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Annual Report 2010
ALL THE RIGHT
CONNECTIONS
Co. Reg. No.198401088W
45 Ubi Road 1, Summit Building
Singapore 408696
Tel: (65) 6745 3288
Fax: (65) 6748 9612
Email: [email protected]
Website: www.smsummit.com.sg
SM SUMMIT HOLDINGS LIMITED
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Designed and produced by
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SAR1009002 SM Summit AR().indb 1SAR1009002 SM Summit AR().indb 1 3/31/2011 8:19:28 PM3/31/2011 8:19:28 PM
OUR MISSIONTo maintain leadership in Optical Storage Media manufacturing
by providing a one-stop manufacturing solution
and delivering the highest quality products and services to our customers,
in the most effi cient manner.
CONTENTS16 Corporate Information17 Corporate Governance Report26 Financial Report87 Statistics of Shareholdings89 Notice of Annual General Meeting Proxy Form
04 Chairman’s Statement06 Board of Directors09 Senior Management12 Operations Review14 Five-Year Financial Highlights15 Group Structure
OUR VISIONTo be a leading global provider of data storage media,
serving the needs of the Leisure, Entertainment
and Software Industries.
Singapore
SUMMIT CD MANUFACTURE PTE LTDSUMMIT HI-TECH PTE LTD45 Ubi Road 1, Summit Building
Singapore 408696
Tel: (65) 6745 3288
Fax: (65) 6748 9612
Email: [email protected]
Website: www.smsummit.com.sg
FAIRVISION PTE LTD3NGINE PTE LTD45 Ubi Road 1, Summit Building
Singapore 408696
Tel: (65) 6745 3288
Fax: (65) 6749 7728
Email: [email protected]
Website: www.fairvision.com.sg
China
SHANGHAI HUADE PHOTOELECTRON SCIENCE & TECHNOLOGY CO. LTDB4, B5, 558 Gang Ye Road
Song Jiang District
Shanghai Post Code 201614, China
Tel: (8621) 5785 2857
Fax: (8621) 5785 3545
Email: [email protected]
Website: www.smsummit.com.cn
Australia
SUMMIT TECHNOLOGY AUSTRALIA PTY LTDUnit 28, Slough Business Park, Slough Avenue
Silverwater NSW 2128, Australia
Tel: (612) 8756 4488
Fax: (612) 8719 8750
Email: [email protected]
Website: www.summittechnology.com.au
SUMMIT PRINTING (AUSTRALIA) PTY LTDUnit 51, Slough Business Park, Slough Avenue
Silverwater NSW 2128, Australia
Tel: (612) 8756 4488
Fax: (612) 8756 4468
Email: [email protected]
Website: www.summitprinting.com.au
Indonesia
PT DIGITAL MEDIA TECHNOLOGYMM2100 Industrial Town
Jl. Bali H1-1, Cibitung
Bekasi 17520, Indonesia
Tel: (6221) 8998 3333
Fax: (6221) 8998 3939
Email: [email protected]
Website: www.dmtech.web.id
CORE SUBSIDIARIES AND ASSOCIATE
SAR1009002 SM Summit AR().indb 2SAR1009002 SM Summit AR().indb 2 3/31/2011 8:20:00 PM3/31/2011 8:20:00 PM
POSSIBILITIESENHANCING LIFE
As a leading one-stop manufacturer of the Optical
Storage Media industry, we are constantly providing fresh
innovative ideas and capabilities to realise our customers’
aspirations, offering unlimited possibilities in life. We have
also incorporated environmental-friendly practices in product
and business development to underscore our commitment
towards saving the earth.
PASSIONENHANCING LIFE
With over 30 years of unwavering
commitment towards meeting the
needs of customers, we pride ourselves
on delivering only premium products
and services of exceptional quality in
the most effi cient manner. To us, life’s
passion is about being able to enjoy
what you love best time and again.
SM SUMMIT HOLDINGS LIMITED4A N N U A L R E P O R T 2 0 1 0
When the Going Gets Tough,
the Tough Gets Going
DEAR SHAREHOLDERS,
On behalf of the Board of Directors, I am pleased to
present the Annual Report of SM Summit Holdings Limited
(“the Group”) for the financial year ended 31 December
2010.
FY2010 was a challenging year for the Group despite
the overall global economic recovery. The entertainment
industry continued to be negatively impacted by the
adverse retail environment for DVDs and Compact Discs as
the industry faced increasing competition and changes in
consumption patterns. Demand for optical disc products fell
as our customers became more conservative in managing
their orders and inventory at the retail stores when releasing
their titles. As such, our revenue fell by 11% from S$42.9
million in FY2009 to S$38.3 million in FY2010.
However, I am pleased to announce that the Group has
dug deep and our cost management efforts have yielded
positive results. One of the actions we carried out was a
re-structuring exercise wherein we relocated our machinery
from Singapore and Australia to Indonesia. These efforts
have helped to reduce our labour and factory overheads
and through such cost containment measures, we were
able to improve our gross profit by 7% from S$8.7 million
in 2009 to S$9.3 million in 2010 in spite of the drop in
revenue.
Other income fell by approximately S$1.3 million primarily
due to lower exchange gains for the year. On the other
hand, depreciation was reduced by S$0.8 million as some
assets were already fully depreciated. In line with the lower
CHAIRMAN’S STATEMENT
SM SUMMIT HOLDINGS LIMITED 5A N N U A L R E P O R T 2 0 1 0
SM SUMMIT HOLDINGS LIMITED 5A N N U A L R E P O R T 2 0 1 0
sales volume, distribution costs also fell by S$1.1 million
compared to FY2009 as selling expenses such as freight
and marketing salaries were reduced. With an income tax
credit of about S$90,000, the Group successfully swung
from S$0.4 million net loss in FY2009 to net profit of S$0.6
million in FY2010.
CONSOLIDATING CAPABILITIES, OPTIMISING
EFFICIENCY
With global economic growth seen slowing down and
inflationary pressures building up, the macro environment
going forward continues to be uncertain. We foresee that
demand for optical disc manufacturing will likely remain
weak and given the uptrend in the price of polycarbonate,
a key raw material for our products, the Group’s priority
for the coming year will still be cost management through
consolidation of capabilities and effective utilization of
resources to match demand, so as to achieve optimum
efficiency.
In fact, we will continue to focus on our Indonesian
production base as our current capacity and size is still
small. By growing this segment, we expect to gain a
bigger market share while keeping costs down at the
same time. In addition, we will also be exploring new
technologies and cultivating new revenue streams by
working with strategic partners in the areas of BluRay Disc
and EcoDisc manufacturing.
NEW BUSINESS OPPORTUNITY
As the outlook for the optical disc industry remains
challenging, we saw the need to explore alternative
business opportunities to generate new stable streams of
revenue and profits for the Group.
In line with the Group’s diversification plans, we entered
into term sheets to acquire 100% interest in Centurion
Dormitory (Westlite) Pte Ltd (“Westlite”), 45% interest in Lian
Beng Centurion (Mandai) Pte Ltd (“JVCo”) and 75% interest
in JYC-NCL Pte Ltd (“JYC-NCL”), collectively referred to
as the “Proposed Transactions” on 13 January 2011. Both
Westlite and JYC-NCL have existing profitable businesses
in the ownership, management and operation of workers
dormitories and temporary workers’ accommodation. On a
combined basis, the dormitories managed by Westlite and
JYC-NCL can house more than 14,000 workers. JVCo, on
the other hand, is a company which has a piece of land in
Mandai which, subject to the necessary approvals, can be
developed for the operation of workers’ dormitories with a
capacity of at least 4,000 beds.
This will allow the Group to diversify itself from its current
business where the operating environment for optical disc
manufacturing remains difficult. The acquisition of existing
profitable businesses with healthy operating cashflows
will also strengthen the Group’s fundamentals. While
ambitious in nature, the Proposed Transactions will help
the Group make a meaningful foray into this new sector
with foreseeable growth potential.
At the time of writing this message, we are still in the
process of carrying out our due diligence on Westlite,
JVCo and JYC-NCL and are in discussions and enquiring
with the respective vendors on certain matters arising
from the due diligence that are crucial to the Proposed
Transactions. We are also in discussions and negotiations
with the respective vendors of Westlite, JVCo and JYC-
NCL on the terms of the definitive sale and purchase
agreements to be entered into in relation to the Proposed
Transactions.
The Proposed Transactions will require, amongst
others, the approval of shareholders at an Extraordinary
General Meeting to be convened. We will make further
announcement of any material developments on the
Proposed Transactions at the appropriate time. As these
transactions are complex, I must inform shareholders
that there is no certainty or assurance that the Definitive
Agreements will be entered into or that Proposed
Transactions will be proceeded with.
DIVIDEND
To reward our shareholders for their support during
these challenging times, the Board of Directors has
recommended a first and final dividend of 0.5 cent per
ordinary share for FY2010.
APPRECIATION AND ACKNOWLEDGEMENTS
Finally, on behalf of the Board of Directors, I would like
to express my gratitude to the management team and for
their hard work during these trying times. I would also like
to take this opportunity to thank all shareholders, business
associates, partners and customers for their staunch
support over the years. Lastly, I would also like to thank
the Board members for the guidance that they have given
to the Group as we move on to a new chapter.
Lee Kerk Chong
Chairman
25 March 2011
SM SUMMIT HOLDINGS LIMITED6A N N U A L R E P O R T 2 0 1 0
MR. LEE KERK CHONGChairman
Chief Executive Offi cer (CEO)
MR. KONG CHEE MINExecutive Director
Group Finance Director
MR. LEE KERK CHONG was appointed to the Board on 31 March 1984 and
was last re-elected a Director on 28 April 2009. He is a member of the Nominating
Committee.
With a career in the media storage industry spanning over 36 years, Mr. Lee brings
vast entrepreneurial experience and strong management skills to the Summit Group.
As founder of the Group, Mr. Lee has been instrumental in its growth, developing the
Group from a company with a single rented factory in Singapore with 10 employees
to one with a network of 4 production facilities in Singapore, Australia, Indonesia and
China today.
Mr. Lee set up Summit Audio Enterprise in 1981 to manufacture cassette tapes and
in 1991, he capitalised on the growth in optical disc storage by advancing Summit
from a manufacturer of cassette tapes to compact disc and digital versatile disc
manufacturing. A hands-on leader, he remains active in every aspect of the Group’s
operations, on top of overseeing its strategic development and growth.
MR. KONG CHEE MIN was appointed to the Board on 28 March 2000 and was last
re-elected a Director on 28 April 2010.
As the Group’s Finance Director, Mr. Kong leads the Group’s finance, accounting,
information technology, administration and corporate management functions and has
held his current appointment since 2000. Apart from his finance and administrative
duties, he also assists the Managing Director (CEO) to oversee and manage the
Group’s business operations, development and growth.
Mr. Kong is a Certified Public Accountant with over 20 years of finance and corporate
management experience. He worked in an American MNC as well as an international
public accounting firm before joining the Group in 1996. Mr. Kong graduated with a
Bachelor of Accountancy degree from Nanyang Technological University. He is also
a member of the Institute of Certified Public Accountants of Singapore.
BOARD OF DIRECTORS
SM SUMMIT HOLDINGS LIMITED 7A N N U A L R E P O R T 2 0 1 0
SM SUMMIT HOLDINGS LIMITED 7A N N U A L R E P O R T 2 0 1 0
MR. CHANDRA MOHAN S/O RETHNAMIndependent Non-Executive Director
MR. GN HIANG MENGIndependent Non-Executive Director
MR. GN HIANG MENG was appointed as an Independent Non-Executive Director of
the Company on 17 May 2007 and was last re-elected a Director on 28 April 2010.
He is the Chairman of both the Audit Committee and Nominating Committee and also
a member of the Remuneration Committee.
He was with the United Overseas Bank Group for 28 years and prior to his resignation
in 2001 was the Senior Executive Vice-President in charge of investment banking
and stockbroking businesses. He was the Deputy President of UOL Group prior to
his retirement in 2007. Mr. Gn graduated with a Bachelor of Business Administration
(Honours) degree from the University of Singapore. He is currently a Director of Koh
Brothers Group Limited.
MR. CHANDRA MOHAN S/O RETHNAM was appointed as an Independent Non-
Executive Director of the Company on 17 May 2007 and was last re-elected a Director
on 28 April 2009. He is the Chairman of the Remuneration Committee and a member
of both the Audit Committee and Nominating Committee.
He is presently an Advocate and Solicitor and a Partner of a law firm in Singapore.
Prior to that, he was a lecturer with the Faculty of Law at the National University of
Singapore, in which he joined in 1987. On top of his experience in law, he is also
a Fellow of the Singapore Institute of Arbitrators and the UK Chartered Institute of
Arbitrators. His academic qualifications include a Bachelor of Law (Honours) degree
from the University of Singapore and a Master of Law degree from the University of
Cambridge.
SM SUMMIT HOLDINGS LIMITED8A N N U A L R E P O R T 2 0 1 0
MS. MAK BANG MUINon-Executive Director
MR. TANG KAY HWANon-Executive Director
MS. MAK BANG MUI was appointed as a Non-Executive Director of the Company on
17 May 2007 and was last re-elected a Director on 28 April 2008. She is a member
of the Audit Committee.
Currently the Director of Centurion Investment Management Pte Ltd, she is responsible
for providing advice on the management of funds in the organisation. She first began
her career as an equity analyst in 1986, focusing particularly on Asian markets,
including Singapore, Malaysia and Indonesia. Prior to her present position, she was
with UOB Kay Hian Pte Ltd as a sell-side analyst. Apart from these professional
employments, she had also accumulated a wealth of experience during her previous
tenure in other stockbroking companies. Ms. Mak graduated from the National
University of Singapore in 1986 and is a member of the Institute of Certified Public
Accountants of Singapore.
MR. TANG KAY HWA was appointed as a Non-Executive Director of the Company
on 17 May 2007 and was last re-elected a Director on 28 April 2008. He is a member
of the Remuneration Committee.
Mr Tang is currently the Chief Executive Officer of Centurion Investment Management
Limited which is an Asian private-equity investment company with offices in Singapore,
Hong Kong and Shanghai. Prior to joining Centurion, he was the Deputy Managing
Director of UOB Kay Hian (Hong Kong) Ltd. He brings with him a wealth of financial
experience having spent more than 20 years in stockbroking and equity capital markets
in Hong Kong. Mr. Tang holds a Bachelor’s degree in Business Administration.
BOARD OF DIRECTORS
SM SUMMIT HOLDINGS LIMITED 9A N N U A L R E P O R T 2 0 1 0
MR. LEONG SIEW FATT
Group Technical and Operations Director
Mr. Leong started as an engineer in the Group for 4 years
before being promoted to the position of Group Technical
Manager in 1997. He then took up the appointment for
his current role in 2001, and now oversees the Group’s
technical and optical disc manufacturing operations. Mr.
Leong has extensive technical and factory operations
experience spanning over 26 years which includes working
with the Singapore Armed Forces and several private
organisations. In addition to his role, Mr. Leong also
oversees our China associated company’s operations
as General Manager. He graduated with a Bachelor of
Engineering Management degree from the University of
Western Sydney.
MR. YEO BOON HING DAVID
Group Regional Sales & Marketing Director
In his current role, Mr. Yeo is responsible for the regional
sales and marketing function of the Group. He has a wealth
of sales and marketing experience and management
experience in both local and multi-national organisations.
Mr. Yeo first joined Summit CD Manufacture Pte Ltd, a
Singapore subsidiary of the Group, as Sales and Marketing
Director in 1997.
Besides his role as Regional Sales & Marketing Director
at Group level, Mr. Yeo is presently the Chief Executive
Officer of Summit CD Manufacture Pte Ltd overseeing its
local operations. Academically, Mr. Yeo holds a Bachelor
of Science degree with double majors in Finance and
Marketing.
MS. LEE GEOK ING JANICE
Group HR & Admin Manager
Ms. Lee was first appointed to the Board on 11 August
1994. She has resigned from the Board on 18 May 2007
and remains as Group Human Resource and Admin
Manager. She is the sister of Mr. Lee Kerk Chong and
has been with the Group since its incorporation. As HR
& Admin manager, she currently oversees the Group’s
human resource development, administration, security
and facilities management. Ms. Lee is equipped with
more than 26 years of accounting, human resource and
administrative experience, and was an external auditor
with a local public accounting firm and had worked in a
private company overseeing its finance, administration
and human resource matters before becoming part of
the Group.
MR. SEK CHONG POH FRANCIS
CEO of Summit Technology Australia Pty Ltd
Mr. Sek is based in Australia, managing the day-to-day
operations of the Group’s subsidiary in Australia, Summit
Technology Australia Pty Ltd. He first joined the Group in
November 1988 as Regional Marketing Manager and was
posted to Australia for the establishment of the subsidiary
there in 1995. Mr. Sek brings with him over 26 years of
marketing and operations experience. Prior to joining
the group, Mr. Sek worked in a private organisation as
Assistant Manager, a position he held for several years.
MR. SONY TAN
CEO of PT Digital Media Technology
Mr. Tan first joined the Group in January 2001 as a
Finance and Operations Manager. He was posted to
Indonesia to assist in the Group’s expansion goals.
Initially, he was appointed to manage PT Digital Media
Technology (“DMTech”), then an investment for the Group,
after which he was promoted to become the Director of
Finance and Operations. After becoming CEO in 2005, Mr.
Tan is responsible for the strategic planning, expansion
and day-to-day operations of DMTech.
Mr. Tan is armed with 23 years of experience in
accounting, auditing, corporate restructuring, factory
operations and management, having worked for various
local and multi-national companies in Indonesia. Prior
to joining the Group, he was a Division Head of Internal
Audit at PT Bank Tiara Asia, a public-listed company. Mr.
Tan graduated from the University of North Sumatera and
is a registered accountant in Indonesia. He also holds
a Certified Management Accountant degree from the
Institute of Certified Management Accountant Australia and
Certified Human Resource Professional from University of
Atmajaya Jakarta. Mr. Tan is registered as a member of
the Indonesian Institute of Corporate Directorship (IICD).
SENIOR MANAGEMENT
SM SUMMIT HOLDINGS LIMITED10A N N U A L R E P O R T 2 0 1 0
ENHANCING LIFE
PROGRESS
We are in the business of improving lives.
Our data storage solutions make progress
possible in the leisure, entertainment and
software industries. Providing the essentials for
our customers’ lives, we form the fundamentals
of most technological solutions in their daily
lives.
SM SUMMIT HOLDINGS LIMITED 11A N N U A L R E P O R T 2 0 1 0
SM SUMMIT is one of the leading manufacturers and
service providers of optical storage media in Asia Pacifi c Region.
A public listed company that has evolved through innovation
and commitment for 30 years.
Serving the audio, video, multimedia and the IT industries,
SM Summit is committed to deliver world class services
and the highest quality of compact disc (CD) and digital versatile disc (DVD).
The Group has over 500 staff across Singapore, Australia,
Indonesia, Japan, and China to serve its prominent diversifi ed clients
in the leisure, entertainment and IT industries.
SM SUMMIT HOLDINGS LIMITED12A N N U A L R E P O R T 2 0 1 0
Being one of the leading manufacturers and service
provider of optical storage media in the Asia Pacific
Region, the Group is focused on delivering world class
services and the highest quality of optical disc products.
