Stratech AR 2013 by Melvin Lin

Stratech Systems Limited annual report 2012/13

Vision

10 iFerret

12 iVACS速 Gen. X

14 Super BullsEye速 II

16 VIPS速

iFerret BDA TM

Stratech Systems Limited annual report 2012/13

Vision Towards Building a Safer and Better World mission To Power Our Customers with intelligent Technologies to Build a Safer and Better World

COnTEnTS 02 Corporate Profile 03 Corporate Information 04 Chairmanâ&#x20AC;&#x2122;s Message 08 intelligent Vision 10 Our Products 20 Operations Review 22 Board of Directors 24 Management Team

Stratech Systems Limited annual report 2012/13

Corporate Profile

Stratech Systems Limited (“Stratech”) is a world-class advanced technology company. Listed on the mainboard of the Singapore Exchange in 2000, it is principally engaged in the design, development, integration, implementation, maintenance and project management of information technology and advanced technology systems. The Group delivers large-scale complex, real-time, mission-critical systems in the areas of intelligent Vision, intelligent Transport (Air, Land and Sea) Systems and e-Systems for governments and businesses. Founded in 1989, the Group has established an impressive track record serving industries such as aerospace and defence, ﬁnancial services, government, healthcare, homeland security and transportation (air, land and sea). The Group develops and implements advanced technological solutions that achieve signiﬁcant business transformation and competitive advantage for its clients.

intelligent Vision INTELLIGENCE BEHIND VISION

e-Systems COMPETITIVE ADVANTAGE THROUGH TECHNOLOGY

Stratech prides itself in making signiﬁcant contributions to the ﬁeld of intelligent Vision (“iVision”). It is constantly developing advanced technology solutions in homeland security, aerospace, defence, maritime, surveillance and other industries. Our solutions combine image and video capturing devices with intelligent software to provide computers with the ability to see, recognise, analyse and understand what is seen.

Stratech is focussed on providing innovative, technologyintensive IT solutions capable of creating signiﬁcant competitive advantage for clients. Our high value e-business applications are combined with a good understanding of our clients’ needs to transform their brick-and-mortar businesses into effective, collaborative e-businesses with their partners and clients. These clients include both private corporations and government agencies.

Our technologies are deployed across six continents–Asia, Australia, Europe, Africa, North America and South America. Our iVision customers rely on our trusted and outstanding solutions such as iFerret™, iFerret™ BDA, iVACS®, Super BullsEye® II and VIPS® to provide them with comprehensive safety and security surveillance.

One well-proven and well-tested solution is Stratech’s Dynamic Pricing & Secure Payment System, which powers the Land Transport Authority of Singapore’s Online Certiﬁcate of Entitlement (“OCOE”) Open Bidding System. The largest known dynamic pricing engine in the world, the system provides transparency and critical real-time information to millions of users to make informed bid decisions in an open but highly-secure environment. Other innovative e-Systems solutions include the Group’s SmartCare™, which powers the Prime Minister’s Ofﬁce of Singapore’s Medical Claims Proration System (“MCPS”); the Group’s SmartReports™ which powers the Singapore Parliamentary Reporting System (“SPRS”); and integrated web services for the Media Development Authority of Singapore that is powered by Web 2.0 technology.

intelligent Transport (Air, Land and Sea) Systems THE FUTURE OF TRANSPORTATION AND MOBILITY Stratech develops and applies cutting-edge knowledge in the realm of transportation with intelligent Transport Systems (“iTS”). It constantly pursues innovative solutions to meet ongoing challenges in air, land and sea transportation. Stratech facilitates transport operators and governments in the strategic development of their transportation systems. Our key iTS products include the intelligent Border Crossing Systems (“iBCS™”) – Next-Generation High Security Border Crossing System and Vehicle Entry Permit (Toll) System (“VEPS”) for Immigration and Customs Authorities.

Stratech Systems Limited annual report 2012/13

Corporate Information

DIRECTORS

AUDITORS

David Chew Khien Meow (“David K.M. Chew”) Leong Sook Ching Lim Soon Hock Sajjad Ahmad Akhtar Chew Hai Chwee Lim Kim Choon

LTC LLP Certified Public Accountants 1 Raffles Place #17-02 One Raffles Place Singapore 048616

Engagement Partner: Yow Geok Kein (appointed for ﬁnancial year ended 31 March 2013)

COMPANY SECRETARY Leong Sook Ching

BANKERS REGISTERED OFFICE 31 International Business Park #02-02 Creative Resource Singapore 609921

Citibank, N.A. United Overseas Bank Limited DBS Bank Ltd Hongkong and Shanghai Banking Corporation Limited

SHARE REGISTRAR B.A.C.S. Private Limited 63 Cantonment Road Singapore 089758

Stratech Systems Limited annual report 2012/13

Chairman’s Message

The Company has made investments to create new and emerging state-of-theart technologies over the years, which the Company believes to be “disruptive technologies”

Stratech Systems Limited annual report 2012/13

On behalf of the Board of Stratech Systems Limited, I present our Annual Report for the ﬁnancial year ended 31 March 2013. Vision Vision is arguably the most important of our five senses. Research has shown that about 70% of human sensory input comes from Vision. It is also known that approximately onethird of the human brain is devoted to Vision. The ability to see is key to our survival and development as the most intelligent species on this planet. In our daily lives, most of us rely on Vision for learning, communicating, moving around, detecting threats and discovering opportunities. Even as we are reading this Annual Report, we are relying on Vision. In another dimension, Vision is important to an organisation. Vision represents foresight, focus, vigilance, circumspection and strategy. These are all critical to an organisation’s success. These allow us to make the best of every situation, whether to capitalise on every opportunity that comes our way, or to prepare for challenges and ride out the storm when we experience setbacks. For lessons on these Vision-related qualities, we are learning from the very best, which is none other than Mother Nature. In the following pages, we will examine how Mother Nature demonstrates the potentials of possessing good Vision.

For Stratech, Vision has an added significance. We are a global leader in the field of intelligent Vision. For many years, we have been tirelessly working on developing the brains behind machines that see, to allow our systems to think about and report what they see, making them superior over others that merely see. Today, Stratech’s intelligent Vision technologies have been deployed across six continents-Asia, Africa, Australia, Europe, North America and South America. Our systems have served the needs of many blue-chip customers across a variety of industries, placing us at the forefront of the intelligent Vision field. We will continue to build on this to achieve Stratech’s Vision of building a safer and better world.

Stratech Systems Limited annual report 2012/13

Chairman’s Message

Within Sight

The Year in Review

The Company has made investments to create new and emerging state-of-the-art technologies over the years, which the Company believes to be “disruptive technologies”—new approaches or products that have the potential to create a new industry or transform an existing one.

In the past Financial Year, several signiﬁcant events have taken place. These include:

However, such disruptive technologies tend to take a longer time for the customers to adopt. The technology adoption lifecycle of disruptive technologies by customers can be divided into five stages, and customers who adopt the technology at each stage are known as innovators, early adopters, early majority, late majority and lastly, laggards. The Company has worked hard to overcome the initial stages of acceptance and to build a potential customer base. This was done by cultivating the innovators and early adopters, towards the goal of securing contracts from such potential customers and realising returns for our shareholders from the current financial year onwards. These customers, who are ahead of the curve in their respective industries, will also demonstrate to their peers the potentials of our technologies in enhancing operations. These industries are potentially huge. By establishing ourselves in the early stages, we have an opportunity to be the market leader later on. In light of the global economic slow-down and delay in recovery, the Company has experienced delays in the issue of tenders and award of contracts. These delays have impacted the Company’s financial performance. Notwithstanding, we are cautiously optimistic that our efforts will begin to bear fruits from the current financial year, and we are working very hard towards this.

•

Stratech entered into a partnership with Bayanat Airports Engineering & Supplies Co LLC in the United Arab Emirates (UAE). Bayanat is a leading airport systems integrator in the region, specialising in air trafﬁc management (ATM) systems, Airside and Terminal systems.

•

Stratech entered into a partnership with Modern Times Technical Systems (MTTS) to market, sell, implement and support iFerret™ to the international airports in the Kingdom of Saudi Arabia. Earlier in 2012, the Saudi Arabia government had announced that it plans to invest more than US$50 billion in the aviation sector over the following ﬁve years.

•

With the partnerships, Stratech has made further progress to boost our global channel network. Also, they allow us to establish a greater presence in the Middle East—a large market where the economy is still performing strongly despite challenges faced in other regions.

•

Stratech entered into a joint venture with The Garrett Group Asia (TGGA) to establish Stratech Finance Pte. Ltd. Stratech Finance will offer long-term and flexible financing options for iFerret™, as well as some of the other intelligent Vision technologies developed by Stratech. It aims to provide flexible financing arrangements to make iFerret™ affordable to airports. Stratech Finance will help to accelerate iFerret™’s roll-out in many markets that we are pursuing.

Stratech Systems Limited annual report 2012/13

Appreciation

•

Stratech was awarded a contract worth $2.7 million by the Government of Singapore to operate and maintain the Medical Claims Proration System (MCPS). MCPS, developed by Stratech in 1998, has been in service since 1999 for the management and processing of electronic claims of healthcare beneﬁts of civil servants.

•

Stratech Aerospace, a wholly-owned subsidiary whose objective is to spin out iFerret™ in key aviation markets, received the International Headquarters (IHQ) Award presented by the Singapore Economic Development Board (SEDB). SEDB’s Headquarters Programme encourages companies to use Singapore as a base for conducting headquarters management activities to oversee, manage and control their regional and global operations and businesses. The IHQ Award recognises the potential significant growth and development of Stratech Aerospace.

•

Stratech Aerospace unveiled its plans for growth. In the plan, it will establish a network covering key regions with signiﬁcant potential for the aerospace industry. It will also set up a Centre of Excellence for Video Analytics, which will be a Research & Development centre for video analytics, to further enhance Stratech’s global leadership in intelligent Vision. iVACS® had been called for and speciﬁed in a project in the Middle East which involves several hundred buildings meant for administration, security and civil defence. Stratech has entered into a partnership with the Group that has been awarded the project, and will provide at least 28 units of iVACS®. There is a worldwide trend of increasing take up rates for under-vehicle surveillance systems. Previous orders for iVACS® used to involve just a handful of units each, but nowadays, relatively large orders such as this are becoming more common.

On behalf of the Company, I would like to thank our shareholders for keeping your faith and for your continued support in us. The Rights Issue which we undertook in September 2012 had more than 1,000 shareholders subscribing for the shares, with many even applying for excess shares over the original allotment. As I had said in last year’s Annual Report, all of us in Stratech are “Resolved to Soar”. Now, with the support and encouragement of the shareholders in a most concrete way, the team is even more determined to do so. To the members of the Board, management and staff, it has been a challenging year, but we have continued to soldier on. By staying united and persevering with our Vision clearly in sight, I am conﬁdent we can turn things around. Together, we will fulfil our Vision of building a safer and better world!

Sincerely David K.M. Chew Executive Chairman

Stratech Systems Limited annual report 2012/13

Intelligent Vision

Stratech is a global leader in the ďŹ eld of intelligent Vision. Our intelligent Vision technologies have been deployed across six continentsâ&#x20AC;&#x201D;Africa, Asia, Australia, Europe, North America and South America.

Intelligent Vision refers to the brains behind machines that see. It seeks to emulate and extend the human visual faculty (eyes and brain) by enabling the system to process visual information that is captured. In essence, intelligent Vision is about creating systems that see, and think about what they see.

Stratech Systems Limited annual report 2012/13

In brief, the key steps of intelligent Vision are: 1.

Image acquisition, usually in real-time using Electro-Optic (EO) Sensors

2. Image Processing 3. Reporting of output, e.g., automatic alerts, providing measured information, highlighting abnormal results etc Some of the tasks that intelligent Vision can perform include: •

Measuring and counting quickly and accurately

•

Comparing quickly and with precision

•

Detection

•

Locating and tracking

Applications of intelligent Vision arising from its ability to perform the above tasks include: •

Inspections and screenings

•

Detection of foreign objects, persons or vehicles in areas where they are not supposed to be present

•

Measurement of dimensions for vehicles and objects

•

Locating objects and impact points

•

Surveillance

•

Classiﬁcation and identiﬁcation of objects or vehicles

•

Enforcement of trafﬁc/movement rules

Some of the beneﬁts of deploying intelligent Vision over human labour include: •

Quick results and reports

•

Objective and consistent

•

24 x 7 non-stop operations possible

•

Wider visual spectrum, able to “see” clearly even in low-light and bad weather conditions

•

Can be deployed in potentially hazardous and dangerous situations and environments

•

Better accuracy in remote operations, e.g. measurement, identiﬁcation

•

Not affected by personal subjectivity, distraction, fatigue, negligence etc

Stratech Systems Limited annual report 2012/13

Our Products

iFerret™, the Future of Airfield Safety and Surveillance iFerret™ is the world’s first intelligent Vision-based Foreign Object & Debris (FOD) Detection System that provides realtime, automated FOD detection, location, classification and recording. Using Stratech’s intelligent Vision software and state-of-the-art Electro-Optic (EO) Sensors, iFerret™ automatically detects, locates and records FOD in civil airports and military airbases. Upon FOD detection, iFerret™ automatically zooms in on the subject for visual verification before sending a remote alert to the ground crew to remove the FOD. The system can also be augmented with additional capabilities to enhance safety and security in the airport’s airside environment. These include: Night vision; Airside safety and security surveillance; Wildlife incursion detection; Airfield pavement condition monitoring; Incursion detection; Integrated command and control; Apron obstacle detection; Hijack monitoring; and Video analytics. iFerret™ offers superior image quality. It produces colour images in high-definition, facilitating visual verification and eliminating false alarms. It also provides unmatched night visibility, displaying sharp images of the airside in its natural colours even at night. Operators can also make use of iFerret™’s powerful optical zoom capability of more than 70x for visual verification or closer examinations of objects or situations in the airside. On top of performing both in the day and night, iFerret™ is also proven to operate in all weather conditions. It is user-friendly, eliminating the need for extensive training before operators can use the system. Unlike other systems, iFerret™’s operations involve no active emissions like sonar pulses or active light. This ensures that there is no interference with other airport and aircraft systems, and that there is no need for approval by government agencies like the Federal Communications Commission (FCC) or local equivalents. iFerret™’s performance measures up to the requirements of the busiest airport hubs of today. It is very precise, being able to detect FOD of any material and as small as 4cm in size. On average, its FOD detection time is 45 seconds in the day, and 2 minutes at night. This quick scan time meets requirements for typical aircraft movement activity, and allows for scans to be conducted between flights. The short scan time between flights also allows airports to optimise the runway capacity, as the waiting time between flights can be kept to a minimum. iFerret™ also very precisely reports the location of the FOD to aid in its swift removal. The US Federal Aviation Administration (FAA) had in March 2012 published a performance report stating that iFerret™ fulfils requirements listed in its Advisory Circular (“AC”) 150-5220-24, Airport Foreign Object Debris (FOD) Detection Equipment. In April the same year, iFerret™ was also granted the Buy American Waiver. Previously, there had been no technology, financing or regulations for automated FOD detection, and airports relied on the FAA or ICAO (International Civil Aviation Organization) mandated daily manual sweeps, which are inadequate and inefficient. In recent years the FAA has begun providing directions on specifications and funding of FOD detection systems, and these have subsequently been adopted as the de-facto standards by many airports globally. The FAA accreditation and Buy American Waiver therefore have opened up huge opportunities in this rapidlydeveloping market. The airports where iFerret™ has been deployed in include the Changi International Airport in Singapore, Chicago O’Hare International Airport in the U.S. and Düsseldorf International Airport in Germany.

FOCUS

Known and utilised for millennia for their instinct, alertness and developed olfactory preference, ferrets possess a physiology that makes them capable hunters. With long and slender bodies, as well as an inquisitive nature, ferrets are biologically equipped to swiftly chase rabbits and rodents out of their burrows.

Stratech Systems Limited annual report 2012/13

Our Products

iVACS® Gen. X - intelligent Vehicle Access Control System iVACS® Gen. X is the next-generation security system that provides total vehicle and driver surveillance and access control. Technically superior to other under-vehicle scanning systems in the market, iVACS® is the original (and only true) intelligent under-vehicle surveillance system that is capable of automated foreign object and abnormality detection. It is augmented by the ability to scan for HAZMAT (Hazardous Materials) in the trunks of vehicles without having to open them. Flexible for a wide range of security applications and adaptable to potential site constraints, iVACS® is available in three configurations (Fixed Base, Mobile and Robotics) to aid security agencies in conducting quick and thorough inspections of all vehicle types. iVACS® delivers unmatched high-resolution, photo-quality under-vehicle images in real time. It is able to overcome problems associated with variations in ambient lighting through its built-in adaptive image enhancement feature. It can also adapt itself to screening the undercarriages of vehicles of varying lengths. It is the original (and only true) under-vehicle inspection system with automated foreign object & abnormality detection capability. The system automatically identifies and highlights abnormalities like foreign objects on the under-carriage. Operators are able to zoom in on images to verify and respond to suspected security threats. It is also equipped with the capability to extend detection beyond the under-carriage to include the vehicle trunk, automatically scanning the boot for HAZMAT without having to open it, facilitating a faster security clearance process. iVACS® Gen. X is able to perform automated vehicle surveillance and access control. It incorporates essential security procedures and policies into a single central management system, enabling vehicle recognition via licence plate recognition or RFID, and personnel authentication via biometrics. It is integrated with other capabilities like vehicle trunk scanning and traffic control. The unique “networked intelligence” capability of iVACS® allows for further tightening of the security of facilities that have multiple entrances and exits, and even for multiple-site operations in a nation-wide/global inter-facility network. Its open architecture and modular design ensure that iVACS® is ready for expansion and scalability for total access control and security protection. iVACS® has another application—iVACS® Rail. For iVACS® Rail, iVACS® is adapted to provide security scans on the undercarriages of trains. By employing iVACS®’s superior imaging technologies and intelligent software, iVACS® Rail scans, detects and allows for validation of potential threats like explosive devices planted on the underside of the train carriages. iVACS® has an impressive track record of customers, including the US government, Interpol and the United Nations. It has also been deployed in high-security facilities in Singapore, Australia, the Middle East and Latin America.

VIGILANCE

Known to be one of the most reliable “sentries” in the animal world, meerkats have incredible vision. In fact, it is the meerkat’s most developed sense. Dark patches around their eyes mitigate glare and help them see far into the distance.

Stratech Systems Limited annual report 2012/13

Our Products

Super BullsEye® II – Advanced Weapons Scoring System Super BullsEye® II is a state-of-the-art Weapons Scoring System that is powered by Stratech’s proprietary intelligent Vision technologies. A proven product that has been deployed and used by Air Forces and Navies in several countries, Super BullsEye® II can automatically detect and score the impacts of missiles, rockets, bombs and small rounds with high precision, locating all visible weapon impacts to an accuracy of one metre. Be it single or multiple hits, Super BullsEye® II provides fast and accurate feedback for weapons training and defence exercises. Super BullsEye® II features the intelligent Vision-based Scoring for rockets and bombs. This involves the real-time capture and transmission of video images, from which the system automatically detects and scores visible weapon impacts over land and water. The data is then presented in comprehensive graphical result tabulations. This is complemented by the acoustic scoring by the Air-to-ground Gunnery Scoring System (AGSS), which allows for instantaneous assessment of shots striking a target. Super BullsEye® II is able to operate both in the day and night. It also stands out with its ability to perform scoring over water, on top of its ability to score over many different terrain types on land. On top of that, the system is able to perform scoring for most known ammunition, both for live and training rounds. These, together with its portability, allow for flexible deployment of the system in a comprehensive variety of training and assessment scenarios. Super BullsEye® II can be integrated with systems like the Electronic Warfare Training System (EWTS) and the Air Combat Manoeuvring Instrumentation (ACMI) System. It can also perform firing profile and trajectory analysis, by monitoring and recording the flight path of the aircraft before, during and after the attack. Super BullsEye® II has the ability to track projectiles of varying calibres and velocities. Stratech recently completed the delivery of the TV Ordnance Scoring System (TOSS) to the Republic of Korea Air Force (ROKAF). TOSS is powered by Stratech’s state-of-the-art Super BullsEye® II Advanced Weapons Scoring System, and is integrated with the EWTS. The EWTS is used to train ROKAF pilots by simulating hostile threat environments, including missile interceptors, ground-to-air guided rockets, anti-aircraft guns and others.

FORESIGHT

Known for their incredible ability to see far ahead through long distances, the eagle’s eyesight is estimated at 4 to 8 times stronger than that of the average human. Their eyes are large in proportion to their heads, have extremely large pupils, and have a million lightsensitive cells per square mm of retina, ﬁve times more than a human’s.

Stratech Systems Limited annual report 2012/13

Our Products

VIPS™ - Vessel Identification & Positioning System VIPS™ is the next-generation Maritime Surveillance and Vessel Traffic Management System that enables port, naval and other maritime authorities to perform round-the-clock, all-weather coastal surveillance with remote centralised command and control management. Automatically detecting, identifying and tracking all vessels and predicting their paths in real time, VIPS™ enhances waterside security and provides information such as length, height, shape, latitude, longitude, velocity, heading and time of vessels. It is the only maritime surveillance system in the market that is capable of automatic validation and enforcement of compliance with International Maritime Organization’s Automatic Identification System (AIS). Local equivalents of the AIS can also be installed on smaller vessels which are not equipped with AIS, to facilitate surveillance and identification. VIPS™ is the global leader in vessel and ship height surveillance. It can perform real-time, round-the-clock measurement and computation of vessel heights. It can be deployed to facilitate enforcement of vessel height restriction compliance, for example in areas where there are:

• • •

Bridges, cables or other structures that are suspended across waterways Areas with aircraft takeoff or landing paths passing over water Other zones with low-ﬂying aircraft

The system provides real-time detection of intrusion and maritime trafﬁc enforcement, and is able to determine vessel length, height and identity. It offers reliable detection and incident alerts. VIPS™ also tracks the target vessels’ latitude, longitude, velocity, heading and time in real-time. It can also automatically track vessels with its PTZ (Pan, Tilt, Zoom) EO Sensor control. The Automatic Vessel Prediction feature provides early warnings to aid in the prevention of collisions, by sending out alerts when it detects vessels on crossed paths or heading towards low-lying infrastructure. VIPS™ also performs vessel data logging, capturing and recording information on static, dynamic and voyage-speciﬁc vessel information. Zoomed-in images of vessels that have been tracked and monitored are also stored, allowing for video replay and scene reconstruction. Other VIPS™ applications include:

• • • • • • •

Vessel height surveillance Coastal/waterway surveillance Anti-piracy for ships Ship perimeter security and surveillance Ship collision avoidance Offshore asset protection Hydro-electric dam security and surveillance

CIRCUMSPECTION

Jumping spiders have one of the exceptionally highest acuities among invertebrates. Their excellent vision is ideal in courtship, hunting and navigation. Their eight eyes are grouped four on the face, and four on top of the carapace, giving them a wider ďŹ eld of view.

