best of class - kinergy ltdannual report 2011 this annual report has been prepared by the company...

Annual Report 2011

This annual report has been prepared by the Company and its contents have been reviewed by the Company’s sponsor, PrimePartners Corporate Finance Pte. Ltd. (the “Sponsor”), for compliance with the relevant rules of the Singapore Exchange Securities Trading Limited (the “SGX-ST”). The Sponsor has not independently verified the contents of this annual report. This annual report has not been examined or approved by the SGX-ST and the SGX-ST assumes no responsibility for the contents of this annual report, including the correctness of any of the statements or opinions made or reports contained in this annual report. The contact person for the Sponsor is Mr Mark Liew, Managing Director, Corporate Finance, at 20 Cecil Street, #21-02 Equity Plaza, Singapore 049705, telephone (65) 6229 8088.

Block 5002, Ang Mo Kio Ave 5, TechPlace II #03-03Singapore 569871 Tel: +65 64810211Fax: +65 64821931 www.kinergy.com.sg

Annua lR e p o r t 2 0 1 1

Best of ClassOf Electronics Manufacturing Services

CONTENTS

01 Corporate Profile

03 Corporate Information

04 Chairman / CEO’s Message

06 Board of Directors

07 Key Management

08 Financial Highlights

09 Financial Contents

84 Statistic of Shareholdings

86 Notice of Annual General Meeting

90 Appendix

Proxy Form

Our VisionOur vision is to be an international, best of class, provider of Electronics Manufacturing Services in the area of high-mix / low volume high technology sub-systems and equipment.

Our MissionOur mission is to build an efficient, market-driven, company providing world-class engineering and manufacturing expertise that adds value to our customers’ total competitiveness.

Printed by: Toppan Security Printing Pte. Ltd.

1 Annual Report 2011

CORPORATE PROFILE

(“Kinergy”) provides Electronics Manufacturing Services (“EMS”) for high-mix / low volume sub-systems and equipment, and also provides Original Equipment Manufacturing (“OEM”) of our proprietary “Kinergy” brand of equipment.

We serve customers from the various electronic industry sectors like Printed Circuit Board Assembly (“PCBA”), surface mount equipment, semiconductor assembly equipment, medical analytical, solar-led, and other industrial equipment.

Our unique blend of multi-disciplinary engineering capabilities and manufacturing services, flexibility and responsiveness, position us as the partner of choice to our customers.

At Kinergy, we pride ourselves in our ability to provide quality, timely and cost-effective manufacturing services and engineering solutions, tailored to support our customers’ needs.

COmPAny OvERvIEwEstablished in 1988, Kinergy is one of the leading high-tech equipment contract manufacturers in the region, synonymous with top quality, best in class and innovative solutions.

Our business activities can be divided into the following two divisions:

Electronics manufacturing Services Division Our EMS division focuses primarily on the “high-mix / low volume” contract design and manufacturing of microprocessor-controlled automated equipment and sub-systems for original equipment manufacturers for both the front-end and back-end processes of the semiconductor industry. Our other sectors

include the medical analytical, solar-led, and other industrial equipment.

Our Products:Original Design and manufacture of Complete machines

Design, manufacture and assemble complete equipment and machines according to customers’ specifications.

Value-added engineering services to improve customers’existing designs and further development of their existing products.

Col laboration with customers through conceptualisation, design and manufacture of new products.

Sub-Systems

Assembly of components manufactured or procured by us into sub-systems, which form critical modules to equipment and machines produced by our customers.

Components

Manufacture of mechanical and electronic components, which are used by our customers in their manufacture of equipment and machines.

Our customers are internationally “Best of Class” players in their respective fields.

Original Equipment manufacturing Division Our OEM division designs and manufactures proprietary equipment such as microprocessor-controlled automated machines under the “Kinergy” brand name for use mainly in the semiconductor assembly and test industry. We also work closely with our customers to customise our proprietary designs in accordance with their requirements. The designs for customised


CORPORATE PROFILE

machines continue to be proprietary to us and may be used in the production of machines for other OEM customers. Our OEM division also fabricates, commissions, and provides maintenance services for our machines.

Our Products and Services:Equipment manufacturing

Design, develop, and manufacture of machines to be used mainly in the semiconductor back-end assembly process. Some of the machines designed and manufactured by us are as follows:

Auto Frame Loader – the machine automatically takes the fragile wire bonded lead-frames from magazines and places them onto a loading frame using a “Scara” robotic arm.

Dry Auto-Buffing Machine – the machine is used to remove excess mold resin bleed and tape residue from the sensitive surface of leadless package lead-frames.

Strip Laser Marking System – machines that automate the process of laser marking of integrated circuits (IC) packages.

High Speed Servo Trim & Form System – the machine automatically delivers lead-frames with encapsulated IC chips into a die-set for trimming and forming of the leads into required shapes for use in PCBAs.

Precision Tooling

Design, develop, fabricate and install precision tools for precision application to the accuracy of two microns, as currently required in the semiconductor industry. The products manufactured can be classified into two categories:

Encapsulation Molds – a variety of ferrous encapsulation molds which are used by our

customers, in conventional molding as well as automold machines, to form the protective encapsulation of an IC chip.

Trim & Form Dies – a variety of ferrous dies used in trimming and forming of encapsulated IC chips by cutting and bending the terminals of the lead-frame to different shapes prior to their assembly onto the printed circuits board (“PCB”).

COmmITmEnT TO QuALITyAt Kinergy, we are committed to providing our customers with high-quality and cost efficient products with timely delivery. This is achieved through the process of continual improvement and commitment of resources to meet and maintain the effectiveness of the quality management system and compliance to applicable product performance safety, statutory and customers’ requirements. We have achieved ISO 9001: 2008 certification in June 1999. In November 2009, the Company was also certified for DS/EN ISO 13485: 2003. Our plant in Nantong is also certified for both ISO9001: 2008 and ISO14000: 2004 quality systems.

