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RT 2011

ANNUAL REPORT

2011

GROWSERVELEADCONSERVE

CONTENTS02 Corporate Profile

03 Group of Companies

04 Chief Executive’s Message

06 Challenger Retail Locations

08 Corporate Information

10 Profile of Board of Directors

11 Profile of Key Management

12 Financial Highlights

13 Operations Review

17 Corporate Governance

32 Directors’ Report

35 Statement by Directors

36 Independent Auditors’ Report

38 Audited Financial Statements

43 Notes to the Financial Statements

89 Statistics of Shareholdings

91 Notice of Annual General Meeting

CHALLENGER TECHNOLOGIES LIMITED ANNUAL REPORT 2011 01

Since our inception, we have established ourselves as the foremost retailer of IT

products. We continuously identify emerging product needs in the market and strategically add new outlets. Our dynamic business model has enabled us to achieve our long-term vision of business expansion and revenue growth successfully.

GROW

CHALLENGER TECHNOLOGIES LIMITED ANNUAL REPORT 201102

CORPORATE PROFILE

With convenience and service as its hallmarks, Challenger Technologies Limited (“Challenger”) is the leading IT products and services provider in Singapore. It has an extensive network of 28 strategically located retail outlets, comprising of one flagship megastore, 19 superstores and 8 specialty stores (under the brand names of Challenger Mini and Matrix. Challenger is also represented in Malaysia by one megastore and three superstores. Listed on the Singapore Stock Exchange in January 2004, Challenger’s achievements are well-grounded with a loyal membership base of over 280,000 members who regularly patronise its outlets.


GROUP OF COMPANIES

Challenger Technologies Limited

Challenger IT Services Pte. Ltd.*Singapore

(IT Solutions Providerfor Businesses)

100%

Challenger Technologies (M) Sdn Bhd

Malaysia(IT Retail Store)

100%

Matrix Integration Pte. Ltd.* Singapore

(IT Specialty Store)

100%

CBD eVision Pte Ltd

Singapore(Electronic Signage)

100%

Challenger eCommerce Pte. Ltd.*Singapore

(Online Retail Store)

100%

Incall Systems Pte Ltd Singapore

(Telephonic Call Centre,Data Management Services and Provision of Star Shield

Extended Warranty)

70%

* Currently Dormant


CHIEF EXECUTIVE’S MESSAGEBY MR LOO LEONG THYE

Revenue from the Group’s core retail business in IT products and services increased 31% to $310.1 million in FY2011. This business contributed about 97.9% of our Group revenue. The increase has been mainly attributed to better same-store sales, full year operations for stores opened during the year 2010 and new stores that were opened during the year 2011.

In FY2011, we added six stores to our Singapore operations — the most number of stores opened in a single year since our expansion drive began in 2006.

As at the date of this report, we expect to open two more Challenger stores in the west and central region of Singapore by April 2012. Whilst new retail stores will still be opened at strategic locations, we may also close stores that are deemed not viable.

We currently operate four Challenger retail stores in Malaysia. Three of the stores are located in Kuala Lumpur and one in Malacca. We will also expand our Malaysian operations if we secure suitable locations.

In the past year, we have continued to enhance our loyalty programme for our members, resulting in a significant increase in our membership base to more than 280,000 members. Our members are able to purchase selected products at attractive discounts and accumulate points to redeem products and vouchers. A new initiative embarked in late-2011 also saw our first Outlet concept store at Changi City Point, with prices and merchandise marked down exclusively for our members.

For the financial year ended 31 Dec 2011 (“FY2011”),our Group revenue jumped about

31% to $316.9 millionand net profit increased by about

14% to $15.7 million.Our electronic signage service business, operated by CBD eVision Pte Ltd, registered an increase in turnover of 453% to $3.2 million in FY2011 due to completion of projects for commercial buildings like offices and shopping malls. We expect this business unit to continue its performance in the current financial year.

Our subsidiary, Incall Systems Pte Ltd (“Incall”), increased its revenue in FY2011 by about 11% to about $3.6 million. Incall is in the business of operating call centres, event management, direct marketing, database management and publishing of directories. In addition, Incall offers extended warranties for various electrical and IT products through its Star Shield Extended Warranty programme (“Star Shield”). It is the exclusive service provider for Star Shield sold at our retail stores in Singapore.

A final tax-exempt one-tier dividend of 1.2 cents per ordinary share has been proposed, subject to shareholders’ approval during the forthcoming Annual General Meeting to be held on 25 April 2012. We had paid an interim tax-exempt one-tier dividend of 1.0 cent per ordinary share in September 2011. This brings the total dividend to 2.2 cents per ordinary share for FY2011.

Finally, I would like to thank my fellow directors, management team and all employees for their hard work and commitment to the Company. In addition, I also appreciate the invaluable support rendered to us by shareholders and business partners for their contributions to the Group. As we enter a new challenging year, we look forward to the continued support from all our stakeholders.


Our 30 years of success is built on our strong dedication to customer service

excellence. We strive to be attentive to our customers’ needs and constantly adapt and seek innovative ways to enhance our customers’ experience.

SERVE


CHALLENGER RETAIL LOCATIONS

SINGAPORE

MEGASTORE

MEGASTORE @ FUNAN 109 North Bridge Road #06-00, Funan DigitaLife Mall Singapore 179097 Tel: 6339 9008 [email protected]

SUPERSTORE

AMK HUB 53 Ang Mo Kio Avenue 3#02-10/14, #02-59/64AMK HubSingapore 569933Tel: 6555 [email protected]

BEDOK POINT 799 New Upper Changi Road#B1-23/26 Bedok PointSingapore 467351Tel: 6446 [email protected]

CHANGI CITY POINT 5 Changi BusinessPark Central 1#01-56/59 Changi City PointSingapore 486038Tel: 6636 [email protected]

THE CLEMENTI MALL 3155 Commonwealth Avenue West#04-56/60 The Clementi MallSingapore 129588Tel: 6570 [email protected]

EASTPOINT 3 Simei Street 6 #03-21/22, Eastpoint Mall Singapore 528833 Tel: 6587 7182 [email protected]

HOUGANG MALL 90 Hougang Avenue 10 #04-15, Hougang Mall Singapore 538766 Tel: 6488 0123 [email protected]

IMM 2 Jurong East Street 21 #02-23, IMM Building Singapore 609601 Tel: 6426 9123 [email protected]

JCUBE 2 Jurong East Central 1#02-11 JCubeSingapore 609731Tel: 6592 [email protected]

JURONG POINT SHOPPING CENTRE 63 Jurong West Central 3 #B1-94/96, Jurong Point Shopping Centre Singapore 648331 Tel: 6793 7122 [email protected]

112 KATONG 112 East Coast Road#03-01 & 31, 112 KatongSingapore 428802Tel: 6447 [email protected]

NEX SERANGOON CENTRAL 23 Serangoon Central#04-33 nexSingapore 556083Tel: 6634 [email protected]

NORTHPOINT 930 Yishun Avenue 2#03-12/15 NorthpointShopping CentreSingapore 769098Tel: 6853 [email protected]

PARKWAY PARADE 80 Marine Parade Road #04-01, Parkway Parade Singapore 449269 Tel: 6342 5699 [email protected]

PLAZA SINGAPURA 68 Orchard Road#04-12/12A Plaza SingapuraSingapore 238839Tel: 6837 [email protected]

TAMPINES 1 10 Tampines Central 1 #04-22/25, Tampines 1 Singapore 529536 Tel: 6260 6318 [email protected]

TIONG BAHRU PLAZA 302 Tiong Bahru Road #03-19, Tiong Bahru Plaza Singapore 168732 Tel: 6376 5646 [email protected]

UNITED SQUARE 101 Thomson Road #02-26, United Square Singapore 307591 Tel: 6478 6255 [email protected]

VIVOCITY 1 HarbourFront Walk #02-34/35, VivoCity Singapore 098585 Tel: 6376 6100 [email protected]

WHITE SANDS 1 Pasir Ris Central Street 3 #03-03, White Sands Singapore 518457 Tel: 6585 5188 [email protected]


CHALLENGER RETAIL LOCATIONS (CONTINUED)

SINGAPORE

SPECIALTY STORE

MATRIX @ FUNAN DIGITALIFE MALL109 North Bridge Road#03-33, Funan DigitaLife MallSingapore 179097Tel: 6338 [email protected]

MATRIX @ FUNAN DIGITALIFE MALL109 North Bridge Road#03-39, Funan DigitaLife MallSingapore 179097Tel: 6339 [email protected]

CHALLENGER MINI @ FUNAN 109 North Bridge Road #02-05, Funan DigitaLife Mall Singapore 179097 Tel: 6334 6101 [email protected]

CHALLENGER MINI @ FUNAN 109 North Bridge Road#04-19, Funan DigitaLife MallSingapore 179097Tel: 6334 [email protected]

CHALLENGER MINI @ FUNAN 109 North Bridge Road#04-27, Funan DigitaLife MallSingapore 179097Tel: 6336 [email protected]

CHALLENGER MINI @ THOMSON 301 Upper Thomson Road #03-28/29, Thomson Plaza Singapore 574408 Tel: 6457 3219 [email protected]

CHALLENGER MINI @ IMM 2 Jurong East Street 21#02-18 IMM BuildingSingapore 609601Tel: 6562 0361 [email protected]

YEW TEE POINT 21 Choa Chu Kang North 6#01-18 Yew Tee PointSingapore 689578Tel: 6465 [email protected]

MALAYSIA

MEGASTORE

MEGASTORE @ MINES SHOPPING FAIR L04-16, Mines Shopping Fair Jalan Dulang, Mines Resort City 43300 Seri KembanganSelangor, Malaysia Tel: (603) 8946 9000 [email protected]

SUPERSTORE

CAPSQUARE Lot F12A - F15A, Level 1Pikom ICT Mall CapsquareNo. 7 Persiaran CapsquareCapital Square 50100, Kuala LumpurTel: (603) 2202 [email protected]

SURIA KLCC Lot 306-307, Third FloorSuria KLCCKuala Lumpur City Centre50088 Kuala LumpurMalaysiaTel: (603) 2332 [email protected]

MAHKOTA PARADE Lot S09B, Mahkota ParadeNo. 1 Jalan Merdeka75000 MelakaMalaysiaTel: (606) 2839 [email protected]

UPCOMING STORE– SINGAPORE

Great World City 1 Kim Seng Promenade#02-22/24 Great World CitySingapore 237994Tel: 6592 [email protected]


CORPORATE INFORMATION

BOARD OF DIRECTORS Chief Executive Loo Leong Thye

Executive Director Ng Kian Teck

Non-Executive Director Ong Sock Hwee

Independent Director Ho Boon Chuan Wilson

Independent Director Max Ng Chee Weng

AUDIT COMMITTEE Chairman Ho Boon Chuan Wilson

MembersMax Ng Chee Weng Ong Sock Hwee

NOMINATING COMMITTEE ChairmanMax Ng Chee Weng

MembersHo Boon Chuan Wilson Ong Sock Hwee

REMUNERATION COMMITTEE ChairmanMax Ng Chee Weng

MembersHo Boon Chuan Wilson Ong Sock Hwee

COMPANY SECRETARY Chia Foon Yeow

REGISTERED OFFICE 1 Ubi Link Challenger TecHub Singapore 408553 Tel: (65) 6318 9800 Fax: (65) 6318 9801 Email: [email protected] Company Registration No.: 198400182K

SHARE REGISTRAR AND SHARE TRANSFER OFFICE Boardroom Corporate & Advisory Services Pte. Ltd. 50 Raffles Place #32-01 Singapore Land Tower Singapore 048623

AUDITORS RSM Chio Lim LLP Public Accountants and Certified Public Accountants (a member of RSM International) 8 Wilkie Road#03-08 Wilkie EdgeSingapore 228095 Partner-in-charge: Lee Mong Sheong (effective from financial year ended 31 December 2010)

PRINCIPAL BANKERS Citibank, N.A. 8 Marina View #17-01 Asia Square Tower 1 Singapore 018960

DBS Bank Limited 6 Shenton Way DBS Building Singapore 068809

United Overseas Bank Limited 80 Raffles Place UOB Plaza Singapore 048624

CHALLENGER TECHNOLOGIES LIMITED ANNUAL REPORT 2011 099R

GER TECHNOLOGIESANNUAL REPO

MITED

Our leadership vision is consistently mani fested in our management ’s

actions, values and goals. We are committed to training and empowering our staff to contribute proactively to the development of the company. Together, we surmount challenges, chart new growth and attain greater heights.

LEAD


PROFILE OF BOARD OF DIRECTORS

MR LOO LEONG THYE (CHIEF EXECUTIVE)

He is responsible for the overall management of our Group. He also charts our corporate directions, strategies and policies. He has over 30 years of experience in the IT industry. He started the business operations of our Group in 1982 as a sole-proprietorship business and has been instrumental in growing the operations of our Group to its present size. In 1986, he started the electronic signage business under CBD eVision and has been involved in the operations of the Company since its inception. In the year 2011, he has been awarded Best Chief Executive Officer 2011 for listed companies with less than $300 million in market capitalization by the Singapore Exchange.

MR NG KIAN TECK (EXECUTIVE DIRECTOR)

He is in-charge of merchandising and inventory control of the Singapore retail operations. He joined the Group in 1996 and has over 17 years of experience in the IT industry. Mr Ng holds a Bachelor of Science in Business Administration from the California State University, Los Angeles.

MADAM ONG SOCK HWEE (NON-EXECUTIVE DIRECTOR)

Beginning 1997, she played an integral role in growing the business by assisting our Chief Executive in the operations of retail stores. She has over 14 years of experience in the IT industry. Since May 2011, she has relinquished her executive role and has been re-designated as a Non-Executive Director.

MR HO BOON CHUAN WILSON (INDEPENDENT DIRECTOR)

He is the Managing Director of Westcon Solutions, the IT security and value added distribution arm of Westcon across Asia. His experiences over the past 18 years include working in the capital markets group of DBS Bank, holding the post of Chief Financial Officer of a listed company in Singapore and managing a regional IT distribution group. Mr Ho is an accountant by training and is a Certified Public Accountant with the Institute of Certified Public Accountants of Singapore and a Chartered Financial Analyst.

MR MAX NG CHEE WENG (INDEPENDENT DIRECTOR)

He is the Managing Director of Gateway Law Corporation, a regional intellectual property and technology law practice, headquartered in Singapore and with people and offices in Kuala Lumpur, Jakarta and Hong Kong. He specialises in the areas of intellectual property and other forms of litigation. He is also frequently listed as a leading lawyer in his field, in publications such as Chambers Asia-Pacific, Legal 500, AsiaLaw Leading Lawyers, The International Who’s Who of Business Lawyers and Singapore’s inaugural Legal Who’s Who. He holds a Master of Laws from the National University of Singapore, and is also admitted to practice in Malaysia, England and Wales. He is also a partner of a law firm in Malaysia, based in Kuala Lumpur.


PROFILE OF KEY MANAGEMENT

MR TAN WEE KO (GROUP CHIEF FINANCIAL OFFICER)

He joined the Group in May 2005 and is overall in-charge of matters relating to human resource, business development, accounting, financial and funding requirements of the Group. He is a Certified Public Accountant with the Institute of Certified Public Accountants of Singapore and CPA Australia. He has a Master in Business Administration from the University of Adelaide and a Bachelor degree in Accountancy from the Nanyang Technological University.

MS LOO PEI FEN(GROUP MARKETING & ECOMMERCE DIRECTOR)

She joined the Group in 2010 and is in charge of Group marketing activities and visual merchandising of the Singapore retail operations. She holds a Bachelor’s of Arts from the University of Southern California and a Masters of Marketing from the University of Newcastle.

MR NG GAK SENG (DIRECTOR & GENERAL MANAGER - CHALLENGER TECHNOLOGIES (M) SDN. BHD.)

He joined the Group in 2004 and is responsible for the overall retail operations and business developments in Malaysia. He has more than 37 years of experience in the IT and computer industry. Prior to joining the Group, he worked with international corporations and IT related companies where he held senior management positions and was responsible for managing their operations.

MR CHIA KANG WHYE (GENERAL MANAGER & EXECUTIVE DIRECTOR – CBD EVISION PTE LTD)

He is responsible for the day-to-day management of the electronic signage business, which includes the marketing of electronic signage products and overseeing turnkey projects for the supply and installation of electronic signage. He joined CBD eVision in 1986 and has over 23 years of experience in the electronic signage business.

MR SEAH CHIN TIONG (MANAGING DIRECTOR – INCALL SYSTEMS PTE LTD)

He started inCall Systems, an Outsourced Business Service Provider which offers end-to-end integrated marketing solutions in 2001. He is responsible for the overall management and the day-to-day operations of our database, call centre and direct marketing business. With more than 20 years of experience in the IT industry, he brings a dynamic and unique blend of technology experience and business expertise to the Company. He holds a Bachelor of Business Administration from the National University of Singapore and a Graduate Diploma in Systems Analysis from the Institute of Systems Science.