ENHANCING EFFICIENCY
In spite of the difficult operating environment and weak
demand faced by our customers, compounded by rising
prices of raw materials, the Group remained steadfast in
its commitment to deliver high quality products at a good
value. To that end, the Group’s key focus for the year was
to rationalise the utilisation of resources and consolidate
capacity pegged to demand, as well as improve efficiency
to optimise operation. By doing so, the Group remained
lean and was able to achieve overall higher margins that
propped up the Group’s bottom line despite the drop in
revenue.
During the year, the Group completed its restructuring
exercise carried out in its Australian subsidiaries and
achieved substantial savings by relocating more production
to its Indonesian base.
Through the Group’s efficient cost-cutting measures,
selling expenses such as freight and marketing salaries
also fell by a greater proportion as compared to the decline
in sales volume. Selling expenses were down by 29% as
opposed to 11% pull back in revenue. Administrative cost
also fell by 7% as the Group continued to rationalise its
manpower needs.
Through the Group’s prudent management of cash flow,
the Group managed to generate S$3 million in cash flow
from its operating activities. Resultantly, after taking into
account the payment of dividends to shareholders and
repayment of bank borrowings upon due, the Group’s
overall cash position improved by approximately S$1 million
over the previous financial year.
COMMITTING TO SECURITY AND QUALITY
However, the Group’s efforts to manage costs did not
deter its steadfast commitment to security and quality. The
production plants under the Group continue to be certified
as compliant under the anti-piracy and security programs
of the Content Delivery and Storage Association (“CDSA”).
This underscores the Group’s dedication towards
OPERATIONS REVIEW
SM SUMMIT HOLDINGS LIMITED 13A N N U A L R E P O R T 2 0 1 0
SM SUMMIT HOLDINGS LIMITED 13A N N U A L R E P O R T 2 0 1 0
intellectual property rights protection. In addition, the
Group’s staunch adherence towards quality standards and
environmental protection is also displayed in its ISO9001
and ISO14001 certifications, which endorses the Group’s
quality and environmental management systems.
It is this perseverance towards stringent environmental
and quality standards that has built up the Group’s sound
reputation in the region, sustained its strong relationship
with its customers and differentiated the Group from
its competitors. The Group’s brand name continues to
be associated with reliability and quality which gives
customers the confidence that their intellectual property
assets are being well-handled and protected.
FOSTERING NEW GROWTH
The Group recognises that the optical media storage
industry is unlikely to grow by leaps and bounds going
forward. In order to enhance shareholder value, the
management team is constantly been on the lookout for
good business opportunities that the Group can capitalise
on to diversify from its traditional business.
As a result, the Group has recently entered into term
sheets to acquire companies in the business of owning,
managing and operating workers’ dormitories and
temporary workers’ accommodation. Westlite owns
and operates a workers dormitory complex that can
accommodate over 5,000 workers. JYC-NCL on the
other hand, manages three primary dormitories that can
accommodate a total of 9,000 workers. JVCo is not yet
operational, but has a piece of land in Mandai which
offers the Group an opportunity for further expansion of
the dormitory business. Upon obtaining the necessary
approvals, a workers’ dormitory can be built on this piece
of land in Mandai, increasing the Group’s capacity by a
further 4,000 beds.
On completion of this series of Proposed Transactions, the
Group will be able to immediately have on hand a portfolio
of dormitories with a capacity exceeding 14,000 with the
potential to reach 18,000 and more. With such a sizeable
capacity, the Group will be able venture into this new
business in a meaningful way by gaining a strong foothold
right from the start. The operational assets are already
profitable and generating positive cash flow. Hence, the
addition of these assets will also improve profitability and
strengthen the Group’s balance sheet.
REMAINING RESILIENT AND WELL-ROOTED
While the Group is excited with the prospects of its
impending new business, the Group will not lose sight
of its roots. The Group will continue to explore ways
to further enhance its existing operations and maximise
utilisation of resources to further increase efficiency and
productivity. Keeping operations lean and managing cash
flow prudently will continue to keep the Group’s financial
position strong, allowing it to capitalise on opportunities
when they arise.
SM SUMMIT HOLDINGS LIMITED14A N N U A L R E P O R T 2 0 1 0
2010
2010
0.19
13.03
2009
2009
(0.12)
2008
2008
(1.26)
2007
2007
3.71
2006
2006
1.13
19.9716.6916.72
13.36
2010
2010
38,326
541
2009
2009
42,940
(180)
2008
2008
58,865
(5,029)
2007
2007
83,353
12,834
2006
2006
79,306
4,442
TURNOVER($’000)
PROFIT/(LOSS) BEFORE TAX ($’000)
EARNINGS PER SHARE (CENTS)
NET ASSETS PER SHARE (CENTS)
FIVE-YEAR FINANCIAL HIGHLIGHTS
SM SUMMIT HOLDINGS LIMITED 15A N N U A L R E P O R T 2 0 1 0
SINGAPORE
AUSTRALIA
INDONESIA
CHINA
SUMMIT CD MANUFACTURE PTE LTD
SUMMIT TECHNOLOGY AUSTRALIA PTY LTD
GATE COSMOS INVESTMENTS LTD
SM SUMMIT INVESTMENT PTE LTD
SUMMIT HI-TECH PTE LTD
SUMMIT TECHNOLOGY JAPAN K. K
SUMMIT PRINTING (AUSTRALIA) PTY LTD
PT DIGITAL MEDIA TECHNOLOGY (ULTIMATE HOLDING)
ADVANCE TECHNOLOGY INVESTMENT LTD
SHANGHAI HUADE PHOTOELECTRON SCIENCE & TECHNOLOGY CO. LTD
FAIRVISION PTE LTD
100%
100%
100%
100%
100%
100%
100%
100%
100%
49%
70%
SM SUMMIT INVESTMENT PTE LTD100%
3NGINE PTE LTD100%
SM SUMMIT HOLDINGS LIMITEDcovering core subsidiaries and associate
GROUP STRUCTURE
BOARD OF DIRECTORS
Executive:
Lee Kerk Chong (Chairman/CEO)
Kong Chee Min
Non-Executive:
Mak Bang Mui
Tang Kay Hwa
Independent Non-Executive:
Chandra Mohan s/o Rethnam
Gn Hiang Meng
AUDIT COMMITTEE
Gn Hiang Meng (Chairman)
Chandra Mohan s/o Rethnam
Mak Bang Mui
NOMINATING COMMITTEE
Gn Hiang Meng (Chairman)
Chandra Mohan s/o Rethnam
Lee Kerk Chong
REMUNERATION COMMITTEE
Chandra Mohan s/o Rethnam (Chairman)
Gn Hiang Meng
Tang Kay Hwa
COMPANY SECRETARIES
Hazel Chia Luang Chew
Juliana Tan Beng Hwee
REGISTERED OFFICE
45 Ubi Road 1
Summit Building
Singapore 408696
Tel : (65) 6745 3288
Fax : (65) 6748 9612
Email : [email protected]
SHARE REGISTRARS
B.A.C.S. Private Limited
63 Cantonment Road
Singapore 089758
Tel : (65) 6593 4848
Fax : (65) 6593 4847
AUDITORS
PricewaterhouseCoopers LLP
8 Cross Street #17-00
PWC Building
Singapore 048424
AUDIT PARTNER-IN-CHARGE
Chua Lay See
(Date of appointment:
For Financial year beginning 01 January 2008)
CORPORATE INFORMATION
SM SUMMIT HOLDINGS LIMITED16A N N U A L R E P O R T 2 0 1 0
SM SUMMIT HOLDINGS LIMITED 17A N N U A L R E P O R T 2 0 1 0
SM SUMMIT HOLDINGS LIMITED 17A N N U A L R E P O R T 2 0 1 0
CORPORATE GOVERNANCE REPORT
SM Summit Holdings Limited (the “Company”) is committed to achieve good standards of corporate governance and
business conduct in order to protect the interest of shareholders and has adopted the principles and guidelines as set
out in the Code of Corporate Governance 2005 (the “Code”). The Company strives to subscribe to the principles and
guidelines as set out in the Code where applicable, feasible and practical to the Group unless otherwise specified.
BOARD OF DIRECTORS (THE “BOARD”)
The Board comprises 6 members of whom two are Executive Directors, two are Non-Executive Directors and two are
Independent Non-Executive Directors.
The Board oversees the businesses and affairs of the Group and the Company. In addition to its statutory responsibilities,
the Board approves strategic plans, key operational initiatives, major investments and financing decisions and reviews
the financial performance of the Group. The Board is supported by the Audit Committee, Nominating Committee and
Remuneration Committee.
The Board met 5 times during the financial year under review. The Company’s Articles of Association provide for
meetings to be held via telephone conference, video conferencing or other similar means of communications.
The Non-Executive Directors constructively challenge Management and assist in the development of proposals on
strategy.
The Directors are provided with sufficient information including information on financial performance of the Group on a
quarterly and on-going basis and have separate and independent access to Management of the Group. The Chairman/
Chief Executive Officer (“CEO”) also submits a report to the Board on a quarterly basis highlighting the performance,
business conditions and outlook of the Group.
The Directors have separate and independent access to the Company Secretary. The Company Secretary attends Board
and Board Committee meetings and provides advice, secretarial support and assistance to the Board and ensures
adherence to the Board procedures and relevant rules and regulations applicable to the Company.
The Directors may seek independent professional advice to fulfill their duties and such cost will be borne by the
Company.
The Company has in place orientation programmes for newly appointed Directors to ensure that they are familiar with
the Group structure, and the Company’s business and operations. Newly appointed Director is expected to participate
in an orientation programme which includes meeting with the Chairman/CEO and Finance Director to obtain an
understanding of the affairs of the Group’s business.
The Company also has a training budget for its Directors to attend courses and seminars which is utilised on a need
basis. The Directors are provided with updates on changes in the relevant laws and regulations, where appropriate,
to enable them to make well-informed decisions and to discharge their duties responsibly.
The Board is of the view that the current Board size is appropriate taking into account the nature and scope of the
Group’s operations.
As a group, the Board brings with them a broad range of expertise and experience in areas such as accounting, finance,
legal, business and management experience, industry knowledge, strategic planning and knowledge necessary to meet
the Company’s objectives. Profile of each Director is set out on pages 6 to 8.
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Currently, the roles of the Group’s Executive Chairman and CEO are not separated. The Board is of the view that it
is not practical and cost effective to have such a division in view of the present business and scope of operations of
the Group.
The Group’s Executive Chairman and CEO, Mr Lee Kerk Chong, is also the founder of the Group. He has extensive
experience in the media storage industry and is pivotal to the development and growth of the Company’s core
business. The Chairman, amongst his other duties, schedules and chairs Board meetings and, with the assistance
of the Company Secretary and Executive Director, prepares Board agenda as well as controls the quality, quantity
and timeliness flow of information to the Board. The Chairman is also responsible for the workings of the Board and
ensures the integrity and effectiveness of the governance process of the Board. In carrying out his executive duties
and responsibilities for the Company’s operations and business, the Chairman is assisted by the various functional
directors and senior management.
The Chairman’s remuneration is reviewed annually by the Remuneration Committee. The Audit Committee, Nominating
Committee and Remuneration Committee comprise a majority of Independent Non-Executive Directors of the Company.
As such, the Board believes that there are adequate safeguards in place against an uneven concentration of power
and authority in a single individual.
BOARD COMMITTEES
To assist the Board in the execution of its duties, the Board has delegated specific functions to the following Board
Committees:
AUDIT COMMITTEE (“AC”)
The AC comprises 3 Non-Executive Directors, a majority of whom are Independent Non-Executive Directors, as
follows:
Gn Hiang Meng (Chairman) Independent Non-Executive Director
Chandra Mohan s/o Rethnam Independent Non-Executive Director
Mak Bang Mui Non-Executive Director
The Board is of the view that the AC members have adequate accounting or related financial management expertise
and experience to discharge the AC’s functions.
The AC met 4 times during the financial year, and as and when deemed necessary to carry out its functions.
The AC’s primary function is to provide assistance to the Board in fulfilling its responsibility relating to corporate
accounting and auditing, the Company’s financial reporting practices, the quality and integrity of the Company’s financial
reports and the Company’s internal control systems including financial, operational and compliance controls, and risk
management established by Management and the Board.
The AC also performs the following functions:
• reviews the audit plan and scope of audit examination of the external auditors;
• evaluates the overall effectiveness of both the internal and external audits through regular meetings with the
internal and external auditors;
• reviews the adequacy of the internal audit function;
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• determines that no restrictions are being placed by Management upon the work of the internal and external
auditors;
• evaluates the adequacy of the internal control systems of the Group by reviewing written reports from the internal
and external auditors, and Management’s responses and actions to address any deficiencies noted;
• evaluates the adherence to the Group’s administrative, operating and internal accounting controls;
• reviews the quarterly and full-year financial statements and announcements before submission to the Board for
approval;
• reviews interested person transactions in accordance with the requirements of the Listing Rules of the Singapore
Exchange Securities Trading Limited (SGX-ST);
• reviews all non-audit services provided by the external auditors to determine if the provision of such services
would affect the independence of the external auditors;
• reviews and recommends the appointment or re-appointment of the external auditors; and
• considers other matters as requested by the Board.
The AC is authorised to investigate any matter within its terms of reference, and has full access to Management and full
discretion to invite any Executive Director or executive officer to attend its meetings, as well as reasonable resources
to enable it to discharge its functions properly.
Annually, the AC meets with the internal and external auditors without the presence of Management. This is to review
the adequacy of audit arrangements, with particular emphasis on the scope and quality of their audits, the independence
and objectivity of the external auditors and the observations of the auditors.
The Company has in place a whistle-blowing programme where employees of the Company may, in confidence, report
possible improprieties which may cause financial or non-financial loss to the Company. The objective is to ensure that
arrangements are in place for the independent investigations of such concerns and for appropriate follow-up action.
The AC has reviewed the non-audit services provided by the external auditors, Messrs PricewaterhouseCoopers LLP,
and is of the opinion that the provision of such services does not affect their independence.
The AC had recommended the re-appointment of Messrs PricewaterhouseCoopers LLP as the Company’s external
auditors at the forthcoming Annual General Meeting (“AGM”).
INTERNAL CONTROLS
The Board believes that, in the absence of any evidence to the contrary, the system of internal control maintained by
the Group, which was in place throughout the year and up to the date of this report, is adequate to meet the needs
of the Group in its current business environment.
The Group’s external auditors have, in the course of their statutory audit, carried out a review of the Group’s material
internal control but not for the purpose of expressing an opinion on the effectiveness of the internal control. Material
non-compliance and internal control weaknesses noted during their audit and the auditors’ recommendations are
reported to the AC.
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The Group’s internal auditor also carries out major internal control checks and compliance review as instructed by
the AC.
The AC will review the external and internal auditors’ reports and ensure that there are adequate internal controls in
the Group.
INTERNAL AUDIT
The Company has out-sourced its internal audit function to BDO Consultants Pte Ltd. The internal auditor reports
directly to the Chairman of the AC and present their reports and audit findings and recommendations to the AC.
The AC reviews the internal auditor’s reports on the state of the Group’s internal controls on an annual basis. The AC
also reviews and approves the annual internal audit plans.
The AC is satisfied that the internal auditor has the necessary resources to adequately perform its functions. The
internal auditor conducts audits based on the BDO Internal Audit Methodology which is consistent with the Standards
for the Professional Practice of Internal Auditing set by the Institute of Internal Auditors. To ensure the adequacy of
the internal audit function, the AC reviews, on an annual basis, the internal auditor’s activities.
ACCOUNTABILITY AND AUDIT
The Board is accountable to the shareholders, while Management is accountable to the Board.
Directors are provided with adequate and timely information prior to Board meetings and on an on-going basis, and
have separate and independent access to the Company’s senior management.
The Board provides shareholders with a balanced and understandable explanation and analysis of the Company’s
performance on a quarterly basis in the Group’s quarterly and full-year financial results announcements.
NOMINATING COMMITTEE (“NC”)
The NC, regulated by a set of written terms of reference, comprises 3 members, a majority of whom are Independent
Non-Executive Directors, as follows:
Gn Hiang Meng (Chairman) Independent Non-Executive Director
Chandra Mohan s/o Rethnam Independent Non-Executive Director
Lee Kerk Chong Executive Chairman/CEO
The NC is chaired by Gn Hiang Meng, an Independent Non-Executive Director not associated with any substantial
shareholder.
The NC reviews and ensures that there is an appropriate composition of members of the Board with suitably diverse
backgrounds to meet the Group’s operational and business requirements.
The NC is responsible for making recommendations to the Board on all appointments and re-appointment of Directors.
The NC meets at least once annually and as and when deemed necessary.
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The principle responsibilities of the NC are summarised below:
• assesses the effectiveness of the Board as a whole and the contribution of each Director;
• reviews and nominates newly appointed Directors and Directors retiring by rotation, having regard to their
contributions and performance, for re-election at each AGM;
• reviews and recommends all new appointments to the Board;
• determines on an annual basis the independence of each Director;
• decides whether a Director is able to and has been adequately carrying out his or her duties as a Director of
the Company, particularly when the Director has multiple Board representations; and
• identifies gaps in the mix of skills, experience and other qualities required in an effective Board so as to better
nominate or recommend suitable candidates to fill the gaps.
In accordance with the Company’s Articles of Association, each Director retires at least once in every three years by
rotation and all newly appointed Directors retire at the next AGM following their appointments. The retiring Directors
are eligible to offer themselves for re-election.
Where a vacancy arises, the NC will consider potential candidate for appointment based on the selection criteria
determined in consultation with the Board and after taking into consideration the qualification and experience of such
candidate, his/her ability to increase the effectiveness of the Board and to add value to the Group’s business. The NC
will recommend the appropriate candidate for the consideration by the Board.
The NC had reviewed the independence of each Director for FY2010 in accordance with the Code’s definition of
independence and is satisfied that at least one-third of the Board comprises Independent Non-Executive Directors.
The NC had recommended the re-appointment of the following Directors who will be retiring at the forthcoming
AGM:
(i) Mak Bang Mui
(ii) Tang Kay Hwa
The Board has accepted the NC’s recommendation and accordingly, the above-named Directors will be offering
themselves for re-election.
The NC had adopted a formal process to evaluate the performance of the Board as a whole. A Board performance
evaluation was carried out to assess and evaluate the Board’s composition, size and expertise. Quantitative financial
criteria such as return on equity (ROE) and return on assets (ROA) were also considered in the evaluation.
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REMUNERATION COMMITTEE (“RC”)
The RC, regulated by a set of written terms of reference, comprises 3 Non-Executive Directors, a majority of whom
are Independent Non-Executive Directors, as follows:
Chandra Mohan s/o Rethnam (Chairman) Independent Non-Executive Director
Gn Hiang Meng Independent Non-Executive Director
Tang Kay Hwa Non-Executive Director
The members of the RC have many years of corporate experience and are knowledgeable in the field of executive
compensation. The RC also has access to external professional advice on remuneration and human resource related
matters, if required.
The RC reviews and recommends to the Board a framework of remuneration as well as determines the remuneration
package and terms of employment for each Director and employees who are immediate family members of a Director
or controlling shareholder of the Group.
The RC also reviews the remuneration policies and packages for senior management on an annual basis. The review
covers all aspects of remuneration, including but not limited to Directors’ fees, salaries, allowances, bonuses, and
benefits-in-kind. The RC has access to the Company’s internal human resource department to assist in their review.
The RC’s recommendations are submitted for endorsement by the entire Board. Annual reviews of the compensation
of Directors are also carried out by the RC to ensure that the remuneration of the Directors and senior management
commensurate with their performance and value-add to the Group, giving due regard to the financial and commercial
health and business needs of the Group. The remuneration of the Chairman/CEO (along with that of other senior
management) is also reviewed annually by the RC and the Board.