Our core competencies in a wide range of engineering disciplines, in particular, precision kinetics, electronic control, material technology and precision tooling, coupled with our ability to leverage on the combined knowledge and skill sets from both our EMS and OEM divisions, is a key differentiating competitive factor for us.

A three-time Enterprise 50-award winner (in 1999, 2000 and 2001) and headquarter in Singapore, Kinergy currently has manufacturing and service facilities in Nantong, Wuhan and Shanghai in the PRC, and in the Philippines. We also have marketing presence in Pennsylvania USA, Thailand, Malaysia, and Philippines.


CORPORATE InFORmATIOn

DirectorsBradley Fraser Kerr (Non-Executive Chairman)

Lim Kuak Choi Leslie (Executive Director / CEO)

Foo Kaw Jee (Non-Executive Director)

Ridwan Gunawan (Independent Director)

Ng Cher Yan (Independent Director)

Ng Tiak Soon (Independent Director)

Toh Hock Ghim (Independent Director) - appointed on 12 March 2012

Audit CommitteeNg Cher Yan - Chairman

Ng Tiak Soon

Ridwan Gunawan

Toh Hock Ghim

Remuneration CommitteeNg Cher Yan - Chairman

Bradley Fraser Kerr

Ng Tiak Soon

Toh Hock Ghim

nominating CommitteeNg Tiak Soon - Chairman

Ng Cher Yan

Ridwan Gunawan

Toh Hock Ghim

Registered OfficeBlk 5002 Ang Mo Kio Ave 5

#03-03 TechPlace II

Singapore 569871

Tel: 64810211 Fax: 64821931

SecretariesGwendolyn Gn Jong Yuh

David Loh Boon Leng

RegistrarBoardroom Corporate & Advisory Services Pte Ltd

50 Raffles Place #32-01

Singapore Land Tower

Singapore 048623

AuditorsErnst & Young LLP

Public Accountants and Certified Public Accountants

One Raffles Quay

North Tower, Level 18

Singapore 048583

Partner-in-charge: Liew Choon Wai (appointed since FY2010)

Principal BankersUnited Overseas Bank Ltd

DBS Bank Ltd

Standard Chartered Bank

Shanghai Pudong Development Bank (Nantong,PRC)

Agricultural Bank of China (Nantong,PRC)

Bank of China (Nantong,PRC)


ChAIRmAn / CEO’S mESSAgE

Leslie Lim Kuak Choi

CEO

Bradley Fraser Kerr

Chairman

“

”DEAR ShAREhOLDERS, On behalf of the Board of Directors, we present the Annual Report and Financial Statements of the Group for the financial year ended 31 December 2011 (“FY2011”).

An Eventful and Challenging year 2011 was an interesting and challenging year. The world witnessed a devastating earthquake and tsunami in Japan. The United States was hit with a credit downgrade by Standard & Poors. European leaders struggled to contain the economic problems initiated by the very weak state of the Greek finances. Central banks inflated their economies while the Chinese economy showed signs of slowing down. All of the foregoing set the stage for a difficult 2012.

Financial & Operational Performance Sales revenue for FY2011 decreased by $8.9 million (5.2%) to $162.7 million as compared to $171.6 million in FY2010. Revenue for the electronics manufacturing services (“EMS”) business division decreased by $13.7 million (8.6%) to $145.1 million in FY2011 (FY2010: $158.8 million), while revenue for the original equipment manufacturing (“OEM”) business

division increased by $4.9 million (38.1%) to $17.6 million in FY2011 (FY2010: $12.8 million).

The Board is pleased to report a profit after tax of $7.2 million for FY2011 – a marginal decrease of $200,000 from $7.4 million reported for FY2010. Comprehensive income for FY2011 increased significantly to $8.7 million (FY2010: $6.3 million) – mainly due to a stronger RMB for its investment in the China subsidiaries.

As at 31 December 2011, net current assets increased to $29.7 million (FY2010: $22.6 million) - mainly due to an increase in inventory at year-end. The shareholders’ equity has increased to $40.8 million as compared to $33.2 million for FY2010. The NTA per ordinary share has also increased to 32 cents as compared to 26 cents in FY2010.

Dividend The Board is pleased to recommend a first and final dividend of one (1) Singapore cent per ordinary share tax-exempt (one tier) payable on or about 23 May 2012, subject to shareholders’ approval at the forthcoming annual general meeting (“AGM”) of the Company to be held on 27 April 2012.

The Board is pleased to report a profit after tax of $7.2 million for FY2011 – a marginal decrease of $200,000 from $7.4 million reported for FY2010.


gearing for growth The strong sales performance of $103.1 million in the first half of FY2011 was not sustained in the second half of FY2011. This slide has continued into 2012 though we are seeing a slight upturn at the bottom of the trough. However, this is no harbinger of an upward trend as Europe and Japan are still depressed, while the BRIC countries and poorer regions like South America and Africa are moving at a very slow pace.

We will take this period to accelerate our efforts in several key areas of operations: intensifying our search for new customers over a broader base of industries, further strengthening our production technology know-how and continuing to secure more value for shareholders.

Appreciation & Acknowledgement Our heartfelt thanks go to all our valued customers, business associates, suppliers and shareholders for their support. We welcome Ambassador Toh Hock Ghim who joined the Board on 12 March 2012. Mr Oded Lendner resigned as an alternate director to Mdm Foo Kaw Jee on 8 March 2012. Mr Ng Cher Yan will

retire from the Board at the forthcoming AGM. On behalf of the Board, we thank Cher Yan and Oded for their past contributions. We also record our appreciation to our fellow Directors for their invaluable contribution, counsel and guidance.

We would also like to thank our management and staff for their dedication and loyalty for another challenging year. We look forward to everyone’s continued support as we march on towards a brighter future.