FINANCIAL HIGHLIGHTS

CHALLENGER TECHNOLOGIES LIMITED AND ITS SUBSIDIARIES

FY2011 FY2010 FY2009 FY2008 FY2007*$'000 $'000 $'000 $'000 $'000

(Restated)

Group Revenue 316,864 240,999 191,599 168,723 136,089

Profit Before Tax 19,018 16,496 13,652 7,989 8,773

Profit After Tax 15,725 13,778 11,145 5,981 7,059

Earnings/(Loss) Per Share (cents) – diluted 4.53 3.96 4.80 2.58 3.56

Shareholders' funds 42,717 34,292 26,286 20,781 21,815

Net Tangible Assets Per Share (cents) 12.37 9.93 11.47 9.09 10.74

* Have not been restated in accordance with INT FRS113 Customer Loyalty Programme

KEY FINANCIAL RATIOS

FY2011 FY2010 FY2009 FY2008 FY2007(Restated)

Net Profit Margin (%) 5% 6% 6% 4% 5%

Inventory turnover (days) 34 45 36 25 28

Trade receivable turnover (days) 4 4 6 4 9

Return on equity (%) 37% 40% 42% 29% 32%

Quick ratio (times) 1.11 0.92 0.96 1.21 1.51

Current ratio (times) 1.59 1.47 1.56 1.57 2.01

13CHALLENGER TECHNOLOGIES LIMITED ANNUAL REPORT 2011

OPERATIONS REVIEW

Group VarianceIncrease/

(Decrease) Remarks31.12.2011 31.12.2010S$’000 S$’000 S$’000

Revenue 316,864 240,999 75,865 > Revenue increased mainly due to improved performance of existing stores and expansion of retail operations in Singapore and Malaysia.

Changes in inventories (650) 9,793 (10,443)Cost of goods purchased (255,812) (202,178) 53,634 > This increase has been in line with

higher retail revenue achieved in FY2011.

Other consumables used (694) (466) 228

Other Items of IncomeInterest Income 209 148 61Dividend Income 39 61 (22)Other Credits 598 717 (119)Other Items of ExpenseDepreciation expense (3,126) (2,254) 872 > This increase has been due to

acquisition of new plant and equipment as a results of expansion of retail stores.

Employee Benefits Expense

(18,812) (16,486) 2,326 > The increase has been mainly due to increase in number of headcount for new stores and higher staff incentive paid as a result of higher sales achieved.

Finance Costs (100) - 100Other Expenses (18,811) (13,764) 5,047 > The increase has been mainly due to:

1) higher premises expenses due to increased number of stores in FY2011; and2) increase other operating expenses to support additional stores.

Other Charges (687) (74) 613 > The increase has been due to unrealised foreign exchange loss arising from United States (“US”) dollar against Singapore dollar for the purpose of US dollar purchase transactions, compared to a gain recorded in FY2010.

Profit Before Tax 19,018 16,496 2,522Income Tax Expenses (3,293) (2,718) 575 > The increase has been due to higher

profits achieved in FY2011.

Profit Net of Tax 15,725 13,778 1,947

STATEMENT OF COMPREHENSIVE INCOME


OPERATIONS REVIEW



AssetsNon-Current AssetsDeferred Tax Assets 27 27 –Other Financial Assets, Non-Current 1,768 2,725 (957) >

The decrease has been mainly due to the disposal of quoted shares investment.

Property, Plant and Equipment, Total 14,203 12,300 1,903 >

The increase has been due to acquisition of equipment and renovation for new and existing retail stores in Singapore during FY2011.

These have been partially offset by depreciation charged for the year.

Total Non-Current Assets 15,998 15,052 946

Current AssetsInventories 24,081 25,161 (1,080) > This decrease has been due to better

inventory control.

Cash and Cash Equivalents 48,879 36,167 12,712 > The increase has been mainly due to operating profits and working capital generated from operations. These have been partially offset by payment of dividends and capital expenditure incurred for new and existing retail stores.

Trade and Other Receivables, Current 3,281 2,828 453

> This increase has been due to higher trade debt from credit card companies and higher sales.

Other Assets, Current 3,637 2,698 939 > The increase has been mainly due to higher deposits paid for new stores in Singapore and Malaysia.

Total Current Assets 79,878 66,854 13,024

Total Assets 95,876 81,906 13,970

STATEMENT OF FINANCIAL POSITION


OPERATIONS REVIEW



Equity and LiabilitiesEquityShare Capital 18,775 18,775 –Retained Earnings 23,611 15,221 8,390Other Reserves, Total 331 296 35

Total Shareholders’ Funds 42,717 34,292 8,425Minority Interests 298 257 41

Total Equity 43,015 34,549 8,466

Non-Current LiabilitiesDeferred Tax Liabilities 142 144 (2)Other Liabilities, Non-Current 2,335 1,807 528 >

The increase has been mainly due to increase in deferment of the recognition of membership admin fee and revenue from Starshield Warranty.

Total Non-Current Liabilities 2,477 1,951 526

Current Liabilities

Trade and Other Payables, Current 23,375 31,065 (7,690) >

This has been mainly due to early settlement of trade payments.

Income Tax Payable, Current 3,744 2,782 962Other Financial Liabilities 16,629 6,429 10,200 > The increase has been due to the draw

down of additional short-term loan facility in FY2011.

Other Liabilities, Current 6,636 5,130 1,506 > This has been mainly due to increase in deferment of the recognition of reward points granted to customers and deferment of membership admin fee recognition.

Total Current Liabilities 50,384 45,406 4,978

Total Liabilities 52,861 47,357 5,504

Total Equity and Liabilities 95,876 81,906 13,970


W e b e l i e v e t h a t environmentally-friendly

practices complement business efficiency. Our staff are encouraged to reduce, recycle and reuse and we advocate corporate social responsibility towards the environment by incorporating these processes in our daily operations.

CONSERVE

CORPORATE GOVERNANCE


The Board of Directors of Challenger Technologies Limited is committed to achieving a high standard of corporate governance within the Group. Therefore, the Board has put in place effective and self-regulatory corporate governance practices for greater transparency, protection of shareholders’ interests and enhancement of long-term shareholder value and to strengthen investors’ confidence in its management and financial reporting.

The Board has adopted for its corporate governance practices all applicable principles of the Code of Corporate Governance 2005.

The Board’s Conduct of its Affairs

Principle 1: Every company should be headed by an effective Board to lead and control the Company. The Board is collectively responsible for the success of the Company. The Board works with Management to achieve this and the Management remains accountable to the Board.

Role of Board

The Board provides leadership to the Group by setting up the corporate policies and strategic aims. The principal functions of the Board, apart from its statutory responsibilities, are:

i. charting the corporate strategy and direction of the Group, including the approval of broad policies, strategies and financial objectives;

ii. approving annual budgets, proposals for acquisition, investments and disposals;

iii. reviewing the financial results of the Group and approving the publishing of the same;

iv. approving the annual report of the Company and the audited financial statements of the Group;

v. with the assistance of the Audit Committee, overseeing the processes for evaluating the adequacy of internal controls, risk management practices, financial reporting structures and compliance controls;

vi. approving nominations to the Board and appointing key personnel;

vii. evaluating the performance and approving the remuneration of key management personnel; and

viii. generally managing the affairs of the Group.

Delegation to Sub-Committees

To ensure that specific issues are subject to in-depth reviews and discussions, certain functions have been delegated by the Board to committees of its members. These Committees make recommendations to the Board, upon such reviews and discussions. Currently, there are three Committees – the Audit Committee (AC), the Nominating Committee (NC) and the Remuneration Committee (RC).



Frequency of Meetings

The Board and Committees meet regularly and as and when warranted by particular circumstances as deemed appropriate by the Board. The Articles of Association of the Company also provide for telephonic meetings.

The number of meetings of the Board and Committees held in FY2011, as well as the attendance of each Board member thereat, are set out below:

Board Committees

Audit Nominating Remuneration

Number of meetings held 2 2 1 1

Board Members Number of meetings attended

Loo Leong Thye 2 2 1 1Ong Sock Hwee1 2 2 1 1Ng Leong Hai2 – – – –Ng Kian Teck2 1 1 1 1Ng Kian Teck3 1 1 – –Ho Boon Chuan Wilson 2 2 1 1Max Ng Chee Weng 2 2 1 1

1 Mdm Ong Sock Hwee was re-designated as a Non-Executive Director of the Company, and a member of the Audit Committee, Remuneration Committee and Nominating Committee with effect from 3 May 2011.

2 Mr Ng Leong Hai, a Non-Executive Director, did not offer himself for re-election at the Annual General Meeting of the Company held on 26 April 2011 and Mr Ng Kian Teck, who is the Alternate Director to Mr Ng Leong Hai, has by fact of Mr Ng Leong Hai’s retirement ceased to be a director of the Company with effect from 26 April 2011.

3 Mr Ng Kian Teck was appointed as an Executive Director on 3 May 2011.

Matters requiring Board Approval

The Board had previously approved and adopted internal control procedures and guidelines for the Company. Under such procedures and guidelines, the approval of the Board is required for any transaction exceeding $1 million in value not entered into in the ordinary course of business.

Training for Directors

Comprehensive briefings are conducted for new Directors to provide them with an insight to the operations of the Group and its corporate governance practices. Directors are also periodically briefed on the performance and developments in respect of the Group. Directors are also informed of changes in laws, regulations and risks impacting the Group. Directors will be sent for external seminars to obtain updates in business and regulatory changes relevant to the Group, when necessary.

In addition to the above, Directors may also request further explanations, briefings or informal discussions on any aspect of the Group’s operations or business issues from the management.



Letter to New Directors

The Company will provide formal letters of appointment for any newly appointed Directors, setting out their duties and obligations.

Board Composition and Guidance

Principle 2: There should be a strong and independent element on the Board, which is able to exercise objective judgment on corporate affairs independently, in particular, from Management. No individual or small group of individuals should be allowed to dominate the Board’s decision making.

Strong and independent element on the Board

The Board comprises of five members. Save for Mr Loo Leong Thye (the CEO) and Mr Ng Kian Teck, the rest of the Board is made up of Non-Executive and Independent Directors (the “IDs”). Each Director has been appointed on the strength of his and her calibre and experience. Please refer to the section on the Board of Directors for their individual profiles.

As there are two IDs on the Board, the requirement of the Code that at least one-third of the Board comprised of IDs is satisfied.

The NC adopts the Code’s definition of what constitutes an ID. The independence of each Director is reviewed annually by the NC. The NC is of the view that Mr Wilson Ho and Mr Max Ng are independent and that there are no individuals or small groups of individuals who dominate the Board’s decision making process.

Board Size

The Board periodically examines its size to ensure that it is of an appropriate number for effective decision making, taking into account the scope and nature of the operations of the Company.

Competencies of Directors

The Board is of the opinion that its current size is appropriate and facilitates effective decision making, taking into account the nature and scope of the Group’s operations. The Board composition reflects the broad range of experience, skills and knowledge necessary for the effective stewardship of the Group. The Board comprises of businessmen and professionals who as a group possess competencies in accounting, finance, business, management and law, and knowledge and experience in strategic planning and the Group’s industry and customer-base. The profile of each Director is set out in this Annual Report.

Chairman and Chief Executive Officer

Principle 3: There should be a clear division of responsibilities at the top of the Company – the working of the Board and the executive responsibility of the Company’s business – which will ensure a balance of power and authority, such that no one individual represents a considerable concentration of power.



Chairman

The Company has not created a separate position of Chairman as the Directors are of the view that the current Board composition and the establishment of the Committees, namely, the AC, NC and RC, are sufficient to ensure accountability and independent decision-making.

The Board collectively ensures the following:

i. in consultation with the management, the timely scheduling of meetings to enable the Board to perform its duties responsibly, while not interfering with the flow of the Company’s operations;

ii. in consultation with the management, the preparation of the agenda for Board meetings;

iii. in consultation with the management, the exercise of control over the quality, quantity and timeliness of information between the management and the Board; and

iv. compliance with corporate governance best practices.

CEO

The CEO, Mr Loo Leong Thye, bears executive responsibility for the Group’s business and implements the decisions and directions of the Board. For administrative purposes only, he is usually elected as the Chairman of each Board meeting.

Board Membership

Principle 4: There should be a formal and transparent process for the appointment of new directors to the Board.

Establishment, Composition and Membership of NC

The Company has the NC, which makes recommendations to the Board on all appointments and re-appointments to the Board.

The NC comprises of three Non-Executive Directors, two of whom, including the Chairman of the NC, are IDs. The Chairman of the NC is neither a substantial shareholder nor directly associated (within the meaning of the Code) to a substantial shareholder (with an interest of 5% or more in the voting shares of the Company).



The membership of the NC is, as follows:

Chairman: Max Ng Chee Weng (ID)Members: Ho Boon Chuan Wilson (ID)

Mdm Ong Sock Hwee (Non-Executive Director)

The NC has written terms of reference that describe the responsibilities of its members.

Responsibilities of NC

The responsibilities of the NC are:

i. to review the nominations for the appointments and re-appointments of Directors;

ii. to review the independence of the Directors;

iii. to review the adequacy of each Director’s contribution at meetings and his ability and capacity in carrying out the duties as a Director;

iv. to ensure that all Directors submit themselves for re-nomination and re-election at regular intervals and at least once every three years; and

v. to decide on how the Board’s performance may be evaluated, and propose objective performance criteria to assess effectiveness of the Board as a whole and the contribution of each Director.

Independence and Commitment of Directors

The NC determines on an annual basis whether or not a Director is independent, for the purposes of the Code. The NC is of the view that the IDs are independent.

In assessing the performance of each individual Director, the NC considers whether he has multiple board representations and is able to and adequately carried out his duties as a Director notwithstanding such commitments. The NC is satisfied that sufficient time and attention to the affairs of the Company has been given by those Directors who have multiple board representations.

Selection and Appointment of New Directors

The Company does not have a formal process for the selection and appointment of new Directors to the Board. However, if required, the Company has or is able to procure search services, contacts and recommendations for the purposes of identifying suitably qualified and experienced persons for appointment to the Board.



Key information on Directors

The date of initial appointment and last re-election of each director, together with their directorships in other listed Companies are set out below:

Name Age AppointmentDate of initial appointment

Date of last election

Directorships in other listed

companies

Loo Leong Thye 58 Chief Executive Officer

14/01/1984 27/04/2010 NIL

Ng Leong Hai1 60 Non-Executive Director

15/07/2003 18/04/2008 NIL

Ng Kian Teck 44 Alternate Director to Mr Ng Leong Hai

15/07/2003 – NIL

Ng Kian Teck2 44 Executive Director 03/05/2011 – NIL

Ong Sock Hwee 57 Non-executive Director

28/12/1994 16/04/2009 NIL

Ho Boon Chuan Wilson 42 Independent

Director17/11/2003 27/04/2010 Present

Directorships

NIL

Past Directorships(in the last three preceding years)

Multi-Chem Limited

Max Ng Chee Weng 41 Independent Director

12/01/2006 26/04/2011 NIL

1 Mr Ng Leong Hai, a Non-Executive Director, did not offer himself for re-election at the Annual General Meeting of the Company held on 26 April 2011.

2 Mr Ng Kian Teck was appointed as an Executive Director on 3 May 2011.

Key information of each Director is disclosed in the profile of that Director as set out in this Annual Report.



Board Performance

Principle 5: There should be a formal assessment of the effectiveness of the Board as a whole and the contribution by each Director to the effectiveness of the Board.

Formal assessment of the effectiveness of the Board and contribution of each Director

The NC has adopted processes for the evaluation of the Board’s performance and effectiveness as a whole and the performance of individual Directors, based on performance criteria set by the Board. For the financial year ending 31 December 2011, the NC has set performance targets in respect of sales, profits, gross profit margin and return on equity as gauges to measure and monitor the performance of the Board. Other performance criteria include qualitative and quantitative factors such as performance of principal functions and fiduciary duties, level of participation at meetings, guidance provided to the management and attendance record.

Access to Information

Principle 6: In order to fulfil their responsibilities, Board members should be provided with complete, adequate and timely information prior to board meetings and on an on-going basis.

Information from and Access to Management

Each member of the Board has complete access to such information regarding the Company as may be required for the discharge of his duties and responsibilities. Prior to each Board meeting, the members of the Board are each provided with the relevant documents and information necessary, including background and explanatory statements, financial statements, budgets, forecasts and progress reports of the Group’s business operations, for them to comprehensively understand the issues to be deliberated upon and make informed decisions thereon.

As a general rule, notices are sent to the Directors one week in advance of Board meetings, followed by the Board papers in order for the Directors to be adequately prepared for the meetings. Senior management personnel attend board meetings to address queries from the Directors. The Directors also have unrestricted access to the Company’s senior management.

The Company Secretary

The Company Secretary or his colleague attends all Board meetings and ensures that Board procedures and the provisions of applicable laws, the Articles of Association of the Company and the SGX Listing Manual are followed. The Company Secretary also assists with the circulation of Board papers and updates the Directors on changes in laws and regulations relevant to the Group. The appointment and removal of the Company Secretary is a matter for the Board as a whole.

Professional Advisers

The Board (whether as individual members or as a group) has direct access to independent professional advisers, where so requested by them in the furtherance of their duties, at the expense of the Company.



Remuneration Matters

Principle 7: There should be a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of individual directors. No director should be involved in deciding his own remuneration.

Establishment, Composition and Membership of RC

The Company has the RC, which makes recommendations to the Board on the framework of remuneration and the specific remuneration packages for each Director and the CEO. Recommendations of the RC have to be submitted to and endorsed by the entire Board.

The RC comprises of three Non-Executive Directors, two of whom, including the Chairman of the RC, are IDs.

The membership of the RC is, as follows:

Chairman: Max Ng Chee Weng (ID)Members: Ho Boon Chuan Wilson (ID)


The RC has written terms of reference that describe the responsibilities of its members.

Responsibilities of RC

The responsibilities of the RC are:

i. to recommend to the Board a framework of remuneration, including but not limited to director’s fees, salaries, allowances, bonuses, options and benefits in kind;

ii. to recommend specific remuneration packages for each Director, including the CEO; and

iii. to review the remuneration of senior management.

