challenger ar complete low-res

8/12/2019 Challenger AR Complete Low-Res

1/94

FOR YOU

ANNUAL REPORT 2012

ALL


2/94

02 Crpr Prl

03 Chief Executives Message

05 Corporate Information

06 Group of Companies

07 Prl f Brd f Drcr

08 Prl f K Mm

10 Chllr Rl Lc

13 Fcl Hhlh

14 Operations Review

CONTENTS


3/94

1

CHALLENGERALL FOR YOU aPtLy DesCRiBes us

stRiving to give ouR veRy Bestto ouR CustoMeRs, MeMBeRs,

Business PaRtneRs, sHaReHoLDeRsanD investoRs. tHe aDDition oFnew stoRes Has aLLoweD us togRow stRengtH to stRengtH in

ouR RetaiL Business anD seRviCeDeLiveRy stanDaRDs. at tHe HeaRt

oF eveRytHing is ouR MeMBeRs in

aDDition to sHowCasing tHe Latestit anD LiFestyLe PRoDuCts, we aRe

ConstantLy enRiCHing tHeiR sHoPPingexPeRienCe By PioneeRing RetaiL

teCHnoLogies FaR aHeaD oFtHe MaRKet.

Challenger Technologies Limited . Annual Report 2012

WE ARE


4/94

2

Challenger Technologies Limited. Annual Report 2012

CORPORATEPROFILE

witH ConvenienCe anD seRviCeas ouR RetaiL HaLLMaRKs,CHaLLengeR teCHnoLogies LiMiteD(CHaLLengeR) is singaPoResLeaDing it PRoDuCts anD seRviCesPRoviDeR. ouR extensive netwoRK

oF 29 stRategiCaLLy-LoCateD RetaiLstoRes CoMPRise oF 1 FLagsHiPMEGASTORE, 19 SUPERSTORESanD 9 Mini stoRes. in MaLaysia,CHaLLengeR is RePResenteDBy 1 FLagsHiP MegastoRe anD3 suPeRstoRes. ListeD on tHesingaPoRe stoCK exCHange sinCeJanuaRy 2004, ouR aCHieveMentsaRe weLL-gRounDeD witH a LoyaLBase oF oveR 400,000 MeMBeRs.


5/94

3

CHieFEXECUTIVESMESSAGEB Mr L L th

For the nancial year ended 31

December 2012 (FY2012), our

Group revenue increased by about

6% to $337.3 million and net prot

increased by about 4% to $16.4

million. Revenue from the core retail

business in IT products and services

also increased by about 7% to $331.4

million in FY2012. Fueled by full-year

operations for stores opening during

FY2011 and new store openings

in FY2012, our retail business

contributed about 98.3% of our

Group revenue.

Singapore has presented opportunities

for us to grow our retail footprint. In

FY2012, we opened three stores. In

the rst half of FY2013 alone, we will

open up to ve stores. The expansion

trend will continue as long as we nd

stores at suitable locations to serve

our customers better.

In the rst quarter of 2013, we closed

two stores in Singapore. While we

continue to expand with more new

store openings, we will also close

stores at malls that undergo large-

scale renovations or are deemed not

viable. In Malaysia, we currently have

three stores in Kuala Lumpur and one

in Malacca. We will continue to add

more stores in Malaysia once suitablelocations at reasonable rentals are

found.

In the past year, we have continued

to enhance our loyalty programme

for our members by improving

our product range, redemption

process and value buys. The

result is a signicant increase in

our membership base, with our

members forming the bulk of our

daily transactions and foot trafc.

To reward our members with more

value, we will be celebrating with an

exclusive 3-day member event at the

end of April 2013.

Riding on the upward trend, our

subsidiary, Incall Systems Pte Ltd

(Incall), increased its revenue in

FY2012 by about 30% to about $4.6

million. Incall is in the business

of operating call centres, event

management, direct marketing,

database management and publishing

of directories. In addition, Incalloffers 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.

The electronic signage service

business, operated by CBD eVision

Pte Ltd, registered a decrease inturnover of about 62% to $1.3 million

in FY2012 due to lesser completion

of projects for commercial buildings

such as ofces and shopping malls.

A nal tax-exempt one-tier dividend of

1.25 cents per ordinary share has been

proposed, subject to shareholders

approval during the coming Annual

General Meeting to be held on 15

April 2013. We had paid an interim

tax-exempt one-tier dividend of 1.0

cent per ordinary share in September

2012. This brings the total dividend

to 2.25 cents per ordinary share for

FY2012, which is an increase of 2.3%

over FY2011 of 2.2 cents per ordinary

share.

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 byshareholders and business partners

for their contributions to the Group.

As we enter into another new year, we

look forward to the continued support

from all our stakeholders.


6/94

4

L

LUS

Our customers, especially our members are the lifeblood of our business and their patronage

underpins our growth. Our member base is diverse, from tech-savvy teenagers tobusy professionals.


7/94

5

CORPORATEINFORMATION

BoaRD oF DiReCtoRs

Loo Leong Thye

(Chief Executive Ofcer)

Ng Kian Teck

(Executive Director)

Ho Boon Chuan Wilson

(Lead Independent Director)

Max Ng Chee Weng

(Independent Director)

Tan Han Beng


Tan Chay Boon


auDit CoMMittee

Chairman


Members

Max Ng Chee Weng

Tan Han Beng

Tan Chay Boon

NOMINATING COMMITTEE

Chairman

Max Ng Chee Weng

Members

Ho Boon Chuan WilsonTan Han Beng

Tan Chay Boon

REMUNERATION COMMITTEE

Chairman

Max Ng Chee Weng

Members


Tan Han Beng

Tan Chay Boon

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 Rafes Place

#32-01 Singapore Land Tower

Singapore 048623

auDitoRs

RSM Chio Lim LLP

Public Accountants and

Certied Public Accountants

(a member of RSM International)

8 Wilkie Road

#03-08 Wilkie Edge

Singapore 228095

Partner-in-charge: Lee Mong Sheong

(effective from nancial 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 Rafes Place

UOB Plaza

Singapore 048624


8/94

6


GROUP OFCOMPANIES

2. CBD eVision Pte Ltd(Singapore)(Electronic Signage)

100%

6. 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%

7.