Stratech Systems Limited annual report 2012/13

Our Products

iFerret™ BDA – The Future of Airfield Battle Damage Assessment The iFerret™ BDA (Battle Damage Assessment) System is an advanced airfield surveillance and assessment system for military airbases. iFerret™ BDA can rapidly and automatically determine and measure the damage on the runway/ taxiway and recommend the Minimum Airfield Operating Surface (MAOS) for critical operations to be resumed. During peace time, iFerret™ BDA functions as an automated FOD detection system to prevent injuries to personnel or damage to aircraft by detecting and facilitating the prompt removal of FOD. It automatically detects, locates and records FOD and allows operators to verify the FOD threat with the high-quality images that it captures. Through the synergistic fusion of two field-proven technologies from Stratech—Super BullsEye™ and iFerret™, iFerret™ BDA is able to automatically detect, locate, measure and classify battle damage such as craters, unexploded ordnances (UXOs), camouflets and spalls, on the runway/taxiway. The system rapidly and automatically determines and locates the weapon impact points and identifies the battle damage on the map of the runway/taxiway in the user interface. It then intelligently computes and reports the MAOS with the information, optimising the resources, time and material on hand to plan the necessary repair work. iFerret™ BDA operates round-the-clock. Its EO Sensor offers unmatched night visibility. It also offers safe and passive operations, with no emissions of sonar pulses or active light. It is designed with built-in redundancy to ensure the system’s survivability during wartime. During peace time, iFerret™ BDA can also perform some other value-added functions. Some of these include: Airside Security and Safety Surveillance; Airfield Pavement Condition Monitoring; and Wildlife Incursion Monitoring.

STRATEGY

Widely associated with wisdom and good judgment, owls possess large, forward-facing eyes giving good stereoscopic vision, vital for judging distances. In smaller species the head often appears ďŹ&#x201A;attened so that the eyes can be as widely spaced as possible to increase the stereoscopic effect.

Stratech Systems Limited annual report 2012/13

Operations Review

Revenue

Selling and Distribution Expenses

Revenue of the Group amounted to S$2.54 million. This reduction of S$3.2 million, or 56.1%, compared to FY2012, was largely attributed to lower level of activity. Revenue for FY2013 was from the following projects:

The selling and distribution expenses increased by 35.4%, from S$0.74 million in FY2012 to S$1.9 million in FY2013. This increase was mainly attributed to the increase in travelling, marketing and other selling expenses undertaken by the Company to penetrate markets in the Middle East and China.

•

a sub-contract for the manufacture and sale of a TV Ordance Scoring system (TOSS), powered by Super BullsEye® II, for the Republic of Korea Air Force (ROKAF)

•

The iFerret™ maintenance contract, sale of 2 units of iFerret™-Mobile and supply and delivery of 1 node of iFerrret™ II for the iFerret™ system installed at the Singapore Changi International Airport for the Changi Airport Group (“CAG”)

Administrative Expenses

• •

Operation and maintenance of the Medical Claims Proration Systems (“MCPS”) for the Government of Singapore Sale of the iVACS® intelligent Vehicle Access Control System.

The administrative expenses were reduced by 7.3% from S$6.8 million in FY2012 to S$6.3 million in FY 2013 owing to our continuing costs containment efforts.

Other Operating Expenses Other operating expenses decreased by 41.4% from S$5.8 million in FY2012 to S$3.4 million in FY2013. In FY2012, there were provisions for project losses and doubtful debts amounting to approximately S$1.0 million and S$1.02 million respectively which accounted for the higher other operating expenses in FY2012.

Gross Proﬁt and Gross Margin Gross proﬁt was S$0.85 million at 33.4% gross margin for FY2013, compared to S$1.42 million at 24.6% gross margin in FY2012. The increase in percentage of gross margin was mainly attributed to the reduction in costs.

Finance Costs The ﬁnance costs marginally decreased by 13.1% from S$0.6 million in FY2012 to S$0.5 million in FY 2013 owing to lower costs in project expenses.

Other Operating Income Net Loss Other operating income increased by 172.40% from S$0.41 million in FY2012 to S$1.13 million in FY2013, mainly attributed to the write-back of provisions for litigation made in FY2011 relating to the decision of the Court of Appeal of the Hong Kong SAR with respect to the legal suit with Atal Technologies Limited and reversal of provisions for project costs no longer required.

The group incurred a loss in FY2013, mainly due to a reduction in revenue. Overall, the net loss of the Group decreased by S$2.9 million from S$12.1 million in FY2012 to S$9.2 million in FY2013, mainly attributed to the reduction in operating expenses.

Stratech Systems Limited annual report 2012/13

Financial Position The ﬁnancial position for FY2013: FY2013

FY2012

17,805

17,427

(23,059)

(24,601)

Net current (liabilities) / assets

(5,254)

(7,174)

Non-current assets

6,609

8,159

Current assets Current liabilities

Non-current liabilities

(147)

(178)

The Group’s net assets were S$1.2 million as at end FY2013 compared to S$0.8 million as at end FY2012. Subsequent to the ﬁnancial year ended 31 March 2013, the Company made placement issues of 150,000,000 shares to boost its net assets and cash ﬂow position. 2 batches of Convertible Bonds amounting to 33,000,000 shares were not converted. The amount due to a director-cum-shareholder stands at S$2.5 million for FY2013 (FY2012: S$5.4 million).

Stratech Systems Limited annual report 2012/13

Board of Directors

David K.M. Chew Executive Chairman

Leong Sook Ching Executive Director and Chief Corporate Ofﬁcer

Sajjad Ahmad Akhtar Independent Director

David K.M. Chew is the Founder and Executive Chairman of the Stratech Group. With 30 years of experience in the industry, David K.M. Chew has played an integral role in the development and success of Stratech.

Leong Sook Ching is the Executive Director and Chief Corporate Officer. She joined the company in 1995 to form and helm the Legal Affairs Department. She is responsible for corporate strategic planning and review, organisational planning and the formulation of general Company policies as well as policies for these other departments that she manages: Human Resource & Administration, Legal, Quality Excellence and Intellectual Property Management.

Sajjad Ahmad Akhtar, an independent director of the Company, is currently Chairman of PKF International Limited as well as Chairman of the PKFI AsiaPacific Board. He has more than 30 years of experience providing attest, financial and business consulting services to large multinationals and small and medium enterprises in UK and across Asia Paciﬁc.

He was awarded the Rotary-ASME Entrepreneur of the Year in 1999 and in the same year put the Company on the Enterprise 50 list of most enterprising privately-held corporations in Singapore. David K.M. Chew was a member of the National University of Singapore Mechanical Engineering Departmental Consultative Committee and the Singapore ONE Steering Committee which was instrumental in the development of the world’s first nationwide broadband network. He was also a Founding Member of the Board of Directors of the Intellectual Property Office of Singapore (IPOS), where he served for three terms.

Ms. Leong engaged in private law from 1989 to 1995 and she was made Partner in 1993. She practised in the areas of civil litigation and corporate matters. She has a Bachelor of Laws from the National University of Singapore.

Mr. Sajjad is a Fellow of the Singapore Institute of Directors. In addition, he sits on the Board of Directors of other companies, government bodies and civic organisations. Mr. Sajjad holds an MBA from the Booth School of Business, University of Chicago. He is a Fellow of the Institute of Certified Public Accountants of Singapore, the Institute of Chartered Accountants in England and Wales, and the Singapore Institute of Arbitrators.

Stratech Systems Limited annual report 2012/13

Chew Hai Chwee Independent Director

Lim Kim Choon Independent Director

Lim Soon Hock Non-executive and Non- Independent Director

Chew Hai Chwee, an independent director of the Company, sits on the Board of Directors of several public-listed companies and privately held companies, including his current position as an Independent Director and member of the AC committee of the SGX-listed Paciﬁc Andes.

Lim Kim Choon (MG (R) Lim), an independent director of the Company, has over 30 years of aviation and air navigation experience in both civil and military aviation. A qualified F16 pilot, MG (R) Lim held many principal appointments in the Republic of Singapore Air Force (RSAF) including the Head of Air Intelligence Department, Head of Air Operations Department and Commander of Tengah Air Base.

Lim Soon Hock, a non-executive and nonindependent director of the Company, was the former Vice President and Managing Director of Compaq Computer Asia Paciﬁc Ltd, where he was the ﬁrst Asian appointed to the position.

His illustrious career includes having held the positions of Independent Director and Chairman of the AC committee and later as Executive Director of United Fibre System Limited, and as Executive Director of NASDAQ listed Pacific Internet Limited, one of the largest telcoindependent Internet Communications Service Providers in Singapore. He is currently a member of the Singapore Institute of Directors and several public associations. Mr. Chew is a member of the WWF Singapore Board and Council member of Red Cross Singapore and Chairman, Committee for Humanitarian Assistance and International Relief. He is also a member of the Board of UNLV-S (University of Las Vegas-Singapore) which runs the Singapore campus of UNLV. Mr. Chew holds a Masters in Business Administration and a Bachelor of Science in Accounting with ﬁrst class Honors from University of South Alabama, USA.

In 1998, he was appointed Chief of Staff (Air Staff) of the RSAF, and subsequently as the Chief of Air Force from April 2001 to March 2006. He later joined the Civil Aviation Authority of Singapore (CAAS) as its Senior Deputy Director General in May 2006, and took over as Director General and Chief Executive Ofﬁcer in July 2007. MG (R) Lim holds a Master of Science (Management) degree from the Massachusetts Institute of Technology and graduated from the University of Loughborough, United Kingdom with a 2nd Upper Honours in Bachelor of Science. In 2009, he attended the Advance Management Program in Harvard University. He has received numerous commendations and foreign awards for his outstanding contributions and distinguished military career.

Since stepping down from Compaq in 1995, he had been involved in taking 3 companies public, one each on SGX, ASX and AIM, as well as being involved in 8 mergers and acquisitions. Mr. Lim continues to sit on the Board of Directors of several government agencies, public listed and private companies as well as civic organisations. He is presently the Founder and Managing Director of PLAN-B ICAG Pte Ltd, a boutique corporate advisory firm. He holds an honours degree in Electrical Engineering from the University of Singapore and is a Fellow of the Institution of Engineers, Singapore, Institution of Engineering and Technology, UK, Academy of Engineering Singapore, Singapore Computer Society, and the Singapore Institute of Directors. Mr Lim was a recipient of numerous awards, which include the 2012 President’s Award for Volunteerism from NVPC, 2010 IES-IEEE Joint Medal of Excellence Award, 2009 National Day Public Service Medal, 2009 NUS Distinguished Alumni Service Award and 1992 NUS Distinguished Engineering Alumni Award. He was appointed a Justice of the Peace in May 2008.

Stratech Systems Limited annual report 2012/13

Management Team

2. Kennedy K.M. Chew Technical Fellow

David K.M. Chew Executive Chairman (Please see proﬁle on page 22)

Leong Sook Ching Executive Director and Chief Corporate Ofﬁcer (Please see proﬁle on page 22)

1. Leo Siang Kwong Acting Chief Operating Officer Leo Siang Kwong was appointed Acting Chief Operating Officer in January 2013. He is responsible for the day-today operations management and reports to the Executive Chairman of the Company. He joined the Company in July 2010 and heads the Aerospace division, managing the engineering, productisation, project management and business development functions. Prior to joining the Company, Mr. Leo served more than 20 years in the Ministry of Defence (MINDEF), Singapore. He held various engineering managerial positions, such as the Officer Commanding (OC) of Air Logistics Squadron, the Head Technical Branch and the Deputy Head of the Singapore Armed Forces (SAF) Unmanned Aerial Vehicles (UAV) Office. He performed all these various roles and responsibilities during his tenure in the Joint Plans and Transformation Department (JPTD), Air Logistics Group (ALG) and Air Plans Department (APD) within the Republic of Singapore Air Force (RSAF). Mr. Leo holds a Master of Business Administration (Management of Technology) from the Nanyang Business School, Nanyang Technological University. He also holds a Master of Science in Automatic Control from Lund Institute of Technology, Lund University, Sweden, and a Bachelor of Electrical Engineering with a 2nd Upper Honours from the Nanyang Technological University, both of which were achieved while he was on the Ministry of Defence Technology Training Awards (DTTA) scholarships.

Kennedy K.M. Chew is the Technical Fellow. He tracks and analyses market trends and developments, and helps chart new business and technology directions for the Company. He plays a key role in large-scale, mission-critical systems design and development, including the creation of related intellectual property rights. He has also previously held other portfolios including CTO and System Architect in the Company. Formerly, Dr. Chew worked at the R&D arm of National Computer Board (NCB) of Singapore (presently the Infocomm Development Authority or iDA) as Chief Architect and a member of the Technical Staff. Dr. Chew was awarded NCB’s undergraduate scholarship to read Computer Science at the University of Toronto, Canada. He later undertook NCB’s postgraduate scholarship and was conferred a PhD in Computer Science by the University of Texas at Austin, USA. 3. Song Ah Kim Edward Acting Chief Financial Officer Edward A.K. Song is the Acting Chief Financial Officer. He was appointed in January 2013 and oversees the Group’s finance department. Mr. Song has almost 45 years of experience, the majority of which he has spent with American multinational companies, including on overseas assignments. His areas of specialisation include greenfield operations and acquisition and mergers. Mr. Song has also served as the Head of Finance in organisations spanning a variety of industries.

Stratech Systems Limited annual report 2012/13

Financial Contents

26 Corporate Governance Report 45 Directors’ Report 49 Statement by Directors 50 Independent Auditor’s Report 51

Statements of Financial Position

52 Consolidated Statement of Comprehensive Income 53 Consolidated Statement of Changes in Equity 54 Consolidated Statement of Cash Flows 56 Notes to the Financial Statements 95 Shareholders’ Information 97 Notice of Annual General Meeting

Proxy Form

Stratech Systems Limited annual report 2012/13

CORPORATE GOVERNANCE REPORT

The Board of Directors (the “Board”) of Stratech Systems Limited (the “Company” and together with its subsidiaries, the “Group”) has, in all its dealings, been committed to maintaining and upholding the highest standards of corporate governance to enhance and safeguard the interests of all shareholders. It, therefore, recognises the importance of corporate governance and good business practices and has adopted measures and practices in line with the Code of Corporate Governance 2005 (the “Code”), which forms part of the continuing obligations under the Listing Manual of the Singapore Exchange Securities Trading Limited (“SGX-ST”). This report sets out the Company’s corporate governance practices that were in place during the year with specific reference to the Code. The Company confirms that it has generally adhered to the principles and guidelines set out in the Code where they are applicable, relevant and practicable to the Group and has explained areas of non-compliance. The Board will be reviewing, and where necessary, adopting the recommendations made by the Corporate Governance Council on the Code of Corporate Governance 2012 (“2012 Code”) which is effective in respect of the Company’s Annual Report for the financial year ended 31 March 2014. 1.

BOARD OF DIRECTORS Board of Directors & Conduct of its Affairs (Principle 1) The Board, in addition to its statutory responsibilities, has the duty to protect and enhance long-term shareholders’ value. It sets the overall strategy for the Group and supervises the management of the Company (“Management”). Board members are expected to act in good faith and exercise independent judgement in the best interests of the Group. The principal functions of the Board are to: (1)

provide entrepreneurial leadership, set strategic objectives, and ensure that the necessary financial and human resources are in place for the company to meet its objectives;

(2)

establish a framework of prudent and effective controls which enables risks to be assessed and managed, including addressing financial, operational and compliance risks, safeguarding of shareholders’ interests and the Company’s assets;

(3)

review Management performance;

(4)

identify the key stakeholder groups and recognize that their perceptions affect the Company’s reputation; and

(5)

set the Company’s values and standards (including ethical standards), and ensure that obligations to shareholders and other stakeholders are understood and met.

Matters requiring the Board’s approval include those involving a conflict of interest for a substantial shareholder or a Director, matters which are likely to have a material impact on the Group’s operating units and/or financial positions as well as matters other than in the ordinary course of business, raising of funds and capitals, share issuance, convertible bonds, rights issue, performance share bonus for employees, dividends and other returns to shareholders. Other issues which will require the Board’s approval are specified under the Company’s Interested Person Transactions (“IPT”) policy. The Board believes that when making decisions, all Directors act objectively and for the interest of the Company. To assist the Board in the detailed consideration of various issues at hand to facilitate a more effective decision-making, discharge its responsibilities and enhance the Group Corporate Governance framework, three Board Committees had been formed, namely the Audit and Risk Management Committee (“ARMC”), the Nominating Committee (“NC”) and the Remuneration Committee (“RC”).

Stratech Systems Limited annual report 2012/13

CORPORATE GOVERNANCE REPORT

All Board Committees are chaired by an Independent Director and all members of the Board Committees, save for the NC, are non-executive. Each Committee is governed and regulated by clearly defined terms of reference which sets out the scope of duties and responsibilities, rules and regulations, and procedures governing the manner in which the Committee is to operate and how decisions are to be taken. Executive Directors are invited to attend the Board Committees’ meetings as and when required, to provide additional insight to matters raised at such meetings. The Board accepts that while the Board Committees have the delegated power to make decisions, execute actions and/or make recommendations to the Board in their specific areas respectively, the ultimate responsibility for the decisions and actions rests with the Board. The Board is headed by David K.M. Chew, Executive Chairman and Chief Executive Officer (“CEO”), who is responsible for: (i)

guiding the strategic direction and goals of the Company;

(ii)

putting in place appropriate and adequate systems of internal control, risk management processes and financial controls;

(iii)

monitoring the business and financial performance, major capital and operating expenses; and

(iv)

monitoring managerial and staff performance.

The Board has delegated the day-to-day management and running of the Company to the Management team led by the Executive Chairman and CEO, David K.M. Chew, and the Executive Director, Leong Sook Ching (Chief Corporate Officer), while reserving certain key issues and policies for its approval. The Board conducts regular scheduled meetings and ad-hoc meetings are convened to address significant issues or approve major transactions. The members of the Board are provided with regular updates on the Company’s business operations and, as the case may be, are briefed by the Executive Chairman on matters to be discussed at Board meetings so that they can effectively provide strategic direction and guidance to the Company. In place of physical meetings, the Board and Board Committees also circulate written resolutions for approval by the relevant Board and Board Committee members. The Company’s Articles of Association provides for telephone and audio-visual communication conferences at Board meetings. Directors are welcome to request for further explanation, briefing or discussion on any aspect of the Group’s operations or business from the Management team. When circumstances require, Board members exchange views outside the formal environment of Board meetings. The attendances of the Directors at meetings of the Board and Board Committees as well as the number of meetings held (excluding management meetings) as at 31 March 2013 are disclosed below. Directors’ Attendance at Board and Board Committee Meetings as at March 2013

Board Names of Directors

Held

Attended

Audit and Risk Management Committee* Held

Attended

Nominating Committee* Held

Remuneration Committee*

Attended

Held

Attended

David K.M. Chew

Lim Soon Hock

Leong Sook Ching

Lim Kim Choon

Sajjad Ahmad Akhtar

Chew Hai Chwee

Re-composition of Board Committees with effect from 3 October 2012.

Stratech Systems Limited annual report 2012/13

CORPORATE GOVERNANCE REPORT

BOARD COMPOSITION AND GUIDANCE (Principle 2) There is a strong and independent element on the Board with the majority of Directors being Non-Executives. The Non-Executive Directors contribute to the Board process by monitoring and reviewing Management’s performance against goals and objectives. Their views and opinions provide alternate perspectives to the Group’s business. When challenging Management’s proposals or decisions, they bring independent judgement to bear on business activities and transactions involving conflicts of interest and other complexities. Presently, the Board comprises the following Directors: (1)

David K.M. Chew – Executive Chairman and Chief Executive Officer

(2)

Leong Sook Ching – Executive Director and Chief Corporate Officer

(3)

Lim Soon Hock – Non-Executive and Non-Independent Director

(4)

Sajjad Ahmad Akhtar – Independent Director

(5)

Chew Hai Chwee – Independent Director

(6)

Lim Kim Choon – Independent Director

The independence of each Director is reviewed annually by the NC based on the Code’s definition of independent director and guidelines as to relationships which would deem a director not to be independent. The size and composition of the Board is reviewed annually by the NC to ensure that there is an appropriate mix of expertise and experience so as to facilitate effective decision making. The review will also ensure that Board members collectively possesses the relevant and necessary skills sets and core competencies which the Group may tap on for assistance in furthering its business objectives and shaping its business strategies. The NC, with the concurrence of the Board, is of the view that the current composition of the Board is appropriate and balanced, comprising persons who as a group, provide core competencies in the areas of finance, legal, commercial and domain knowledge. The diversity of the Directors’ experience allows for useful exchange of ideas and views. In addition, the NC also considered the Board size of six Directors to be adequate and effective, taking into account the size, nature and scope of the Company’s business. Key information regarding the Directors is set out on pages 29 to 32 of the Annual Report. The composition of the Board complies with the Code’s guideline that Independent Directors make up at least one-third of the Board. Directors’ Information

Board of Directors

Date of first Date of last Audit and Risk Nominating Remuneration Appointment re-election Management Committee Committee Committee

David K.M. Chew

19 Nov 1996

27 Jul 2012

Leong Sook Ching

19 Nov 1996

16 Aug 2010

Sajjad Ahmad Akhtar

31 Oct 2002

29 Jul 2011

Lim Soon Hock

3 Sep 2004

29 Jul 2011

Chew Hai Chwee

30 May 2006

27 Jul 2012

Lim Kim Choon

19 May 2011

29 Jul 2011

Chairman

Member

Member**

Chairman**

Member**

Member

Chairman

Chairman**

Member**

Member

Member**

Re-composition of Board and Board Committees with effect from 3 October 2012

Chairman**

Member**

Stratech Systems Limited annual report 2012/13

CORPORATE GOVERNANCE REPORT

EXECUTIVE CHAIRMAN & CHIEF EXECUTIVE OFFICER (“CEO”) (Principle 3) David K.M. Chew, founder of the Stratech Group, is the Executive Chairman and CEO of the Company. He plays a key role in developing the business of the Group and provides the Group with leadership and vision. He is responsible for the business strategy and directions, formulation of the Group’s corporate plans and policies. As Chairman of the Board, David K.M. Chew is also responsible for the effective working of the Board such as ensuring that Board meetings are held when necessary, assisting in ensuring compliance with the Company’s guidelines on corporate governance, acting as a facilitator at Board meetings, maintaining regular dialogue with Management on all operational matters and effective communication with shareholders of the Company. The Company currently has no plans to separate the roles of Chairman of the Board and CEO in line with the Company’s cost containment measures. Although this is a deviation from the recommendation of the Code, the Board with the concurrence of the NC believes that vesting the roles of both Chairman and CEO on the same person who is knowledgeable in the business of the Group, provides the Group with a strong and consistent leadership and allows for more effective planning and execution of long-term business strategies. The Board is of the opinion that there is an independent element on the Board to enable independent exercise of objective judgment on the corporate affairs of the Group and that there is a good balance of power and authority. All major decisions are reviewed and approved by the Board. The performance of the Executive Chairman is reviewed annually by the NC and his remuneration packages by the RC including the renewal of his service agreement upon the expiry of his term in office. Both the NC and RC are chaired by Independent Directors. The Board with the concurrence of the NC believes that there are adequate safeguards and checks in place to ensure that the process of decision making by the Board is independent and based on collective decision making without any individual exercising any considerable concentration of power of influence. The NC will review the need to separate the roles from time to time and make its recommendations accordingly.

