beyond the st r - 早报 · 2013-05-13 · beyond the st r challenger ... 69 ubi crescent #02-02...

beyond the st rchallenger technologies limited annual report 2005

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challenger technologies limited annual report 2005

Challenger @ Funan109 North Bridge Road #06-00 Funan DigitaLife MallSingapore 179097T : 65 - 6339 9008

Challenger @ Tampines12 Tampines Central #02-02/03 DBS Tampines Centre Singapore 529537T : 65 - 6426 9123

Matrix IT Gallery @ Funan109 North Bridge Road #03-39/#04-19 Funan DigitaLife MallSingapore 179097T : 65 - 6334 1741

CBD eVision Pte Ltd69 Ubi Crescent#02-02 CES BuildingSingapore 408561T : 65 - 6288 8223

CBD eVision (M) Sdn BhdNo 9-1 Jalan USJ 21/747630 UEP Subang Jaya Selangor, MalaysiaT : 603 - 5885 0313

01 Mission Statement 02 Corporate Profile 03 Challenger Group of Companies 04 Chief Executive Officer’s Message 06 Profile of Board

of Directors 07 Profile of Key Management 08 Corporate Information 09 Financial Highlights 10 Operations Review

Beyond products... into lifestyles.

Mission StatementTo ensure all our customers get value for all products and services provided by us andhave a pleasant shopping experience.

Beyond variety... into vivacity.

2 CHALLENGER TECHNOLOGIES LIMITED ANNUAL REPORT 2005

Established in 1984 as an IT products retailer,

Challenger Technologies has grown from one

outlet to two superstores and two small format

outlets (“Matrix Business Units”) in Singapore.

Challenger Technologies offers a diverse range

of IT products and services, as well as on-site

IT solutions and services through our Itechcare

subsidiary. In 1994, we also expanded into the

electronic signage business through our CBD

eVision subsidiary. Today, our Group counts

well-known corporate clients and walk-in shoppers

amongst its customers.

Under the IT products and services segment of our

business, we house over 20 product categories

spanning hardware, software and accessories.

We source products from more than 200 IT

vendors. Our PC Clinics provide after-sales

service 7 days a week, which is complemented

by our Itechcare subsidiary.

CBD eVision’s principal market is Singapore

and it has also served overseas markets such as

Brunei, the People’s Republic of China, Indonesia

and Malaysia. Its Malaysia subsidiary, which was

established in 2004, allows CBD eVision to cater

to the growing demand for electronic signage

services within the region.

CORPORATE PROFILE

As one of the pioneers in a niche industry, the electronic signage services segment of our business possesses the technical expertise to provide a wide range of products and services.


CHALLENGER TECHNOLOGIES LIMITED ANNUAL REPORT 2005 3

CHALLENGER GROUP OF COMPANIES

100% 40% 100%

96% 100% 25%

60%

MATRIX INTEGRATION PTE LTD

SINGAPORE(Small Format Outlet - Retail)

CHALLENGER INFORTECH (BEIJING)

CO., LTDPEOPLE’S REPUBLIC

OF CHINA(Marketing and Development of

Anti-Virus Software)

ITECHCARE (S) PTE LTDSINGAPORE

(IT Service Provider)

CHALLENGER TECHNOLOGIES (M) SDN BHD*

MALAYSIA(Superstore - Retail)

CBD eVISION PTE LTD SINGAPORE

(Electronic Signage)

NCL SOLUTIONS SDN BHDMALAYSIA

(Conducting training and educational

courses)

CBD eVISION (M) SDN BHDMALAYSIA

(Electronic Signage)

®

* Currently dormant


Challenger and Matrix IT Gallery

Riding on higher retail revenue achieved from all

our retail outlets, the Group’s core business of

providing IT products and services increased 7.3%

to $76.0 million in FY2005. We have been

able to attract new customers and retain

existing customers through our rewards

programme, competitive pricing and wide

range of merchandise.

On the superstore front, our flagship Funan

DigitaLife Mall outlet started extensive phase-by-

phase renovation works in November 2005. The

additional outlet space will translate into the ability

to present more product categories and a wider

product range to provide our customers a holistic

shopping experience. Our renovated flagship outlet

will house dedicated areas such as an expanded

Apple Gallery and a selection of popular lifestyle

products including wide-screen LCD TVs. Our

Customer Service and Games sections are just two

of the several departments that will be expanded

CHIEF EXECUTIVE OFFICER’S MESSAGE

The Group registered revenue of $77.5 million and net profit of $3.7 million for the financial year ended 31 December 2005. Group revenue increased 2.7% from $75.5 million while net profit after taxation jumped 33% from $2.8 million in FY2004.

Revenue for the Group was achieved despite the disposal of a former subsidiary, OA Supplies Pte Ltd in April 2005 and the closure of two small-format retail outlets in Sim Lim Square in the second half of 2004.

to better cater to our customers’ needs. This facelift

is expected to be completed in July 2006 in

time for the Great Singapore Sale and back-to-

school season and will rejuvenate the IT shopping

experience for all our customers.

Over at our DBS Tampines Centre outlet, our

lease expires on 31 March 2006. While a

one-year extension was signed with effect from

1 April 2006, this outlet may be closed due to

the redevelopment of DBS Tampines Centre in the

second half of 2006. We will continue to focus

on our retail business in Singapore and have

signed new leases with United Square and Sim Lim

Square. Where feasible, we will continue to secure

new leases at suitable locations in Singapore.

We believe this will mitigate any impact on the

potential closure of our DBS Tampines Centre outlet.

Going forward, we believe our superstores and

small-format outlets will perform well and remain

profitable.


Electronic Signage Business

The electronic signage services business segment

of CBD eVision divested its holdings in the Thailand

subsidiary to concentrate on the Singapore and

Malaysia market. Revenue soared 33.8% to $1.3

million in FY2005 due to expansion into Malaysia.

Despite keen competition in this segment of our

business, our operations in both Singapore and

Malaysia have attained good reputation over the

years.

We have proposed to reward our shareholders

with a dividend of almost 99% of our net profit

for FY2005. Going forward, we intend to pay a

significant percentage of our net profit as dividend

if we have sufficient cash flow.

As a listed Company with the interest of our

shareholders in mind, we view corporate

governance as a top priority. Thus, we will strive to

achieve the highest standards of transparency as

well as to increase shareholders’ value.

Barring unforeseen circumstances, our Directors are

of the view that we will continue to be profitable for

the current financial year based on our performance

achieved to-date.

I would like to thank my fellow Directors,

management team and all employees for their

hard work and commitment to the Company, as

well as suppliers and business associates for their

invaluable support.


MR LOO LEONG THYEChief Executive Officer He is responsible for the overall management and day-to-day operations of our Group. He also charts our corporate directions, strategies and policies. He has more than 21 years of experience in the IT industry. He started the business operations of our Group in 1983 and has been instrumental in growing the operations of our Group to its present stature today. In 1986, he started the electronic signage business under CBD eVision and has been involved in the operations of the Company ever since.

MDM ONG SOCK HWEEExecutive DirectorShe is responsible for the overall management and day-to-day operations of our Challenger Superstore at DBS Tampines Centre. Prior to that, from 1997-2001, she assisted our Chief Executive Officer in the management and operations of Challenger at Funan DigitaLife Mall and other business operations of our Group. She was involved in supervising operations, finance and administration matters as well as sales and merchandising. She has more than eight years of experience in the IT industry.

MR NG LEONG HAINon-Executive DirectorHe is one of the original founders of our Singapore Group of Companies. He is currently the President of Columbia Computer Products, Inc., our sourcing and procurement supplier in the USA, where he is in-charge of its day-to-day operations. He has more than 21 years of experience in the IT industry.

MR NG KIAN TECKAlternate Director to Mr Ng Leong HaiHe is the Director of merchandising and inventory control of our Singapore Group Companies. He is also in charge of the marketing department of our Singapore Group Companies. He joined our Group in 1996 and has more than 12 years of experience in the IT industry.

MR HO BOON CHUAN WILSONIndependent DirectorHe is the chief financial officer and company secretary of Multi-Chem Limited (a company listed on the SGX-ST) where he is responsible for its accounting, finance, investments and investor relations functions. He is also responsible for the growth and operations of the M.Tech companies, which form the IT arm of the Multi-Chem Group. Mr Ho graduated from the National Technological University with a bachelor of accountancy degree. He is a certified public accountant and a chartered financial analyst.

MR MAX NG CHEE WENGIndependent DirectorHe is a principal Director of Gateway Law Corporation, a regional legal practice based in Singapore. He specialises in the areas of intellectual property, information technology, telecommunications, franchising and media law. He holds a Masters in Law from the National University of Singapore, and is also admitted to practice as a solicitor in the UK and Wales.

PROFILE OF BOARD OF DIRECTORS



PROFILE OF KEY MANAGEMENT

MR CHIA KANG WHYEGeneral Manager of CBD eVision Pte LtdHe is responsible for the day-to-day management of our 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 more than 19 years of experience in the electronic signage business.

MS LIM KIM HUAYOperations ManagerShe is responsible for the day-to-day operations of Challenger at Funan DigitaLife Mall and also assists in merchandising. She joined the Company in 1985 and has more than 20 years of experience in the IT industry. She holds a diploma in retail management from the Singapore Retailers’ Association.

MS CHUA LEH SUANAdministration DirectorShe is responsible for the day-to-day operations of the accounts and human resource department for our Singapore Group Companies where she handles group accounts and human resource matters. She joined us in 1984 and has more than 21 years of experience in the IT industry.

MR TAN WEE KOFinancial ControllerHe joined the Group in May 2005 and is overall in-charge of matters relating to accounting, financial and funding requirements of our Group, ad hoc investment project evaluation, as well as compliance and reporting requirements of the SGX-ST. He is a member of the Institute of Certified Public Accountants of Singapore and CPA Australia.



CORPORATE INFORMATION

Board of DirectorsLOO LEONG THYEChief Executive Officer

ONG SOCK HWEEExecutive Director

NG LEONG HAINon-Executive Director

NG KIAN TECKAlternate Director to Ng Leong Hai

HO BOON CHUAN WILSONIndependent Director

MAX NG CHEE WENGIndependent Director

Audit CommitteeHO BOON CHUAN WILSON (Chairman)MAX NG CHEE WENGNG LEONG HAI

Nominating CommitteeMAX NG CHEE WENG (Chairman)HO BOON CHUAN WILSONNG LEONG HAI

Remuneration CommitteeMAX NG CHEE WENG (Chairman)HO BOON CHUAN WILSONNG LEONG HAI

Company SecretaryLIN TIAN HAW, LLB (Hons)

Registered Office109 North Bridge Road#06-00 Funan DigitaLife MallSingapore 179097Tel : 65 - 6336 7747Fax : 65 - 6337 2588Email : [email protected]

Share Registrar and Share Transfer OfficeLIM ASSOCIATES (PTE) LTD10 Collyer Quay#19-08 Ocean BuildingSingapore 049315

AuditorsRSM CHIO LIM Certified Public Accountants (a member of RSM International)18 Cross Street #08-01Marsh & McLennan CentreSingapore 048423Partner in-charge: LIM LEE MENG(since financial year ended 31 December 2003)

Principal BankerUNITED OVERSEAS BANK LIMITED80 Raffles PlaceUOB Plaza 1Singapore 048624



FY2005 FY2004 FY2003 FY2002 FY2001 FY2000 $’000 $’000 $’000 $’000 $’000 $’000

Revenue 77,497 75,478 67,265 59,058 56,095 61,323

Profit/(Loss) Before Tax 4,632 3,715 4,024 2,190 1,610 (4,011)

Profit/(Loss) After Tax 3,731 2,798 3,169 1,839 1,225 (3,993)

Earnings/(Loss) Per Share (cents) 2.47 1.88 2.61 1.51 1.01 (3.29)

Shareholders’ Funds 13,455 14,573 6,129 4,649 9,368 9,982

Net Tangible Assets Per Share (cents) 8.76 9.48 5.01 3.83 7.71 8.22

KEY FINANCIAL RATIOS

Net Profit Margin (%) 5% 4% 5% 3% 2% -7%

Inventory Turnover (days) 38 36 40 37 39 27

Trade Receivable Turnover (days) 8 10 10 14 10 18

Return on Equity (%) 28% 19% 52% 40% 13% -40%

Quick Ratio (times) 1.87 1.93 0.87 0.79 1.51 1.80

Current Ratio (times) 2.81 2.69 1.73 1.45 2.20 2.45

FINANCIAL HIGHLIGHTSFOR THE YEAR ENDED 31 DECEMBER 2005

CHALLENGER TECHNOLOGIES LIMITED AND ITS SUBSIDIARIES


31.12.2005$’000

31.12.2004$’000

Increase /(Decrease)

$’000Remarks

Revenue 77,497 75,478 2,019 Revenue increased mainly due to:(1) higher retail revenue from retail operations; and(2) expansion of electronic signage services into Malaysia.

Financial income 427 411 16 The increase was mainly from interest income on fixed deposits.

Financial expense (275) (62) 213 The increase was mainly due to foreign exchange losses from Australian dollar fixed deposits.

Changes in inventories 742 (421) 1,163

Cost of goods purchased (62,687) (60,326) 2,361

Other consumables used (277) (229) 48 The increase was in line with higher retail revenue.

Employee benefits expense including Directors’ remuneration

(5,184) (4,891) 293 The increase was mainly due to higher staff bonus and incentive paid as a result of higher retail revenue.

Depreciation expense (354) (526) (172)

Other operating expenses (5,061) (5,231) (170) The decrease was mainly due to lower rental expense as a result of disposal of our subsidiary and closure of two small format outlets during FY2004.

Other (charges) / credits (143) (492) (349) The increase in other charges was mainly due to provision for impairment in our associate and point rewards redemption which has been offset by gain on disposal of our subsidiary and write-off of goodwill on acquisition of a subsidiary in the previous year.

Share of (loss) / profit of associates (53) 4 (57)

Profit before tax 4,632 3,715 917

Income tax expense (901) (917) 16

Profit for the year 3,731 2,798 933

Minority interest 61 76 (15)

Profit attributable to shareholders 3,792 2,874 918

OPERATIONS REVIEW- FY2005



OPERATIONS REVIEW- FY2005

31.12.2005$’000

31.12.2004$’000

Increase /(Decrease)

$’000Remarks

ASSETSNon-Current Assets:Plant and equipment 1,092 1,208 (116) The decrease was due to depreciation charge of $0.3M,

disposal of a former subsidiary of $0.1M and these were offset by addition of $0.3M for upgrade of computer systems and renovation at our retail outlets.

Investment in associates - 313 (313) The decrease was due to share of losses and impairment provision for our associates.

Other assets 5 22 (17)

1,097 1,543 (446)

Current Assets:

Cash and cash equivalents 10,666 12,737 (2,071) The decrease was mainly due to profits generated from operations less payment of dividends of $4.9M during the year.

Trade receivables 1,711 2,011 (300) The decrease was mainly due to disposal of a former subsidiary.

Other receivables 605 435 170 The increase was mainly due to deposit paid to a renovations contractor for our renovation at our retail outlet.

Inventories 6,479 5,976 503 The increase was due to expansion of our retail space at our Challenger @ Funan outlet.

19,461 21,159 (1,698)

Total Assets 20,558 22,702 (2,144)

LIABILITIES AND EQUITY

Current Liabilities:

Short-term borrowings 20 852 (832) The decrease was due to disposal of a former subsidiary.