Challenger Technologies (M) Sdn.Bhd. (Malaysia)

(IT Retail Store)

100%

1.

3. Challenger Holding (HK) Private Limited (Hong Kong)(Trading and Investment Holding)

100%

4. Valore Lifestyle Pte. Ltd. (Singapore)(IT Specialty Store)

100%

5. Challenger IT Services Pte. Ltd.*(Singapore)(IT Solutions Provider for Businesses)

100%

* Currently dormant


9/94

7

PROFILE OFBoaRD oFDiReCtoRs

Mr L L th

Chief Executive Ofcer

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 2011, he received the

Best Chief Executive Ofcer Award

(listed companies with less than $300

million in market capitalisation)

from Singapore Corporate Awards,

organised by The Business Times

and supported by the Singapore

Exchange.

Mr n K tck

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 18 years of experience in the ITindustry. Mr Ng holds a Bachelor of

Science in Business Administration

from the California State University,

Los Angeles.

Mr H B Ch wl

Lead 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 20 years include

working in the capital markets group

of DBS Bank, holding the post of

Chief Financial Ofcer of a listed

company in Singapore and managing

a regional IT distribution group. Mr

Ho is an accountant by training and

is a Certied Public Accountant with

the Institute of Certied 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 with ofces in Kuala

Lumpur, Jakarta and Hong Kong.

He specialises in intellectual property

and other forms of litigation. He is

also frequently listed as a leading

lawyer in his eld in publications

such as Chambers Asia-Pacic,

Legal 500, AsiaLaw Leading Lawyers,The International Whos Who of

Business Lawyers and Singapores

inaugural Legal Whos Who. He holds

a Master of Law 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 rm based in Kuala

Lumpur, Malaysia.

Mr t H B


He is a Director at CNP Compliance

Pte Ltd, which provides advisory

services to SGX listed companies

on listing rules and corporate

governance. He has over 14 years

of professional accounting and

nancial experience including

nancial, internal and special

audit engagements with a Big

Four accounting rm. Mr Tan is

an accountant by training and is a

Certied Public Accountant with

the Institute of Certied Public

Accountants of Singapore.

M t Ch B


She has more than 25 years of

working experience in the IT and fast-

moving consumer goods industries

covering Singapore, Asia Pacic and

global regions. She was most recently

the Vice President for Enterprise

Group (South East Asia) in Hewlett

-Packard. In her 21 years tenure with

Hewlett-Packard, she held several

management positions in charge of

consumer, small medium business

and enterprise segments.

Ms Tan has a Master of Business

Administration from University

of Dubuque, Iowa. She also holds

a Bachelors degree with a dual

major in Logistics/Transportation

and International Business, and a

minor in Industrial Psychology from

Ohio State University, Ohio.


10/94

8


PROFILEoF KeyMANAGEMENT

Mr t H B

Group Chief Operating Ofcer

He joined the Group in October 2012

and oversees the retail operations,

merchandising, marketing and

corporate sales departments of the

Group. He has more than 20 years

of experience in the IT industry and

retail operations. Prior to joining the

Group, he was General Manager ofRetail Sales and Marketing Division in

Microsoft (Asia Pacic), responsible

for over US$500 million in revenue

from four business units over nine

countries and has been employed by

Microsoft corporations for over 16

years. He has a Master of Business

Administration and a Bachelor of

Business Administration from the

University of Portland, Oregon.

Mr Ch K wh

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 24 years of experience in the

electronic signage business.

Mr t w K

Group Chief Financial Ofcer

He joined the Group in May 2005

and oversees human resources,

business development, accounting,

nancial and funding requirements

of the Group. He is a Certied

Public Accountant with the Institute

of Certied Public Accountants of

Singapore and CPA Australia. He hasa Master of Business Administration

from the University of Adelaide and

a Bachelor degree in Accountancy

from the Nanyang Technological

University.

Mr Seah Chin Tiong

Managing Director Incall Systems

Pte Ltd

In 2001, he started inCall Systems,

an Outsourced Business Service

Provider which offers end-to-end

integrated marketing solutions.

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.

Mr Woon Yoon Siong

Group Chief Information Ofcer

He joined the Group in September

2011 and oversees the network,

hardware and software systems.

He has more than 20 years of

experience in IT systems and is

instrumental in developing the

Groups Enterprise Resource

Planning and Point of Sales (POS)systems. He holds a Master of Science

in Computer & Information Sciences

from the National University of

Singapore.


11/94

9

1

3

2

28

3

14

0

6

8

9

1

0

11

12

13

15

16

ALLoun

2

14

Keeping in line with our strategy to expand our retail footprint, our customers can conveniently

locate a Challenger near them today.


12/94

10

Challenger Technologies Limited . Annual Report 2012

CHaLLengeRRETAILLOCATIONS

SINGAPORE

MEGASTORE

Megastore @ Funan109 North Bridge Road#06-00 Funan DigitaLife MallSingapore 179097Tel: 6339 [email protected]

SUPERSTORES

Ang Mo Kio Hub53 Ang Mo Kio Avenue 3#02-10 Ang Mo Kio HubSingapore 569933Tel: 6555 [email protected]

Bedok Point799 New Upper Changi Road#B1-23 Bedok PointSingapore 467351

Tel: 6446 [email protected]

Changi City Point5 Changi Business Park Central 1#01-56 Changi City PointSingapore 486038Tel: 6636 [email protected]

City Square Mall180 Kitchener Road#B1-11A/12 City Square Mall

Singapore 208539Tel: 6509 [email protected]

The Clementi Mall3155 Commonwealth Avenue West#04-56 The Clementi MallSingapore 129588Tel: 6570 [email protected]

Great World City1 Kim Seng Promenade#02-22 Great World CitySingapore 237994Tel: 6592 [email protected]

Hougang Mall90 Hougang Avenue 10#04-15 Hougang MallSingapore 538766Tel: 6488 [email protected]

IMM2 Jurong East Street 21#02-23, IMM BuildingSingapore 609601Tel: 6426 [email protected]

JCube2 Jurong East Central 1#02-11 JCube

Singapore 609731Tel: 6592 [email protected]

Jurong Point63 Jurong West Central 3#B1-94/95/96 Jurong PointShopping CentreSingapore 648886Tel: 6793 [email protected]