The members of the RC are familiar with executive compensation matters as they manage their own businesses and/or are holding other directorships. The RC has access to advice regarding executive compensation matters, if required.



Level and Mix of Remuneration

Principle 8: The level of remuneration should be appropriate to attract, retain and motivate the directors needed to run the company successfully but companies should avoid paying more than is necessary for this purpose. A significant proportion of executive directors’ remuneration should be restructured so as to link rewards to corporate and individual performance.

Appropriate remuneration to attract, retain and motivate Directors

The remuneration, including incentive bonuses of the Executive Director, Mr Loo Leong Thye and his wife, Non-Executive Director, Madam Ong Sock Hwee1, are based on service agreements made on 15 September 2003, as disclosed in the Company’s IPO prospectus dated 5 January 2004. The service agreements were for an initial term of three years and are automatically renewed for successive terms of two years each after the initial term on such terms and conditions as the Executive Directors and the Company may agree. Either of the Executive Directors or the Company may terminate the relevant service agreement by giving three month’s written notice or payment in lieu thereof.

The Company has also entered into a service agreement with the Executive Director, Mr Ng Kian Teck on 3 May 2011 for an initial term of three years and is automatically renewed for successive terms of two years each on such terms and conditions as may be mutually agreed.

The remuneration of the Executive Directors includes a fixed salary and a variable performance related bonus which is designed to align the interests of the Directors with those of shareholders. Revisions to the terms of the service agreements are subject to review by the RC (taking into consideration the employment conditions within the IT industry and comparable companies), which then recommends the same to the Board for their consideration and approval.

Independent Directors are each paid a Director’s fee for their effort and time spent, responsibilities and contributions to the Board, subject to the approval of shareholders at the Company’s Annual General Meetings.

Disclosure on Remuneration

Principle 9: Each company should provide clear disclosure of its remuneration policy, level and mix of remuneration, and the procedure for setting remuneration in the company’s annual report. It should provide disclosure in relation to its remuneration policies to enable investors to understand the link between remuneration paid to directors and key executives, and performance.

1 Mdm Ong Sock Hwee who was re-designated as a Non-Executive Director from 3 May 2011, has ceased to receive any remuneration in accordance with her service agreement.



Directors’ Remuneration

Breakdown of remuneration of each Director by % (financial year ended 31 December 2011)

Remuneration Band & Name of Directors Fixed Salary Directors’ Fees

Variable or Performance

Related Income/Bonus Total

$1,000,000 to $1,249,999Loo Leong Thye 36% – 64% 100%

Below $250,000Ng Kian Teck 62% – 38% 100%Ho Boon Chuan Wilson – 100% – 100%Max Ng Chee Weng – 100% – 100%Ong Sock Hwee1 86% – 14% 100%Ong Sock Hwee2 – – – –

1 Remuneration of Mdm Ong Sock Hwee in her capacity as an Executive Director until her re-designation to a Non-Executive Director from 3 May 2011.

2 Mdm Ong Sock Hwee does not receive any remuneration in her capacity as an Non-Executive Director.

Remuneration of Key Executives

The remuneration of its top 5 executives for the year ended 31 December 2011 is as shown:

Remuneration Band & Name of Directors Fixed Salary

Variable or Performance

Related Income/Bonus Total

$500,000 to $749,999Tan Wee Ko 34% 66% 100%

Below $250,000Chia Kang Whye 42% 58% 100%Lim Kim Huay 55% 45% 100%Lim Seng Kiat 53% 47% 100%Yong Kim Hon 52% 48% 100%

No immediate family member of any Director and whose remuneration had exceeded $150,000 during the financial year ended 31 December 2011 was employed by the Company or its subsidiaries.



Accountability

Principle 10: The Board should present a balanced and understandable assessment of the company’s performance, position and prospects.

Half and full yearly results are released via SGXNET within the respective time lines stipulated in the SGX Listing Manual. In this regard, the Board, with the assistance of the management, strives to provide a balanced and understandable assessment of the Company’s performance, position and prospects. The Board also released other price sensitive public reports and reports to regulators, where required.

Going forward in financial year 2012, the Board will be reporting the Company’s operating performance and financial results on a quarterly basis via SGXNET.

Audit Committee

Principle 11: The Board should establish an Audit Committee with written terms of reference which clearly set out its authority and duties.

Establishment, Composition and Membership of AC

The Company has the AC, which reports to the Board on all matters requiring audit in respect of the Company.

The AC comprises of three Non-Executive Directors, two of whom, including the Chairman of the AC, are IDs.

The membership of the AC is, as follows:

Chairman: Ho Boon Chuan Wilson (ID)Members: Max Ng Chee Weng (ID)


The AC has written terms of reference that clearly set out its authority and duties.

Responsibilities of AC

The responsibilities of the AC are:

i. to review the half-yearly (FY2012: quarterly) financial statements and the accompanying statements presented for approval, before endorsement by the Board so as to ensure the integrity of information to be released;

ii. to review the scope and results of the audit of the Group and its cost effectiveness, and the independence and objectivity of the external auditors;

iii. to review the nature and extent of non-audit services by the external auditors, when necessary and to seek a balance in the maintenance of objectivity;



iv. to review significant financial reporting issues and judgments to ensure the integrity of financial statements and any formal announcements relating to the Company’s financial statements;

v. to review the adequacy of the Company’s internal financial controls, operational and compliance controls and risk management policies and systems established by the Management;

vi. to meet with the external auditors without the presence of the Management at least once a year; and

vii. to review the independence of the external auditors annually.

The members of the AC have sufficient financial management expertise, as determined by the Board in its business judgment, to discharge the AC’s functions.

The AC has met with the external auditors and the internal auditors, without the presence of the management at least once in FY2011.

The aggregate amount of fees paid to the external auditors and other independent auditors for FY 2011 was approximately S$128,000. The audit fees to the external auditors amounted to approximately S$83,000 and non-audit fees (in connection with the provision of income tax compliance work and review of results announcement service) amounted to approximately S$20,000. The audit fees paid to the other independent auditors for FY 2011 amounted to approximately S$15,000 and non-audit fees (in connection with the provision of income tax compliance work) amounted to approximately S$10,000.1 The AC, having reviewed such non-audit services is satisfied that the nature and extent of such services will not prejudice the independence and objectivity of the external auditors and other independent auditors.

The Board of Directors and AC are satisfied that the appointment of different auditing firms would not compromise the standard and effectiveness of the audit of the Group. The Group confirms that it has complied with Rule 712, 715(2) and Rule 716 of the SGXST Listing Manual in relation to its auditing firms.

The AC has reviewed arrangements by which the staff of the Company may, in confidence, raise concerns about (such as possible improprieties in matters of financial reporting or other matters), with the object of ensuring that arrangements are in place for the independent investigation of such matters for appropriate follow-up action. In this regard, the AC had since adopted a whistle-blowing policy during FY2007.

Internal Controls

Principle 12: The Board should ensure that the Management maintains a sound system of internal controls to safeguard the shareholders’ investments and the company’s assets.

The Group’s internal controls and systems are designed to provide reasonable assurance as to the integrity and reliability of the financial information and to safeguard and maintain accountability of its assets. Procedures are in place to identify major business risks and evaluate potential financial consequences, as well as for the authorisation of capital expenditures and investments. Comprehensive budgeting systems are in place to develop annual budgets covering key aspects of the business of the Group. Actual performance is compared against budgets and periodical revised forecasts for the year.

1 Please refer to Note 10 and 15 of the Notes to The Financial Statement for more information.



The Board and Audit Committee are of the opinion that, in the absence of any evidence to the contrary, there are adequate controls in place within the Group addressing material financial, operational and compliance risks based on:

• The internal controls established and maintained by the Group;

• Confirmation by the Chief Executive Officer and Chief Financial Officer;

• Reports issued by the internal and external auditors; and

• Regular reviews performed by the management, various Board committees and the Board.

The Board notes that no system of internal controls can provide absolute assurances against the occurrence of material errors, poor judgment in decision making, human error, fraud or other irregularities.

The Board recognises the importance of establishing a formal Enterprise Risk Management Framework to facilitate the governance of risks and monitoring the effectiveness of internal controls. Accordingly, to facilitate the compliance of Rule 1207(10) of the Listing Manual, the Board intends to engage an external consultant to set up an Enterprise Risk Management Framework in the financial year 2012.

Internal Audit

Principle 13: The Company should establish an internal audit function that is independent of the activities it audits.

The Company outsources its internal audit function to an external CPA firm. The internal auditors have conducted a review of the Company’s internal control systems during the financial year ended 31 December 2011. In addition to the internal audit function, the key element in the Group’s internal control system is the control which the senior management exercises over procurement of products and goods, cash collections and point-of-sales system, expenditures for projects and capital spending, with different levels of approvals required for different limits set by the Board. The issuance of cheques is approved by two authorised signatories in accordance with the authorisation limits set by the Board.

The Company has appointed Yang Lee & Associates as its internal auditors to review the Group’s internal control system.

The internal auditors have a direct and primary reporting line to the Audit Committee and assist the Board in monitoring and managing risks and internal controls of the Group. The internal auditor will plan its internal audit reviews in consultation with, but independent of the management. The audit plan will be submitted to the Audit Committee for approval prior to the commencement of the audit. The Audit Committee will review the activities of the internal auditors on a regular basis, including overseeing and monitoring the implementation of improvements required on internal control weaknesses identified.

The Standards for the Professional Practice of Internal Auditing set by the Institute of Internal Auditors are used as a reference and guide by the Company’s internal auditors.



Communication with Shareholders

Principle 14: Companies should engage in regular, effective and fair communication with shareholders.

Principle 15: Companies should encourage greater shareholder participation at AGMs, and allow shareholders the opportunity to communicate their views on various matters affecting the company.

The Board is mindful of its obligations to provide timely disclosure of material information to shareholders of the Company and does so through:

i. annual reports issued to all shareholders. Non-shareholders may access the SGX website for copies of the Company’s annual reports;

ii. half and full yearly announcements of, and press briefings on, its financial statements on the SGXNET (From FY2012, quarterly announcements);

iii. other announcements on the SGXNET;

iv. press releases on major developments regarding the Company; and

v. the Company’s website at www.challengerasia.com through which shareholders can access information on the Company.

The Company regards its Annual General Meeting as an opportunity to communicate directly with shareholders and therefore encourages greater shareholder participation, whether in person or by proxy. The CEO and other Directors attend the Annual General Meetings and are available to answer questions from shareholders.

Securities Transactions by Officers and Employees

In compliance with the best practices set out in the SGX Listing Manual on dealings in securities, Directors and employees of the Company are advised not to deal in the Company’s shares on short-term considerations or when they are in the possession of unpublished price-sensitive information. The Company prohibits dealings in its shares by its officers and employees during the period commencing one month before any announcement of the Company’s financial statements and ending on the date of the announcement of the basis. From FY2012, the officers and employees are not allowed to deal in the Company’s shares during the period commencing two weeks before the announcement of the Company’s quarterly results or one month before the announcement of the Company’s full year results, and ending on the date of the announcement of the results.



Interested Person Transactions (IPTs)

When a potential conflict of interest arises, the director concerned does not participate in discussion and refrains from exercising any influence over other members of the Board.

The Company has established internal control policies to ensure that IPTs are properly reviewed and approved and are conducted at arm’s length basis.

The AC has reviewed the interested person transactions during FY2011. The aggregate value of the interested person transactions between the Company and the interested persons during FY2011 are as follows:

Name of interested personAggregate amount of transaction

for the financial year 2011

Gateway Law Corporation(in relation to professional fees) S$3,000

Advent Solutions And Projects Pte. Ltd.(in relation to purchase of goods and services) S$79,000

DIRECTORS’ REPORT


The Directors of the Company are pleased to present their report together with the audited financial statements of the Company and of the Group for the reporting year ended 31 December 2011.

1. Directors at Date of Report

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

Loo Leong Thye (Chief Executive Officer)Ng Kian TeckOng Sock HweeHo Boon Chuan WilsonMax Ng Chee Weng

2. Arrangements to Enable Directors to Acquire Benefits by Means of the Acquisition of Shares and Debentures

Neither at the end of the reporting year nor at any time during the reporting year did there subsist any arrangement whose object is to enable the Directors of the Company to acquire benefits by means of the acquisition of shares or debentures in the Company or any other body corporate.

3. Directors’ Interests in Shares and Debentures

The Directors of the Company holding office at the end of the reporting year had no interests in the share capital of the Company and related corporations as recorded in the register of Directors’ shareholdings kept by the Company under section 164 of the Companies Act, Chapter 50 except as follows:

Number of shares of no par value

Name of Directors – holdings in Challenger Technologies Limited

At beginning of the

reporting yearAt end of the

reporting year

Direct interestLoo Leong Thye 99,549,500 149,324,250Ong Sock Hwee 21,960,500 32,940,750Ng Kian Teck 800,000 1,200,000Ho Boon Chuan Wilson 150,000 225,000Max Ng Chee Weng 10,000 17,500

Deemed interestLoo Leong Thye 1,096,500 1,644,750Ng Kian Teck 105,000 157,500Max Ng Chee Weng – 11,500

By virtue of section 7 of the Companies Act, Chapter 50, Mr Loo Leong Thye with the above shareholding in the Company are deemed to have an interest in all the related corporations of the Company.

The Directors’ interests as at 21 January 2012 were the same as those at the end of the reporting year.

DIRECTORS’ REPORT


4. Contractual Benefits of Directors

Since the beginning of the reporting year, no director of the Company has received or become entitled to receive a benefit which is required to be disclosed under section 201(8) of the Companies Act, Chapter 50, by reason of a contract made by the Company or a related corporation with the director or with a firm of which he is a member, or with a company in which he has a substantial financial interest except as disclosed in the financial statements.

There were certain transactions (shown in the financial statements under related party transactions) with corporations in which certain Directors have an interest.

5. Share Options

During the reporting year, no option to take up unissued shares of the Company or any subsidiary was granted.

During the reporting year, there were no shares of the Company or any subsidiary issued by virtue of the exercise of an option to take up unissued shares.

At the end of the reporting year, there were no unissued shares of the Company or any subsidiary under option.

6. Audit Committee

The members of the audit committee at the date of this report are as follows:–

Ho Boon Chuan Wilson – Chairman of audit committee and Independent DirectorOng Sock Hwee – Non-Executive Director with effect from 3 May 2011Max Ng Chee Weng – Independent Director

The audit committee performs the functions specified by section 201B (5) of the Companies Act. Among other functions, it performed the following:

• Reviewed with the independent external auditors their audit plan;

• Reviewed with the independent external auditors their evaluation of the Company’s internal accounting controls and their report on the financial statements and the assistance given by the Company’s officers to them;

• Reviewed with the internal auditors the scope and results of the internal audit procedures;

DIRECTORS’ REPORT


6. Audit Committee (Cont’d)

• Reviewed the financial statements of the Group and the Company prior to their submission to the Directors of the Company for adoption; and

• Reviewed the interested party transactions (as defined in Chapter 9 of the Listing Manual of the SGX).

Other functions performed by the audit committee are described in the report on corporate governance included in the annual report. It also includes an explanation of how independent auditors’ objectivity and independence is safeguarded where the independent auditors provide non-audit services.

The audit committee has recommended to the Board of Directors that the independent auditors, RSM Chio Lim LLP, be nominated for re-appointment as independent auditors at the next Annual General Meeting of the Company.

7. Independent Auditors

The independent auditors, RSM Chio Lim LLP, have expressed their willingness to accept re-appointment.

8. Subsequent Developments

There are no significant developments subsequent to the release of the Group’s and the Company’s preliminary financial statements, as announced on 16 February 2012, which would materially affect the Group’s and the Company’s operating and financial performance as of the date of this report.

On Behalf of The Directors

Loo Leong Thye Ng Kian TeckChief Executive Officer Executive Director

23 March 2012

STATEMENT BY DIRECTORS


In the opinion of the directors,

(a) the accompanying consolidated statement of comprehensive income, statements of financial position, statements of changes in equity, consolidated statement of cash flows, and notes thereto are drawn up so as to give a true and fair view of the state of affairs of the company and of the group as at 31 December 2011 and of the results and cash flows of the group and changes in equity of the company and of the group for the reporting year then ended; and

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

The board of directors approved and authorised these financial statements for issue.

On Behalf of The Directors

Loo Leong Thye Ng Kian TeckChief Executive Officer Executive Director

23 March 2012

INDEPENDENT AUDITORS’ REPORT


Independent Auditors’ Report to the Members ofChallenger Technologies Limited (Registration No: 198400182K)

Report on the Consolidated Financial Statements

We have audited the accompanying consolidated financial statements of Challenger Technologies Limited and its subsidiaries (the Group), which comprise the statements of financial position of the Group and the Company as at 31 December 2011, and the consolidated statement of comprehensive income, statement of changes in equity and statement of cash flows of the Group, and statement of changes in equity of the Company for the reporting year then ended, and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with the provisions of the Singapore Companies Act, Chapter 50 (the “Act”) and Singapore Financial Reporting Standards, and for devising and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair statement of comprehensive income and statements of financial positions and to maintain accountability of assets.

Auditor’s Responsibility

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

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

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

INDEPENDENT AUDITORS’ REPORT


Independent Auditors’ Report to the Members ofChallenger Technologies Limited (Registration No: 198400182K)

Opinion

In our opinion, the consolidated financial statements of the Group and the statement of financial position and statement of changes in equity of the Company are properly drawn up in accordance with the provisions of the Act and 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 2011 and the results, changes in equity and cash flows of the Group and the changes in equity of the Company for the reporting year ended on that date.