Trade payables 5,676 5,713 (37)

Other payables 222 318 (96) Mainly due to decreased of rental deposits.

Deferred franchise fee income 7 13 (6)

Income tax payable 1,001 963 38

Current portion of finance lease 8 16 (8)

6,934 7,875 (941)

Non-current Liabilities:

Finance Leases 35 92 (57)

Deferred taxation 127 127 -

162 219 (57)

Total liabilities 7,096 8,094 (998)

Equity attributable to equity holders of the parent:

Share capital 6,140 6,140 -

Other reserves 5,152 5,150 2

Retained earnings 2,163 3,283 (1.120)

Total Shareholders’ Funds 13,455 14,573 (1,118)

Minority interests 7 35 (28)

Total equity 13,462 14,608 (1,146)

Total liabilities and equity 20,558 22,702 (2,144)


13 Corporate Governance 21 Report of Directors 24 Statement of Directors 25 Auditors’ Report 26 Audited Financial Statements

30 Notes to Financial Statements 61 Statistics of Shareholding 62 Notice of Annual General Meeting


CORPORATE GOVERNANCE

The Board of Directors (the “Board”) of Challenger Technologies Limited is committed to achieving a high standard of corporate governance within the Group and has put in place effective self-regulatory corporate governance practices to provide the structure through which the objectives of greater transparency, protection of shareholders’ interests and enhancement of long term shareholder value are met as well as strengthening investors’ confidence in its management and financial reporting.

Since the listing of Challenger Technologies Limited on SGX-Sesdaq on 14 January 2004, the Board has adopted the following corporate governance practices with specific reference to the Code of Corporate Governance.

1. THE BOARD’S CONDUCT OF ITS AFFAIRS

The Board is to meet at least twice yearly in addition to ad-hoc meetings. The principal functions of the Board, apart from its statutory responsibilities, are:

i. the charting of corporate strategy and direction of the Group, including but not limited to approval of broad policies, strategies and financial objectives of the Group;

ii. the approval of annual budgets, proposals for acquisitions, investments and disposals; iii. the review of financial results of the Group and the approval of announcements of financial results

on SGX-ST and the approval of annual reports and financial statements of the Group; iv. together with the assistance of the Audit Committee, overseeing the processes for evaluating the

adequacy of the internal controls, risk management, financial reporting and compliance; v. the approval of nominations to the Board and appointment of key personnel; vi. the evaluation of the performance and the approval of the remuneration of key management

personnel; and vii. the responsibility for overall corporate governance of the Group.

The Board has approved the recommendations of the Internal Auditors pertaining to the internal control procedures of the Company. In addition, the Board’s approval has to be sought for a transaction not in the ordinary course of business which exceeds $1.0 million in value. For operational efficiency, the Board’s approval is not required for day-to-day decisions and matters that are operational in nature, even though any such single transaction may exceed $1.0 million in value.

Additional Board Meetings are also held at such other times as and when required to address any specific matters or particular circumstances, as deemed appropriate by the Board.

The Board has established committees to assist it in discharging its responsibilities. These committees operate under clearly defined terms of reference. The three committees are:

i. Audit Committee (the “AC”); ii. Nominating Committee (the “NC”); and iii. Remuneration Committee (the “RC”).

The attendance of the Directors at meetings of the Board committees, as well as the frequency of such meetings during financial year 2005 was as follows:


1. THE BOARD’S CONDUCT OF ITS AFFAIRS (CONT’D) ATTENDANCE AT MEETINGS

Board Committees

Board Audit Nominating Remuneration

Number of meetings held 2 2 1 1

Board Members Number of meetings attended

Loo Leong Thye 2 2* 1* 1*Ong Sock Hwee 2 2* 1* 1*Ng Leong Hai(Alternate Director: Ng Kian Teck) 2 2 1 1Ho Boon Chuan Wilson 2 2 1 1Choo Swee Cher 2 2 1 1Max Ng Chee Weng** - - - -

* Attendance at the invitation of the committee. ** Max Ng Chee Weng was appointed as our Independent Director in place of Choo

Swee Cher on 12 January 2006.

Please refer to Principle 4 in respect of the appointment of each of the Directors.

To ensure new Directors have an insight to the workings of the Group, management or such other appropriate persons will brief these newly appointed members to the Board on the Group’s business operations and corporate governance practices. From time to time, the Directors will be informed of developments relevant to the Group, including changes in laws, regulations and risks that may impact the Group. The Directors will be sent to certain external seminars to obtain the latest updates in business and regulatory changes from time to time.

2. BOARD COMPOSITION AND BALANCE

The Board has five Directors, comprising two Executive Directors, one Non-Executive Director and two Independent Directors. This composition complies with the Code’s requirement that at least one-third of the Board should be made up of Independent Directors.

The independence of each Director is reviewed annually by the NC. The NC is of the view that the current Board has an independent element ensuring objectivity in the exercise of judgment on corporate affairs independently from the management. The NC is also of the view that no individual or small group of individuals dominates the Board’s decision making process.

The Board is of the opinion that its current board size of five Directors is appropriate, 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 business persons and professionals with industry and financial backgrounds and its composition enables the management to benefit from a diverse and objective external perspective on issues raised before the Board. Profiles of the Directors are set out on page 6 of this Annual Report.

3. ROLE OF CHAIRMAN AND CHIEF EXECUTIVE OFFICER

Mr Loo Leong Thye, is the Chief Executive Officer (“CEO”) of the Group. His responsibilities pertaining to the workings of the Board and his executive responsibilities pertaining to the Group’s business are kept distinct, increasing the accountability and greater capacity of the Board for independent decision making.




3. ROLE OF CHAIRMAN AND CHIEF EXECUTIVE OFFICER (CONT’D)

The Chairman shall:

(i) in consultation with the management, schedule meetings that enable the Board to perform its duties responsibly while not interfering with the flow of the Company’s operations;

(ii) prepare meeting agenda in consultation with the management; (iii) in consultation with the management, exercise control over quality, quantity and timeliness of the

flow of information between management and the Board; and (iv) assist in ensuring compliance with Company’s guidelines on corporate governance.

However, the Company has not created a separate Chairman position as the Directors are of the view that the current Board composition is appropriate and effective for the purposes for which the Board’s roles and responsibilities are set up. The Directors are satisfied that the establishment of the three committees, namely AC, NC and RC would be sufficient to provide the necessary increased accountability and independence for decision-making.

4. BOARD MEMBERSHIP

The NC comprises three members, two of whom are Independent Directors.

Chairman: Max Ng Chee Weng (Independent Director) Members: Ho Boon Chuan Wilson (Independent Director) Ng Leong Hai (Non-Executive Director)

The NC meets at least once a year to discuss issues of Board appointments.

The functions of the NC include the following:

i. recommendations to the Board on all Board appointments or re-appointments; ii. assessment of the effectiveness of the Board as a whole and the contributions of each Director to

the effectiveness of the Board; iii. determination of the independence of the members of the Board; and iv. determination of whether a Director is able to and has adequately carried out his duties as

a Director of the Company, in particular, where the Director concerned has multiple Board representations.

Board appointments are made by way of a Board resolution after the NC has recommended such appointment to the Board, reviewed his or her resume and conducted appropriate interviews. Pursuant to the Articles of Association of the Company, each Director is required to retire at least once every three years by rotation and all newly appointed Directors would have to retire at the next Annual General Meeting following their appointment. The retiring Directors are eligible to offer themselves for re-election.

The dates of initial appointment and re-election of the Directors are set out below:

Director PositionDate of InitialAppointment

Date of LastRe-election

Loo Leong Thye Chief Executive Officer 14 January 1984 21 April 2004Ong Sock Hwee Executive Director 28 December 1994 12 April 2005Ng Leong Hai Non-Executive Director 15 July 2003 12 April 2005Ho Boon Chuan Wilson Independent Director 17 November 2003 21 April 2004Max Ng Chee Weng Independent Director 12 January 2006 -

The NC in determining whether to recommend a Director for re-appointment will have regard to such Director’s performance and contribution to the Group and whether such Director has adequately carried out his or her duties as a Director.


4. BOARD MEMBERSHIP (CONT’D)

The NC nominated Loo Leong Thye and Max Ng Chee Weng, who would be retiring as Directors at the forthcoming Annual General Meeting, to the Board for their re-election as Directors at the forthcoming Annual General Meeting.

5. BOARD PERFORMANCE

The Board’s performance is ultimately reflected in the performance of the Group. The Board shall, at all times, act honestly and use reasonable diligence and care in the members of the discharge of the duties of their office. They have to carry out their duties in the best interests of the Company and its shareholders. Board members must attend at least 75% of all Board Meetings.

The NC in considering the nomination of a Director for re-appointment evaluates such Director’s contribution and performance, such as his or her attendance at meetings of the Board or Board committees, where applicable, participation, candour and any other special contributions.

The NC is tasked with the assessment of the Board’s performance and is in the process of adopting performance criteria which will take into consideration quantitative and qualitative criteria such as the success of the strategic and long term objectives set by the Board.

6. ACCESS TO INFORMATION

The members of the Board in their individual capacity have complete access to information on a timely basis in the form and quality necessary for the discharge of their duties and responsibilities. Prior to each Board Meeting, the members of the Board are each provided with the relevant documents and information to enable them to obtain a comprehensive understanding of the issues to be deliberated upon, so as to enable them to arrive at an informed decision. Management will update the Independent Directors on a regular basis on the Group’s operations and performance.

The Directors have direct access to the management and the advice and services of the Company Secretary, who attends all Board Meetings and is responsible for ensuring that Board Meeting procedures are followed and that applicable rules, acts and regulations are complied with.

The Board (whether individually or as a group) has direct access to independent professional advisors to obtain advice. Any cost of obtaining such professional advice will be borne by the Company.

7. REMUNERATION MATTERS

The RC comprises three Directors, a majority of whom are Independent Directors.

Chairman: Max Ng Chee Weng (Independent Director) Members: Ho Boon Chuan Wilson (Independent Director) Ng Leong Hai (Non-Executive Director)

The RC meets at least once a year to discuss matters relating to remuneration of the Board and key management personnel.

The main terms of reference of the RC are as follows:

i. recommendation to the Board of a framework of remuneration for the Board and key management personnel, which covers all aspects of remuneration, including but not limited to Directors’ fees, salaries, allowances, bonuses and benefits in kind;

ii. recommend to the Board the remuneration of Non-Executive Directors (which should be appropriate to the level of contribution and the responsibilities of the directors);

iii. determine specific remuneration packages for each Executive Director; and iv. determine targets for any performance-related pay schemes operated by the Company.




7. REMUNERATION MATTERS (CONT’D)

The recommendations of the RC should be submitted to the Board for endorsement.

The RC has access to expert professional advice on human resource matters whenever there is a need to consult externally. In its deliberations, the RC will take into consideration industry practices and norms in compensation in addition to the Company’s performance relative to the industry and the performance of the individual Directors. No individual Director should be involved in deciding his or her own remuneration.

8. LEVEL AND MIX OF REMUNERATION

The remuneration, including an incentive bonus, of the Executive Directors, Mr Loo Leong Thye and Madam Ong Sock Hwee are based on service agreements made on 15 September 2003 as disclosed to shareholders in the Company’s Prospectus dated 5 January 2004. The service agreements are for an initial period of three years commencing on 1 October 2003 and thereafter shall be automatically renewed for successive periods of two years each on such terms and conditions as the parties may agree. Either party may terminate the service agreement by giving 3 months’ written notice or payment in lieu of notice. Both Mr Loo Leong Thye and Mdm Ong Sock Hwee are spousal to each other.

The Independent Directors are each paid a director’s fee for their efforts and time spent, responsibilities and contribution to the Board, subject to approval by the shareholders at the Annual General Meeting.

Future service contracts to be entered into by the Company with Directors shall have a fixed appointment period and shall not be excessively long or with onerous removal clauses. The RC will consider what compensation the Directors’ contracts of service would entail in the event of early termination and will aim to be fair and avoid rewarding poor performance. The RC will also consider whether Directors should be eligible for benefits under long-term incentive schemes, such as share option schemes. Currently, the Executive Directors do not have long-term incentive scheme because they are also the major shareholders of the Company and their interests are aligned with the interests of the Company.

9. DISCLOSURE ON REMUNERATION

Remuneration is fixed in accordance with the experience of the person in question, the role performed, market comparison, the contribution of the individual and the performance of the Company.

Breakdown of remuneration of each Director by % (financial year ended 31 December 2005).

Remuneration Band &Name of Directors

Fixed Salary Directors’ FeesVariable or PerformanceRelated Income/Bonus

Total

$250,000 to $499,999Loo Leong Thye

Below $250,000Ong Sock Hwee

75%

79%

-

-

25%

21%

100%

100%

Ng Leong HaiNg Kian Teck

-74%

--

-26%

-100%

Ho Boon Chuan Wilson - 100% - 100%Max Ng Chee Weng (appointed on 12 January 2006)Choo Swee Cher (resigned on 12 January 2006)

-

-

-

100%

-

-

-

100%

The Company has no share option plans. Accordingly, no share option has been granted to the above Directors.


9. DISCLOSURE ON REMUNERATION (CONT’D)

Breakdown of remuneration of each key executive (who are not Directors) by % (financial year ended 31 December 2005)

Remuneration Band & Name of Key Executives

Fixed SalaryVariable or PerformanceRelated Income/Bonus

Total

Below $250,000Chia Kang WhyeChua Leh Suan

89%83%

11%17%

100%100%

Lim Kim Huay 63% 37% 100%Tan Wee Ko 87% 13% 100%

The Company has no share option plans. Accordingly, no share options have been granted to the above key executives.

There was no employee of the Company or its subsidiaries who was an immediate family member of any Director or the CEO and whose remuneration exceeded $150,000 during the financial year ended 31 December 2005. “Immediate family member” means the spouse, child, adopted child, stepchild, brother, sister and parent.

10. ACCOUNTABILITY

The Company recognises that the Board should provide shareholders with a balanced and understandable assessment of the Group’s performance, position and prospects on a regular basis and adopts the practice of communicating major developments in its business operations to the SGX-ST, its shareholders and its employees.

Management provides the Directors with balanced and understandable management accounts of the Group on a quarterly basis. The half year and full year accounts will be provided to Directors prior to Board meetings. The Directors also have separate and independent access to all levels of key personnel in the Group.

11. AUDIT COMMITTEE

The AC comprises three members, two of whom are independent.

Chairman: Ho Boon Chuan Wilson (Independent Directors) Members: Max Ng Chee Weng (Independent Director) Ng Leong Hai (Non-Executive Director)

The members of the AC have the relevant experience in the areas of business, accounting and finance and are appropriately qualified to discharge their responsibilities. The detailed profile of the members of the AC are set out in the “Board of Directors” section on page 6 in this Annual Report.

The main terms of reference of the AC are as follows:

i. review the audit plans, the system of internal accounting controls, the audit report, the management letter and the management’s response in conjunction with the external auditors;

ii. review the assistance given by the Company’s officers to the external auditors; iii. ensure that the internal audit function is adequate and has appropriate standing within the

Company, (such adequacy of the internal audit function to be reviewed at least annually) and review the scope and results of the internal audit procedures;

iv. ensure a review of the effectiveness of the Company’s material internal controls, including financial, operational and compliance controls and risk management, is conducted at least annually by the external auditors;




11. AUDIT COMMITTEE (CONT’D)

v. review and discuss with the external auditors, if necessary, any suspected fraud or irregularity or suspected failure of internal controls, which may have a material impact on the Group’s operating results;

vi. review the scope and results of the external audit and its cost effectiveness, as well as the independence and objectivity of the external auditors annually;

vii. consider the appointment or re-appointment of the external auditors; viii.review the financial statements of the Company, including the half-year and full-year results and

the respective announcements before submission to the Board of Directors; ix. approve internal control procedures and arrangements for all interested person transactions;

and x. give due consideration to the requirements of the Stock Exchange Listing Rules.