112 Katong

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

nex Serangoon Central23 Serangoon Central#04-33 nexSingapore 556083Tel: 6634 [email protected]

Northpoint930 Yishun Avenue 2#03-15 NorthpointShopping CentreSingapore 769098Tel: 6853 [email protected]

Parkway Parade80 Marine Parade Road#04-01, Parkway ParadeSingapore 449269Tel: 6342 [email protected]

Plaza Singapura68 Orchard Road#04-12 Plaza SingapuraSingapore 238839Tel: 6837 [email protected]

Tampines 110 Tampines Central 1

#04-24/25, Tampines 1Singapore 529536Tel: 6260 [email protected]

Tiong Bahru Plaza302 Tiong Bahru Road#03-19, Tiong Bahru PlazaSingapore 168732Tel: 6376 [email protected]

VivoCity

1 HarbourFront Walk#02-34/35, VivoCitySingapore 098585Tel: 6376 [email protected]

White Sands1 Pasir Ris Central Street 3#03-03, White SandsSingapore 518457Tel: 6585 [email protected]


13/94

11

SINGAPORE

MINI STORES

Challenger Mini @ Funan109 North Bridge Road#02-05, Funan DigitaLife MallSingapore 179097Tel: 6334 [email protected]




Challenger Mini @Causeway Point1 Woodlands Square#04-07 Causeway PointSingapore 738099

Tel: 6893 [email protected]

Challenger Mini @ Lot One21 Choa Chu Kang Avenue 4#03-05/06 Lot OneSingapore 689812Tel: 6894 [email protected]

Challenger Mini @ Thomson301 Upper Thomson Road#03-28/29, Thomson PlazaSingapore 574408Tel: 6457 [email protected]

Challenger Mini @ IMM2 Jurong East Street 21#02-18 IMM BuildingSingapore 609601Tel: 6562 [email protected]

Challenger Mini @Yew Tee Point21 Choa Chu Kang North 6

#01-18 Yew Tee PointSingapore 689578Tel: 6465 [email protected]

MALAYSIA

MEGASTORE

Megastore @ MinesShopping FairL04-16, Mines Shopping FairJalan Dulang, Mines Resort City43300 Seri KembanganSelangor, MalaysiaTel: (603) 8946 9000

[email protected]

SUPERSTORES

CapsquareLot F12a - F15a, Level 1Pikom Ict Mall CapsquareNo. 7 Persiaran CapsquareCapital Square 50100Kuala Lumpur, MalaysiaTel: (603) 2202 [email protected]

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

Mahkota ParadeLot S09b, Mahkota ParadeNo. 1 Jalan Merdeka75000 Melaka

MalaysiaTel: (606) 2839 [email protected]

NEW STORES OPENING IN SECOND QUARTER 2013

Bukit Panjang Plaza1 Jelebu Road#03-10A Bukit Panjang PlazaSingapore 677743

JEM50 Jurong Gateway Road#04-01Singapore 608549

CHaLLengeRRETAILLoCations (ContD)


14/94

12

Upholding high standards of corporate disclosure is our conviction. We believe in facilitating

communication with our stakeholders, constantly keeping ourselves in check and strivingto achieve the best results.


15/94

13

FINANCIALHigHLigHts

CHaLLengeR teCHnoLogies LiMiteD anD its suBsiDiaRies

FY2012

$000

FY2011

$000

FY2010

$000

FY2009

$000

FY2008

$000

(Restated)

Revenue 337,258 316,864 240,999 191,599 168,723

Prot Before Tax 19,531 19,018 16,496 13,652 7,989

Prot After Tax 16,362 15,725 13,778 11,145 5,981

Earnings/(Loss) Per Share

(cents) - diluted

4.69 4.53 3.96 4.80 2.58

Shareholders Funds 51,055 42,717 34,292 26,286 20,781

Net Tangible Assets Per Share (cents) 14.79 12.37 9.93 11.47 9.09

Key FinanCiaL Ratios

FY2012

$000

FY2011

$000

FY2010

$000

FY2009

$000

FY2008

$000

(Restated)Net Prot Margin (%) 4.9% 5.0% 5.7% 5.8% 3.5%

Inventory Turnover (days) 37 34 45 36 25

Trade Receivable Turnover (days) 3 4 4 6 4

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

Quick Ratio (times) 1.37 1.11 0.92 0.96 1.21

Current Ratio (times) 2.16 1.59 1.47 1.56 1.57


16/94

14


OPERATIONSREVIEW

ConsoLiDateD stateMent oF PRoFit oR Loss anD otHeR CoMPReHensive inCoMe

GroupVariance

Increase /

(Decrease)

S$000

Remarks31.12.2012

S$000

31.12.2011

S$000

Revenue 337,258 316,864 20,394 Revenue increased mainly due to

improved retail performance of

existing stores and expansion of retail

operations in Singapore and Malaysia.

Changes in Inventories 4,127 (650) 4,777

Cost of Goods Purchased (277,804) (255,812) 21,992 This increase has been in line with

higher retail revenue achieved inFY2012.

Other Consumables Used (719) (694) 25

Other Items of Income

Interest Income 41 209 (168)

Dividend Income 1 39 (38)

Other Credits 873 598 275

Other Items of Expense

Depreciation Expense (3,772) (3,126) 646 This increase has been due to

acquisition of new plant and

equipment as a results of expansionof retail stores.

Employee Benets Expense (20,013) (18,812) 1,201The 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 (18) (100) (82)

Other Expenses (20,251) (18,811) 1,440 The increase has been mainly due to:

1) higher premises expenses due to

increased number of stores in

FY2012; and

2) increase other operating expenses to

support additional stores.

Other Charges (192) (687) (495) The decrease has been due to unrealised

foreign exchange gain arising from

United States (US) dollar against

Singapore dollar for the purpose of US

dollar purchase transactions, compared

to a loss recorded in FY2011.

Prot Before Tax 19,531 19,018 513

Income Tax Expenses (3,169) (3,293) (124)

Prot Net of Tax 16,362 15,725 637


17/94

15

OPERATIONSReview (ContD)

ConsoLiDateD stateMent oF FinanCiaL Position

GroupVariance

Increase /

(Decrease)

S$000

Remarks31.12.2012

S$000

31.12.2011

S$000

Assets

Non-Current AssetsDeferred Tax Assets - 27 (27)Other Financial Assets - 1,768 (1,768) The decrease has been mainly due

to the disposal of Australian dollar

investment fund.Property, Plant and

Equipment

13,170 14,203 (1,033) The decrease has been due to

depreciation expense and disposal

charged for the year. These have

been partially offset by acquisition of

equipment and renovation for new

and existing retail stores in Singapore

during FY2012.

