all FOR YOU ANNUAL REPORT 2012

Transcription

1 all FOR YOU ANNUAL REPORT 2012

2 contents 02 Corporate Profile 03 Chief Executive s Message 05 Corporate Information 06 Group of Companies 07 Profile of Board of Directors 08 Profile of Key Management 10 Challenger Retail Locations 13 Financial Highlights 14 Operations Review

3 1 we are challenger All for you aptly describes us striving to give our very best to our customers, members, business partners, shareholders and investors. The addition of new stores has allowed us to grow strength to strength in our retail business and service delivery standards. At the heart of everything is our members in addition to showcasing the latest IT and lifestyle products, we are constantly enriching their shopping experience by pioneering retail technologies far ahead of the market. Challenger Technologies Limited. Annual Report 2012

4 2 Corporate Profile With convenience and service as our retail hallmarks, Challenger Technologies Limited ( Challenger ) is Singapore s leading IT products and services provider. Our extensive network of 29 strategically-located retail stores comprise of 1 flagship megastore, 19 superstores and 9 mini stores. In Malaysia, Challenger is represented by 1 flagship megastore and 3 superstores. Listed on the Singapore Stock Exchange since January 2004, our achievements are well-grounded with a loyal base of over 400,000 members. Challenger Technologies Limited. Annual Report 2012

5 3 Chief Executive s message By Mr Loo Leong Thye For the financial year ended 31 December 2012 ( FY2012 ), our Group revenue increased by about 6% to $337.3 million and net profit 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 first half of FY2013 alone, we will open up to five stores. The expansion trend will continue as long as we find stores at suitable locations to serve our customers better. In the first 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 largescale 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 suitable locations 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 significant increase in our membership base, with our members forming the bulk of our daily transactions and foot traffic. To reward our members with more value, we will be celebrating with an exclusive 3-day member event at the end of April 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, 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. The electronic signage service business, operated by CBD evision Pte Ltd, registered a decrease in turnover of about 62% to $1.3 million in FY2012 due to lesser completion of projects for commercial buildings such as offices and shopping malls. A final 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 We had paid an interim tax-exempt one-tier dividend of 1.0 cent per ordinary share in September 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 by shareholders 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 4 all InClUsIvE l IvE 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 to busy professionals.

7 5 CORPORATE INFORMATION BOARD OF DIRECTORS Loo Leong Thye (Chief Executive Officer) Ng Kian Teck (Executive Director) Ho Boon Chuan Wilson (Lead Independent Director) Max Ng Chee Weng (Independent Director) Tan Han Beng (Independent Director) Tan Chay Boon (Independent Director) AUDIT COMMITTEE Chairman Ho Boon Chuan Wilson Members Max Ng Chee Weng Tan Han Beng Tan Chay Boon NOMINATING COMMITTEE Chairman Max Ng Chee Weng REMUNERATION COMMITTEE Chairman Max Ng Chee Weng Members Ho Boon Chuan Wilson Tan Han Beng Tan Chay Boon COMPANY SECRETARY Chia Foon Yeow REGISTERED OFFICE 1 Ubi Link Challenger TecHub Singapore Tel: (65) Fax: (65) ir@challenger.sg Company Registration No.: K SHARE REGISTRAR AND SHARE TRANSFER OFFICE Boardroom Corporate & Advisory Services Pte. Ltd. 50 Raffles Place #32-01 Singapore Land Tower Singapore AUDITORS RSM Chio Lim LLP Public Accountants and Certified Public Accountants (a member of RSM International) 8 Wilkie Road #03-08 Wilkie Edge Singapore 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 DBS Bank Limited 6 Shenton Way DBS Building Singapore United Overseas Bank Limited 80 Raffles Place UOB Plaza Singapore Members Ho Boon Chuan Wilson Tan Han Beng Tan Chay Boon

8 6 group of companies 1. Challenger Technologies (M) Sdn.Bhd. (Malaysia) (IT Retail Store) 100% 2. CBD evision Pte Ltd (Singapore) (Electronic Signage) 100% 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% 6. Challenger ecommerce Pte. Ltd.* (Singapore) (Online Retail Store) 100% 7. Incall Systems Pte Ltd (Singapore) (Telephonic Call Centre, Data Management Services and Provision of Star Shield Extended Warranty) 70% * Currently dormant Challenger Technologies Limited. Annual Report 2012

9 7 Profile of board of directors Mr Loo Leong Thye Chief Executive Officer 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 Officer 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 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 18 years of experience in the IT industry. Mr Ng holds a Bachelor of Science in Business Administration from the California State University, Los Angeles. Mr Ho Boon Chuan Wilson 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 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 with offices 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 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 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 firm based in Kuala Lumpur, Malaysia. Mr Tan Han Beng Independent Director 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 financial experience including financial, internal and special audit engagements with a Big Four accounting firm. Mr Tan is an accountant by training and is a Certified Public Accountant with the Institute of Certified Public Accountants of Singapore. Ms Tan Chay Boon Independent Director She has more than 25 years of working experience in the IT and fastmoving consumer goods industries covering Singapore, Asia Pacific 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 Bachelor s degree with a dual major in Logistics/Transportation and International Business, and a minor in Industrial Psychology from Ohio State University, Ohio.