Leslie Lim Kuak Choi

CEO

Bradley Fraser Kerr

Chairman


BOARD OF DIRECTORS

[LtoR: Fu Weigang, Tay Kim Kah, Ng Tiak Soon, Ng Cher Yan, Leslie Lim, Bradley Kerr, Ridwan Gunawan, Oded Lendner, Tong Hua, David Loh]

Bradley Fraser Kerr Chairman – non-Executive Director, member of RCMr Kerr has been a Board Member since 2000 and was nominated to be the Non-Executive Chairman in 2006. He holds a BA from the Rutgers University and a MBA from the University of Tennessee. He previously worked with Citibank and The Chase Manhattan Bank. He represents Unitras (H.K.) Ltd, which is a controlling shareholder of the Company.

Leslie Lim Kuak Choi CEO – Executive DirectorMr Lim is a co-founder of the Company, and has been a Board Member since 1988. He was a teacher with the Ministry of Education, and has attended the Stanford Executive Program. He is an honorary life chairman of Singapore Precision Engineering & Tools Association (SPETA), and a member of the China Network. He was commended for his meritorious service rendered to the National Productivity Board as a Board Member. Mr Lim and his wife Mdm Foo Kaw Jee are the controlling shareholders of the Company.

Foo Kaw Jee non-Executive DirectorMdm Foo is a co-founder of the Company and has been a Board Member since 1988. She was a teacher with the Ministry of Education. She previously sat on the board of a few private companies.

Ridwan gunawan Independent Director, member of AC, nCPak Gunawan has been a Board Member since 2000. He has worked in PT Astra Group from 1972 to 2000, where his last position was Deputy CEO of the Federal Group of Companies; and remained as an advisor till 2005. He holds a M.Sc. from the Institut of Teknologi Bandung.

ng Cher yan Independent Director, Chairman of AC, RC, member of nCMr Ng was appointed as an Independent Director in October 2006. He holds a B.Acc. from the National University of Singapore and is a Fellow member of the Institute of Certified Public Accountants of Singapore and a member of the Institute of Chartered Accountants of Australia. He runs a public accounting firm and sits on the board of other listed companies.

ng Tiak Soon Independent Director, Chairman of nC, member of AC, RCMr Ng was appointed as an Independent Director in December 2006. He is a Fellow member of the Association of Chartered Certified Accountants (UK), and also of the Institute of Certified Public Accountants of Singapore, and a member of the Singapore Institute of Directors. He is a retired senior partner of Ernst & Young and now sits on the board of other listed companies. He is currently providing consultancy services on a part-time basis.

Toh hock ghimIndependent Director, member of AC, RC, nCAmbassador Toh was appointed as an Independent Director to the Board on 12 March 2012. He has been a Senior Advisor to the Ministry of Foreign Affairs since 2007. Ambassador Toh joined the Ministry of Foreign Affairs of Singapore since 1966 with diplomatic postings to Malaysia, Philippines, Thailand, Vietnam and the HongKong SAR and Macau SAR. He retired form the foreign services in 2007. He currently sits on the board of several private and listed companies.


Oded Lendner President – Kinergy (u.S.) Ltd.Mr Lendner joined the Group in August 2008. Prior to this, he was the COO and Director of Antares Advanced Test Technologies Inc, and has worked extensively in senior management positions within Kulicke & Soffa Inc. He holds a BS in Industrial Engineering and Management from the Technion Israel Institute of Technology.

Joseph Lim hon mann vP – Business Development groupgeneral manager, nantongMr Lim was appointed as Vice President – Business Development Group since 2002. He has been with the Company since 1995 and has worked up the ranks, commencing as an engineer. In March 2011, he was also appointed to oversee the Nantong operations as the General Manager. He graduated from the Ohio Northern University with a B.Sc. (Mech. Engrg).

David Loh Boon Leng CFO / Company SecretaryvP – Finance, hR, general AdminMr Loh has been with the Company since 2000. He was formerly the General Manager at Sunningdale Plastic and the CFO at Foseco-Fosroc Singapore. He is a Fellow member of the Institute of Certified Public Accountants of Singapore. He holds a B.Acc. (University of Singapore), a MBA (University of Strathclyde, Glasgow) and a graduate diploma from the Institute of Chartered Secretaries & Admin.(UK).

Cham Toon how vP – OEm Division, head of R&DMr Cham first joined the company in 1988 from Texas Instruments to head the Research and Development Department. He holds a Bachelor of Engineering (Mechanical) from the University of Singapore.

gerry Ferrer Abelanes vP – EmS manufacturingMr Abelanes first joined the company in 1991 from Texas Instruments (Philippines) Inc. as an engineer. He holds a B.Sc. in Electronics and Communication Engineering from St. Louis University in the Philippines.

Bernard TsaivP – EmS OperationsMr Tsai joined the Company in May 2010 to head the Operations of certain EMS business units. Mr Tsai has spent many years in the semiconductor-electronic industry, where he held senior positions in Hewlett Packard Singapore and Venture Manufacturing. He graduated from the MIT (Cambridge, MA) with a B.Sc. in Electrical Engineering, and a B.Sc in Physics.

KEy mAnAgEmEnT


FInAnCIAL hIghLIghTS

FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11

Revenue (S$ Million) Shareholders’ Equity (S$ Million)

200

180

160

140

120

100

80

60

40

20

0

40

36

30

25

20

15

5

0

76.6

85.187.9

27.1

24.0

20.1

103

36.2

58.9

171.6162.7

30.2

33.2

40.8

62.4

26.9

S$’000 Fy 2004Fy

2005Fy

2006Fy

2007Fy

2008Fy

2009Fy

2010Fy

2011

Revenue 87,906 85,092 76,564 103,008 58,854 62,417 171,555 162,695

Profit/ (loss) before taxation 4,064 3,990 4,273 4,843 (5,560) (2,948) 8,183 8,041