Total Non-Current Assets 13,170 15,998 (2,828)

Current Assets

Inventories 28,127 24,081 4,046 This increase has been due to theopening of new stores and more

purchase in December 2012.

Cash and Cash Equivalents 42,094 48,879 (6,785) The decrease has been mainly due to

settlement of short term loan, payment

of dividends and capital expenditure

incurred for new and existing retail

stores. These have been partially offset

by operating prots and working capital

generated from operations.

Trade and Other Receivables 3,210 3,281 (71) This decrease has been due to lower

trade debt.Other Assets 3,660 3,637 23 The increase has been mainly due to

higher deposits paid for new stores in

Singapore.

Total Current Assets 77,091 79,878 (2,787)

Total Assets 90,261 95,876 (5,615)


18/94

16


GroupVariance

Increase /

(Decrease)

S$000

Remarks31.12.2012

S$000

31.12.2011

S$000

Equity and Liabilities

EquityShare Capital 18,775 18,775 -Retained Earnings 32,216 23,611 8,605

Other Reserves 64 331 (267)

Total Shareholders Funds 51,055 42,717 8,338

Non-Controlling Interests 371 298 73Total Equity 51,426 43,015 8,411

Non-Current LiabilitiesDeferred Tax Liabilities 164 142 22

Other Liabilities 3,014 2,335 679 The increase has been mainly due toincrease in deferment of the recognitionof membership admin fee and revenuefrom Starshield Warranty.

Total Non-Current Liabilities 3,178 2,477 701

Current Liabilities

Trade and Other Payables 24,160 23,375 785 This increase has been mainly due tohigher provisions for expenses.

Income Tax Payable 3,389 3,744 (355)

Other Financial Liabilities - 16,629 (16,629) The decrease has been due to repaymentof short-term loan facility.

Other Liabilities 8,108 6,636 1,472 This has been mainly due to increasein deferment of the recognition ofreward points granted to customersand deferment of the recognition ofmembership admin fee recognition.

Total Current Liabilities 35,657 50,384 (14,727)

Total Liabilities 38,835 52,861 (14,026)

Total Equity and Liabilities 90,261 95,876 (5,615)

OPERATIONSReview (ContD)

ConsoLiDateD stateMent oF FinanCiaL Position (ContD)


19/94

17

18 Corporate Governance

32 Directors Report

35 Statement by Directors

36 Independent Auditors Report

38 Consoidated Statement o Pot oLoss and Other Comprehensive Income

39 Statements of Financial Position

40 Statements of Changes in Equity

42 Consolidated Statement of Cash Flows

43 Notes to the Financial Statements

84 Statistics of Shareholdings

86 Notice of Annual General Meeting

FINANCIAL

CONTENTS


20/94

18


The Board of Directors of Challenger Technologies Limited is committed to achieving a high standard of corporategovernance 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 condence in its management and nancial reporting.

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

Governance 2005 (the Code). The Board will be reviewing, and where necessary, adopting the recommendations given

under the revised Code of Corporate Governance 2012 (CG2012) issued on 2 May 2012 which would be effective for the

nancial years commencing from 1 November 2012 onwards.

The Boards Conduct of its Affairs

Principle 1: Every company should be headed by an effective Board to lead and control the company. The Board iscollectively 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

nancial objectives;

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

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

iv. approving the annual report of the Company and the audited nancial 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, nancial 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 specic 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).

CORPORATE GOVERNANCE


21/94

19

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 FY2012, as well as the attendance of each Board member

thereat, are set out below:

Board CommitteesAudit Nominating Remuneration

Number of meetings held 4 4 1 1

Board Members Number of meetings attended

Loo Leong Thye 4 4 1 1

Ng Kian Teck 4 4 1 1

Ong Sock Hwee1 4 4 1 1

Ho Boon Chuan Wilson 4 4 1 1

Max Ng Chee Weng 4 4 1 1

Tan Han Beng2 NA NA NA NA

Tan Chay Boon3 NA NA NA NA

1

Mdm Ong Sock Hwee, a Non-Executive Director, resigned as a member of the Audit Committee, Nominating Committee andRemuneration Committee on 1 March 2013.

2 Mr Tan Han Beng was appointed as an Independent Director (member of the Audit Committee, Nominating Committee and

Remuneration Committee) on 1 March 2013. No Audit Committee, Nominating Committee or Remuneration Committee meetings

were held during the nancial period under review after his appointment.

3 Ms Tan Chay Boon was appointed as an Independent Director (member of the Audit Committee, Nominating Committee and

Remuneration Committee) on 1 March 2013. No Audit Committee, Nominating Committee or Remuneration Committee meetings

were held during the nancial period under review after her appointment.

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 briengs 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, briengs or informal discussions on any aspect

of the Groups operations or business issues from the management.



22/94

20


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 Boards decision making.

Strong and independent element on the Board

As at the date of this report, the Board comprises of six 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 proles.

As there are two IDs on the Board for the nancial year under review, the requirement of the Code that at least one-third of

the Board comprised of IDs is satised.

The NC adopts the Codes denition of what constitutes an ID. The independence of each Director is reviewed annually by

the NC. The NC is of the view that Mr Ho Boon Chuan Wilson, Mr Max Ng Chee Weng, Mr Tan Han Beng and Ms Tan Chay

Boon are independent and that there are no individuals or small groups of individuals who dominate the Boards 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 Groups operations. The Board composition reects the broad range of experience, skills and

knowledge necessary for the effective stewardship of the Group. The Board comprises of businessmen and professionalswho as a group possess competencies in accounting, nance, business, management and law, and knowledge and

experience in strategic planning and the Groups industry and customer-base. The prole of each Director is set out in this

Annual Report.

Chaiman and Chie Exective Oce

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 companys business which will ensure a balance of power and authority,

such that no one individual represents a considerable concentration of power.



23/94

21

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 sufcient 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 ow of the Companys 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 Groups 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.