Report on Other Legal and Regulatory Requirements

In our opinion, the accounting and other records required by the Act to be kept by the Company and by those subsidiaries incorporated in Singapore of which we are the independent auditors have been properly kept in accordance with the provisions of the Act.

RSM Chio Lim LLPPublic Accountants andCertified Public AccountantsSingapore

23 March 2012

Partner in charge of audit: Lee Mong SheongEffective from year ended 31 December 2010

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEYEAR ENDED 31 DECEMBER 2011


Notes 2011 2010$’000 $’000

Revenue 5 316,864 240,999Other Items of IncomeInterest Income 6 209 148Dividend Income 39 61Other Credits 7 598 717Other Items of ExpenseChanges in Inventories (650) 9,793Cost of Goods Purchased (255,812) (202,178)Other Consumables Used (694) (466)Depreciation Expense (3,126) (2,254)Employee Benefits Expense 8 (18,812) (16,486)Finance Cost (100) –Other Expenses 9 (18,811) (13,764)Other Charges 7 (687) (74)

Profit Before Tax from Continuing Operations 19,018 16,496Income Tax Expense 11 (3,293) (2,718)

Profit Net of Tax 15,725 13,778

Other Comprehensive Income:Exchange Difference on Translating Foreign Operations, Net of Tax 23 35 (18)

Other Comprehensive Income for the Year, Net of Tax 35 (18)

Total Comprehensive Income 15,760 13,760

Profit Attributable to Equity Holders of the Company, Net of Tax 15,639 13,663Profit Attributable to Non-Controlling Interests, Net of Tax 86 115

Profit Net of Tax 15,725 13,778

Total Comprehensive Income Attributable to Equity Holders of the Company, Net of Tax 15,674 13,645Total Comprehensive Income Attributable to Non-Controlling Interests, Net of Tax 86 115

Total Comprehensive Income 15,760 13,760

Earnings Per ShareEarnings per Share Currency Unit Cents CentsContinuing OperationsBasic 12 4.53 3.96

Diluted 12 4.53 3.96

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

STATEMENTS OF FINANCIAL POSITIONAS AT 31 DECEMBER 2011


Group CompanyNotes 2011 2010 2011 2010

$’000 $’000 $’000 $’000

ASSETSNon-Current AssetsProperty, Plant and Equipment, Total 14 14,203 12,300 12,710 11,359Investment in Subsidiaries 15 – – 2,182 2,182Investment in Associates 16 – – – –Deferred Tax Assets 11 27 27 – –Other Financial Asset, Non-Current 17 1,768 2,725 1,768 2,648

Total Non-Current Assets 15,998 15,052 16,660 16,189

Current AssetsInventories 18 24,081 25,161 22,122 22,654Trade and Other Receivables, Current 19 3,281 2,828 7,591 6,785Other Assets, Current 20 3,637 2,698 3,065 2,282Cash and Cash Equivalents 21 48,879 36,167 45,507 33,420

Total Current Assets 79,878 66,854 78,285 65,141

Total Assets 95,876 81,906 94,945 81,330

LIABILITIESEquityShare Capital 22 18,775 18,775 18,775 18,775Retained Earnings 23,611 15,221 26,342 17,410Other Reserves, Total 23 331 296 319 319

Equity, Attributable to Equity Holders 42,717 34,292 45,436 36,504Non-controlling Interest 298 257 – –

Total Equity 43,015 34,549 45,436 36,504

Non-Current LiabilitiesDeferred Tax Liabilities 11 142 144 22 22Other Liabilities, Non-Current 24 2,335 1,807 810 573

Total Non-Current Liabilities 2,477 1,951 832 595

Current LiabilitiesTrade and Other Payables, Current 26 23,375 31,065 21,692 29,862Income Tax Payable, Current 11 3,744 2,782 3,663 2,749Other Financial Liabilities, Current 25 16,629 6,429 16,629 6,429Other Liabilities, Current 24 6,636 5,130 6,693 5,191

Total Current Liabilities 50,384 45,406 48,677 44,231

Total Liabilities 52,861 47,357 49,509 44,826

Total Equity and Liabilities 95,876 81,906 94,945 81,330


STATEMENTS OF CHANGES IN EQUITYYEAR ENDED 31 DECEMBER 2011


Attributable to Equity Holders of the CompanyAttributable Non-

Total to Parent Share Retained Other controllingEquity sub-total Capital Earnings Reserves Interests$’000 $’000 $’000 $’000 $’000 $’000

GroupCurrent Year:Opening Balance at 1 January 2011 34,549 34,292 18,775 15,221 296 257

Movements in Equity:Total Comprehensive Income for the Year 15,760 15,674 – 15,639 35 86Dividends Paid (Note 13) (7,294) (7,249) – (7,249) – (45)

Closing Balance at 31 December 2011 43,015 42,717 18,775 23,611 331 298

Previous Year:Opening Balance at 1 January 2010 26,548 26,286 18,661 7,311 314 262

Movements in Equity:Total Comprehensive Income for the Year 13,760 13,645 – 13,663 (18) 115Dividends Paid (Note 13) (5,873) (5,753) – (5,753) – (120)Issue of Share Capital (Note 22) 114 114 114 – – –

Closing Balance at 31 December 2010 34,549 34,292 18,775 15,221 296 257


STATEMENTS OF CHANGES IN EQUITYYEAR ENDED 31 DECEMBER 2011


Total Share Retained OtherEquity Capital Earnings Reserves$’000 $’000 $’000 $’000

CompanyCurrent Year:Opening Balance at 1 January 2011 36,504 18,775 17,410 319

Movements in Equity:Total Comprehensive Income for the Year 16,181 – 16,181 –Dividends Paid (Note 13) (7,249) – (7,249) –

Closing Balance at 31 December 2011 45,436 18,775 26,342 319

Previous Year:Opening Balance at 1 January 2010 26,897 18,661 7,917 319

Movements in Equity:Total Comprehensive Income for the Year 15,246 – 15,246 –Dividends Paid (Note 13) (5,753) – (5,753) –Issue of Share Capital (Note 22) 114 114 – –

Closing Balance at 31 December 2010 36,504 18,775 17,410 319


CONSOLIDATED STATEMENT OF CASH FLOWSYEAR ENDED 31 DECEMBER 2011


2011 2010$’000 $’000

Cash Flows From Operating ActivitiesProfit Before Tax 19,018 16,496Adjustments for:Depreciation Expense 3,126 2,254Loss on Disposal of Plant and Equipment 1 9Gain on Disposal of Quoted Shares Investment (482) –Interest Expense 100 –Interest Income (209) (148)Dividend Income (39) (61)Foreign Exchange Adjustment Gain (16) (65)Other Liabilities – Non-Current 528 –Net Effect of Exchange Rate Changes in Consolidating Foreign Operations 35 (18)

Operating Cash Flows Before Working Capital Changes 22,062 18,467Trade and Other Receivables (453) 105Other Assets (939) (369)Inventories 1,080 (9,793)Trade and Other Payables (7,690) 12,058Other Liabilities – Current 1,506 1,263

Net Cash Generated From Operations 15,566 21,731Income Tax Paid (2,333) (2,396)

Net Cash Flows From Operating Activities 13,233 19,335

Cash Flows From Investing ActivitiesInterest Received 209 148Dividend Received 39 61Investment in Non-Quoted Shares – (77)Proceeds from Disposal of Plant and Equipment 156 –Proceeds from Disposal of Quoted Shares 1,455 28Purchase of Plant and Equipment (5,186) (3,444)

Net Cash Flows Used in Investing Activities (3,327) (3,284)

Cash Flows From Financing ActivitiesCash Restricted in Use (22,580) (6,570)Interest Paid (100) –Dividends Paid to Equity Owners (7,249) (5,753)Dividends Paid to Non-Controlling Interests (45) (120)Proceeds from Issuing Shares – 114Term Borrowings 16,629 6,429Repayment of Term Borrowings (6,429) –

Net Cash Flows Used in Financing Activities (19,774) (5,900)

Net (Decrease)/Increase in Cash and Cash Equivalents (9,868) 10,151Cash and Cash Equivalents, Statement of Cash Flows, Beginning Balance 28,921 18,770

Cash and Cash Equivalents, Statement of Cash Flows, Ending Balance (Note 21) 19,053 28,921


NOTES TO THE FINANCIAL STATEMENTS31 DECEMBER 2011


1. General

The Company is incorporated in Singapore with limited liability. The financial statements are presented in Singapore dollars and they cover the Company (referred to as “parent”) and the subsidiaries.

The Board of Directors approved and authorised these financial statements for issue on the date of the statement by Directors.

The principal activities of the Company are to provide IT products and services through the sale of IT and related products. It is listed on the Singapore Exchange Securities Trading Limited.

The principal activities of the subsidiaries are described in Note 15 to the financial statements.

The registered office is: 1 Ubi Link, Singapore 408553. The Company is situated in Singapore.

2. Summary of Significant Accounting Policies

Accounting Convention

The financial statements have been prepared in accordance with the Singapore Financial Reporting Standards (“FRS”) and the related Interpretations to FRS (“INT FRS”) as issued by the Singapore Accounting Standards Council and the Companies Act, Chapter 50. The financial statements are prepared on a going concern basis under the historical cost convention except where an FRS requires an alternative treatment (such as fair values) as disclosed where appropriate in these financial statements.

Basis of Presentation

The consolidation accounting method is used for the consolidated financial statements that include the financial statements made up to the end of the reporting year of the Company and all of its directly and indirectly controlled subsidiaries. Consolidated financial statements are the financial statements of the Group presented as those of a single economic entity. The consolidated financial statements are prepared using uniform accounting policies for like transactions and other events in similar circumstances. All significant intragroup balances and transactions, including profit or loss items and dividends are eliminated in full on consolidation. The results of the investees acquired or disposed of during the financial year are accounted for from the respective dates of acquisition or up to the dates of disposal which is the date on which effective control is obtained of the acquired business until that control ceases. On disposal the attributable amount of goodwill if any is included in the determination of the gain or loss on disposal. The equity accounting method is used for associates in the Group financial statements.

The Company’s financial statements have been prepared on the same basis, and as permitted by the Companies Act, Chapter 50, no statement of income is presented for the Company.



2. Summary of Significant Accounting Policies (Continued)

Basis of Preparation of the Financial Statements

The preparation of financial statements in conformity with generally accepted accounting principles requires the management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting year. Actual results could differ from those estimates. The estimates and assumptions are reviewed on an ongoing basis. Apart from those involving estimations, management has made judgements in the process of applying the entity’s accounting policies. The areas requiring management’s most difficult, subjective or complex judgements, or areas where assumptions and estimates are significant to the financial statements, are disclosed at the end of this footnote, where applicable.

Revenue Recognition

The revenue amount is the fair value of the consideration received or receivable from the gross inflow of economic benefits during the reporting year arising from the course of the activities of the entity and it is shown net of any related sales taxes, estimated returns and rebates. Revenue from the sale of goods is recognised when significant risks and rewards of ownership are transferred to the buyer, there is neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold, and the amount of revenue and the costs incurred or to be incurred in respect of the transaction can be measured reliably. Rental revenue is recognised on a time-proportion basis that takes into account the effective yield on the asset on a straight-line basis over the lease term. Revenue from rendering of services that are of short duration is recognised when the services are completed. Interest is recognised using the effective interest method. Dividend from equity instruments is recognised as income when the entity’s right to receive payment is established. Revenue from project contracts is recognised in accordance with the accounting policy on project contracts (see below).

The consideration received from the sale of goods to customers under the customer loyalty programme is allocated to the goods sold and the points issued (award credits) that are expected to be redeemed. The consideration allocated to the award credits is measured at the fair value of the points. It is recognised as a liability (deferred revenue) on the statement of financial position and recognised as revenue when the points are redeemed, have expired or are no longer expected to be redeemed. The amount of revenue recognised is based on the number of award credits that have been redeemed, relative to the total number expected to be redeemed.

Warranty service revenues are recognised rateably over the warranty period; warranty-related costs are recognised as incurred. The unearned warranty service revenues are recognised as a liability on the statement of financial position.

Membership fees are recognised rateably over the membership period after recognition of a portion of fees as initial setup revenue. The unearned membership fees are recognised as a liability on the statement of financial position.




Employee Benefits

Contributions to defined contribution retirement benefit plans are recorded as an expense as they fall due. The entity’s legal or constructive obligation is limited to the amount that it agrees to contribute to independently administered funds which include the Central Provident Fund in Singapore (a government managed retirement benefit plan). For employee leave entitlement the expected cost of short-term employee benefits in the form of compensated absences is recognised in the case of accumulating compensated absences, when the employees render service that increases their entitlement to future compensated absences; and in the case of non-accumulating compensated absences, when the absences occur. A liability for bonuses is recognised where the entity is contractually obliged or where there is constructive obligation based on past practice.

Income Tax

The income taxes are accounted using the asset and liability method that requires the recognition of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequence of events that have been recognised in the financial statements or tax returns. The measurements of current and deferred tax liabilities and assets are based on provisions of the enacted or substantially enacted tax laws; the effects of future changes in tax laws or rates are not anticipated. Income tax expense represents the sum of the tax currently payable and deferred tax. Current and deferred income taxes are recognised as income or as an expense in profit or loss unless the tax relates to items that are recognised in the same or a different period outside profit or loss. For such items recognised outside profit or loss the current tax and deferred tax are recognised (a) in other comprehensive income if the tax is related to an item recognised in other comprehensive income and (b) directly in equity if the tax is related to an item recognised directly in equity. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same income tax authority. The carrying amount of deferred tax assets is reviewed at each end of the reporting year and is reduced, if necessary, by the amount of any tax benefits that, based on available evidence, are not expected to be realised. A deferred tax amount is recognised for all temporary differences, unless the deferred tax amount arises from the initial recognition of an asset or liability in a transaction which (i) is not a business combination; and (ii) at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss). A deferred tax liability or asset is recognised for all taxable temporary differences associated with investments in subsidiaries and associates except where the Company is able to control the timing of the reversal of the taxable temporary difference and it is probable that the taxable temporary difference will not reverse in the foreseeable future or for deductible temporary differences, they will not reverse in the foreseeable future and they cannot be utilised against taxable profits.

Foreign Currency Transactions

The functional currency of the Company is the Singapore dollar as it reflects the primary economic environment in which the entity operates. Transactions in foreign currencies are recorded in the functional currency at the rates ruling at the dates of the transactions. At each end of the reporting year, recorded monetary balances and balances measured at fair value that are denominated in non-functional currencies are reported at the rates ruling at the end of the reporting year and fair value dates respectively. All realised and unrealised exchange adjustment gains and losses are dealt with in profit or loss except when recognised in other comprehensive income and if applicable deferred in equity such as for qualifying cash flow hedges. The presentation is in the functional currency.




Translation of Financial Statements of Other Entities

Each entity in the Group determines the appropriate functional currency as it reflects the primary economic environment in which the entity operates. In translating the financial statements of an investee for incorporation in the consolidated financial statements in the presentation currency the assets and liabilities denominated in other currencies are translated at end of the reporting year rates of exchange and the profit and loss items are translated at average rates of exchange for the reporting year. The resulting translation adjustments (if any) are recognised in other comprehensive income and accumulated in a separate component of equity until the disposal of that investee.

Borrowing Costs

All borrowing costs that are interest and other costs incurred in connection with the borrowing of funds that are directly attributable to the acquisition, construction or production of a qualifying asset that necessarily take a substantial period of time to get ready for their intended use or sale are capitalised as part of the cost of that asset until substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are complete. Other borrowing costs are recognised as an expense in the period in which they are incurred. The interest expense is calculated using the effective interest rate method.

Property, Plant and Equipment

Depreciation is provided on a straight-line basis to allocate the gross carrying amounts of the assets less their residual values over their estimated useful lives of each part of an item of these assets. The annual rates of depreciation are as follows:

Property – 3.8%Renovations – 12.5% to 33%Plant and equipment – 10% to 33%

An asset is depreciated when it is available for use until it is derecognised even if during that period the item is idle. Fully depreciated assets still in use are retained in the financial statements.

Property, plant and equipment are carried at cost on initial recognition and after initial recognition at cost less any accumulated depreciation and any accumulated impairment losses. The gain or loss arising from the derecognition of an item of property, plant and equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item and is recognised in profit or loss. The residual value and the useful life of an asset is reviewed at least at each end of the reporting year and, if expectations differ significantly from previous estimates, the changes are accounted for as a change in an accounting estimate, and the depreciation charge for the current and future periods are adjusted.

Cost also includes acquisition cost, borrowing cost capitalised and any cost directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Subsequent costs are recognised as an asset only when it is probable that future economic benefits associated with the item will flow to the entity and the cost of the item can be measured reliably. All other repairs and maintenance are charged to profit or loss when they are incurred. Any gains/losses on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment are included in acquisition cost.