10 8 profile of Key ManaGEMEnt Mr tan Huat Ben Group Chief Operating Officer 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 of Retail Sales and Marketing Division in Microsoft (Asia Pacific), 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 Chia Kang whye General Manager & Executive Director CBD evision Pte Ltd He is responsible for the day-today 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 tan wee Ko Group Chief Financial Officer He joined the Group in May 2005 and oversees human resources, 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 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 Officer 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 Group s 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. Challenger Technologies Limited. Annual Report 2012

11 U7U Us all around Keeping in line with our strategy to expand our retail footprint, our customers can conveniently locate a Challenger near them today.

12 10 challenger retail locations Singapore Megastore Funan 109 North Bridge Road #06-00 Funan DigitaLife Mall Singapore Tel: fc@challenger.sg SuperstoreS Ang Mo Kio Hub 53 Ang Mo Kio Avenue 3 #02-10 Ang Mo Kio Hub Singapore Tel: amk@challenger.sg Bedok Point 799 New Upper Changi Road #B1-23 Bedok Point Singapore Tel: bp@challenger.sg Changi City Point 5 Changi Business Park Central 1 #01-56 Changi City Point Singapore Tel: cp@challenger.sg City Square Mall 180 Kitchener Road #B1-11A/12 City Square Mall Singapore Tel: cy@challenger.sg The Clementi Mall 3155 Commonwealth Avenue West #04-56 The Clementi Mall Singapore Tel: cm@challenger.sg Great World City 1 Kim Seng Promenade #02-22 Great World City Singapore Tel: gwc@challenger.sg Hougang Mall 90 Hougang Avenue 10 #04-15 Hougang Mall Singapore Tel: hm@challenger.sg Imm 2 Jurong East Street 21 #02-23, IMM Building Singapore Tel: imm@challenger.sg JCube 2 Jurong East Central 1 #02-11 JCube Singapore Tel: jc@challenger.sg Jurong Point 63 Jurong West Central 3 #B1-94/95/96 Jurong Point Shopping Centre Singapore Tel: jp@challenger.sg 112 Katong 112 East Coast Road # Katong Singapore Tel: kt@challenger.sg nex Serangoon Central 23 Serangoon Central #04-33 nex Singapore Tel: nex@challenger.sg Northpoint 930 Yishun Avenue 2 #03-15 Northpoint Shopping Centre Singapore Tel: np@challenger.sg Parkway Parade 80 Marine Parade Road #04-01, Parkway Parade Singapore Tel: pp@challenger.sg Plaza Singapura 68 Orchard Road #04-12 Plaza Singapura Singapore Tel: ps@challenger.sg Tampines 1 10 Tampines Central 1 #04-24/25, Tampines 1 Singapore Tel: tp@challenger.sg Tiong Bahru Plaza 302 Tiong Bahru Road #03-19, Tiong Bahru Plaza Singapore Tel: tb@challenger.sg VivoCity 1 HarbourFront Walk #02-34/35, VivoCity Singapore Tel: vc@challenger.sg White Sands 1 Pasir Ris Central Street 3 #03-03, White Sands Singapore Tel: ws@challenger.sg Challenger Technologies Limited. Annual Report 2012