In view of the above and in line with the Code, the Company has appointed an ID, Mr Ho Boon Chuan Wilson to be

the Lead Independent Director (the Lead ID) to enhance the independence of the Board and to assist the CEO in the

discharge of his duties when the need arises. He is also available to address shareholders concerns on issues that cannot

be appropriately dealt with by the CEO.

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.

As the date of this report, the NC comprises of four 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 (Lead ID)

Tan Han Beng (Appointed on 01/03/2013) (ID)

Tan Chay Boon (Appointed on 01/03/2013) (ID)



24/94

22


However, for the nancial year under review, the Nominating Committee comprised of three Non-Executive Directors then,namely Mr Max Ng Chee Weng (Chairman), Mr Ho Boon Chuan Wilson (member) and Mdm Ong Sock Hwee (member). When

Mdm Ong Sock Hwee resigned with effect from 1 March 2013, she also stepped down from the Nominating Committee.

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 Directors 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 Boards 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. To be in line with the CG2012, the NC had adopted a set of revised terms of

reference in May 2012.

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 satised

that sufcient time and attention to the affairs of the Company has been given by those Directors who have multiple board

representations. In accordance with the CG2012, the Board has stipulated that the maximum number of listed company

board representations which any director may hold is ve (5).

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 qualied and experienced persons for appointment to the Board.



25/94

23

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 Appointment

Date of initial

appointment

Date of last

election

Directorships in

other listed companies

Loo Leong Thye 59 Chief Executive

Ofcer

14/01/1984 27/04/2010 NIL

Ng Kian Teck 45 Executive Director 03/05/2011 25/04/2012 NIL

Ong Sock Hwee

(resigned with effect

from 01/03/2013)

58 Non-Executive

Director

28/12/1994 25/04/2012 NIL

Ho Boon Chuan Wilson 43 Independent

Director

17/11/2003 27/04/2010 Present Directorships

Sysma Holdings Limited

Past Directorships(in the last threepreceding years)

Multi-Chem Limited

Max Ng Chee Weng 42 Independent

Director

12/01/2006 26/04/2011 Present Directorships

NIL


NIL

Tan Han Beng 38 Independent

Director

01/03/2013 - Present Directorships

NIL


NIL

Tan Chay Boon 53 Independent

Director

01/03/2013 - Present Directorships

NIL


NIL

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



26/94

24



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 Boards performance and effectiveness as a whole and the

performance of individual Directors, based on performance criteria set by the Board. For the nancial year ended 31

December 2012, the NC has set performance targets in respect of sales, prots, gross prot 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 duciary duties, level of participation at meetings,

guidance provided to the management and attendance record.

Access to Information

Pincipe 6: In ode to thei esponsibiities, Boad membes shod be povided ith compete, adeate 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, nancialstatements, budgets, forecasts and progress reports of the Groups 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 Companys 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 regulationsrelevant 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.


27/94

25


Remuneration Matters

Principle 7: There should be a formal and transparent procedure for developing policy on executive remuneration

and o xin the emneation packaes o individa diectos. No diecto shod be invoved in decidin his on

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 specic

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 four IDs.

The membership of the RC is, as follows:

Chairman: Max Ng Chee Weng (ID)

Members: Ho Boon Chuan Wilson (Lead ID)



However, for the nancial year under review, the Nominating Committee comprised of three Non-Executive Directors then,

namely Mr Max Ng Chee Weng (Chairman), Mr Ho Boon Chuan Wilson (member) and Mdm Ong Sock Hwee (member).

When Mdm Ong Sock Hwee resigned with effect from 1 March 2013, she also stepped down from the Remuneration

Committee.

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 directors fees, salaries,

allowances, bonuses, options and benets in kind;

ii. to recommend specic 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.


28/94

26



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

sinicant popotion o exective diectos emneation shod be estcted so as to ink eads to copoate

and individual performance.

Appropriate remuneration to attract, retain and motivate Directors

The remuneration, including incentive bonuses of the CEO, Mr Loo Leong Thye, is based on the service agreement made

on 15 September 2003, as disclosed in the Companys IPO prospectus dated 5 January 2004. The service agreement was

for an initial term of three years and is automatically renewed for successive terms of two years each after the initial term

on such terms and conditions as the CEO and the Company may agree. Either the CEO or the Company may terminate therelevant service agreement by giving three months 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 xed 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 Directors fee for their effort and time spent, responsibilities and contributions to the

Board, subject to the approval of shareholders at the Companys 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 companys 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.


29/94

27


Directors Remuneration

Breakdown of remuneration of each Director by % (nancial year ended 31 December 2012)

Remuneration Band &

Name of Directors Fixed Salary Directors Fees

Variable or Performance

Related Income/Bonus Total

$1,000,000 to $1,249,999

Loo Leong Thye 35% - 65% 100%

Below $250,000

Ng Kian Teck 69% - 31% 100%Ho Boon Chuan Wilson - 100% - 100%

Max Ng Chee Weng - 100% - 100%

Ong Sock Hwee1 - - - -

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

Remuneration of Key Executives

The remuneration of its top 5 executives for the year ended 31 December 2012 is as shown:

Remuneration Band &

Name of Key Executives Fixed Salary

Variable or Performance

Related Income/Bonus Total

$500,000 to $749,999

Tan Wee Ko 33% 67% 100%

Below $250,000

Chia Kang Whye 57% 43% 100%

Seah Chin Tiong 72% 28% 100%

Tan Huat Ben1 83% 17% 100%

Woon Yoon Siong 66% 34% 100%

1 Mr Tan Huat Ben was appointed as the Chief Operating Ofcer with effect from 1 October 2012.

No immediate family member of any Director and whose remuneration had exceeded $150,000 during the nancial year

ended 31 December 2012 was employed by the Company or its subsidiaries.


30/94

28


Accountability

Principle 10: The Board should present a balanced and understandable assessment of the companys performance,

position and prospects.

Quarterly and full year 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 Companys performance, position and prospects. The Board also released other price sensitive public

reports and reports to regulators, where required.

Audit Committee

Principle 11: The Board should establish an Audit Committee with written terms of reference which clearly set outits 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 four IDs.