Leases

Whether an arrangement is, or contains, a lease, it is based on the substance of the arrangement at the inception date, that is, whether (a) fulfilment of the arrangement is dependent on the use of a specific asset or assets (the asset); and (b) the arrangement conveys a right to use the asset. Leases are classified as finance leases if substantially all the risks and rewards of ownership are transferred to the lessee. All other leases are classified as operating leases. At the commencement of the lease term, a finance lease is recognised as an asset and as a liability in the statement of financial position at amounts equal to the fair value of the leased asset or, if lower, the present value of the minimum lease payments, each determined at the inception of the lease. The discount rate used in calculating the present value of the minimum lease payments is the interest rate implicit in the lease, if this is practicable to determine, the lessee’s incremental borrowing rate is used. Any initial direct costs of the lessee are added to the amount recognised as an asset. The excess of the lease payments over the recorded lease liability are treated as finance charges which are allocated to each reporting year during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent rents are charged as expenses in the reporting years in which they are incurred. The assets are depreciated as owned depreciable assets. Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased assets are classified as operating leases. For operating leases, lease payments are recognised as an expense in profit or loss on a straight-line basis over the term of the relevant lease unless another systematic basis is representative of the time pattern of the user’s benefit, even if the payments are not on that basis. Lease incentives received are recognised in profit or loss as an integral part of the total lease expense. Rental income from operating leases is recognised in profit or loss on a straight-line basis over the term of the relevant lease unless another systematic basis is representative of the time pattern of the user’s benefit, even if the payments are not on that basis. Initial direct cost incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term.

Subsidiaries

A subsidiary is an entity including unincorporated and special purpose entity that is controlled by the Group. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities accompanying a shareholding of more than one half of the voting rights or the ability to appoint or remove the majority of the members of the Board of Directors or to cast the majority of votes at meetings of the Board of Directors. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.

In the Company’s own separate financial statements, an investment in a subsidiary is accounted for at cost less any allowance for impairment in value. Impairment loss recognised in profit or loss for a subsidiary 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. The net book value of the investment in a subsidiary is not necessarily indicative of the amount that would be realised in a current market.




Associates

An associate is an entity including an unincorporated entity in which the investor has a substantial financial interest (usually not less than 20% of the voting power), significant influence and that is neither a subsidiary nor a joint venture of the investor. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies. The accounting for investments in an associate is on the equity method. The investment in an associate is carried in the statement of financial position at cost plus post-acquisition changes in the share of net assets of the associate, less any impairment in value adjusted for any changes in contingent consideration. The profit or loss reflects the investor’s share of the results of operations of the associate. Losses of an associate in excess of the Group’s interest in the relevant entity are not recognised except to the extent that the Group has an obligation. Profits and losses resulting from transactions between the Group and an associate are recognised in the financial statements only to the extent of unrelated investors’ interests in the associate. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of an associate are changed where necessary to ensure consistency with the policies adopted by the Group. The net book value of an associate is not necessarily indicative of the amounts that would be realised in a current market exchange. The investor discontinues the use of the equity method from the date that it ceases to have significant influence over the associate and accounts for the investment in accordance with FRS 39 from that date. Any gain or loss is recognised in profit or loss. Any investment retained in the former associate is measured at its fair value at the date that it ceases to be an associate.

In the Company’s own separate financial statements, an investment in an associate is stated at cost less any allowance for impairment in value adjusted for any changes in contingent consideration. Impairment loss recognised in profit or loss for an associate 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. The net book value of an associate is not necessarily indicative of the amount that would be realised in a current market exchange.

Segment Reporting

The Group discloses financial and descriptive information about its reportable segments. Reportable segments are operating segments or aggregations of operating segments that meet specified criteria. Operating segments are components about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Generally, financial information is reported on the same basis as is used internally for evaluating operating segment performance and deciding how to allocate resources to operating segments.

Business Combinations

Business combinations are accounted for by applying the acquisition method. There were none during the year.




Non-Controlling Interests

The non-controlling interests in the net assets and net results of a consolidated subsidiary are shown separately in the appropriate components of the consolidated financial statements. For each business combination, any non-controlling interest in the acquiree (subsidiary) is initially measured either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets. Where the non-controlling interest is measured at fair value, the valuation techniques and key model inputs used are disclosed in the relevant note.

Profit or loss and each component of other comprehensive income are attributed to the owners of the parent and to the non-controlling interests. Total comprehensive income is attributed to the owners of the parent and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

Impairment of Non-Financial Assets

Irrespective of whether there is any indication of impairment, an annual impairment test is performed at the same time every year on an intangible asset with an indefinite useful life or an intangible asset not yet available for use. The carrying amount of other non-financial assets is reviewed at each end of the reporting year for indications of impairment and where an asset is impaired, it is written down through profit or loss to its estimated recoverable amount. The impairment loss is the excess of the carrying amount over the recoverable amount and is recognised in profit or loss. The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs to sell and its value in use. When the fair value less costs to sell method is used, any available recent market transactions are taken into consideration. When the value in use method is adopted, in assessing the 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. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). At each end of the reporting year non-financial assets other than goodwill with impairment loss recognised in prior periods are assessed for possible reversal of the impairment. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.




Financial Assets

Initial recognition, measurement and derecognition:

A financial asset is recognised on the statement of financial position when, and only when, the entity becomes a party to the contractual provisions of the instrument. The initial recognition of financial assets is at fair value normally represented by the transaction price. The transaction price for financial asset not classified at fair value through profit or loss includes the transaction costs that are directly attributable to the acquisition or issue of the financial asset. Transaction costs incurred on the acquisition or issue of financial assets classified at fair value through profit or loss are expensed immediately. The transactions are recorded at the trade date.

Irrespective of the legal form of the transactions performed, financial assets are derecognised when they pass the “substance over form” based on the derecognition test prescribed by FRS 39 relating to the transfer of risks and rewards of ownership and the transfer of control.

Subsequent measurement:

Subsequent measurement based on the classification of the financial assets in one of the following four categories under FRS 39 is as follows:

1. Financial assets at fair value through profit or loss: As at end of the reporting year there were no financial assets classified in this category.

2. Loans and receivables: Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Assets that are for sale immediately or in the near term are not classified in this category. These assets are carried at amortised costs using the effective interest method (except that short-duration receivables with no stated interest rate are normally measured at original invoice amount unless the effect of imputing interest would be significant) minus any reduction (directly or through the use of an allowance account) for impairment or uncollectibility. Impairment charges are provided only when there is objective evidence that an impairment loss has been incurred as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. The methodology ensures that an impairment loss is not recognised on the initial recognition of an asset. Losses expected as a result of future events, no matter how likely, are not recognised. For impairment, the carrying amount of the asset is reduced through use of an allowance account. The amount of the loss is recognised in profit or loss. An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. Typically the trade and other receivables are classified in this category.

3. Held-to-maturity financial assets: As at end of the reporting year there were no financial assets classified in this category.




Financial Assets (Continued)

4. Available-for-sale financial assets: These are non-derivative financial assets that are designated as available-for-sale on initial recognition or are not classified in one of the previous categories. These assets are carried at fair value by reference to the transaction price or current bid prices in an active market. If such market prices are not reliably determinable, management establishes fair value by using valuation techniques. Changes in fair value of available-for-sale financial assets (other than those relating to foreign exchange translation differences on non-monetary investments) are recognised in other comprehensive income and accumulated in a separate component of equity under the heading revaluation reserves. Such reserves are recycled to profit or loss when realised through disposal. Impairments below cost are recognised in profit or loss. When there is objective evidence that the asset is impaired, the cumulative loss is reclassified from equity to profit or loss as a reclassification adjustment. If, in a subsequent period, the fair value of an equity instrument classified as available-for-sale increases and the increase can be objectively related to an event occurring after the impairment loss, it is reversed against revaluation reserves and are not subsequently reversed through profit or loss. However for debt instruments classified as available-for-sale impairment losses recognised in profit or loss are subsequently reversed if an increase in the fair value of the instrument can be objectively related to an event occurring after the recognition of the impairment loss. The weighted average method is used when determining the cost basis of publicly listed equities being disposed of. For non-equity instruments classified as available-for-sale the reversal of impairment is recognised in profit or loss. They are classified as non-current assets unless management intends to dispose of the investment within 12 months of the end of the reporting year. Usually non-current investments in equity shares and debt securities are classified in this category but do not include subsidiaries, joint ventures, or associates. Unquoted investments are stated at cost less allowance for impairment in value where there are no market prices, and management is unable to establish fair value by using valuation techniques.

Changes in the fair value of non-functional currency denominated investments classified as available-for-sale are analysed between translation differences and other changes in the carrying amount of the investments. The translation differences on monetary investments are recognised in profit or loss; translation differences on non-monetary investments are recognised in other comprehensive income. Changes in the fair value of monetary and non-monetary investments classified as available-for-sale are recognised in other comprehensive income.

Cash and Cash Equivalents

Cash and cash equivalents include bank and cash balances, on demand deposits and any highly liquid debt instruments purchased with an original maturity of three months or less. For the statement of cash flows the item includes cash and cash equivalents less cash subject to restriction and bank overdrafts payable on demand that form an integral part of cash management.




Financial Liabilities

Initial recognition, measurement and derecognition:

A financial liability is recognised on the statement of financial position when, and only when, the entity becomes a party to the contractual provisions of the instrument and it is derecognised when the obligation specified in the contract is discharged or cancelled or expires. The initial recognition of financial liability is at fair value normally represented by the transaction price. The transaction price for financial liability not classified at fair value through profit or loss includes the transaction costs that are directly attributable to the acquisition or issue of the financial liability. Transaction costs incurred on the acquisition or issue of financial liability classified at fair value through profit or loss are expensed immediately. The transactions are recorded at the trade date. Financial liabilities including bank and other borrowings are classified as current liabilities unless there is an unconditional right to defer settlement of the liability for at least 12 months after the end of the reporting year.

Subsequent measurement:

Subsequent measurement based on the classification of the financial liabilities in one of the following two categories under FRS 39 is as follows:

1. Liabilities at fair value through profit or loss: As at end of the reporting year date there were no financial liabilities classified in this category.

2. Other financial liabilities: All liabilities, which have not been classified as in the previous category fall into this residual category. These liabilities are carried at amortised cost using the effective interest method. Trade and other payables and borrowings are usually classified in this category. Items classified within current trade and other payables are not usually re-measured, as the obligation is usually known with a high degree of certainty and settlement is short-term.

Financial Guarantees

A financial guarantee contract requires that the issuer makes specified payments to reimburse the holder for a loss when a specified debtor fails to make payment when due. Financial guarantee contracts are initially recognised at fair value and are subsequently measured at the greater of (a) the amount determined in accordance with FRS 37 and (b) the amount initially recognised less, where appropriate, cumulative amortisation recognised in accordance with FRS18.

Inventories

Inventories are measured at the lower of cost (first in first out method) and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. A write down on cost is made for where the cost is not recoverable or if the selling prices have declined. Cost includes all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.




Fair Value of Financial Instruments

The carrying values of current financial instruments approximate their fair values due to the short-term maturity of these instruments and the disclosures of fair value are not made when the carrying amount of current financial instruments is a reasonable approximation of fair value. The fair values of non-current financial instruments may not be disclosed separately unless there are significant differences at the end of the reporting year and in the event the fair values are disclosed in the relevant notes. The maximum exposure to credit risk is: the total of the fair value of the financial assets and other financial instruments: the maximum amount the entity could have to pay if the guarantee is called on; and the full amount of any commitments on borrowings at the end of the reporting year. The fair value of a financial instrument is derived from an active market or by using an acceptable valuation technique. The appropriate quoted market price for an asset held or liability to be issued is usually the current bid price without any deduction for transaction costs that may be incurred on sale or other disposal and, for an asset to be acquired or liability held, the asking price. If there is no market, or the markets available are not active, the fair value is established by using an acceptable valuation technique. The fair value measurements are classified using a fair value hierarchy of 3 levels that reflects the significance of the inputs used in making the measurements, that is, Level 1 for the use of quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 for the use of inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and Level 3 for the use of inputs for the asset or liability that are not based on observable market data (unobservable inputs). The level is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. Where observable inputs that require significant adjustment based on unobservable inputs, that measurement is a Level 3 measurement.

Project Contracts

When the outcome of a project contract can be estimated reliably, the revenue and costs associated with the contract are recognised as revenue and expenses respectively by reference to the stage of completion of the contract activity at the end of the reporting year using the completion of a physical proportion of the contract work method. Contract costs consist of costs that relate directly to the specific project, costs that are attributable to contract activity in general and can be allocated to the project and such other costs as are specifically chargeable to the customer under the terms of the contract. Variations in contract work, claims and incentive payments are included to the extent that they have been agreed with the customer. The stage of completion method relies on estimates of total expected contract revenue and costs, as well as dependable measurement of the progress made towards completing a particular project. Recognised revenues and profits are subject to revisions during the project in the event that the assumptions regarding the overall project outcome are revised. The cumulative impact of a revision in estimates is recorded in the period such revisions become likely and estimable. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately. The work in progress projects have operating cycles longer than one year. The management includes in current assets amounts relating to the contracts realisable over a period in excess of one year.




Equity

Equity instruments are contracts that give a residual interest in the net assets of the Company. Ordinary shares are classified as equity. Equity instruments are recognised at the amount of proceeds received net of incremental costs directly attributable to the transaction. Dividends on equity are recognised as liabilities when they are declared. Interim dividends are recognised when declared by the Directors.

Provisions

A liability or provision is recognised when there is a present obligation (legal or constructive) 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. Provisions are made using best estimates of the amount required in settlement and where the effect of the time value of money is material, the amount recognised is the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense. Changes in estimates are reflected in profit or loss in the reporting year they occur.

Critical Judgements, Assumptions and Estimation Uncertainties

The critical judgements made in the process of applying the accounting policies that have the most significant effect on the amounts recognised in the financial statements and the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting year, 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. These estimates and assumptions are periodically monitored to ensure they incorporate all relevant information available at the date when financial statements are prepared. However, this does not prevent actual figures differing from estimates.

Net realisable value of inventories:

A review is made periodically on inventory for excess inventory, obsolescence and declines in net realisable value below cost and an allowance is recorded against the inventory balance for any such declines. The review require management to consider the future demand for the products. In any case the realisable value represents the best estimate of the recoverable amount and is based on the most reliable evidence available at the end of the reporting year and inherently involves estimates regarding the future expected realisable value. The usual considerations for determining the amount of allowance or write-down include ageing analysis, technical assessment and subsequent events and arrangement with suppliers. In general, such an evaluation process requires significant judgment and materially affects the carrying amount of inventories at the end of the reporting year. Possible changes in these estimates could result in revisions to the stated value of the inventories. The carrying amount of inventories at the end of the reporting year was $24,081,000 (2010: $25,161,000).




Critical Judgements, Assumptions And Estimation Uncertainties (Continued)

Customer loyalty programme:

The Group allocates the consideration received from the sale of goods to the goods sold and the points issued under its Reward Points Customer Loyalty Programme. The consideration allocated to the points issued is measured at their fair values. Fair values are determined by considering, among others, the following factors: the range of products available to the customers, the prices at which the Group sells the products which can be redeemed and the changing patterns in the redemption rates. The carrying amount of the Group’s deferred revenue in relation to the Customer Loyalty Programme at the end of the reporting year was $4,070,000 (2010: $3,330,000).

Useful lives of property, plant and equipment:

The estimates for the useful lives and related depreciation charges for its property, plant and equipment is based on commercial and other factors which could change significantly as a result of technical innovations and competitor actions in response to severe market conditions. The depreciation charge is increased where useful lives are less than previously estimated lives, or the carrying amounts are written off or written down for technically obsolete or non-strategic assets that have been abandoned or sold. It is impracticable to disclose the extent of the possible effects. It is reasonably possible, based on existing knowledge, that outcomes within the next financial year that are different from assumptions could require a material adjustment to the carrying amount of the balances affected. The carrying amount of the specific asset at the end of the reporting year affected by the assumption is $14,203,000 (2010: $12,300,000).

Estimated impairment of subsidiary or associate:

Where a subsidiary or associate is in net equity deficit and has suffered losses a test is made whether the investment in the investee has suffered any impairment, in accordance with the stated accounting policy. This determination requires significant judgement. An estimate is made of the future profitability of the investee, and the financial health of and near-term business outlook for the investee, including factors such as industry and sector performance, and operational and financing cash flow. The amount of the relevant investment is $527,000 (2010: $527,000) at the end of the reporting year.



3. Related Party Relationships and Transactions

FRS 24 defines a related party as a person or entity that is related to the reporting entity and it includes (a) A person or a close member of that person’s family if that person: (i) has control or joint control over the reporting entity; (ii) has significant influence over the reporting entity; or (iii) is a member of the key management personnel of the reporting entity or of a parent of the reporting entity. (b) An entity is related to the reporting entity if any of the following conditions applies: (i) The entity and the reporting entity are members of the same group. (ii) One entity is an associate or joint venture of the other entity. (iii) Both entities are joint ventures of the same third party. (iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity. (v) The entity is a post-employment benefit plan for the benefit of employees of either the reporting entity or an entity related to the reporting entity. (vi) The entity is controlled or jointly controlled by a person identified in (a). (vii) A person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

The ultimate controlling party is Mr Loo Leong Thye.

3.1 Related companies:

Related companies in these financial statements include the members of the group of companies.

There are transactions and arrangements between the reporting entity and members of the group and the effects of these on the basis determined between the parties are reflected in these financial statements. The current intercompany balances are unsecured without fixed repayment terms and interest unless stated otherwise. For non-current balances if significant an interest is imputed unless stated otherwise. For financial guarantees an amount is imputed and is recognised accordingly if significant where no charge is payable.

Intragroup transactions and balances that have been eliminated in these consolidated financial statements are not disclosed as related party transactions and balances below.