Profit/ (loss) attributable to shareholders

4,085 3,566 3,562 4,502 (5,836) (3,064) 7,411 7,182

EBITDA 6,983 6,960 6,652 7,058 (2,920) (538) 11,279 10,851

Earnings/ (loss) Per Share (cents) 4.3 3.8 3.75 3.63 (4.6) (2.4) 5.8 5.6

nTA Per Share (cents) 21.2 25.3 28.5 29.2 23.6 21.0 25.9 31.9


FINANCIAL CONTENTS

10 Report on Corporate Governance

21 Directors’ Report

26 Statement by Directors

27 Independent Auditors’ Report

28 Consolidated Statement of Comprehensive Income

29 Balance Sheets

30 Statements of Changes in Equity

32 Consolidated Statement of Cash Flow

33 Notes to the Financial Statements

90 Appendix 1

SPS1203002_Kinergy().indb 9 3/29/2012 7:14:47 PM


REPORT ON CORPORATE GOVERNANCE

Kinergy Ltd (the “Company”) was admitted to the Official List of the Singapore Exchange Securities Trading Limited (the “SGX-ST”) Dealing and Automated Dealing System (“SESDAQ”) on 15 February 2007. SESDAQ has been renamed “CATALIST” – a sponsor-supervised listing platform. The Company is committed to maintaining a high standard of corporate governance in complying with the Code of Corporate Governance 2005 (the “Code”). Good corporate governance establishes and maintains an ethical environment, which strives to enhance the interests of all shareholders of the Company.

In compliance with Rule 1204(21) of the Listing Manual (Section B: Rules of Catalist) of the SGX-ST (“Catalist Rules”), there were no non-sponsor fees paid to the Company’s previous sponsor, Shooklin Advisory Services Pte Ltd and the Company’s current sponsor, PrimePartners Corporate Finance Pte Ltd for the financial year ended 31 December (“FY”) 2011.

(A) BOARD COMPOSITION AND GUIDANCE

Principle 1: The Board’s Conduct of its Affairs

The Board’s role is to:

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

(b) establish a framework of prudent and effective controls which enables risk to be assessed and managed, including safeguarding of shareholders’ interests and the Group’s assets;

(c) review management performance;

(d) identify the key stakeholder groups and recognise that their perceptions affect the Company’s reputation;

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

(f) consider sustainability issues, e.g. environmental and social factors, as part of its strategic formulation.

To facilitate effective management, certain functions have been delegated to various board of directors (the “Board”) committees, namely the Nominating Committee (the “NC”), the Remuneration Committee (the “RC”) and the Audit Committee (the “AC”), each of which has its own written terms of reference and whose actions are reported to and monitored by the Board.

The Company has adopted internal guidelines setting forth matters that require the Board’s approval. The types of material transactions that require the Board’s approval under such guidelines are listed below:

a) approval of half-yearly results announcement;

b) approval of full-year results and accounts;

c) declaration of interim dividends (if any) and proposal of final dividends (if any);

d) convening of shareholders’ meetings;

e) approval of corporate strategy;



REPORT ON CORPORATE GOVERNANCE (CONT’D)

f) authorisation of merger and acquisition transactions; and

g) authorisation of major transactions.

The Board met regularly during FY2011. The number of Board and Board committees meetings held, as well as the attendance of each Board member at those meetings are disclosed below.

Name of Director/Attendance Record

Board of Directors

Audit Committee

Remuneration Committee

Nominating Committee

Mr Bradley Fraser Kerr 5/5 – 1/1 –

Mr Lim Kuak Choi Leslie 5/5 – – –

Mdm Foo Kaw Jee 3/5 – – –(alt. Oded Lendner1)

Mr Ridwan Gunawan 4/5 2/2 – 2/2

Mr Ng Cher Yan3 5/5 2/2 1/1 2/2

Mr Ng Tiak Soon 5/5 2/2 1/1 2/2

Ambassador Toh Hock Ghim2 – – – –

Notes:

1. Mr Oded Lendner had resigned from the Board on 8 March 2012.

2. Ambassador Toh Hock Ghim was appointed to the Board on 12 March 2012.

3. Mr Ng Cher Yan is retiring and is not seeking re-election at the Company’s forthcoming annual general

meeting (“AGM”).

The Company’s management (the “Management”) conducted briefings and orientation programmes to familiarise newly appointed Director with the various businesses, operations and processes of the Group.

Principle 2: Board Composition

As at the date of this annual report, the Board comprises the following members:

Executive Director Mr Leslie Lim Kuak Choi (CEO)Non-Executive Directors Mr Bradley Fraser Kerr (Chairman) Mdm Foo Kaw JeeIndependent Directors Mr Ridwan Gunawan Mr Ng Cher Yan Mr Ng Tiak Soon Ambassador Toh Hock Ghim

The NC reviews the independence of all directors annually. The requirement of the Code that at least one-third of the Board comprises Independent Directors is satisfied. The Independent Directors have confirmed that they do not have any relationship with the company or its related companies or its officers that could interfere, or be reasonably perceived to interfere, with the exercise of the Directors’ independent business judgement with a view to the best interest of the Company. The NC has reviewed and determined that the said Directors are independent.




The Board consists of high calibre members with a wealth of knowledge, expertise and experience. The Board contributes valuable direction and insight, drawing from their vast experience in matters relating to accounting, finance, legal, business and general corporate matters.

The Board taking into account the nature and scope of the Group’s operations considers its current Board size to be adequate for effective decision-making.

Non-Executive Directors constructively contributed and help develop proposals on strategy, and review the performance of management in meeting agreed goals and objectives and monitor the reporting of performance.

Principle 3: Chairman & Chief Executive Officer

The role of the Chairman and the CEO, in the Company, is assumed by different individuals. The Chairman, Mr Bradley Fraser Kerr, is a Non-Executive Director while the CEO, Mr Lim Kuak Choi Leslie, is an Executive Director. There is a clear division of responsibilities between the Chairman and the CEO, which ensures a balance of power and authority at the top of the Company. The Chairman and the CEO are not related to each other.