The remuneration package of the Chairman/CEO, includes a variable bonus which is tied to individual performance
as well as the Company’s performance. The remuneration for the Executive Director(s) and senior management staff
comprises a fixed basic salary plus other variable component in the form of annual performance bonus tied to individual
performance as well as the Company’s performance
Directors’ fees payable to all the Directors are set in accordance within a remuneration framework comprising a basic
fee and incremental fixed fee for the level of responsibilities such as chairing Board Committee and attendance at
Board and Board Committee meetings.
The RC has recommended to the Board an amount of S$157,000 as Directors’ fees for the year ended 31 December
2010. The Board will table this recommendation at the forthcoming AGM for shareholders’ approval.
There is an employee of the Group (Lee Geok Ing) who is the sister of Lee Kerk Chong, Chairman/CEO and substantial
shareholder of the Company. For FY2010, the remuneration of this employee did not exceed S$150,000.
The existing service contracts for Executive Directors are for a period of 3 years and thereafter will be automatically
renewed annually. New service contracts or renewals, if any, will be subject to RC’s review to ensure that the terms
are fair and for a reasonable period.
The Company does not have any long-term incentive or share option scheme in place.
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CORPORATE GOVERNANCE REPORT
DIRECTORS’ REMUNERATION
The remuneration paid for FY2010 is shown below:
Director’s
fees (%)
Salary
(%)
Bonus
(%)
Others Benefits
(%)
Total
(%)
Name
S$250,000 to below S$500,000
Lee Kerk Chong 4 82 7 7 100
Below S$250,000
Kong Chee Min 4 73 3 20 100
Chandra Mohan s/o Rethnam 100 0 0 0 100
Gn Hiang Meng 100 0 0 0 100
Mak Beng Mui 100 0 0 0 100
Tang Kay Hwa 100 0 0 0 100
EMPLOYEES’ REMUNERATION
The annual remuneration paid to each of the top five executives (who are not Directors of the Company) is set out
below:
Salary (%) Bonus (%) Others Benefits (%) Total (%)
Name
S$250,000 to below S$500,000
Sek Chong Poh Francis 89 0 11 100
Below S$250,000
Lee Geok Ing Janice 83 0 17 100
Leong Siew Fatt 76 4 20 100
Sony Tan 60 29 11 100
Yeo Boon Hing David 71 4 25 100
COMMUNICATION WITH SHAREHOLDERS
The Company does not practice selective disclosure. In line with the continuous disclosure obligations of the Company,
the Board ensures that shareholders are equally informed of all major developments within the Group on a timely
basis.
Financial results and other material information are communicated to shareholders on a timely basis through:
• Annual Report and Notice of the AGM are prepared annually and issued to all shareholders;
• financial statements/results for the respective quarter and full-year which are released through SGXNET in
accordance with the requirements of the SGX-ST’s Listing Rules;
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• notices of and explanatory memoranda for AGMs and extraordinary general meetings are also advertised in the
newspapers and also made via SGXNet;
• announcements relating to major developments of the Group are made via SGXNET in accordance with the
requirements of the SGX-ST’s Listing Rules; and
• the Group’s website at which shareholders can access information regarding the Group. The website provides
all corporate announcements, press releases, annual reports, and profiles of the Group.
The notice of the AGM, together with explanatory notes or a circular on items of special business are dispatched to
shareholders at least 14 days before the meeting.
At the AGM, shareholders are given opportunities to communicate their views on matters relating to the Group
and to participate in the meeting. Issues seeking approval of shareholders, if any, are usually tabled as separate
resolutions.
The Chairmen of the AC, RC and NC and the external auditors will be available at the forthcoming AGM to attend to
any queries raised by the shareholders.
BUSINESS RISKS/INTERNAL CONTROLS
The Board considers the management of key business risks to be an important and integral part of the Group’s internal
control framework especially in the areas against copyright infringement. Stringent internal controls are in place to
ensure that intellectual property rights are protected and to reduce the risk of inadvertent production of unauthorised
material. Besides working closely with Intellectual Property Rights owner associations such as International Federation
of the Phonographic Industry (IFPI), Business Software Alliance (BSA) and Motion Picture Association (MPA), our
internal control procedures have ensured compliance with the Manufacture of Optical Discs Act. The Company has
also gone one step further on its own accord to apply to have its internal control procedures on copyright verification
be certified by Content Delivery and Storage Association (CDSA), formally known as International Recording Media
Association (IRMA), when its Anti-Piracy Certification/Compliance Program launched in Asia early 2002. The program
contains specific standards and guidelines for copyright verifications which received international recognition and are
endorsed by various Intellectual Property Rights owner associations.
Our Singapore Plant is the first company in Singapore to have certification by CDSA in October 2002. Thereafter, a
Group directive was issued to have all our optical disc manufacturing subsidiaries and associates obtain certification
by CDSA. Our Indonesian Plant and Australian Plant have since received certification in June 2004 and May 2005
respectively. Our associate in China was certified by CDSA in December 2007. Scheduled external surveillance audits
are also conducted every year by CDSA independent auditors to ensure that our internal procedures are in compliance
with the required standards. All our plants have since continued to be certified annually.
Based on internal control review carried out by the internal auditors, the Board is assured that adequate internal
controls are in place.
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CORPORATE GOVERNANCE REPORT
INTERESTED PERSON TRANSACTIONS
The Company has adopted an internal policy in respect of any transactions with interested person and has set out the
procedures for review and approval of the Company’s interested person transactions. All interested person transactions
are subject to review by the AC.
During the financial year under review, there were no interested person transactions entered into by the Company.
The Company does not have a shareholders’ mandate for interested person transactions.
DEALINGS IN THE COMPANY’S SECURITIES
The Company has adopted an internal code governing dealings in securities by Directors and officers of the Company
and its subsidiaries. This code has been disseminated to all the Directors and officers of the Group as defined in the
code.
Directors and officers have been informed not to deal in the Company’s securities at all times whilst in possession of
unpublished price sensitive information and during the periods commencing at least two weeks before the announcement
of the Company’s results for each of the first three quarters of its financial year and one month before the announcement
of the Company’s full-year results, and ending on the date of the announcement of the relevant results.
Directors and officers have also been directed to refrain from dealing in the Company’s securities on short-term
considerations.
MATERIAL CONTRACTS
No material contracts were entered between the Company or any of its subsidiaries involving the interest of the CEO,
any Directors or controlling shareholder during or at the end of the financial year ended 31 December 2010.
DIRECTORS’ ATTENDANCES AT BOARD AND BOARD COMMITTEE MEETINGS IN FY2010
Board of
Directors
Audit
Committee
Nominating
Committee
Remuneration
Committee
Name
No. Of
Meetings
Held
No. Of
Meetings
Attended
No. Of
Meetings
Held
No. Of
Meetings
Attended
No. Of
Meetings
Held
No. Of
Meetings
Attended
No. Of
Meetings
Held
No. Of
Meetings
Attended
Lee Kerk Chong 5 5 – – 1 1 – –
Kong Chee Min 5 5 – – – – – –
Chandra Mohan
s/o Rethnam
5 5 4 4 1 1 2 2
Gn Hiang Meng 5 5 4 4 1 1 2 2
Mak Bang Mui 5 5 4 4 – – – –
Tang Kay Hwa 5 5 – – – – 2 2
FINANCIAL REPORT27 Directors’ Report
29 Statement by Directors
30 Independent Auditor’s Report
32 Consolidated Income Statement
33 Consolidated Statement of Comprehensive Income
34 Balance Sheets
35 Consolidated Statement of Changes in Equity
36 Consolidated Statement of Cash Flows
37 Notes to the Financial Statements
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DIRECTORS’ REPORTFor the fi nancial year ended 31 December 2010
The directors present their report to the members together with the audited financial statements of the Group for the
financial year ended 31 December 2010 and the balance sheet of the Company as at 31 December 2010.
DIRECTORS
The directors of the Company in office at the date of this report are as follow:
Lee Kerk Chong (Chairman/Chief Executive Officer)
Kong Chee Min
Mak Bang Mui
Tang Kay Hwa
Chandra Mohan s/o Rethnam
Gn Hiang Meng
ARRANGEMENTS TO ENABLE DIRECTORS TO ACQUIRE SHARES AND DEBENTURES
Neither at the end of nor at any time during the financial 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
(a) 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:
Holdings registered
in name of director
Holdings in which director
is deemed to have an interest
At
31.12.2010
At
1.1.2010
or date of
appointment,
if later
At
31.12.2010
At
1.1.2010
or date of
appointment,
if later
Company
(No. of ordinary shares)
Lee Kerk Chong 20,932,543 14,932,543 37,500,000 43,500,000
Kong Chee Min 34,375 34,375 – –
Gn Hiang Meng – – 450,000 450,000
(b) The directors’ interests in the ordinary shares of the Company as at 21 January 2011 were the same as those
as at 31 December 2010.
DIRECTORS’ CONTRACTUAL BENEFITS
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 he is a member
or with a company in which he has a substantial financial interest, except as disclosed in the accompanying financial
statements and in this report.
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DIRECTORS’ REPORTFor the fi nancial year ended 31 December 2010
SHARE OPTIONS
There were no options granted during the financial year to subscribe for unissued shares of the Company or its
subsidiaries.
No shares have been issued during the financial year by virtue of the exercise of options to take up unissued shares
of the Company or its subsidiaries.
There were no unissued shares of the Company or its subsidiaries under option at the end of the financial year.
AUDIT COMMITTEE
The members of the Audit Committee at the end of the financial year were as follows:
Gn Hiang Meng (Chairman)
Chandra Mohan s/o Rethnam
Mak Bang Mui
All members of the Audit Committee were non-executive directors. Except for Ms Mak Bang Mui, all members were
independent.
The Audit Committee carried out its functions in accordance with Section 201B(5) of the Singapore Companies Act.
In performing those functions, the Committee reviewed:
• the scope and the results of internal audit procedures with the internal auditor;
• the audit plan of the Company’s independent auditor and any recommendations on internal accounting controls
arising from the statutory audit;
• the assistance given by the Company’s management to the independent auditor; and
• the balance sheet of the Company and the consolidated financial statements of the Group for the financial year
ended 31 December 2010 before their submission to the Board of Directors, as well as the independent auditor’s
report on the balance sheet of the Company and the consolidated financial statements of the Group.
The Audit Committee has recommended to the Board that the independent auditor, PricewaterhouseCoopers LLP, be
nominated for re-appointment at the forthcoming Annual General Meeting of the Company.
INDEPENDENT AUDITOR
The independent auditor, PricewaterhouseCoopers LLP, has expressed its willingness to accept re-appointment.
On behalf of the directors
Lee Kerk Chong Kong Chee Min
Director Director
25 March 2011
SM SUMMIT HOLDINGS LIMITED 29A N N U A L R E P O R T 2 0 1 0
STATEMENT BY DIRECTORSFor the fi nancial year ended 31 December 2010
In the opinion of the directors,
(a) the balance sheet of the Company and the consolidated financial statements of the Group as set out on pages
32 to 86 are drawn up so as to give a true and fair view of the state of affairs of the Company and of the Group
as at 31 December 2010 and of the results of the business, changes in equity and cash flows of the Group for
the financial year then ended; and
(b) at the date of this statement, there are reasonable grounds to believe that the Company will be able to pay its
debts as and when they fall due.
On behalf of the directors
Lee Kerk Chong Kong Chee Min
Director Director
25 March 2011
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INDEPENDENT AUDITOR’S REPORTTo the Members of SM Summit Holdings Limited
REPORT ON THE FINANCIAL STATEMENTS
We have audited the accompanying financial statements of SM Summit Holdings Limited (the “Company”) and its
subsidiaries (the “Group”) set out on pages 32 to 86, which comprise the consolidated balance sheet of the Group
and the balance sheet of the Company as at 31 December 2010, the consolidated income statement, the consolidated
statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement
of cash flows of the Group for the financial year then ended, and a summary of significant accounting policies and
other explanatory information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation of 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, that 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 controls 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 controls. 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 balance sheet of the Company are properly
drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards so as to give a
true and fair view of the state of affairs of the Group and of the Company as at 31 December 2010, and the results,
changes in equity and cash flows of the Group for the financial year ended on that date.
SM SUMMIT HOLDINGS LIMITED 31A N N U A L R E P O R T 2 0 1 0
INDEPENDENT AUDITOR’S REPORTTo the Members of SM Summit Holdings Limited
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.
PricewaterhouseCoopers LLP
Public Accountants and Certified Public Accountants
Singapore, 25 March 2011
CONSOLIDATED INCOME STATEMENTFor the fi nancial year ended 31 December 2010
SM SUMMIT HOLDINGS LIMITED32A N N U A L R E P O R T 2 0 1 0
2010 2009
Note $’000 $’000
Sales 4 38,326 42,940
Cost of sales 5 (29,046) (34,250)
Gross profit 9,280 8,690
Other gains – net 4 1,717 3,066
Expenses
– Distribution 5 (2,607) (3,664)
– Administrative 5 (7,840) (8,468)
– Finance 6 (91) (155)
Share of profit of associated companies 15 82 351
Profit/(loss) before income tax 541 (180)
Income tax credit/(expense) 8 90 (239)
Net profit/(loss) 631 (419)
Profit/(loss) attributable to:
Equity holders of the Company 688 (419)
Non-controlling interests (57) –
631 (419)
Earnings/(losses) per share attributable to equity holders
of the Company (basis and diluted) 9 0.19 cent (0.12) cent
The accompanying notes form an integral part of these financial statements.
SM SUMMIT HOLDINGS LIMITED 33A N N U A L R E P O R T 2 0 1 0
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFor the fi nancial year ended 31 December 2010
2010 2009
Note $’000 $’000
Profit/(loss) for the year 631 (419)
Other comprehensive income:
Financial assets, available-for-sale
– Fair value gains 87 400
Currency translation difference arising from consolidation (146) 3,259
Other comprehensive income, net of tax (59) 3,659
Total comprehensive income 572 3,240
Total comprehensive income/(losses) attributable to:
Equity holders of the Company 629 3,240
Non-controlling interests (57) –
572 3,240
The accompanying notes form an integral part of these financial statements.
BALANCE SHEETSAs at 31 December 2010
SM SUMMIT HOLDINGS LIMITED34A N N U A L R E P O R T 2 0 1 0
Group Company
2010 2009 2010 2009
Note $’000 $’000 $’000 $’000
ASSETS
Current assets
Cash and cash equivalents 10 21,010 20,602 7,040 4,736
Trade and other receivables 11 17,173 17,651 15,684 14,367
Current income tax recoverable 8 – 543 – 500
Inventories 12 2,796 2,663 – –
Other current assets 13 1,789 1,857 786 759
42,768 43,316 23,510 20,362
Non-current assets
Trade and other receivables 11 – – 8,727 13,509
Financial assets, available-for-sale 14 4,488 4,401 4,488 4,401
Investments in associated companies 15 2,647 2,589 1,298 1,298
Investments in subsidiaries 16 – – 9,384 9,384
Property, plant and equipment 17 12,632 16,656 109 216
Intangible assets 18 64 486 – –
19,831 24,132 24,006 28,808
Total assets 62,599 67,448 47,516 49,170
LIABILITIES
Current liabilities
Trade and other payables 19 10,292 12,152 1,813 1,625
Current income tax liabilities 8 900 448 435 –
Borrowings 20 492 1,620 34 34
11,684 14,220 2,282 1,659
Non-current liabilities
Borrowings 20 72 127 9 49
Deferred income tax liabilities 23 683 1,024 28 41
Other liabilities 22 2,938 3,654 1,094 1,679
3,693 4,805 1,131 1,769
Total liabilities 15,377 19,025 3,413 3,428
NET ASSETS 47,222 48,423 44,103 45,742
EQUITY
Capital and reserves attributable to the
equity holders of the Company
Share capital 24 40,194 40,194 40,194 40,194
Other reserves 25 470 529 11 (76)
Retained earnings 26 6,558 7,700 3,898 5,624
Total equity 47,222 48,423 44,103 45,742
The accompanying notes form an integral part of these financial statements.
SM SUMMIT HOLDINGS LIMITED 35A N N U A L R E P O R T 2 0 1 0
CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFor the fi nancial year ended 31 December 2010
Attributable to equity holders of the Company
Share
capital
Other
reserves
Retained
earnings Total
Non-
controlling
interests
Total
equity
Note $’000 $’000 $’000 $’000 $’000 $’000
2010
Beginning of financial year 40,194 529 7,700 48,423 – 48,423
Dividend relating to 2009 paid 27 – – (1,812) (1,812) – (1,812)
Issuance of shares in a
subsidiary – – (18) (18) 568 550
Dilution of shares from
subsidiary to an associated
company – – – – (511) (511)
Total comprehensive (expense)/
income for the year – (59) 688 629 (57) 572
End of financial year 40,194 470 6,558 47,222 – 47,222
2009
Beginning of financial year 40,194 (3,130) 23,522 60,586 – 60,586
Dividend relating to 2008 paid 27 – – (15,403) (15,403) – (15,403)
Total comprehensive income/
(expense) for the year – 3,659 (419) 3,240 – 3,240
End of financial year 40,194 529 7,700 48,423 – 48,423
The accompanying notes form an integral part of these financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWSFor the fi nancial year ended 31 December 2010
SM SUMMIT HOLDINGS LIMITED36A N N U A L R E P O R T 2 0 1 0
Group
2010 2009
Note $’000 $’000
Cash flows from operating activities
Net profit/(loss) 631 (419)
Adjustments for:
– Tax (credit)/expense (90) 239
– Depreciation and amortisation 4,816 5,625
– Net (gain)/loss on disposal of other property, plant and equipment (11) 12
– Write back of reinstatement cost (186) –
– Impairment of property, plant and equipment – 492
– Dividend income (212) (232)
– Interest income (552) (365)
– Interest expense 91 155
– Share of profit of associated companies (82) (351)
Operating cash flow before working capital changes 4,405 5,156
Changes in working capital
– Inventories (133) 665
– Trade and other receivables 365 6,021
– Other current assets 66 131
– Trade and other payables (2,271) (4,555)
– Currency translation differences (192) 74
Cash generated from operations 2,240 7,492
Income tax received/(paid) – net 750 (288)
Net cash provided by operating activities 2,990 7,204
Cash flows from investing activities
Proceeds from disposal of property, plant and equipment 155 87
Proceeds from disposal of investment properties – 1,469
Proceeds from disposal of financial assets, available-for-sale – 1,013
Purchase of property, plant and equipment (790) (912)
Loan to an associated company (100) (100)
Dividend received 212 232
Interest received 552 365
Short-term deposits released as security to bank – 85
Capital injection in an associated company (4) –
Dilution of share holdings from subsidiary to associated company,
net of cash disposed off 10 454 –
Net cash provided by investing activities 479 2,239
Cash flows from financing activities
Proceeds from borrowings 54 1,000
Repayment of borrowings (748) (3,529)
Interest paid (91) (155)
Dividends paid to shareholders (1,812) (15,403)
Net cash used in financing activities (2,597) (18,087)
Net increase/(decrease) in cash and cash equivalents held 872 (8,644)
Cash and cash equivalents at the beginning of the financial year 18,106 24,780
Effects of exchange rate changes on cash and cash equivalents 82 1,970
Cash and cash equivalents at the end of the financial year 10 19,060 18,106
The accompanying notes form an integral part of these financial statements.
