234 í 395,234 í Revenue reserve 18,059,954 18,455,188 4,215,941 4,611,175

Consolidated statement of cash flow Operating profit before income tax 1,026,134 1,224,050 íí Share-based payments 197,916 íí í

Notes to the financial statements Directors’ Remuneration: - Directors of the 510,629 432,248 Company - Other directors of subsidiary companies 306,453 251,944

96 Trek 2000 International Ltd Annual Report 2005 Notes to the Financial Statements

31 DECEMBER 2005

37. Authorisation of financial statements The financial statements for the year ended 31 December 2005 were authorised for issue in accordance with a resolution of the directors on 3 April 2006.

97 Trek 2000 International Ltd Annual Report 2005 Shareholders’ Information

AS AT 22 MARCH 2006

Authorised share capital : S$50,000,000.00 Issued and fully paid-up capital : S$15,134,733.75 Class of shares : Ordinary share of S$0.05 each Voting rights : One vote per share

STATISTICS OF SHAREHOLDINGS Number of Size of Shareholding Shareholders % Number of Shares %

1 -999 93 4.41 35,599 0.01 1,000 -10,000 1,184 56.17 6,583,768 2.18 10,001 - 1,000,000 804 38.14 41,255,300 13.63

1,000,001 and above 27 1.28 254,820,008 84.18 2,108 100.00 302,694,675 100.00

SUBSTANTIAL SHAREHOLDERS (As recorded in the Register of Substantial Shareholders) Direct Interest % Deemed Interest %

Henn Tan (1) – – 103,761,767 34.28 Toshiba Corporation (2) 22,722,359 7.51 8,500,000 2.81 CTI II Limited (3) 27,500,000 9.09 – – Creative Technology Ltd (3) – – 27,500,000 9.09 Sim Wong Hoo (4) – – 27,500,000 9.09

Notes: (1) Henn Tan is deemed interested in the 103,761,767 shares held as follows:- a) 4,196,176 shares held by his wife, Ang Poh Tee, by virtue of Section 7 of the Companies Act, Cap 50; b) 36,565,591 shares held by Kim Eng Securities Pte Ltd; c) 43,000,000 shares held by Citibank Nominees Singapore Pte Ltd; and d) 20,000,000 shares held by UOB Kay Hian Pte Ltd.

(2) Toshiba Corporation is deemed interested in the 8,500,000 shares held by its wholly owned subsidiary, Toshiba Electronics Asia (Singapore) Pte Ltd.

(3) Creative Technology Ltd (“CTL”) is the holding company of CTI II Limited (“CTI”) and is deemed interested in the 27,500,000 shares held by CTI by virtue of Section 7 of the Companies Act, Cap 50.

(4) Mr Sim Wong Hoo owns more than 20% of the issued share capital of CTL and is deemed interested in the 27,500,000 shares held by CTI by virtue of Section 7 of the Companies Act, Cap 50.

98 Trek 2000 International Ltd Annual Report 2005 Shareholders’ Information

AS AT 22 MARCH 2006

TWENTY LARGEST SHAREHOLDERS No. Name of Shareholders Number of Shares % 1 Kim Eng Securities Pte. Ltd. 67,081,949 22.16 2 Merrill Lynch (Singapore) Pte Ltd 45,458,250 15.02 3 UOB Kay Hian Pte Ltd 28,858,500 9.53 4 CTI II Limited 27,500,000 9.09 5 Waterworth Pte Ltd 10,000,000 3.30 6 DBS Vickers Securities (S) Pte Ltd 9,009,500 2.98 7 HSBC (Singapore) Nominees Pte Ltd 8,760,000 2.89 8 Toshiba Electronics Asia (Singapore) Pte Ltd 8,500,000 2.81 9 Phillip Securities Pte Ltd 6,376,936 2.11 10 Citibank Nominees Singapore Pte Ltd 4,682,000 1.55 11 Ang Poh Tee 4,196,176 1.39 12 Tan Boon Tat 3,900,000 1.29 13 United Overseas Bank Nominees Pte Ltd 3,368,750 1.11 14 Tan Charlie 2,868,550 0.95 15 Tan Johnny 2,855,250 0.94 16 Raffl es Nominees Pte Ltd 2,590,375 0.86 17 DBS Nominees Pte Ltd 2,469,001 0.82 18 OCBC Securities Private Ltd 2,351,250 0.78 19 Yeo Theng Swee 2,030,375 0.67 20 Capital Intelligence Limited 1,991,000 0.66 Total 244,847,862 80.91