13 11 challenger retail locations (cont D) Singapore mini STOREs Challenger Funan 109 North Bridge Road #02-05, Funan DigitaLife Mall Singapore Tel: fcmini@challenger.sg Challenger Funan 109 North Bridge Road #03-33, Funan DigitaLife Mall Singapore Tel: fim@mig.sg Challenger Funan 109 North Bridge Road #03-39, Funan DigitaLife Mall Singapore Tel: fim@mig.sg Challenger Funan 109 North Bridge Road #04-19, Funan DigitaLife Mall Singapore Tel: fcm19@challenger.sg Challenger Causeway Point 1 Woodlands Square #04-07 Causeway Point Singapore Tel: cw@challenger.sg Challenger Lot One 21 Choa Chu Kang Avenue 4 #03-05/06 Lot One Singapore Tel: L1@challenger.sg Challenger Thomson 301 Upper Thomson Road #03-28/29, Thomson Plaza Singapore Tel: ts@challenger.sg Challenger IMM 2 Jurong East Street 21 #02-18 IMM Building Singapore Tel: imm@challenger.sg Challenger Yew Tee Point 21 Choa Chu Kang North 6 #01-18 Yew Tee Point Singapore Tel: yt@challenger.sg MALAYSIA Megastore Mines Shopping Fair L04-16, Mines Shopping Fair Jalan Dulang, Mines Resort City Seri Kembangan Selangor, Malaysia Tel: (603) enquiry@challenger.my SUPERSTOREs Capsquare Lot F12a - F15a, Level 1 Pikom Ict Mall Capsquare No. 7 Persiaran Capsquare Capital Square Kuala Lumpur, Malaysia Tel: (603) enquiry@challenger.my Suria KLCC Lot , Third Floor Suria KLCC Kuala Lumpur City Centre Kuala Lumpur Malaysia Tel: (603) enquiry@challenger.my Mahkota Parade Lot S09b, Mahkota Parade No. 1 Jalan Merdeka Melaka Malaysia Tel: (606) enquiry@challenger.my New Stores Opening in second quarter 2013 Bukit Panjang Plaza 1 Jelebu Road #03-10A Bukit Panjang Plaza Singapore JEM 50 Jurong Gateway Road #04-01 Singapore

14 12 Upholding high standards of corporate disclosure is our conviction. We believe in facilitating communication with our stakeholders, constantly keeping ourselves in check and striving to achieve the best results.

15 13 FINANCIAL HIGHLIGHTS CHALLENGER TECHNOLOGIES LIMITED AND ITS SUBSIDIARIES FY2012 FY2011 FY2010 FY2009 FY2008 (Restated) Revenue 337, , , , ,723 Profit Before Tax 19,531 19,018 16,496 13,652 7,989 Profit After Tax 16,362 15,725 13,778 11,145 5,981 Earnings/(Loss) Per Share (cents) - diluted Shareholders Funds 51,055 42,717 34,292 26,286 20,781 Net Tangible Assets Per Share (cents) Key Financial Ratios FY2012 FY2011 FY2010 FY2009 FY2008 (Restated) Net Profit Margin (%) 4.9% 5.0% 5.7% 5.8% 3.5% Inventory Turnover (days) Trade Receivable Turnover (days) Return on Equity (%) 32% 37% 40% 42% 29% Quick Ratio (times) Current Ratio (times)

16 14 OPERATIONs REVIEW CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME Group Variance Increase / (Decrease) Remarks S S S Revenue 337, ,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 in FY2012. Other Consumables Used (719) (694) 25 Other Items of Income Interest Income (168) Dividend Income 1 39 (38) Other Credits 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 expansion of retail stores. Employee Benefits Expense (20,013) (18,812) 1,201 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 (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. Profit Before Tax 19,531 19, Income Tax Expenses (3,169) (3,293) (124) Profit Net of Tax 16,362 15, Challenger Technologies Limited. Annual Report 2012

17 15 OPERATIONs REVIEW (CONT D) CONSOLIDATED STATEMENT OF FINANCIAL POSITION Assets S Group S Variance Increase / (Decrease) S Remarks Non-Current Assets Deferred 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 Total Non-Current Assets 13,170 15,998 (2,828) 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. Current Assets Inventories 28,127 24,081 4,046 This increase has been due to the opening of new stores and more purchase in December 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 profits 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, 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 16 OPERATIONs REVIEW (CONT D) CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONT D) S Group S Variance Increase / (Decrease) S Remarks Equity and Liabilities Equity Share Capital 18,775 18,775 - Retained Earnings 32,216 23,611 8,605 Other Reserves (267) Total Shareholders Funds 51,055 42,717 8,338 Non-Controlling Interests Total Equity 51,426 43,015 8,411 Non-Current Liabilities Deferred Tax Liabilities Other Liabilities 3,014 2, 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 3,178 2, Current Liabilities Trade and Other Payables 24,160 23, This increase has been mainly due to higher provisions for expenses. Income Tax Payable 3,389 3,744 (355) Other Financial Liabilities - 16,629 (16,629) The decrease has been due to repayment of short-term loan facility. Other Liabilities 8,108 6,636 1,472 This has been mainly due to increase in deferment of the recognition of reward points granted to customers and deferment of the recognition of membership 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) Challenger Technologies Limited. Annual Report 2012

19 17 FINANCIAL contents 18 Corporate Governance 32 Directors Report 35 Statement by Directors 36 Independent Auditors Report 38 Consolidated Statement of Profit or Loss 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

20 18 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 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 financial years commencing from 1 November 2012 onwards. 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. iii. iv. approving annual budgets, proposals for acquisition, investments and disposals; reviewing the financial results of the Group and approving the publishing of the same; 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. vii. viii. approving nominations to the Board and appointing key personnel; evaluating the performance and approving the remuneration of key management personnel; and 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). Challenger Technologies Limited. Annual Report 2012