BOARD MEMBERSHIP (Principle 4) Nominating Committee The NC is regulated by a set of written terms of reference and comprises three members, a majority of whom are independent Directors, including the Chairman. The Chairman of the NC is not associated with any substantial shareholder. The members are as follows: (1)

Lim Kim Choon – Chairman

(2)

Sajjad Ahmad Akhtar – Member

(3)

Lim Soon Hock - Member

The NC’s main functions include: (1)

evaluating and making recommendations to the Board on the appointment of new executive and non-executive directors, including disclosure on the search and nomination process;

(2)

regularly reviewing the Board structure, size and composition and making recommendations to the Board with regard to any adjustments that are deemed necessary to ensure a balanced Board;

(3)

making recommendations to the Board on the nomination of retiring directors and those appointed during the year standing for re-election at the annual general meeting (“AGM”), having regard to the directors’ contribution and performance;

(4)

evaluating the effectiveness of the Board as a whole and contributions of each director. Identifying the skills, expertise and capabilities needed for the effective functioning of the Board;

Stratech Systems Limited annual report 2012/13

CORPORATE GOVERNANCE REPORT

(5)

in respect of a Director who has multiple board representations on various companies, reviewing and evaluating whether the said Director is able to and has been adequately carrying out his/her duties as a Director, having regard to competing time commitments ; and

(6)

reviewing on an annual basis the independence of Directors, bearing in mind the circumstances set forth in the Code and any other salient factors.

From time to time, new Directors may be identified for appointment to the Board whereupon the NC will evaluate and assess their suitability, based on their qualifications, working experience and expertise, to determine if they are able to fit into the overall competency matrix of the Company’s Board before recommending them to the Board for its approval. The NC has in place a Process for Selection and Appointment of New Directors. All Directors, including newly appointed directors will be briefed and given an orientation by Management to familiarise themselves with the businesses and operations of the Group. Directors who do not have prior experience or are not familiar with the duties and obligations required of a listed company in Singapore, will undergo the necessary training and briefing. The Directors also have the opportunity to visit the Group’s operating facilities and meet with Management to gain a better understanding of the Group’s business operations and governance practices. The Directors may join institutes and group associations of specific interests, and attend relevant training seminars or informative talks from time to time to apprise themselves of legal, financial and other regulatory developments. As an ongoing exercise, the Directors will also be briefed during Board meetings or at separate seminars on amendments and requirements of the Listing Manual of the Singapore Exchange Trading Securities (“SGX-ST Listing Manual”) and other statutory and regulatory changes which may have an important bearing on the Company and the Directors’ obligations to the Company, from time to time. To ensure that there is a formal and transparent process for the appointment of new Directors to the Board, all Directors of the Company are required to submit themselves for re-election at regular intervals of at least every 3 years. Article 104 of the Articles of Association of the Company requires at least one-third of the Directors (except the Managing Director or Joint Managing Director or equivalent office) to retire by rotation at every AGM. Article 108 of the Articles of Association of the Company requires any person appointed as a Director of the Company to hold office only until the next AGM following their appointment. The retiring Directors are eligible to offer themselves for re-election. Lim Soon Hock and Leong Sook Ching are Directors who are retiring by rotation at the forthcoming AGM pursuant to Article 104 of the Company’s Articles of Association. Lim Soon Hock has however expressed his intention to retire at the AGM and will not seek re-election. He will also step down as a member of the NC. The NC, having considered the attendance and participation of Leong Sook Ching at Board and Board Committees meetings, in particular, her contributions to the business and operations of the Company as well as Board processes, had recommended to the Board her re-election at the forthcoming AGM. Each member of the NC shall abstain from voting on any resolution and making any recommendation and/or participating in respect of his re-election as a Director, where applicable. The Board had accepted the NC’s recommendation and accordingly, Leong Sook Ching will be offering herself for reelection at the forthcoming AGM. The Board would like to express its appreciation to Lim Soon Hock for his guidance and invaluable contributions during his tenure in office and wish him well in his future endeavours. The NC has also reviewed the independence of the Board members with reference to the guidelines set out in the Code. Each Non-Executive Director is required to complete a confirmation stating his independence and whether he considers himself independent despite having any of the relationships identified in the Code which would deem him not to be independent, if any. Based on the Non-Executive Directors’ confirmation, the NC has determined Chew Hai Chwee to be independent and free from any of the relationships outlined in the Code. The NC noted that Lim Kim Choon is also a Director of Stratech Aerospace Pte Ltd, a wholly-owned subsidiary of the Company and he receives Director’s and consultancy fees, which are separate from the Directors’ fees which he received from the Company as an Independent Director. The NC also noted that the total fees which he received from the Group is below S$200,000 set out in the guidelines of the Code and is deemed to be insignificant. In view of this, the NC considered him to be independent and that such relationship does not affect his ability to bring independent and considered judgment to bear in his discharge of duties as a member of the Board and Board Committees. Lim Soon Hock has relinquished his position as an Executive Director and Deputy Chairman of the Company with effect from 9 August 2012. He was re-designated a Non-Executive Director on 10 August 2012. Pursuant to the guidelines set out in the Code, Lim Soon Hock is considered non-independent in view of him being employed by the Company for the past three financial years.

Stratech Systems Limited annual report 2012/13

CORPORATE GOVERNANCE REPORT

The NC is of the view that although Sajjad Ahmad Akhtar has served beyond nine years as an Independent Director since 2002, he continues to express his individual viewpoints, debate issues and objectively and constructively challenge Management’s proposals and/or decisions on business activities and transactions involving conflicts of interest and other complexities. The NC has determined that Sajjad Ahmad Akhtar’s tenure in office has not affected his independence and ability to bring independent and considered judgment to bear in his discharge of duties as a member of the Board and Board Committees. The Board concurred with the NC’s views after having considered the confirmation of independence forms submitted by the Non-Executive Directors. A Director with multiple board representations is expected to ensure that sufficient time and attention is given to the affairs of the Group. While the NC will not stipulate the maximum number of boards each Director should be involved in, it will continue to monitor the contributions and the performance of each Director and to assess whether he/she has devoted sufficient time and attention to the affairs of the Group.The NC, having considered the confirmations received from Lim Soon Hock, Chew Hai Chwee, Sajjad Ahmad Akhtar and Lim Kim Choon, their list of Directorships and attendance record at Board and Board Committee meetings, is of the view that such multiple board representations do not hinder the Directors from carrying out their duties in the Company. The NC is also satisfied that sufficient time and attention have been accorded by these Non-Executive Directors to the affairs of the Company. The Board concurred with the NC’s views. 5.

BOARD PERFORMANCE (Principle 5) The NC conducts an annual assessment of the effectiveness of the Board as a whole and the contribution of each Director to the effectiveness of the Board. In pursuance thereto, the NC has implemented a set of objective performance criteria, approved by the Board, to evaluate the performance of its Directors. Besides their attendance at Board and Board Committee meetings, the directors’ abilities to provide strategic networking to enhance the business of the Company, availability for guidance and advice outside the scope of formal Board meetings, and contributions in specialised areas are also factors relevant in assessing the contributions of the Directors. The Board with the concurrence of the NC has taken the view that the financial indicators recommended under the Code to be included as part of the performance criteria for Board evaluation might not be appropriate as these are more of a measurement of Management’s performance and therefore less applicable to the Board. Completed questionnaires are collated by the Company Secretary and the findings analyzed and discussed with the NC and the Board respectively. During the year, an evaluation of the Board performance had been conducted. The NC is generally satisfied with the results of the Board Performance Evaluation for FY2013 which indicated areas of strengths and those that require improvement. No significant problems were identified. The NC had discussed the results with the Board members who agreed to work on those areas that require improvements. The NC would continue to evaluate the process for such review, its effectiveness and development from time to time.

ACCESS TO INFORMATION (Principle 6) To ensure that the Board is able to fulfill its responsibilities, Management regularly provides Board members with updates and the Non-Executive Directors have full access to all members of the Management team, without the presence or interference of Management if necessary. The Directors have also been provided with the telephone numbers and e-mail addresses of the Company’s Management and Company Secretary to facilitate access.

Stratech Systems Limited annual report 2012/13

CORPORATE GOVERNANCE REPORT

Should Directors, whether as a group or individually, need independent professional advice, the Company Secretary will, upon direction of the Board, appoint a professional advisor selected by the Group or the individual to render the advice. The cost of such professional advice will be borne by the Company. The Company Secretary attends all board meetings and is responsible for ensuring that Board procedures are followed. It is the Company Secretary’s responsibility to ensure that the Company complies with the requirements of the Companies Act and SGX-ST Listing Manual. Together with the Management staff, the Company Secretary is responsible for the compliance with all other rules and regulations which are applicable to the Company. The Company has also engaged an external professional firm as the Company’s Compliance Advisor. 7.

REMUNERATION MATTERS Procedures for Developing Remuneration Policies (Principle 7) The RC was formed to provide the Board with an independent assessment and review of the Directors’ remuneration. The RC also reviews from time to time the remuneration framework and strategy for executive compensation. In accordance with the Code, the RC comprises wholly of Non-Executive Directors who are independent of Management, so as to ensure that the members are able to exercise their independent judgment and to minimise the risk of any potential conflict of interest. The RC, regulated by a set of written terms of reference and comprises three members, all of whom are Independent Directors: (1)

Sajjad Ahmad Akhtar – Chairman

(2)

Chew Hai Chwee – Member

(3)

Lim Kim Choon– Member

The RC, which also administers the Stratech Share Option Scheme (“2011 Scheme”) and Stratech Performance Share Scheme (“PS Scheme”), performs the following main duties: (1)

reviews and recommends to the Board in consultation with Management and the Chairman of the Board, a framework of remuneration and the specific remuneration packages and terms of employment for each of the Executive Directors and senior executives/divisional directors (those reporting directly to the Executive Chairman and the CEO) including those employees related to the Executive Directors and controlling shareholders of the Company;

In the case of service agreements, to consider what compensation commitments in the Directors’ service agreements, if any, would entail in the event of early termination with a view to be fair and avoid rewarding poor performance;

(2)

carries out its duties in the manner that it deems expedient, subject always to any regulations or restrictions that may be imposed upon the RC by the Board of Directors from time to time;

(3)

recommends a formal and transparent policy for determining all aspects of remuneration on Directors’ fees for Non-Executive Directors of the Company, including Directors’ fees, salaries, allowances, bonuses, options and benefits-in-kind; and

(4)

approves the participants and determines the quantum of options to be granted under the 2011 Scheme and to reward Directors and employees on the number of shares to be given out under the PS Scheme.

Stratech Systems Limited annual report 2012/13

CORPORATE GOVERNANCE REPORT

In the discharge of its responsibilities, the RC has, from time to time, sought expert advice from a human resource consultancy firm to conduct salary benchmarking of the executive Management team, considered the National Wage Council guidelines and recommendations and made various comparisons with similar-sized listed companies within the same industry on the shares to be awarded. 8.

LEVEL AND MIX OF REMUNERATION (Principle 8) In recommending to the Board the remuneration packages for the Company’s Directors and officers, the RC’s objective is to achieve a level of remuneration that would be appropriate to attract, retain and motivate the directors and officers needed to run the Company successfully and at the same time avoid incurring excessive payments for this purpose. In setting a remuneration package, the RC will consider the pay and conditions of employment within the industry and comparable companies accordingly. The structure for the payment of Directors’ fees for Non-Executive Directors is based on a framework comprising basic fee, additional fees for serving on Board Committees and undertaking additional services for the Group. The fees are also subject to approval of shareholders at the AGM. The Executive Directors do not receive any Director’s fees for their Board directorship with the Company. No Director is involved in deciding his or her own remuneration. The Non-Executive Directors of the Company are appointed pursuant to, and hold office in accordance with, the Articles of Association. They are eligible for and have been granted options under the 2011 Scheme and also been granted performance shares under the PS Scheme. For FY2013, the RC is satisfied that the Executive Directors’ remuneration for FY2013 are in line with the terms of their service agreements. Additional Directors’ fees of S$128,513.95 have been proposed for FY2013 for participating in Board Committee meetings and attendance fees. Directors’ fees amounting to S$108,000 for the financial year ending 31 March 2014 at S$36,000 to each Non-Executive Director have been proposed for payment in arrears on a monthly basis. The RC will continue to develop and refine the structure of the remuneration packages and the PS Scheme as and when necessary.

DISCLOSURE OF REMUNERATION (Principle 9) A.

Executive Directors David K.M. Chew was appointed Executive Chairman and Chief Executive Officer and Leong Sook Ching was appointed Executive Director and Chief Corporate Officer (each an “Appointee” and collectively the “Appointees”) pursuant to their respective service agreements with the Company (each a “Service Agreement” and collectively, the “Service Agreements”). The Service Agreements commenced from 1 October 2012 for a period of three years, expiring 30 September 2015 and renewable for subsequent periods of three years each by the mutual consent of the Company and the Appointees. The RC had commissioned a benchmarking survey of the remuneration packages of some of the executive management positions, namely those of the Appointees and Chief Operation Officer, by independent consultants, with the view of negotiating new contracts with the Appointees. Their remuneration packages consist of fixed salaries, allowances, benefits, bonuses and performance share awards under the PS Scheme conditional upon achievement of performance targets and are based on the recommendation of the Consultant’s Report. No bonuses were paid and no performance shares under the PS Scheme were awarded to the directors in FY2013.

Stratech Systems Limited annual report 2012/13

CORPORATE GOVERNANCE REPORT

Executive Directors’ Remuneration (FY2013 and FY2012) Directors’ Remuneration Fees %

Salary¹ %

Bonus %

Others² %

Total %

David K.M. Chew

100

Leong Sook Ching

89.5

10.5

100

39.5

9.1

51.4

100

Name

Lim Soon Hock* Notes:

1) Includes Employers’ CPF contribution 2) Includes Transport, medical and insurance. 3) Value of share options granted under the Company’s Share Option Scheme is not included in the above table. *

Lim Soon Hock ceased to be Deputy Chairman and Executive Director on 9 August 2012 and he was re-designated a Non-Executive and Non-Independent Director on 10 August 2012. His remuneration reflected in this table was only for the period of 1 April 2012 to 6 August 2012

Non-Executive Directors At the AGM held on 27 July 2012, the shareholders approved the additional payment of Directors’ fees of S$121,725 for the financial year ended 31 March 2012. Payment of S$108,000 for FY2013 at S$36,000 to each Non-Executive Director payable monthly in arrears had also been approved at the AGM held on 27 July 2012, which is the same fee structure as FY2011. The total Directors’ fees paid for FY2012 amounted to S$229,725.00. The Non-Executive Directors’ fee structure adopted includes an annual fee and additional fees for participation in Board committees as follows: (1)

Chairman of Audit and Risk Management Committee (“ARMC”) – 50% of annual fee

(2)

Member of ARMC – 50% of ARMC Chairman’s fee

(3)

Chairman of other committees – 25% of annual fee

(4)

Member of other committees – 50% of committee Chairman’s fee

In addition, an attendance fee of S$1,000 per Board or Board Committee meeting and teleconference fee of S$500 for attendance via teleconference is payable to each non-executive director with effect from FY2009. The fees are established annually for the Non-Executive Directors, taking into consideration, amongst others, the performance of the Company, size and complexity of the Company’s operations, achievements of the Company, workload requirements of directors and comparison with industry peers. Pursuant to the fee structure, the additional fees proposed for Non-Executive Directors amounted to S$128,513.95 for FY2013. Subject to approval at the Company’s AGM for the collective additional fees for participation in Board Committees meetings, the Non-Executive Directors will be paid Directors’ Fees totaling S$236,513.95 for FY2013.

Stratech Systems Limited annual report 2012/13

CORPORATE GOVERNANCE REPORT

Non-Executive Directors’ Remuneration (Financial Year 2013 & 2012) Remuneration Bands

FY 2013

FY 2012

S$75,001 to S$100,000

S$50,001 to S$75,000

S$50,001 to S$50,000

S$25,000 to S$50,000

Note: Lim Soon Hock ceased to be Deputy Chairman and Executive Director on 9 August 2012 and he was re-designated a Non-Executive and NonIndependent Director on 10 August 2012.

Stratech ESOS Scheme (“2011 Scheme”) The 2011 Scheme was adopted at an Extraordinary General Meeting held on 29 July 2011. The 2011 Scheme is for a duration of 10 years from the adoption date of 29 July 2011 and will expire on 28 July 2021. The 2011 Scheme was adopted to acknowledge the contributions made by the employees and Directors of the Company to the success and development of the Company and to motivate employees and Directors to optimise their performance standards, dedication and efficiency. The Scheme is also a strong incentive to attract and recruit new employees with abilities and expertise which are crucial to the long-term growth and profitability of the Company. The 2011 Scheme is administered by the RC, which determines the terms and conditions of the grant of options, the vesting periods, (which may be over and above the minimum vesting periods prescribed by the Listing Manual of the SGX-ST.) The number of shares which may be offered to an employee or eligible director of the Company is determined by taking into account criteria such as rank, performance, years of service and the potential for future development of the particular employee or director. Under the 2011 Scheme, the RC has the ability to grant options to confirmed employees of the Group who have attained the age of 18 on or before the date of grant and eligible directors including Controlling Shareholders and their Associates. Pursuant to the SGX-ST, the grant of options to Controlling Shareholders and their Associates requires the approval of the independent shareholders of the Company at a general meeting. It is provided in the 2011 Scheme that the Board may make grants to non-executive directors, as it recognised that the non-executive directors, although not employed within the Group and are not involved in the day-to-day running of the Group’s business, work closely with the Company and by reason of their relationship with the Company are in a position to provide valuable input and contribute their experience, knowledge and expertise to the development of the Group. The total number of shares, which may be granted under the 2011 Scheme, shall not exceed 15% of the issued capital of the Company at any time and from time to time. Not more than 25% of the total number of these shares may be offered or granted to Controlling Shareholders and their Associate. The number of shares may be granted to each Controlling Shareholder and his Associate shall not exceed 10% of the shares available under the Scheme.

Stratech Systems Limited annual report 2012/13

CORPORATE GOVERNANCE REPORT

Options granted under the 2011 Scheme in FY 2013 : Aggregate Options granted since commencement of the Options Scheme to end of the FY 2013

Aggregate Options exercised since commencement of the Options Scheme to end of the FY 2013

Aggregate Options outstanding as at end of the FY 2013

Mah Peek Sze Patsy

4,000,000

Raman s/o Palaniappan

6,000,000

Leo Siang Kwong

6,000,000

James Balasubramaniam Rathakrishna

4,000,000

Name of Participants Options granted during the FY 2013

• The Options granted to Mah Peek Sze Patsy and Raman s/o Palaniappan have been revoked on 25 January 2013 and 29 January 2013 respectively.

The Aggregate Options granted since commencement of the Options Scheme to the end of the FY 2013 is 20,000,000 and 10,000,000 options have since been revoked on 25 January 2013 and 29 January 2013. No options under the Scheme were granted to the directors and controlling shareholders. The options granted under the Scheme may be granted at the market price or at a discount to the market price, provided that the maximum discount shall not exceed 20% of the market price. There were no options granted at a discount to the market price in FY2013. Shares allotted and issued on the exercise of an option rank in full for all dividends or other distributions declared or recommended in respect of the then existing shares and shall in other respects rank paripassu with other existing shares. The subscription price payable for each share is calculated based on the average of the last dealt prices per share for the 3 consecutive market days in which trades were done in the shares immediately preceding the date of grant or its nominal value, whichever is higher. The Company deems it desirable for share options to be granted to non-executive directors to form part of the Directors’ remuneration and the RC has established a framework approved by the Board for the determination of the number of shares to be granted to the directors. The annual grants to each of the non-executive directors shall comprise shares not exceeding 0.4% of the total shares available under the Scheme in any one year and a grant of 500,000 shares shall be made to each non-executive member upon joining the Board. This number of shares is insignificant and will not affect the non-executive directors’ independence or judgment in their decision-making or Board Committee functions. Performance Share Scheme On 4 June 2007, the shareholders approved the implementation of a new performance share scheme (“PS Scheme”) in addition to the ESOS Scheme that will increase the Company’s flexibility and effectiveness in its continuing efforts to reward, motivate and retain employees to achieve superior performance. The PS Scheme will further strengthen the Company’s competitiveness in attracting and retaining superior local and foreign talent. The PS Scheme differs from the ESOS Scheme in that it allows the Company to target specific performance objectives and to provide an incentive for participants to achieve these targets. The PS Scheme provides a more broad-based incentive that is based on the overall performance of the Company. The PS Scheme is not intended to replace the ESOS Scheme, but to complement it. The Directors believe that together, the two plans will provide the Company with a flexible approach to provide performance incentives to its staff, and consequently to improve performance and achieve sustainable growth for the Company in the changing business environment, and to foster a greater ownership culture amongst key senior management and senior executives. By implementing the PS Scheme, the Company hopes to inculcate in all participants a stronger and more lasting sense of identification with the Group. The PS Scheme will also operate to attract, retain and provide incentive to participants to encourage greater dedication and loyalty by enabling the Company to give recognition for past contributions and services as well as motivating participants generally to contribute towards the Group’s long-term prosperity.