The Chairman bears the primary responsibility for the workings of the Board and ensuring its effective functions. He also ensures that the Board meetings are held as and when necessary; that Directors receive accurate and timely information; encourages constructive relations between the Management and the Board, and within the members of the Board; and ensures effective communication with shareholders.

The CEO is primarily responsible for the operations and performance of the Group; charting of corporate directions and strategies, including overseeing its financial planning and investment activities; and reporting to the Board on the Group’s operations and performance.

Principle 4: Board Membership/Nominating Committee (the “NC“)

The NC comprises:

Mr Ng Tiak Soon – Chairman/Independent DirectorMr Ng Cher Yan – Independent DirectorMr Ridwan Gunawan – Independent DirectorAmbassador Toh Hock Ghim – Independent Director

The NC, which has written terms of reference, is responsible for (i) re-nomination of directors having regard to the director’s contribution and performance, (ii) recommending the appointment of a new director, if any; (iii) determining annually whether or not a director is independent; and (iv) deciding whether or not a director is able to and has been adequately carrying out his duties as a director.

Where a vacancy arises under any circumstances, or where it is considered that the Board would benefit from the services of a new director with particular skills, the NC in consultation with the Board, determines the selection criteria and selects candidates with the appropriate expertise and experience for the position.




The NC has decided on how the Board’s performance is to be evaluated with agreed objectives, which were duly approved by the Board. The Board has implemented a process to assess the effectiveness of the Board as a whole, and for assessing the contribution by each individual director to the effectiveness of the Board. Each member of the NC shall abstain from voting on any resolutions in respect of the assessment of his performance or re-nomination as a director.

Key information on the Directors is set out below:

Name of director

Board Committee

as chairman or

member

Directorship:

Date of first

appointment/date

of last election

Board appointment

whether executive

or non-executive

Due for re-election

at the forthcoming

AGM

Mr Bradley Fraser Kerr RC – Member 1 September 2000/

29 April 2009

Non-executive Retirement by rotation

(Article 107)

Mr Lim Kuak Choi

Leslie

– 4 January 1988/

29 April 2011

CEO –

Mdm Foo Kaw Jee – 4 January 1988/

27 April 2010

Non-executive –

Mr Ridwan Gunawan AC – Member

NC – Member

1 September 2000/

29 April 2011

Non-executive/

Independent

–

Mr Ng Cher Yan AC – Chairman

RC – Chairman

NC – Member

20 October 2006/

29 April 2009

Non-executive/

Independent

Retirement by rotation

(Article 107)

Mr Ng Tiak Soon NC – Chairman

AC – Member

RC – Member

29 December 2006/

27 April 2010

Non-executive/

Independent

–

Ambassador Toh Hock

Ghim

AC – Member

RC – Member

NC – Member

12 March 2012 Non-executive/

Independent

Retirement by rotation

(Article 117)

The NC has recommended to the Board that Mr Bradley Fraser Kerr and Ambassador Toh Hock Ghim be nominated for re-election at the forthcoming AGM. Mr Ng Cher Yan is retiring and is not seeking re-election as a Director. Mr Bradley Kerr, upon re-election will remain as a member of the RC; and Ambassador Toh, upon re-election will remain as a member of the AC, RC and NC and will be considered independent for the purposes of Rule 704(7) of the Catalist Rules. In making the recommendation, the NC had considered the Directors’ overall contributions and performance.

Principle 5: Board Performance

During FY2011, the NC had conducted an assessment of the effectiveness and performance of the Board as a whole and of each individual Director. This was based on the assessment parameters that had been adopted by the Board. The assessment parameters include the size of the Board, the proportion of non-executive directors in relation to executive directors, the skill or expertise represented, and peer evaluation. The findings of the NC were subsequently presented to the Board for further review.

The NC is of the view that the performance of the Board as a whole was satisfactory. Although some of the Board members have other board representations, the NC is satisfied that they had provided sufficient time and attention to the Group.




Principle 6: Access to Information

Board members are provided with board papers for proposals and are given regular management information prior to each Board meeting and at such other times as necessary. Information provided to the Board includes background information relating to the matters to be brought before the Board. Relevant information on material events and transactions are circulated to Directors as and when they arise. The Board also receives regular reports pertaining to the operational and financial performance of the Group. The Board members have separate and independent access to the Management as well as the Company Secretary at all times. Minutes of the Board and various Board Committees are circulated to the Board for information.

Where the Directors, either individually or collectively, in the furtherance of their duties, require professional advice, the Management will assist them in obtaining independent professional advice at the Company’s expense.

(B) REMUNERATION MATTERS

Principle 7: Remuneration Committee (the “RC“)

The RC comprises:

Mr Ng Cher Yan – Chairman/Independent DirectorMr Ng Tiak Soon – Independent DirectorMr Bradley Fraser Kerr – Non-Executive DirectorAmbassador Toh Hock Ghim – Independent Director

The RC is responsible for setting up cash and long-term incentive compensation for the CEO and certain key employees. As part of its responsibilities, the RC also review the annual remuneration and fees of each of the directors and employee who is related to the Company’s substantial shareholders and make recommendations, in consultation with the Chairman of the Board, to the entire Board for approval.

Principle 8: Level and Mix of Remuneration

Non-Executive Directors do not have service contracts with the Company and their terms are specified in the Articles of Association of the Company which contain retirement and re-election provisions. Non-Executive Directors are paid directors’ fees subject to the approval of the Company’s Shareholders at the forthcoming AGM. Our Executive Director does not receive director’s fees.

The CEO has a service contract with the Company, which can be terminated by either party giving three months’ notice. The remuneration packages of the Executive Director and other key executives (including bonuses) are tied to the performance of the Group, the relevant unit or department and the individual’s performance.