SM SUMMIT HOLDINGS LIMITED 37A N N U A L R E P O R T 2 0 1 0
NOTES TO THE FINANCIAL STATEMENTSFor the fi nancial year ended 31 December 2010
These notes form an integral part of and should be read in conjunction with the accompanying financial statements.
1. GENERAL INFORMATION
SM Summit Holdings Limited (the “Company”) is listed on the Singapore Exchange and incorporated and
domiciled in Singapore. The address of its registered office is 45 Ubi Road 1, Summit Building, Singapore
408696.
The principal activities of the Company include investment holding and provision of management services. The
principal activities of the subsidiaries consist of the manufacture and sale of compact discs, digital versatile
discs and data storage products.
2. SIGNIFICANT ACCOUNTING POLICIES
2.1 BASIS OF PREPARATION
These financial statements have been prepared in accordance with Singapore Financial Reporting
Standards (“FRS”). The financial statements have been prepared under the historical cost convention,
except as disclosed in the accounting policies below.
The preparation of 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. Areas involving a higher degree of judgement or
complexity, or areas where assumptions and estimates are significant to the financial statements, are
disclosed in Note 3.
Interpretations and amendments to published standards effective in 2010
On 1 January 2010, the Group adopted the new or amended FRS and Interpretations to FRS (“INT FRS”)
that are mandatory for application from that date. Changes to the Group’s accounting policies have been
made as required, in accordance with the transitional provisions in the respective FRS and INT FRS.
The adoption of these new or amended FRS and INT FRS 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 years.
2.2 REVENUE RECOGNITION
Sales comprises the fair value of the consideration received or receivable for the sale of goods and
rendering of services in the ordinary course of the Group’s activities. Sales are presented net of
value-added tax, rebates and discounts, and after eliminating sales within the Group.
The Group recognises revenue when the amount of revenue and related cost can be reliably measured,
when it is probable that the collectibility of the related receivables is reasonably assured and when the
specific criteria for each of the Group’s activities are met as follows:
(a) Sale of goods
Revenue from sales of goods is recognised when a Group entity has delivered the products to
the customer and the customers have accepted the products and collectibility of the related
receivables is reasonably assured.
NOTES TO THE FINANCIAL STATEMENTSFor the fi nancial year ended 31 December 2010
SM SUMMIT HOLDINGS LIMITED38A N N U A L R E P O R T 2 0 1 0
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.2 REVENUE RECOGNITION (CONTINUED)
(b) Rendering of services
Revenue from rendering of services is recognised when the services are rendered, using the
percentage of completion method based on the actual service provided as a proportion of the
total services to be performed.
(c) Interest income
Interest income is recognised using the effective interest method.
(d) Dividend income
Dividend income is recognised when the right to receive payment is established.
(e) Rental income
Rental income from operating leases (net of any incentive given to the lessees) is recognised on
a straight-line basis over the lease term.
2.3 GROUP ACCOUNTING
(a) Subsidiaries
Subsidiaries are entities (including special purpose entities) over which the Group has power to
govern the 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.
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 asset transferred. Accounting policies of subsidiaries have
been changed where necessary to ensure consistency with the policies adopted by the Group.
Non-controlling interests 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 Company. They are shown separately in the consolidated statement of
comprehensive income, statement of changes in equity and balance sheet. Total comprehensive
income is attributed to the non-controlling interests based on their respective interests in a
subsidiary, even if this results in the non-controlling interests having a deficit balance.
(b) Acquisition of businesses
The acquisition method of accounting is used to account for business combinations by the
Group.
The consideration transferred for the acquisition of a subsidiary 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.
SM SUMMIT HOLDINGS LIMITED 39A N N U A L R E P O R T 2 0 1 0
NOTES TO THE FINANCIAL STATEMENTSFor the fi nancial year ended 31 December 2010
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.3 GROUP ACCOUNTING (CONTINUED)
(b) Acquisition of businesses (continued)
Acquisition-related costs are expensed 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 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 fair value of the net identifiable assets acquired is recorded as goodwill4. Please refer to the
paragraph “Intangible assets – Goodwill” for the subsequent accounting policy on goodwill.
(c) Disposals of subsidiaries or businesses
When a change in the Company’s 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 recognised in other comprehensive income 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 interest in the entity is remeasured at fair value. The difference between the carrying
amount of the retained investment at the date when control is lost and its fair value is recognised
in profit or loss.
Please refer to the paragraph “Investments in subsidiaries and associated companies” for the
accounting policy on investments in subsidiaries in the separate financial statements of the
Company.
(d) Transactions with non-controlling interests
Changes in the Company’s ownership interest in a subsidiary that do not result in a loss of
control over the subsidiary are accounted for as transactions with equity owners of the Group.
Any difference between the change in the carrying amounts of the non-controlling interest and the
fair value of the consideration paid or received is recognised in a separate reserve within equity
attributable to the equity holders of the Company.
(e) Associated companies
Associated companies are entities over which the Group has significant influence, but not control,
generally accompanied by a shareholding giving rise to voting rights of 20% and above but not
exceeding 50%. Investments in associated companies are accounted for in the consolidated
financial statements using the equity method of accounting less impairment losses, if any.
NOTES TO THE FINANCIAL STATEMENTSFor the fi nancial year ended 31 December 2010
SM SUMMIT HOLDINGS LIMITED40A N N U A L R E P O R T 2 0 1 0
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.3 GROUP ACCOUNTING (CONTINUED)
(e) Associated companies (continued)
Investments in associated companies are initially recognised at cost. The cost of an acquisition
is measured at the fair value of the assets given, equity instruments issued or liabilities incurred
or assumed at the date of exchange, plus costs directly attributable to the acquisition. Goodwill
on associated companies represents the excess of the cost of acquisition of the associate over
the Group’s share of the fair value of the identifiable net assets of the associate and is included
in the carrying amount of the investments.
In applying the equity method of accounting, the Group’s share of its associated companies’
post-acquisition profits or losses are 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 companies 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
non-current receivables, the Group does not recognise further losses, unless it has obligations or
has made payments on behalf of the associated company.
Unrealised gains on transactions between the Group and its associated companies are eliminated
to the extent of the Group’s interest in the associated companies. Unrealised losses are also
eliminated unless the transaction provides evidence of an impairment of the asset transferred.
The accounting policies of associated companies have been changed where necessary to ensure
consistency with the accounting policies adopted by the Group.
Gains and losses arising from partial disposals or dilutions in investments in associated companies
are recognised in profit or loss.
Investments in associated companies 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 investment at the date when significant influence is lost and its
fair value is recognised in profit or loss.
Please refer to the paragraph “Investments in subsidiaries and associated companies” for the
accounting policy on investments in associated companies in the separate financial statements
of the Company.
2.4 PROPERTY, PLANT AND EQUIPMENT
(a) Measurement
(i) Land and buildings
Land and buildings are initially recorded at cost. Buildings and leasehold land are
subsequently carried at cost less accumulated depreciation and accumulated impairment
losses.
(ii) Other property, plant and equipment
All other items of property, plant and equipment are initially recognised at cost and
subsequently carried at cost less accumulated depreciation and accumulated impairment
losses.
SM SUMMIT HOLDINGS LIMITED 41A N N U A L R E P O R T 2 0 1 0
NOTES TO THE FINANCIAL STATEMENTSFor the fi nancial year ended 31 December 2010
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.4 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
(a) Measurement (continued)
(iii) Component of costs
The cost of an item of property, plant and equipment initially recognised includes its
purchase price and any cost that is directly attributable to bringing the asset to the
location and condition necessary for it to be capable of operating in the manner intended
by management.
(b) Depreciation
Capital work-in-progress are not depreciated. Depreciation on other items of property, plant and
equipment is calculated using the straight-line method to allocate their depreciable amounts over
their estimated useful lives as follows:
Useful lives
Leasehold land and buildings 20 years
Plant, machinery and equipment 3 – 10 years
Renovation, furniture and fittings 4 – 10 years
Motor vehicles 4 – 5 years
Office equipment and computers 3 – 10 years
The residual values, estimated useful lives and depreciation method of property, plant and
equipment are reviewed, and adjusted as appropriate, at each balance sheet date. The effects of
any revision are recognised in profit or loss when the changes arise.
(c) Subsequent expenditure
Subsequent expenditure relating to property, plant and equipment that has already been recognised
is added to the carrying amount of the asset only when it is probable that future economic benefits
associated with the item will flow to the Group and the cost of the item can be measured reliably.
All repair and maintenance expenses are recognised in profit or loss when incurred.
(d) Disposal
On disposal of an item of property, plant and equipment, the difference between the disposal
proceeds and its carrying amount is recognised in profit or loss within ‘Revenue and other gains
– net’.
NOTES TO THE FINANCIAL STATEMENTSFor the fi nancial year ended 31 December 2010
SM SUMMIT HOLDINGS LIMITED42A N N U A L R E P O R T 2 0 1 0
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.5 INTANGIBLE ASSETS
(a) Goodwill on acquisitions
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s
share of the identifiable assets and contingent liabilities of the acquired subsidiaries and associated
companies at the date of acquisition.
Goodwill on subsidiaries is recognised separately as intangible assets and carried at cost less
accumulated impairment losses.
Goodwill on associated companies is included in the carrying amount of the investments.
Gains and losses on the disposal of the subsidiaries and associated companies include the carrying
amount of goodwill relating to the entity sold.
(b) Development of software
Costs directly attributable to the development of computer software are capitalised as intangible
assets only when technical feasibility of the project is demonstrated, the Group has an intention
and ability to complete and use the software and the costs can be measured reliably. Such costs
include purchase of materials and services and payroll-related costs of employees directly involved
in the project. These costs are amortised to profit or loss using the straight-line method over their
estimated useful lives of 5 years.
The amortisation period and amortisation method of intangible assets other than goodwill are
reviewed at each balance sheet date. The effects of any revision are recognised in profit or loss
when the changes arise.
2.6 BORROWING COSTS
Borrowing costs are recognised in profit or loss using the effective interest method.
2.7 INVESTMENTS IN SUBSIDIARIES AND ASSOCIATED COMPANIES
Investments in subsidiaries and associated companies are carried at cost less accumulated impairment
losses in the Company’s balance sheet. On disposal of investments in subsidiaries and associated
companies, the difference between disposal proceeds and the carrying amounts of the investments are
recognised in profit or loss.
SM SUMMIT HOLDINGS LIMITED 43A N N U A L R E P O R T 2 0 1 0
NOTES TO THE FINANCIAL STATEMENTSFor the fi nancial year ended 31 December 2010
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.8 IMPAIRMENT OF NON-FINANCIAL ASSETS
(a) Goodwill
Goodwill is tested for impairment annually and whenever there is indication that the goodwill may
be impaired. Goodwill included in the carrying amount of an investment in associated companies
is tested for impairment as part of the investment, rather than separately.
For the purpose of impairment testing of goodwill, goodwill is allocated to each of the Group’s
cash-generating-units (“CGU”) expected to benefit from synergies arising from the business
combination.
An impairment loss is recognised when the carrying amount of a CGU, including the goodwill,
exceeds the recoverable amount of the CGU. The recoverable amount of a CGU is the higher of
the CGU’s fair value less cost to sell and value-in-use.
The total impairment loss of a CGU is allocated first to reduce the carrying amount of goodwill
allocated to the CGU and then to the other assets of the CGU pro-rated on the basis of the
carrying amount of each asset in the CGU.
An impairment loss on goodwill is recognised as an expense and is not reversed in a subsequent
period.
(b) Intangible assets
Property, plant and equipment
Investments in subsidiaries and associated companies
Intangible assets, property, plant and equipment and investments in subsidiaries and associated
companies are tested for impairment whenever there is any objective evidence or indication that
these assets may be impaired.
For the purpose of impairment testing, the recoverable amount (i.e. the higher of fair value less
cost to sell and the 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 this is the case,
the recoverable amount is determined for the CGU to which the asset belongs.
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.
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 is increased to its revised
recoverable amount, provided that this amount does not exceed the carrying amount that would
have been determined (net of any accumulated 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.
NOTES TO THE FINANCIAL STATEMENTSFor the fi nancial year ended 31 December 2010
SM SUMMIT HOLDINGS LIMITED44A N N U A L R E P O R T 2 0 1 0
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.9 FINANCIAL ASSETS
(a) Classification
The Group classifies its financial assets in the following categories: at fair value through profit
or loss, loans and receivables, held to maturity and available-for-sale. However, the Group
has financial assets only in the categories of loans and receivables and financial assets,
available-for-sale. The classification depends on the purpose for which the assets were acquired.
Management determines the classification of its financial assets at initial recognition.
(i) Loans and receivables
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 balance sheet date which are
presented as non-current assets. Loans and receivables are presented as “trade and other
receivables” and “cash and cash equivalents” on the balance sheet except for certain
non-trade receivable from subsidiaries which have been accounted for in accordance with
Note 2.7.
(ii) Financial assets, available-for-sale
Financial assets, available-for-sale are non-derivatives that are either designated in this
category or not classified in any of the other categories. They are presented as non-current
assets unless management intends to dispose off the assets within 12 months after the
balance sheet date.
(b) Recognition and derecognition
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 and 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 the consolidated income statement. Any amount in the fair
value reserve relating to that asset is transferred to profit or loss.
(c) Initial measurement
Financial assets are initially recognised at fair value plus transaction costs.
SM SUMMIT HOLDINGS LIMITED 45A N N U A L R E P O R T 2 0 1 0
NOTES TO THE FINANCIAL STATEMENTSFor the fi nancial year ended 31 December 2010
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.9 FINANCIAL ASSETS (CONTINUED)
(d) Subsequent measurement
Financial assets, available-for-sale are subsequently carried at fair value. Loans and receivables
are subsequently carried at amortised cost using the effective interest method.
Interest and dividend income on financial assets, available-for-sale are recognised separately
in profit or loss. Changes in the fair values of available-for-sale debt securities (i.e. monetary
items) denominated in foreign currencies are analysed into currency translation differences on
the amortised cost of the securities and other changes; the currency translation differences are
recognised in the consolidated income statement and the other changes are recognised in the
fair value reserve. Changes in fair values of available-for-sale equity securities (i.e. non-monetary
items) are recognised in the fair value reserve, together with the related currency translation
differences.
(e) Impairment
The Group assesses at each balance sheet date whether there is objective evidence that a financial
asset or a group of financial assets is impaired and recognises an allowance for impairment when
such evidence exists.
(i) Loans and receivables
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 the allowance account. Subsequent
recoveries of amounts previously written off are recognised against the same line item in
profit or loss.
The allowance for impairment loss account is reduced through 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.
(ii) Financial assets, available-for-sale
Significant or prolonged declines in the fair value of the security below its cost and the
disappearance of an active trading market for the security are objective evidence that the
security is impaired.
The cumulative loss that was recognised in the fair value reserve is transferred to profit or
loss. The cumulative loss is measured as the difference between the acquisition cost (net of
any principal repayments and amortisation) and the current fair value, less any impairment
loss previously recognised as an expense. The impairment losses recognised in profit or
loss on equity securities are not reversed through profit or loss.
NOTES TO THE FINANCIAL STATEMENTSFor the fi nancial year ended 31 December 2010
SM SUMMIT HOLDINGS LIMITED46A N N U A L R E P O R T 2 0 1 0
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.10 FINANCIAL GUARANTEES
The Company has issued corporate guarantees to banks for borrowings of its subsidiaries. These
guarantees are financial guarantees as they require the Company to reimburse the banks if the subsidiaries
fail to make principal or interest payments when due in accordance with the terms of their borrowings.
Financial guarantees are initially recognised at their fair values plus transaction costs in the Company’s
balance sheet.
Financial guarantees are subsequently amortised to profit or loss over the period of the subsidiaries’
borrowings, unless it is probable that the Company will reimburse the bank for an amount higher than
the unamortised amount. In this case, the financial guarantees shall be carried at the expected amount
payable to the bank in the Company’s balance sheet.
Intra-group transactions are eliminated on consolidation.
2.11 BORROWINGS
Borrowings are presented as current liabilities unless the Group has unconditional right to defer settlement
for at least 12 months after the balance sheet date.
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.
2.12 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.
2.13 FAIR VALUE ESTIMATION OF FINANCIAL ASSETS AND LIABILITIES
The fair values of financial instruments traded in active markets (such as exchange-traded and
over-the-counter securities and derivatives) are based on quoted market prices at the balance sheet date.
The quoted market prices used for financial assets are the current bid prices; the appropriate quoted
market prices for financial liabilities are the current asking prices.
The fair values of current financial assets and liabilities carried at amortised cost approximate their
carrying amounts.
2.14 LEASES
(a) When the Group is the lessee:
The Group leases motor vehicles and certain property, plant and equipment under finance and
operating leases from non-related parties.
(i) Lessee – Finance leases
Leases where the Group assumes substantially the risks and rewards incidental to
ownership of the leased assets, are classified as finance leases.
SM SUMMIT HOLDINGS LIMITED 47A N N U A L R E P O R T 2 0 1 0
NOTES TO THE FINANCIAL STATEMENTSFor the fi nancial year ended 31 December 2010
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.14 LEASES (CONTINUED)
(a) When the Group is the lessee: (continued)
(i) Lessee – Finance leases (continued)
The leased assets and the corresponding lease liabilities (net of finance charges) under
finance leases are recognised on the balance sheet as property, plant and equipment and
borrowings respectively, at the inception of the leases based on the lower of the fair value
of the leased assets and the present value of the minimum lease payments.
Each lease payment is apportioned between the finance expense and the reduction of the
outstanding lease liability. The finance expense is recognised in profit or loss on a basis
that reflects a constant periodic rate of interest on the finance lease liability.
(ii) Lessee – Operating leases
Leases of property, plant and equipment where substantially all risks and rewards incidental
to ownership are retained by the lessors are classified as operating leases. Payments made
under operating leases (net of any incentives received from the lessors) are recognised in
profit or loss on a straight-line basis over the period of the lease.
Profits on sale and leaseback transactions which constitute operating leases are recognised
immediately in the consolidated income statement when such sale and leaseback
transactions are established at fair value. If the sale price is below fair value, any profit or
loss shall be recognised immediately except that, if the loss is compensated for by future
lease payments at below market price, it shall be deferred and amortised in proportion to
the lease payments over the period for which the asset is expected to be used. If the sale
price is above fair value, the excess over fair value shall be determined and amortised over
the period for which the asset is expected to be used.
(b) When the Group is the lessor:
The Group sublease its leased office premises under operating leases to non-related parties.
Leases of investment properties where the Group retains substantially all risks and rewards
incidental to ownership are classified as operating lease.
Rental income from operating leases (net of any incentives given to lessees) is recognised in profit
or loss on a straight-line basis over the lease term.
Initial direct costs incurred by the Group in negotiating and arranging operating leases are added
to the carrying amount of the leased assets and recognised as an expense in profit or loss over
the lease term on the same basis as the lease income.
2.15 INVENTORIES
Inventories are carried at the lower of cost and net realisable value. Cost is determined on a weighted
average basis. The cost of finished goods and work-in-progress comprises raw materials, direct labour,
other direct costs and related production overheads (based on normal operating capacity) but excludes
borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business,
less applicable variable selling expenses.
NOTES TO THE FINANCIAL STATEMENTSFor the fi nancial year ended 31 December 2010
SM SUMMIT HOLDINGS LIMITED48A N N U A L R E P O R T 2 0 1 0
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.16 INCOME TAXES
Current income tax for current and prior periods are recognised at the amounts expected to be paid
to or recovered from the tax authorities, using the tax rates and tax laws that have been enacted or
substantively enacted by the balance sheet date.