Stratech Systems Limited annual report 2012/13

CORPORATE GOVERNANCE REPORT

Unlike Options granted under the ESOS Scheme, the PS Scheme contemplates the award of fully-paid Shares (the “Awards”) to eligible employees after the pre-determined performance target(s) has been achieved. The PS Scheme is to reward and motivate the directors and employees to achieve superior performance. The Company believes that with the PS Scheme in place, it will be more effective than merely having pure cash performance bonuses in place to motivate employees to work towards determined goals. In addition, the ESOS Scheme has a vesting period which is normally imposed before the Options can be exercised, while such vesting period is not applicable to performance shares granted under the PS Scheme, save that the employees shall be obliged to hold these shares awarded to them for a period of 9 months from the date of grant. A performance target based share may be granted, for example, on the successful completion of a project and therefore, under the PS Scheme, participants are encouraged to continue serving the Group beyond the achievement date of the performance targets. An option may be granted, for example, as a supplement to the remuneration packages for employees. The Company believes that with both Schemes in place, it will strengthen and enhance the Company’s ability in attracting and retaining suitable talents. The PS Scheme is administered by the RC. Senior executives and executive directors who, in the opinion of the RC, have contributed or will contribute to the success of the Group shall be eligible to participate in the PS Scheme. Nonexecutive directors shall also be eligible. In compliance with the requirements of the Listing Manual, a participant of the PS Scheme who is a member of the RC shall not be involved in its deliberations in respect of shares to be granted to that member of the RC. The performance shares given to a particular participant under the PS Scheme will be determined at the discretion of the RC, who will take into account factors such as the participant’s capability, scope of responsibility, skill and vulnerability to leaving the employment of the Group. In addition, the RC will also consider the compensation and/or benefits to be given to the participant under the PS Scheme as well as such other share-based incentive schemes of the Company, if any. When deciding on the number of shares to be awarded under the PS Scheme to a participant at any time, the RC will also take into consideration the number of shares to be awarded to that participant under the other Scheme at that time, if any. No Performance Shares were issued for the FY 2013. D.

Remuneration for Top 6 Key Executives FY 2013 * Name

Designation

Date Joined

Kennedy K.M. Chew

Technical Fellow

15 May 1996

Nwee Kok Thai

Director of Technology

6 Nov 1998

Leo Siang Kwong**

Chief Operating Officer

Mah Peek Sze Patsy

Chief Financial Officer

Raman s/o Palaniappan Song Ah Kim Edward

1 Jul 2010

Date Left

13 Dec 2010

25 Jan 2013

Chief Operating Officer

9 Mar 2012

29 Jan 2013

Acting Chief Financial Officer

3 Dec 2012

FY 2013

FY 2012

S$250,001 to S$500,000

Up to S$250,000

* **

Ranked by joining date Leo Siang Kwong was appointed as Acting Chief Operating Officer on 30 January 2013.

Remuneration Bands

For confidentiality reasons, the Company is not disclosing the remuneration of each individual Key Executives. Save for Kennedy K.M. Chew, who is the brother of David K.M. Chew, CEO and Executive Chairman and brother-in-law of Leong Sook Ching, Executive Director of the Company, there are no employees who are immediate family members of a Director or the CEO and whose remuneration exceeds S$50,000 for FY2013.

Stratech Systems Limited annual report 2012/13

CORPORATE GOVERNANCE REPORT

10.

ACCOUNTABILITY & AUDIT Accountability (Principle 10) The Board of Directors is accountable to the shareholders while the Company’s management team is accountable to the Board. Management presents to the Board half-year and full-year accounts and the ARMC reports on the results for review and approval by the Board. The Board approves the results and authorizes the release of results to SGX-ST and public via SGXNET. In line with the requirements of the SGX-ST Listing Manual, a negative assurance statement was issued by the Board to accompany the half-year results confirming to the best of the Board’s knowledge that nothing has come to its attention that may render the results to be false or misleading. In addition, the Company has also kept its shareholders abreast of material developments of the Company in its periodic announcement of its financial results.

11.

AUDIT AND RISK MANAGEMENT COMMITTEE (Principle 11) On 11 July 2011, the Audit Committee has been re-named as “Audit and Risk Management Committee” (“ARMC”) in line with the recommendation of the Code. The functions previously carried out by the Audit Committee are now assumed by the ARMC. The ARMC, regulated by a set of written terms of reference, comprises 3 members, all of whom are independent directors. The members of the ARMC were as follows: (1)

Chew Hai Chwee – Chairman

(2)

Sajjad Ahmad Akhtar – Member

(3)

Lim Kim Choon – Member

The Board has reviewed and is satisfied that the members of the ARMC are appropriately qualified, having the necessary accounting or related financial management expertise and experience as the Board interprets such qualification to discharge their responsibilities. The ARMC is granted full authority and access to the Company’s Auditors, finance and accounts department without the presence and interference of the executive management and senior management. The role of the ARMC is to assist the Board with discharging its responsibilities to: (1)

safeguard the Company’s assets;

(2)

maintain adequate accounting records;

(3)

develop and maintain effective systems of internal control; and

(4)

provide oversight of financial reporting compliance and risk management.

The overall objective of the ARMC is to ensure that Management has created and maintained an effective control environment in the Company and that management demonstrates and stimulates the necessary respect of the internal control structure amongst all parties.

Stratech Systems Limited annual report 2012/13

CORPORATE GOVERNANCE REPORT

As a Committee of the Board, the ARMC provides a channel of communication between the Board, Management, and Auditors on matters arising out of the external audits. The duties of the ARMC are to: (1)

review with the Auditors: • • • •

the audit plan, including the nature and scope of the audit before the audit commences their evaluation of the system of internal accounting controls their audit report their management letter and Management’s response

(2)

ensure co-ordination where more than one audit firm is involved;

(3)

review the Group’s half-year and full-year financial statements before submission to the Board for approval, focusing in particular, on: • • • • • •

changes in accounting policies and practices major risk areas significant adjustments resulting from the audit the going concern statement compliance with accounting standards compliance with stock exchange and statutory/ regulatory requirements

(4)

discuss problems and concerns, if any, arising from the interim and final audits, and any matters which the Auditors may wish to discuss (in the absence of Management where necessary);

(5)

review the assistance given by Management to the Auditors;

(6)

review the internal controls and ensure co-ordination between the Auditors and the Management;

(7)

review the effectiveness of the Group’s internal audit procedures and internal controls, including financial, operational, compliance and risk management;

(8)

review the balance sheet and profit and loss account of the Company and the consolidated balance sheet and profit and loss account, before approval by the Board, and to review significant accounting and reporting issues and also their impact on financial statements so as to ensure the integrity of the financial statements and any formal announcements relating to the Company’s financial performance and recommend to the Board the acceptance of such financial statements;

(9)

review and discuss with the external auditor any suspected fraud, irregularity or suspected infringement of any Singapore law, rules or regulations which has or is likely to have a material impact on the Company’s operating results or financial position and Management’s response;

(10) report to the Board its findings from time to time on matters arising and requiring the attention of the ARMC; (11) review transactions falling within the scope of Chapter 9 (Interested Person Transactions) of the SGX Listing Manual and potential matters of conflicts, if any; (12) undertake such other reviews and projects as may be requested by the Board; (13) undertake such other functions and duties as may be required by statute or the Listing Manual and by such amendments made thereto from time to time;

Stratech Systems Limited annual report 2012/13

CORPORATE GOVERNANCE REPORT

(14) keep under review the scope and results of the audit and its cost effectiveness, independence and objectivity of the Auditors, including the volume of non-audit services provided by the Auditors, to satisfy itself that the nature and extent of such services will not prejudice the independence and objectivity of the Auditors before confirming their re-nomination; and (15) consider the appointment or re-appointment of the Auditors at the Annual General Meeting and matters relating to their resignation or dismissal. The ARMC has the authority to investigate any matter within its terms of reference, full access to and co-operation by management and full discretion to invite any Director or member of the management team to attend its meetings. The ARMC is entitled to reasonable resources to enable it to discharge its functions properly. The ARMC has also adopted a Risk Management Policy which forms part of the internal control and governance arrangements of the Stratech Group. The Risk Management Policy explains the underlying approach to risk management, documents the roles and responsibility of the ARMC and other key parties. It also outlines key aspects of the risk management process and identifies the main reporting procedures. In addition, it describes the process that the ARMC will use to evaluate the effectiveness of the Group’s internal control procedures. The ARMC will oversee the review of the Group’s business and operational activities to identify areas of significant business risks as well as of appropriate measures to control and mitigate these risks within the Group’s policies and strategies. Any significant matters detected by Management are reported to the ARMC and the Board. The ARMC has adopted a Whistle-Blowing Policy to encourage and to provide a channel for staff of the Group to report and to raise, in good faith and in confidence, their concerns about possible improprieties in matters of financial reporting or other matters. There were no whistle blowing reports received in FY2013. The Group’s financial risk management is disclosed under Note 4 of the Notes to Financial Statements on page 69 of this Annual Report. During the financial year, the ARMC has: (i)

met with the Auditors without the presence of the Management. The Auditors, LTC LLP, confirmed that they had full access to and had the full cooperation and assistance of Management;

(ii)

reviewed the independence and objectivity of the Auditors including the scope of non-audit services performed, to satisfy itself that the nature and extent of such services will not prejudice the independence and objectivity of the Auditors as well as the cost effectiveness of the audit before confirming their re-nomination. The following fees were approved:

Audit fee Non-audit fee

FY2013

FY2012

S$’000

150

There was no non-audit fee for FY2013.The Auditors had also confirmed its independence in this respect. (iii)

confirmed that Company had complied with Rule 712 of the SGX-ST Listing Manual in relation to the appointment of a suitable auditing firm to meet its audit obligations. LTC LLP, the appointed Auditor of the Group, is registered with the Accounting and Corporate Regulatory Authority and is an independent member firm of BKR International.

The ARMC was satisfied that the resources in terms of supervisory and professional staff assigned to the audit of the Group and experience of LTC LLP, the Audit Engagement Partner and his team assigned to the audit were adequate.

Stratech Systems Limited annual report 2012/13

CORPORATE GOVERNANCE REPORT

(iv)

confirmed that the Company had complied with Rule 715 of the SGX-ST Listing Manual in relation to the appointment of the same auditing firm based in Singapore to audit its accounts, its Singapore-incorporated subsidiaries and, its foreign-incorporated subsidiaries. The Group’s subsidiaries and associated companies are disclosed under Note 2.5 of the Notes to the Financial Statements on page 58 of this Annual Report.

(v)

reviewed the IPTs for FY2013 and was satisfied that the IPTs for FY2013 were below the threshold limits set out under Chapter 9 of the SGX-ST Listing Manual. In view thereof, no announcement or shareholders’ approval was required. The Board concurred with the ARMC’s views.

The ARMC, with the concurrence of the Board, had recommended the re-appointment of LTC LLP as Auditors at the forthcoming AGM. 12. 13.

INTERNAL CONTROLS (Principle 12) INTERNAL AUDIT (Principle 13) The Company strives continually to identify gaps, develop, improve and enforce compliance of internal controls procedures. This is to improve the overall internal controls in order to safeguard shareholders’ investment and the Company’s assets. The ARMC reviews the Company’s internal controls, including financial, operational and compliance risk areas, existing risk management policies and systems established by Management and their adequacy on an annual basis. The Company has established a Quality & Excellence department (“Q&E”), which is responsible for the review of the internal controls and processes of the Group. The Q&E will schedule the audit of the various departments for each financial year and will submit a report to the ARMC highlighting their findings, lapses in internal control and any areas of weaknesses at least once a year. The Q&E also ensures that the Company passes the ISO9001 surveillance audit and the last audit was completed on 4 June 2013. The ARMC will continue to work together with the Q&E, Auditors and Management to improve the internal control system and mitigate the risks identified. The AC, with the assistance of the Q&E and the Auditors, reviews the adequacy of the Company’s internal financial controls, operational and compliance controls, and risk management policies and systems established by Management on an annual basis. The Q&E and Auditors have, during the course of their audits, carried out a review of the effectiveness of key internal controls within the scope of their audit. It was noted that there were no material non-compliance and internal control weaknesses noted during their respective audits, save for the salient observations and their respective recommendations, which had been reported to the AC. The AC has reviewed the Q&E report and Auditors’ comments to ensure that there are adequate internal controls in the Group and follow up actions from the last audit reviews had been implemented. The AC would ensure that recommendations by the Q&E and Auditors, arising from the FY2013 audits are followed up and implemented by Management at the next audit reviews or within the timeline stipulated in the respective reports. The Board recognises that no internal control system will preclude all errors and irregularities, as a system is designed to manage rather than eliminate the risk of failure to achieve business objectives, and can provide only reasonable and not absolute assurance against material misstatement or loss. The review of the Group’s internal control systems is a concerted and continuing process. To this end and in view of the recent changes to the Company’s processes in line with the business and operational changes, the Company has engaged WLA Regnum Advisory Services, to perform a high level review to identify key risks currently faced by the Group and to do a gap analysis of the Group’s processes against internal audit standards over a three-year period (to be proposed) commencing FY2014. As recommended by the SGX-ST, an opinion of the Board with the concurrence of the ARMC on the adequacy of the internal controls, addressing financial, operational and compliance risks is set out in the Directors’ Report under page 47 of the Annual Report.

Stratech Systems Limited annual report 2012/13

CORPORATE GOVERNANCE REPORT

14.

COMMUNICATIONS WITH SHAREHOLDERS (Principles 14 & 15) The Company regularly communicates pertinent and relevant information to shareholders, gathers views and addresses shareholders’ concerns. Information is communicated to shareholders on a timely basis. Communication with shareholders is conducted through announcements to the SGX and press releases, press and media briefings, if any, after the announcement of the financial results, and the posting of announcements and releases on the Company’s regularly updated website at www.stratechsystems.com. Investors may send in their requests or queries to the Company through the e-mail address on the website. The Company does not participate in selective disclosure in the communication of material information. Communication with SGX is handled by the Company Secretary and its Compliance Advisor while communication with shareholders, analysts and fund managers is handled by the Company Corporate Communications Officer. In addition, the Company has responded promptly to queries from the SGX on any unusual trading activities in its securities and or any queries thereto. The Company announces its half-year and full-year results via the SGXNet. Price sensitive information is publicly released via SGXNet before the Company meets with any group of investors or analysts. In line with continuous obligations, the Company is mindful of the need for regular and proactive communication with its shareholders. All shareholders of the Company receive the notice of Annual General Meeting (AGM) and/or Extraordinary General Meeting (EGM), if any, through the post. The notice is also advertised in the newspapers and also through SGXNet. At shareholders’ meetings, shareholders are given the opportunity to air their views and pose questions to Directors or Management. The Auditors will be present to assist the Directors in addressing any relevant queries by shareholders. Each distinct issue is proposed as a separate resolution. The Articles allow a member of the Company to appoint one or more proxies to attend and vote instead of the member. The duly completed proxy form is to be submitted 48 hours before the shareholders’ meeting and deposited at the Company’s registered office.

15.

OTHER MATTERS Interested Person Transactions (“IPT”) Policy The Company reviews interested person transactions in accordance with the requirements of the SGX-ST Listing Manual. The following have been declared: (a)

David K.M. Chew provided a continuing guarantee for the recovery of outstanding debts from Procurement Bureau of the Republic of China, Taiwan, Ministry of National Defence and EDS Electronic Data Systems (HK) LTD.

(b)

During FY2011, David K.M. Chew had extended a loan amounting to S$3.7 mil to the Company pursuant to a loan agreement dated 8 August 2011 (the “Loan”). The amount due to him under the Loan has since been repaid via a set-off against the full satisfaction of the consideration payable by him pursuant to the Rights Issue, the results of which was announced on 21 September 2012.

(c)

During the financial year, Lim Kim Choon, an Independent Director of the Company, received the amount of Director’s fee and consultancy fee paid to him in respect of his services rendered to a wholly-owned subsidiary was S$131,100 (FY2012: S$120,000).

Stratech Systems Limited annual report 2012/13

CORPORATE GOVERNANCE REPORT

(d)

In accordance with Rule 907 of the SGX-ST Listing Manual: Aggregate value of all interested person transactions during the financial year under review (excluding transactions less than S$100,000 each) Transactions not conducted under shareholders’ mandate pursuant to Rule 920 Name of interested person David K.M. Chew (Para 15(a) and (b))

Transactions conducted under shareholders’ mandate pursuant to Rule 920

FY2013

FY2012

FY2013

FY2012

S$’000

2,304

2,414

Lim Kim Choon (Para 15(c) and Material Contracts) 74.7 120 Provision of consultancy service (e) Other than disclosed above, there was no IPT shareholders’ mandate or IPT disclosable under Chapter 9 of the Listing Manual of the Singapore Exchange Securities Trading Limited (“SGX-ST”). Dealing in Securities The Company has adopted an internal code on dealings in securities to govern dealings in its shares by key employees within the Group. Officers of the Company are not allowed to deal in the Company’s shares during the period commencing one month before the announcement of the Company’s full year and half-yearly financial results and ending on the date of the announcement of the results. Officers are also not allowed to deal in the Company’s shares while in possession of material price sensitive information and on short-term considerations at all times. The Company confirms that it has complied with Rule 1207(19) of the SGX-ST Listing Manual. Material Contracts Mr. Lim Kim Choon was appointed as a Non-Executive Director of the Company in May 2011. Subsequently in October 2011, the Group renewed the consultancy agreement with him which was entered into in April 2010. Consultancy fees paid to him during the financial year were S$74,700 (FY2012: S$120,000). Save as disclosed, there is no material contract involving the interests of any Director or controlling shareholders of the Company has been entered into by the Company or any of its subsidiary companies in FY2012 except the transaction with the Director disclosed in Principle 15, Interested Person Transactions Policy on page 42.

Stratech Systems Limited annual report 2012/13

CORPORATE GOVERNANCE REPORT

Use of net proceeds of funds (a)

Use of proceeds for Share Placements on 7 May 2012 and 7 January 2013 Use of proceeds to-date

(b)

Utilised-to-date

For financing the order book of the Company

60.9%

For other general working capital purposes

39.1%

Use of proceeds for Share Placements on 4 July 2012 Use of proceeds to-date

(c)

For financing the order book of the Company

24.2%

For other general working capital purposes

75.8%

Use of proceeds for sums raised by Convertible Bonds as announced on 2 April 2013 and 12 June 2013 Sums raised by Convertible Bonds from 4 subscribers

(d)

Utilised-to-date

Sing $1,242,000

Financing the order books including salaries of project manpower, project purchases, sales/account management and other operations expenses for projects.

58.8%

S$730.3K

Working capital needed to support daily administration, rental, salaries, etc.

41.2%

S$511.7K

Use of proceeds for Share Placements as announced on 12 June 2013 Sums raised from shares placements

Sing $3,525,000

Financing the order books including salaries of project manpower, project purchases, sales/account management and other operations expenses for projects.

32.2%

S$1,135.1K

Working capital needed to support daily administration, rental, salaries, etc.

33.4%

S$1,177.4K

Stratech Systems Limited Directors' Report For the financial year ended 31 March 2013 The directors present to the members of Stratech Systems Limited (the "Company") their report together with the audited consolidated financial statements of the Company and its subsidiaries (the "Group") for the financial year ended 31 March 2013 (the "year") and the statement of financial position of the Company as at 31 March 2013.

Directors The directors of the Company in office at the date of this report are: David K.M. Chew Leong Sook Ching Sajjad Ahmad Akhtar Lim Soon Hock Chew Hai Chwee Lim Kim Choon

Arrangements to enable directors to acquire shares and debentures Except as described in paragraph 5 below, neither at the end of nor at any time during the year was the Company a party to any arrangement whose object was to enable the directors of the Company to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate.

Directors' interests in shares or debentures According to the register of directors' shareholdings, none of the directors holding office at the end of the financial year had any interest in the shares or debentures of the Company or its related corporations, except as follows:

Direct interest Name of directors

At start of year

At end of year

Deemed interest At start of year

At end of year

Stratech Systems Limited (no. of ordinary shares) David K.M. Chew Leong Sook Ching Sajjad Ahmad Akhtar Lim Soon Hock Chew Hai Chwee

269,303,102 54,897,489 641,380 29,459,823 609,380

441,918,405 90,832,852 855,173 29,459,823 812,506

54,897,489 269,303,102 -

90,832,852 441,918,405 -

By virtue of Section 7 of the Singapore Companies Act, Cap. 50, David K.M. Chew and Leong Sook Ching are each deemed to have an interest in the shares of the Companyâ&#x20AC;&#x2122;s subsidiaries. Sajjad Ahmad Akhtar and Chew Hai Chwee are independent directors of the Company. The directors' interests in the shares of the Company at 21 April 2013 were the same as those at 31 March 2013.

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

Stratech Systems Limited Directors' Report (cont'd) For the financial year ended 31 March 2013 5

Share options (a)

ESOS 2000 Scheme Options to take up unissued shares During the prior financial years, the Company had an employee share option scheme (the "Employee Stock Option Scheme 2000" or the "ESOS 2000 Scheme") for the granting of non-transferable options to eligible employees. The Company had, at an extraordinary general meeting held on 29 July 2011, obtained a shareholders' mandate to terminate the ESOS 2000 Scheme and replace it with the Employee Share Option Scheme 2011 ("ESOS 2011 Scheme). Unissued shares under options and options exercised under the ESOS 2000 Scheme The number of outstanding options under the ESOS 2000 Scheme as at 31 March 2013 were as follows:-

Expiry date 08 July 2013 19 May 2014 02 January 2015 22 January 2016

(b)

Exercise price (S$) 0.190 0.143 0.060 0.076

Number of options 436,000 960,000 1,288,000 695,000

ESOS 2011 Scheme At the Company's extraordinary general meeting held on 29 July 2011, the Company obtained a shareholders' mandate for the ESOS 2011 Scheme for granting of non-transferrable options to eligible employees and directors, including certain executive directors who are also controlling shareholders of the Company. Options are granted for terms of up to 10 years to purchase the Company's ordinary shares ("shares") at the prevailing market price or at a discount of up to but not exceeding 20% of the prevailing market price of the Company's share on the relevant date of the grant of the options. The options, upon payment of its exercise price, are exercisable in numbers or percentages according to each grant made, beginning on the first or second anniversary and subsequent relevant anniversaries of the date of each grant or other option periods as granted by the Company. Options granted with a discount under the ESOS 2011 Scheme are subject to a longer vesting period (two (2) years) than those granted at the Market Price (one (1) year). Options to take up unissued shares

Pursuant to the ESOS 2011 scheme, the Company had, during FY2013, granted to: (i)

Leo Siang Kwong, the Chief Operating Officer of the Company, 6,000,000 share options exercisable for 6,000,000 shares. These share options are exercisable from 31 January 2014 to 30 January 2023 at an exercise price of S$0.02 per share option.