The AC has direct access to and enjoys the full co-operation of the Company’s management. It has full discretion to invite any Director or executive officer to attend its meetings and has been given reasonable resources to enable it to discharge its functions.

The AC is to meet at least twice a year to review the announcements of the half-year and full-year results before being approved by the Board for release to the SGX-ST. The AC also meets with the external auditors and reviews the scope and results of the external audit. The AC may meet the external auditors at any time, without the presence of the Company’s management.

The aggregate amount of non-audit fees paid to the external auditors for the financial period review was approximately $3,000 in connection with our half year financial results review. The AC having reviewed all non-audit services to the Group by the external auditors is satisfied that the nature and extent of such services will not prejudice the independence and objectivity of the external auditors.

The AC has recommended to the Board the nomination of RSM Chio Lim, for re-appointment as auditors of the Company at the forthcoming Annual General Meeting.

12. INTERNAL CONTROLS

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 effects, as well as for the authorisation of capital expenditure and investments. Comprehensive budgeting systems are in place to develop annual budgets covering key aspects of the business. Actual performance is compared against budgets and revised forecasts for the year are prepared on a regular basis.

The Board believes that the system of internal controls and risk management maintained by the Group is adequate to safeguard shareholders’ investments and the Group’s assets.

13. INTERNAL AUDIT

The Company outsources its internal audit function to an external CPA firm. The internal auditors have conducted two reviews of our sales and collection cycle during the last financial year ended 31 December 2005. In addition to the internal audit function, the key element in the Group’s internal control system is the control which our 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.


14. COMMUNICATIONS WITH SHAREHOLDERS

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

i. annual reports issued to all shareholders. Non-shareholders may access the SGX-ST’s website for a soft copy of the annual report;

ii. announcement of half-year and full-year results on the SGXNET; iii. other SGXNET announcements; iv. press releases on major developments of the Company; and v. Company’s website at www.challengerasia.com through which shareholders can access

information on the Company.

The Board regards the Annual General Meeting as an opportunity to communicate directly with shareholders and encourages greater shareholder participation. The CEO and other Directors attend the Annual General Meeting and are available to answer questions from shareholders at the Annual General Meeting.

15. CODE ON SECURITIES TRANSACTIONS BY OFFICERS

In compliance with the Best Practices Guide, Directors and employees of the Company have been advised not to deal in the Company’s shares on short term considerations or when they are in the possession of unpublished price-sensitive information. Dealings in the Company’s shares during the period commencing one month before any announcement of the Company’s financial statements and ending on the date of announcements of the results is prohibited.

16. INTERESTED PERSON TRANSACTIONS (“IPT”)

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

For the year under review, the Group carried out interested person transactions with Columbia Computer Products, Inc (“Columbia”) involving the sales of IT products to the Group. Mr Ng Leong Hai is the Director of Columbia as well as the Company and is hence an interested person.

Pursuant to Rule 920(1)(a)(ii) of the SGX-ST Listing Manual, the aggregate value of the transactions between the Group and Columbia is set out below.

Name of interested Person Aggregate value of all interested person transactions during the financial year under review (excluding transactions less than $100,000 and transactions conducted under shareholders’ mandate pursuant to Rule 920)

Aggregate value of all interested person transactions conducted under shareholders’ mandate pursuant to Rule 920 (excluding transactions less than $100,000)

Columbia ComputerProducts, Inc.

Nil$813,000(FY2004:$805,000)



The Directors of the Company are pleased to present their report together with the audited financial statements of the Company and of the Group for the financial year ended 31 December 2005.

1. DIRECTORS AT DATE OF REPORT

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

Loo Leong Thye (Chief Executive Officer)Ong Sock Hwee (Executive Director)Ng Leong Hai (Non-Executive Director) (a) (b) (c)

Ng Kian Teck (Alternate Director to Ng Leong Hai) Ho Boon Chuan Wilson (Independent Director) (a) (b) (c)

Max Ng Chee Weng (Independent Director) (a) (b) (c) – appointed on 12 January 2006

(a) Members of Audit Committee (b) Members of Remuneration Committee (c) Members of Nominating Committee

2. ARRANGEMENTS TO ENABLE DIRECTORS TO ACQUIRE BENEFITS BY MEANS OF THE ACQUISITION OF SHARES AND DEBENTURES

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

3. DIRECTORS' INTERESTS IN SHARES AND DEBENTURES

The Directors of the Company holding office at the end of the financial 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, Cap. 50 except as follows :

Name of directors and companies in which interests are held At beginning of year At end of year

Challenger Technologies Limited (the Company)

Ordinary shares of $0.04 each

Ordinary shares of $0.04 each

Loo Leong Thye 65,693,000 65,693,000

Ong Sock Hwee 14,019,000 14,019,000

Ng Leong Hai 37,830,000 37,830,000

Ng Kian Teck 200,000 200,000

Ho Boon Chuan Wilson 100,000 100,000

Choo Swee Cher – resigned on 12 January 2006 100,000 100,000

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

The Directors’ interests as at 21 January 2006 were the same as those at the end of the financial year ended 31 December 2005, save for Mr Ng Kian Teck, who held 270,000 shares as at 21 January 2006 as he was deemed to be interested in the 70,000 shares acquired by his wife on 5 January 2006.

REPORT OF THE DIRECTORS



4. CONTRACTUAL BENEFITS OF DIRECTORS

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

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

5. OPTIONS TO TAKE UP UNISSUED SHARES

During the financial year, no option to take up unissued shares of the Company or any corporation in the Group was granted.

6. OPTIONS EXERCISED

During the financial year, there were no shares of the Company or any corporation in the Group issued by virtue of the exercise of an option to take up unissued shares.

7. UNISSUED SHARES UNDER OPTION

At the end of the financial year, there were no unissued shares of the Company or any corporation in the Group under option.

8. 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 DirectorNg Leong Hai – Non-Executive DirectorMax Ng Chee Weng – Independent Director – appointed on 12 January 2006

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

• Reviewed with the external auditors the external audit plan; • Reviewed with the external auditors their evaluation of the Company’s internal accounting

controls and their audit report on the financial statements and the assistance given by the Company’s officers to them;

• Reviewed with the internal auditors the scope and results of the internal audit procedures; • Reviewed the financial statements of the Group and the Company prior to their submission to the

Directors of the Company for adoption; and • Reviewed the interested party transactions (as defined in Chapter 9 of the Listing Manual of the

SGX).


8 AUDIT COMMITTEE (CONT’D)

Other functions performed by the audit committee are described in the report on corporate governance included in the annual report.

The audit committee has recommended to the Board of Directors that the auditors, RSM Chio Lim, be nominated for re-appointment as auditors at the next annual general meeting of the Company.

9. AUDITORS

The auditors, RSM Chio Lim, have expressed their willingness to accept re-appointment. This audit firm was known as Chio Lim & Associates before 11 January 2006.

10. SUBSEQUENT DEVELOPMENTS

There are no significant developments subsequent to the release of the Group’s and the Company’s preliminary financial statements, as announced on 23 February 2006, which would materially affect the Group’s and the Company’s operating and financial performance as of the date of this report.

ON BEHALF OF THE DIRECTORS

Loo Leong ThyeChief Executive Officer

27 February 2006


Ong Sock HweeExecutive Director


STATEMENT OF DIRECTORS

In the opinion of the Directors, the financial statements set out on pages 26 to 60 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 2005 and changes in equity of the Company and of the Group and of the results and cash flows of the Group for the financial year then ended and at the date of this statement there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due.

ON BEHALF OF THE DIRECTORS

Loo Leong ThyeChief Executive Officer

27 February 2006

Ong Sock HweeExecutive Director


AUDITORS’ REPORT TO THE MEMBERS OF CHALLENGER TECHNOLOGIES LIMITED

We have audited the financial statements of Challenger Technologies Limited set out on pages 26 to 60 for the year ended 31 December 2005. These financial statements are the responsibility of the Company’s Directors. Our responsibility is to express an opinion on these financial statements based on our audit.

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

In our opinion,

a) the consolidated financial statements of the Group and the balance sheet and statement of changes in equity of the Company are properly drawn up in accordance with the provisions of the Companies Act, Cap. 50 (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 2005 and the results, changes in equity and cash flows of the Group and the changes in equity of the Company for the year ended on that date; and

b) the accounting and other records required by the Act to be kept by the Company and by the

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 Certified Public Accountants

Singapore 27 February 2006 Partner in charge : Lim Lee Meng Effective from year ended 31 December 2003

AUDITORS’ REPORT


BALANCE SHEETSAs at 31 December 2005

Group Company

Notes 2005 2004 2005 2004

$’000 $’000 $’000 $’000

ASSETSCurrent assets:Cash and cash equivalents 4 10,666 12,737 10,349 12,269Trade and other receivables 5 2,316 2,446 2,338 1,991Inventories 6 6,479 5,976 5,818 5,270Total current assets 19,461 21,159 18,505 19,530

Non-current assets:Investments in associates 7 – 313 51 311Investments in subsidiaries 8 – – 889 865Plant and equipment 9 1,092 1,208 840 794Other assets 10 5 22 – – Goodwill 11 – – – – Total non-current assets 1,097 1,543 1,780 1,970

Total assets 20,558 22,702 20,285 21,500

LIABILITIES AND EQUITYCurrent liabilities:Short-term borrowings 12 20 852 – – Trade and other payables 13 5,598 6,044 5,386 5,180Short-term provisions 14 307 – 307 – Current tax payable 1,001 963 999 954Current portion of finance leases 15 8 16 – – Total current liabilities 6,934 7,875 6,692 6,134

Non-current liabilities:Deferred tax liabilities 22 127 127 124 124Finance leases 15 35 92 – – Total non-current liabilities 162 219 124 124

Total liabilities 7,096 8,094 6,816 6,258

Equity attributable to equity holders of the parent:Share capital 16 6,140 6,140 6,140 6,140Other reserves 5,152 5,150 5,155 5,155Retained earnings 2,163 3,283 2,174 3,947 13,455 14,573 13,469 15,242Minority interest 7 35 – – Total equity 13,462 14,608 13,469 15,242Total liabilities and equity 20,558 22,702 20,285 21,500

See accompanying notes to financial statements.


Group

Notes 2005 2004

$’000 $’000

Revenue 17 77,497 75,478

Financial income 18 427 411

Financial expense 18 (275) (62)

Changes in inventories 742 (421)

Cost of goods purchased (62,687) (60,326)

Other consumables used (277) (229)

Employee benefits expense including Directors’ remuneration 19 (5,184) (4,891)

Depreciation expense (354) (526)

Other operating expenses (5,061) (5,231)

Other (charges)/credits 20 (143) (492)

Share of (loss)/profit of associates (53) 4

Profit before tax 21 4,632 3,715

Income tax expense 22 (901) (917)

Profit for the year 3,731 2,798

Attributable to:

Equity holders of the Company 3,792 2,874

Minority interest (61) (76)

3,731 2,798

Earnings per share for profit attributable to the equity holders of the Company during the year (expressed in cents per share)

23

– Basic 2.47 1.88

– Diluted 2.47 1.88


CONSOLIDATED INCOME STATEMENTYear ended 31 December 2005


STATEMENTS OF CHANGES IN EQUITYYear ended 31 December 2005

Attributable to equity holders of the parent

Minorityinterest$’000

Totalequity$’000

Share Share Translation Retainedcapital premium reserve earnings Total

$’000 $’000 $’000 $’000 $’000

GROUPBalance at 1 January 2004 4,860 – – 1,269 6,129 – 6,129

Changes in equity for 2004

Exchange differences on translating foreign operations – – (5) – (5) – (5)Acquisition of subsidiaries – – – – – 111 111Net income recognised directly in equity – – (5) – (5) 111 106Profit for the year – – – 2,874 2,874 (76) 2,798Total recognised income and expense for the year – – (5) 2,874 2,869 35 2,904

Issue of share capital 1,280 6,080 – – 7,360 – 7,360Share issue expenses – (925) – – (925) – (925)Dividends (Note 24) – – – (860) (860) – (860)Balance at 31 December 2004 6,140 5,155 (5) 3,283 14,573 35 14,608

Balance at 1 January 2005 6,140 5,155 (5) 3,283 14,573 35 14,608


Exchange differences on translating foreign operations – – 2 – 2 2 4Gain on dilution of interest – – – – – 6 6Net income recognised directly in equity – – 2 – 2 8 10Profit for the year – – – 3,792 3,792 (61) 3,731Total recognised income and expense for the year

– – 2 3,792 3,794 (53) 3,741

Issue of share capital by a subsidiary – – – – – 25 25Dividends (Note 24) – – – (4,912) (4,912) – (4,912)Balance at 31 December 2005 6,140 5,155 (3) 2,163 13,455 7 13,462

(a) (a)COMPANYBalance at 1 January 2004 4,860 – – 1,269 6,129 – 6,129


Profit for the year – – – 3,538 3,538 – 3,538Total recognised income and expense for the year – – – 3,538 3,538 – 3,538Issue of share capital 1,280 6,080 – – 7,360 – 7,360Share issue expenses – (925) – – (925) – (925)Dividends (Note 24) – – – (860) (860) – (860)Balance at 31 December 2004 6,140 5,155 – 3,947 15,242 – 15,242

Balance at 1 January 2005 6,140 5,155 – 3,947 15,242 – 15,242


Profit for the year – – – 3,139 3,139 – 3,139Total recognised income and expense for the year – – – 3,139 3,139 – 3,139Dividends (Note 24) – – – (4,912) (4,912) – (4,912)Balance at 31 December 2005 6,140 5,155 – 2,174 13,469 – 13,469

(a)(a) Unrealised and not available for distribution as cash dividends.



2005 2004

$’000 $’000

Cash flows from operating activities :Profit for the year 3,731 2,798Adjustments for : Depreciation expense 354 526 Amortisation of goodwill on consolidation – 15 Amortisation of master franchise fee 17 17 Impairment loss of goodwill on consolidation 6 388 Loss on disposal of plant and equipment 29 33 Gain on disposal of subsidiaries (540) – Provision for impairment loss of investments in associates 271 – Share of loss/(profit) of associates 53 (4) Income tax expense 901 917 Interest income (383) (247) Interest expense 12 39Operating profit before working capital changes 4,451 4,482Trade and other receivables 2 1,037Short-term provisions 307 – Inventories (722) 400Trade and other payables 122 (1,530)Decrease/(Increase) in restricted fixed bank deposits 600 (600)Cash generated from operations 4,760 3,789Interest received 383 247Interest paid (12) (39)Income tax paid (863) (843)

Net cash from operating activities 4,268 3,154

Cash flows from investing activities :Acquisition of subsidiary net of cash acquired (Note 26) – 59Disposal of subsidiaries (Note 25) (166) – Increase in investments in associates (11) (311)Disposal of plant and equipment – 30Purchase of plant and equipment (Note 4) (374) (427)

Net cash used in investing activities ( 551) ( 649)

Cash flows from financing activities :(Decrease)/Increase in short-term borrowings (315) 478Proceeds from issuing shares – 7,360Share issue expenses – (925)Proceeds from issuing shares to minority shareholders by a subsidiary 25 – Increase in minority interest – 111Decrease in finance leases (Note 4 and 26) (10) (46)Dividends paid (4,912) (860)Net cash (used in)/from financing activities (5,212) 6,118

Net effect of exchange rate changes in consolidating subsidiaries 4 (5)

Net (decrease)/increase in cash (1,491) 8,618Cash at beginning of year 12,137 3,519Cash at end of year (Note 4) 10,646 12,137


CONSOLIDATED CASH FLOW STATEMENTYear ended 31 December 2005


NOTES TO FINANCIAL STATEMENTS31 December 2005

1. GENERAL

The Company is incorporated in Singapore. The financial statements are presented in Singapore dollars. They are drawn up in accordance with the provisions of the Companies Act, Cap. 50 and the Singapore Financial Reporting Standards. The financial statements were approved and authorised for issue by the Board of Directors on 27 February 2006.