PERCENTAGE OF SHAREHOLDING IN PUBLIC’S HANDS 41.24% of the Company’s shares are held in the hands of public. Accordingly, the Company has complied with Rule 723 of the Listing Manual of the SGX-ST.

99 Trek 2000 International Ltd Annual Report 2005 Notice Of Annual General Meeting

TREK 2000 INTERNATIONAL LTD (Company Registration No. 199905744N) (Incorporated in Singapore)

NOTICE IS HEREBY GIVEN that the Annual General Meeting of Trek 2000 International Ltd (the “Company”) will be held at 30 Loyang Way #07-13/14/15, Loyang Industrial Estate, Singapore 508769 on Tuesday, 25 April 2006 at 10.30 a.m. for the following purposes:

AS ORDINARY BUSINESS 1. To receive and adopt the Directors’ Report and the Audited Accounts of the Company for the year ended 31 December 2005 together with the Auditors’ Report thereon. (Resolution 1)

2. To declare a fi rst and fi nal dividend of 20% (or 1 cent per share) less income tax for the year ended 31 December 2005. (2004: 20%) (Resolution 2)

3. To re-elect the following Directors retiring pursuant to Article 91 of the Company’s Articles of Association:-

Mr Seah Moon Ming (Resolution 3) Mr Cheah Kim Teck (Resolution 4) Mr Foo Kok Wah (Resolution 5)

Mr Seah Moon Ming will, upon re-election as a Director of the Company, remain Chairman of the Remuneration Committee and as a member of the Audit and Nominating Committees and will be considered independent.

Mr Cheah Kim Teck will, upon re-election as a Director of the Company, remain Chairman of the Nominating Committee and as a member of Remuneration Committee and will be considered independent.

4. To approve the payment of Directors’ fees of S$43,000 for the year ended 31 December 2005. (2004: S$31,000) (Resolution 6)

5. To re-appoint Messrs Ernst & Young as the Company’s Auditors and to authorise the Directors to fi x their remuneration. (Resolution 7)

6. To transact any other ordinary business which may properly be transacted at an Annual General Meeting.

100 Trek 2000 International Ltd Annual Report 2005 Notice Of Annual General Meeting

TREK 2000 INTERNATIONAL LTD (Company Registration No. 199905744N) (Incorporated in Singapore)

AS SPECIAL BUSINESS To consider and if thought fi t, to pass the following resolutions as Ordinary Resolutions, with or without any modifi cations:

7. Authority to allot and issue shares up to 50 per centum (50%) of issued shares in the capital of the Company That pursuant to Section 161 of the Companies Act, Cap. 50 and Rule 806 of the Listing Manual of the Singapore Exchange Securities Trading Limited, the Directors be empowered to allot and issue shares and convertible securities in the Company at any time and upon such terms and conditions and for such purposes as the Directors may, in their absolute discretion, deem fi t provided that the aggregate number of shares (including shares to be issued in accordance with the terms of convertible securities issued, made or granted pursuant to this Resolution) to be allotted and issued pursuant to this Resolution shall not exceed fi fty per centum (50%) of the issued shares in the capital of the Company at the time of the passing of this Resolution, of which the aggregate number of shares and convertible securities to be issued other than on a pro rata basis to all shareholders of the Company shall not exceed twenty per centum (20%) of the issued shares in the capital of the Company and that such authority shall, unless revoked or varied by the Company in general meeting, continue in force (i) until the conclusion of the Company’s next Annual General Meeting or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is earlier or (ii) in the case of shares to be issued in accordance with the terms of convertible securities issued, made or granted pursuant to this Resolution, until the issuance of such shares in accordance with the terms of such convertible securities. [See Explanatory Note (i)] (Resolution 8)