(ii)

James B Rathakrishna, Operations Director of the Company, 4,000,000 share options exercisable for 4,000,000 shares. These share options are exercisable from 26 February 2014 to 25 February 2023 at an exercise price of S$0.029 per share option.

Unissued shares under options and options exercised under the ESOS 2011 Scheme The number of outstanding options under the ESOS 2011 Scheme as at 31 March 2013 were as follows:Expiry date 01 September 2021 10 November 2021 30 January 2023 25 February 2023

Exercise price (S$) 0.0187 0.0166 0.0200 0.0290

Number of options 25,618,330 500,000 6,000,000 4,000,000

Stratech Systems Limited Directors' Report (cont'd) For the financial year ended 31 March 2013 5

Share options (cont'd) The Company's ESOS scheme are administered by the Remuneration Committee whose members are: Sajjad Ahmad Akhtar, Chairman (independent) Chew Hai Chwee, Member (independent) Lim Kim Choon, Member (independent) Further particulars of the options granted under the ESOS 2011 Scheme are set out in Note 16 to the financial statements.

Performance Share Scheme The Company established a performance share scheme (the "PS Scheme") on 4 June 2007. The performance share given to a particular participant under the PS Scheme will be determined at the discretion of the Remuneration Committee, who will take into account factors such as the participant's capability, scope of responsibility, skill, and vulnerability to leaving the employment of the Group. During the current financial year ended 31 March 2013, there was no performance shares awarded to employees. In the previous financial year ended 31 March 2012 4,324,114 performance shares were issued to certain eligible employees of the Company. The scheme is administered by the Remuneration Committee.

Audit and Risk Management Committee ("ARMC") The ARMC, regulated by a set of written terms of reference, comprises 3 members, all of whom are non-executive directors. The members of the ARMC were as follows: Chew Hai Chwee – Chairman (independent) Sajjad Ahmad Akhtar – Member (independent) Lim Kim Choon – Member (independent) The ARMC carried out its function in accordance with Section 201B(5) of the Singapore Companies Act. In performing those functions, the ARMC reviewed:

(i)

the effectiveness of the Group’s internal audit procedures and internal controls, including financial, operational, compliance and risk management;

(ii)

the audit plan of the Company's independent auditor and any recommendations on internal accounting control arising from the statutory audit;

(iii)

the assistance given by the Company's management to the independent auditor;

Stratech Systems Limited Directors' Report (cont'd) For the financial year ended 31 March 2013 7

Audit and Risk Management Committee (cont'd) (iv)

to review and discuss with the external auditor any suspected fraud, irregularity or suspected infringement of any Singapore law, rules or regulations which has or is likely to have a material impact on the Companyâ&#x20AC;&#x2122;s operating results or financial position and Managementâ&#x20AC;&#x2122;s response;

(v)

the statement of financial position of the Company and the consolidated statement of financial position and consolidated statement of comprehensive income, before approval by the Board, and to review significant accounting and reporting issues and also their impact on financial statements so as to ensure the integrity of the financial statements and any formal announcements relating to the Companyâ&#x20AC;&#x2122;s financial performance and recommend to the Board the acceptance of such financial statements;

The duties and functions performed by the ARMC are explained in more detailed in the Corporate Governance Report set out in this Annual Report of the Company. 8

Compliance with Rule 1207(10) of the Listing Manual of the Singapore Exchange Securities Trading Limited ("SGX-ST") The Board, with the concurrence of the ARMC, after carrying out a review, is of the opinion that the internal controls of the Group are adequate to address operational, financial and compliance risks. In arriving at the opinion, the Board is of the view that there is reasonable assurance in the internal controls of the Group to achieve the objectives set out below: (a)

effectiveness and efficiency of operations;

(b)

reliability of financial reporting; and

(c)

compliance with applicable laws and regulations.

With regards to the Company's internal control system, the Board notes that no system of internal controls and risk management can provide absolute assurance in this regard, or absolute assurance against the occurence of material errors, poor judgement in decision-making, human errors, losses, fraud or other irregularities. The Board, together with the ARMC and management, will continue to enhance and improve the existing internal control framework to identify and mitigate these risks.

Independent Auditors The independent auditors, LTC LLP, have expressed their willingness to accept re-appointment.

On behalf of the directors

David K.M. Chew Director

Leong Sook Ching Director

Singapore, 5 July 2013

Stratech Systems Limited Statement by Directors For the financial year ended 31 March 2013

In the opinion of the directors, (a)

the statements of financial position of the Company and the consolidated financial statements of the Group 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 March 2013, and of the results of the business, changes in equity and cash flows of the Group for the financial year then ended; and

(b)

as more fully described in note 2.4 to the financial statements, 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

David K.M. Chew Director

Leong Sook Ching Director

Singapore, 5 July 2013

Independent Auditor's Report To the Members of Stratech Systems Limited For the financial year ended 31 March 2013 Report on the Financial Statements We have audited the accompanying financial statements of Stratech Systems Limited (the "Company") and its subsidiaries (the "Group"), which comprise the statements of financial position of the Group and of the Company as at 31 March 2013, and the statement of comprehensive income, statement of changes in equity and statement of cash flows of the Group, for the financial year then ended, and a summary of significant accounting policies and other explanatory information.

Managementâ&#x20AC;&#x2122;s Responsibility for the Financial Statements Management is responsible for the preparation of financial statements that give a true and fair view in accordance with the provisions of the Singapore Companies Act (the "Act") and Singapore Financial Reporting Standards, and for devising and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair profit and loss accounts and balance sheets and to maintain accountability of assets.

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

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

Opinion In our opinion, the consolidated financial statements of the Group and the statement of financial position of the Company are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 March 2013, and the results, changes in equity and cash flows of the Group for the financial year ended on that date.

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

LTC LLP Public Accountants and Chartered Accountants

Singapore, 5 July 2013

Statements of Financial Position As at 31 March 2013 Group Note Assets Non-current assets Plant and equipment Investments in subsidiaries Investment in an associated company Intangible assets

6 7A 7B 8

Current assets Inventories Trade and other receivables Fixed deposits Cash and bank balances

9 10 10

Total assets

Company FY2013 S$'000

FY2013 S$'000

FY2012 S$'000

616 5,993 6,609

774 7,385 8,159

616 876 5,993 7,485

774 876 7,385 9,035

89 5,900 11,733 37 17,759

141 6,140 11,103 43 17,427

89 4,554 11,733 22 16,398

141 9,807 11,103 21 21,072

24,368

25,586

23,883

30,107

Liabilities Current liabilities Borrowings Trade and other payables Deferred development grant Provisions

11 12 15 13

11,360 7,996 3,750 23,106

9,317 11,067 55 4,162 24,601

11,360 7,822 3,750 22,932

9,317 10,984 55 4,162 24,518

Non-current liabilities Borrowings

147 147

178 178

147 147

178 178

23,253

24,779

23,079

24,696

1,115

807

804

5,411

Total liabilities Net assets Equity Capital and reserves attributable to equity holders of the Company Share capital Share option reserve Translation reserve Accumulated losses Total equity

109,184 520 (223) (108,366)

99,508 353 (244) (98,810)

1,115

807

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

109,184 520 (108,900) 804

99,508 353 (94,450) 5,411

Consolidated Statement of Comprehensive Income For the financial year ended 31 March 2013 Group

Revenue Cost of goods and services sold

Note

FY2013 S$'000

FY2012 S$'000

2,543 (1,757)

5,787 (4,366)

Gross profit

786

Other operating income Selling and distribution expenses Administrative expenses Other operating expenses Finance costs

Operating expenses, net

1,421

1,125 (999) (6,398) (3,390) (482)

413 (744) (6,775) (5,792) (594)

(10,144)

(13,492)

Loss before income tax

(9,358)

(12,071)

Income tax expense

(9,358)

(12,071)

Net loss for the year Other comprehensive income: Item that may be reclassified subsequently to profit or loss: Foreign currency translation relating to financial statements of foreign subsidiaries Other comprehensive income for the year, net of tax

Total comprehensive loss for the year

(9,337)

(12,068)

Net loss attributable to shareholders of the Company

(9,358)

(12,071)

Total comprehensive loss attributable to shareholders of the Company

(9,337)

(12,068)

(0.77)

(1.37)

Loss per share (cents) - basic and diluted

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

Consolidated Statement of Changes in Equity For the financial year ended 31 March 2013 Share capital S$'000

Share option reserve S$'000

Translation reserve

Accumulated

Total

S$'000

(244)

(98,810)

(9,358)

(9,337)

9,193 (209)

losses S$'000

Group As at 1 April 2012 Total comprehensive loss for the year

99,508

353

Share issue proceeds

9,193

Share issue expenses

Conversion of shares during the financial year

483

Reversal of equity-settled share options

(11)

Employees' share option expenses

178

As at 31 March 2013

109,184

Share capital S$'000

520

Share option reserve S$'000

(209) -

807

483 11

178

(223)

(108,366)

1,115

Translation reserve

Accumulated

S$'000

(247)

(86,952)

11,942

(12,071)

(12,068)

Total

losses S$'000

Group As at 1 April 2011

98,692

449

Total comprehensive loss for the year

Share based payment to a director

721

Employees' performance share expenses

Reversal of equity-settled share options

(213)

213

Employees' share option expense

117

99,508

353

(98,810)

807

As at 31 March 2012

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

(244)

Consolidated Statement of Cash Flows For the financial year ended 31 March 2013 Group FY2013 S$'000

FY2012 S$'000

Cash flow from operating activities Loss before income tax Adjustments: Amortisation of deferred development grant Amortisation of intangible assets Bad debts written off Depreciation expense Intangible assets written off Loss on disposal of plant and equipment Equity-settled share options expenses granted to directors and employees Equity-settled remuneration payment to a director Employee performance share expense Provision for doubtful trade and other receivables Provision for impairment of accrued revenue (Reversal)/Provision for project costs Provision for foreseeable project loss Provision for litigation Unrealised foreign exchange loss Interest income Finance costs

(9,358)

(12,071)

(55) 2,874 120 161 178 100 (154) 1,637 21 (38) 482

(109) 2,678 233 108 157 88 117 299 95 1,527 343 154 470 64 3 (34) 594

Operating cash flow before working capital changes

(4,032)

(5,284)

Inventories Trade and other receivables Trade and other payables

52 (42) (3,794)

26 1,955 2,647

Cash used in operations

(7,816)

(656)

(480) 16

(462) 7

Net cash used in operating activities

(8,280)

(1,111)

Cash flow from investing activities Additions to intangible assets Additions to plant and equipment

(1,482) (3)

(2,520) (507)

Net cash used in investing activities

(1,485)

(3,027)

Interest paid Interest received

Consolidated Statement of Cash Flows For the financial year ended 31 March 2013 Group FY2013 S$'000

FY2012 S$'000

Cash flow from financing activities Repayment to hire purchase creditor (Decrease)/increase in bills payable Proceeds from advance from a director-cum-shareholder Proceeds from loan from financial institution Repayment of loan from financial institution Fixed deposit pledged as security for banking facilities Proceeds from rights issue Proceeds from placement shares Share issue expenses Proceeds from issuance of convertible bonds Deposits received for subscription of shares

(29) (673) 260 (650) 1,975 2,213 3,280 (209) 1,242 2,350

(27) 673 4,316 2,150 (1,779) (1,250) -

Net cash generated from financing activities

9,759

4,083

Currency realignment on changes in cash and cash equivalents Net decrease in cash and cash equivalents Cash and cash equivalents at start of the year

Cash and cash equivalents at end of the year (Note 10)

(6) 43

(55) 98

Major non-cash transactions: The Company issued renounceable non-underwritten Rights issue of up to 328,485,455 new ordinary shares in the capital of the Company at an issue price of S$0.018 for each Rights share on the basis of one (1) rights share for every three (3) existing ordinary shares in the capital of the Company. The Directors cum shareholders took up 208,550,666 of these rights amounting to S$3,753,912 in September 2012 and this amount was deducted from the money owed to the Directors.

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

Notes to the Financial Statements for the financial year ended 31 March 2013 1.

General information The Company (Registration No. 199608251Z) is incorporated and domiciled in Singapore with its principal place of business and registered office at 31 International Business Park, #02-02 Creative Resource, Singapore 609921. The Company is listed on the mainboard of the Singapore Exchange Securities Trading Limited. The Company is principally engaged in the design, development, integration, implementation, maintenance and project management of information technology and advanced technology systems. The Company (together with its subsidiaries, the "Group") delivers large-scale complex, real-time, mission critical systems in areas of intelligent Vision, intelligent Transport Systems and e-Systems for governments and businesses, serving industries such as aerospace and defence, financial services, government, healthcare, homeland security and transportation (air, sea and land).

The principal activities of the subsidiaries are disclosed in Note 7A to the financial statements. The consolidated financial statements of the Group for the financial year ended 31 March 2013 and the statement of financial position of the Company as at 31 March 2013 were authorised for issue in accordance with a resolution of the directors on the date of the Statement of Directors.

Basis of preparation and summary of significant accounting policies 2.1

Basis of preparation

The consolidated financial statements of the Group and the statement of financial position of the Company have been prepared in accordance with Singapore Financial Reporting Standards (FRS). The preparation of the consolidated financial statements in conformity with FRS requires management to exercise its judgement in the process of applying the Group's accounting policies. It also requires the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expense during the year. Although these estimates are based on management's best knowledge of current events and actions, actual results may ultimately differ from those estimates. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 3. The financial statements are presented in Singapore Dollars (S$ or SGD) and all values are rounded to the nearest thousand (S$'000) except where otherwise indicated. 2.2

Interpretations and amendments to published standards effective in FY2013

The accounting policies have been consistently applied by the Group and the Company and are consistent with those used in the previous financial year except that in the current financial year, the Group has adopted all of the new and revised FRS and Interpretations of FRS ("INT FRS") that are mandatory for application for accounting periods beginning on or after 1 April 2012. Changes to the Group's accounting policies have been made as required, in accordance with the relevant transitional provisions in the respective FRS and INT FRS. The adoption of these standards and interpretations did not result in substantial changes to the Group's and Company's accounting policies and had no material effect on the amounts reported for the current or prior financial year.

2.3

New or revised accounting standards and interpretations

Following are the mandatory FRSs and amendments to FRS that have been published by the Accounting Standards Council as at the date of authorisation of these financial statements by the Company's Directors, and may be relevant for the Group's and/or Company's financial year beginning on or after 1 April 2013 and later financial years and which the Group/Company has not early adopted:

Notes to the Financial Statements for the financial year ended 31 March 2013 2.3

New or revised accounting standards and interpretations (cont'd) ●

FRS 110 Consolidated Financial Statements (effective for annual periods beginning on or after 1 January 2014)

●

FRS 112 Disclosure of Interests in Other Entities (effective for annual periods beginning on or after 1 January 2014)

●

FRS 113 Fair Value Measurement (effective for annual periods beginning on or after 1 January 2013)

●

FRS 19 (Revised) Employee Benefits (effective for annual periods beginning on or after 1 January 2013)

●

FRS 27 (Revised 2011) Separate Financial Statements (effective for annual periods beginning on or after 1 January 2014)

●

Amendments to FRS 1 Presentation of Items of Other Comprehensive Income (effective for annual periods beginning on or after 1 July 2012)

●

Amendments to FRS 32 Offsetting Financial Assets and Financial Liabilities (effective for annual periods beginning on or after 1 January 2014)

●

Amendments to FRS 107 Disclosures: Offsetting Financial Assets and Financial Liabilities (effective for annual periods beginning on or after 1 January 2013)

●

Improvements to FRSs 2012 (effective for annual periods beginning on or after 1 January 2013)

As at the date of authorization of these financial statements, the possible impact that the application of the above FRSs and amendments to FRS will have on the Group's and Company's financial statements in their period of mandatory initial application is not known as management has not made an assessment on the possible impact.

2.4

Going Concern

As at 31 March 2013, the Group recorded a net loss of S$9.36 million (FY2012 : net loss of S$12.07 million) and its total current liabilities also exceeded its total current assets by S$5.35 million (FY2012: S$7.17 million). The ability of the Group and the Company to continue as a going concern is dependent on factors including: (a)

the Company and the Group being able to secure new contracts and projects;

(b)

the Company and the Group continuing to receive adequate financial support from bankers and financial institutions in relation to the banking and credit facilities made available to the Group;

(c)

sufficient funding being made available by controlling shareholders of the Company; and

(d)

successful fund raising by the Company (Note 28).

Notes to the Financial Statements for the financial year ended 31 March 2013 2.4

Going Concern (cont'd)

The financial statements have been prepared on the assumption that the Company and the Group will continue as going concern. This assumption is premised on future events, the outcome of which is uncertain. The Directors of the Company are of the view that it is appropriate for the financial statements to be prepared on a going concern basis having regard to the support received from a director and controlling shareholder of the Company and the measures and proposed measures to raise additional working capital. In the event that the Company and the Group are unable to continue in operational existence for the foreseeable future, adjustments may have to be made to reflect the situation that assets may need to be realised other than in the amounts at which they are currently recorded in the statements of financial position. In addition, the Group and the Company may have to reclassify non-current assets and non-current liabilities as current assets and current liabilities respectively. No such adjustments have been made to these financial statements.

2.5

Group Accounting

(i)

Subsidiaries

Subsidiaries are entities (including special purpose entities) over which the Group has power to govern their financial and operating policies so as to obtain benefits from its activities, generally accompanied by a shareholding giving rise to a majority 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.

Subsidiaries are consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date on which control ceases.

Notes to the Financial Statements for the financial year ended 31 March 2013 2.5

Group Accounting (cont'd)

(i)

Subsidiaries (cont'd)

In preparing the consolidated financial statements, transactions, balances and unrealised gains on transactions between group entities are eliminated. Unrealised losses are also eliminated but are considered an impairment indicator of the assets transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. Non-controlling interest are that part of the net results of operations and of net assets of a subsidiary attributable to the interests which are not owned directly or indirectly by the equity holders of the Group. Acquisitions The acquisition method of accounting is used to account for business combinations by the Group. The consideration transferred for the acquisition of a subsidiary or business comprises the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred also includes the fair value of any contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary. Investments in subsidiaries are carried at cost less accumulated impairment losses in the Company's statement of financial position. Acquisition-related costs are expenses as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree at the date of acquisition either at fair value or at the non-controlling interest's proportionate share of the acquiree's net identifiable assets. The excess of (i) the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the (ii) fair value of the net identifiable assets acquired is recorded as goodwill. Disposals When a change in the Group ownership interest in a subsidiary results in a loss of control over the subsidiary, the assets and liabilities of the subsidiary including any goodwill are derecognised. Amounts previously recognised in profit or loss in respect of that entity are also reclassified to profit or loss or transferred directly to retained earnings if required by a specific Standard. Any retained equity interest in the entity is remeasured at fair value. The difference between the carrying amount of the retained interest at the date when control is lost and its fair value is recognised in profit or loss. (ii)

Associated Company

Associated company (or "Associates") are entities over which the Group has significant influence, but not control, and generally accompanied by a shareholding giving rise to between and including 20% and 50% of the voting rights. Investments in associated companies are accounted for in the consolidated financial statements using the equity method of accounting less impairment losses, if any. Acquisitions Investments in associated company are initially recognised at cost. The cost of an acquisition is measured at fair value of the asset given, equity instruments issued or liabilities incurred or assumed at the date of exchange, plus cost directly attributable to the acquisition.

Notes to the Financial Statements for the financial year ended 31 March 2013 2.5

Group Accounting (cont'd)

Equity method of accounting In applying the equity method of accounting, the Group share of its associated company's post-acquisition profits or losses is recognised in profit or loss and its share of post-acquisition other comprehensive income is recognised in other comprehensive income. These post-acquisition movements and distributions received from the associated company are adjusted against the carrying amount of the investment. When the Group's share of losses in an associated company equals or exceeds its interest in the associated company, including any other unsecured receivables from or obligations made on behalf of the associated company, the Group does not recognise further losses. Unrealised gains on transactions between the Group and its associated company are eliminated to the extent of the Group's interest in the associated company. Unrealised losses are also eliminated but are considered an impairment indicator of that interest. Accounting policies of associated company have been changed where necessary to ensure consistency with the policies adopted by the Group. Disposal Investments in associated company are derecognised when the Group loses significant influence. Any retained interest in the entity is remeasured at its fair value. The difference between the carrying amount of the retained interest at the date when the significant influence is lost and its fair value is recognised in profit or loss.

2.6

Plant and equipment

Measurement (i)

Plant and equipment Plant and equipment are initially recognised at purchase cost and subsequently carried at cost less accumulated depreciation and accumulated impairment loss, if any.

(ii)

Components of cost The cost of plant and equipment initially recognised includes expenditure that is directly attributable to the acquisition of the items. Dismantlement, removal or restoration costs are included as part of the cost of plant and equipment if the obligation for dismantlement, removal or restoration is incurred as a consequence of acquiring or using the asset.

Depreciation Depreciation on plant and equipment are calculated using the straight-line method to allocate their respective depreciable amounts over their estimated useful lives. The estimated useful lives are as follows: Estimated useful lives Computers Furniture and fittings Motor vehicles Office equipment Renovation

5 years 5 years 5 years 5 to 10 years 5 years

The residual values and useful lives of plant and equipment are reviewed and adjusted, as appropriate, at the end of each reporting period. Fully depreciated plant and equipment still in use are retained in the financial statements.

Notes to the Financial Statements for the financial year ended 31 March 2013

2.6

Plant and equipment (cont'd)

Subsequent expenditure Subsequent expenditure relating to plant and equipment that has already been recognised is added to the carrying amount of the asset when it is probable that future economic benefits, in excess of the standard of performance of the asset before the expenditure was made, will flow to the Group and the cost can be reliably measured. Other subsequent expenditure is recognised as an expense during the financial year in which it is incurred.

Disposal On disposal of plant and equipment, the difference between the net disposal proceeds and its carrying amount is recognised in profit or loss.

2.7

Intangible assets (development expenditure)

Expenditure on software and/or product development activities is recognised as an expense in the period in which it is incurred. It is recognised in the statements of financial position only if all of the following conditions are met: ●

The technical feasibility of the Group's ability in completing the intangible asset so that it will be available for use or sale;

●

The Group's intention to complete the intangible asset and use or sell it;

●

The Group's ability to use or sell the intangible asset;

●

How the intangible asset will generate probable future economic benefits for the Group;

●

The availability of adequate technical, financial and other resources of the Group to complete the development and to use or sell the intangible asset; and

●

The Group's ability to measure reliably the expenditure attributable to the intangible asset during its development.