3. Related Party Relationships and Transactions (Continued)

3.2 Other related parties:

There are transactions and arrangements between the reporting entity and related parties and the effects of these on the basis determined between the parties are reflected in these financial statements. The current related party balances are unsecured without fixed repayment terms and interest unless stated otherwise. For non-current balances if significant an interest is imputed unless stated otherwise rate if any provided in the agreement for the balance. For financial guarantees an amount is imputed and is recognised accordingly if significant where no charge is payable.

Significant related party transactions:

In addition to the transactions and balances disclosed elsewhere in the notes to the financial statements, this item includes the following:

Other related party2011 2010$’000 $’000

Fees to a firm in which a director has an interest 3 –Purchase of goods and services from a related party 79 –

3.3 Key management compensation:

2011 2010$’000 $’000

Salaries and other short-term employee benefits 1,746 2,914

The above amounts are included under employee benefits expense. Included in the above amounts are as follows:

2011 2010$’000 $’000

Remuneration of directors of the company 1,282 1,755Fees to directors of the company 50 48

Key management personnel are directors and those persons having authority and responsibility for planning, directing and controlling the activities of the Company, directly or indirectly. The above amounts for key management compensation are for five directors and other key management personnel.

Further information about the remuneration of individual directors is provided in the report on corporate governance.



4. Financial Information by Operating Segments

4A. Information about Reportable Segment Profit or Loss, Assets and Liabilities

Disclosure of information about operating segments, products and services, the geographical areas, and the major customers are made as required by FRS 108 Operating Segments. This disclosure standard has no impact on the reported results or financial position of the Group.

For management purposes the Group is organised into the following major strategic operating segments that offer different products and services: (1) IT products and services, (2) electronic signage services and (3) telephonic call centre and data management services. Such a structural organisation is determined by the nature of risks and returns associated with each business segment and defines the management structure as well as the internal reporting system. It represents the basis on which the management reports the primary segment information. They are managed separately because each business requires different strategies.

The segments and the types of products and services are as follows:

The IT products and services segment is involved in retailing a large selection of IT products including personal computers, notebooks, printers, scanners, digital imaging solutions, personal digital assistants, mobile and wireless connectivity solutions, audio-visual and projection equipment, and related peripherals.

The electronic signage services segment is involved in the supply and installation of electronic signages and provision of electronic signage services.

The telephonic call centre and data management services segment carries on the business of telephonic call centre, data management services and direct marketing services.

Inter-segment sales are measured on the basis that the entity actually used to price the transfers. Internal transfer pricing policies of the Group are as far as practicable based on market prices. The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies.

The management reporting system evaluates performances based on a number of factors. However the primary profitability measurement to evaluate segment’s operating results comprises two major financial indicators: (1) earnings from operations before depreciation, amortisation, interests and income taxes (called “Recurring EBITDA”) and (2) operating result before interests and income taxes and other unallocated items (called “ORBIT”).



4. Financial Information by Operating Segments (Continued)

4B. Profit or Loss from Continuing Operations and Reconciliations

IT productsand services

Electronicsignage

Telephonic Call Centre

and Data Management

Services Unallocated Total$’000 $’000 $’000 $’000 $’000

2011Revenue by SegmentTotal revenue by segment 310,108 3,368 3,562 – 317,038Inter-segment sales and services (15) (159) – – (174)

Total revenue 310,093 3,209 3,562 – 316,864

Recurring EBITDA 21,518 373 353 – 22,244Depreciation (3,038) (10) (78) – (3,126)Finance cost (100) – – – (100)

ORBIT 19,018Share of profit of associate –

Profit before tax from continuing operations 19,018Income tax expense (3,293)

Profit from continuing operations 15,725

2010Revenue by SegmentTotal revenue by segment 237,210 640 3,215 – 241,065Inter-segment sales and services (1) (65) – – (66)

Total revenue 237,209 575 3,215 – 240,999

Recurring EBITDA 18,363 (139) 526 – 18,750Depreciation (2,194) (11) (49) – (2,254)

ORBIT 16,496Share of profit of associate –

Profit before tax from continuing operations 16,496Income tax expense (2,718)

Profit from continuing operations 13,778




4C. Assets and Reconciliations

IT products and services

Electronic signage


and Data Management


2011Total assets for reportable segments 60,007 1,074 3,174 – 64,255Unallocated:Deferred tax assets 27 27Cash and cash equivalent 29,826 29,826Other financial assets 1,768 1,768

Total Group Assets 60,007 1,074 3,174 31,621 95,876

2010Total assets for reportable segments 62,688 885 2,568 – 66,141Unallocated:Deferred tax assets 27 27Cash and cash equivalent 13,013 13,013Other financial assets 2,725 2,725

Total Group Assets 62,688 885 2,568 15,765 81,906




4D. Liabilities and Reconciliations


Electronic signage


and Data Management


2011Total liabilities for reportable segments 46,363 251 2,361 – 48,975Unallocated:Deferred and current tax liabilities 3,886 3,886

Total Group Liabilities 46,363 251 2,361 3,886 52,861

2010Total liabilities for reportable segments 42,350 136 1,945 – 44,431Unallocated:Deferred and current tax liabilities 2,926 2,926

Total Group Liabilities 42,350 136 1,945 2,926 47,357

4E. Other Material Items and Reconciliations


Electronic signage


and Data Management


Expenditures for non-current assets2011 5,127 – 59 – 5,186

2010 3,303 – 141 – 3,444




4F. Geographical Information

Revenue Non- current assets2011 2010 2011 2010$’000 $’000 $’000 $’000

Singapore 301,959 234,035 14,686 14,435Malaysia 14,905 6,964 1,312 617

316,864 240,999 15,998 15,052

Revenues are attributed to countries on the basis of the customer’s location, irrespective of the origin of the goods and services. The non-current assets are analysed by the geographical area in which the assets are located. The non-current assets exclude any financial instruments, post-employment benefit assets.

4G. Information About Major Customers

There are no customers with revenue transactions of over 10% of the Group revenue.

5. Revenue

Group2011 2010$’000 $’000

IT products and services 308,553 235,900Electronic signage services – rendering of services 3,209 575Rental income 1,540 1,309Telephonic call centre and data management services 3,562 3,215

316,864 240,999

6. Interest Income and (Finance Cost)

Group2011 2010$’000 $’000

Interest income 209 148Interest expense on bank borrowings (100) –

109 148

Presented in the profit or loss as:Interest income 209 148Finance cost (100) –

109 148



7. Other Credits and (Other Charges)

Group2011 2010$’000 $’000

Foreign exchange adjustment (loss)/gain (647) 569Sundry income 116 148Loss on disposal of plant and equipment (1) (9)Gain on disposal of available-for-sale financial assets 482 –Inventories written off (39) (49)Inventories (provision)/reversal – (9)Allowance for impairment of trade receivable – (7)

Net (89) 643

Presented in the profit or loss as:Other Credits 598 717Other Charges (687) (74)

Net (89) 643

8. Employee Benefits Expense

Group2011 2010$’000 $’000

Employee benefits expense including directors 16,891 14,913Contributions to defined contribution plans 1,921 1,573

Total employee benefits expense 18,812 16,486

9. Other Expenses

Group2011 2010$’000 $’000

Rental expenses 11,226 8,345Selling and distribution costs 4,361 2,846Other operating expenses 3,224 2,573

18,811 13,764



10. Items in the Consolidated Statement of Comprehensive Income

In addition to the charges and credits disclosed elsewhere in the notes to the financial statements, this item includes the following charges:

Group2011 2010$’000 $’000

Audit fees to independent auditors: – Company’s independent auditors 83 83 – Other independent auditors 15 13

Subtotal 98 96

Other fees to independent auditors: – Company’s independent auditors 20 20 – Other independent auditors 10 10

Subtotal 30 30

128 126

11. Income Tax

11A. Components of tax expense recognised in profit or loss include:

Group2011 2010$’000 $’000

Current tax expense:Current tax expense 3,181 2,768Over adjustments to current tax in respect of prior periods (8) (126)

Subtotal 3,173 2,642

Deferred tax expense:Deferred tax expense 120 76

Subtotal 120 76

Total income tax expense 3,293 2,718



11. Income Tax (Continued)

11A. Components of tax expense recognised in profit or loss include: (Continued)

The income tax in profit or loss varied from the amount of income tax amount determined by applying the Singapore income tax rate of 17% (2010: 17%) to profit or loss before income tax as a result of the following differences:

Group2011 2010$’000 $’000

Profit Before Tax 19,018 16,496

Income tax expense at the above rate 3,233 2,804Non deductible items 174 177Tax exemptions (60) (48)Over adjustments to tax in respect of previous periods (8) (126)Prior years’ unrecorded capital allowances utilised (43) (35)Effect of different tax rates in different countries (10) (56)Other minor items less than 3% each 7 2

Total income tax expense 3,293 2,718

There are no income tax consequences of dividends to owners of the Company.

Temporary differences arising in connection with interests in subsidiaries and associates are insignificant.

11B. Deferred tax (income) expense recognised in profit or loss includes:

Group2011 2010$’000 $’000

Excess of net book value of plant and equipment over tax values 249 195Deferred revenue (129) (119)

Total deferred tax expense recognised in profit or loss 120 76



11. Income Tax (Continued)

11C. Deferred tax balance in the statements of financial position:

Group Company2011 2010 2011 2010$’000 $’000 $’000 $’000

Deferred tax liabilities:Excess of net book value of plant and equipment over tax values (951) (706) (831) (584)

Total deferred tax liabilities (951) (706) (831) (584)

Deferred tax assets:Excess of tax values over net book value of plant and equipment 27 27 – –Deferred revenue 809 562 809 562

Total deferred tax assets 836 589 809 562

Net balance (115) (117) (22) (22)

Presented in the statements of financial position as follows:

Group Company2011 2010 2011 2010$’000 $’000 $’000 $’000

Deferred tax liabilities: (142) (144) (22) (22)Deferred tax assets 27 27 – –

Net balance (115) (117) (22) (22)

It is impracticable to estimate the amount expected to be settled or used within one year.

For the Malaysia company, the realisation of the future income tax benefit from tax loss carryforwards and temporary difference from capital allowances is available for an unlimited future period subject to agreement with tax authorities. The tax losses and unabsorbed capital allowance amounting to approximately $1,648,000 (2010:$1,370,000) and $594,000 (2010: $273,000) respectively.



12. Earnings Per Share

The following table illustrates the numerators and denominators used to calculate basic and diluted earnings per share of no par value:

Group2011 2010$’000 $’000

A. Numerators: earnings attributable to equity:Continuing operations: attributable to equity holders 15,639 13,663

B. Denominators: weighted average number of equity sharesBasic 230,139 229,901Dilutive warrants effect – 238Bonus shares 115,069 115,069

Diluted 345,208 345,208

The weighted average number of equity shares refers to shares in circulation during the reporting period.

The dilutive effect derives from warrants.

Basic earnings per share ratio is based on the weighted average number of ordinary shares outstanding during each reporting period. The diluted earnings per share is based on the weighted average number of ordinary shares and dilutive ordinary share equivalents outstanding during each reporting period. The ordinary share equivalents included in this calculation are the shares issuable upon assumed exercise of warrants which would have a dilutive effect.

The Company issued a total of 115,069,000 bonus shares on the basis of one bonus share for every two existing ordinary shares during the reporting year 2011. The weighted average number of shares used in the calculation of earnings per share have been computed as if the bonus share issue had occurred at the beginning of the earliest period presented. Accordingly earnings per share for the comparative period have also been restated.



13. Dividends on Equity Shares

Group2011 2010$’000 $’000

Interim tax exempt (1-tier) dividend paid of 1.0 cents (2010: 1.2 cent) per share 3,452 2,761Final tax exempt (1-tier) dividend paid of 1.1 cents (2010: 1.3 cents) per share 3,797 2,992

7,249 5,753

In respect of the current year, the Directors propose that a final dividend of 1.2 cents per share totalling $4,142,496 to be paid to shareholders after the Annual General Meeting. There are no income tax consequences. This dividend is subject to approval by shareholders at the next Annual General Meeting and has not been included as a liability in these financial statements. The proposed final dividend for 2011 is payable in respect of all ordinary shares in issue at the end of the reporting year and including the new qualifying shares issue up to the date the dividend become payable, if any.

14. Property, Plant and Equipment

GroupLeasehold Property Renovation

Plant & Equipment Total

$’000 $’000 $’000 $’000

Cost:At 1 January 2010 7,200 5,049 7,239 19,488Additions – 736 2,708 3,444Disposals – (71) (177) (248)

At 31 December 2010 7,200 5,714 9,770 22,684Additions – 1,305 3,881 5,186Disposals – (3,099) (3,447) (6,546)

At 31 December 2011 7,200 3,920 10,204 21,324

Accumulated depreciation:At 1 January 2010 277 3,311 4,781 8,369Depreciation for the year 277 712 1,265 2,254Disposals – (65) (174) (239)

At 31 December 2010 554 3,958 5,872 10,384Depreciation for the year 277 830 2,019 3,126Disposals – (3,047) (3,342) (6,389)

At 31 December 2011 831 1,741 4,549 7,121

Net book value:At 1 January 2010 6,923 1,738 2,458 11,119

At 31 December 2010 6,646 1,756 3,898 12,300

At 31 December 2011 6,369 2,179 5,655 14,203



14. Property, Plant and Equipment (Continued)

CompanyLeasehold Property Renovation

Plant & Equipment Total

$’000 $’000 $’000 $’000Cost:At 1 January 2010 7,200 4,192 6,127 17,519Additions – 662 2,348 3,010Disposals – – (157) (157)

At 31 December 2010 7,200 4,854 8,318 20,372Additions – 1,102 2,968 4,070Disposals – (2,771) (3,133) (5,904)

At 31 December 2011 7,200 3,185 8,153 18,538

Accumulated depreciation:At 1 January 2010 277 2,845 4,155 7,277Depreciation for the year 277 569 1,046 1,892Disposals – – (156) (156)

At 31 December 2010 554 3,414 5,045 9,013Depreciation for the year 277 712 1,716 2,705Disposals – (2,770) (3,120) (5,890)

At 31 December 2011 831 1,356 3,641 5,828

Net book value:At 1 January 2010 6,923 1,347 1,972 10,242

At 31 December 2010 6,646 1,440 3,273 11,359

At 31 December 2011 6,369 1,829 4,512 12,710

Certain bank facilities were secured by a first legal mortgage over the property at a carrying value of $6,369,000 (2010: $6,646,000). Those facilities remain unutilised at end of the reporting year.

15. Investments in Subsidiaries

Company2011 2010$’000 $’000

Movements during the year:At beginning of the year 3,799 3,299Additions – 500

3,799 3,799Less: Allowance for impairment (1,617) (1,617)

Total at cost 2,182 2,182

Net book value of subsidiaries 2,072 1,912

Movements in allowance for impairment:Balance at beginning and end of the year 1,617 1,617

Analysis of above amount denominated in non-functional currency:Malaysian ringgit 427 427



15. Investments in Subsidiaries (Continued)

The subsidiaries held by the Company are listed below:

Name of Subsidiaries, Country of Incorporation, Place of Operations and Principal Activities (and Independent Auditors)

Cost in Books of Company

Effective Percentage of Equity Held

2011 2010 2011 2010$’000 $’000 % %

CBD eVision Pte Ltd (a) 1,500 1,500 100 100SingaporeElectronic signage business

Matrix Integration Pte. Ltd. (a) 385 385 100 100SingaporeIT retailing speciality store

Challenger IT Services Pte. Ltd. (a) 100 100 100 100SingaporeIT maintenance and technical support services

Challenger Technologies (M) Sdn Bhd (b) 427 427 100 100MalaysiaProvision of IT products and services(Douglas Loh & Associates)

Incall Systems Pte Ltd (b) 887 887 70 70SingaporeTelephonic call centre and data management services(PS Phuan & Co)

Challenger eCommerce Pte. Ltd. (a) 500 500 100 100Online retailing

3,799 3,799

(a) Audited by RSM Chio Lim LLP, a member of RSM International.

(b) Other independent auditors. Audited by firms of accountants other than member firms of RSM International of which RSM Chio Lim LLP in Singapore is a member. Their names are indicated above. The Board of Directors and Audit Committee are satisfied that the appointment of different auditors would not compromise the standard and effectiveness of the audit of the Group.



16. Investments in Associates

Group Company2011 2010 2011 2010$’000 $’000 $’000 $’000

Carrying value:Unquoted equity shares at cost 311 311 311 311Less: Allowance for impairment (311) (311) (311) (311)

– – – –

Analysis of above amount denominated in non-functional currency:China renminbi 311 311 311 311

The associates held by the Company are listed below:

Name of Associates, Country of Incorporation,Place of Operations and Principal Activities

Percentage ofEquity Held

by Group2011 2010

% %

Challenger Infortech (Beijing) Co., Ltd (a) (b) 40 40People’s Republic of ChinaProvision of software and installation services

(a) Other independent auditors. Audited by firms of accountants other than member firms of RSM International of which RSM Chio Lim LLP in Singapore is a member.

(b) The accounts of the associate for years ended 31 December 2011 and 31 December 2010 were not available. The Group has recognised its share of loss up to the cost of investment totalling $311,000 (2010: $311,000) which is not material to the Group. The associate is currently dormant.