21 19 corporate governance 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 Committees Audit Nominating Remuneration Number of meetings held Board Members Number of meetings attended Loo Leong Thye Ng Kian Teck Ong Sock Hwee Ho Boon Chuan Wilson Max Ng Chee Weng Tan Han Beng 2 NA NA NA NA Tan Chay Boon 3 NA NA NA NA 1 Mdm Ong Sock Hwee, a Non-Executive Director, resigned as a member of the Audit Committee, Nominating Committee and Remuneration Committee on 1 March Mr Tan Han Beng was appointed as an Independent Director (member of the Audit Committee, Nominating Committee and Remuneration Committee) on 1 March No Audit Committee, Nominating Committee or Remuneration Committee meetings were held during the financial 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 No Audit Committee, Nominating Committee or Remuneration Committee meetings were held during the financial 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 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.

22 20 corporate governance 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 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 profiles. As there are two IDs on the Board for the financial year under review, 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 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 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. Challenger Technologies Limited. Annual Report 2012

23 21 corporate governance 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. iii. iv. in consultation with the management, the preparation of the agenda for Board meetings; in consultation with the management, the exercise of control over the quality, quantity and timeliness of information between the management and the Board; and 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. 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 22 corporate governance However, for the financial 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. iii. iv. to review the independence of the Directors; to review the adequacy of each Director s contribution at meetings and his ability and capacity in carrying out the duties as a Director; 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. To be in line with the CG2012, the NC had adopted a set of revised terms of reference in May 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. In accordance with the CG2012, the Board has stipulated that the maximum number of listed company board representations which any director may hold is five (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 qualified and experienced persons for appointment to the Board. Challenger Technologies Limited. Annual Report 2012

25 23 corporate governance 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 Loo Leong Thye 59 Chief Executive Officer Date of initial appointment Date of last election 14/01/ /04/2010 NIL Directorships in other listed companies Ng Kian Teck 45 Executive Director 03/05/ /04/2012 NIL Ong Sock Hwee (resigned with effect from 01/03/2013) 58 Non-Executive Director 28/12/ /04/2012 NIL Ho Boon Chuan Wilson 43 Independent Director 17/11/ /04/2010 Present Directorships Sysma Holdings Limited Past Directorships (in the last three preceding years) Multi-Chem Limited Max Ng Chee Weng 42 Independent Director 12/01/ /04/2011 Present Directorships NIL Past Directorships (in the last three preceding years) NIL Tan Han Beng 38 Independent Director 01/03/ Present Directorships NIL Past Directorships (in the last three preceding years) NIL Tan Chay Boon 53 Independent Director 01/03/ Present Directorships NIL Past Directorships (in the last three preceding years) Key information of each Director is disclosed in the profile of that Director as set out in this Annual Report. NIL

26 24 corporate governance 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 ended 31 December 2012, 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. Challenger Technologies Limited. Annual Report 2012

27 25 corporate governance 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 four IDs. The membership of the RC 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) However, for the financial 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 director s fees, salaries, allowances, bonuses, options and benefits in kind; ii. iii. to recommend specific remuneration packages for each Director, including the CEO; and 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 26 corporate governance 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 CEO, Mr Loo Leong Thye, is based on the service agreement made on 15 September 2003, as disclosed in the Company s IPO prospectus dated 5 January 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 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. Challenger Technologies Limited. Annual Report 2012

29 27 corporate governance Directors Remuneration Breakdown of remuneration of each Director by % (financial 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 Hwee 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 Ben 1 83% 17% 100% Woon Yoon Siong 66% 34% 100% 1 Mr Tan Huat Ben was appointed as the Chief Operating Officer with effect from 1 October No immediate family member of any Director and whose remuneration had exceeded $150,000 during the financial year ended 31 December 2012 was employed by the Company or its subsidiaries.

30 28 corporate governance Accountability Principle 10: The Board should present a balanced and understandable assessment of the company s 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 Company s 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 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 four IDs. The membership of the AC is, as follows: Chairman: Ho Boon Chuan Wilson (Lead ID) Members: Max Ng Chee Weng (ID) Tan Han Beng (Appointed on 01/03/2013) (ID) Tan Chay Boon (Appointed on 01/03/2013) (ID) However, for the financial 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 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. iii. iv. 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; 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; 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; Challenger Technologies Limited. Annual Report 2012

31 29 corporate governance 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. vii. to meet with the external auditors without the presence of the Management at least once a year; and 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 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 nonaudit 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 satisfied 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 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 and 715 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 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 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. The Board and Audit Committee are of the opinion that, there are adequate controls in place within the Group addressing financial, operational and compliance risks as at 31 December 2012, 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.