Principle 9: Disclosure on Remuneration

The breakdown of the remuneration of the Directors for FY2011 is set out below:

Remuneration Band Fees Salary BonusOther

Benefits2 Total% % % % %

(Between $750,001-$1000,000)

Mr Oded Lendner1 – 12.4 – 87.6 100

(Between $250,001 – $500,000)

Mr Leslie Lim Kuak Choi – 66.2 29.9 3.9 100

(Below $250,000)

Mr Bradley Fraser Kerr 100 – – – 100

Mdm Foo Kaw Jee 100 – – – 100

Mr Ridwan Gunawan 100 – – – 100

Mr Ng Cher Yan 100 – – – 100

Mr Ng Tiak Soon 100 – – – 100

Ambassador Toh Hock Ghim3 – – – – –

Notes:

1. Resigned as alternate director to Mdm Foo Kaw Jee on 8 March 2012.

2. Other benefits refer to benefits-in-kind such as commissions, car, housing allowances, club membership,

etc made available to the Directors as appropriate.

3. Ambassador Toh was appointed to the Board on 12 March 2012.

Senior Management Staff

The remuneration of the top five senior executives, who are not directors of the Company, is shown in the following bands:

Below $250,000 Mr Lim Hon Mann Joseph *Mr Loh Boon Leng DavidMr Cham Toon HowMr Gerry Ferrer AbelanesMr Bernard Tsai

* Joseph Lim is the son of Mr Leslie Lim Kuak Choi and Mdm Foo Kaw Jee, who are the Executive Director

and Non-Executive Director of the Company respectively.

Save as disclosed above, there are no employees who are immediate family members of a Director or the CEO, and whose remuneration exceeds $150,000 during FY2011.




Share Option Scheme & Performance Share Plan

The Company has an Employee Share Option Scheme (the “ESOS”) and a Performance Share Plan Scheme (the “PSP”). These schemes were approved and adopted by the shareholders at EGM held on 8 August 2008 and 29 April 2011 respectively. The purpose of the ESOS and PSP is to reward, retain and motivate employees, directors, controlling shareholders and their associate to perform excellently and to participate in the equity of the Company. Unlike the ESOS whereby participants are required to pay the exercise price of the options, the PSP allows the Company to award fully paid shares to deserving participants.

The ESOS was granted on (a) 30 April 2010, and (b) 29 April 2011, to participating staffs, independent directors and an associate. Exercise of option (a) shall be exercisable by a participant on and after 1 May 2011 and will expire on 30 April 2015, and the exercise of option (b) shall be exercisable on and after 30 April 2012 and will expire on 29 April 2016. The details of the ESOS and the PSP are disclosed in the Directors’ Report.

(C) ACCOUNTABILITY AND AUDIT

Principle 10: Accountability and Audit

The Company announces its financial results on a half-yearly basis and other material information via the SGXNET in accordance with the requirements of the Catalist Rules.

Other relevant disclosure documents were also made available to the Board prior to meetings and on an on-going basis.

Principle 11: Audit Committee (the “AC”)Principle 12: Internal Control

The AC comprises:

Mr Ng Cher Yan – Chairman/Independent DirectorMr Ng Tiak Soon – Independent DirectorMr Ridwan Gunawan – Independent DirectorAmbassador Toh Hock Ghim – Independent Director

The AC meets periodically to perform the following functions:–

• reviews the audit plans of the internal and external auditors of the Group, and reviews the internal auditors’ evaluation of the adequacy of the Group’s system of internal accounting controls and the assistance given by the Management to the external and internal auditors;

• reviews the half year and annual financial statements and the auditors’ report on the annual financial statements of the Company before submission to the Board for approval;

• reviews effectiveness of the Group’s material internal controls, including financial, operational and compliance controls and risk management;

• meets with the external auditors, other committees, and the Management in separate executive sessions to discuss any matters that these groups believe should be discussed privately with the AC;




• reviews legal and regulatory matters that may have a material impact on the financial statements, related compliance policies and programmes and any reports received from regulators;

• reviews the cost effectiveness and the independence and objectivity of the external auditors;

• reviews the nature and extent of non-audit services provided by the external auditors;

• recommends to the Board the external auditors to be nominated, approves the compensation of the external auditors, and reviews the scope and results of the audit;

• reports actions and minutes of the AC to the Board with such recommendations as the AC considers appropriate; and

• reviews interested person transactions in accordance with the requirements of the Catalist Rules.

Apart from duties listed above, the AC also commissions and reviews the findings of internal investigations into matters where there is any suspected fraud or irregularity, or failure of internal controls or infringement of a Singapore law, rule or regulation which has or is likely to have a material impact on the Group’s operating results and/or financial position. The AC has reasonable resources to enable it to discharge its functions properly.

Ernst & Young LLP is the auditor of the Company. In order to issue an opinion on the Group’s financial statements, Ernst & Young LLP also conducts procedures on the financials of the Group significant subsidiaries in the Peoples’ Republic of China (“PRC”). All the overseas subsidiaries are subjected to its own local audit to satisfy their own local statutory reporting purposes. The Board and the AC are satisfied that this additional work done by Ernst & Young LLP would ensure the standard and effectiveness of the annual audit of the Group and the Company, and that Rules 712 and 715 of the Catalist Rules have been fully complied with.

The AC has reviewed the annual fees of S$138,000 paid for statutory audit, and the fees of S$19,000 paid for non-audit services (mainly tax advisory services to Ernst & Young LLP). The AC is of the opinion that the provision of such non-audit services does not affect their independence and objectivity of the external auditors. The AC has recommended the re-appointment of Ernst & Young LLP as external auditors at the forthcoming AGM.

In the event that a member of the AC is interested in any matter being considered by the AC, he will abstain from reviewing that particular transaction or voting on that particular transaction.

The Board is responsible for the governance of risk. The Board ensures that the Management maintains a sound system of risk management and internal controls to safeguard shareholders’ interests and the company’s assets, and has determined the nature and extent of the significant risk which the Board is willing to take in achieving its strategic objectives.

The Company’s external auditors have conducted an annual review of the Company and its significant subsidiaries in the PRC, in accordance with their audit plans and solely for the purpose of the audit of the financial statements, and the effectiveness and adequacy of the Company’s material internal accounting controls system. Any material non-compliance or failures in internal accounting controls and recommendations for improvement, which they have noted in the process of audit was reported to the Management and the AC.