17. Other Financial Assets, Non-Current

Group Company2011 2010 2011 2010$’000 $’000 $’000 $’000

Balance is made up of:Investment in unit trust as available- for-sale at fair value through other comprehensive income 1,768 1,752 1,768 1,752Quoted equity shares in corporations as available-for-sale at fair value through other comprehensive income – 896 – 896Unquoted shares in corporation – 77 – –

1,768 2,725 1,768 2,648

Movements during the year:Fair value at beginning of the year 2,725 2,611 2,648 2,611Additions – 77 – –Disposals (973) (28) (896) (28)Foreign exchange adjustments 16 65 16 65

Fair value at end of the year 1,768 2,725 1,768 2,648

Group Company2011 2010 2011 2010$’000 $’000 $’000 $’000

Analysis of amount denominated in non-functional currency:Australian dollars 1,768 1,752 1,768 1,752

Movements in allowance:Balance at beginning of the year 746 746 746 746Disposal during the year (746) – (746) –

Balance at end of the year – 746 – 746

The investments in unit trust and quoted equity securities are held primarily for long-term growth potential. The fair value of the investment in unit trust is derived based on the fair value of the underlying portfolio investments held by the unit trust as at the end of the reporting year (level 3).



18. Inventories

Group Company2011 2010 2011 2010$’000 $’000 $’000 $’000

Goods for resale 24,081 25,161 22,122 22,654

Inventories are stated after allowance.

Movements in allowance:Balance at beginning of the year 33 26 29 25(Reversed)/charged to profit or loss included in other (credits)/charges – 9 – 4Used – (2) – –

Balance at end of the year 33 33 29 29

The reversal of the allowance is for goods with an estimated increase in net realisable value.

There are no inventories pledged as security for liabilities.

19. Trade and Other Receivables, Current

Group Company2011 2010 2011 2010$’000 $’000 $’000 $’000

Trade receivables:Outside parties 3,281 2,556 2,002 1,571Retention monies on construction contracts – 123 – –Subsidiaries (Notes 3 and 15) – – – 1,513

Subtotal 3,281 2,679 2,002 3,084

Other receivables:Subsidiaries (Notes 3 and 15) – – 5,582 3,671Other receivables – 149 7 30

Subtotal – 149 5,589 3,701

Total trade and other receivables 3,281 2,828 7,591 6,785



20. Other Assets, Current

Group Company2011 2010 2011 2010$’000 $’000 $’000 $’000

Deposits to secure services 3,547 2,628 2,982 2,237Prepayments 90 70 83 45

Balance at end of the year 3,637 2,698 3,065 2,282

21. Cash and Cash Equivalents

Group Company2011 2010 2011 2010$’000 $’000 $’000 $’000

Not restricted in use 19,053 28,921 15,681 26,174Cash pledged for bank facilities #a 29,826 7,246 29,826 7,246

Balance at end of year 48,879 36,167 45,507 33,420

Interest earning balances 29,826 13,013 29,826 13,013

The rate of interest for the cash on interest earning balances is between 0.05% and 4.90% (2010: 0.05% and 4.90%).

Cash and cash equivalent in the consolidated statement of cash flows:

Group2011 2010$’000 $’000

Amount as shown above 48,879 36,167Cash pledged for bank facilities #a (29,826) (7,246)

Cash and cash equivalents at end of the year 19,053 28,921

#a Certain bank facilities were secured by a charge on the fixed deposit balances (Note 25).

22. Share Capital

Group and CompanyNumber of

shares issuedShare capital

’000 $’000

Ordinary shares of no par value:Balance at beginning of the year 1 January 2010 228,993 18,661Issue of shares arising from warrants exercised at $0.1 each(a) 1,146 114

Balance at end of the year 31 December 2010 230,139 18,775Issue of shares arising from bonus share issue(b) 115,069 –

Balance at end of the year 31 December 2011 345,208 18,775



22. Share Capital (Continued)

(a) The Company received approximately $114,000 from the conversion of warrants during the year 2010. This gives a total of about $3,058,000 received to date out of the potential total proceeds of about $3,100,000 from the conversion of warrants. This amount has been used for working capital and expansion of business in Singapore and overseas. The rights comprised in the warrants to subscribe for new ordinary shares have expired on 8 April 2010.

(b) On 29 March 2011, the Company issued a total of 115,069,303 new ordinary shares, being bonus share issue on the basis of one bonus share for every two existing ordinary shares. These bonus shares were officially listed and quoted on the Singapore Exchange Securities Trading Limited on 30 March 2011.

The ordinary shares of no par value which are fully paid carry no right to fixed income. The Company is not subject to any externally imposed capital requirements except as mentioned below.

Capital management:

The objectives when managing capital are: to safeguard the reporting entity’s ability to continue as a going concern, so that it can continue to provide returns for owners and benefits for other stakeholders, and to provide an adequate return to owners by pricing the sales commensurately with the level of risk. The management sets the amount of capital to meet its requirements and the risk taken. There were no changes in the approach to capital management during the reporting year. The management manages the capital structure and makes adjustments to it where necessary or possible in the light of changes in conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the management may adjust the amount of dividends paid to owners, return capital to owners, issue new shares, or sell assets to reduce debt.

In order to maintain its listing on the Singapore Stock Exchange it has to have share capital with a free float of at least 10% of the shares. The Company met the capital requirement on its initial listing and the rules limiting treasury share purchases mean it will automatically continue to satisfy that requirement, as it did throughout the year. Management receives a report from the registrars frequently on substantial share interests showing the non-free float and it demonstrated continuing compliance with the 10% limit throughout the year.

The primary objective for capital management is to ensure a strong credit rating and healthy capital ratios to support its business and maximise shareholder value. The management does not set a target level of gearing but uses capital opportunistically to add value for shareholders. The key discipline adopted is to widen the margin between the return on capital employed and the cost of that capital.

The Group and Company’s bank loans are secured by specific assets. There is also large cash balance. The debt-to-adjusted capital ratio may not provide a meaningful indicator of the risk of borrowings.



23. Other Reserves

Revaluation reserve

Currency translation Total

Group: $’000 $’000 $’000

At 1 January 2011 319 (23) 296Foreign exchange adjustment – 35 35

At 31 December 2011 319 12 331

At 1 January 2010 319 (5) 314Foreign exchange adjustment – (18) (18)

At 31 December 2010 319 (23) 296

Revaluation reserve

Company: $’000

At 1 January 2011 319Fair value adjustment on available-for-sale investments –

At 31 December 2011 319

At 1 January 2010 319Fair value loss on available-for-sale investments –

At 31 December 2010 319

The currency translation reserve accumulates all foreign exchange differences.

The revaluation reserve arises from the annual revaluation of available-for-sale financial assets. It is not distributable until it is released to the profit or loss statement on the disposal of the investments.

All reserves classified on the face of the balance sheet as retained earnings represents past accumulated earnings and are distributable as cash dividends. The other reserves are not available for cash dividends unless realised.



24. Other Liabilities

Group Company2011 2010 2011 2010$’000 $’000 $’000 $’000

Non-Current:Membership fees 810 573 810 573Star Shield warranty 1,525 1,234 – –

Total non-current deferred revenue 2,335 1,807 810 573

Current:Customer loyalty programme (Note 24A) 4,070 3,330 4,070 3,330Membership fees 2,352 1,686 2,352 1,686Customer vouchers 214 114 208 112Star Shield warranty – – 63 63

Total current deferred revenue 6,636 5,130 6,693 5,191

24A. Customer Loyalty Programme

The Company operates the Challenger Membership Scheme, where every dollar spent on the purchase of the company’s products entitles the member to earn one reward point. Reward points accumulated can be used to redeem specific products at specific retail location, or cash vouchers issued by the Company.

Group and Company2011 2010$’000 $’000

Revenue deferred relating to customer loyalty programme:Balance at beginning of the year 3,330 2,610Revenue deferred in respect of award credits earned 2,532 1,790Revenue recognised on discharge of obligations for award credits (1,792) (1,070)

Balance at end of the year 4,070 3,330

25. Other Financial Liabilities, Current


Current:Bank loans (secured) 16,629 6,429

All the amounts are at floating interest rates. The range of interest rates paid was from 1.260% to 1.265%.

The bank loan is a short-term loan for 1-month, 3-month or 6-month duration for up to US$20,000,000 and shall be repayable on demand. It is secured by a charge on certain fixed deposits (Note 21).



26. Trade and Other Payables, Current

Group Company2011 2010 2011 2010$’000 $’000 $’000 $’000

Trade payables:Outside parties and accrued liabilities 22,293 30,148 20,505 29,119Subsidiaries (Note 3) – – 188 151

Subtotal 22,293 30,148 20,693 29,270

Other payables:Subsidiaries (Note 3) – – 421 135Advances 777 645 320 205Deposits received 239 248 239 238Other payables 66 24 19 14

Subtotal 1,082 917 999 592

Total trade and other payables 23,375 31,065 21,692 29,862

27. Financial Instruments: Information on Financial Risks

27A. Classification of Financial Assets and Liabilities

The following table summarises the carrying amount of financial assets and liabilities recorded at the end of the reporting year by FRS 39 categories:

Group Company2011 2010 2011 2010$’000 $’000 $’000 $’000

Financial assets:Cash and cash equivalents 48,879 36,167 45,507 33,420Loans and receivables 3,281 2,828 7,591 6,785Available-for-sale financial assets 1,768 2,725 1,768 2,648

At end of the year 53,928 41,720 54,866 42,853

Group Company2011 2010 2011 2010$’000 $’000 $’000 $’000

Financial liabilities:Borrowings at amortised cost 16,629 6,429 16,629 6,429Trade and other payables at amortised cost 23,375 31,065 21,692 29,862

At end of the year 40,004 37,494 38,321 36,291

Further quantitative disclosures are included throughout these financial statements.



27. Financial Instruments: Information on Financial Risks (Continued)

27B. Financial Risk Management

The main purpose for holding or issuing financial instruments is to raise and manage the finances for the entity’s operating, investing and financing activities. The main risks arising from the entity’s financial instruments are credit risk, interest risk, liquidity risk, foreign currency risk and market price risk comprising interest rate and currency risk exposures. The management has certain practices for the management of financial risks. The guidelines set up the short and long term objectives and action to be taken in order to manage the financial risks. The guidelines include the following:

1. Minimise interest rate, currency, credit and market risk for all kinds of transactions.

2. Maximise the use of “natural hedge”: favouring as much as possible the natural off-setting of sales and costs and payables and receivables denominated in the same currency and therefore put in place hedging strategies only for the excess balance. The same strategy is pursued with regard to interest rate risk.

3. All financial risk management activities are carried out and monitored by senior management staff.

4. All financial risk management activities are carried out following good market practices.

5. When appropriate may consider investing in shares or similar instruments.

There has been no changes to the exposures to risk; the objectives, policies and processes for managing the risk and the methods used to measure the risk.

The Group and Company are exposed to currency and interest rate risks. The Company is primarily exposed to currency and interest rate risk arising from its Australian dollar investment and fixed deposit. The Company does not enter into derivative contracts and other hedging instruments to hedge against these risks. It is the Group’s policy not to trade in derivative contracts.

The Company places excess funds with reputable banks in foreign currency other than the Singapore dollar to generate better interest income in comparison to placing the same amount in Singapore dollar accounts. Interest rate risk is managed by placing such excess funds on varying maturities and interest rate terms.

As for the foreign currency investment, the Company reviews periodically its investment held in currency other than the Singapore dollar to ensure that its net exposure is kept at an acceptable level.

The Chief Financial Officer who monitors the procedures reports to the Board.




27C. Fair Values of Financial Instruments

Fair value of financial instruments stated at amortised cost in the statement of financial position

The financial assets and financial liabilities at amortised cost are at a carrying amount that is a reasonable approximation of fair value.

Fair value measurements recognised in the statement of financial position

The fair value measurements are classified using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The levels are: Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and Level 3 inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Balances recognised at fair value in the statement of financial position included investment in unit trust of $1,768,000 (2010: $1,752,000) and quoted equity shares in corporations of Nil (2010: $896,000). They were measured at Level 3 and Level 1 of the fair value hierarchy respectively. There were no significant transfers between Level 1 and Level 3 of the fair value hierarchy.

27D. Credit Risk on Financial Assets

Financial assets that are potentially subject to concentrations of credit risk and failures by counterparties to discharge their obligations in full or in a timely manner consist principally of cash balances with banks, cash equivalents and receivables, and other financial assets. The maximum exposure to credit risk is: the total of the fair value of the financial instruments; the maximum amount the entity could have to pay if the guarantee is called on; and the full amount of any loan payable commitment at the end of the reporting year. Credit risk on cash balances with banks and any derivative financial instruments is limited because the counter-parties are entities with acceptable credit ratings. Credit risk on other financial assets is limited because the other parties are entities with acceptable credit ratings. For credit risk on receivables an ongoing credit evaluation is performed on the financial condition of the debtors and a loss from impairment is recognised in profit or loss. The exposure to credit risk is controlled by setting limits on the exposure to individual customers and these are disseminated to the relevant persons concerned and compliance is monitored by management. There is no significant concentration of credit risk, as the exposure is spread over a large number of counter-parties and customers unless otherwise disclosed in the notes to the financial statements.




27D. Credit Risk on Financial Assets (Continued)

Note 21 discloses the maturity of the cash and cash equivalents balances.

As part of the process of setting customer credit limits, different credit terms are used. The average credit period generally granted to trade receivable customers is about 30 to 60 days (2010: 30 to 60 days). But some customers take a longer period to settle the amounts. The total of overdue accounts was $303,000 (2010: $533,000).

(a) Ageing analysis of the trade receivables amounts that are past due as at the end of the reporting year but not impaired:

Group Company2011 2010 2011 2010$’000 $’000 $’000 $’000

Trade receivables:Less than 60 days 1,181 1,426 764 1,05861 to 90 days 221 257 28 38Over 90 days 82 276 135 98

Total 1,484 1,959 927 1,194

(b) As at the end of the reporting year, there were no amounts that were impaired.

Other receivables are normally with no fixed terms and therefore there is no maturity.

Available-for-sale financial assets: these are equity shares and unit trust and therefore there is no maturity.

Concentration of trade receivable customers:

Group Company2011 2010 2011 2010$’000 $’000 $’000 $’000

Top 1 customer 384 315 137 1,600Top 2 customers 651 488 252 1,699Top 3 customers 767 639 343 1,780




27E. Liquidity Risk

The following table analyses the non-derivative financial liabilities by remaining contractual maturity (contractual and undiscounted cash flows):

Group Company2011 2010 2011 2010$’000 $’000 $’000 $’000

Less than 1 year:Trade and other payables 23,375 31,065 21,692 29,862Gross borrowings commitments 16,629 6,429 16,629 6,429

At end of the year 40,004 37,494 38,321 36,291

The liquidity risk refers to the difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. It is expected that all the liabilities will be paid at their contractual maturity. The average credit period taken to settle trade payables is about 30 days (2010: 30 days). The other payables are with short-term durations. In order to meet such cash commitments the operating activity is expected to generate sufficient cash inflows. In addition, the financial assets are held for which there is a liquid market and that are readily available to meet liquidity needs.

Financial guarantee contracts:

At the end of the reporting year, no claims on the financial guarantee are expected. All the corporate guarantees provided are disclosed in Note 31. The underlying bank facilities mature within one year.

Bank facilities: Group Company2011 2010 2011 2010$’000 $’000 $’000 $’000

Undrawn borrowing facilities 37,192 40,069 37,092 39,969Unused bank guarantees 3,288 1,309 3,038 1,070

The undrawn borrowing facilities are available for operating activities and to settle other commitments. Borrowing facilities are maintained to ensure funds are available for the operations.

Certain bank facilities were secured by a charge on the fixed deposit balance.




27F. Interest Rate Risk

The interest rate risk exposure, which mainly concern financial liabilities and financial assets, is not significant.

27G. Foreign Currency Risks

Analysis of amounts denominated in non-functional currency:

GroupFinancial assets:

Australian dollars

Malaysian ringgit

United States dollars Total

$’000 $’000 $’000 $’000

2011:Cash 4,347 299 301 4,947Receivables – 146 – 146Other financial assets 1,768 – – 1,768

At end of the year 6,115 445 301 6,861

2010:Cash 3,267 184 72 3,523Receivables – 147 – 147Other financial assets 1,752 77 – 1,829

At end of the year 5,019 408 72 5,499

CompanyFinancial assets:

Australian dollars

Malaysian ringgit


$’000 $’000 $’000 $’000

2011:Cash 4,347 – – 4,347Receivables – 5,120 – 5,120Other financial assets 1,768 – – 1,768

At end of the year 6,115 5,120 – 11,235

2010:Cash 3,267 – – 3,267Receivables – 3,066 – 3,066Other financial assets 1,752 77 – 1,829

At end of the year 5,019 3,143 – 8,162




27G. Foreign Currency Risks (Continued)

GroupFinancial liabilities:

Australian dollars

Malaysian ringgit


$’000 $’000 $’000 $’000

2011:Trade and other payables – 1,180 3,467 4,647

At end of the year – 1,180 3,467 4,647

Net financial assets and/ (liabilities) at end of the year 6,115 (735) (3,166) 2,214

2010:Trade and other payables – 458 7,635 8,093

At end of the year – 458 7,635 8,093

Net financial assets and/ (liabilities) at end of the year 5,019 (50) (7,563) (2,594)

CompanyFinancial liabilities:

Australian dollars

Malaysian ringgit


$’000 $’000 $’000 $’000

2011:Trade and other payables – – 3,467 3,467

At end of the year – – 3,467 3,467

Net financial assets and/ (liabilities) at end of the year 6,115 5,120 (3,467) 7,768

2010:Trade and other payables – – 7,635 7,635

At end of the year – – 7,635 7,635

Net financial assets and/ (liabilities) at end of the year 5,019 3,143 (7,635) 527

There is exposure to foreign currency risk as part of its normal business.