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 Stock Exchange of Singapore Dealing and Automated Quotation System (“SESDAQ”). The principal activities of the subsidiaries are described in Note 8 to the financial statements.

The registered office address of the Company is 109 North Bridge Road, #06-00 Funan DigitaLife Mall, Singapore 179097. The Company is domiciled in Singapore.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ACCOUNTING CONVENTION – The financial statements are prepared under the historical cost convention, modified to include the revaluation of financial assets and financial liabilities as disclosed where appropriate in these financial statements.

BASIS OF PRESENTATION – The consolidation accounting method is used for the consolidated financial statements which include the financial statements made up to the balance sheet date each year of the Company and of those companies in which it holds, directly or indirectly through subsidiaries, over 50 percent of the shares and voting rights (its subsidiaries including special purpose entities). The consolidated financial statements are prepared using uniform accounting policies for like transactions and other events in similar circumstances. All significant intergroup balances and transactions, including income, expenses and dividends, are eliminated in full on consolidation. The equity accounting method is used for associates in the group financial statements. The results of the investees acquired or disposed of during the financial year are consolidated from the respective dates of acquisition or up to the dates of disposal. On disposal the attributable amount of goodwill is included in the determination of the gain or loss on disposal.

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

CASH AND CASH EQUIVALENTS – Cash and cash equivalents include bank and cash balances and any highly liquid debt instruments purchased with an original maturity of three months or less. Cash for the cash flow statement includes cash and cash equivalents less bank overdrafts payable on demand that form an integral part of cash management and cash subject to restriction.


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

TRADE RECEIVABLES – After initial recognition at fair value, trade receivables are measured at amortised cost using the effective interest method but short-duration receivables with no stated interest rate are normally measured at original invoice amount unless the effect of imputing interest would be significant. Trade receivables are stated after provision for impairment. A trade receivable amount is regarded as impaired if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition and that loss event has an impact on the estimated future cash flows of the financial asset that can be reliably estimated. The carrying amounts of trade receivables are assumed to approximate their fair value. The amount of the provision is recognised in the income statement. Normally no interest is charged on trade receivables.

LOANS AND OTHER RECEIVABLES – Loans and other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, not held for trading and not designated on initial recognition as assets at fair value through profit or loss or as available for sale. Loans and other receivables which may not be substantially recoverable, other than because of credit deterioration, are classified as available for sale. Items with a short duration are not discounted. After initial recognition such financial assets, including derivatives that are assets, are measured at their fair values, without any deduction for transaction costs that may be incurred on sale or other disposal, except for the non-current financial assets that are loans and receivables which are measured at amortised cost using the effective interest method less provision for impairment. These items are included in the balance sheet in loan receivables and trade and other receivables as current assets or as non-current assets where the maturities are greater than 12 months after the balance sheet date.

INVENTORIES – Inventories are measured at the lower of cost (first-in-first-out method) and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. Cost includes all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

SUBSIDIARIES – A subsidiary is an entity including unincorporated and special purpose entities that are controlled by the Group. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. In the Company’s own separate financial statements, the investments in subsidiaries are stated at cost less any provision for impairment in value. The net book values of the subsidiaries are not necessarily indicative of the amounts that would be realised in a current market exchange.

ASSOCIATE – An associate is an entity including an unincorporated entity in which the Company has a substantial financial interest (usually not less than 20% of the voting power), significant influence and that is neither a subsidiary nor a joint venture of the Company. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies. Investments in the associates are included in the Group’s financial statements under the equity method of accounting in the Company’s own separate financial statement, the investments in associates are stated at cost less any provision for impairment in value. The book values of the associates are not necessarily indicative of the amounts that would be realised in a current market exchange.




BUSINESS COMBINATIONS – Business combinations are accounted for by applying the purchase method. The cost of a business combination includes the fair values, at the date of exchange, of assets given, liabilities incurred or assumed and equity instruments issued by the acquirer, in exchange for control of the acquiree; plus any costs directly attributable to the business combination. Any excess of the cost over the acquirer’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities so recognised is accounted for as goodwill. The excess of acquirer’s interest in the net fair value of acquiree’s identifiable assets, liabilities and contingent liabilities over cost is accounted for as “negative goodwill”. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under FRS 103 are recognised at their fair values at the acquisition date, except for non-current assets (or disposal groups) that are classified as held for sale in accordance with FRS 105 Non-Current Assets Held for Sale and Discontinued Operations, which are recognised and measured at fair value less costs to sell. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is not amortised but is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired. An impairment loss in respect of goodwill is not reversed. There was no negative goodwill.

MINORITY INTERESTS – Any minority interest in the acquiree (subsidiary) is initially measured at the minority’s proportion of the net fair value of the assets, liabilities and contingent liabilities recognised.

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

Renovation – 12.5% to 20% Plant and equipment – 10% to 33%

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

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

FRANCHISE FEE – Acquired franchise is carried at acquisition cost less accumulated amortisation and any accumulated impairment losses. The depreciable amount is allocated on a systematic basis over 3 years.




IMPAIRMENT OF NON-FINANCIAL ASSETS – At each reporting date an assessment is made whether there is any indication that a depreciable or amortisable asset may be impaired. If any such indication exists, an estimate is made of the recoverable amount of the asset. The impairment loss is the excess of the carrying amount over the recoverable amount and is recognised in the income statement unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs to sell and its value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). At each reporting date non-financial assets other than goodwill with impairment loss recognised in prior periods are assessed for possible reversal of the impairment. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

IMPAIRMENT OF FINANCIAL ASSETS – All financial assets except those measured at fair value

through profit or loss are subject to review for impairment. A financial asset or a group of financial assets is impaired and impairment losses are incurred if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. Losses expected as a result of future events, no matter how likely, are not recognised.

FINANCIAL LIABILITIES – Financial liabilities including bank and other borrowings when recognised initially are measured at fair value plus, in the case of items not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial liability. After initial recognition these are measured at amortised cost and any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method except for financial liabilities at fair value through profit or loss. Such liabilities, including derivatives that are liabilities, are measured at fair value. Liabilities are classified as current liabilities unless there is an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

LIABILITIES AND PROVISIONS – A liability or provision is recognised when there is a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. These include trade and other payables and where the effect of the time value of money is material, the amount recognised is the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense. A provision for loyalty program is recognised when the revenue qualifying for rewards points granted to customers have been recognised.




LEASES AS A LESSEE– A finance lease is a lease that transfers substantially all the risks and rewards incidental to ownership of an asset. At the commencement of the lease term, a finance lease is recognised as an asset and as liability in the balance sheet at amounts equal to the fair value of the leased asset or, if lower, the present value of the minimum lease payments, each determined at the inception of the lease. The discount rate used in calculating the present value of the minimum lease payments is the interest rate implicit in the lease, if this is practicable to determine; if not, the lessee’s incremental borrowing rate is used. Any initial direct costs of the lessee are added to the amount recognised as an asset. The excess of the lease payments over the recorded lease liability are treated as finance charges which are allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent rents are charged as expenses in the periods in which they are incurred. The assets are depreciated as owned depreciable assets. Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased assets are classified as operating leases. For operating leases, lease payments are recognised as an expense in the income statement on a straight-line basis over the term of the relevant lease unless another systematic basis is representative of the time pattern of the user's benefit, even if the payments are not on that basis. Lease incentives received are recognised in the income statement as an integral part of the total lease expense.

SHARE CAPITAL – Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction from the proceeds. Where the Company reacquires its own equity instruments as treasury shares, the consideration paid, including any directly attributable incremental cost is deducted from equity attributable to the Company’s equity holders until the shares are cancelled, reissued or disposed of. Where such shares are subsequently sold or reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the Company’s equity holders and no gain or loss is recognised in the income statement.

FAIR VALUE OF FINANCIAL INSTRUMENTS – The carrying values of current financial assets and financial liabilities including cash, accounts receivable, short-term borrowings, accounts payable approximate their fair values due to the short-term maturity of these instruments.

REVENUE RECOGNITION – The revenue amount is the fair value of the consideration received or receivable from the gross inflow of economic benefits during the period arising from the course of the ordinary activities of the entity and it is shown net of related tax, estimated returns, discounts and volume rebates. Revenue from sale of goods is recognised when significant risks and rewards of ownership are transferred to the buyer, there is neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold, the amount of revenue and the costs incurred or to be incurred in respect of the transaction can be measured reliably. Revenue from rendering of services is recognised by reference to the stage of completion of the transaction at the balance sheet date determined by services performed to date as a percentage of total services and the amount of revenue, stage of completion and the costs incurred for the transaction and the costs to complete the transaction can be measured reliably. Franchise fee income is recognised on a straight-line basis over the period of the franchise agreement. Interest revenue is recognised on a time-proportion basis using the effective interest rate that takes into account the effective yield on the asset. Rental revenue is recognised on a time-proportion basis that takes into account the effective yield on the asset.




FOREIGN CURRENCY TRANSACTIONS – The functional currency is the Singapore dollar as it reflects the primary economic environment in which the entity operates. Transactions in foreign currencies are recorded in Singapore dollars at the rates ruling at the dates of the transactions. At each balance sheet date, recorded monetary balances and balances measured at fair value that are denominated in foreign currencies are reported at the rates ruling at the balance sheet and fair value dates respectively. All realised and unrealised exchange adjustment gains and losses are dealt with in the income statement.

FOREIGN CURRENCY FINANCIAL STATEMENTS – The foreign entities determine the appropriate functional currency as it reflects the primary economic environment in which the entities operate. In translating the financial statements of a foreign entity for incorporation in the consolidated financial statements the assets and liabilities denominated in currencies other than the functional currency of the Company are translated at year end rates of exchange and the income and expense items are translated at average rates of exchange for the year. The resulting translation adjustments (if any) are accumulated in a separate component of equity until the disposal of the foreign entity.

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

INCOME TAX – The income taxes are accounted using the asset and liability method that requires the recognition of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequence of events that have been recognised in the financial statements or tax returns. The measurements of current and deferred tax liabilities and assets are based on provisions of the enacted tax laws; the effects of future changes in tax laws or rates are not anticipated. Income tax expense represents the sum of the tax currently payable and deferred tax. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same income tax authority. The carrying amount of deferred tax assets is reviewed at each balance sheet date and is reduced, if necessary, by the amount of any tax benefits that, based on available evidence, are not expected to be realised. A deferred tax amount is recognised for all temporary differences, unless the deferred tax liability arises from (a) goodwill for which amortisation is not deductible for tax purposes; or (b) the initial recognition of an asset or liability in a transaction which (i) is not a business combination; and (ii) at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss). A deferred tax liability is not recognised for all taxable temporary differences associated with investments in subsidiaries and associates because (a) the Company is able to control the timing of the reversal of the temporary difference; and (b) it is probable that the temporary difference will not reverse in the foreseeable future.

EMPLOYEE BENEFITS – Contributions to defined contribution retirement benefit plans are recorded as an expense as they fall due. The entity's legal or constructive obligation is limited to the amount that it agrees to contribute to the fund. This includes the government managed retirement benefit plan such as the Central Provident Fund in Singapore. For employee leave entitlement the expected cost of short-term employee benefits in the form of compensated absences is recognised in the case of accumulating compensated absences, when the employees render service that increases their entitlement to future compensated absences; and in the case of non-accumulating compensated absences, when the absences occur.




SEGMENT REPORTING – A business segment is a distinguishable component of an enterprise that is engaged in providing an individual product or service or a group of related products or services and that is subject to risks and returns that are different from those of other business segments. A geographical segment is a distinguishable components of an enterprise that is engaged in providing products or services within a particular economic environment and that is subject to risks and returns that are different from those of components operating in other economic environments.

CRITICAL JUDGEMENTS, ASSUMPTIONS AND ESTIMATION UNCERTAINTIES

The critical judgements made in the process of applying the entity’s accounting policies that have the most significant effect on the amounts recognised in the financial statements and the key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:

Critical accounting judgements:

ALLOWANCES FOR DOUBTFUL ACCOUNTS – An allowance is for doubtful accounts for estimated losses resulting from the subsequent inability of our customers to make required payments. If the financial conditions of the customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required in future periods. Management specifically analyses accounts receivables and analyses historical bad debt, customer concentrations, customer creditworthiness, current economic trends and changes in customer payment terms when making a judgement to evaluate the adequacy of the allowance for doubtful accounts.

INCOME TAXES – Significant judgment is required in determining whether items are subject to withholding tax and double taxation relief. There are some transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Company recognises liabilities for anticipated tax based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. If the actual final outcome (on the judgement areas) were to differ by 10% from management’s estimates, the income tax liability would increase by $100,000 and the deferred tax liability by $13,000, if unfavourable; or – decrease the income tax liability by $100,000 and the deferred tax liability by $13,000, if favourable.

DEFERRED INCOME TAXES – Management judgment is required in determining the provision for income taxes, deferred tax assets and liabilities and the extent to which deferred tax assets can be recognised. A deferred tax asset is recognised if it is probable that sufficient taxable income will be available in the future against which the temporary differences and unused tax losses can be utilised. Management also considers future taxable income and tax planning strategies in assessing whether deferred tax assets should be recognised.

PROVISION FOR LOYALTY PROGRAMME – A provision is made for future redemption after taking into account the historical claim information as well as recent trends that might suggest that past cost information may difference from future claims. The obligations are affected by actual redemption rates. If the actual claims costs were to be different by 10% from the management’s estimates, the provision for loyalty program would be estimated $30,000 higher or $30,000 lower.




Critical assumptions and estimation uncertainties:

INVENTORY RELATED ALLOWANCES – A review is made periodically on inventory for excess inventory, obsolescence and declines in net realisable value below cost and record an allowance against the inventory balance for any such declines. These reviews require management to estimate future demand for our products. Possible changes in these estimates could result in revisions to the valuation of inventory.

USEFUL LIVES OF PLANT AND EQUIPMENT – The estimates for the useful lives and related

depreciation charges for its plant and equipment is based on commercial and production factors which could change significantly as a result of technical innovations and competitor actions in response to severe market conditions. The depreciation charge is increased where useful lives are less than previously estimated lives, or the carrying amounts are written off or written down for technically obsolete or non-strategic assets that have been abandoned or sold. If the actual useful lives of theses items of plant and equipment were to differ by 10% from management’s estimates, the carrying amount of the plant and equipment would be an estimated $109,000 higher or $109,000 lower.