Software and/or product development expenditure are amortised on a straight-line basis over their estimated useful lives of 3 to 5 years.

2.8

Intangible assets (patents and trademarks)

Patents and trademarks are initially measured at purchase cost and subsequently carried at cost less accumulated amortisation and accumulated impairment loss, if any. These costs are amortised to profit or loss using the straight-line basis over an estimated useful life of 5 years.

2.9

Impairment of non-financial assets

Intangible assets Plant and equipment Investment in subsidiaries and associated company The carrying amounts of the Group's non-financial assets are reviewed for impairment whenever there is any objective evidence or indication that these assets may be impaired. If any such indication exists, the recoverable amount of the asset is estimated to determine the amount of impairment loss.

Notes to the Financial Statements for the financial year ended 31 March 2013 2.9

Impairment of non-financial assets (cont'd)

Recoverable amount (i.e., the higher of fair value less cost to sell and value in use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. If that is the case, the recoverable amount is determined for the cash generating unit ("CGU") to which the asset belongs. 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 assessment of the time value of money and the risks specific to the asset.

If the recoverable amount of the asset or CGU is estimated to be less than its carrying amount, the carrying amount of the asset or CGU is reduced to its recoverable amount. The difference between the carrying amount and recoverable amount is recognised as an impairment loss in profit or loss unless the asset is carried at a revalued amount, in which case, such impairment loss is treated as a revaluation decrease. An impairment loss for an asset (other than goodwill) is reversed if, and only if, there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognised. The carrying amount of this asset (other than goodwill) is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised for the asset in prior years. A reversal of impairment loss for an asset (other than goodwill) is recognised in profit or loss, unless the asset is carried at a revalued amount, in which case, such reversal is treated as a revaluation increase. However, to the extent that an impairment loss on the same revalued asset was previously recognised in profit or loss, a reversal of that impairment is also recognised in profit or loss.

2.10

Financial assets

Financial assets are recognised on the statements of financial position when, and only when, the Group becomes a party to the contractual provision of the financial instruments. They are initially recognised at fair value plus transaction costs. The Group classifies its financial assets as loans and receivables. The classification depends on the purpose for which the assets were acquired. Management determines the classification of its financial assets at initial recognition. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are presented as current assets, except for those maturing later than 12 months after the end of the reporting period which are presented as non-current assets. Loans and receivables are presented as “trade and other receivables”, "fixed deposits" and “cash and bank balances” on the statement of financial position.

Regular way purchases and sales of financial assets are recognised on trade-date – the date on which the Group commits to purchase or sell the asset.

Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred whereby the Group has transferred substantially all risks and rewards of ownership. On disposal of a financial asset, the difference between the carrying amount and the sale proceeds is recognised in profit or loss. Any amount in the fair value reserve relating to that asset is transferred to profit or loss.

Loans and receivables are subsequently carried at amortised cost using the effective interest method.

Notes to the Financial Statements for the financial year ended 31 March 2013

2.11

Impairment of financial assets

The Group assesses at each end of the reporting period whether there is any objective evidence that a financial asset or a group of financial assets is impaired and recognises an allowance for impairment when such evidence exists. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy, and default or significant delay in payments are objective evidence that these financial assets are impaired. The carrying amount of these assets is reduced through the use of an impairment allowance account which is calculated as the difference between the carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. When the asset becomes uncollectible, it is written off against that allowance account. Subsequent recoveries of amounts previously written off are recognised against the same line item in profit or loss.

The impairment allowance account is reduced through the profit or loss in a subsequent period when the amount of impairment loss decreases and the related decrease can be objectively measured. The carrying amount of the asset previously impaired is increased to the extent that the new carrying amount does not exceed the amortised cost, had no impairment been recognised in prior periods.

2.12

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and those overheads that have been incurred in bringing the inventories to their present location and condition. Cost is calculated using the first-in-first-out method. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.

2.13

Trade and other payables

Trade and other payables are initially recognised at fair value, and subsequently carried at amortised cost using the effective interest method.

2.14

Cash and cash equivalents

For the purpose of presentation in the consolidated statement of cash flows, cash and cash equivalents include cash on hand and deposits with financial institutions, which are subject to an insignificant risk of change in value and bank overdrafts. Bank overdrafts are presented as current borrowings on the statements of financial position.

2.15

Loans and borrowings

Loans and borrowings are presented as current liabilities unless the Group has an unconditional right to defer settlement for at least 12 months after the end of the reporting period, in which case they are presented as non-current liabilities.

Loans and borrowings are initially recognised at fair value (net of transaction costs) and subsequently carried at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest method.

2.16

Fair value estimation of financial assets and liabilities

The fair value of current financial assets and liabilities carried at amortised cost approximate their carrying amounts.

Notes to the Financial Statements for the financial year ended 31 March 2013

2.17

Provisions

Provisions are recognised when the Group has a present legal or contractual obligation as a result of a past event, and it is probable that the Group will be required to settle that obligation. Provisions are measured at the directors' best estimate of the expenditure required to settle the obligation at the end of the reporting period, and are discounted to present value where the effect is material.

2.18

Share-based payments

The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value at the date of grant. The fair value determined at date of grant of a equity-settled share-based payment is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest and adjusted for the effect of non market-based vesting conditions.

Fair value is measured using the Black-Scholes pricing model. The expected life used in the model has been adjusted, based on management's best estimate for the effects of non-transferability, exercise restrictions and behavioral considerations. When the options are exercised, the proceeds received (net of transaction costs) and the related balance previously recognised in the share option reserve are credited to share capital account, when new ordinary shares are issued.

2.19

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts and sales related taxes. The Group recognises revenue when the amount of revenue and related costs can be reliably measured, when it is probable that the collectability of the related receivables is reasonably assured and when the specific criteria for each of the Group's activities are met as follows: â&#x2014;?

Revenue from sales of goods is recognised when goods are delivered and title has passed.

â&#x2014;?

Revenue from projects is recognised by reference to the stage of completion of the contract activity at the end of the reporting period (Note 3.1.1); and in respect of third party component, revenue is recognised equivalent to the cost without any mark up when goods and services are delivered, installed, or used in the project.

â&#x2014;?

Interest income is accrued on a time proportionate basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount.

2.20

Employee defined contribution plan

As required by law, the Company and relevant subsidiaries make contributions to state managed retirement schemes, such as the Central Provident Fund ("CPF"). CPF contributions are recognised as a compensation expense in the same period as the employment that gives rise to the contributions.

2.21

Employee leave entitlements

Employee entitlements to annual leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave as a result of services rendered by employees up to the end of the reporting period.

Notes to the Financial Statements for the financial year ended 31 March 2013

2.22

Income tax

Income tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on the taxable profit for the year. Taxable profit differs from profit as reported in profit or loss because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are not taxable or tax deductible.

The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted in countries where the Company and its subsidiaries operate at the end of the reporting period. Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investment in subsidiaries and associated company, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised. Deferred tax is charged or credited to profit or loss, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

2.23

Leases

Leases of plant and equipment are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee at the end of the lease period. All other leases are classified as operating leases. Assets held under finance leases are recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the statements of financial position as a finance lease obligation. Lease payments are apportioned between financial charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to profit or loss. Rental payable under operating leases are charged to profit or loss on a straight-line basis over the term of the relevant lease.

2.24

Borrowing costs

Borrowing costs are recognised in profit or loss using the effective interest method.

Notes to the Financial Statements for the financial year ended 31 March 2013

2.25

Currency translation

Items included in the financial statements of each entity in the Group are measured using the currency of the primary economic environment in which the entity operates (“functional currency”). The financial statements are presented in Singapore Dollars, which is the Company’s functional and presentation currency.

Transactions in a currency other than the functional currency (“foreign currency”) are translated into the functional currency using the exchange rates at the dates of the transactions. Currency translation differences from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at the closing rates at the end of the reporting period are recognised in profit or loss, unless they arise from borrowings in foreign currencies, other currency instruments designated and qualifying as net investment hedges and net investment in foreign operations. Those currency translation differences are recognised in the translation reserve in the consolidated financial statements and transferred to profit or loss as part of the gain or loss on disposal of the foreign operation. The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: ●

Assets and liabilities are translated at the closing exchange rates at the date of the statement of financial position;

●

Income and expenses are translated at average exchange rates (unless the average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case, income and expenses are translated using the exchange rates at the dates of the transactions); and

●

All resulting currency translation differences are recognised in the translation reserve.

2.26

Government grant

Government grant is recognised at its fair value where there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. When the grant relates to an expense item, it is recognised in profit or loss over the period necessary to match it on a systematic basis to the cost that it is intended to compensate. Where the grant relates to an asset, the fair value is recognised as deferred capital grant in the statement of financial position and is amortised to profit or loss over the expected useful life of the relevant asset by equal annual installments.

2.27

Segment reporting

A business segment is a distinguishable component of the Group engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is a distinguishable component of the Group engaged in providing products or services within a particular economic environment that is subject to risks and returns that are different from those of segments operating in other economic environments. For management purposes, the Group is organised into operating segments based on their products and services. Additional disclosures on each of these segments are shown in Note 19, including factors used to identify the reportable segments and the measurement basis of segment information.

2.28

Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of new ordinary shares are charged directly to the accumulated losses account.

Notes to the Financial Statements for the financial year ended 31 March 2013 3.

Critical accounting judgements and key sources of estimation uncertainty 3.1

Critical judgements in applying the entity's accounting policies

In the process of applying the entity's accounting policies, which are described in the notes above, management will have made judgements that would have significant effect on the amounts recognised in the financial statements (apart from those involving estimations, which are dealt with further below) mostly from the following.

3.1.1

Revenue recognition

Revenue from projects is recognised in the financial statements by reference to the stage of completion of the contract activity at the end of the reporting period, which is measured by the percentage of actual manpower cost to the estimated total manpower cost required for the project (Note 2.19).

Where the outcome of a contract cannot be reliably estimated, contract costs are recognised as revenue to the extent of costs incurred. Management has exercised its best judgement based on its industry experience and expertise in arriving at the revenue recognised as measured above. The accrued revenue as at 31 March 2013 was S$2.1 million (FY2012: S$2.1 million).

3.1.2

Capitalisation of development expenditure, patents and trademarks

As described in the notes to the financial statements, it is the Group's policy to capitalise development expenditure, patents and trademarks related to its advanced technology systems. Management is satisfied that it is probable that the expenditure so capitalised will generate future economic benefits.

The carrying amounts of development expenditure and patents and trademarks at 31 March 2013 were S$5.6 million and S$0.4 million, respectively (FY2012: S$7.0 million and S$0.4 million, respectively).

3.2

Key sources of estimation uncertainty

The key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, 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.

3.2.1

Impairment of tangible and intangible assets

Management considered the recoverability of the Group's tangible and intangible assets at the end of the reporting period. Changes in the expected level of usage, technological development, level of competition, and economic climate could impact the economic useful lives and the recoverable amounts of these assets and, therefore, future depreciation and amortisation charges could be revised or impairment charges could be recorded.

There was no impairment of tangible and intangible assets at the end of the reporting period.

Notes to the Financial Statements for the financial year ended 31 March 2013 3.

Critical accounting judgements and key sources of estimation uncertainty (cont'd) 3.2.2

Recognition of equity-settled share-based payments

FRS 102 "Share-based Payment" requires the recognition of equity-settled share-based payments at fair value at the date of grant. The fair value of share-based payment of the Group was calculated using the Black-Scholes pricing model and certain assumptions were made to variables used in the pricing model. These included the expected volatility and life of options, the risk-free rate of return used, and the expected dividend yield in the future. These variables used were based on management's best estimate of the effects of non-transferability, exercise restrictions, and behavioral considerations of option holders. Future changes in variables like interest rates, the Company's share price, and future changes in circumstances like the Group's performance and stock market performance will result in differences between the estimated and the actual variables used in the calculations and, hence, would have resulted in different fair value amounts calculated at the initial recognition of these options under FRS.

3.2.3

Allowances for bad and doubtful receivables and impairment of accrued revenue (Note 9)

The policy for allowances for bad and doubtful receivables of the Group is based on management's evaluation of collectability and aging analyses of accounts. A considerable amount of judgement is required in assessing the ultimate realisation of these receivables, including the current credit-worthiness and the past collection history of each customer. If the financial conditions of customers of the Group were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. Except for the bad debts written off amounting to S$120,000 (FY2012: S$233,000) during the financial year, there was no allowance for doubtful trade, accrued revenue and other receivables recognised in the current financial year (FY2012: S$1.9 million). The allowance of S$1.9 million made in FY2012 was made pursuant to the Company's announcement made on 7 June 2012 in relation to the legal action that the Company intends to pursue relating to a project to protect its rights and to recover monies for work done, services rendered, goods delivered and damages suffered.

3.2.4

Allowances for slow moving inventory

Inventory consisted mainly of standby spare-parts for the Group's projects. Upon management's continual assessment, allowance for slow-moving inventories amounting to S$0.07 million (FY2012: Nil) has been provided for.

3.2.5

Provision for foreseeable loss (Note 13 and Note 24)

After management's risk assessment of all its projects, there was no provision made for foreseeable project loss during the financial year (FY2012: S$0.7 million). The provision for foreseeable project loss recognised in FY2012 comprised of provision for liquidation damages S$0.5 million and provision for project costs S$0.2 million. The provision for liquidation damages was derived based on management's estimates taking into consideration commercial practices and the probable quantum of future cash outlay to settle the liabilities.

Notes to the Financial Statements for the financial year ended 31 March 2013 4.

Financial risk management 4.1

Financial risk factors

The Group's activities expose it to a variety of financial risks such as market risk, credit risk and liquidity risk. The Group's overall business strategies, tolerance of risk and general risk management philosophy are determined by directors in accordance with prevailing economic and operating conditions.

The main risks arising from the Group's financial instruments during the year were interest rate risk, liquidity risk, currency risk and credit risk. The Board reviewed and agreed policies for managing each of these risks and they are summarised below:

4.2

Credit risk

Credit risk is the risk that companies and other parties would be unable to meet their obligations to the Group resulting in financial loss to the Group. The Group manages such risk by dealing with a diversity of credit-worthy counterparties to mitigate any significant concentration of credit risk. Credit policy includes assessing and evaluation of existing and new customers' credit reliability and monitoring of receivable collections. The Group's trade receivables comprise 4 debtors (FY2012: 1 debtor) that individually represented more than 5% of trade receivables at the year-end. The Group places its cash and cash equivalents with credit-worthy institutions. The maximum exposure to credit risk in the event that the counterparties fail to perform their obligations at the year-end in relation to each class of financial assets is the carrying amount of these assets in the statements of financial position (Note 9). Financial assets that are neither past due nor impaired: Bank deposits that are neither past due nor impaired are mainly deposits with banks with high credit-ratings assigned by international credit-rating agencies. Trade receivables that are neither past due nor impaired are substantially debtors with good collection track records with the Group.

Financial assets that are past due and/or impaired:

Save as disclosed, there was no other class of financial assets that was past due and/or impaired at the year-end.

The aged analysis of trade receivables past due but not impaired was as follows: Group FY2013 S$'000

FY2012 S$'000

Not past due Past due 0 to 3 months Past due over 6 months

101 186 1,499

52 53 1,338

At end of the year

1,786

1,443

Notes to the Financial Statements for the financial year ended 31 March 2013 4.

Financial risk management (cont'd) 4.3

Currency risk

The Group operates in Asia with dominant operations in Singapore. The Company and entities in the Group regularly transact in currencies other than their respective functional currencies ("foreign currencies") such as United States Dollar (USD), Euro (EUR), Hong Kong Dollar (HKD), Great Britain Pound Sterling (GBP) and Japanese Yen (JPY).

Currency risk arises when transactions are denominated in foreign currencies. The Group does not use financial derivatives to hedge foreign currency risk. To manage the currency risk, companies within the Group manage this risk as far as possible by natural hedges of matching assets and liabilities. At the same time, the Group also maintains foreign currency bank accounts for operating purposes.

In addition, the Group is exposed to currency translation risk on the net assets in foreign operations. The Group's currency exposure based on the information provided to key management is as follows: Group As at 31 March 2013 Financial assets

SGD

USD

EUR

HKD

GBP

JPY

Total

S$'000

11,770

3,701

15,471

Cash and cash equivalents, fixed deposits and other short-term deposits

11,763

2,365

752

560

14,128

758

560

Trade and other receivables and other current assets

Financial liabilities Trade and other payables and borrowings

(20,752)

(74)

(25)

(2,151)

(10)

(4)

(23,016)

(6,624)

684

535

(2,150)

(4)

(7,545)

Less: Net financial liabilities denominated in the respective entities' functional currencies

6,624

(18)

666

535

(2,150)

6,606 (4)

(939)

Notes to the Financial Statements for the financial year ended 31 March 2013 4.

Financial risk management (cont'd) 4.3

Currency risk (cont'd)

Group As at 31 March 2012 Financial assets

SGD

USD

EUR

HKD

GBP

JPY

Total

S$'000

Cash and cash equivalents, fixed deposits and other short-term deposits

11,122

11,146

Trade and other receivables and other current assets

2,471

916

363

13,593

939

363

(21,346)

(38)

(17)

(2,901)

(17)

(7,753)

901

346

(2,900)

(17)

3,771

14,917

Financial liabilities Trade and other payables and borrowings

(24,319) 21

(9,402)

(1,681)

Less: Net financial liabilities denominated in the respective entities' functional currencies

7,753

(32)

869

346

(2,900)

(17)

7,721

Notes to the Financial Statements for the financial year ended 31 March 2013 Sensitivity analysis If the USD, EUR and HKD vary against the SGD by 5% (2012: 5%) respectively, with all other variables including tax rate being held constant, the effect on the total profit will be as follows: Increase/(decrease) Group FY2013 S$'000

FY2012 S$'000

USD against SGD - Strengthen - Weaken

33 (33)

43 (43)

EUR against SGD - Strengthen - Weaken

27 (27)

17 (17)

HKD against SGD - Strengthen - Weaken

(108) 108

(145) 145

GBP against SGD - Strengthen - Weaken

1 (1)

(1) 1

JPY against SGD - Strengthen - Weaken

1 (1)

Notes to the Financial Statements for the financial year ended 31 March 2013 4.

Financial risk management (cont'd) 4.4

Interest rate risk

Interest rate risk is the adverse financial effect that changes in interest rates might have on the Group's financial conditions and results. The primary sources of the Group's interest rate risk during the year were its borrowings from a bank and other financial institutions and leasing arrangements in Singapore. The Group's policy was to obtain the most favourable interest rates available. The Group had cash balances placed with a reputable bank as at year-end. The Group managed its interest rate risk on its interest income by placing the cash balances in applicable maturities and interest rate terms. The financial assets and liabilities of the Group as at year-end were non-interest bearing except for cash and bank balances and borrowings. The Group's cash and bank balances and borrowings during the year were at variable interest rates for 6 months or less. The Groupâ&#x20AC;&#x2122;s and the Companyâ&#x20AC;&#x2122;s borrowings at variable rates, upon which effective hedges have not been entered into, are denominated mainly in SGD. If the SGD interest rates increased/decreased by 0.5% (FY2012: 0.5%) with all other variables including the tax rate being held constant, the net profit would be lower/higher by S$0.04 million (FY2012: S$0.05 million) as a result of higher/lower interest expense on these borrowings.

4.5

Liquidity risk

Prudent liquidity management implies maintaining sufficient cash and the availability of funding through an adequate amount of committed credit facilities. The Group maintains sufficient cash balances to provide flexibility in meeting its day to day funding requirements and has managed its tight cash situation via various measures including fund raising, loans and advances from directors, and others. As mentioned in note 2.4 (d) and 28, the Company had, subsequent to the financial year in first quarter of FY2014, made a placement of 150 million new shares to raise S$3.53 million in gross proceeds to finance the Group's working capital and operations and improve its liquidity. The Company is continuing to evaluate various strategies to improve the cash flow of the Group, which include fund raising through the involvement of strategic investors and financiers and increased efforts in obtaining new contracts. Other than the non-current finance lease portion, the Group's trade and other payables and bank borrowings were payable within 12 months from the year-end.

Notes to the Financial Statements for the financial year ended 31 March 2013 4.

Financial risk management (cont'd) 4.5

Liquidity risk (cont'd)

The Group's financial liabilities based on the remaining period at the end of the reporting period to the contractual maturity date based on contractual undiscounted cash flows are as follows:

Less than one year Trade and other payables Borrowings

Between 2 to 5 years Borrowings

Group FY2013 S$'000

FY2012 S$'000

7,996 10,611 18,607

11,067 9,328 20,395

164

206

18,771

20,601

Group FY2013 S$'000

FY2012 S$'000

Balances due within 12 months equal their carrying amounts as the impact of discounting is not significant.

Compensation of directors and key management personnel The remuneration of directors and other members of key management during the year was as follows:

Short-term benefits Share-based payments (Note 16)

The remuneration of directors is disclosed in Note 21.

1,362 278

1,673 422

1,640

2,095

Notes to the Financial Statements for the financial year ended 31 March 2013 6.

Plant and equipment Office

Renovation

Computers

equipment

Furniture

Motor

and fittings

vehicle

S$'000

174 (18)

1,542 501 (1,542)

1,437 5 (120)

558 1 (355)

Total

S$'000

Group and Company Cost: As at 1 April 2011 Addition Disposal Reclassification during the year As at 31 March 2012 Addition As at 31 March 2013

(29)

391 -

204

391

4,102 507 (2,035) -

185

501

1,293

2,574

186

502

1,294

204

391

2,577

1,273 39 (32)

545 14 (355)

107 39 -

3,639 108 (1,947)

Accumulated Depreciation: As at 1 April 2011 Charge Disposal Reclassification during the year

172 4 (18)

1,542 12 (1,542)

(22)

204

146

1,800

161

180

1,258

101

As at 31 March 2013

183

113

1,276

204

185

1,961

Carrying amount: As at 31 March 2012

489

245

774

As at 31 March 2013

389

206

616

As at 31 March 2012 Charge

At 31 March 2013, the carrying amount of the motor vehicle of the Group and Company held under a finance lease amounted to S$0.21 million (FY2012: S$0.25 million).

Notes to the Financial Statements for the financial year ended 31 March 2013 7A.