Deferred income tax is recognised for all temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the financial statements except when the deferred income tax
arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business
combination and affects neither accounting nor taxable profit or loss at the time of the transaction.
A deferred income tax liability is recognised on temporary differences arising on investments in subsidiaries
and associated companies except where the Group is able to control the timing of the reversal of the
temporary difference and it is probable that the temporary difference will not reverse in the foreseeable
future.
A deferred income tax asset is recognised to the extent that it is probable that future taxable profit will
be available against which the deductible temporary differences and tax losses can be utilised.
Deferred income tax is measured:
(i) at the tax rates that are expected to apply when the related deferred income tax asset is realised
or the deferred income tax liability is settled, based on tax rates and tax laws that have been
enacted or substantively enacted by the balance sheet date; and
(ii) based on the tax consequence that will follow from the manner in which the Group expects, at
the balance sheet date, to recover or settle the carrying amounts of its assets and liabilities.
Current and deferred income taxes are recognised as income or expense in profit or loss, except to the
extent that the tax arises from a business combination or a transaction which is recognised directly in
equity. Deferred tax arising from a business combination is adjusted against goodwill on acquisition.
2.17 EMPLOYEE COMPENSATION
The Group’s contributions are recognised as employee compensation expense when they are due, unless
they can be capitalised as an asset.
(a) Defined contribution plans
Defined contribution plans are post-employment benefit plans under which the Group pays fixed
contributions into separate entities such as the Central Provident Fund on a mandatory, contractual
or voluntary basis. The Group has no further payment obligations once the contributions have
been paid.
(b) Defined benefit plans
The Group also has an unfunded defined benefit plan as part of a subsidiary’s national severance,
gratuity and corporation benefits plan. An independent actuary’s valuation is obtained in
determining the defined benefit obligation using the projected unit credit method. The present
value of the defined benefit obligation is determined by discounting the estimated future cash
outflows using interest rates of high-quality corporate bonds that are denominated in the currency
in which the benefits will be paid and that have terms of maturity approximating the terms of the
related liability.
SM SUMMIT HOLDINGS LIMITED 49A N N U A L R E P O R T 2 0 1 0
NOTES TO THE FINANCIAL STATEMENTSFor the fi nancial year ended 31 December 2010
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.17 EMPLOYEE COMPENSATION (CONTINUED)
(c) Employee leave entitlements
Employee entitlements to annual leave and long service 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 balance sheet date.
(d) Termination benefits
Termination benefits are those benefits which are payable when employment is terminated before
the normal retirement date. The Group recognises termination benefits when it is demonstrably
committed to terminating the employment of current employees according to a detailed formal
plan without possibility of withdrawal. Benefits falling due more than 12 months after balance sheet
date are discounted to present value.
2.18 CURRENCY TRANSLATION
(a) Functional and presentation currency
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 (“the functional
currency”). The financial statements are presented in Singapore Dollar, which is the functional
currency of the Company.
(b) Transactions and balances
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 balance
date are recognised in the consolidated income statement, unless they arise from borrowings
in foreign currencies or other currency instruments which are designated and qualifying as net
investment hedges, and net investment in foreign operations. These currency translation differences
are recognised in the currency translation reserve in the consolidated financial statements and
transferred to the consolidated income statement as part of the gain or loss on disposal of the
foreign operation.
Non-monetary items measured at fair values in foreign currencies are translated using the exchange
rates at the date when the fair values are determined.
(c) Translation of Group entities’ financial statements
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:
(i) Assets and liabilities are translated at the closing exchange rates at the date of the balance
sheet;
(ii) 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
date of the transactions); and
NOTES TO THE FINANCIAL STATEMENTSFor the fi nancial year ended 31 December 2010
SM SUMMIT HOLDINGS LIMITED50A N N U A L R E P O R T 2 0 1 0
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.18 CURRENCY TRANSLATION (CONTINUED)
(c) Translation of Group entities’ financial statements (continued)
(iii) All resulting exchange currency translation differences are recognised in the currency
translation reserve.
Goodwill and fair value adjustments arising on the acquisition of foreign operations on or after
1 January 2005 are treated as assets and liabilities of the foreign operations and translated at
the closing rates at the date of the balance sheet. For acquisitions prior to 1 January 2005, the
exchange rates at the dates of acquisition are used.
2.19 SEGMENT REPORTING
Operating segments are reported in a manner consistent with the internal reporting provided by the senior
management whose members are responsible for allocating resources and assessing performance of
the operating segments.
2.20 CASH AND CASH EQUIVALENTS
For the purpose of presentation in the consolidated cash flow statement, cash and cash equivalents
include cash on hand, 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
balance sheet.
2.21 SHARE CAPITAL
Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of new
ordinary shares are deducted against the share capital account.
2.22 DIVIDENDS TO THE COMPANY’S SHAREHOLDERS
Dividends to the Company’s shareholders are recognised when the dividends are approved for
payments.
2.23 GOVERNMENT GRANTS
Grants from the government are recognised as a receivable at their fair value when there is reasonable
assurance that the grant will be received and the Group will comply with all the attached conditions.
Government grants receivable are recognised as income over the periods necessary to match them with
the related costs which they are intended to compensate, on a systematic basis. Government grants
relating to expenses are shown separately as other income.
Government grants relating to assets are deducted against the carrying amount of the assets.
SM SUMMIT HOLDINGS LIMITED 51A N N U A L R E P O R T 2 0 1 0
NOTES TO THE FINANCIAL STATEMENTSFor the fi nancial year ended 31 December 2010
3. CRITICAL ACCOUNTING ESTIMATES, ASSUMPTIONS AND JUDGEMENTS
Estimates, assumptions and judgements are continually evaluated and are based on historical experience
and other factors, including expectations of future events that are believed to be reasonable under the
circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will,
by definition, seldom equal the related actual results.
(a) Impairment of loans and receivables
Management reviews its loans and receivables for objective evidence of impairment at least quarterly.
Significant financial difficulties of the debtor, the probability that the debtor will enter bankruptcy, and
default or significant delay in payments are considered objective evidence that a receivable is impaired.
In determining this, management makes judgement as to whether there is observable data indicating
that there has been a significant change in the payment ability of the debtor, or whether there have been
significant changes with adverse effect in the technological, market, economic or legal environment in
which the debtor operates in.
Where there is objective evidence of impairment, management makes judgements as to whether an
impairment loss should be recorded as an expense. In determining this, management uses estimates
based on historical loss experience for assets with similar credit risk characteristics. The methodology and
assumptions used for estimating both the amount and timing of future cash flows are reviewed regularly
to reduce any differences between the estimated loss and actual loss experience.
(b) Income taxes
The Group is subject to income taxes in numerous jurisdictions. Significant judgement is required in
determining the capital allowances and deductibility of certain expenses during the estimation of the
provision for income taxes. There are many transactions and calculations for which the ultimate tax
determination is uncertain during the ordinary course of business. The Group recognises liabilities for
anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final
tax outcome of these matters is different from the amounts that were initially recorded, such differences
will impact the income tax and deferred income tax provisions in the period in which such determination
is made.
NOTES TO THE FINANCIAL STATEMENTSFor the fi nancial year ended 31 December 2010
SM SUMMIT HOLDINGS LIMITED52A N N U A L R E P O R T 2 0 1 0
4. REVENUE AND OTHER GAINS – NET
Group
2010 2009
$’000 $’000
Sales of goods 36,963 40,443
Services rendered 1,363 2,497
Total sales 38,326 42,940
Other gains – net:
Rental income 654 835
Interest income 552 365
Dividend income 212 232
Currency exchange gain – net 112 721
Government grant – Jobs Credit Scheme 22 397
Write back in relation to cost incurred on the disposal
of investment property – 115
Net gain/(loss) on disposal of property, plant and equipment 11 (12)
Write back in relation to the aborted acquisition of TES-Envirocorp – 100
Others 154 313
Other gains – net 1,717 3,066
The Jobs Credit Scheme is a cash grant introduced in the Singapore Budget 2009 to help businesses preserve
jobs in the economic downturn. The amount an employee can receive would depend on the fulfillment of the
conditions as stated in the scheme.
5. EXPENSES BY NATURE
Group
2010 2009
$’000 $’000
Purchase of raw materials and consumables 12,755 13,251
Depreciation of property, plant and equipment (Note 17) 4,679 5,437
Amortisation of intangible assets (Note 18) 137 188
Impairment of property, plant and equipment – 492
Employee compensation (Note 7) 11,678 13,555
Rental on operating leases 2,543 2,857
Utilities 2,052 1,903
Repairs and maintenance 1,403 1,545
Insurance 414 454
Freight outwards 305 455
Write back of reinstatement cost (186) –
Changes in inventories of raw materials, work-in-progress and finished goods (133) 665
Non-audit fees paid/payable to:
– Auditors of the Company 76 100
– Other auditors 19 11
Others 3,751 5,469
Total cost of sales, distribution and administrative expenses 39,493 46,382
SM SUMMIT HOLDINGS LIMITED 53A N N U A L R E P O R T 2 0 1 0
NOTES TO THE FINANCIAL STATEMENTSFor the fi nancial year ended 31 December 2010
6. FINANCE EXPENSES
Group
2010 2009
$’000 $’000
Interest expense:
– bank borrowings 20 85
– bank overdrafts 59 42
– finance lease liabilities 12 28
91 155
7. EMPLOYEE COMPENSATION
Group
2010 2009
$’000 $’000
Wages and salaries 10,188 11,617
Employer’s contribution to defined contribution plans,
including Central Provident Fund 1,178 1,536
Post-employment benefits (Note 22) 55 44
Termination benefits 257 358
11,678 13,555
8. INCOME TAXES
(a) Income tax (credit)/expense
Group
2010 2009
$’000 $’000
Tax expense attributable to the results is made up of:
Current income tax
– Singapore 80 56
– Foreign 294 159
374 215
Deferred income tax (Note 23) (252) 24
122 239
Overprovision in prior financial years
– Singapore income tax (125) –
– Deferred tax (Note 23) (87) –
(90) 239
NOTES TO THE FINANCIAL STATEMENTSFor the fi nancial year ended 31 December 2010
SM SUMMIT HOLDINGS LIMITED54A N N U A L R E P O R T 2 0 1 0
8. INCOME TAXES (CONTINUED)
(a) Income tax (credit)/expense (continued)
The tax on the Group’s profit before tax and share of profit of associated companies differs from the
theoretical amount that would arise using the Singapore standard rate of income tax as follows:
Group
2010 2009
$’000 $’000
Profit/(loss) before tax and share of profit of associated companies 459 (531)
Tax calculated at a tax rate of 17% (2009: 17%) 78 (90)
Effects of:
– changes in tax rates (Note 23) – (29)
– different tax rates in other countries 56 (62)
– statutory stepped income exemption (31) –
– expenses not deductible for tax purposes 213 396
– income not subject to tax (158) (319)
– utilisation of previously unrecognised
• tax losses (193) (101)
• capital allowances (93) –
– others – (18)
Withholding tax 50 49
Unrecognised deferred tax assets 200 413
122 239
Deferred income tax assets of approximately $2,503,000 (2009: $2,561,000) for the Group have not been
recognised for unutilised tax losses and capital allowances of certain subsidiaries as there is no reasonable
certainty that future taxable profits will be available for utilisation of these temporary differences. As at 31
December 2010, total balances of unutilised tax losses and capital allowances available for offset against
future taxable income are disclosed in Note 23 to the financial statements.
(b) Movements in current tax (recoverable)/liabilities
Group Company
2010 2009 2010 2009
$’000 $’000 $’000 $’000
Beginning of financial year (95) (11) (500) (385)
Currency translation differences (4) (11) – –
Income tax refund/(paid) – net 750 (288) 995 (171)
Tax expense 374 215 65 56
Overprovision in prior financial years (125) – (125) –
End of financial year 900 (95) 435 (500)
SM SUMMIT HOLDINGS LIMITED 55A N N U A L R E P O R T 2 0 1 0
NOTES TO THE FINANCIAL STATEMENTSFor the fi nancial year ended 31 December 2010
8. INCOME TAXES (CONTINUED)
(b) Movements in current tax (recoverable)/liabilities (continued)
The current income tax account comprises the following:
Group Company
2010 2009 2010 2009
$’000 $’000 $’000 $’000
Current income tax recoverable – (543) – (500)
Current income tax liabilities 900 448 435 –
900 (95) 435 (500)
9. EARNINGS/(LOSSES) PER SHARE
Basic earnings/(losses) per share is calculated by dividing the net profit/(loss) attributable to equity holders of
the Company by the weighted average number of ordinary shares outstanding during the financial year.
2010 2009
Net profit/(loss) attributable to equity holders of the Company ($’000) 688 (419)
Weighted average number of ordinary shares outstanding
for basic earnings per share (’000) 362,420 362,420
Basic and diluted loss earnings/(losses) per share 0.19 cent (0.12) cent
The diluted earnings/(losses) per share is the same as basic earnings/(losses) per share as there are no dilutive
potential ordinary shares.
10. CASH AND CASH EQUIVALENTS
Group Company
2010 2009 2010 2009
$’000 $’000 $’000 $’000
Cash at bank and on hand 8,464 10,467 375 356
Short-term bank deposits 12,546 10,135 6,665 4,380
21,010 20,602 7,040 4,736
As at 31 December 2010, short-term bank deposits at the balance sheet date have an average maturity of
3 months (2009: 3 months) from the end of the financial year with the following weighted average effective
interest rates:
Group Company
2010 2009 2010 2009
$’000 $’000 $’000 $’000
Singapore Dollar 0.42% 0.58% 0.43% 0.46%
Hong Kong Dollar 0.01% 0.01% – –
Australian Dollar 4.11% 3.28% 4.09% 3.25%
NOTES TO THE FINANCIAL STATEMENTSFor the fi nancial year ended 31 December 2010
SM SUMMIT HOLDINGS LIMITED56A N N U A L R E P O R T 2 0 1 0
10. CASH AND CASH EQUIVALENTS (CONTINUED)
As at 31 December 2010, short-term bank deposits of the Group and Company amounting to $1,555,000 (2009:
$1,555,000) are charged to a bank as security for the issue of a banker’s guarantee in connection with a bank
loan drawn by an associated company.
For the purposes of presenting the consolidated cash flow statement, the consolidated cash and cash
equivalents comprise the following:
Group
2010 2009
$’000 $’000
Cash and bank balances (as above) 21,010 20,602
Less: Bank overdrafts (Note 20) (395) (941)
Short-term bank deposits charged as security to bank (1,555) (1,555)
Cash and cash equivalents per consolidated cash flow statement 19,060 18,106
DILUTION OF SHAREHOLDING FROM SUBSIDIARY TO ASSOCIATE COMPANY
On 20 August 2010, the Company diluted its interest in Wow Vision Pte Ltd from 51.6% to 34.0% for nil cash
consideration as the Company did not partake in the new shares issued by Wow Vision Pte Ltd. As such, Wow
Vision Pte Ltd is accounted as an associated company with effect from 20 August 2010. The effects of the
dilution on the cash flows of the Group were:
Group
$’000
Carrying amounts of assets and liabilities diluted
Cash and cash equivalents (32)
Trade and other receivables (212)
Property, plant and equipment (Note 17) (29)
Intangible assets (Note 18) (835)
Other current assets (2)
Total assets (1,110)
Trade and other payables 113
Bank overdraft 486
Total liabilities 599
Net assets derecognised (511)
Less: Non-controlling interests 511
Net assets disposed –
The aggregate cash inflows arising from the dilution of Wow Vision Pte Ltd were:
Group
$’000
Net assets disposed (as above) –
Cash proceeds from disposal –
Less: Cash and cash equivalents in Wow Vision Pte Ltd 454
Net cash inflow on disposal 454
SM SUMMIT HOLDINGS LIMITED 57A N N U A L R E P O R T 2 0 1 0
NOTES TO THE FINANCIAL STATEMENTSFor the fi nancial year ended 31 December 2010
11. TRADE AND OTHER RECEIVABLES
(a) Current
Group Company
2010 2009 2010 2009
$’000 $’000 $’000 $’000
Trade receivables – third parties 11,920 12,636 60 64
Less: Allowance for impairment (2,119) (2,007) – –
9,801 10,629 60 64
Receivables from subsidiaries
– trade – – 2,917 3,347
– non-trade – – 6,266 3,201
Receivables from associated companies
– trade 147 10 – –
– non-trade 339 108 181 24
Loans to subsidiaries – – 13,663 15,328
Loans to associated companies 6,260 6,503 – –
6,746 6,621 23,027 21,900
Less: Allowance for impairment – – (7,650) (7,810)
6,746 6,621 15,377 14,090
Other receivables 626 401 247 213
17,173 17,651 15,684 14,367
The non-trade receivables from subsidiaries and associated companies, and loans to subsidiaries and
associated company are unsecured, interest-free and repayable on demand.
(b) Non-current
Company
2010 2009
$’000 $’000
Loans to subsidiaries 13,442 18,647
Less: Allowance for impairment (4,715) (5,138)
8,727 13,509
Loans to an associated company 447 –
Less: Allowance for impairment (447) –
– –
8,727 13,509
NOTES TO THE FINANCIAL STATEMENTSFor the fi nancial year ended 31 December 2010
SM SUMMIT HOLDINGS LIMITED58A N N U A L R E P O R T 2 0 1 0
11. TRADE AND OTHER RECEIVABLES (CONTINUED)
(b) Non-current (continued)
The loans to subsidiaries are unsecured with no fixed terms of repayment but are not expected to be
repaid within the next twelve months. Included in the loans to subsidiaries is an amount of $6,550,000
(2009: $10,842,000) which bears interest at 2% (2009: 2%) per annum.
Included in loan to subsidiaries is an amount of $12,242,000 (2009: $16,593,000) which are considered
to be part of the Company’s net investment in the subsidiaries.
At the balance sheet date, the carrying amounts of the non-current loans approximated their fair value.
12. INVENTORIES
Group
2010 2009
$’000 $’000
Finished goods 197 169
Work-in-progress 67 134
Raw materials 2,532 2,360
2,796 2,663
The cost of inventories recognised as expense and included in “cost of sales” amounted to $27,451,000 (2009:
$31,174,000).
13. OTHER CURRENT ASSETS
Group Company
2010 2009 2010 2009
$’000 $’000 $’000 $’000
Deposits 1,479 1,427 752 752
Prepayments 310 430 34 7
1,789 1,857 786 759
Included in the deposits is an amount of $464,000 (2009: $506,000) being the cost of an option to acquire
additional shares of an associated company.
14. FINANCIAL ASSETS, AVAILABLE-FOR-SALE
Group and Company
2010 2009
$’000 $’000
Beginning of financial year 4,401 5,014
Disposals – (1,013)
Fair value gains transferred to equity [Note 25(b)(i)] 87 400
End of financial year 4,488 4,401
SM SUMMIT HOLDINGS LIMITED 59A N N U A L R E P O R T 2 0 1 0
NOTES TO THE FINANCIAL STATEMENTSFor the fi nancial year ended 31 December 2010
14. FINANCIAL ASSETS, AVAILABLE-FOR-SALE (CONTINUED)
Financial assets, available-for-sale are analysed as follows:
Group and Company
2010 2009
$’000 $’000
Listed equity securities – Singapore 4,488 4,401
The fair value of listed equities are based on quoted market prices at the balance sheet dates.