8. Authority to allot and issue shares under the Trek 2000 International Ltd Share Option Scheme That pursuant to Section 161 of the Companies Act, Cap. 50, the Directors be authorised and empowered to allot and issue shares of the Company to all the holders of options granted by the Company, whether granted during the subsistence of this authority or otherwise, under the Trek 2000 International Ltd Share Option Scheme (“the Scheme”) upon the exercise of such options and in accordance with the terms and conditions of the Scheme, provided always that the aggregate number of additional ordinary shares to be allotted and issued pursuant to the Scheme shall not exceed fi fteen per centum (15%) of the issued shares in the capital of the Company from time to time and that such authority shall, unless revoked or varied by the Company in general meeting, continue in force until the conclusion of the Company’s next Annual General Meeting or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is earlier. [See Explanatory Note (ii)] (Resolution 9)

By Order of the Board

Yeo Poh Noi Caroline Secretary Singapore, 7 April 2006

101 Trek 2000 International Ltd Annual Report 2005 Notice Of Annual General Meeting

TREK 2000 INTERNATIONAL LTD (Company Registration No. 199905744N) (Incorporated in Singapore)

Explanatory Notes: (i) The Ordinary Resolution 8 proposed in item 7 above, if passed, will empower the Directors from the date of this Meeting until the date of the next Annual General Meeting, or the date by which the next Annual General Meeting is required by law to be held or when varied or revoked by the Company in general meeting, whichever is the earlier, to allot and issue shares and convertible securities in the Company. The number of shares and convertible securities that the Directors may allot and issue under this resolution would not exceed fi fty per centum (50%) of the issued shares in the capital of the Company at the time of the passing of this resolution. For issue of shares and convertible securities other than on a pro rata basis to all shareholders, the aggregate number of shares and convertible securities to be issued shall not exceed twenty per centum (20%) of the issued shares in the capital of the Company.

For the purpose of this resolution, the percentage of issued shares is based on the issued shares in the capital of the Company at the time this proposed Ordinary Resolution is passed after adjusting for new shares arising from the conversion or exercise of convertible securities, the exercise of share options or the vesting of share awards outstanding or subsisting at the time when this proposed Ordinary Resolution is passed and any subsequent consolidation or subdivision of shares.

(ii) The Ordinary Resolution 9 proposed in item 8 above, if passed, will empower the Directors of the Company, from the date of this Meeting until the next Annual General Meeting, or the date by which the next Annual General Meeting is required by law to be held or when varied or revoke by the Company in general meeting, whichever is the earlier, to allot and issue shares in the Company of up to a number not exceeding in total fi fteen per centum (15%) of the issued ordinary shares in the capital of the Company from time to time pursuant to the exercise of the options under the Scheme.

Notes: 1. A Member entitled to attend and vote at the Annual General Meeting (the “Meeting”) is entitled to appoint a proxy to attend and vote in his/her stead. A proxy need not be a Member of the Company.

2. The instrument appointing a proxy must be deposited at the Registered Offi ce of the Company at 30 Loyang Way #07-13/14/15, Loyang Industrial Estate, Singapore 508769 not less than forty-eight (48) hours before the time appointed for holding the Meeting. TREK 2000 INTERNATIONAL LTD IMPORTANT: [Company Registration No. 199905744N] 1. For investors who have used their CPF monies to buy Trek 2000 (Incorporated In The Republic of Singapore with limited liability) International Ltd’s shares, this Report is forwarded to them at the request of the CPF Approved Nominees and is sent solely FOR INFORMATION ONLY. Proxy Form 2. This Proxy Form is not valid for use by CPF investors and shall be ineffective (Please see notes overleaf before completing this Form) for all intents and purposes if used or purported to be used by them. 3. CPF investors who wish to attend the Meeting as an observer must submit their requests through their CPF Approved Nominees within the time frame specifi ed. If they also wish to vote, they must submit their voting instructions to the CPF Approved Nominees within the time frame specifi ed to enable them to vote on their behalf.