The membership of the AC is, as follows:

Chairman: Ho Boon Chuan Wilson (Lead ID)

Members: Max Ng Chee Weng (ID)



However, for the nancial year under review, the Audit Committee comprised of three Non-Executive Directors then, namely

Mr Ho Boon Chuan Wilson (Chairman), Mr Max Ng Chee Weng (member) and Mdm Ong Sock Hwee (member). When Mdm

Ong Sock Hwee resigned with effect from 1 March 2013, she also stepped down from the Audit Committee.

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 quarterly nancial 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 signicant nancial reporting issues and judgments to ensure the integrity of nancial statements and any

formal announcements relating to the Companys nancial statements;



31/94

29

v. to review the adequacy of the Companys internal nancial controls, operational and compliance controls and riskmanagement 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 sufcient nancial management expertise, as determined by the Board in its business

judgment, to discharge the ACs functions.

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

in FY2012.

The aggregate amount of fees paid to the external auditors and other independent auditors for FY2012 was approximately

$121,000. The audit fees to the external auditors amounted to approximately $91,000 and non-audit fees (in connection

with the provision of income tax compliance work and review of results announcement service) amounted to approximately

$22,000. The audit fees paid to the other independent auditors for FY 2012 amounted to approximately $6,000 and non-

audit fees (in connection with the provision of income tax compliance work) amounted to approximately $2,000. The AC,

having reviewed such non-audit services is satised that the nature and extent of such services will not prejudice the

independence and objectivity of the external auditors.

The Board of Directors and AC are satised that the appointment of different auditing rms would not compromise the

standard and effectiveness of the audit of the Group. The Group conrms that it has complied with Rule 712 and 715 of the

SGXST Listing Manual in relation to its auditing rms.

The AC has reviewed arrangements by which the staff of the Company may, in condence, raise concerns about (such as

possible improprieties in matters of nancial 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 with effect from 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 companys assets.

The Groups internal controls and systems are designed to provide reasonable assurance as to the integrity and reliabilityof the nancial information and to safeguard and maintain accountability of its assets. Procedures are in place to identify

major business risks and evaluate potential nancial 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.

The Board and Audit Committee are of the opinion that, there are adequate controls in place within the Group addressing

nancial, operational and compliance risks as at 31 December 2012, based on:

The internal controls established and maintained by the Group;

Conrmation by the Chief Executive Ofcer and Chief Financial Ofcer;

Reports issued by the internal and external auditors; and

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



32/94

30



The Board notes that no system of internal controls can provide absolute assurances against the occurrence of materialerrors, 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 has engaged an external consultant, Yang Lee & Associates, to set up an

Enterprise Risk Management Framework in the nancial year 2013, after a review conducted by Yang Lee & Associates

during the nancial 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 rm. The internal auditors have conducted a review

of the Companys internal control systems during the nancial year ended 31 December 2012. In addition to the internal

audit function, the key element in the Groups 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 Groups 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

identied.

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 Companys 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

Companys annual reports;

ii. quarterly and full year announcements of, and press briengs on, its nancial statements on the SGXNET;

iii. other announcements on the SGXNET;


33/94

31


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

v. the Companys 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.

Secities Tansactions b Oces and Empoees

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 Companys shares on short-term considerations or when they are in thepossession of unpublished price-sensitive information. The Company prohibits dealings in its shares by its ofcers and

employees during the period commencing two weeks before the announcement of the Companys quarterly results or one

month before the announcement of the Companys full year results, and ending on the date of the announcement of the

results.

Interested Person Transactions (IPTs)

When a potential conict of interest arises, the director concerned does not participate in discussion and refrains from

exercising any inuence over other members of the Board.

The Company has established internal control polices to ensure that IPTs are properly reviewed and approved and are

conducted at arms length basis.

Saved as disclosed in the audited nancial statements of this Annual report, the Company conrms that there was no

interested person transactions, as dened in Chapter 9 of the SGX-ST Listing Manual, above $100,000 entered into during

FY2012.

Corporate Social Responsibility

We believe that environmentally-friendly practices complement business efciency. 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. We encourage the use of non-woven bags in our retail outlets.


34/94

32


DIRECTORS REPORT

The Directors of the Company are pleased to present their report together with the audited nancial statements of theCompany and of the Group for the reporting year ended 31 December 2012.

1. Directors at Date of Report

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

Loo Leong Thye (Chief Executive Ofcer)

Ng Kian Teck


Max Ng Chee Weng

Tan Han Beng (Appointed on 1 March 2013)Tan Chay Boon (Appointed on 1 March 2013)

2. Aanements to Enabe Diectos to Acie Benets b Means o the Acisition o Shaes 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 benets 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 ofce 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 (the Act) except as follows:

Name of directors

At beginning of

the reporting year

At end of

the reporting year

holdings in Challenger Technologies Limited

Number of shares of no par value

Direct interest

Loo Leong Thye 149,324,250 149,324,250

Ong Sock Hwee (Resigned on 1 March 2013) 32,940,750 32,940,750

Ng Kian Teck 1,200,000 1,200,000

Ho Boon Chuan Wilson 225,000 225,000

Max Ng Chee Weng 17,500 17,500

Deemed interest

Loo Leong Thye 1,644,750 1,644,750

Ng Kian Teck 157,500 157,500

Max Ng Chee Weng 11,500 11,500

By virtue of section 7 of the Act, Mr Loo Leong Thye with the above shareholding in the Company is deemed to

have an interest in all the related corporations of the Company.

The Directors interests as at 21 January 2013 were the same as those at the end of the reporting year.


35/94

33

DIRECTORS REPORT

4. Contacta Benets o Diectos

Since the beginning of the reporting year, no Director of the Company has received or become entitled to receive

a benet which is required to be disclosed under section 201(8) of the Act, by reason of a contract made by the

Company or a related corporation with the Director or with a rm of which he is a member, or with a Company in

which he has a substantial nancial interest except as disclosed in the nancial statements.

There were certain transactions (shown in the nancial 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 Director

Max Ng Chee Weng Independent Director

Tan Han Beng Independent Director

Tan Chay Boon Independent Director

The Audit Committee performs the functions specied 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 Companys internal accounting controls

relevant to their statutory audit, and their report on the nancial statements and the assistance given by theCompanys ofcers to them;

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

Reviewed the nancial statements of the Group and the Company prior to their submission to the Directors

of the Company for adoption; and

Reviewed the interested person transactions (as dened in Chapter 9 of the Listing Manual of SGX).