Investments in subsidiaries Company FY2013 S$'000

FY2012 S$'000

Unquoted equity shares, at cost At start of the year Written-off during the year At end of the year

8,561 (3) 8,558

8,561 8,561

Impairment loss At start of the year Written-off during the year At end of the year

7,685 (3) 7,682

7,685 7,685

Net investment in subsidiaries at start and end of the year

876

Details of the Companyâ&#x20AC;&#x2122;s subsidiaries as at 31 March 2013 were as follows:

Name of subsidiary

Country of incorporation and operation

Stratech (Aerospace) Pte Ltd *

Singapore

100

Stratech Aerospace Inc #

United States of America

100

Dormant

Singapore

100

Dormant

Hong Kong

100

Dissolved

United States of America

100

Design and development of information technology systems services

Stratech Systems (Shanghai) Co., Ltd. #

China

100

Dormant

Strategic Technologies Pte Ltd *

Singapore

100

Dormant

Stratech Vision Pte Ltd *

Singapore

100

Dormant

Safe-Ex Global Pte Ltd * Stratech (Hong Kong) Ltd Stratech Systems, Inc.

* #

Proportion (%) of ownership interest and voting power held FY2013 FY2012 % %

Audited by LTC LLP, Singapore. Audited by LTC LLP, Singapore for the purpose of consolidation of the Group.

The subsidiaries, except for Stratech Systems Inc., are dormant or inactive during the year.

Principal activities

Design and development of aerospace information technology systems services

Notes to the Financial Statements for the financial year ended 31 March 2013 7B.

Investment in an associated company In FY2012, the Company disposed off its 40% interest in an associated company, Stratech Aeronautics Pte Ltd. Company FY2012 $'000 Unquoted equity shares, at cost At start of the year Disposed during the year

40 (40)

At end of the year

Group FY2012 $'000

Represented by: Net tangible assets Disposed during the year

40 (40) -

Intangible assets Development expenditure S$'000

Patents and trademarks S$'000

Total S$'000

Group Cost: As at 1 April 2011 Addition Write-off

13,103 2,395 (186)

As at 31 March 2012 Addition

15,312 1,402

1,087 80

16,399 1,482

As at 31 March 2013

16,714

1,167

17,881

962 125 -

14,065 2,520 (186)

Accumulated amortisation: As at 1 April 2011 Amortisation Write-off

5,839 2,546 (29)

526 132 -

6,365 2,678 (29)

As at 31 March 2012 Amortisation

8,356 2,728

658 146

9,014 2,874

As at 31 March 2013

11,084

804

11,888

Carrying amount: As at 31 March 2012

6,956

429

7,385

As at 31 March 2013

5,630

363

5,993

The intangible assets included above have finite useful lives, over which the assets are amortised. Development expenditure and patents and trademarks incurred on the Group's advanced technology systems are amortised over their estimated useful lives of 3 to 5 years and 5 years respectively.

The amortisation expense included in other operating expenses in the statement of comprehensive income amounts to S$2,874,000 (FY2012: S$2,678,000).

Notes to the Financial Statements for the financial year ended 31 March 2013 8.

Intangible assets (cont'd) Development expenditure S$'000

Patents and trademarks S$'000

Total S$'000

Company Cost: As at 1 April 2011 Addition Write-off

13,043 2,276

954 125

13,997 2,401

As at 31 March 2012 Addition

15,319 1,402

1,079 80

16,398 1,482

As at 31 March 2013

16,721

1,159

17,880

Accumulated amortisation: As at 1 April 2011 Amortisation

5,835 2,520

526 132

6,361 2,652

As at 31 March 2012 Amortisation

8,355 2,728

658 146

9,013 2,874

As at 31 March 2013

11,083

804

11,887

Carrying amount: As at 31 March 2012

6,964

421

7,385

As at 31 March 2013

5,638

355

5,993

The intangible assets included above have finite useful lives, over which the assets are amortised. Development expenditure and patents and trademarks incurred on the Company's advanced technology systems are amortised over their estimated useful lives of 3 to 5 years and 5 years respectively.

The amortisation expense included in other operating expenses in the statement of comprehensive income amounts to S$2,874,000 (FY2012: S$2,652,000).

Notes to the Financial Statements for the financial year ended 31 March 2013 9.

Trade and other receivables Group

Company FY2013 S$'000

FY2013 S$'000

FY2012 S$'000

2,790

2,461

2,049

1,668

(1,018) 14 (1,004)

(1,018) (1,018)

(1,018) 14 (1,004)

(1,018) (1,018)

Net trade receivables

1,786

1,443

1,045

650

(ii). Accrued revenue Less: allowance for impairment At start of the year Provisions b At end of the year

2,463

2,473

2,463

2,473

Net accrued revenue

2,120

2,130

2,120

2,130

939

1,512

937

1,510

(i). Trade receivables a Less: allowance for doubtful debts At start of the year Provisions b Reverse in the year At end of the year

(iii). Other receivables c Outside parties Less: allowance for doubtful debts At start of the year Provisions b At end of the year

(343) (343)

(509) (509)

Net other receivables

430

Subsidiaries Receivable in respect of a personal guarantee from director-cum-shareholder Current

(343) (343)

(509) (509)

(343) (343)

(509) (509)

FY2012 S$'000

(343) (343)

(509) (509)

1,003

428

1,001

961

6,026

1,564

5,900

6,140

4,554

9,807

Trade receivables Included in trade receivables of the Group is an amount of US$596,000 equivalent to S$739,000 (FY2012: S$749,000) due from an external party trade debtor, the recovery of which was and still is guaranteed by David K.M. Chew, a director-cum-shareholder of the Company. The Group commenced legal proceedings in Singapore against the said debtor and judgement was awarded by the High Court of the Republic of Singapore in favour of the Group on 9 December 2002. The amount awarded then was approximately US$1.6 million equivalent to S$2.0 million (FY2012: S$2.0 million), excluding interest. The Group has registered the judgement in several jurisdictions. The management is continuing to make efforts to enforce the judgement by tracing the debtor's assets worldwide.

The directors of the Company are therefore of the opinion that no allowance is necessary for the receivable at the end of the reporting period as the excess of the amount awarded over the carrying value of the receivable is estimated at S$1.3 million (FY2012: FY1.2 million). The excess amount would only be recognised in the financial statements upon its receipt.

Notes to the Financial Statements for the financial year ended 31 March 2013 9.

Trade and other receivables b.

Provisions During the current financial year, the Company announced that it intends to pursue legal actions to protect its rights and to recover monies for work done, services rendered, goods delivered and damages suffered. As of the date of this report, the Company has yet to take any further legal action.

As a result, the Company has decided that it would make adjustments to its financial statements to provide impairment for the receivables pertaining to the project.

Other receivables S$1.56 million (FY2012: S$1.56 million) related to a receivable in respect of a personal guarantee a director-cum-shareholder of the Company has given to the Group to make good any part of a debt owing by the Procurement Bureau of the Republic of China, Taiwan, Ministry of National Defence (“MOND”) (refer to note (a) above) and EDS Electronic Data Systems (HK) LTD (“EDS”). The receivable in respect of a personal guarantee from a director-cum-shareholder was unsecured, interest-free and repayable on demand. The amount due from subsidiaries were unsecured, interest-free and repayable on demand. Other receivables include cash collateral of S$0.3 (FY2012: S$0.5 million) as performance bonds and bankers' guarantee for certain other revenue projects.

10.

Fixed deposits and cash and bank balances Group

Short-term bank fixed deposits Cash and bank balances

FY2013 S$'000

FY2012 S$'000

Company FY2013 S$'000

FY2012 S$'000

11,733 37

11,103 43

11,733 22

11,103 21

11,770

11,146

11,755

11,124

The Company has short-term bank fixed deposits of S$11.7 million (FY2012: S$8.8 million) at the end of the reporting period that are pledged in relation to the security granted for certain bank borrowings (Note 11). These deposits are readily available to reduce those bank borrowings.

The Company also has short-term fixed deposit of Nil (FY2012: S$2.3 million) at the end of the reporting period pledged for the security of a banker's guarantee in respect of the legal suit with Atal Technologies Limited (Note 13). The short-term bank fixed deposits of S$11.7 million (FY2012: S$11.1 million) at the end of the reporting period had a maturity period of 7 to 12 months (FY2012: 4 month) from the end of the reporting period. The weighted average effective interest rate of the short-term bank fixed deposits at the end of the reporting period was 0.3% per annum (FY2012: 0.4% per annum).

Notes to the Financial Statements for the financial year ended 31 March 2013 10.

Fixed deposits and cash and bank balances For the purpose of presenting the consolidated statement of cash flows, the cash and cash equivalents comprised the following:

Cash and bank balances (as above) Less: Fixed deposit pledged, excluding pledged for bank overdraft Bank overdraft (Note 11) Cash and cash equivalents per consolidated statement of cash flows

11.

Group FY2013 S$'000

FY2012 S$'000

11,770 (8,663) (3,070)

11,146 (10,638) (465)

Borrowings Group and Company FY2013 S$'000

FY2012 S$'000

Current Bank overdraft (a) Short-term loan (a) Trade financing from a bank Obligations under finance lease (note 14) Convertible bonds

Non-current Obligations under finance lease (note 14) (a)

3,070 7,500 31 759

465 8,150 673 29 -

11,360

9,317

147

178

Bank overdraft and short-term loan facilities

The bank overdraft and short-term loan facilities were secured by the Company's short-term bank fixed deposits (Note 10). The repricing of short term loan is 3 months (FY2012: 6 months). The weighted average effective interest rate applicable to the bank overdraft and short-term loan facilities at the end of the reporting period were 6.10% and 2.92% per annum (FY2012: 4.65% and 3.57% per annum) respectively. (b)

Convertible bonds

During the financial year, the Company entered into subscription agreements with third party holders whereby the Company issued two (2) 10% redeemable convertible bonds with a total nominal value of S$506,000 and S$253,000, respectively. The bonds are due for repayment 12 months after the date of issue of the respective bond at their respective nominal value or conversion into shares of the Company at the holder's option at the rate of S$0.023 per conversion share. Due to the relative short-term nature of convertible bonds, the directors of the Company are of the opinion that the 10% coupon rate of these bonds approximate to the market interest rate of similar bonds without the conversion rights. The residual amount, representing the value of the equity conversion component, is therefore negligible. The carrying amount of the liability component of the convertible bonds at the balance sheet date approximates its fair value.

12.

Trade and other payables Group

Trade payables Accruals Amount due to a director-cumshareholder (a) Other payables Deposits received for subscription of shares (b) Salaries, bonus and CPF payable

Company FY2013 S$'000

FY2013 S$'000

FY2012 S$'000

1,428 1,037

2,852 1,242

1,428 885

2,852 1,191

1,861 408

5,356 629

1,845 402

5,342 611

2,350 912

988

2,350 912

988

7,996

11,067

7,822

10,984

(a)

The loan due to a director-cum-shareholder is unsecured, interest-free and repayable on demand.

(b)

As at the end of the reporting period, the Company has received deposits for subscription of shares amounting to S$2.35 million (FY2012: Nil) pursuant to the subscription of 150,000,000 new ordinary shares in the capital of the Company (Note 28).

Notes to the Financial Statements for the financial year ended 31 March 2013

13.

Provisions Group and Company FY2013 S$'000

FY2012 S$'000

Litigation Foreseeable project loss Project costs Unutilised leaves

2,062 1,275 413

2,393 1,275 154 340

At end of the year

3,750

4,162

Movement for provision for litigation: Group and Company FY2013 S$'000 At start of year Reversal and settlement during the year Additional provision during the year At end of the year

FY2012 S$'000

2,393 (1,968) 1,637

2,329 64

2,062

2,393

Provision for litigation The provision for litigation in the previous financial year was derived based on the SGD equivalent amount for the damages (denominated in HK$8,720,000) plus interest and estimated legal costs awarded by the High Court of Hong Kong SAR after setting off against the Company's claims.

During the financial year, the Companyâ&#x20AC;&#x2122;s appeal and Atalâ&#x20AC;&#x2122;s cross-appeals were heard on 9 May 2012 and an announcement was made on 25 May 2012 to update on the judgement issued by the Court of Appeal of the Hong Kong SAR. In summary, the judgment of 30 June 2011 resulting in a net award of HKD$8,720,000 (S$1.41 million equivalent) to Atal is reduced by HKD$4,700,000 (S$781,000 equivalent) which was recognised in other operating income during the financial year. Based on management's best estimate of the remaining legal costs to be paid relevant to the case, additional provision of S$1.6 million (FY2012: S$0.06 million) has been made during the financial year. Provision for project costs As mentioned in Note 3.2.5, the Company made a provision for project costs in the previous financial year pursuant to the Company's announcement made on 7 June 2012 in relation to the proposed legal actions that the Company intended to pursue to protect its rights and to recover monies for work done, services rendered, goods delivered and damages suffered.

Movement in provision for unutilised leave:

Group and Company FY2013 S$'000

At start of the year Addition in the year Reversal in the year At end of the year

FY2012 S$'000

340 413 (340)

255 340 (255)

413

340

Notes to the Financial Statements for the financial year ended 31 March 2013 Finance leases

14.

The average effective borrowing rate for the finance lease of the Group and the Company was 6.41% (FY2012: 6.41%) per annum. The lease was on a fixed repayment basis and no arrangement was entered into for any contingent payment. The lease obligation was denominated in Singapore Dollars and the fair value of the Group's and the Company's lease obligation approximated the carrying amount at the end of the reporting period.

Future minimum lease payments under the hire purchase agreement together with the present value of the net minimum lease payments are as follows:

Minimum lease payments FY2013 S$'000

FY2012 S$'000

Present value of net minimum lease payments FY2013 FY2012 S$'000 S$'000

Group and Company Obligation under finance leases: Current liabilities Within one year

161 3

162 44

144 3

135 43

164

206

147

178

Less: future finance charges

(27)

(39)

Present value of lease obligation

178

207

178

207

Non-current liabilities Within 2nd to 5th years inclusive After 5 years

Deferred development grant

15.

The Enterprise Challenge (TEC) grant was awarded by the Prime Ministerâ&#x20AC;&#x2122;s Office of Singapore for the iFerretâ&#x201E;˘ pilot with CAAS that had completed during the previous financial year. The grant has a remaining useful life of 6 months.

Group and Company FY2013 S$'000 At start of the year Amortisation to other operating income (Note 20)

55 (55)

At end of the year

FY2012 S$'000 164 (109) 55

Share-based payments

16. (a)

Equity-settled share option scheme The Company has employee stock option scheme to reward contributions made by employees and directors to the success and development of the Group. The ESOS Scheme is administered by the Remuneration Committee. Options are exercisable at a price based on (a) the market price or (b) a price which is set at a discount to the market price, the quantum of such discount to be determined by the Committee in its absolute discretion, provided that the maximum discount which may be given in respect of any Option shall not exceed 20% of the market price of the shares of the Company listed on the Singapore Exchange Securities Trading Limited. Options granted at an Exercise Price which is at a discount to the market price may only be exercised after two (2) years from the date of grant. Options which are granted at market price may be exercised after one (1) year from the Date of Grant. The option is exercisable commencing after the first or second anniversary of the date of grant of the option (as may be prescribed under the Scheme) and expiring on the tenth anniversary of the date of grant of the option. The vesting period is one, two, three and/or four years. If the options remain unexercised after ten (10) years from the date of grant, the options expire. Options are forfeited if the employee leaves the Group.

Notes to the Financial Statements for the financial year ended 31 March 2013 Share-based payments (cont'd)

16. (a)

Equity-settled share option scheme (cont'd) Employee Share Option Scheme 2000 In the prior financial years, the Company had a share option scheme for all employees of the Company (the "Employee Stock Option Scheme 2000" or the "ESOS 2000"). The ESOS 2000 had expired on 31 March 2010 and was terminated and replaced by the Employee Share Option Scheme 2011 (ESOS 2011) pursuant to the shareholders' approval obtained at the Company's extraordinary general meeting held on 29 July 2011.

Details of the ESOS 2000 movements during and those outstanding as at the end of the reporting period were as follows: Group and Company FY2013 No. of share options

Weighted average exercise price S$

FY2012 No. of share options

Weighted average exercise price S$

Outstanding at start of the year Expired in the year Forfeited in the year

3,663,000 (100,000) (184,000)

0.10

12,575,000 (1,917,000) (6,995,000)

0.08

Outstanding at end of the year

3,379,000

0.10

3,663,000

0.10

Exercisable at end of the year

3,379,000

0.10

3,663,000

0.10

Employee Share Option Scheme 2011 Pursuant to the ESOS 2011 scheme the Company had, during FY2013, granted to: (i)

(ii)

During FY2012, share options were granted to: (i)

David K.M. Chew, an Executive Director and Chairman of the Company, 9,182,830 share options exercisable for 9,182,830 shares. These share options are exercisable from 1 September 2012 to1 September 2021 at an exercise price of S$0.0187 per share option.

(ii)

Lim Soon Hock 12,500,000 share options exercisable for 12,500,000 shares. These share options are exercisable from 1 September 2012 to 1 September 2021 at an exercise price of S$0.0187 per share option.

(iii)

Leong Sook Ching, an Executive Director and Chief Corporate Officer of the Company, 3,935,500 share options exercisable for 3,935,500. These share options are exercisable from 1 September 2012 to 1 September 2021 at an exercise price of S$0.0187 per share option.

(iv)

Lim Kim Choon, a Non-executive Director of the Company, 500,000 share options exercisable for 500,000 shares. These share options are exercisable from 11 November 2012 to 10 November 2021 at an exercise price of S$0.0166 per share option.

(v)

A management staff of the Company, 4,000,000 share options exercisable for 4,000,000 shares. These share options were forfeited during the financial year as the management staff has resigned from the Company.

Notes to the Financial Statements for the financial year ended 31 March 2013 Share-based payments (cont'd)

16. (a)

Equity-settled share option scheme (cont'd) Employee Share Option Scheme 2011 (cont'd) Group and Company FY2013 No. of share options

(b)

Weighted average exercise price S$

FY2012 No. of share options

Weighted average exercise price S$

Outstanding at start of the year Granted during the year Forfeited in the year

30,118,330 16,000,000 (10,000,000)

0.02

30,118,330 -

0.02

Outstanding at end of the year

36,118,330

0.02

30,118,330

0.02

Exercisable at end of the year

11,809,165

0.02

Equity-settled director's remuneration In FY2012 and pursuant to the shareholders' approval obtained at the Company's extraordinary general meeting held on 29 July 2011, the Company allotted and issued 28,818,443 shares to Lim Soon Hock, an Executive Director and Deputy Chairman of the Company for the purpose of satisfying part of the remuneration payable to him. No such shares were issued for the same purpose during the financial year.

Notes to the Financial Statements for the financial year ended 31 March 2013 Share-based payments (cont'd)

16.

Employee Share Option Scheme 2011 (cont'd)

(c)

Equity-settled performance share scheme Paragraph 6 of the Directors' Report includes further disclosure on the equity-settled performance share scheme for employees and directors.

During the current financial year, there was no performance shares awarded to employees. In FY2012, 4,324,114 fully paid shares were awarded to certain employees who are eligible pursuant to the Stratech Performance Shares Scheme approved by the shareholders.

Group and Company FY2013 S$'000 Expenses of equity-settled share options granted to directors and employees Expenses of equity-settled remuneration share issued to a director Expenses of equity-settled performance shares issued to staff Reversal of expenses of equity-settled share options granted to employees

17.

FY2012 S$'000

178 100 (11)

117 299 95 (213)

267

298

Share capital

Group and Company FY2013 No. of shares

S$'000

FY2012 No. of shares

S$'000

Issued and fully paid: Ordinary shares At start of the year

907,697,916

99,508

Placement shares (Note a)

160,000,000

3,280

Rights issue (Note b)

328,485,455

5,913

21,000,000

483

Conversion shares (Note c) Remuneration shares issued to a director (Note 16 (b))

Employee performance shares (Note 16 (c))

At end of the year

1,417,183,371

109,184

874,555,359

28,818,443

721

4,324,114

907,697,916

99,508

During the financial year: a. the Company issued the following Placement Shares: i. 80,000,000 placement shares at a price of S$0.0182 per placement share. The shares were listed and quoted on the SGX-ST on 27 April 2012; and ii. 80,000,000 placement shares at a price of S$0.0228 per placement share. The shares were listed and quoted on the SGX-ST on 14 May 2012. b. the Company issued 328,485,455 renounceable non-underwritten rights issue shares at S$0.018 per rights share. The shares were listed and quoted on the SGX-ST on 25 September 2012. c. two (2) convertible bond holders with a total of 21,000,000 bonds were converted into shares at S$0.023 per conversion shares. The shares were listed and quoted on the SGX-ST on 8 March 2013.

98,692

Notes to the Financial Statements for the financial year ended 31 March 2013 17.

Share capital (cont'd) The holders of ordinary shares are entitled to receive dividends as and when declared by the Company. All issued ordinary shares which have no par value, are fully paid and carry one vote per share without restriction. All newly issued shares rank pari passu in all respects with the prevously issued shares.

Capital management The Company's objectives when managing capital are: â&#x20AC;˘

to safeguard the Group's and the Company's ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders, and

â&#x20AC;˘

to provide an adequate return to shareholders by pricing products and services commensurable with the level of risk.

The Company sets the amount of capital in proportion to risk. The Company manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, or sell assets to reduce debt.

The Company monitors capital based on a gearing ratio. The gearing ratio is calculated as 'net debt' divided by 'total capital'. Net debt is borrowings plus trade and other payables less cash and cash equivalents. 'Total capital' is equity plus net debt.

FY2013 S$'000

Group FY2012 S$'000

Company FY2013 S$'000

FY2012 S$'000

Net debt Equity

19,466 1,115

20,519 807

19,307 804

20,458 5,411

Total capital

20,581

21,326

20,111

25,869

Gearing ratio

0.946

0.962

0.960

0.791

Please refer to note 2.4 to the financial statements on the proposed measures to improve the Group's & Company's financial position.

18.

Revenue Group FY2013 S$'000 Sale of goods Rendering of services Contract revenue

FY2012 S$'000

1,913 630

385 3,303 2,099

2,543

5,787

Notes to the Financial Statements for the financial year ended 31 March 2013

19.

Business and geographical segments information The Group's operations are organised into two core business activities. The first is the e-Systems project and services division comprising: •

expertise and activities as a systems and technology developer in developing, hosting and operating IT e-business projects; and

•

expertise and activities in developing and providing e-business applications, services and infrastructure.

The second is the Technology-intensive IT division comprising: •

expertise and activities in computer vision systems; and

•

expertise and activities in intelligent transport systems.