RISK MANAGEMENT POLICIES FOR FINANCIAL INSTRUMENTS

GENERAL RISK MANAGEMENT PRINCIPLES – The entity’s financial instruments comprise borrowings, some cash and liquid resources and various items, such as trade and other receivables, trade and other payables, that arise directly from its operations. The main purpose of these financial instruments is to raise finance for the entity’s operations. The main risks arising from the entity’s financial instruments are credit risk, interest risk, liquidity risk and foreign currency risk. The management reviews and agrees policies for managing each of these risks and they are summarised below.

CREDIT RISK ON FINANCIAL ASSETS – Financial assets that are potentially subject to concentrations of credit risk and failures by counterparties to discharge their obligations consist principally of cash, cash equivalents and trade and other accounts receivable. The management believes that the financial risks associated with these financial instruments are minimal. The cash and cash equivalents and other liquid financial assets are placed with high credit quality institutions. An ongoing credit evaluation is performed of the debtors’ financial condition and a loss from impairment is recognised in the income statement. There is no significant concentration of credit risk, as the exposure is spread over a large number of counterparties and customers unless otherwise disclosed in the notes to the financial statements.




OTHER RISKS ON FINANCIAL INSTRUMENTS – The main risks arising from the entity’s financial instruments are interest risk, liquidity risk and foreign currency risk. The operations are financed through a mixture of retained earnings and borrowings. Borrowings are in the desired currencies at both fixed and floating rates of interest. The policy is to retain flexibility in selecting borrowings at both fixed and floating rates interest. There is exposure to interest rate price risk for financial instruments with a fixed interest rate and to interest rate or cash flow risk for financial instruments with a floating interest rate that is reset as market rates change. Interest rate swaps are not used to generate the desired interest profit and to manage the exposure to interest rate fluctuations. There is also exposure to liquidity. As regards liquidity, the policy has to ensure continuity of funding and where necessary a certain percentage of the borrowings should mature in two to five years. Short-term flexibility is achieved by overdraft facilities. There is also exposure to changes in foreign exchange rates arising from foreign currency transactions and balances and changes in fair values. These exposures and changes in fair values from time to time are monitored and any gains and losses are included in the income statement unless otherwise stated in the notes to the financial statements. There is no policy to reduce currency exposures through forward currency contracts, derivatives transactions or other arrangements.

OTHER BUSINESS RISKS AND UNCERTAINTIES – There is exposure to a number of risks including the development and marketing of unproven products, the need to maintain adequate financing, better capitalised competitors and dependence on essential personnel. The industry is characterised by rapid technological developments, frequent products introductions, evolving industry standards, changes in customer requirements and short product life cycles. Significant technological changes or the emergence of competitive products with new capabilities could adversely affect the business plan and operating results of the Company.

3. RELATED PARTY TRANSACTIONS

A related party is an entity or person that directly or indirectly through one or more intermediaries controls, is controlled by, or is under common or joint control with, the entity in governing the financial and operating policies, or that has an interest in the entity that gives it significant influence over the entity in financial and operating decisions. It also includes members of the key management personnel or close members of the family of any individual referred to herein and others who have the ability to control, jointly control or significantly influence by or for which significant voting power in such entity resides with, directly or indirectly, any such individual. This includes parents, subsidiaries, fellow subsidiaries, associates, joint ventures and post-employment benefit plans, if any.

Related companies:

Related companies in these financial statements refer to members of the Company’s group of companies.

There are transactions and arrangements between the Company and members of the Group and effects of these on the basis determined between the parties are reflected in these financial statements. The current intercompany balances are unsecured without fixed repayment terms and interest unless stated otherwise.

Intra-group transactions and balances that have been eliminated in the consolidated financial statements are not disclosed as related party transactions and balances below.



3. RELATED PARTY TRANSACTIONS (CONT’D)

Other related parties:

There are transactions and arrangements between the Company and related parties and the effects of these on the basis determined between the parties are reflected in these financial statements. The current related party balances are unsecured without fixed repayment terms and interest unless stated otherwise.

Significant related party transactions:

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

Other related parties

2005$’000

2004$’000

Purchases of goods 813 803Purchase of plant and equipment – 2

Key management compensation:

2005$’000

2004$’000

Salaries and other short-term employee benefits 930 831

Included in the above amounts are the Directors’ remuneration as follows :

2005$’000

2004$’000

Directors' remuneration of Directors of the Company 527 456

Key management personnel are Directors and those persons having authority and responsibility for planning, directing and controlling the activities of the Company, directly or indirectly.

Other receivables from and other payables to related parties:

The trade receivables and payables balances arising from sales and purchases of goods and services are disclosed elsewhere in the notes to the financial statements.

The movements in other payables to related parties are as follows:

Directors

2005$’000

2004$’000

Other payables:Balance at beginning of year 25 –Amounts received during the year 7 25Balance at end of year 32 25



4. CASH AND CASH EQUIVALENTS

Group Company

2005$’000

2004$’000

2005$’000

2004$’000

Not restricted in use 10,666 12,137 10,349 11,669Restricted in use (a) – 600 – 600

10,666 12,737 10,349 12,269

Analysis of above amount denominated in foreign currency :Malaysian ringgit 156 30 – – Thailand baht – 90 – – Australian dollars 6,025 5,972 6,025 5,972

(a) This was fixed bank deposits held by bankers for bank facilities granted to a subsidiary (see Note 12).

The rate of interest for the cash on interest earning accounts is between 0.3% and 5.4% (2004: 0.7% and 5.1%) per year receivable weekly, quarterly and yearly. These approximate the weighted effective interest rate.

Cash and cash equivalent in the cash flow statement:

Group

2005$’000

2004$’000

As shown above 10,666 12,737Bank overdraft (20) – Restricted fixed bank deposits – (600)Cash and cash equivalents at end of year 10,646 12,137

NON-CASH TRANSACTIONS – In 2004, additions to plant and equipment amounting to $120,000 were financed by new finance leases.

5. TRADE AND OTHER RECEIVABLES

Group Company

2005$’000

2004$’000

2005$’000

2004$’000

Trade receivables:Outside parties 1,711 2,012 1,476 1,261Less provision for doubtful debts – (1) – – Subsidiaries (Note 3 and 8) – – 316 436

Other receivables and prepayments:Other receivables 49 60 33 20Subsidiaries (Note 3 and 8) – – 52 36Deposits 461 326 374 216Prepayments 95 49 87 22

2,316 2,446 2,338 1,991



5. TRADE AND OTHER RECEIVABLES (CONT’D)

Group Company

2005$’000

2004$’000

2005$’000

2004$’000

Movements in above provision:Balance at beginning and end of year 1 1 – – Used (1) – – – Balance at end of year – 1 – –

Analysis of above amount denominated in foreign currency:Malaysian ringgit 56 94 – – Thailand baht – 1 – –

The average credit period generally granted to trade receivable customers is about 30 days (2004 : 30 days). Current receivables with a short duration are not discounted and the carrying values are assumed to approximate the fair value.

Group Company

2005$’000

2004$’000

2005$’000

2004$’000

Concentration of trade receivables customers:Top 1 customer 586 578 355 569Top 2 customers 865 719 419 993Top 3 customers 881 829 474 1,099

6. INVENTORIES

Group Company

2005$’000

2004$’000

2005$’000

2004$’000

Goods for resale 6,479 5,976 5,818 5,270

Inventories are stated after provision.Movements in provision:

Balance at beginning of year 27 60 27 60

Charged to income statement included in other (charges)/credits 39 27 25 27

Amount written off (18) (60) (18) (60)Balance at end of year 48 27 34 27



7. INVESTMENTS IN ASSOCIATES

Group Company

2005$’000

2004$’000

2005$’000

2004$’000

Unquoted equity shares at cost 322 311 322 311Less provision for impairment (271) – (271) –Share of post-acquisition (loss)/profits,net of dividend received (51) 2 – –

– 313 51 311

Share of net book value of associates 272 300 272 300

Movements in provision for impairment:Balance at beginning of year – – – –

Charged to income statement included in other (charges)/credits 271 – 271 –

Balance at end of year 271 – 271 –

Analysis of above amount denominated in foreign currency :Malaysian ringgit 11 – 11 – China renminbi 311 311 311 311

The investment is carried at cost less provision for impairment. Impairment losses recognised in profit and loss for equity investments are not reversed.

The associates held by the company are listed below :

Name of associates, country of incorporation,place of operations and principal activities (and auditors)

Percentage ofequity held by Group

2005%

2004%

Challenger Infortech (Beijing) Co., Ltd (a) 40 40People’s Republic of ChinaProvision of software and installation services( Hua Qing Certified Public Accountants )

NCL Solutions Sdn. Bhd. (a) 25 –MalaysiaProvision of e-learning training( Goi Cheng Poh & Co. )

(a) Other auditors. Audited by firms of accountants other than member firms of Horwath International of which Chio Lim & Associates in Singapore was a member until 10 January 2006. RSM Chio Lim is now a member of RSM International. Their names are indicated above.



8. INVESTMENTS IN SUBSIDIARIES

Company

2005$’000

2004$’000

Unquoted equity shares at cost 2,196 2,086Less provision for impairment (1,307) (1,221)Total at cost 889 865

Net book value of subsidiaries 969 573

Movements in provision for impairment:Balance at beginning of year 1,221 1,153Charged to income statement 151 68Amount written off (65) – Balance at end of year 1,307 1,221 Analysis of above amount denominated in foreign currency:Malaysian ringgit 211 36

The investment is carried at cost less provision for impairment. Impairment losses recognised in profit and loss for equity investments are not reversed.

The subsidiaries held by the company are listed below:-

Name of subsidiaries, country of incorporation,place of operations and principal activities (and auditors)

Cost in booksof Group

Effective percentageof equity heldby the Group

2005$’000

2004$’000

2005%

2004%

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

Matrix Integration Pte. Ltd. (a) 385 385 100 100Singapore Small format IT retailing

Itechcare (S) Pte Ltd (a) 100 100 100 100SingaporeProvision of IT services and franchising of IT services

OA Supplies Pte Ltd (disposed in April 2005) (a) (d) – 65 – 55Singapore Provision of office supplies

Challenger Technologies (M) Sdn Bhd (b) 211 36 96 80MalaysiaProvision of IT products and services( Douglas Loh & Associates )



8. INVESTMENTS IN SUBSIDIARIES (CONT’D)

Name of subsidiaries, country of incorporation,place of operations and principal activities (and auditors)

Cost in booksof Group

Effective percentage

of equity heldby the Group

2005$’000

2004$’000

2005%

2004%

Held by CBD eVision Pte Ltd

CBD eVision (M) Sdn Bhd (b) 40 40 60 60MalaysiaElectronic signage business( Douglas Loh & Associates )

CBD eVision (Thailand) Company Limited (disposed in December 2005) (c) (d) – 110 – 52

ThailandElectronic signage business

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

(b) Other auditors. Audited by firms of accountants other than member firms of Horwath International of which Chio Lim & Associates in Singapore was a member until 10 January 2006. RSM Chio Lim is now a member of RSM International. Their names are indicated above.

(c) Not audited as it is immaterial.

(d) The subsidiaries were disposed during the year at the date shown.

9. PLANT AND EQUIPMENT

Group:Renovation

Plant andequipment Total

$’000 $’000 $’000

Cost:At beginning of year 1 January 2004 521 3,242 3,763Additions 37 510 547Arising from acquisition of subsidiary 25 133 158Disposals (37) (155) ( 192)At end of year 31 December 2004 546 3,730 4,276

Accumulated depreciation:At beginning of year 1 January 2004 318 2,306 2,624Depreciation for the year 68 458 526Arising from acquisition of subsidiary 3 44 47Disposals (5) (124) ( 129)At end of year 31 December 2004 384 2,684 3,068

Net book value:At end of year 31 December 2004 162 1,046 1,208



9. PLANT AND EQUIPMENT (CONT’D)

Group:Renovation


$’000 $’000 $’000

Cost:At beginning of year 1 January 2005 546 3,730 4,276Foreign exchange adjustments – 3 3Additions 95 279 374Elimination on disposal of subsidiaries (29) (105) (134)Disposals (5) (220) ( 225)At end of year 31 December 2005 607 3,687 4,294

Accumulated depreciation:At beginning of year 1 January 2005 384 2,684 3,068Foreign exchange adjustments – 3 3Depreciation for the year 35 319 354Elimination on disposal of subsidiaries (6) (21) ( 27)Disposals (4) (192) (196)At end of year 31 December 2005 409 2,793 3,202

Net book value:At end of year 31 December 2005 198 894 1,092

Certain items of plant and equipment are under finance lease agreements (see Note 15).

Company Renovation


$’000 $’000 $’000

Cost:At beginning of year 1 January 2004 416 2,978 3,394Additions 14 336 350Disposals – (71) (71)At end of year 31 December 2004 430 3,243 3,673

Accumulated depreciation:At beginning of year 1 January 2004 289 2,203 2,492Depreciation for the year 48 385 433Disposals – (46) (46)At end of year 31 December 2004 337 2,542 2,879

Net book value:At end of year 31 December 2004 93 701 794

Cost:At beginning of year 1 January 2005 430 3,243 3,673Additions 84 257 341Disposals (5) (139) (144)At end of year 31 December 2005 509 3,361 3,870

Accumulated depreciation:At beginning of year 1 January 2005 337 2,542 2,879Depreciation for the year 20 264 284Disposals (4) (129) (133)At end of year 31 December 2005 353 2,677 3,030

Net book value:At end of year 31 December 2005 156 684 840



10. OTHER ASSETS

Group Company

2005$’000

2004$’000

2005$’000

2004$’000

Master franchise fee (a)

Cost:At beginning and end of year 50 50 – –

Accumulated amortisation:At beginning of year 28 11 – –Amortisation for the year 17 17 – –At end of year 45 28 – –

Net book value 5 22 – –

(a) This relates to a prepayment for master franchise fee by a subsidiary to carry out certain IT product servicing activities for a period of 3 years commencing on 18 April 2003, with an option to extend it for a further 7 years upon payment of a renewal fee of $50,000. It is amortised over 3 years.

11. GOODWILL

Group Company

2005$’000

2004$’000

2005$’000

2004$’000

Cost:At beginning of year 403 – – –Arising from additional investment in a subsidiary 6 403 – –Disposal of a subsidiary (403) – – –At end of year 6 403 – –

Accumulated amortisation:At beginning of year (403) – – –

Amortisation for the year – (15) – –

Provision for impairment included in other (charges)/credits (6) (388) – –

Disposal of a subsidiary 403 – – –

At end of year (6) (403) – –

Net book value:At end of year – – – –



12. SHORT-TERM BORROWINGS

Group Company

2005$’000

2004$’000

2005$’000

2004$’000

Bank overdraft (secured) 20 – – –Bank loan (secured) – 317 – –Trust receipts (secured) – 89 – –Factoring creditors (secured) – 446 – –

20 852 – –

All the short-term borrowings are interest bearing. The carrying values approximate fair values. In 2005, the bank overdraft is covered by corporate guarantees by the Company and is at interest

rate of 6.5% per year.

In 2004, the bank loan was covered by a pledge on the fixed deposits of the Group and personal guarantee from a director of a subsidiary. The Group’s other short-term borrowings are secured by joint and several guarantees from certain directors of a subsidiary and a floating charge over the subsidiary’s receivables. The interest rates for the bank loan ranged from 1.5453% to 2.1265% per year. Trust receipts and factoring facilities were at interest rate of 5% per year.