36/94

34


6. Audit Committee (Contd)

Other functions performed by the Audit Committee are described in the report on corporate governance included

in the annual report of the Company. It also includes an explanation of how independent auditor 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 signicant developments subsequent to the release of the Groups and the Companys preliminary

nancial statements, as announced on 7 February 2013, which would materially affect the Groups and the

Companys operating and nancial performance as of the date of this report.

On Behalf of The Directors

Loo Leong Thye Ng Kian Teck

Chief Executive Ofcer Executive Director

15 March 2013

DIRECTORS REPORT


37/94

35

In the opinion of the Directors,

(a) the accompanying consolidated statement of prot or loss and other comprehensive income, statements of

nancial position, statements of changes in equity, consolidated statement of cash ows, 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 2012 and of the results and cash ows 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 nancial statements for issue.

On Behalf of The Directors

Loo Leong Thye Ng Kian Teck

Chief Executive Ofcer Executive Director

15 March 2013

STATEMENT BY DIRECTORS


38/94

36


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

Report on the Financial Statements

We have audited the accompanying nancial statements of Challenger Technologies Limited (the Company) and its

subsidiaries (the Group), which comprise the consolidated statement of nancial position of the Group and the statement

of nancial position of the Company as at 31 December 2012, and the consolidated statement of prot or loss and other

comprehensive income, statement of changes in equity and statement of cash ows of the Group, and statement of

changes in equity of the Company for the reporting year then ended, and a summary of signicant accounting policies and

other explanatory information.

Managements Responsibility for the Financial Statements

Management is responsible for the preparation of the nancial 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 sufcient 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 prot or loss and other

comprehensive income and statements of nancial position and to maintain accountability of assets.

Auditors Responsibility

Our responsibility is to express an opinion on these nancial 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 about whether the nancial statements are free from material

misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the nancial

statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material

misstatement of the nancial statements, whether due to fraud or error. In making those risk assessments, the auditor

considers internal control relevant to the entitys preparation of nancial statements that give a true and fair view 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 entitys 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 presentationof the nancial statements.

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

INDEPENDENT AUDITORS REPORT


39/94

37

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

Opinion

In our opinion, the consolidated nancial statements of the Group and the statement of nancial 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 2012 and of the results, changes in equity and cash ows 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 auditors have been properly kept in accordance with the provisions of the Act.

RSM Chio Lim LLP

Public Accountants andCertied Public Accountants

Singapore

15 March 2013

Partner in charge of audit: Lee Mong Sheong

Effective from year ended 31 December 2010

INDEPENDENT AUDITORS REPORT


40/94

38


GroupNotes 2012 2011

$000 $000

Revenue 5 337,258 316,864

Other Items of Income

Interest Income 6 41 209

Dividend Income 1 39

Other Credits 7 873 598

Other Items of Expense

Changes in Inventories 4,127 (650)

Cost of Goods Purchased (277,804) (255,812)

Other Consumables Used (719) (694)Depreciation Expense (3,772) (3,126)

Employee Benets Expense 8 (20,013) (18,812)

Finance Costs 6 (18) (100)

Other Expenses 9 (20,251) (18,811)

Other Charges 7 (192) (687)

Pot Beoe Tax om Continin Opeations 19,531 19,018

Income Tax Expense 11 (3,169) (3,293)

Pot om Continin Opeations, Net o Tax 16,362 15,725

Other Comprehensive (Loss) Income:

Items that may be Reclassied Subsequently to Prot or Loss:Exchange Difference on Translating Foreign Operations, Net of Tax 23 52 35

Gain on Available-for-Sale Financial Assets, Reclassied from Equity to Prot

or Loss as a Reclassication Adjustment 23 (319)

Other Comprehensive (Loss) Income for the Year, Net of Tax (267) 35

Total Comprehensive Income 16,095 15,760

Pot Attibtabe to Eit Hodes o the Compan, Net o Tax 16,199 15,639

Pot Attibtabe to Non-Contoin Inteests, Net o Tax 163 86

Pot Net o Tax 16,362 15,725

Tota Compehensive Income Attibtabe to Eit Hodes othe Company 15,932 15,674

Total Comprehensive Income Attributable to Non-Controlling Interests 163 86

Total Comprehensive Income 16,095 15,760

Earnings Per Share

Earnings per Share Currency Unit Cents Cents

Continuing Operations

Basic 12 4.69 4.53

Diluted 12 4.69 4.53

CONSOLIDATED STATEMENT OF PROFIT OR LOSSAND OTHEr COMPrEHENSIVE INCOMEYear Ended 31 December 2012

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


41/94

39

Group Company Notes 2012 2011 2012 2011

$000 $000 $000 $000

ASSETS

Non-Current Assets

Property, Plant and Equipment 14 13,170 14,203 11,897 12,710

Investments in Subsidiaries 15 2,482 2,182

Investment in Associate 16

Deferred Tax Assets 11 27

Other Financial Assets 17 1,768 1,768

Total Non-Current Assets 13,170 15,998 14,379 16,660

Current Assets

Inventories 18 28,127 24,081 25,635 22,122

Trade and Other Receivables 19 3,210 3,281 7,590 7,591

Other Assets 20 3,660 3,637 3,259 3,065

Cash and Cash Equivalents 21 42,094 48,879 37,115 45,507

Total Current Assets 77,091 79,878 73,599 78,285

Total Assets 90,261 95,876 87,978 94,945

EQUITY AND LIABILITIES

EquityShare Capital 22 18,775 18,775 18,775 18,775

Retained Earnings 32,216 23,611 35,591 26,342

Other Reserves 23 64 331 319

Eit, Attibtabe to Eit Hodes o the Compan 51,055 42,717 54,366 45,436

Non-Controlling Interests 371 298

Total Equity 51,426 43,015 54,366 45,436

Non-Current Liabilities

Deferred Tax Liabilities 11 164 142 22 22

Other Liabilities 24 3,014 2,335 1,077 810

Total Non-Current Liabilities 3,178 2,477 1,099 832

Current Liabilities

Trade and Other Payables 26 24,160 23,375 21,002 21,692

Income Tax Payable 3,389 3,744 3,341 3,663

Other Financial Liabilities 25 16,629 16,629

Other Liabilities 24 8,108 6,636 8,170 6,693

Total Current Liabilities 35,657 50,384 32,513 48,677

Total Liabilities 38,835 52,861 33,612 49,509

Total Equity and Liabilities 90,261 95,876 87,978 94,945

STATEMENTS OF FINANCIAL POSITIONAs at 31 December 2012



42/94

40


Attibtabe to Eit Hodes o the Compan

Total

Attributable

to Parent Share Retained Other

Non-

ControllingEquity sub-total Capital Earnings Reserves Interests$000 $000 $000 $000 $000 $000