I/We,

of

being a member/members of Trek 2000 International Ltd (the “Company”), hereby appoint:

Name NRIC/Passport No. Proportion of Shareholdings No. of Shares % Address

and/or (delete as appropriate) Name NRIC/Passport No. Proportion of Shareholdings No. of Shares % Address

or failing him/her, the Chairman of the Meeting as my/our proxy/proxies to vote for me/us on my/our behalf at the Annual General Meeting (the “Meeting”) of the Company to be held on 25 April 2006 at 10.30 a.m. and at any adjournment thereof. I/We direct my/our proxy/proxies to vote for or against the Resolutions proposed at the Meeting as indicated hereunder. If no specifi c direction as to voting is given or in the event of any other matter arising at the Meeting and at any adjournment thereof, the proxy/proxies will vote or abstain from voting at his/ her discretion. The authority herein includes the right to demand or to join in demanding a poll and to vote on a poll.

(Please indicate your vote “For” or “Against” with a tick [—] within the box provided.)

No. Resolutions relating to: For Against 1 Directors’ Report and Audited Accounts for the year ended 31 December 2005 2 Payment of proposed fi rst & fi nal dividend 3 Re-election of Mr Seah Moon Ming as a Director 4 Re-election of Mr Cheah Kim Teck as a Director 5 Re-election of Mr Foo Kok Wah as a Director 6 Approval of Directors’ fees amounting to S$43,000 7 Re-appointment of Messrs Ernst & Young as Auditors 8 Authority to allot and issue new shares 9 Authority to allot and issue shares under the Trek 2000 International Ltd Share Option Scheme

Dated this day of 2006

Total number of Shares in: No. of Shares (a) CDP Register (b) Register of Members

Signature of Shareholder(s) or, Common Seal of Corporate Shareholder  Notes : 1. Please insert the total number of Shares held by you. If you have Shares entered against your name in the Depository Register (as defi ned in Section 130A of the Companies Act, Chapter 50 of Singapore), you should insert that number of Shares. If you have Shares registered in your name in the Register of Members, you should insert that number of Shares. If you have Shares entered against your name in the Depository Register and Shares registered in your name in the Register of Members, you should insert the aggregate number of Shares entered against your name in the Depository Register and registered in your name in the Register of Members. If no number is inserted, the instrument appointing a proxy or proxies shall be deemed to relate to all the Shares held by you.

2. A member of the Company entitled to attend and vote at a meeting of the Company is entitled to appoint one or two proxies to attend and vote in his/her stead. A proxy need not be a member of the Company.

3. Where a member appoints two proxies, the appointments shall be invalid unless he/she specifi es the proportion of his/her shareholding (expressed as a percentage of the whole) to be represented by each proxy.

4. The instrument appointing a proxy or proxies must be deposited at the registered offi ce of the Company at 30 Loyang Way #07-13/14/15, Loyang Industrial Estate, Singapore 508769 not less than 48 hours before the time appointed for the Meeting.

5. The instrument appointing a proxy or proxies must be under the hand of the appointor or of his attorney duly authorised in writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed either under its seal or under the hand of an offi cer or attorney duly authorised. Where the instrument appointing a proxy or proxies is executed by an attorney on behalf of the appointor, the letter or power of attorney or a duly certifi ed copy thereof must be lodged with the instrument.

6. A corporation which is a member may authorise by resolution of its directors or other governing body such person as it thinks fi t to act as its representative at the Meeting, in accordance with Section 179 of the Companies Act, Chapter 50 of Singapore.

General: The Company shall be entitled to reject the instrument appointing a proxy or proxies if it is incomplete, improperly completed or illegible or where the true intentions of the appointor are not ascertainable from the instructions of the appointor specifi ed in the instrument appointing a proxy or proxies. In addition, in the case of Shares entered in the Depository Register, the Company may reject any instrument appointing a proxy or proxies lodged if the member, being the appointor, is not shown to have Shares entered against his name in the Depository Register as at 48 hours before the time appointed for holding the Meeting, as certifi ed by The Central Depository (Pte) Limited to the Company. Fellow Trekkians 30 Loyang Way #07-13/14/15 Loyang Industrial Estate Singapore 508769

Tel: 6546 6088 Fax: 6546 6066 www.trek2000.com.sg www.thumbdrive.com