13. TRADE AND OTHER PAYABLES

Group Company

2005$’000

2004$’000

2005$’000

2004$’000

Trade payables:Subsidiaries (Note 3 and 8) – – 3 40Related party (Note 3) 14 65 14 65Outside parties and accrued liabilities 5,356 5,648 5,180 4,805

Other payables:Directors (Note 3) 32 25 – – Subsidiaries (Note 3 and 8) – – 106 2Deposits received 52 235 51 229Deferred franchise fee income 6 13 – – Other payables 138 58 32 39

5,598 6,044 5,386 5,180

Analysis of above amount denominated in foreign currency:United states dollars 14 65 14 65Malaysian ringgit 52 46 – –

The average credit period taken to settle trade payables by the Group is about 30 days (2004 : 30 days). The other payables are with short-term durations. The notional amount is deemed to reflect the fair value.



14. SHORT-TERM PROVISIONS

Group Company

2005$’000

2004$’000

2005$’000

2004$’000

Provision for loyalty programBalance at beginning of year – – – – Provision charged to income statement included in other (charges) / credits 307 – 307 – Balance at end of year 307 – 307 –

The provision for loyalty program relates to cost to be incurred upon redemption of rewards points granted to customers. A provision is made based on past experience and future expectation and an assessment of the probability of an outflow for the obligations as a whole.

15. FINANCE LEASE LIABILITIES

GroupMinimumpayments

Financecharges

Presentvalue

2005 $’000 $’000 $’000

Minimum lease payments payable:Due within one year 10 (2) 8Due within 2 to 5 years 43 (8) 35Total 53 (10) 43

Analysis of above amount denominated in foreign currency:Malaysian ringgit 43

Net book value of plant and equipment under finance leases 47

2004Minimumpayments

Financecharges

Presentvalue

$’000 $’000 $’000

Minimum lease payments payable:Due within one year 21 (5) 16Due within 2 to 5 years 109 (17) 92Total 130 (22) 108

Analysis of above amount denominated in foreign currency:Malaysian ringgit 50

Net book value of plant and equipment under finance leases 112

It is the Group’s policy to lease certain of its plant and equipment under finance leases. The average

lease term is 5 years. The rates of interest for the finance lease during the year is about 3.3% (2004: 3.3% to 6.3%) per year. There is an exposure to fair value interest risk because the interest rates are fixed at the contract date. All leases are on a fixed repayment basis and no arrangement has been entered into for contingent rental payments. The obligations under the finance leases are secured by the lessor’s charge over the leased assets. The fair value of the lease liabilities approximates the carrying amounts.



16. SHARE CAPITAL

Number of sharesIssued share

capital$’000

Ordinary shares:

Balance at beginning of year and end of year 153,500,000 6,140

With the changes to the Companies Act, Cap 50, effective from 30 January 2006, there is the removal of the concept of par value and authorised capital and there is no share premium account. The Company had a share premium account balance of $5,155,000 at the end of the year. This amount will be included in the share capital as required by the changes to the Companies Act in 2006.

The ordinary shares carry no right to fixed income.

17. REVENUE

Group

2005$’000

2004$’000

IT products and services 76,002 70,852Electronic signage services 1,314 987Office supplies 181 3,639

77,497 75,478

18. FINANCIAL INCOME AND (EXPENSE)

Group

2005$’000

2004$’000

Bad debts written off trade receivables – (23)Bad debts recovered from trade receivables 1 5Foreign exchange transaction (losses)/gains (263) 103Interest income from financial institutions 383 247Interest expense to financial institutions (12) (39)Sundry income 43 56

152 349Presented in the income statement as:Financial income 427 411Financial expense (275) (62)

152 349



19. EMPLOYEE BENEFITS EXPENSE

Group

2005$’000

2004$’000

Employee benefits expense including directors 4,786 4,433Contributions to defined contribution plans 398 458Total employee benefits expense 5,184 4,891

20. OTHER (CHARGES)/CREDITS

Group

2005$’000

2004$’000

Amortisation of master franchise fee (17) (17)Amortisation of goodwill on consolidation – (15)Gain on disposal of subsidiaries 540 – Loss on disposal of plant and equipment (29) (33)Provision for impairment of goodwill on consolidation (6) (388)Provision for impairment of investments in associates (271) – Inventories written off (14) (12)Provision for inventories (39) (27)Provision for loyalty program (307) –

( 143) ( 492)

21. ITEMS IN THE INCOME STATEMENT

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

Group

2005$’000

2004$’000

Non-audit fees to auditors included under administrative expenses - Company’s auditors 12 17 - Other auditors 1 –

22. INCOME TAX

Group

2005$’000

2004$’000

Current 901 954Deferred – (37)Total income tax expense 901 917



22. INCOME TAX (CONT’D)

The income tax expense for the year varied from the amount of income tax expense determined by applying the Singapore income tax rate of 20% (2004 : 20%) to profit before tax as a result of the following differences:-

Group

2005$’000

2004$’000

Profit before tax 4,632 3,715

Income tax expense at the statutory rate (926) (743)Non allowable items (14) (44)Over / (under) provision in prior years 25 (55)Tax exemptions 12 11Change in tax rates – 11Share of income tax of associate – (2)

Losses of certain subsidiaries being unavailable for set-off against the profit of other companies in the Group (8) (39)

Utilisation of / increase in deferred tax assets valuation allowance 82 (56)

Reversal of deferred tax assets valuation allowance due todisposal of subsidiary (72) –

Total income tax expense ( 901) (917)

At balance sheet date, the Company had a balance of about $319,000 (2004 : $1,547,000) under section 44 of the Income Tax Act available for declaration of dividends to shareholders in the five years beginning from 1 January 2003. This amount is subject to agreement by the Inland Revenue Authority of Singapore. Profits earned from 1 January 2003 are not subject to the section 44 charge.

The net deferred tax amount in the balance sheet is as follows:

Group Company

2005$’000

2004$’000

2005$’000

2004$’000

Deferred tax liabilities:Excess of net book value of plant and equipment 135 136 112 119

Interest receivable 12 5 12 5Total deferred tax liabilities 147 141 124 124

Deferred tax assets:Excess of tax written down value of plant and equipment 3 11 – – Tax losses carryforwards 43 116 – – Tax losses carryforwards used in group relief (5) (10) – – Deferred tax assets valuation allowance (21) (103) – – Total deferred tax assets 20 14 – –

Net total deferred tax liabilities 127 127 124 124



22. INCOME TAX (CONT’D)

An allowance is made to the extent that it is not probable that taxable profit will be available against which the unused tax loss carryforwards can be utilised. The realisation of the future income tax benefits from tax loss carryforwards and temporary differences from capital allowances is available for an unlimited future period subject to the conditions imposed by law including the retention of majority shareholders as defined. Where provision for deferred tax arising from temporary differences has been offset against the above tax loss carryforwards, such provision for deferred tax will be required to be set up when the tax losses are utilised in the future.

There is no income tax consequence of dividends to shareholders of the Company.

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

23. EARNINGS PER SHARE

The basic earnings per share is calculated by dividing the Group’s profit attributable to shareholders of $3,792,000 (2004 : $2,874,000) by the weighted average number of ordinary share of 153,500,000 (2004 : 152,447,945) of $0.04 each in issue during the year.

Both basic and diluted earnings per share are the same as there are no dilution ordinary share equivalents outstanding during the period.

24. DIVIDENDS

Group

2005$’000

2004$’000

First interim dividend of 0.8 cents net of income tax (2004 : 0.56 cents) per share 1,228 860Final dividend paid of 2.4 cents net of income tax per share 3,684 –

4,912 860

In respect of the current year, the Directors propose that a final dividend of 0.8 cents net of income tax per share totalling $1,228,000 and a final tax exempt dividend of 0.8 cents per share totalling $1,228,000 be paid to shareholders after the annual general meeting. These dividends are subject to approval by shareholders at the next general meeting and have not been included as a liability in these financial statements.



25. DISPOSAL OF SUBSIDIARIES

The Group disposed its 55% and 52% interest in OA Supplies Pte Ltd and CBD eVision (Thailand) Company Limited in April 2005 and December 2005 respectively. The net assets of the subsidiaries at date of disposal were as follows:-

Group

2005$’000

Plant and equipment 107Inventories 219Trade and other receivables 128Cash and cash equivalents 12Trade and other payables (568)Short-term borrowings (537)Finance leases (55)

(694)Total consideration -Gain on disposal (694)Expenses incurred on disposal 154Net gain on disposal (540)

Net cash outflow on disposal:Cash balance disposed of (12)Expenses incurred on disposal (154)

(166)

The results of the subsidiaries for the period from January 2005 to date of disposal, which have been included in the consolidated financial statements, were as follows:-

Revenue 192Loss before tax (257)

As the disposal of subsidiaries did not constitute a separate major line of business or geographical area of operations, further disclosure for discontinued operations was not made other than that presented above.



26. ACQUISITION OF SUBSIDIARY

In year 2004, the Group acquired 55% of OA Supplies Pte Ltd in April 2004. The transaction was accounted for by the purchase method of accounting.

The fair values of net assets acquired were as follows:

Group

2004$’000

Cash and bank balances 124Trade receivables 886Other receivables and prepayments 24Inventories 313Plant and equipment (net book value) 111Goodwill 403Trade payables and accrued liabilities (1,391)Short-term borrowings (374)Finance leases (31)Consideration 65Less cash taken over (124)Net cash inflow from acquisition (59)

The contributions from the subsidiary for the period between the date of acquisition and the balance sheet date as at 31 December 2004 were as follows:

Revenue 3,709Loss before tax (218)

27. CAPITAL COMMITMENTS

Estimated amounts committed at the balance sheet date for future capital expenditure but not recognised in the financial statements are as follows:

Group Company

2005$’000

2004$’000

2005$’000

2004$’000

Commitments to purchase of plant and equipment 252 84 252 84



28. OPERATING LEASE COMMITMENTS

At the balance sheet date the total of future minimum lease payments under non-cancellable operating leases are as follows:

Group Company

2005$’000

2004$’000

2005$’000

2004$’000

Not later than one year 2,543 2,452 2,370 2,094Later than one year and not later than five years 8,801 384 8,798 163

Rental expense for the year 3,011 3,185 2,720 2,759

Operating lease payments represent rentals payable by the Group for its retail outlets and office space. The lease rental terms are negotiated for an average of 1 to 3 years and rentals are subject to an escalation clause but the amount of the rent increase is not to exceed a certain percentage. Such increases are not included in the above amounts.

29. BANK FACILITIES

Group Company

2005$’000

2004$’000

2005$’000

2004$’000

Bankers’ guarantee (secured) (Note 4) 431 643 431 643

Corporate guarantee in favour of a subsidiary– – 350 350

431 643 781 993



30. FINANCIAL INFORMATION BY SEGMENT

For management purposes, the Group is currently organised into three operating divisions – IT products and services, electronic signage services and office supplies. These divisions are the basis on which the Group reports its primary segment information.

Segment information about these business is presented below:-

Year ended 31 December 2005

IT productsand

services

Electronic signage services

Officesupplies* Elimination Total

$’000 $’000 $’000 $’000 $’000

REVENUEExternal sales and services 76,002 1,314 181 – 77,497Inter-segment sales and services – 12 – (12) – Total revenue 76,002 1,326 181 (12) 77,497

RESULTSSegment results 4,963 (153) (134) – 4,676Financial income 427Financial expense (275)Other (charges)/credits (143) Share of loss of associates (53)Profit before tax 4,632Income tax expense (901)Profit after tax 3,731Minority interest 61Profit for the year 3,792

OTHER INFORMATIONCapital expenditure 363 11 – – 374Depreciation expense 315 33 6 – 354Amortisation of master franchise fee 17 – – – 17

BALANCE SHEET As at 31 December 2005

ASSETSSegment assets 10,565 597 – (80) 11,082Investment in associate – Unallocated assets 9,476Consolidated total assets 20,558

LIABILITIESSegment liabilities 5,778 270 – (80) 5,968Unallocated liabilities 1,128Consolidated total liabilities 7,096

* This business segment was disposed and discontinued during the year.



30. FINANCIAL INFORMATION BY SEGMENT (CONT’D)

Year ended 31 December 2004

IT products and

services

Electronic signage services

Officesupplies Elimination Total

$’000 $’000 $’000 $’000 $’000

REVENUEExternal sales and services 70,852 987 3,639 – 75,478Inter-segment sales and services − 4 69 (73) –Total revenue 70,852 991 3,708 (73) 75,478

RESULTSSegment results 4,199 (157) (225) − 3,817Financial income 411Financial expense (25)Other (charges)/credits (492)Share of profit of associate 4Profit before tax 3,715Income tax expense (917)Profit after tax 2,798Minority interest 76Profit for the year 2,874

OTHER INFORMATIONCapital expenditure 383 118 46 − 547Depreciation expense 466 28 32 − 526

Amortisation of master franchise fee 17 – – − 17

Amortisation of goodwill on consolidation 15 – – – 15

BALANCE SHEETAs at 31 December 2004

ASSETSSegment assets 9,130 633 1,080 (46) 10,797Investment in associate 313Unallocated assets 11,592Consolidated total assets 22,702

LIABILITIESSegment liabilities 5,250 164 1,636 (46) 7,004Unallocated liabilities 1,090Consolidated total liabilities 8,094



30. FINANCIAL INFORMATION BY SEGMENT (CONT’D)

GEOGRAPHICAL SEGMENTS

The Group’s operations are located in Singapore, Malaysia and Thailand. The Group’s IT products and services and office supplies divisions are located in Singapore. Electronic signage service divisions are located in Singapore, Malaysia and Thailand.

The following table provides an analysis of the Group’s revenue by geographical market irrespective of the origin of goods/service: -

Sales revenue bygeographical market2005$’000

2004$’000

Singapore 76,990 75,367Malaysia 495 111Thailand 12 –

77,497 75,478

The following is an analysis of the carrying amount of segment assets and additions to plant and equipment, analysed by the geographical area in which the assets are located: -

Carrying amount ofsegment assets

Additions to plantand equipment

Year ended Year ended

2005$’000

2004$’000

2005$’000

2004$’000

Singapore 20,269 22,061 362 470Malaysia 289 225 12 69Thailand – 103 – 8

20,558 22,389 374 547Associate – 313

20,558 22,702



31. CHANGES AND ADOPTIONS OF ACCOUNTING STANDARDS

For the year ended 31 December 2005 the following Singapore Financial Reporting Standards were adopted for the first time:

FRS 1 (revised 2004) Presentation of Financial Statements FRS 2 (revised 2004) Inventories FRS 8 (revised 2004) Accounting Policies, Changes in Accounting Estimates and Errors FRS 10 (revised 2004) Events after the Balance Sheet Date FRS 16 (revised 2004) Property, Plant and Equipment FRS 17 (revised 2004) Leases FRS 21 (revised 2004) The Effects of Changes in Foreign Exchange Rates FRS 24 (revised 2004) Related Party Disclosures FRS 27 (revised 2004) Consolidated and Separate Financial Statements FRS 28 (revised 2004) Investments in Associates FRS 32 (revised 2004) Financial Instruments: Disclosure and Presentation FRS 33 (revised 2004) Earnings per Share FRS 36 (revised 2004) Impairment of Assets FRS 38 (revised 2004) Intangible Assets FRS 39 (revised 2004) Financial Instruments: Recognition and Measurement FRS 41 Agriculture (*) FRS 102 (issued 2004) Share-based Payments (*) FRS 103 (issued 2004) Business Combinations FRS 104 Insurance Contracts (*) FRS 105 Non-current assets held for sale and discontinued operations

(*) Not applicable to the entity.