Some e-Business projects and services incorporate or integrate with computer vision and intelligent transport systems. The Group's diversified business segments and related information are as follows: (a)

Business segments Segment revenue and expense: These are the operating revenue and expense reported in the Group's statement of comprehensive income that are directly attributable to a segment and the relevant portions of such revenue and expense, where applicable, are allocated to that segment on a reasonable and consistent basis. Segment assets and liabilities: Segment assets include all operating assets used by a segment and consist principally of receivables, inventories and plant and equipment, net of allowances and provisions. Capital expenditure includes the total cost incurred to acquire assets expected to have future benefits over more than one reporting period which are directly attributable to the segment, such as plant and equipment and intangible assets. Segment liabilities include all operating liabilities of the segment and consist principally of trade payables and accrued expenses.

Notes to the Financial Statements for the financial year ended 31 March 2013 19.

Business and geographical segments information (cont'd) e-Systems

Revenue External sales Results Segment results

FY2013 S$'000

FY2012 S$'000

Technology-intensive IT FY2013 FY2012 S$'000 S$'000

Consolidated FY2013 S$'000

1,255

2,477

1,288

3,310

2,543

5,787

375

703

411

718

786

1,421

FY2012 S$'000

Other operating income Selling and distribution expenses Administrative expenses Operating expenses Finance costs

1,125 (999) (6,398) (3,390) (482)

413 (744) (6,775) (5,792) (594)

Loss before income tax

(9,358)

(12,071)

Income tax expense

Net loss for the year

(9,358)

(12,071)

10,405

10,915

Unallocated assets

13,963

14,671

Consolidated total assets

24,368

25,586

3,794

3,485

Unallocated liabilities

19,459

21,294

Consolidated total liabilities

23,253

24,779

3 3

507 507

Assets

Liabilities

414

585

434

537

9,991

3,209

10,481

2,948

Other information Capital expenditure (unallocated)

Intangible assets

1,483

2,520

1,483

2,520

Depreciation Depreciation (unallocated)

27 134 161

18 90 108

Amortisation Amortisation (unallocated)

189

176 -

2,685 -

2,501

2,874 2,874

2,677 1 2,678

Provision for -doubtful trade and other receivables

1,527

-Impairment of -accrued revenue

343

-Project costs

-Foreseeable project loss

470

-Litigation

1,637

(154)

154

(154)

154

Notes to the Financial Statements for the financial year ended 31 March 2013

19.

Business and geographical segments information (cont'd) (b)

Geographical segments The following table provides an analysis of the Group's revenue by geographical market, irrespective of the origin of the goods/services:

Group FY2013 S$'000 Singapore Asia South East Asia United States of America Africa Europe

FY2012 S$'000

2,488 16 7 32

3,870 1,482 259 73 46 57

2,543

5,787

The following is an analysis of the carrying amounts of segment assets and additions to capital expenditure analysed by the geographical area in which the assets were located.

Carrying amounts of segment assets

Singapore United States of America

20.

Additions to plant and equipment and intangible assets

FY2013 S$'000

FY2012 S$'000

FY2013 S$'000

FY2012 S$'000

24,362 6

25,531 55

1,501 -

3,027 -

24,368

25,586

1,501

3,027

Other operating income Group FY2013 S$'000 Development grant income (Note 15) Government grant - project subsidies Interest income from bank fixed deposits Write-back of trade and other payables Write back of provision for litigation (Note 13) Reversal of provision for project cost Others

FY2012 S$'000

31 38 54 781 154 67

109 128 34 118 24

1,125

413

Notes to the Financial Statements for the financial year ended 31 March 2013 21.

Salaries and related costs

Group FY2013 S$'000 3,767 278 387

Salaries and CPF Share-based compensation Other staff related expenses

4,432

Group FY2013 S$'000 1,111

Directors' remuneration

FY2012 S$'000 3,690 512 575 4,777

FY2012 S$'000 1,343

The directors' remuneration above includes remuneration of S$0.23 million (FY2012: S$0.31 million) capitalised as development expenditures in the intangible assets of the Group and Company.

22.

Finance costs

Group FY2013 S$'000 Interest on borrowings Interest on obligations under finance lease (Note 14) Other interest charges

23.

FY2012 S$'000

295 12 175

354 44 196

482

594

Income tax expense Group FY2013 S$'000

Income tax expense

FY2012 S$'000

Domestic income tax is calculated at 17% (FY2012: 17%) of the estimated assessable profit for the year. Taxation for other jurisdictions is calculated at the rates prevailing in the relevant jurisdictions. Group FY2013 S$'000

FY2012 S$'000

Loss before income tax

(9,358)

(12,071)

Tax at the domestic rates applicable to losses in the countries where the Group operates (FY2012: 17%) Expenses not deductible for income tax purposes Capitalised expenses deductible for tax purposes Deferred tax assets not recognised Others

(1,590) 30 (239) 1,762 37

(2,052) 15 (387) 2,410 14

Page 47

Notes to the Financial Statements for the financial year ended 31 March 2013 23.

Income tax expense (cont'd) As of the end of the reporting period, the Group has unutilised tax losses of approximately S$83.68 million (FY2012: S$70.99 million) available for offset against future taxable profits subject to compliance with certain provisions of the Singapore Income Tax Act and agreement with the Inland Revenue Authority of Singapore. No deferred tax asset has been recognised in respect of the above tax losses and unabsorbed capital allowances due to the unpredictability of future profit streams.

24.

Loss before income tax Group FY2013 S$'000

Amortisation of intangible assets Auditor's remuneration Group audit fees Bad trade debts written off Depreciation of plant and equipment Directors' fee Loss on disposal of plant and equipment Legal and professional expenses Cost of inventories charged to cost of goods and services sold Provision for doubtful trade and other receivables (Note 9b) Provision for impairment of accrued revenue (Note 9b) (Reversal)/Provision for project costs (Note 13) Provision for foreseeable project loss Provision for litigation (Note 13) Salaries and related costs (Note 21) Rental of office premises

FY2012 S$'000

2,874

2,678

150 120 161 300 434 (154) 1,637 4,432 355

150 233 108 261 88 1,962 26 1,527 343 154 470 64 4,777 546

Notes to the Financial Statements for the financial year ended 31 March 2013 25.

Loss per share Basic and diluted loss per share is based on:

Group

Loss before income tax ($'000) Weighted average number of ordinary shares

FY2013

FY2012

(9,358)

(12,071)

1,213,690,644

882,407,739

(0.77)

Basic and diluted loss per share (cents)

(1.37)

The denominators used are the same as those detailed above for both basic and diluted loss per share as the options and the conversion of outstanding convertible bonds do not have dilutive effect. 26.

Operating lease commitments

Group FY2013 S$'000 Minimum lease payments under operating leases in respect of office premises and equipment recognised as an expense in the year

FY2012 S$'000

572

1,178

At the end of the reporting period, the Group and the Company have outstanding commitments under non-cancellable operating leases, which fall due as follows: Group FY2013 FY2012 S$'000 S$'000 Within one year Two to three years

392 252 644

553 649 1,202

Operating lease payments represent rental payable by the Group and Company for its office premises and certain equipment. The office rental lease was negotiated for a lease term of 3 years and is not subject to re-pricing during these 3 years. The lease will end on 19 January 2015.

27.

Related party disclosures Some of the Group's and Company's transactions and arrangements are between entities of the Group and with related parties, the effects of which, on basis determined between the parties, are reflected in these consolidated financial statements. The balances with these parties are unsecured, interest-free and repayable on demand unless except for note 27 (a) below. In addition to the information disclosed elsewhere in the financial statements, the following related party transactions took place between the Group and related parties during the financial year on terms agreed by the parties concerned.

Notes to the Financial Statements for the financial year ended 31 March 2013 27.

Related party disclosures (cont'd)

Group FY2013 S$'000

Directors: David K.M. Chew - Note 27 (a) Interest on loan

FY2012 S$'000

100

Lim Kim Choon - Note 27 (b) Provision of consultancy service Director's fee of a subsidiary

75 56

120 36

Related parties other than the directors Note 27 (c)

206

Transactions with directors (a)

During FY2011, David K.M. Chew had extended a loan amounting to S$3.7 mil to the Company pursuant to a loan agreement dated 8 August 2011 (the "Loan"). The amount due to David K.M. Chew under the Loan has since been repaid via a set-off against the full satisfaction of the consideration payable by him pursuant to the Rights Issue, the results of which was announced on 21 September 2012. During FY2012, S$100,000 was accrued for as interest payable to David K.M. Chew by the Company.

(b)

Since 19 May 2011, Lim Kim Choon ("Mr Lim") was appointed as director of the Company and of a subsidiary. At the same time Mr Lim also provided consultancy services to the Group.

Transactions with other related parties other than the directors (c)

Transaction with close family members During the year, staff costs of $68,035 (FY2012: $206,405) were paid to the Company's Technical Fellow who is a close family member of certain directors.

Saved as disclosed in this note and the related party information disclosed elsewhere in the financial statements, in particular in (i) Note 5 - compensation of directors and key management personnel and (ii) Note 21 - salaries and related costs there are no other significant transactions.

28.

Subsequent event Subsequent to the financial year in first quarter of FY2014, the Company made a placement of 150 million new shares to raise S$3.53 million in gross proceeds to satisfy its general corporate and working capital purposes and improve the cash-flow situation of the Group (Notes 2.4 and 12).

Stratech Systems Limited annual report 2012/13

SHAREHOLDERSâ&#x20AC;&#x2122; INFORMATION AS AT 25 JUNE 2013

Issued and fully paid-up capital

S$112,708,766.33125

No. of shares issued

1,567,183,371 shares

Class of shares

Ordinary shares

Voting rights

One vote per share

The Company does not hold any Treasury Shares STATISTICS OF SHAREHOLDINGS

Size of Shareholding 1

999

1,000

10,001

1,000,001

Number of Shareholders

Number of Shares 35,715

121

1.94

0.00

10,000

2,867

45.88

9,757,708

0.62

1,000,000

3,101

49.62

477,984,678

30.50

and above

160

2.56

1,079,405,270

68.88

6,249

100.00

1,567,183,371

100.00

Direct Interest

Deemed Interest

441,918,405

28.20

90,832,852

5.80

90,832,852

5.80

441,918,405

28.20

SUBSTANTIAL SHAREHOLDERS AS AT 25 JUNE 2013 (As recorded in the Register of Substantial Shareholders)

David K.M. Chew

(1)

Leong Sook Ching

(1)

Notes: (1)

David K.M. Chew is the spouse of Leong Sook Ching and they are deemed to be interested in the shares held by each other.

Stratech Systems Limited annual report 2012/13

SHAREHOLDERS’ INFORMATION AS AT 25 JUNE 2013

TWENTY LARGEST SHAREHOLDERS AS AT 25 JUNE 2013 No.

Name of Shareholders

David K.M. Chew (1)

DB Nominees (S) Pte Ltd

Number of Shares

- direct

294,161,072

28.20

- through nominees

147,757,333

(total)

133,353,333

8.51

83,448,216

5.80

7,384,636

(total)

- direct

Leong Sook Ching (2)

DBS Nominees Pte Ltd

41,045,991

2.62

Phillip Securities Pte Ltd

31,830,826

2.03

Lim Soon Hock

29,459,823

1.88

United Overseas Bank Nominees Pte Ltd

28,232,328

1.80

Ang Chin San

22,100,000

1.41

Kaedjohare Ismail Chechatwala

15,000,000

0.96

10.

Maybank Kim Eng Securities Pte Ltd

14,473,978

0.92

11.

Chua Tiong Boon

12,500,000

0.80

12.

Primalani Chandru Gulabrai

11,000,000

0.70

13.

OCBC Nominees Singapore Pte Ltd

10,694,624

0.68

14.

Tay Kong Ho

10,000,000

0.64

15.

OCBC Securities Private Ltd

9,440,625

0.60

16.

Tan Kim Poh

9,200,000

0.59

17.

Chen Minglue

8,200,000

0.52

18.

Chechatwala Rumana Akbar Mrs Rumana Kaedjohare

8,105,000

0.52

19.

Pai Keng Pheng

8,000,000

0.51

20.

UOB Kay Hian Pte Ltd

7,696,250

0.49

787,942,066

50.28

- through nominees

Total (1)

David K.M. Chew held 147,757,333 shares through DB Nominees (S) Pte Ltd and DBS Nominees Pte Ltd. Together with his direct holdings of 294,161,072 shares, David K.M. Chew held 441,918,405 shares, representing 28.20% of the issued share capital of the Company.

(2)

Leong Sook Ching held 7,384,636 shares through DBS Nominees Pte Ltd. Together with her direct holdings of 83,448,216 shares, Leong Sook Ching held 90,832,852 shares, representing 5.80% of the issued share capital of the Company.

PERCENTAGE OF SHAREHOLDING IN PUBLIC’S HANDS Approximately 63.93% 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.

Stratech Systems Limited annual report 2012/13

NOTICE OF ANNUAL GENERAL MEETING

STRATECH SYSTEMS LIMITED (Incorporated in Singapore with limited liability) (Co. Reg. No: 199608251Z) NOTICE OF ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN that the Annual General Meeting of STRATECH SYSTEMS LIMITED (the “Company”) will be held at the Function Room 1, 31 International Business Park, Level 1, Creative Resource (Main Lobby), Singapore 609921 on Wednesday, 31 July 2013 at 9.00 a.m. for the following purposes: AS ORDINARY BUSINESS 1.

To receive and adopt the Directors’ Report and the Audited Accounts of the Company for the year ended 31 March 2013 together with the Auditors’ Report thereon. (Resolution 1) 2. To re-elect Ms Leong Sook Ching, a Director retiring pursuant to Article 104 of the Company’s Articles of Association and who has offered herself for re-election. (Resolution 2) 3.

To note the retirement of Mr Lim Soon Hock, a Director retiring pursuant to Article 104 of the Company’s Articles of Association at the conclusion of the Annual General Meeting. [See Explanatory Note (i)]

4. To approve additional Directors’ fees of S$128,513.95 payable for the financial year ended 31 March 2013 (FY2012: S$121,725). [See Explanatory Note (ii)] (Resolution 3) 5.

To approve the payment of Directors’ fees of S$108,000 for the financial year ending 31 March 2014 payable at S$36,000 to each Non-Executive Director monthly in arrears (FY2012: S$108,000). (Resolution 4)

To re-appoint LTC LLP as the Company’s Auditors and to authorise the Directors to fix their remuneration. (Resolution 5)

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

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

Stratech Systems Limited annual report 2012/13

NOTICE OF ANNUAL GENERAL MEETING

SHARE ISSUE MANDATE That pursuant to Section 161 of the Companies Act, Cap. 50 and Rule 806 of the Listing Manual of the Singapore Exchange Securities Trading Limited (“SGX-ST”), authority be given to the Directors of the Company to issue shares (“Shares”) whether by way of rights, bonus or otherwise, and/or make or grant offers, agreements or options (collectively, “Instruments”) that might or would require Shares to be issued, including but not limited to the creation and issue of (as well as adjustments to) warrants, debentures or other instruments convertible into Shares at any time and upon such terms and conditions and to such persons as the Directors may, in their absolute discretion, deem fit provided that: (a)

The aggregate number of Shares (including Shares to be issued in pursuance of Instruments made or granted pursuant to this Resolution) does not exceed fifty percent (50%) of the total number of issued shares (excluding treasury shares) in the capital of the Company at the time of the passing of this Resolution, of which the aggregate number of Shares and convertible securities to be issued other than on a pro rata basis to all shareholders of the Company shall not exceed twenty percent (20%) of the total number of issued shares (excluding treasury shares) in the capital of the Company;

(b)

For the purpose of determining the aggregate number of Shares that may be issued under sub-paragraph (a) above, the total number of issued shares (excluding treasury shares) shall be based on the total number of issued shares (excluding treasury shares) of the Company as at the date of the passing of this Resolution, after adjusting for:

(c)

(i)

new shares arising from the conversion or exercise of convertible securities;

(ii)

new shares arising from exercising share options or vesting of Share awards outstanding or subsisting at the time this Resolution is passed; and

(iii)

any subsequent bonus issue, consolidation or subdivision of shares;

And that such authority shall, unless revoked or varied by the Company in general meeting, continue in force (i) until the conclusion of the Company’s next Annual General Meeting or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is earlier or (ii) in the case of shares to be issued in accordance with the terms of convertible securities issued, made or granted pursuant to this Resolution, until the issuance of such shares in accordance with the terms of such convertible securities. [See Explanatory Note (iii)] (Resolution 6)

AUTHORITY TO ALLOT AND ISSUE SHARES UNDER THE STRATECH SHARE OPTION SCHEME 2011 AND THE STRATECH PERFORMANCE SHARE SCHEME That pursuant to Section 161 of the Companies Act, Cap. 50, the Directors be authorised and empowered to allot and issue shares in the capital of the Company: (a)

to all the holders of options granted by the Company, where granted during the subsistence of this authority or otherwise, under the Stratech Share Option Scheme 2011 (“2011 Scheme”) upon the exercise of such options and in accordance with the terms and conditions of the 2011 Scheme; and

Stratech Systems Limited annual report 2012/13

NOTICE OF ANNUAL GENERAL MEETING

(b)

as may be required to be issued pursuant to the vesting of the share awards under the Stratech Performance Share Scheme (the “PS Scheme”);

provided always that the aggregate number of additional ordinary shares to be allotted and issued pursuant to the 2011 Scheme and PS Scheme shall not exceed fifteen percent (15%) of the total number of issued shares (excluding treasury shares) in the capital of the Company from time to time. [See Explanatory Note (iv)] (Resolution 7)

By Order of the Board Leong Sook Ching Company Secretary Singapore, 16 July 2013 Explanatory Notes on Resolutions to be passed: (i)

The item 3 above, is to note the retirement of Mr Lim Soon Hock, who does not wish to seek re-election pursuant to Article 104 of the Company’s Articles of Association. Upon Mr Lim Soon Hock’s cessation as a Director of the Company, he will also relinquish his position as a member of the Nominating Committee of the Company at the conclusion of the Annual General Meeting.

(ii)

The Ordinary Resolution 3 proposed in item 4 above, is to approve the payment of additional Directors’ fees of S$128,513.95 for the financial year ended 31 March 2013 pursuant to the fee structure approved and adopted by the Remuneration Committee. The framework of the fee structure is disclosed under the Corporate Governance Report. Subject to shareholders’ approval, the additional fees will be paid to the Non-Executive Directors for their participation in the Board and Board Committees meetings for the financial year ended 31 March 2013.

(iii)

The Ordinary Resolution 6 proposed in item 8 above, if passed, will empower the Directors from the date of the above Meeting until the date of the next Annual General Meeting, to allot and issue Shares and convertible securities in the Company up to an amount not exceeding fifty percent (50%) of the total number of the issued shares (excluding treasury shares) in the capital of the Company, of which up to twenty percent (20%) may be issued other than on a pro rata basis. For the purpose of this resolution, the total number of issued shares (excluding treasury shares) is based on the Company’s total number of issued shares (excluding treasury shares) at the time this proposed Ordinary Resolution is passed after adjusting for new shares arising from the conversion or exercise of convertible securities, the exercise of share options or the vesting of share awards outstanding or subsisting at the time when this proposed Ordinary Resolution is passed and any subsequent bonus issue, consolidation or subdivision of shares.

(iv)

The Ordinary Resolution 7 proposed in item 9 above, if passed, will empower the Directors of the Company, to allot and issue shares in the Company of up to a number not exceeding in total fifteen percent (15%) of the total number of issued shares (excluding treasury shares) in the capital of the Company from time to time pursuant to the exercise of the options under the 2011 Scheme and vesting of the share awards under the PS Scheme.

Notes: 1.

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

If the appointor is a corporation, the instrument appointing a proxy must be executed under seal or the hand of its duly authorised officer or attorney.

The instrument appointing a proxy must be deposited at the registered office of the Company at 31 International Business Park #02-02, Creative Resource, Singapore 609921 not less than forty-eight (48) hours before the time appointed for holding the Meeting.

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STRATECH SYSTEMS LIMITED (Incorporated in the Republic of Singapore) (Co. Reg. No: 199608251Z)

IMPORTANT: 1. For investors who have used their CPF monies to buy Stratech Systems Limited’s shares, this Report is forwarded to them at the request of the CPF Approved Nominees and is sent solely FOR INFORMATION ONLY. 2. This Proxy Form is not valid for use by CPF investors and shall be ineffective for all intents and purposes if used or purported to be used by them.

PROXY FORM (Please see notes overleaf before completing this Form)

3. CPF investors who wish to vote should contact their CPF Approved Nominees.

*I/We, of being a member/members of Stratech Systems Limited (the “Company”), hereby appoint: Name

NRIC/Passport No.

Proportion of Shareholdings No. of Shares

Address and/or (delete as appropriate) Name

NRIC/Passport No.

Proportion of Shareholdings No. of Shares

Address

or failing *him/her, the Chairman of the Meeting as *my/our *proxy/proxies to vote for *me/us on *my/our behalf at the Annual General Meeting (the “Meeting”) of the Company to be held at the Function Room 1, 31 International Business Park, Level 1, Creative Resource (Main Lobby), Singapore 609921 on Wednesday, 31 July 2013 at 9.00 a.m. and at any adjournment thereof. *I/We direct *my/our *proxy/proxies to vote for or against the Resolutions proposed at the Meeting as indicated hereunder. If no specific direction as to voting is given or in the event of any other matter arising at the Meeting and at any adjournment thereof, the *proxy/proxies will vote or abstain from voting at *his/her discretion. The authority herein includes the right to demand or to join in demanding a poll and to vote on a poll. (Please indicate your vote “For” or “Against” with a tick [√] within the box provided.) No.

Resolutions relating to:

For

Directors’ Report and Audited Accounts for the year ended 31 March 2013

Re-election of Ms Leong Sook Ching as a Director

Approval of additional Directors’ fees amounting to S$128,513.95 for the year ended 31 March 2013

Approval of Directors’ fees amounting to S$108,000 for the year ending 31 March 2014

Re-appointment of LTC LLP as Auditors

Share Issue Mandate

Authority to allot and issue shares under the Stratech Share Option Scheme 2011 and Stratech Performance Share Scheme

Against

* Delete where inapplicable

Dated this day of

2013

Total number of Shares in: (a) CDP Register (b) Register of Members Signature of Shareholder(s)/ and, Common Seal of Corporate Shareholder

No. of Shares

Notes: 1.

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

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

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

The instrument appointing a proxy or proxies must be deposited at the registered office of the Company at 31 International Business Park #02-02, Creative Resource, Singapore 609921 not less than 48 hours before the time appointed for the Meeting.

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

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

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

Stratech Systems Limited Co. Reg. No: 199608251Z

31 International Business Park #02-02 Creative Resource Singapore 609921 SINGAPORE Tel: +65 6323 2188 Fax: +65 6323 2177 Email: stratech@stratechsystems.com www.stratechsystems.com