Group

Current Year:

Opening Balance at

1 January 2012 43,015 42,717 18,775 23,611 331 298

Movements in Equity:

Total Comprehensive Income

for the Year 16,095 15,932 16,199 (267) 163Dividends Paid (Note 13) (7,684) (7,594) (7,594) (90)

Closing Balance at

31 December 2012 51,426 51,055 18,775 32,216 64 371

Previous Year:

Opening Balance at

1 January 2011 34,549 34,292 18,775 15,221 296 257


Total Comprehensive Income

for the Year 15,760 15,674 15,639 35 86

Dividends 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

STATEMENTS Of CHANgES IN EquITyYear Ended 31 December 2012



43/94

41

TotalEquity

ShareCapital

RetainedEarnings

OtherReserves

$000 $000 $000 $000

Company

Current Year:

Opening Balance at 1 January 2012 45,436 18,775 26,342 319


Total Comprehensive Income for the Year 16,524 16,843 (319)

Dividends Paid (Note 13) (7,594) (7,594)

Closing Balance at 31 December 2012 54,366 18,775 35,591

Previous Year:

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


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

STATEMENTS Of CHANgES IN EquITyYear Ended 31 December 2012



44/94

42


Group2012 2011

$000 $000

Cash Flows From Operating Activities

Prot Before Tax 19,531 19,018

Adjustments for:

Depreciation Expense of Property, Plant and Equipment 3,772 3,126

Loss on Disposal of Plant and Equipment 66 1

Gain on Disposal of Available-for-Sale Financial Assets (15) (482)

Gains on Available-for-Sale Financial Assets Reclassied from

Equity to Prot or Loss as a Reclassication Adjustment (319)

Interest Expense 18 100

Interest Income (41) (209)Dividend Income (1) (39)

Foreign Exchange Adjustment Gain (38) (16)

Other Liabilities Non-Current 679 528

Net Effect of Exchange Rate Changes in Consolidating Foreign Operations 80 35

Operating Cash Flows Before Working Capital Changes 23,732 22,062

Trade and Other Receivables 71 (453)

Other Assets (23) (939)

Inventories (4,046) 1,080

Trade and Other Payables 785 (7,690)

Other Liabilities Current 1,472 1,506

Net Cash Flows From Operations 21,991 15,566Income Taxes Paid (3,475) (2,333)

Net Cash Flows From Operating Activities 18,516 13,233

Cash Flows From Investing Activities

Interest Received 41 209

Dividends Received 1 39

Proceeds from Disposal of Plant and Equipment 15 156

Proceeds from Disposal of Available-for-Sale Financial Assets 1,821 1,455

Purchase of Plant and Equipment (2,848) (5,186)

Net Cash Flows Used in Investing Activities (970) (3,327)

Cash Flows From Financing ActivitiesCash Restricted in Use 29,826 (22,580)

Dividends Paid to Equity Owners (7,594) (7,249)

Dividends Paid to Non-Controlling Interests (90) (45)

Interest Paid (18) (100)

Increase from New Borrowings 16,629

Repayment of Borrowings (16,629) (6,429)

Net Cash Flows From (Used in) Financing Activities 5,495 (19,774)

Net Increase (Decrease) in Cash and Cash Equivalents 23,041 (9,868)

Cash and Cash Equivalents, Consolidated Statement of Cash Flows,

Beginning Balance 19,053 28,921

Cash and Cash Equivalents, Consolidated Statement of Cash Flows,Ending Balance (Note 21) 42,094 19,053

CONSOlIDATED STATEMENT Of CASH flOwSYear Ended 31 December 2012



45/94

43

NOTES TO THE fINANCIAl STATEMENTSYear Ended 31 December 2012

1. General

The Company is incorporated in Singapore with limited liability. The nancial 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 nancial 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 nancial statements.

The registered ofce is: 1 Ubi Link, Challenger TecHub, Singapore 408553. The Company is situated in Singapore.

2. Smma o Sinicant Accontin Poicies

Accounting Convention

The nancial 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 nancial 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 nancial statements. Other comprehensive income comprises items of income and expense(including reclassication adjustments) that are not recognised in the income statement, as required or permitted by

FRS. Reclassication adjustments are amounts reclassied to prot or loss in the income statement in the current

period that were recognised in other comprehensive income in the current or previous periods.

Basis of Presentation

The consolidated nancial statements include the nancial statements made up to the end of the reporting year

of the Company and all of its directly and indirectly controlled subsidiaries. The consolidated nancial statements

are the nancial statements of the Group presented as those of a single economic entity and are prepared using

uniform accounting policies for like transactions and other events in similar circumstances. All signicant intragroup

balances and transactions, including prot or loss and other comprehensive income items and dividends are

eliminated on consolidation. The results of any subsidiary acquired or disposed of during the reporting year are

accounted for from the respective dates of acquisition or up to the date of disposal which is the date on which

effective control is obtained of the acquired business, until that control ceases.

Changes in the Groups ownership interest in a subsidiary that do not result in the loss of control are accounted

for within equity as transactions with owners in their capacity as owners. The carrying amounts of the Groups and

non-controlling interests are adjusted to reect the changes in their relative interests in the subsidiary. When the

Group loses control of a subsidiary it derecognises the assets and liabilities and related equity components of the

former subsidiary. Any gain or loss is recognised in prot or loss. Any investment retained in the former subsidiary

is measured at its fair value at the date when control is lost and is subsequently accounted as available-for-sale

nancial assets in accordance with FRS 39.

The Companys nancial statements have been prepared on the same basis, and as permitted by the Companies

Act, Chapter 50, no statement of prot or loss and other comprehensive income is presented for the Company.



46/94

44


Challenger Technologies Limited. Annual Report

challenger ar complete low-res

Documents