Adoption of the above new standards has resulted in some changes in the detailed application of the accounting policies and some modifications to financial statement presentation (See note 33). However, the new standards did not affect the results for the current or prior periods.

32. FUTURE CHANGES IN ACCOUNTING STANDARDS

The following Singapore Financial Reporting Standards that have been issued will be effective in future. The transfer to the new standards from the effective dates is not expected to have a material impact on the financial statements.

FRS 40 Investment Property, effective from 1.1.2007 (*) FRS 106 Exploration for and Evaluation for Mineral Resources effective from 1.1.2006 (*) FRS 107 Financial Instruments: Disclosures, effective from 1.1.2007

(*) Not applicable to the entity.



33. RECLASSIFICATIONS AND COMPARATIVE FIGURES

Certain reclassifications have been made to the prior year's financial statements to enhance comparability with current year's financial statements. The reclassifications included the following:

Group

After reclassification

$’000

Before reclassification

$’000Difference

$’000

Trade and other receivables 2,446 – 2,446Trade receivables – 2,011 (2,011)Other receivables – 435 (435)Trade and other payables (6,044) – (6,044)Trade payables – (5,713) 5,713Other payables – (331) 331Other reserves (5,150) – (5,150)Retained earnings (3,283) – (3,283)Reserves – (8,433) 8,433Financial income 411 – 411Financial expense (62) – (62)Other operating income – 303 (303)Other (charges)/credits (492) (407) (85)Finance costs – (39) 39

Company

After reclassification

$’000

Before reclassification

$’000Difference

$’000

Trade and other receivables 1,991 – 1,991Trade receivables – 1,697 (1,697)Other receivables – 294 (294)Trade and other payables (5,180) – (5,180)Trade payables – (4,910) 4,910Other payables – (270) 270Other reserves (5,155) – (5,155)Retained earnings (3,947) – (3,947)Reserves – (9,102) 9,102



DISTRIBUTION OF SHAREHOLDINGS

Size of ShareholdersNo. of

Shareholders% No. of Shares %

1 - 999 0 0.00 0 0.001,000 - 10,000 446 47.30 2,382,000 1.5510,001 - 1,000,000 492 52.17 30,316,000 19.751,000,001 and above 5 0.53 120,802,00 78.70

Total 943 100.00 153,500,000 100.00

TWENTY LARGEST SHAREHOLDERS

No Name No. Of Shares %

1 LOO LEONG THYE 64,355.000 41.932 NG LEONG HAI 37,830,000 24.643 ONG SOCK HWEE 14,019,000 9.134 DBS VICKERS SECURITIES (S) PTE LTD 2,652,000 1.735 UNITED OVERSEAS BANK NOMINEES PTD LTD 1,946,000 1.276 LIM YEW HOE 855,000 0.567 DBS NIMINEES PTD LTD 854,000 0.568 LIM POH CHOON 810,000 0.539 OCBC SECURITIES PRIVATE LTD 691,000 0.45

10 SBS NOMINEES PTD LTD 536,000 0.3511 UOB KAY HIAN PTD LTD 452,000 0.2912 CHUA CHIN HENG 440,000 0.2913 LOH TEE YANG 430,000 0.2814 YEO KENG HUAT 411,000 0.2715 WEE HIAN KOK 410,000 0.2716 TAN LAY CHIN 400,000 0.2617 HENG TOCK HIN 380,000 0.2518 PHUAH HOCK SIEW LAWRENCE 380,000 0.2519 PHILLIP SECURITIES PTE LTD 378,000 0.2520 HONG LEONG FINANCE NOMINEES PTD LTD 365,000 0.24

TOTAL 128,594,000 83.80

SUBSTANTIAL SHAREHOLDERS(As recorded in the Register of Substantial Shareholders as at 10 March 2006)

Direct Interest

Name of Shareholders No. of Share %

LOO LEONG THYE 65,693,000 42.80%ONG SOCK HWEE 14,019,000 9.13%NG LEONG HAI 37,830,000 24.64%

PERCENTAGE OF SHAREHOLDERS IN PUBLIC HANDS

23.11% of the Company’s shares are held in the hands of public. Accordingly, the Company has complied with Rule 723 of the Listing Manual of the SGX-ST.

STATISTICS OF SHAREHOLDINGSAs at 10 March 2006


CHALLENGER TECHNOLOGIES LIMITED (Incorporated in the Republic of Singapore)

NOTICE IS HEREBY GIVEN that the Annual General Meeting of CHALLENGER TECHNOLOGIES LIMITED will be held at 109 North Bridge Road #06-00 Funan DigitaLife Mall Singapore 179097 on Tuesday, 18 April 2006 at 10.00 a.m. for the following purposes:-

AS ORDINARY BUSINESS:-

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

2. To declare a final dividend of 1.0 cents per ordinary share less income tax at 20% for the year ended 31 December 2005. (Resolution 2)

3. To declare a final tax exempt dividend of 0.8 cents per ordinary share for the year ended 31 December 2005. (Resolution 3)

4. To re-elect Mr Loo Leong Thye retiring pursuant to Article 107 of the Company’s Articles of Association. (Resolution 4) Mr Loo Leong Thye will, upon re-election, remain as the Chief Executive Officer of the Company.

5. To re-elect Mr Max Ng Chee Weng retiring pursuant to Article 117 of the Company’s Articles of Association. (Resolution 5)

Mr Max Ng Chee Weng will, upon re-election as a Director of the Company, remain the Chairman of the Nominating and Remuneration Committee and a member of the Audit Committee and will be considered independent for the purpose of Rule 704(8) of the Listing Manual of the Singapore Exchange Securities Trading Limited (“the SGX-ST”).

6. To approve the payment of Directors’ fees of S$35,000.00 for the financial year ended 31 December 2005. (Resolution 6)

7. To approve the payment of Directors’ fees of S$36,500.00 for the financial year ending 31 December 2006, to be paid quarterly in arrears. (Resolution 7)

8. To re-appoint RSM Chio Lim as Auditors of the Company and to authorise the Directors to fix their remuneration. (Resolution 8)

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


AS SPECIAL BUSINESS:-

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

10. That pursuant to Section 161 of the Companies Act, Cap. 50 and the Listing Manual of the SGX-ST, authority be and is hereby given to the Directors of the Company to allot and issue Shares or convertible securities from time to time (whether by way of rights, bonus or otherwise) and upon such terms and conditions and for such purposes and to such person as the Directors may in their absolute discretion deem fit, provided that the aggregate number of Shares and convertible securities which may be issued pursuant to such authority shall not exceed 50% of the issued share capital of the Company, of which the aggregate number of Shares and convertible securities which may be issued other than on a pro-rata basis to the existing Shareholders of the Company shall not exceed 20% of the issued share capital of the Company (the percentage of issued share capital being based on the issued share capital at the time such authority is given after adjusting for new shares arising from the conversion or exercise of any convertible securities or employee share options on issue at the time such authority is given and any subsequent consolidation or subdivision of shares) and, unless revoked or varied by the Company in general meeting, such authority shall continue in force until the conclusion of the Company’s next Annual General Meeting, or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is the earlier. [see Explanatory Note (1)] (Resolution 9)

11. (a) That approval be and is hereby given for the purposes of Chapter 9 of the Listing Manual of the SGX-ST, for the Company and its subsidiaries, to enter into any of the transactions falling within the categories of interested person transactions set out in the Appendix to the Annual Report of the Company dated 31 March 2006 (the “Appendix”) with any party who is of the class of interested persons described in the Appendix provided that such transactions are made on an arm’s length basis and on normal commercial terms, not prejudicial to the interests of the Company and its minority Shareholders and in accordance with the review procedures for such interested person transactions as set out in the Appendix (“the Shareholders’ Mandate”);

(b) That the Shareholders’ Mandate shall, unless revoked or varied by the Company in general meeting, continue in force until the next Annual General Meeting of the Company; and

(c) That the Directors of the Company be and are hereby authorised to complete and do all such acts and things (including executing all such documents as may be required) as they may consider expedient or necessary in the interests of the Company to give effect to the Shareholders’ Mandate and/or this Resolution.” [see Explanatory Note (2)] (Resolution 10)




BY ORDER OF THE BOARDLIN TIAN HAWCompany SecretarySingapore31 March 2006

EXPLANATORY NOTES:

(1) The Ordinary Resolution 9 proposed in item 10 above, if passed, will empower the Directors of the Company from the date of the above Meeting until the next Annual General Meeting or the date by which the next Annual General Meeting is required by law to be held, whichever is the earlier to allot and issue shares and convertible securities in the Company up to an amount not exceeding in total fifty per cent (50%) of the issued share capital of the Company for such purposes as they consider would be in the interest of the Company, provided that the aggregate number of shares to be issued other than on a pro-rata basis to existing shareholders pursuant to this Resolution shall not exceed twenty per cent (20%) of the issued capital of the Company. The percentage of issued capital is based on the Company’s issued capital at the time the proposed Ordinary Resolution is passed after adjusting for (a) new shares arising from the conversion of convertible securities or employee share options on issue at the time the proposed Ordinary Resolution is passed and (b) any subsequent consolidation or subdivision of shares. This authority will, unless revoked or varied at a General Meeting, expire at the next Annual General Meeting of the Company or the date by which the next Annual General Meeting is required by law to be held, whichever is the earlier .

(2) The Ordinary Resolution 10 proposed in item 11 above, if passed, will authorise the interested person transactions as described in the Appendix and recurring in the year and will empower the Directors to do all acts necessary to give effect to the Shareholders’ Mandate. This authority will, unless revoked or varied by the Company at a general meeting, expire at the conclusion of the next Annual General Meeting of the Company.

NOTES:

(i) A member of the Company entitled to attend and vote at the above Meeting may appoint not more than two proxies to attend and vote instead of him.(ii) Where a member appoints two proxies, he shall specify the proportion of his shareholding to be represented by each proxy in the instrument appointing the proxies. A proxy need not be a member of the Company.(iii) If the member is a corporation, the instrument appointing the proxy must be under its common seal or the hand of its attorney or a duly authorised officer.(iv) The instrument appointing a proxy must be deposited at the Registered Office of the Company at 109 North Bridge Road #06-00 Funan DigitaLife Mall Singapore 179097 not less than 48 hours before the time appointed for holding the above Meeting.

NOTICE OF BOOKS CLOSURE

NOTICE IS HEREBY GIVEN that the Share Transfer Books and Register of Members of Challenger Technologies Limited (the “Company”) will be closed on 26 April 2006 for the preparation of dividend warrants.

Duly completed registrable transfers received by the Company’s Share Registrar, Lim Associates (Pte) Ltd at 10 Collyer Quay #19-08 Ocean Building, Singapore 049315 up to 5.00 p.m. on 25 April 2006 will be registered to determine shareholders’ entitlements to such dividends.

Members whose Securities Accounts with The Central Depository (Pte) Limited are credited with shares as at 5.00 p.m. on 25 April 2006 will be entitled to the proposed dividends.

Payment of the dividend, if approved by shareholders at the Annual General Meeting to be held on 18 April 2006, will be made on 4 May 2006.

BY ORDER OF THE BOARDLIN TIAN HAWCompany Secretary31 March 2006


31 March 2006

This Appendix is circulated to Shareholders of Challenger Technologies Limited (“the Company”) together with the Company’s annual report. Its purpose is to explain to Shareholders the rationale and provide information to the Shareholders for proposed renewal of the Interested Person Transactions Mandate to be tabled at the Annual General Meeting to be held on 18 April 2006 at 10.00 am at 109 North Bridge Road #06-00 Funan DigitaLife Mall Singapore 179097.

The Notice of Annual General Meeting and a Proxy Form are enclosed with the Annual Report.

The Singapore Exchange Securities Trading Limited takes no responsibility for the correctness of any of the statements made, reports contained/referred to, or opinions expressed, in this Appendix.

CHALLENGER TECHNOLOGIES LIMITED(Incorporated in the Republic of Singapore with Company Registration Number 198400182K)

APPENDIX

IN RELATION TO

DETAILS OF THE PROPOSED RENEWAL OF THE SHAREHOLDERS’MANDATE FOR INTERESTED PERSON TRANSACTIONS

APPENDIX

®


APPENDIX

DEFINITIONS

In this appendix (“Appendix”), the following definitions apply throughout unless otherwise stated:

“AGM” : The annual general meeting of the Company to be convened on 18 April 2006, notice of which is set out in the Annual Report 2005 dispatched together with this Appendix

“CDP” : The Central Depository (Pte) Limited“Columbia” : Columbia Computer Products, Inc“Company” : Challenger Technologies Limited“Companies Act” : Companies Act, Chapter 50 of Singapore“Directors” : The directors of the Company as at the date of this Appendix“Group” : The Company and its subsidiaries“Interested Person” : A director, chief executive officer or controlling shareholder of the

listed Company or an associate of such director, chief executive officer or controlling shareholder

“Interested Person Transaction” : Transactions proposed to be entered into between the Group and any Interested Person

“Latest Practicable Date” : The latest practicable date prior to the printing of this Appendix, being 10 March 2006

“Listing Manual” : The listing manual of the SGX-ST“NTA” : Net tangible assets“Securities Account” : A securities account maintained by a Depositor with CDP but does

not include a securities sub-account “SGX-ST” : Singapore Exchange Securities Trading Limited“Shareholders” : Registered holders of Shares, except that where the registered holder

is CDP, the term “Shareholders” shall, where the context admits, mean the Depositors whose Securities Accounts are credited with Shares

“Shares” : Ordinary shares in the capital of the Company“USA” : United States of America“S$” and “cents” : Singapore dollars and cents, respectively“%” or “per cent” : Per centum or percentage

The terms “Depositor” and “Depository Register” shall have the meanings ascribed to them respectively in Section 130A of the Companies Act.

Words importing the singular shall, where applicable, include the plural and vice versa. Words importing the masculine gender shall, where applicable, include the feminine and neuter genders. References to persons shall include corporations.

Any reference in this Appendix to any enactment is a reference to that enactment as for the time being amended or re-enacted. Any word defined under the Companies Act, the Listing Manual or any modification thereof and not otherwise defined in this Appendix shall have the same meaning assigned to it under the Companies Act, the Listing Manual or any modification thereof, as the case may be.

Any reference to a time of day in this Appendix is made by reference to Singapore time unless otherwise stated.


CHALLENGER TECHNOLOGIES LIMITED(Incorporated in the Republic of Singapore with Company Registration Number 198400182K)

1. Introduction The purpose of this Appendix is to provide Shareholders with the relevant information relating to, and

to seek Shareholders’ approval at the AGM to renew the general mandate (“Shareholders’ Mandate”) that will enable the Group to enter into transactions with the Interested Person in compliance with Chapter 9 of the Listing Manual.

Chapter 9 of the SGX-ST Listing Manual applies to transactions which a listed company or any of its unlisted subsidiaries or unlisted associated companies proposes to enter into with an interested person of the listed company. An “interested person” is defined as a director, chief executive officer or controlling shareholder of the listed company or an associate of such director, chief executive officer or controlling shareholder.

Chapter 9 of the Listing Manual allows a listed company to seek a general mandate from its shareholders for recurrent transactions of revenue or trading nature or those necessary for its day-to-day operations, which may be carried out with the listed company’s “interested persons”.

Pursuant to Chapter 9 of SGX-ST Listing Manual, the general mandate, which was approved by the Shareholders on 12 April 2005, will continue in force until the forthcoming AGM. Accordingly, the Directors propose that the general mandate be renewed at the AGM to be held on 18 April 2006, to take effect until the next AGM of the Company.