15. INVESTMENTS IN ASSOCIATED COMPANIES
Group Company
2010 2009 2010 2009
$’000 $’000 $’000 $’000
Equity investment, at cost 3,735 1,668
Less: Accumulated impairment (2,437) (370)
1,298 1,298
Beginning of financial year 2,589 2,290
Currency translation difference (28) (52)
Acquisition of associated company 4 –
Share of profit 82 351
End of financial year 2,647 2,589
(a) The summarised financial information of associated companies, not adjusted for the proportion ownership
interest held by the Group, is as follows:
2010 2009
$’000 $’000
– Assets 19,385 19,214
– Liabilities 11,174 10,982
– Revenue 6,341 5,485
– Net profit 50 827
(b) The Group has not recognised its share of losses of associated companies amounting to $65,000
because the Group’s cumulative share of losses exceeds its interest in those entities and the Group has
no obligation in respect of those losses. The cumulative unrecognised losses amount to $65,000 at the
balance sheet date.
NOTES TO THE FINANCIAL STATEMENTSFor the fi nancial year ended 31 December 2010
SM SUMMIT HOLDINGS LIMITED60A N N U A L R E P O R T 2 0 1 0
15. INVESTMENTS IN ASSOCIATED COMPANIES (CONTINUED)
(c) The associated companies of the Group are as follows:
Name of companies Principal activities
Country of
incorporation
and business
carried on in Equity holding
2010 2009
% %
Held directly by the Company
Sherford (M) Sdn Bhd+ Property investment Malaysia 25 25
WOW Vision Pte Ltd ^ Provision of wireless applications
and solutions
Singapore 34 ##
Held by subsidiaries
Shanghai Huade
Photoelectron Science &
Technology Co. Ltd* ++
Manufacture and replication
of compact discs, data
storage products and related
components
People’s
Republic
of China
49 49
AVSM Logistics Pte Ltd ^ Provide warehousing and logistic
services
Singapore 40 40
Typhoon Creations Pte Ltd ^ Marketing services Singapore 40 –
+ Audited by M.S. Wong & Co.
* Audited by Shanghai LSC Certified Public Accountants Co., Ltd.
++ Holdings through Advance Technology Investment Limited.
^ Audited by Messrs James Chan & Partners.
## During the year, the Company has diluted its shareholding in Wow Vision Pte Ltd from subsidiary to associated
company.
16. INVESTMENTS IN SUBSIDIARIES
(a)
Company
2010 2009
$’000 $’000
Equity investment, at cost 10,432 11,875
Less: Accumulated impairment (1,048) (2,491)
9,384 9,384
SM SUMMIT HOLDINGS LIMITED 61A N N U A L R E P O R T 2 0 1 0
NOTES TO THE FINANCIAL STATEMENTSFor the fi nancial year ended 31 December 2010
16. INVESTMENTS IN SUBSIDIARIES (CONTINUED)
(b) The subsidiaries of SM Summit Holdings Limited are as follows:
Name of companies Principal activities
Country of
incorporation
and business
carried on in Equity holding
2010 2009
% %
Summit CD Manufacture
Pte Ltd#
Manufacture and replication
of compact discs, data
storage products and related
components
Singapore 100 100
Summit Hi-Tech Pte Ltd# Manufacture and replication
of digital versatile discs, data
storage products and related
components
Singapore 100 100
SM Summit Investment
Pte. Ltd #
Investment holding Singapore 100 100
FairVision Pte Ltd#^^ Media advertising Singapore 70 70
3ngine Pte. Ltd. #^^ Media advertising Singapore 100 100
Summit CD Manufacture
(HK) Limited*
Dormant Hong Kong 100 100
SM Summit Holdings
(HK) Limited**
Dormant Hong Kong 100 100
Summit Technology
Australia Pty Ltd@
Manufacture and replication
of compact discs and digital
versatile discs
Australia 100 100
SM Summit Holdings
(Australia) Pty Limited+**
Dormant Australia 100 100
Summit Printing (Australia)
Pty Limited+@
Printing Australia 100 100
Wow Vision Australia
Pty Ltd+@
Dormant Australia 100 100
Gate Cosmos Investments
Ltd**
Trading and investment holding British Virgin
Islands
100 100
PT Digital Media
Technology~^
Manufacture and replication
of compact discs, data
storage products and related
components
Indonesia 100 100
Advance Technology
Investment Limited**^^
Investment holding Hong Kong 100 100
Summit Technology
Japan KK **
Dormant Japan 100 100
Wow Vision Pte Ltd Provision of wireless applications
and solutions
Singapore ## 51
NOTES TO THE FINANCIAL STATEMENTSFor the fi nancial year ended 31 December 2010
SM SUMMIT HOLDINGS LIMITED62A N N U A L R E P O R T 2 0 1 0
16. INVESTMENTS IN SUBSIDIARIES (CONTINUED)
(b) The subsidiaries of SM Summit Holdings Limited are as follows: (continued)
# Audited by PricewaterhouseCoopers LLP, Singapore.
* Audited by Fung. Yu & Co., Certified Public Accountants (Practising).
@ Audited by PricewaterhouseCoopers, Australia.
~ Audited by Kanaka Puradiredja, Robert Yogi, Suhartono.
** No statutory audit required in the country of incorporation.
+ Holdings through Summit Technology Australia Pty Ltd.
^ Holdings through Gate Cosmos Investments Ltd and SM Summit Investment Pte. Ltd.
^^ Holdings through SM Summit Investment Pte. Ltd..
## During the year, the Company has diluted its shareholding in Wow Vision Pte Ltd from subsidiary to associated
company.
In accordance to Rule 716 of The Singapore Exchange Securities Trading Limited – Listing Rules, the Audit
Committee and Board of Directors of the Company confirmed that they are satisfied that the appointment
of different auditors for its subsidiaries or associated companies would not compromise the standard and
effectiveness of the audit of the Group.
17. PROPERTY, PLANT AND EQUIPMENT
Leasehold Plant, Renovation, Office
land machinery furniture equipment Capital
and and and Motor and work-in-
building equipment fittings vehicles computers progress Total
$’000 $’000 $’000 $’000 $’000 $’000 $’000
Group
2010
Cost
Beginning of financial year 3,652 54,529 4,598 2,051 5,077 166 70,073
Currency translation
differences (12) 713 99 12 60 – 872
Additions 107 538 5 67 88 – 805
Disposals (73) (6,075) (351) (230) (573) – (7,302)
Dilution of share holdings
from subsidiary to
associated company – – (259) – (256) – (515)
Transfer from capital
work-in-progress – 166 – – – (166) –
End of financial year 3,674 49,871 4,092 1,900 4,396 – 63,933
Accumulated depreciation
Beginning of financial year 1,593 42,429 3,210 1,563 4,622 – 53,417
Currency translation
differences 57 664 60 13 55 – 849
Disposals (10) (6,129) (235) (220) (564) – (7,158)
Dilution of share holdings
from subsidiary to
associated company – – (247) – (239) – (486)
Depreciation charge 307 3,708 252 201 211 – 4,679
End of financial year 1,947 40,672 3,040 1,557 4,085 – 51,301
Net book value
End of financial year 1,727 9,199 1,052 343 311 – 12,632
SM SUMMIT HOLDINGS LIMITED 63A N N U A L R E P O R T 2 0 1 0
NOTES TO THE FINANCIAL STATEMENTSFor the fi nancial year ended 31 December 2010
17. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Leasehold Plant, Renovation, Office
land machinery furniture equipment Capital
and and and Motor and work-in-
building equipment fittings vehicles computers progress Total
$’000 $’000 $’000 $’000 $’000 $’000 $’000
2009
Cost
Beginning of financial year 2,957 48,582 4,194 2,036 4,812 1,875 64,456
Currency translation
differences 546 4,509 491 139 380 107 6,172
Additions 149 469 46 30 106 112 912
Disposals – (946) (133) (154) (234) – (1,467)
Transfer from capital
work-in-progress – 1,915 – – 13 (1,928) –
End of financial year 3,652 54,529 4,598 2,051 5,077 166 70,073
Accumulated depreciation
Beginning of financial year 1,012 35,352 2,873 1,268 4,237 – 44,742
Currency translation
differences 270 3,194 221 110 319 – 4,114
Disposals – (941) (133) (112) (182) – (1,368)
Depreciation charge 311 4,332 249 297 248 – 5,437
Impairment charge – 492 – – – – 492
End of financial year 1,593 42,429 3,210 1,563 4,622 – 53,417
Net book value
End of financial year 2,059 12,100 1,388 488 455 166 16,656
NOTES TO THE FINANCIAL STATEMENTSFor the fi nancial year ended 31 December 2010
SM SUMMIT HOLDINGS LIMITED64A N N U A L R E P O R T 2 0 1 0
17. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Plant,
machinery
and
equipment
Renovation,
furniture
and
fittings
Motor
vehicles
Office
equipment
and
computers Total
$’000 $’000 $’000 $’000 $’000
Company
2010
Cost
Beginning of financial year 6 842 838 686 2,372
Additions – 2 – 3 5
Disposals – – (108) (128) (236)
End of financial year 6 844 730 561 2,141
Accumulated depreciation
Beginning of financial year 6 830 646 674 2,156
Disposals – – (108) (123) (231)
Depreciation charge – 5 97 5 107
End of financial year 6 835 635 556 2,032
Net book value
End of financial year – 9 95 5 109
2009
Cost
Beginning of financial year 6 968 838 756 2,568
Additions – – – – –
Disposals – (126) – (70) (196)
End of financial year 6 842 838 686 2,372
Accumulated depreciation
Beginning of financial year 6 947 479 731 2,163
Disposals – (126) – (70) (196)
Depreciation charge – 9 167 13 189
End of financial year 6 830 646 674 2,156
Net book value
End of financial year – 12 192 12 216
SM SUMMIT HOLDINGS LIMITED 65A N N U A L R E P O R T 2 0 1 0
NOTES TO THE FINANCIAL STATEMENTSFor the fi nancial year ended 31 December 2010
17. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
(a) At the balance sheet date, the net book value of property, plant and equipment of the Group and the
Company under finance lease agreements amounted to $261,000 (2009: $1,107,000) and $78,000 (2009:
$149,000) [Note 20(b)] respectively.
(b) Certain property, plant and machinery of the Group are mortgaged to banks for term loans and other
credit facilities extended to certain subsidiaries. The net book value of these property, plant and machinery
amounted to approximately $1,668,000 (2009: $2,713,000) [Notes 20(c)].
(c) The leasehold land and buildings of the Group comprise:
Location Tenure Use of Property
Indonesia:
MM2100 Industrial Town
JI. Bali Blok H1-1
Cibitung
Bekasi 17520
22 years lease from 30 September
2004, with an option to extend for
a further 20 years
Industrial factory
building
18. INTANGIBLE ASSETS
Group
2010 2009
$’000 $’000
Composition:
Goodwill arising on consolidation [Note (a)] 64 64
Computer development cost [Note (b)] – 422
64 486
(a) Goodwill on consolidation
Beginning and end of financial year 64 64
Cost 1,649 1,649
Accumulated impairment (1,585) (1,585)
Net book value 64 64
(b) Computer development cost
Beginning of financial year 422 610
Additions 550 –
Amortisation (137) (188)
Dilution of shareholdings from subsidiary to associated company (835) –
End of financial year – 422
Cost 938 938
Additions 550 –
Accumulated amortisation (653) (516)
Dilution of shareholdings from subsidiary to associated company (835) –
Net book value – 422
NOTES TO THE FINANCIAL STATEMENTSFor the fi nancial year ended 31 December 2010
SM SUMMIT HOLDINGS LIMITED66A N N U A L R E P O R T 2 0 1 0
19. TRADE AND OTHER PAYABLES
Group Company
2010 2009 2010 2009
$’000 $’000 $’000 $’000
Trade payables – third parties 4,186 4,844 123 66
Advanced billings – 79 – –
Deferred income 668 583 583 583
Deposits received 145 173 134 164
Payables to associated companies
– trade 6 – – –
– non-trade 5 – – –
Accrued operating expenses 4,849 6,105 861 795
Other payables 433 368 112 17
10,292 12,152 1,813 1,625
20. BORROWINGS
Group Company
2010 2009 2010 2009
$’000 $’000 $’000 $’000
Current
Bank overdrafts [Note (a)] 395 941 – –
Long term bank loans [Note (c)] – 607 – –
Finance lease liabilities [Notes (b) and 21] 97 72 34 34
492 1,620 34 34
Non-current
Finance lease liabilities [Notes (b) and 21] 72 127 9 49
72 127 9 49
Total borrowings 564 1,747 43 83
(a) Bank overdrafts
The bank overdrafts of the Group are supported by a guarantee given by the Company. The weighted
average effective interest rate of the bank overdrafts at the balance sheet date is 5.75% (2009: 5.75%)
per annum.
(b) Finance lease liabilities
The finance lease liabilities are secured on certain property, plant and machinery purchased under finance
leases of the Group and the Company [Note 17(a)]. The Group’s weighted average effective interest rate
of finance lease liabilities at the balance sheet date is 4.51% (2009: 2.66%) per annum. The Company’s
weighted average effective interest rate of finance lease liabilities at the balance sheet date is 2.88%
(2009: 2.88%) per annum.
SM SUMMIT HOLDINGS LIMITED 67A N N U A L R E P O R T 2 0 1 0
NOTES TO THE FINANCIAL STATEMENTSFor the fi nancial year ended 31 December 2010
20. BORROWINGS (CONTINUED)
(c) Non-current bank loans
Group
Outstanding balances
(effective interest
rates per annum)
2010 2009
$’000 $’000
Loan is repayable by monthly instalments falling due for – 607
payment between 2006 and 2010. The loan is secured by a – (8.23%)
first fixed charge on machines of a subsidiary [Note 17(b)].
– 607
Less: Portion of long term bank loans with repayments due within
twelve months – (607)
– –
(d) Interest rate risk
The periods in which the borrowings reprice or mature, whichever is earlier, are as follows:
Variable
rates Fixed rates
Less than
6 months
Less than
6 months
6 to 12
months
1 to 5
years Total
$’000 $’000 $’000 $’000 $’000
Group
2010
Total borrowings 395 48 49 72 564
2009
Total borrowings 941 482 193 131 1,747
(e) Carrying amounts and fair values
At the balance sheet date, the carrying amounts of the borrowings approximated their fair values.
21. FINANCE LEASE LIABILITIES
Group Company
2010 2009 2010 2009
$’000 $’000 $’000 $’000
Minimum lease payments due:
– not later than one year 107 83 40 40
– between one and five years 78 143 9 55
185 226 49 95
Less: Future finance charges (16) (27) (6) (12)
Present value of finance lease liabilities 169 199 43 83
The present value of finance lease liabilities
may be analysed as follows:
– not later than one year (Note 20) 97 72 34 34
– between one and five years (Note 20) 72 127 9 49
169 199 43 83
NOTES TO THE FINANCIAL STATEMENTSFor the fi nancial year ended 31 December 2010
SM SUMMIT HOLDINGS LIMITED68A N N U A L R E P O R T 2 0 1 0
22. OTHER LIABILITIES
Group Company
2010 2009 2010 2009
$’000 $’000 $’000 $’000
Provision for long service leave [Note (a)] 364 295 – –
Deferred income arising from sale
and leaseback 1,094 1,679 1,094 1,679
Provision for post-employment benefits
[Note (b)] 240 198 – –
Others 1,240 1,482 – –
2,938 3,654 1,094 1,679
(a) The movement in provision for long service leave during the financial year is as follows:
Group
2010 2009
$’000 $’000
Beginning of financial year 295 474
Currency translation differences 15 81
Charged/(credited) to the consolidated income statement 71 (244)
Paid during the financial year (17) (16)
End of financial year 364 295
(b) The movement in provision for post-employment benefits which is an unfunded defined post-employment
benefit plan during the financial year is as follows:
Group
2010 2009
$’000 $’000
Beginning of financial year 198 137
Currency translation differences (11) 20
Charged to the consolidated income statement 55 44
Paid during the financial year (2) (3)
End of financial year 240 198
The amounts recognised in profit or loss are as follows:
Group
2010 2009
$’000 $’000
Current service cost 32 23
Interest cost 23 14
Past service cost – 7
55 44
SM SUMMIT HOLDINGS LIMITED 69A N N U A L R E P O R T 2 0 1 0
NOTES TO THE FINANCIAL STATEMENTSFor the fi nancial year ended 31 December 2010
22. OTHER LIABILITIES (CONTINUED)
The principal actuarial assumptions used are as follows:
Group
2010 2009
$’000 $’000
Retirement age 55 years 55 years
Future salary increases per annum 8% 8%
Discount rate per annum 10.5% 10.5%
(c) Carrying amounts and fair values
At the balance sheet date, the carrying amounts of the non-current other payables approximated their
fair values.
23. DEFERRED INCOME TAX LIABILITIES
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to setoff current
income tax assets against current income tax liabilities and when the deferred income taxes relate to the same
fiscal authority. The amounts, determined after appropriate offsetting, are shown on the balance sheets as
follows:
Group Company
2010 2009 2010 2009
$’000 $’000 $’000 $’000
Deferred income tax liabilities:
– to be settled within one year 173 228 26 40
– to be settled after more than one year 510 796 2 1
683 1,024 28 41
Movements in the deferred income tax account is as follows:
Group Company
2010 2009 2010 2009
$’000 $’000 $’000 $’000
Beginning of financial year 1,024 981 41 72
Effect of change in Singapore tax rate
[Note 8(a)] – (29) – –
Currency translation differences (2) 19 – –
Tax (credited)/charged to:
– consolidated income statement [Note 8(a)] (339) 53 (13) (31)
End of financial year 683 1,024 28 41
Deferred income tax assets are recognised for tax losses and capital allowances carried forward to the extent
that realisation of the related tax benefits through future taxable profits is probable. The Group has unrecognised
tax losses of $9,160,000 (2009: $9,213,000) and capital allowances of $1,255,000 (2009: $1,789,000) at the
balance sheet date which can be carried forward and used to offset against future taxable income subject to
meeting certain statutory requirements by those companies with unrecognised tax losses and capital allowances
in their respective countries of incorporation. The tax losses and capital allowances have no expiry date.
NOTES TO THE FINANCIAL STATEMENTSFor the fi nancial year ended 31 December 2010
SM SUMMIT HOLDINGS LIMITED70A N N U A L R E P O R T 2 0 1 0
23. DEFERRED INCOME TAX LIABILITIES (CONTINUED)
The movements in deferred income tax assets and liabilities (prior to offsetting of balances within the same tax
jurisdiction) is as follows:
Group
Deferred income tax liabilities
Accelerated
tax
depreciation Others Total
$’000 $’000 $’000
2010
Beginning of financial year 1,078 97 1,175
Currency translation differences 6 (3) 3
(Credited)/charged to the consolidated
income statement (380) 36 (344)
End of financial year 704 130 834
2009
Beginning of financial year 1,237 105 1,342
Effect of change in tax rate (29) – (29)
Currency translation differences 52 7 59
Credited to the consolidated income statement (182) (15) (197)
End of financial year 1,078 97 1,175
Deferred income tax assets
Provisions
$’000
2010
Beginning of financial year (151)
Currency translation differences (5)
Charged to the consolidated income statement 5
End of financial year (151)
2009
Beginning of financial year (361)
Currency translation differences (39)
Charged to the consolidated income statement 249
End of financial year (151)
SM SUMMIT HOLDINGS LIMITED 71A N N U A L R E P O R T 2 0 1 0
NOTES TO THE FINANCIAL STATEMENTSFor the fi nancial year ended 31 December 2010
23. DEFERRED INCOME TAX LIABILITIES (CONTINUED)
Company
Deferred income tax liabilities
Accelerated
tax
depreciation Others Total
$’000 $’000 $’000
2010
Beginning of financial year 4 37 41
Credited to the consolidated income statement (2) (11) (13)
End of financial year 2 26 28
2009
Beginning of financial year 8 64 72
Effect of changes in tax rate (4) – (4)
Credited to the consolidated income statement – (27) (27)
End of financial year 4 37 41
24. SHARE CAPITAL
No. of
shares Amount
Issued
share
capital
Issued
share
capital
’000 $’000
2010
Balance as at 1 January and 31 December 2010 362,420 40,194
2009
Balance as at 1 January and 31 December 2009 362,420 40,194
All issued ordinary shares with no par value are fully paid.