The Board has conducted its annual review, and has received assurance from the CEO, the CFO and with the concurrence of the AC that, in the absence of any evidence to the contrary, the system of internal controls and risk management systems maintained by the Management that were in place throughout the financial year and up to the date of this annual report, are adequate to address the Group’s financial, operational and compliance risks and to meet the needs of the Group in its current business environment. The Board is satisfied that the Management has provided reasonable, but not absolute, assurance against material financial misstatement or loss, including the safeguarding of assets, the maintenance of proper accounting records, the reliability of financial information, compliance with appropriate legislation, regulation and best practices, and the identification and containment of business risk. The Board notes that no system of risk management and internal control systems could provide absolute assurance against the occurrence of material errors, poor judgment in decision-making, human error, losses, fraud or other irregularities.

Whistle blowing Policy

The Company currently has in place a process whereby all staffs are reminded at regular intervals at each year to observe and conduct themselves to a high standard of business ethics, honesty and integrity. An employee is encouraged to raise any concern of any misconduct or suspected breach of any law by any staff through the appropriate channels. Broadly, the channels available are:– (a) to the Group CEO and/or divisional head for any alleged misconduct of any staff whose grade is below that of a department head; or (b) to the Chairman of the Board and/or the AC for any alleged misconduct of any staff whose grade is above that of a department head. The Company expects to codify this whistle blowing policy in 2012.

Risk Management

The main operational risks of the Group include the political and socio-economic risks of operating in the PRC, the high dependence on our valued suppliers and subcontractors, loss of any major customers, the cyclical nature of the industries we served, and also loss of any key personnel. In this regard, the Group is particularly dependent upon a single customer, which accounted for 54.0% and 63.7% of the Group’s total revenue for FY2011 and FY2010 respectively.

The main financial risks are interest rate hike, credit risk, and volatility of the foreign exchange rate. In this regard, the Group is particularly exposed to the fluctuation of the US$ which accounted for 95.7% of the Group’s total revenue billings for both FY2011 and FY2010.

The Management reviews its key risks constantly and also ensuring that appropriate measures are put in place to address these specific risks.

Principle 13: Establishment of Internal Audit (“IA”)

Since its listing in February 2007, the IA function has been outsourced to external accounting firms on a contractual basis. Such firms have included PKF-CAP Risk Consulting Pte Ltd and KPMG LLP. For FY2011, the Company recruited a staff for internal auditing work. The findings of his assignment were submitted to, and reviewed by both the AC and the Board. The Board is satisfied that the Company has in place an adequate system of internal controls.

The internal audit function primarily reports to the Chairman of AC and also administratively to the CEO. Each year, the AC reviews the internal audit plan and their evaluation of the systems of internal controls, their audit findings and the management’s responses to those finding. The AC is satisfied that the internal audit function is adequately resourced, to either external accounting firms or in-house, and that it has maintained its independence from the activities it audits.




(D) COMMUNICATION WITH SHAREHOLDERS

Principles 14, 15 & 16: Shareholder RightsCommunications with ShareholdersConduct of Shareholder Meetings

The Company released all its announcements on the SGXNET.

The Board is mindful of the obligation to provide regular, effective and fair communication with shareholders. Information is communicated to the shareholders on a timely basis. Where inadvertent disclosure has been made to a select group, the Company has made the same disclosure publicly to all others as soon as practicable. The Board provides shareholders with an assessment of the Company’s performance, position and prospects on a half-yearly basis via announcements of results and other ad-hoc announcements as required by the SGX-ST.

All shareholders are encouraged to attend the AGM to ensure a greater level of shareholder participation and for them to be kept up to date as to the Company’s strategies and goals. The Board views the AGM as the principal forum for dialogue with shareholders, being an opportunity for shareholders to raise issues and ask the Directors or the Management questions regarding the Company and its operations.

The Chairmen of the various Board committees will be available at the AGM to answer questions relating to the work of their respective Board committees. The external auditors will also be present to address shareholders’ queries about the conduct of the audit and the preparation and content of the auditors’ report. The Company ensures that there are separate resolutions at general meetings on each distinct issue.

The Company ensures that there are separate resolutions at general meetings on each distinct issue.

(E) DEALING WITH SECURITIES

The Company has issued a Policy on Share Dealings to the Board and key employees of the Company who have access to price-sensitive, financial and confidential information. The Board and key employees of the Company are not permitted to deal in the Company’s shares during the periods commencing one month before the announcement of the Group’s annual or half-yearly results and ending on the date of the announcement of such results, or when they are in possession of unpublished price-sensitive information on the Group. The Board and key employees of the Company are also discouraged from dealing in the Company’s shares on short-term considerations.

In addition, the Company has reminded its Directors and key employees of the Company on the offence of insider trading under the Securities and Futures Act, Chapter 289 of Singapore, when they are in possession of unpublished material price-sensitive information in relation to the Company’s shares.

(F) INTERESTED PERSON TRANSACTIONS

The Company has established procedures whereby all transactions with interested persons are reviewed by the AC. This is to ensure that the transactions are carried out at arm’s length on normal commercial terms and will not be prejudicial to the interests of the Company and its minority shareholders. The AC would ensure that the provisions of Chapter 9 of the Catalist Rules and internal procedures have been complied with. For FY2011, there were no transactions with any interested person.




(G) MATERIAL CONTRACTS

No material contracts were entered between the Company or any of its subsidiaries with any Director or controlling shareholders of the Company during FY2011.

(H) TREASURY SHARES

The number of treasury shares as at 31 December 2011 is 114,000 shares (FY2010: 200,000).



DIRECTORS’ REPORT

The directors are pleased to present their report to the members together with the audited consolidated financial statements of Kinergy Ltd. (the “Company”) and its subsidiary companies (collectively, the “Group”) and the balance sheet and statement of changes in equity of the Company for the financial year ended 31 December 2011.