General information relating to Chapter 9 of the Listing Manual, including the meanings of terms such as “interested person”, “associate”, “associated company” and “controlling shareholder”, are set out in the annexure of this Appendix.

2. SHAREHOLDERS’ MANDATE FOR INTERESTED PERSON TRANSACTIONS 2.1 Classes of Interested Persons

2.1.1 The renewed Shareholders’ Mandate will apply to the Interested Person Transactions (“IPTs”) (as described in paragraph 2.2 below) which are carried out with Columbia. Mr Ng Leong Hai, a Non-Executive Director and controlling shareholder of the Company, is a Director and shareholder of Columbia.

2.2.2 Transactions with Interested Persons which do not fall within the ambit of the Shareholders’ Mandate shall be subject to the relevant provisions of Chapter 9 and/or other applicable provisions of the Listing Manual.

2.2 Scope of Interested Person Transactions

The recurrent IPTs which will be covered by the Shareholders’ Mandate are purchases of IT and related products from Columbia.

2.3 Rationale for and Benefits of the Shareholders’ Mandate

Columbia sources and procures IT and related products in the USA and the Group purchases these IT and related products from Columbia for sale at our retail outlets. As the Group does not have a procurement office or presence in the USA, the purchases from Columbia allow the Group to leverage on Columbia’s connections and network and procure the latest IT and related products from the USA.

APPENDIX®


APPENDIX

The recurrent IPTs set out above are transactions entered into or to be entered into by the Group in its ordinary course of business. They are recurring transactions which are likely to occur with some degree of frequency and arise at any time and from time to time. The Directors are of the view that it will be beneficial to the Group to transact or continue to transact with the Interested Person, especially since the recurrent IPTs are to be entered into on an arm’s length basis and on normal commercial terms and will not be prejudicial to the interests of the Company and its minority Shareholders.

By renewing the Shareholders’ Mandate at the forthcoming AGM and subsequently at every AGM, the Group would eliminate the need to convene separate general meetings from time to time to seek Shareholders’ approval as and when potential IPTs arise, provided that the transactions are made on an arm’s length basis and on normal commercial terms and are not prejudicial to the interests of the Company and its minority Shareholders. This would reduce the administrative time and expenses in convening such meetings substantially. In addition, it would not be feasible to obtain Shareholders’ approval each and every time the Group enters into an IPT as the transactions would be recurrent in nature.

The Board confirms that the interested person, namely Mr Ng Leong Hai, will abstain and has undertaken to ensure that his associates will abstain, from voting on the resolution for approving the IPT general mandate (resolution 10), as set out on page 63 of the Annual Report.

2.4 Review Procedures for Interested Person Transactions

The Group has implemented the following procedures to ensure that the IPTs including those which fall within the scope of the Shareholders’ Mandate are undertaken on an arm’s length basis and on normal commercial terms.

In general, the Audit Committee will ensure that the terms (including, inter alia, credit terms granted) of the IPTs are consistent with the Group’s usual business practices and procedures as follows:

(a) When purchasing any IT and related products from Columbia, two other quotations for each product will be obtained from unrelated third parties for comparison to ensure that the interests of our Company and its minority Shareholders are not disadvantaged. The purchase price offered by Colombia shall not be higher than the most competitive price of the two other quotations from unrelated third parties. In determining the most competitive price, all pertinent factors, including but not limited to quality, delivery time and track record will be taken into consideration; and

(b) In cases where it is not possible to obtain comparables from other unrelated third parties (for example, if there are no unrelated third party vendors selling a similar type of product), the head of the respective category of product of the merchandising department and corporate sales department will consider whether the pricing of the transaction is in accordance with usual business practices and pricing policies of the Group to determine whether the relevant transactions are undertaken on an arm’s length basis and on normal commercial terms.

In addition, the Directors will monitor the IPTs entered into by the Group by categorising the transactions as follows:

(i) Transactions in value equal to or exceeding S$100,000 will be reviewed and approved by the Audit Committee; and

(ii) Where the aggregate value of all such transactions in the current financial year is equal to or exceeds 5% of the Group’s latest audited NTA, the latest and all future transactions will be reviewed and approved by the Audit Committee.


APPENDIX

2.4 Review Procedures for Interested Person Transactions (CONT’D)

A register will be maintained by the Group to record all IPTs (and the basis on which they are entered into) which are entered into pursuant to the Shareholders’ Mandate.

The Company shall, on a half-yearly basis, report to the Audit Committee on all IPTs and the basis of such transactions, entered into with Columbia during the preceding half-year. The Audit Committee shall review such IPTs at its half-yearly meetings except where such IPTs are required under the review procedures to be approved by the Audit Committee prior to the entry thereof.

The Company’s annual audit plan shall incorporate a review of all IPTs, including the established review procedures for the monitoring of such IPTs, entered into during the current financial year pursuant to the Shareholders’ Mandate.

The Audit Committee shall review from time to time the guidelines and procedures to determine if they continue to be adequate and/or commercially practicable in ensuring that transactions between Columbia and the Group are conducted on an arms’ length basis and on normal commercial terms.

In the event that a member of the Audit Committee or the Board, as the case may be, is deemed to have an interest in the Interested Person, he or she will abstain from reviewing and voting on that IPT.

The Audit Committee will also carry out periodic reviews (not less than twice in a financial year) to ensure that the established guidelines and procedures for IPTs have been complied with and the relevant approvals obtained. Further, if during these periodic reviews, the Audit Committee is of the view that the above guidelines and procedures are not sufficient to ensure that these IPTs will be on an arm’s length basis and on normal commercial terms and will not be prejudicial to the interests of the Company and its minority Shareholders, the Company will seek its Shareholders’ approval for a fresh mandate based on new guidelines and procedures for transactions with Columbia. During the period prior to obtaining a fresh mandate from the Shareholders, all transactions with Columbia will be subject to prior review and approval by the Audit Committee.

2.5 Audit Committee’s Statements

2.5.1 The Audit Committee (currently comprising Mr Ho Boon Chuan Wilson, Mr Max Ng Chee Weng and Mr Ng Leong Hai) has reviewed the terms of the Shareholders Mandate and confirms that the review procedures for IPTs, as well as the reviews to be made periodically by the Audit Committee in relation thereto, are sufficient to ensure that IPTs will be made with the relevant class of Interested Persons on normal commercial terms and will not be prejudicial to the interests of the Company and its minority Shareholders.

2.5.2 If, during the periodic reviews by the Audit Committee, the Audit Committee is of the view that the established guidelines and procedures are not sufficient to ensure that the IPTs will be on normal commercial terms and will not be prejudicial to the interests of the Company and its minority Shareholders, the Company will seek a fresh mandate from its Shareholders based on new guidelines and procedures for transactions with Interested Persons.

2.5.3 The Audit Committee will also ensure that all disclosure and approval requirements for IPTs, including those required by the prevailing legislation, the Listing Manual and the applicable accounting standards, as the case may be, are complied with.

2.5.4 The Audit Committee of the Company confirms that the methods or procedures for determining the transaction prices have not changed since the last Shareholders’ approval for the IPT general mandate at the preceding Annual General Meeting of the Company, which took place on 12 April 2005.


APPENDIX

3. DIRECTORS’ AND SUBSTANTIAL SHAREHOLDERS’ INTERESTS

The interests of the Directors and the substantial Shareholders in Shares as the Latest Practicable Date are set out below:

Number of Shares Directors Direct Interest % Deemed Interest %

Loo Leong Thye 65,693,000 42.80 - - Ong Sock Hwee 14,019,000 9.13 - - Ng Leong Hai(1) 37,830,000 24.64 - - Ng Kian Teck(1) 200,000 0.13 70,000 0.05 Ho Boon Chuan Wilson 100,000 0.07 - - Max Ng Chee Weng - - - -

Note:(1) Mr Ng Kian Teck was appointed as Alternate Director to Mr Ng Leong Hai.

There are no substantial Shareholders (other than the Directors) as disclosed above at the Latest Practicable Date.

4. DIRECTORS RECOMMENDATIONS

The Directors who are considered independent for the purposes of the proposed renewal of the Shareholders’ Mandate are Mr Ho Boon Chuan Wilson and Mr Max Ng Chee Weng (the “Independent Directors”). The Independent Directors are of the opinion that the entry into the IPTs by the Group in the ordinary course of its business will enhance the efficiency of the Group and is in the best interests of the Company. For the reasons set out in paragraph 2.3 of this Appendix, the Independent Directors recommend that Shareholders vote in favour of Resolution 10, being the Ordinary Resolution relating to the proposed renewal of the Shareholders’ Mandate at the forthcoming AGM.

5. ANNUAL GENERAL MEETING

The AGM, notice of which is set out in the Annual Report 2005 of the Company, will be held on 18 April 2006 at 10.00 a.m. at 109 North Bridge Road #06-00 Funan DigitaLife Mall Singapore 179097 for the purpose of considering and, if thought fit, passing with or without any modifications, the Ordinary Resolution relating to the renewal of the Shareholders’ Mandate at the AGM as set out in the Notice of AGM.

6. ACTION TO BE TAKEN BY SHAREHOLDERS

If a Shareholder is unable to attend the AGM and wishes to appoint a proxy to attend and vote on his or her behalf, he or she should complete, sign and return the Proxy Form attached to the Notice of AGM in accordance with the instructions printed thereon as soon as possible and, in any event, so as to reach the Company at 109 North Bridge Road #06-00 Funan Digitalife Mall Singapore 179097 not later than 48 hours before the time fixed for the AGM. Completion and return of the Proxy Form by a Shareholder will not prevent him or her from attending and voting at the AGM if he or she so wishes.

7. INSPECTION OF DOCUMENTS

Copies of the audited financial statements of the Company for the last two financial years ended 31 December 2005 are available for inspection at the registered office of the Company at 109 North Bridge Road #06-00 Funan Digitalife Mall Singapore 179097 during normal business hours from the date of this Appendix up to the date of AGM.


APPENDIX

8. DIRECTORS’ RESPONSIBILITY STATEMENT

The Directors collectively and individually accept full responsibility for the accuracy of the information given in this Appendix and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, the facts stated and the opinions expressed in this Appendix are fair and accurate and that there are no material facts the omission of which would make any statement in this Appendix misleading.

ANNEXURE

GENERAL INFORMATION RELATING TO CHAPTER 9 OF THE LISTING MANUAL

Scope

Chapter 9 of the Listing Manual applies to transactions which a listed company or any of its subsidiaries (other than a subsidiary that is listed on an approved stock exchange) or associated companies (other than an associated company that is listed on an approved stock exchange or over which the listed group and/or its interested person(s) has no control) proposes to enter into with a counter-party who is an interested person of the listed company.

Definitions

An “interested person” means a director, chief executive officer or controlling shareholder of the listed company or an associate of such director, chief executive officer or controlling shareholder.

An “associate” includes an immediate family member (that is, the spouse, child, adopted child, step-child, sibling or parent) of such director, chief executive officer, substantial shareholder or controlling shareholder, and any company in which the director/his immediate family, the chief executive officer/his immediate family or substantial shareholder or controlling shareholder/his immediate family has an aggregate interest (directly or indirectly) of 30% or more, and, where a controlling shareholder is a corporation, its subsidiary or holding company or fellow subsidiary or a company in which it and/or they have (directly or indirectly) an interest of 30% or more.

An “associated company” means a company in which at least 20% but not more than 50% of its shares are held by the listed company or the group.

A “controlling shareholder” means a person who holds (directly or indirectly) 15% or more of the nominal amount of all voting shares in the listed company or one who in fact exercises control over the listed company.


ANNEXURE

General Requirements

Except for certain transactions which, by reason of the nature of such transactions, are not considered to put the listed company at risk to its interested person and are hence excluded from the ambit of Chapter 9 of the Listing Manual, immediate announcement, or, immediate announcement and shareholders’ approval would be required in respect of transactions with interested persons if certain financial thresholds (which are based on the value of the transaction as compared with the listed company’s latest audited consolidated NTA), are reached or exceeded. In particular, shareholders’ approval is required where:

(a) The value of such transaction is equal to or exceeds 5% of the latest audited consolidated NTA of the Group; or

(b) The value of such transaction when aggregated with the value of all other transactions previously entered into with the same interested person in the same financial year of the Group is equal to or exceeds 5% of the latest audited consolidated NTA of the Group.

Immediate announcement of a transaction is required where:

(a) The value of such transaction is equal to or exceeds 3% of the latest audited consolidated NTA of the Group; or

(b) The value of such transaction when aggregated with the value of all other transactions previously entered into with the same interested person in the same financial year of the Group is equal to or exceeds 3% of the latest audited consolidated NTA of the Group.

General Mandate

A listed company may seek a general mandate from its shareholders for recurrent transactions with interested persons of a revenue or trading nature or those necessary for its day-to-day operations such as the purchase and sale of supplies and materials but not in respect of the purchase or sale of assets, undertakings or businesses. A general mandate is subject to annual review.

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

Name Address NRIC/Passport No. Proportion ofShareholdings (%)

and/or (delete as approapriate

Name Address NRIC/Passport No. Proportion ofShareholdings (%)

as my/our proxy/proxies to vote for me/us on my/our behalf, at the Annual General Meeting (“AGM”) of the Company, to be held on Tuesday, 18 April 2006 at 10.00 a.m., and at any adjournment thereof. I/We direct my/our proxy/proxies to vote for or against the Resolutions to be proposed at the AGM as indicated thereunder. If no specific directions as to voting is given or in the event of any other matter arising at the AGM and at any adjournment thereof, the proxy/proxies will vote or abstain from voting at his/their discretion.

No. Resolutions relating to: For* Against*

1 Directors’ Report and Audited Accounts for the year ended 31 December 2005

2 Payment of proposed final dividend

3 Payment of proposed final tax-exempt dividend

4 Re-election of Mr Loo Leong Thye as a Director

5 Re-election of Mr Max Ng Chee Weng as a Director

6 Approval of Directors’ fees amounting to $35,000 for FY2005

7 Approval of Directors’ fees amounting to $36,500 for FY2006

8 Re-appointment of RSM Chio Lim as Auditors

9 Authority to allot and issue new shares

10 Approval for renewal of Shareholders’ Mandate for Interested Person Transactions

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

Dated this day of ,2006.

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

IMPORTANT : PLEASE READ NOTES OVERLEAF


Total number of shares in: No. of shares

(a) CDP Register

(b) Register of Members

PROXY FORMANNUAL GENERAL MEETING

Notes

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

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

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

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

5. This proxy form must be deposited at the Company’s registered office at 109 North Bridge Road #06-00 Funan DigitaLife Mall Singapore 179097 not less than 48 hours before the time set for the Meeting.

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

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

General

The Company shall be entitled to reject a proxy form which is incomplete, improperly completed, illegible or where the true intentions of the appointor are not ascertainable from the instructions of the appointor specified on the proxy form. In addition, in case of shares entered in the Depository Register, the Company may reject a proxy form if the member, being the appointor, is not shown to have shares entered against his name in the Depository Register as at 48 hours before the time appointed for holding the Meeting, as certified by the Central Depository (Pte) Limited to the Company.

The Company SecretaryChallenger Technologies Limited

109 North Bridge Road#06-00 Funan DigitaLife Mall

Singapore 179097

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01 Mission Statement 02 Corporate Profile 03 Challenger Group of Companies 04 Chief Executive Officer’s Message 06 Profile of Board

of Directors 07 Profile of Key Management 08 Corporate Information 09 Financial Highlights 10 Operations Review

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