25. OTHER RESERVES
Group Company
2010 2009 2010 2009
$’000 $’000 $’000 $’000
(a) Composition
Fair value reserve 11 (76) 11 (76)
Currency translation reserve 459 605 – –
470 529 11 (76)
NOTES TO THE FINANCIAL STATEMENTSFor the fi nancial year ended 31 December 2010
SM SUMMIT HOLDINGS LIMITED72A N N U A L R E P O R T 2 0 1 0
25. OTHER RESERVES (CONTINUED)Group Company
2010 2009 2010 2009
$’000 $’000 $’000 $’000
(b) Movements
(i) Fair value reserve
Beginning of financial year (76) (476) (76) (476)
Fair value gains on available-for-sale,
financial assets (Note 14) 87 400 87 400
End of financial year 11 (76) 11 (76)
(ii) Currency translation reserve
Beginning of financial year 605 (2,654)
Net exchange differences on translation
of financial statements of foreign
subsidiaries and associated companies (146) 3,259
End of financial year 459 605
Other reserves are non-distributable.
26. RETAINED EARNINGS
(a) Retained profits of the Group and the Company are distributable except for retained profits of associated
companies amounting to $312,000 (2009: $291,000) which are included in the Group’s retained
profits.
(b) Movement in retained earnings for the Company is as follows:
Company
2010 2009
$’000 $’000
Beginning of financial year 5,624 13,287
Net profit 86 7,740
Dividends paid (Note 27) (1,812) (15,403)
End of financial year 3,898 5,624
27. DIVIDENDS
Group and Company
2010 2009
$’000 $’000
Ordinary dividends paid
Final exempt dividend paid in respect of the previous year
of 0.5 cent (2009: 0.25 cent net per share) 1,812 906
Special exempt dividend paid in respect of the previous year
of nil cent (2009: 4 cents) per share – 14,497
1,812 15,403
At the Annual General Meeting on 28 April 2011, a first and final exempt (one tier) tax dividend of 0.5 cent per
share amounting to a total of $1,812,000 will be recommended. These financial statements do not reflect this
dividend, which will be accounted for in the shareholders’ equity as an appropriation of retained earnings in the
financial year ending 31 December 2011.
SM SUMMIT HOLDINGS LIMITED 73A N N U A L R E P O R T 2 0 1 0
NOTES TO THE FINANCIAL STATEMENTSFor the fi nancial year ended 31 December 2010
28. COMMITMENTS
(a) Operating lease commitments – where the Group is a lessee
The Group leases various buildings under non-cancellable operating lease agreements. The leases have
varying terms and renewal rights.
The future aggregate minimum lease payments under non-cancellable operating leases contracted for
at the reporting date but not recognised as liabilities, are as follows:
Group Company
2010 2009 2010 2009
$’000 $’000 $’000 $’000
Not later than one year 3,015 3,197 1,613 1,581
Between one and five years 4,578 6,455 3,112 4,725
7,593 9,652 4,725 6,306
(b) Unsecured corporate guarantees
The Company has provided unsecured corporate guarantees in favour of financial institutions in
respect of facilities granted to subsidiaries and associated companies amounting to $9,671,000 (2009:
$12,804,000). At 31 December 2010, the amount of the guaranteed loans drawn down by the subsidiaries
and associated companies amounted to $2,197,000 (2009: $3,872,000).
(c) Continuing financial support
The Company has provided an undertaking to provide continuing financial support to certain subsidiaries,
to enable the subsidiaries to meet their obligations as and when they fall due. As at 31 December 2010,
the net liabilities of these subsidiaries amounted to $14,992,000 (2009: $15,338,000).
(d) Other commitments
Group Company
2010 2009 2010 2009
$’000 $’000 $’000 $’000
Uncalled capital contribution
in respect of investment in
Sherford (M) Sdn Bhd 416 416 416 416
NOTES TO THE FINANCIAL STATEMENTSFor the fi nancial year ended 31 December 2010
SM SUMMIT HOLDINGS LIMITED74A N N U A L R E P O R T 2 0 1 0
29. FINANCIAL RISK MANAGEMENT
Financial risk factors
The Group’s activities expose it to market risk (including currency risk, interest rate risk and price risk), credit
risk and liquidity risk. The Group’s overall risk management strategy seeks to minimise adverse effects from the
unpredictability of financial markets on the Group’s financial performance.
Financial risk management is carried out by management in accordance with the policies approved by the
Board of Directors. Management identifies, evaluates and hedges financial risks in close co-operation with the
Group’s operating units.
(a) Market risk
(i) Currency risk
The Group operates in Asia with dominant operations in Singapore, Indonesia and Australia.
Entities in the Group regularly transact in currencies other than their respective functional
currencies (“foreign currencies”).
Currency risk arises within the entities in the Group when transactions are denominated in foreign
currencies such as Singapore Dollar (“SGD”), Australian Dollar (“AUD”) and United States Dollar
(“USD”). The Group also has a number of investments in foreign subsidiaries, whose net assets
are exposed to currency risk. Exposures to foreign currency risks are managed as far as possible
by natural hedges and monitoring to ensure the exposure is minimised.
The Group’s currency exposure based on the information provided to key management is as
follows:
SGD USD AUD Other Total
$’000 $’000 $’000 $’000 $’000
2010
Financial assets
Cash and cash equivalents 10,732 537 8,570 1,171 21,010
Financial assets, available-for-sale 4,488 – – – 4,488
Inter-company balances 27,349 464 2,934 41 30,788
Trade and other receivables 2,144 4,574 5,438 5,017 17,173
Other financial assets 756 464 12 247 1,479
45,469 6,039 16,954 6,476 74,938
Financial liabilities
Trade and other payables 2,579 4,044 4,616 1,991 13,230
Inter-company balances 27,349 464 2,934 41 30,788
Borrowings 126 – – 438 564
30,054 4,508 7,550 2,470 44,582
Net financial assets 15,415 1,531 9,404 4,006 30,356
Less: Net financial assets denominated
in the respective entities’
functional currencies (17,011) – (5,172) (1,574)
Currency risk exposures (1,596) 1,531 4,232 2,432
SM SUMMIT HOLDINGS LIMITED 75A N N U A L R E P O R T 2 0 1 0
NOTES TO THE FINANCIAL STATEMENTSFor the fi nancial year ended 31 December 2010
29. FINANCIAL RISK MANAGEMENT (CONTINUED)
(a) Market risk (continued)
(i) Currency risk (continued)
SGD USD AUD Other Total
$’000 $’000 $’000 $’000 $’000
2009
Financial assets
Cash and cash equivalents 6,153 1,040 11,687 1,722 20,602
Financial assets, available-for-sale 4,401 – – – 4,401
Inter-company balances 27,311 – 2,529 – 29,840
Trade and other receivables 2,436 5,854 5,461 3,900 17,651
Other financial assets 757 505 12 153 1,427
41,058 7,399 19,689 5,775 73,921
Financial liabilities
Trade and other payables 3,113 5,012 6,010 1,592 15,727
Inter-company balances 27,311 – 2,529 – 29,840
Borrowings 1,139 – 608 – 1,747
31,563 5,012 9,147 1,592 47,314
Net financial assets 9,495 2,387 10,542 4,183 26,607
Less: Net financial assets denominated
in the respective entities’
functional currencies (10,378) – (6,722) (1,439)
Currency risk exposures (883) 2,387 3,820 2,744
NOTES TO THE FINANCIAL STATEMENTSFor the fi nancial year ended 31 December 2010
SM SUMMIT HOLDINGS LIMITED76A N N U A L R E P O R T 2 0 1 0
29. FINANCIAL RISK MANAGEMENT (CONTINUED)
(a) Market risk (continued)
(i) Currency risk (continued)
The Company’s currency exposure based on the information provided to key management is as
follows:
2010 2009
SGD USD AUD Total SGD USD AUD Total
$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000
Financial assets
Cash and cash
equivalents 4,861 5 2,174 7,040 3,730 166 840 4,736
Financial assets
available-for-sale 4,488 – – 4,488 4,401 – – 4,401
Trade and other
receivables 15,937 516 7,958 24,411 15,400 562 11,914 27,876
Other financial
assets 752 – – 752 752 – – 752
26,038 521 10,132 36,691 24,283 728 12,754 37,765
Financial liabilities
Trade and other
payables 2,907 – – 2,907 3,266 38 – 3,304
Borrowings 43 – – 43 83 – – 83
2,950 – – 2,950 3,349 38 – 3,387
Net financial
assets 23,088 521 10,132 33,741 20,934 690 12,754 34,378
Less: Net financial
assets
denominated
in the
entity’s
functional
currency (23,088) – – (20,934) – –
Currency risk
exposures – 521 10,132 – 690 12,754
SM SUMMIT HOLDINGS LIMITED 77A N N U A L R E P O R T 2 0 1 0
NOTES TO THE FINANCIAL STATEMENTSFor the fi nancial year ended 31 December 2010
29. FINANCIAL RISK MANAGEMENT (CONTINUED)
(a) Market risk (continued)
(i) Currency risk (continued)
If the USD or AUD change against SGD by 4% (2009: 4%) with all other variables including tax
rate being held constant, the effects arising from the net financial asset position would be as
follows:
2010 2009
Increase/(Decrease)
Profit
after tax
Profit
after tax
$’000 $’000
Group
USD against SGD
– strengthened 61 95
– weakened (61) (95)
AUD against SGD
– strengthened 169 153
– weakened (169) (153)
Company
USD against SGD
– strengthened 21 28
– weakened (21) (28)
AUD against SGD
– strengthened 405 510
– weakened (405) (510)
(ii) Price risk
The Group is exposed to equity securities price risk arising from the investments held by the
Group and classified on the consolidated balance sheet as available-for-sale. These securities
are listed in Singapore.
If prices for equity securities listed in Singapore change by 9% (2009: 14%) with all other variables
including tax rate being held constant, the effects on equity will be:
2010 2009
Increase/(Decrease)
Equity Equity
$’000 $’000
Group
Listed in Singapore
– increased by 403 616
– decreased by (403) (616)
NOTES TO THE FINANCIAL STATEMENTSFor the fi nancial year ended 31 December 2010
SM SUMMIT HOLDINGS LIMITED78A N N U A L R E P O R T 2 0 1 0
29. FINANCIAL RISK MANAGEMENT (CONTINUED)
(a) Market risk (continued)
(iii) Cash flow and fair value interest rate risks
Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will
fluctuate because of changes in market interest rates. Fair value interest rate risk is the risk that
the fair value of a financial instrument will fluctuate due to changes in market interest rates. The
Group’s income is substantially independent of changes in market interest rates.
The Group has no significant exposure to cash flow interest rate risks. The Company’s exposure
to cash flow interest rate risks arise mainly from non-current borrowings and loans to subsidiaries
at fixed rates.
(b) Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in
financial loss to the Group. For trade receivables, the Group adopts the policy of dealing only with
customers of appropriate credit history, where appropriate to mitigate credit risk. For other financial
assets, the Group adopts the policy of dealing only with high credit quality counterparties.
Credit exposure to an individual counterparty is restricted by credit limit that are approved by management
based on ongoing credit evaluation. The counterparty’s payment profile and credit exposure are
continuously monitored at the entity level by the respective management and at the Group level. The
Group and Company have no major concentration of credit risk. The Company has no material third party
debtors. The top 5 debtors of the Group represented 35% of trade receivables in 2010 (2009: 29%).
As the Group and Company does not hold any collateral, the maximum exposure to credit risk for each
class of financial instruments is the carrying amount of that class of financial instruments presented on
the balance sheet, except as follows:
Company
2010 2009
$’000 $’000
Corporate guarantees provided to banks on subsidiaries’
and associates’ loans 9,671 12,804
The Group’s major classes of financial assets are bank deposits and trade receivables. The Company’s
major classes of financial assets are bank deposits and loans to subsidiaries and associates.
The Group’s credit risk for trade receivables based on the information provided to key management is
as follows:
Group
2010 2009
$’000 $’000
By geographical areas
Asia 5,802 6,147
Australia 3,999 4,482
9,801 10,629
SM SUMMIT HOLDINGS LIMITED 79A N N U A L R E P O R T 2 0 1 0
NOTES TO THE FINANCIAL STATEMENTSFor the fi nancial year ended 31 December 2010
29. FINANCIAL RISK MANAGEMENT (CONTINUED)
(b) Credit risk (continued)
Financial assets that are neither past due nor impaired
Bank deposit 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 companies with a good collection track record with the Group.
Financial assets that are past due and/or impaired
There is no other class of financial assets that is past due and/or impaired except for trade
receivables.
The age analysis of trade receivables past due but not impaired are as follows:
Group
2010 2009
$’000 $’000
Past due < 3 months 3,528 3,689
Past due 3 to 6 months 462 586
3,990 4,275
The carrying amount of trade receivables individually determined to be impaired and the movement in
the related allowance for impairment are as follows:
Group
2010 2009
$’000 $’000
Gross amount 2,119 2,007
Less: Allowance for impairment (2,119) (2,007)
– –
Beginning of financial year 2,007 1,548
Currency translation difference 137 280
Allowance made 124 334
Allowance utilised (149) (155)
End of financial year 2,119 2,007
The impaired trade receivables arise mainly from sales to customers who have financial difficulties and
significant delays in payments.
NOTES TO THE FINANCIAL STATEMENTSFor the fi nancial year ended 31 December 2010
SM SUMMIT HOLDINGS LIMITED80A N N U A L R E P O R T 2 0 1 0
29. FINANCIAL RISK MANAGEMENT (CONTINUED)
(c) Liquidity risk
The table below analyses the maturity profile of the Group’s and Company’s financial liabilities (including
derivative financial liabilities) based on contractual undiscounted cash flows.
Less than
1 year
Between
1 and 2
years
Between
2 and 5
years
Over 5
years
$’000 $’000 $’000 $’000
Group
2010
Trade and other payables 10,292 381 1,314 1,243
Borrowings 502 59 19 –
10,794 440 1,333 1,243
2009
Trade and other payables 12,152 1,033 1,245 1,376
Borrowings 1,631 143 – –
13,783 1,176 1,245 1,376
Company
2010
Trade and other payables 1,813 381 713 –
Borrowings 40 9 – –
1,853 390 713 –
2009
Trade and other payables 1,625 434 1,245 –
Borrowings 40 55 – –
1,665 489 1,245 –
(d) Capital risk
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a
going concern and to maintain an optimal capital structure so as to maximise shareholder value. In order
to maintain or achieve optimal capital structure, the Group may adjust the amount of dividend payment,
return capital to shareholders, issue new shares, buy back issued shares, obtain new borrowings or sell
assets to reduce borrowings.
Consistent with others in the industry, management monitors capital based on a gearing ratio. The
Group’s and Company’s strategies, which were unchanged from 2009, are to maintain gearing ratios
below 50%.
The gearing ratio is calculated as borrowings divided by total capital. Total capital is calculated as
borrowing plus equity.
SM SUMMIT HOLDINGS LIMITED 81A N N U A L R E P O R T 2 0 1 0
NOTES TO THE FINANCIAL STATEMENTSFor the fi nancial year ended 31 December 2010
29. FINANCIAL RISK MANAGEMENT (CONTINUED)
(d) Capital risk (continued)
The gearing ratios are computed as follows:
Group Company
2010 2009 2010 2009
$’000 $’000 $’000 $’000
Borrowings (Note 20) 564 1,747 43 83
Total equity 47,222 48,423 44,103 45,742
Total capital 47,786 50,170 44,146 45,825
Gearing ratio 1% 4% –* –*
* Less than 1%.
The Group and the Company do not need to comply with any externally imposed capital requirements
for the financial years ended 31 December 2009 and 2010.
(e) Fair value measurements
Level 1
$’000
As at 31 December 2010
Financial assets, available-for-sale 4,488
The fair value of financial instruments traded in active markets (such as trading and available-for-sale
securities) is based on quoted market prices at the balance sheet date. The quoted market price used
for financial assets held by the Group and Company is the current bid price. These instruments are
included in Level 1.
The carrying amount less impairment provision of trade receivables and payables are assumed to
approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by
discounting the future contractual cash flows at the current market interest rate that is available to the
Group for similar financial instruments. The fair value of current borrowings approximated their carrying
amount.
30. RELATED PARTY TRANSACTIONS
In addition to information disclosed elsewhere in the financial statements, the following transactions took place
between the Group and related parties at terms agreed between the parties:
(a) Sales and purchases of goods and services
The Group
2010 2009
$’000 $’000
Sales to associate 21 18
Management fee income from an associated company 136 –
Rendering of services to a minority interest 14 191
Purchase of services from a minority interest 42 110
Purchase of services from a company in which a director
has an interest 56 193
Outstanding balances at 31 December 2010 arising from sales and purchases of goods are set out in
Notes 11 and 19, respectively.
NOTES TO THE FINANCIAL STATEMENTSFor the fi nancial year ended 31 December 2010
SM SUMMIT HOLDINGS LIMITED82A N N U A L R E P O R T 2 0 1 0
30. RELATED PARTY TRANSACTIONS (CONTINUED)
(b) Key management’s personnel compensation
The key management’s personnel compensation is as follows:
The Group
2010 2009
$’000 $’000
Wages and salaries 989 1,167
Employer’s contribution to defined contribution plans,
including Central Provident Fund 32 37
1,021 1,204
Included in above, total compensation to directors of the Company amounted to $683,000 (2009:
$852,000).
The following information relates to remuneration of directors of the Company during the financial year:
The Group
2010 2009
Number of directors of the Company in remuneration bands:
Above $499,999 – 1
$250,000 to $499,999 1 1
Below $250,000 5 4
6 6
31. SEGMENT INFORMATION
Management has determined the operating segments based on the reports reviewed by the Senior Management
that are used to make strategic decisions. The Senior Management comprises the Chairman and Managing
Director, the Chief Financial Officer, and the Chief Executive Officer of each business/geographic segment.
The Senior Management manages and monitors the business in the two primary geographic areas: Asia and
Australia. Operations of Asia and Australia are essentially similar and consist principally of the manufacture and
sale of pre-recorded optical products.