27G. Foreign Currency Risks (Continued)

Sensitivity analysis:

Group Company2011 2010 2011 2010$’000 $’000 $’000 $’000

A hypothetical 10% strengthening in the exchange rate of the functional currency $ against the Australian dollars would have a favourable/(adverse) effect on Group profit before tax of (612) (502) (612) (502)

A hypothetical 10% strengthening in the exchange rate of the functional currency $ against United States dollars would have a favourable/(adverse) effect on Group profit before tax of 347 764 347 764

The above table shows sensitivity to a hypothetical 10% variation in the functional currency against the relevant foreign currencies. The sensitivity rate used is the reasonably possible change in foreign exchange rates. For similar rate weakening of the functional currency against the relevant foreign currencies, there would be comparable impacts in the opposite direction on the profit or loss.

The hypothetical changes in exchange rates are not based on observable market data (unobservable inputs). The sensitivity analysis is disclosed for each currency to which the entity has significant exposure at end of the reporting year. The analysis above has been carried out on the following basis:

1. There are no hedged transactions.

2. Taking into consideration the currency risk relating to available-for-sale financial assets.

In management’s opinion, the above sensitivity analysis is unrepresentative of the foreign exchange risks as the historical exposure does not reflect the exposure in future.

27H. Equity Price Risk

There are no investment in quoted instrument as at end of the reporting year. All quoted share investments have been disposed during the reporting year.



28. Capital Commitments

Estimated amounts committed at the end of the reporting year for future capital expenditure but not recognised in the financial statements are as follows:

Group Company2011 2010 2011 2010$’000 $’000 $’000 $’000

Commitments to purchase plant and equipment 748 931 748 931

29. Operating Lease Payment Commitments

At the end of the reporting year the total of future minimum lease payment commitments under non-cancellable operating leases are as follows:

Group Company2011 2010 2011 2010$’000 $’000 $’000 $’000

Not later than one year 11,214 8,338 10,206 7,529Later than one year and not later than five years 12,121 11,014 10,723 10,588

Rental expense for the year 11,226 8,345 10,241 7,031

Operating lease payments represent rentals payable by the Group for its retail outlets and office space. The lease rental terms are negotiated for an average of one to three years and rentals are subject to an escalation clause but the amount of the rent increase is not to exceed a certain percentage.

30. Operating Lease Income Commitments

At the end of the reporting year the total of future minimum lease receivables committed under non-cancellable operating leases are as follows:


Not later than one year 919 565

Rental income for the year 1,540 1,309

Operating lease income is for rentals receivable from product and branding display at certain retail outlets. The lease to the tenant is on a yearly basis.



31. Contingent Liabilities

Company2011 2010$’000 $’000

Corporate guarantee given to bank in favour of a subsidiary 350 350Undertaking to support subsidiaries with deficits 2,555 1,861

32. Changes and Adoption of Financial Reporting Standards

For the reporting year ended 31 December 2011 the following new or revised Singapore Financial Reporting Standards were adopted. The new or revised standards did not require material modification of the measurement methods or the presentation in the financial statements.

FRS No. Title

FRS 1 Presentation of Financial Statements Disclosures (Amendments to)FRS 24 Related Party Disclosures (revised)FRS 27 Consolidated and Separate Financial Statements (Amendments to) FRS 32 Classification Of Rights Issues (Amendments to) (*)FRS 34 Interim Financial Reporting (Amendments to)FRS 103 Business Combinations (Amendments to)FRS 107 Financial Instruments: Disclosures (Amendments to)FRS 107 Financial Instruments: Disclosures (Amendments to) – Transfers of

Financial Assets (*)INT FRS 113 Customer Loyalty Programmes (Amendments to)INT FRS 114 Prepayments of a Minimum Funding Requirement (revised) (*)INT FRS 115 Agreements for the Construction of Real Estate (*)INT FRS 119 Extinguishing Financial Liabilities with Equity Instruments (*)

(*) Not relevant to the entity.



33. Future Changes in Financial Reporting Standards

The following new or revised Singapore Financial Reporting Standards that have been issued will be effective in future. The transfer to the new or revised standards from the effective dates is not expected to result in material adjustments to the financial position, results of operations, or cash flows for the following year.

FRS No. Title Effective date for periods

beginning on or after

FRS 1 Amendments to FRS 1 – Presentation of Items of Other Comprehensive Income

1 Jul 2012

FRS 12 Deferred Tax (Amendments to) – Recovery of Underlying Assets (*)

1 Jan 2012

FRS 19 Employee Benefits 1 Jan 2013FRS 27 Consolidated and Separate Financial Statements

(Amendments to)1 Jul 2011

FRS 27 Separate Financial Statements 1 Jan 2013FRS 28 Investments in Associates and Joint Ventures 1 Jan 2013FRS 107 Financial Instruments: Disclosures

(Amendments to) – Transfers of Financial Assets (*)1 Jul 2011

FRS 110 Consolidated Financial Statements 1 Jan 2013FRS 111 Joint Arrangements (*) 1 Jan 2013FRS 112 Disclosure of Interests in Other Entities 1 Jan 2013FRS 113 Fair Value Measurements 1 Jan 2013

(*) Not relevant to the entity.

STATISTICS OF SHAREHOLDINGSAS AT 12 MARCH 2012

Number of Shares : 345,207,961Class of Shares : Ordinary sharesNumber of Shares : One vote per share

DISTRIBUTION OF SHAREHOLDINGS

SIZE OF SHAREHOLDINGSNO. OF

SHAREHOLDERS % NO. OF SHARES %

1 – 999 99 11.90 24,013 0.011,000 – 10,000 266 31.97 1,150,483 0.3310,001 – 1,000,000 449 53.97 35,663,281 10.331,000,001 AND ABOVE 18 2.16 308,370,184 89.33

TOTAL 832 100.00 345,207,961 100.00

TWENTY LARGEST SHAREHOLDERS

NO. NAME NO. OF SHARES %1 Loo Leong Thye 149,324,250 43.262 Ng Leong Hai 84,067,500 24.353 Ong Sock Hwee 32,940,750 9.544 DB Nominees (Singapore) Pte Ltd 8,889,500 2.585 Phillip Securities Pte Ltd 5,707,893 1.656 Lim Yew Hoe 5,377,950 1.567 Wang Tong Pang @ Wang Tong Peng 2,793,999 0.818 DBS Nominees Pte Ltd 2,685,558 0.789 Citibank Nominees Singapore Pte Ltd 2,509,500 0.7310 United Overseas Bank Nominees (Pte) Ltd 2,108,286 0.6111 Tan Wee Ko 1,788,000 0.5212 Ng Hian Hai 1,700,000 0.4913 Loo Pei Fen (Lu Peifen) 1,611,000 0.4714 Loh Tee Yang 1,607,499 0.4715 Law Kim Hong Rosalind 1,535,999 0.4416 Kelly Ronan Philip 1,399,000 0.4117 Ng Kian Teck 1,200,000 0.3518 Hong Leong Finance Nominees Pte Ltd 1,123,500 0.3319 Heng Tock Hin 800,999 0.2320 Choong Kien Siong 786,000 0.23

TOTAL 309,957,183 89.81


STATISTICS OF SHAREHOLDINGSAS AT 12 MARCH 2012

SUBSTANTIAL SHAREHOLDERS AS AT 12 MARCH 2012

Direct interest Deemed interestName of shareholders No. of Shares % No. of Shares %Loo Leong Thye 149,324,250 43.26% 1,644,750* 0.48%*Ng Leong Hai 84,067,500 24.35% – –Ong Sock Hwee 32,940,750 9.54% – –

* Mr Loo Leong Thye is deemed to be interested in the 1,644,750 shares held by his daughter and son.

PERCENTAGE OF SHAREHOLDINGS IN PUBLIC HANDS

Based on the information available to the Company as at 12 March 2012, approximately 21.91% of the issued ordinary shares of the Company is held by the public. Accordingly, the Company has complied with Rule 723 of the Listing Manual issued by the Singapore Exchange Securities Trading Limited.


NOTICE OF ANNUAL GENERAL MEETING


CHALLENGER TECHNOLOGIES LIMITED(Incorporated in the Republic of Singapore)

Company Registration No: 198400182K

NOTICE IS HEREBY GIVEN that the Annual General Meeting of CHALLENGER TECHNOLOGIES LIMITED will be held at 1 Ubi Link, Challenger TecHub, Singapore 408553 on Wednesday, 25 April 2012 at 10.00 a.m. for the following purposes:

AS ORDINARY BUSINESS:

1. To receive and adopt the audited accounts for the financial year ended 31 December 2011 together with the reports of the Directors and Auditors, and the Statement of Directors. (Resolution 1)

2. To declare a final tax exempt (one-tier) dividend of 1.20 cent per ordinary share for the financial year ended 31 December 2011. (Resolution 2)

3. To re-elect Mdm Ong Sock Hwee (retiring pursuant to Article 107 of the Company’s Articles of Association) as a director.

Mdm Ong Sock Hwee will, upon re-election as a Director of the Company, remain as a member of the Audit Committee, Nominating Committee and Remuneration Committee. (Resolution 3)

4. To re-elect Mr Ng Kian Teck (retiring pursuant to Article 117 of the Company’s Articles of Association) as a director.

Mr Ng Kian Teck will, upon re-election as a Director of the Company, remain as the Executive Director of the Company. (Resolution 4)

5. To approve the payment of Directors’ fees of S$56,000 for the financial year ending 31 December 2012, to be paid quarterly in arrears. (Resolution 5)

6. To re-appoint RSM Chio Lim LLP as Auditors of the Company and to authorise the Directors to fix their remuneration. (Resolution 6)

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



AS SPECIAL BUSINESS:

To consider and, if thought fit, to pass the following resolutions as Ordinary Resolutions:

8. That pursuant to Section 161 of the Companies Act, Cap. 50, and the Listing Manual of the SGX-ST, authority be and is hereby given to the Directors of the Company to allot and issue shares or convertible securities or exercise of any share option or vesting of any share award outstanding or subsisting from time to time (whether by way of rights, bonus or otherwise) and upon such terms and conditions and for such purposes and to such persons as the Directors may in their absolute discretion deem fit, provided that the aggregate number of shares and convertible securities which may be issued pursuant to such authority shall not exceed 50% of the issued share capital of the Company, of which the aggregate number of shares and convertible securities which may be issued other than on a pro-rata basis to the existing Shareholders of the Company shall not exceed 20% of the issued share capital of the Company (the percentage of issued share capital being based on the issued share capital at the time such authority is given after adjusting for new shares arising from the conversion or exercise of any convertible securities or employee share options on issue at the time such authority is given and any subsequent consolidation or subdivision of shares) and, unless revoked or varied by the Company in general meeting, such authority shall 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 the earlier.[see Explanatory Note (1)] (Resolution 7)

BY ORDER OF THE BOARD

CHIA FOON YEOWCompany SecretarySingapore9 April 2012



EXPLANATORY NOTES:

(1) The Ordinary Resolution 7 above, if passed, will empower the Directors of the Company from the date of the above Meeting until the next Annual General Meeting or the date by which the next Annual General Meeting is required by law to be held, whichever is earlier, to allot and issue shares and convertible securities in the Company up to an amount not exceeding in total fifty per cent (50%) of the total number of issued shares excluding treasury shares of the Company for such purposes as they consider would be in the interest of the Company, provided that the aggregate number of shares to be issued other than on a pro-rata basis to existing shareholders pursuant to this Resolution shall not exceed twenty per cent (20%) of the total number of issued shares excluding treasury shares of the Company. The percentage of the total number of issued shares excluding treasury shares is based on the Company’s total number of issued shares excluding treasury shares at the time the proposed Ordinary Resolution is passed after adjusting for (a) new shares arising from the conversion or exercise of convertible securities or exercise of share options or vesting of awards outstanding or subsisting at the time the proposed Ordinary Resolution is passed and (b) any subsequent bonus issue, consolidation or subdivision of shares. This authority will, unless previously revoked or varied at a General Meeting, expire at the next Annual General Meeting of the Company.

NOTES:

(i) A member of the Company entitled to attend and vote at the above Meeting may appoint not more than two proxies to attend and vote instead of him.

(ii) Where a member appoints two proxies, he shall specify the proportion of his shareholding to be represented by each proxy in the instrument appointing the proxies. A proxy need not be a member of the Company.

(iii) If the member is a corporation, the instrument appointing the proxy must be under its common seal or the hand of its attorney or a duly authorised officer.

(iv) The instrument appointing a proxy must be deposited at the Registered Office of the Company at 1 Ubi Link, Challenger TecHub, Singapore 408553 not less than 48 hours before the time appointed for holding the above Meeting.

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CHALLENGER TECHNOLOGIES LIMITED(Incorporated in the Republic of Singapore)Company Registration No: 198400182K

I/We, (Name)of (Address)being a member/members of CHALLENGER TECHNOLOGIES LIMITED (the “Company”) hereby appoint:

Name Address NRIC/Passport No.Proportion of

Shareholdings (%)

and/or (delete as appropriate)

Name Address NRIC/Passport No.Proportion of

Shareholdings (%)

as my/our proxy/proxies to vote for me/us on my/our behalf, at the Annual General Meeting (“AGM”) of the Company, to be held at 1 Ubi Link, Challenger TecHub, Singapore 408553 on Wednesday, 25 April 2012 at 10.00 a.m, and at any adjournment thereof. I/We direct my/our proxy/proxies to vote for or against the Resolutions to be proposed at the AGM as indicated hereunder. If no specific directions as to voting are given or in the event of any other matter arising at the AGM and at any adjournment thereof, the proxy/proxies will vote or abstain from voting at his/their discretion.

No. Resolutions relating to:No. of votes

For*No. of votes

Against*

Ordinary Business

1 Adoption of the Audited Accounts for the financial year ended 31 December 2011 together with the reports of the Directors and Auditors, and Statement of Directors.

2 Payment of proposed final tax exempt (one-tier) dividend of 1.20 cent per ordinary share for the financial year ended 31 December 2011.

3 Re-election of Mdm Ong Sock Hwee as a Director.

4 Re-election of Mr Ng Kian Teck as a Director.

5 Approval of Directors’ fees amounting to S$56,000 for the financial year ending 31 December 2012 to be paid quarterly in arrears.

6 Re-appointment of RSM Chio Lim LLP as Auditors and to fix their remuneration.

Special Business

7 Authority to allot and issue new shares or convertible securities pursuant to Section 161 of the Companies Act, Cap. 50, and the Listing Manual of the Singapore Exchange Securities Trading Limited.

* Please indicate your vote “For” or “Against” with a tick (√) within the box provided.

Dated this day of , 2012.Total number of shares held in:

(a) CDP Register

(b) Register of Members

Signature(s) of Member(s) or Common Seal

IMPORTANT: PLEASE READ NOTES OVERLEAF

PROXY FORMANNUAL GENERAL MEETING

IMPORTANT:1. This Annual Report is also forwarded to investors who

have used their CPF monies to buy shares in the Company at the request of their CPF Approved Nominees, and is sent solely for their information only.

2. The Proxy Form is, therefore, not valid for use by CPF Investors and shall be ineffective for all intents and purposes if used or purported to be used by them.

Notes

1. A member entitled to attend and vote at the Meeting is entitled to appoint one or two proxies to attend and vote in his stead.

2. Where a member appoints more than one proxy, the proportion of the shareholding to be represented by each proxy shall be specified in this proxy form. If no proportion is specified, the Company shall be entitled to treat the first named proxy as representing the entire shareholding and any second named proxy as an alternate to the first named or at the Company’s option to treat this proxy form as invalid.

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

4. Please insert the total number of shares held by you. If you have shares entered against your name in the Depository Register (as defined in section 130A of the Companies Act, Cap. 50, you should insert that number of shares. If you have shares registered in your name in the Register of Members of the Company, you should insert that number of shares. If you have shares entered against your name in the Depository Register and registered in your name in the Register of Members, you should insert the aggregate number of shares. If no number is inserted, this proxy form will be deemed to relate to all the shares held by you.

5. This proxy form must be deposited at the Company’s registered office at 1 Ubi Link, Challenger TecHub, Singapore 408553 not less than 48 hours before the time set for the Meeting.

6. This proxy form must be under the hand of the appointor or of his attorney duly authorised in writing. Where this proxy form is executed by a corporation, it must be executed either under its common seal or under the hand of its attorney or a duly authorised officer.

7. Where this proxy form is signed on behalf of the appointor by an attorney, the letter or power of attorney or a duly certified copy thereof must (failing previous registration with the Company) be lodged with this proxy form, failing which this proxy form shall be treated as invalid.

General

The Company shall be entitled to reject a proxy form which is incomplete, improperly completed, illegible or where the true intentions

of the appointor are not ascertainable from the instructions of the appointor specified on the proxy form. In addition, in the case of

shares entered in the Depository Register, the Company may reject a proxy form 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

certified by The Central Depository (Pte) Limited to the Company.

The Company SecretaryChallenger Technologies Limited

1 Ubi LinkChallenger TecHubSingapore 408553

AffixPostageStamp

CONTENTS02 Corporate Profile

03 Group of Companies

04 Chief Executive’s Message

06 Challenger Retail Locations

08 Corporate Information

10 Profile of Board of Directors

11 Profile of Key Management

12 Financial Highlights

13 Operations Review

17 Corporate Governance

32 Directors’ Report

35 Statement by Directors

36 Independent Auditors’ Report

38 Audited Financial Statements

43 Notes to the Financial Statements

89 Statistics of Shareholdings

91 Notice of Annual General Meeting

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ANNUAL REPORT

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