SM SUMMIT HOLDINGS LIMITED 83A N N U A L R E P O R T 2 0 1 0
NOTES TO THE FINANCIAL STATEMENTSFor the fi nancial year ended 31 December 2010
31. SEGMENT INFORMATION (CONTINUED)
The segment information provided to the Senior Management for the reportable segments for the year ended
31 December 2010 is as follows:
Asia Australia Group
$’000 $’000 $’000
Sales:
Total segment sales 21,713 18,611 40,324
Inter-segment sales (1,998) – (1,998)
Sales to external parties 19,715 18,611 38,326
Segment results 266 (480) (214)
Interest income 552
Dividend income 212
Finance expense (91)
Share of profit of associated companies 82
Profit before income tax 541
Income tax credit 90
Net loss 631
Segment assets 27,011 15,907 42,918
Short-term bank deposits 12,546
Financial assets, available-for-sale 4,488
Investments in associated companies 2,647
Consolidated total assets 62,599
Segment liabilities 8,702 4,528 13,230
Borrowings 564
Current income tax liabilities 900
Deferred income tax liabilities 683
Consolidated total liabilities 15,377
Other segment items:
– Capital expenditure 723 82 805
– Depreciation 2,075 2,604 4,679
– Amortisation 137 – 137
– Property, plant and equipment 7,972 4,660 12,632
– Intangible assets 64 – 64
NOTES TO THE FINANCIAL STATEMENTSFor the fi nancial year ended 31 December 2010
SM SUMMIT HOLDINGS LIMITED84A N N U A L R E P O R T 2 0 1 0
31. SEGMENT INFORMATION (CONTINUED)
The segment information provided to the Senior Management for the reportable segments for the year ended
31 December 2009 is as follows:
Asia Australia Group
$’000 $’000 $’000
Sales:
Total segment sales 24,947 21,185 46,132
Inter-segment sales (3,192) – (3,192)
Sales to external parties 21,755 21,185 42,940
Segment results (311) (662) (973)
Interest income 365
Dividend income 232
Finance expense (155)
Share of profit of associated companies 351
Loss before income tax (180)
Income tax expense (239)
Net loss (419)
Segment assets 29,869 19,911 49,780
Short-term bank deposits 10,135
Financial assets, available-for-sale 4,401
Current income tax recoverable 543
Investments in associated companies 2,589
Consolidated total assets 67,448
Segment liabilities 9,554 6,252 15,806
Borrowings 1,747
Current income tax liabilities 448
Deferred income tax liabilities 1,024
Consolidated total liabilities 19,025
Other segment items:
– Capital expenditure 448 464 912
– Depreciation 2,661 2,776 5,437
– Amortisation 188 – 188
– Property, plant and equipment 9,495 7,161 16,656
– Intangible assets 486 – 486
Sales revenue is based on the country in which the assets are located. Inter-segment transactions are determined
on an arm’s length basis.
SM SUMMIT HOLDINGS LIMITED 85A N N U A L R E P O R T 2 0 1 0
NOTES TO THE FINANCIAL STATEMENTSFor the fi nancial year ended 31 December 2010
31. SEGMENT INFORMATION (CONTINUED)
Segment assets consists primarily of property, plant and equipment, intangible assets, inventories, receivables
and operating cash, and exclude deferred tax assets, taxes currently recoverable and short-term bank deposits.
Segment liabilities comprise operating liabilities and exclude items such as tax liabilities and bank borrowings.
Capital expenditure comprises additions to property, plant and equipment.
GEOGRAPHICAL MARKET OF THE CUSTOMERS
The following details show the distribution of the Group’s consolidated sales based on the countries in which
the customers are located, regardless of where the goods are produced.
2010 2009
$’000 $’000
External sales revenue
Asia 18,713 19,347
Australia 19,443 21,848
Others 170 1,745
38,326 42,940
As the Group operates substantially in one business segment which is the manufacture and sale of optical discs
and related data storage products, no other segment information by business segment is presented.
32. EVENTS OCCURRING AFTER BALANCE SHEET DATE
On 13 January 2011, the Company announced that it had entered into term sheets to acquire (i) 100% interest
in Centurion Dormitory (Westlite) Pte. Ltd. (“Westlite”); (ii) 45% interest in Lian Beng-Centurion (Mandai) Pte Ltd
(“JVCo”); and (iii) 75% interest in JYC-NCL Pte Ltd (“JYC-NCL”) (collectively, “Proposed Transactions”).
Westlite and JYC-NCL are companies engaged in the ownership, management and/or operation of workers
dormitories and temporary workers’ accommodation and on a combined basis, own and/or manage workers’
dormitories that can house more than 14,000 workers.
JVCo is a company which was granted and has exercised an option to purchase a piece of freehold industrial
land in Mandai. Subject to all necessary approvals from the relevant authorities, JVCo intends to develop and
operate dormorities on all or part of the land. Completion of the acquisition of this 45% interest in JVCo is
conditional upon completion of the acquisition of interests in Westlite and JYC-NCL and upon JVCo obtaining
all necessary approvals and permissions required for the land to be used for the development and operation of
workers’ dormitories with a capacity of at least 4,000 beds, on or before 30 September 2011.
The Proposed Transactions are subject to the Company entering into definitive sale and purchase agreements
with the respective vendors, and will require, amongst others, the approval of shareholders at an Extraordinary
General Meeting to be convened. The Company will make further announcements on any material developments
in respect of the Proposed Transactions at the appropriate time.
NOTES TO THE FINANCIAL STATEMENTSFor the fi nancial year ended 31 December 2010
SM SUMMIT HOLDINGS LIMITED86A N N U A L R E P O R T 2 0 1 0
33. NEW OR REVISED ACCOUNTING STANDARDS AND INTERPRETATIONS
Below are the mandatory standards, amendments and interpretations to existing standards that have been
published, and are relevant for the Group’s accounting periods beginning on or after 1 January 2011 or later
periods and which the Group has not early adopted:
• Amendments to FRS 24 – Related party disclosures (effective for annual periods beginning on or after 1
January 2011)
The management anticipates that the adoption of the above FRSs, INT FRSs and amendments to FRS in the
future periods will not have a material impact on the financial statements of the Group and of the Company in
the period of their initial adoption, except for the amendments to FRS 24 – related party disclosures.
The amendment clarifies and simplifies the definition of a related party. However, the revised definition of a
related party will mean that some entities will have more related parties and will be required to make additional
disclosures.
Management is currently considering the revised definition to determine whether any additional disclosures will
be required and has yet to put systems in place to capture the necessary information. It is therefore not possible
to disclose the financial impact, if any, of the amendment on the related party disclosures.
34. AUTHORISATION OF FINANCIAL STATEMENTS
These financial statements were authorised for issue in accordance with a resolution of the Board of Directors
of SM Summit Holdings Limited on 25 March 2011
SM SUMMIT HOLDINGS LIMITED 87A N N U A L R E P O R T 2 0 1 0
STATISTICS OF SHAREHOLDINGSAs at 16 March 2011
No. of shares issued : 362,419,500
Class of shares : Ordinary shares
Voting rights : One vote per share
DISTRIBUTION OF SHAREHOLDINGS
Size of Shareholding
Number of
Shareholders %
Number of
Shares %
1 - 999 586 12.53 279,381 0.08
1,000 - 10,000 2,029 43.39 10,265,860 2.83
10,001 - 1,000,000 2,041 43.65 106,665,822 29.43
1,000,001 and above 20 0.43 245,208,437 67.66
4,676 100.00 362,419,500 100.00
TWENTY LARGEST SHAREHOLDERS
No. Name of Shareholders
Number of
Shares %
1. UOB Kay Hian Pte Ltd 94,554,375 26.09
2. United Overseas Bank Nominees Pte Ltd 50,937,809 14.05
3. Lee Kerk Chong 20,932,543 5.78
4. Loh Kim Kang David 20,103,000 5.55
5. DBS Nominees Pte Ltd 9,982,904 2.75
6. OCBC Nominees Singapore Pte Ltd 7,032,937 1.94
7. Phillip Securities Pte Ltd 6,965,308 1.92
8. Han Seng Juan 6,144,000 1.70
9. Lee Joh Ern 4,537,500 1.25
10. Yuan Xiaomin 4,150,000 1.15
11. OCBC Securities Private Ltd 3,697,270 1.02
12. Kim Eng Securities Pte. Ltd. 3,560,105 0.98
13. DBS Vickers Securities (S) Pte Ltd 2,228,249 0.61
14. Ong Teck Beng (Wang Deming) 2,130,000 0.59
15. Tang Kok Onn Simon 1,846,000 0.51
16. Lee Geok Ing 1,523,437 0.42
17. Ng Ngee Hung 1,433,000 0.40
18. Ding Chin Look 1,250,000 0.34
19. Foo Kwang Eng 1,150,000 0.32
20. Tan Kock Hua 1,050,000 0.29
Total 245,208,437 67.66
SM SUMMIT HOLDINGS LIMITED88A N N U A L R E P O R T 2 0 1 0
STATISTICS OF SHAREHOLDINGSAs at 16 March 2011
SHAREHOLDING OF THE SUBSTANTIAL SHAREHOLDERS AS AT 16 MARCH 2011
Name
Registered in the name of
substantial shareholder
Shareholding in which
Substantial shareholder is
Deemed to have an interest
Lee Kerk Chong1 20,932,543 37,500,000
Thinkpac Limited2 – 90,000,000
Loh Kim Kang David3 20,103,000 90,000,000
Han Seng Juan4 6,144,000 90,000,000
Notes:
1. Lee Kerk Chong has a beneficial interest in 37,500,000 Shares held by United Overseas Bank Nominees Pte Ltd.
2. Thinkpac Limited has a beneficial interest in the 90,000,000 shares held by UOB Kay Hian Pte Ltd.
3. Loh Kim Kang David is deemed interested in the 90,000,000 shares held by Thinkpac Limited by virtue of his shareholdings
in Thinkpac Limited.
4. Han Seng Juan is deemed interested in the 90,000,000 shares held by Thinkpac Limited by virtue of his shareholdings in
Thinkpac Limited.
PERCENTAGE OF SHAREHOLDING IN PUBLIC’S HANDS
49.99% 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.
TREASURY SHARES – RULE 1207(9)(F)
The Company does not hold any Treasury Shares.
SM SUMMIT HOLDINGS LIMITED 89A N N U A L R E P O R T 2 0 1 0
NOTICE OF ANNUAL GENERAL MEETINGSM SUMMIT HOLDINGS LIMITED(Incorporated in Singapore)
(Co. Reg. No: 198401088W)
NOTICE IS HEREBY GIVEN that the Annual General Meeting of SM SUMMIT HOLDINGS LIMITED (the “Company”) will
be held at The Conference Room, 45 Ubi Road 1 #05-00, Summit Building, Singapore 408696 on Thursday, 28 April
2011 at 10.00 am 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
December 2010 together with the Auditors’ Report thereon. (Resolution 1)
2. To declare a first and final one-tier tax exempt dividend of 0.5 cent per ordinary share for the year ended 31
December 2010 (2009: 0.5 cent one-tier tax exempt per ordinary share). (Resolution 2)
3. To re-elect the following Directors retiring by rotation pursuant to Article 89 of the Company’s Articles of
Association:
Ms Mak Bang Mui (Resolution 3)
Mr Tang Kay Hwa (Resolution 4)
Ms Mak Bang Mui will, upon re-election as a Director of the Company, remain a member of the Audit Committee
and will be considered non-independent for the purposes of Rule 704(8) of the Listing Manual of the Singapore
Exchange Securities Trading Limited.
4. To approve the payment of Directors’ fees of S$157,000 for the year ended 31 December 2010 (2009:
S$128,000). (Resolution 5)
5. To re-appoint PricewaterhouseCoopers LLP as the Company’s Auditors and to authorise the Directors to fix
their remuneration. (Resolution 6)
6. To transact any other ordinary business which may properly be transacted at an Annual General Meeting.
AS SPECIAL BUSINESS
To consider and if thought fit, to pass the following resolutions as Ordinary Resolutions, with or without any
modifications:
7. Share Issue Mandate
That pursuant to Section 161 of the Companies Act, Chapter 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:
SM SUMMIT HOLDINGS LIMITED90A N N U A L R E P O R T 2 0 1 0
NOTICE OF ANNUAL GENERAL MEETINGSM SUMMIT HOLDINGS LIMITED(Incorporated in Singapore)
(Co. Reg. No: 198401088W)
AS SPECIAL BUSINESS (CONTINUED)
7. Share Issue Mandate (continued)
(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:
(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;
(c) 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 (i)] (Resolution 7)
8. Renewal of Share Purchase Mandate
That for the purposes of Sections 76C and 76E of the Companies Act. Cap. 50, the Directors of the Company
be and are hereby authorised:
(a) to make purchases or otherwise acquire issued shares in the capital of the Company from time to time
(whether by way of market purchases or off-market purchases on an equal access scheme) of up to
ten percent (10%) of the total number of issued shares (excluding treasury shares) in the capital of the
Company (as ascertained as at the date of this Annual General Meeting of the Company) at the price of
up to but not exceeding the Maximum Price in accordance with the terms and conditions set out in the
Summary Sheet together with the Notice of Annual General Meeting to shareholders dated 12 April 2011,
and that this mandate shall, unless revoked or varied by the Company in general meeting, continue in
force until (i) the conclusion of the next Annual General Meeting of the Company; (ii) the expiration of the
period within which the next Annual General Meeting of the Company is required by law to be held; (iii)
the time when this mandate is revoked or varied by an ordinary resolution of the shareholders in general
meeting; or (iv) the date on which the purchases or acquisitions of shares by the Company are carried
out to the full extent mandated, whichever is earlier; and
SM SUMMIT HOLDINGS LIMITED 91A N N U A L R E P O R T 2 0 1 0
NOTICE OF ANNUAL GENERAL MEETINGSM SUMMIT HOLDINGS LIMITED(Incorporated in Singapore)
(Co. Reg. No: 198401088W)
AS SPECIAL BUSINESS (CONTINUED)
8. Renewal of Share Purchase Mandate (continued)
(b) to complete and do all such acts and things (including executing such documents as may be required)
as they may consider expedient or necessary to give effect to the transactions contemplated by this
Resolution. [See Explanatory Note (ii)] (Resolution 8)
By Order of the Board
Hazel Chia Luang Chew
Juliana Tan Beng Hwee
Company Secretaries
Singapore, 12 April 2011
Explanatory Notes:
(i) The Ordinary Resolution 7 proposed in item 7 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 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.
(ii) The Ordinary Resolution 8 proposed in item 8 above, if passed, will empower the Directors from the date of
the above Meeting until the next Annual General Meeting to repurchase ordinary shares of the Company by
way of market purchases or off-market purchases of up to ten percent (10%) of the total number of issued
shares (excluding treasury shares) in the capital of the Company at the Maximum Price in accordance with
the terms and conditions set out in the Summary Sheet together with the Notice of Annual General Meeting
to shareholders dated 12 April 2011, the Companies Act, Chapter 50 and the Listing Manual of the Singapore
Exchange Securities Trading Limited.
Notes:
1. A Member entitled to attend and vote at the Annual General Meeting (the “Meeting”) is entitled to appoint
not more than two (2) proxies to attend and vote in his/her stead. A proxy need not be a Member of the
Company.
2. 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.
3. The instrument appointing a proxy must be deposited at the Registered Office of the Company at 45 Ubi Road
1, Summit Building, Singapore 408696 not less than forty-eight (48) hours before the time appointed for holding
the Meeting.
This page has been intentionally left blank.
PROXY FORMSM SUMMIT HOLDINGS LIMITED(Incorporated in Singapore)
(Co. Reg. No: 198401088W)
(Please see notes overleaf before completing this Form)
IMPORTANT:
1. For investors who have used their CPF monies to buy SM Summit
Holdings Limited’s shares, this Annual 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.
3. CPF investors who wish to vote should contact their CPF
Approved Nominees.
*I/We,
of
being a member/members of SM SUMMIT HOLDINGS 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 on Thursday, 28 April 2011 at 10.00 am 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 Against
1 Directors’ Report and Audited Accounts for the year ended 31 December 2010
2 Payment of proposed first and final dividend
3 Re-election of Mak Bang Mui as a Director
4 Re-election of Tang Kay Hwa as a Director
5 Approval of Directors’ fees
6 Re-appointment of PricewaterhouseCoopers LLP as Auditors
7 Share Issue Mandate
8 Renewal of Share Purchase Mandate
*Delete where inapplicable
Dated this day of 2011
Total number of Shares in: No. of Shares
(a) CDP Register
(b) Register of Members
Signature of Shareholder(s)
or, Common Seal of Corporate Shareholder
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.
2. 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.
3. 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.
4. The instrument appointing a proxy or proxies must be deposited at the registered office of the Company at 45 Ubi Road 1, Summit Building, Singapore 408696
not less than forty-eight (48) hours before the time appointed for the Meeting.
5. 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.
6. 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 forty-eight (48) hours before the time appointed for holding the Meeting, as certified by The
Central Depository (Pte) Limited to the Company.
First fold and glue overleaf. Do not staple.
SM SUMMIT HOLDINGS LIMITED
Co. Reg No. 198401088W
45 Ubi Road 1, Summit Building
Singapore 408696
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OUR MISSIONTo maintain leadership in Optical Storage Media manufacturing
by providing a one-stop manufacturing solution
and delivering the highest quality products and services to our customers,
in the most effi cient manner.
CONTENTS16 Corporate Information17 Corporate Governance Report26 Financial Report87 Statistics of Shareholdings89 Notice of Annual General Meeting Proxy Form
04 Chairman’s Statement06 Board of Directors09 Senior Management12 Operations Review14 Five-Year Financial Highlights15 Group Structure
OUR VISIONTo be a leading global provider of data storage media,
serving the needs of the Leisure, Entertainment
and Software Industries.
Singapore
SUMMIT CD MANUFACTURE PTE LTDSUMMIT HI-TECH PTE LTD45 Ubi Road 1, Summit Building
Singapore 408696
Tel: (65) 6745 3288
Fax: (65) 6748 9612
Email: [email protected]
Website: www.smsummit.com.sg
FAIRVISION PTE LTD3NGINE PTE LTD45 Ubi Road 1, Summit Building
Singapore 408696
Tel: (65) 6745 3288
Fax: (65) 6749 7728
Email: [email protected]
Website: www.fairvision.com.sg
China
SHANGHAI HUADE PHOTOELECTRON SCIENCE & TECHNOLOGY CO. LTDB4, B5, 558 Gang Ye Road
Song Jiang District
Shanghai Post Code 201614, China
Tel: (8621) 5785 2857
Fax: (8621) 5785 3545
Email: [email protected]
Website: www.smsummit.com.cn
Australia
SUMMIT TECHNOLOGY AUSTRALIA PTY LTDUnit 28, Slough Business Park, Slough Avenue
Silverwater NSW 2128, Australia
Tel: (612) 8756 4488
Fax: (612) 8719 8750
Email: [email protected]
Website: www.summittechnology.com.au
SUMMIT PRINTING (AUSTRALIA) PTY LTDUnit 51, Slough Business Park, Slough Avenue
Silverwater NSW 2128, Australia
Tel: (612) 8756 4488
Fax: (612) 8756 4468
Email: [email protected]
Website: www.summitprinting.com.au
Indonesia
PT DIGITAL MEDIA TECHNOLOGYMM2100 Industrial Town
Jl. Bali H1-1, Cibitung
Bekasi 17520, Indonesia
Tel: (6221) 8998 3333
Fax: (6221) 8998 3939
Email: [email protected]
Website: www.dmtech.web.id
CORE SUBSIDIARIES AND ASSOCIATE
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Annual Report 2010
ALL THE RIGHT
CONNECTIONS
Co. Reg. No.198401088W
45 Ubi Road 1, Summit Building
Singapore 408696
Tel: (65) 6745 3288
Fax: (65) 6748 9612
Email: [email protected]
Website: www.smsummit.com.sg
SM SUMMIT HOLDINGS LIMITED
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(65) 6578 6522
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