DIRECTORS

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

Bradley Fraser Kerr (Non-Executive Chairman)Lim Kuak Choi Leslie (Chief Executive Officer)Foo Kaw JeeRidwan GunawanNg Cher YanNg Tiak SoonToh Hock Ghim (Appointed on 12 March 2012)

In accordance with Article 107 and 117 of the Company’s Articles of Association, Mr Bradley Fraser Kerr and Ambassador Toh Hock Ghim retire and, being eligible, offer themselves for re-election.

ARRANGEMENTS TO ENABLE DIRECTORS TO ACQUIRE SHARES AND DEBENTURES

Except as described in paragraph below, neither at the end of the financial year, nor at any time during the financial year was the Company a party to any arrangements whose objects are, or one of whose objects is, to enable the directors of the Company to acquire benefits by means of the acquisition of shares or debentures of the Company or any other body corporate.

DIRECTORS’ INTERESTS IN SHARES AND DEBENTURES

The following directors, who held office at the end of the financial year, had, according to the register of directors’ shareholdings required to be kept under Section 164 of the Singapore Companies Act, Cap. 50, an interest in shares and share options of the Company and related corporations (other than wholly-owned subsidiaries) as stated below:

Direct interest Deemed interestAt beginning At end At beginning At end

Name of directors of the year of the year of the year of the year

The CompanyKinergy Ltd.(Ordinary shares)

Bradley Fraser Kerr – – 30,063,287 30,063,287Lim Kuak Choi Leslie 57,992,788 57,992,788 6,983,925 6,983,925Foo Kaw Jee 6,983,925 6,983,925 57,992,788 57,992,788Ridwan Gunawan 100,000 100,000 – –Ng Cher Yan 100,000 100,000 – –Ng Tiak Soon 100,000 100,000 – –

(Share options)

Ridwan Gunawan 82,000 132,000 – –Ng Cher Yan 82,000 132,000 – –Ng Tiak Soon 82,000 132,000 – –

Kinergy Philippines Inc(Ordinary shares of Peso 1,000)

Lim Kuak Choi Leslie * 1 1 – –

* This share is held in trust by the director on behalf of Kinergy Ltd.



DIRECTORS’ REPORT (CONT’D)

DIRECTORS’ INTERESTS IN SHARES AND DEBENTURES (CONT’D)

There was no change in any of the above-mentioned interests in the Company between the end of the financial year and 21 January 2012.

Pursuant to Section 7 of the Companies Act, Cap. 50, Mr Lim Kuak Choi Leslie and Mr Bradley Fraser Kerr, with shareholdings as above are deemed to have an interest in the issued share capital of the Company’s wholly-owned subsidiary companies.

Except as disclosed in this report, no director who held office at the end of the financial year had interests in shares, share options of the Company, or of related corporations, either at the beginning of the financial year, or at the end of the financial year.

DIRECTORS’ CONTRACTUAL BENEFITS

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

SHARE OPTION SCHEME AND PERFORMANCE SHARE PLAN

The Company has an Employee Share Option Scheme (the “ESOS”) and a Performance Share Plan Scheme (the “PSP”). These schemes were approved and adopted by the shareholders at 2 Extraordinary General Meetings held on 8 August 2008 and 29 April 2011 respectively. The purpose of the ESOS is to provide an opportunity for employees, directors (including non-executive and independent directors), controlling shareholders of the Company and their associate to participate in the equity of the Company. The PSP is to complement the existing ESOS and to increase the Company’s flexibility and effectiveness in its continuing efforts to reward, retain and motivate the employees, directors, controlling shareholders of the Company and their associate to achieve increased performance. Unlike the ESOS whereby the participants are required to pay the exercise price of the share options, the PSP allows the Company to reward the employees, directors, controlling shareholders of the Company and their associate with fully paid shares. These schemes are administered by the Remuneration Committee, namely:

Ng Cher Yan (Chairman)Bradley Fraser KerrNg Tiak SoonToh Hock Ghim

The aggregate number of shares over which options may be granted pursuant to the ESOS and the PSP shall not exceed fifteen per cent (15%) of the total number of issued shares (excluding the treasury shares).

The ESOS and the PSP shall continue to be in operation at the discretion of the Remuneration Committee, subject to a maximum duration of ten (10) years commencing from its adoption by shareholders at the EGM, provided always that the ESOS and the PSP may continue beyond the above stipulated period with the approval of the shareholders by ordinary resolution in general meeting and of any relevant authorities which may then be required.




SHARE OPTION SCHEME AND PERFORMANCE SHARE PLAN (CONT’D)

Details of the options to subscribe for ordinary shares of the Company pursuant to the ESOS as at 31 December 2011 are as follows:

Expiry Date Exercise Price (cents) (SGD) Number of options

30 April 2015 9.2 2,089,00029 April 2016 14.9 2,039,000

Total 4,128,000

In 2010, the Company granted 2,341,000 share options to certain directors and key employees under the ESOS. These options are exercisable on and after 1 May 2011, and subject to the rules laid down in the ESOS. In 2011, 252,000 (2010: Nil) share options relating to this grant were exercised. Accordingly, the number of unexercised options is 2,089,000 (2010: 2,341,000).

In 2011, the Company granted additional 2,039,000 share options to certain directors, employees and the associate of controlling shareholders of the Company under the ESOS. These options are exercisable on and after 30 April 2012, and subject to the rules laid down in the ESOS. In 2011, no options relating to this grant were exercised.

Details of the options to subscribe for ordinary shares of the Company granted to directors and an associate of the controlling shareholders of the Company pursuant to the ESOS are as follows:

Name of participants

Options granted during financial year

Aggregate options

granted since commencement

of the ESOS to end of

financial year

Aggregate options

exercised since commencement

of the ESOS to end of

financial year

Aggregate options

outstanding as at end of

financial year

Ridwan Gunawan 50,000 132,000 – 132,000Ng Cher Yan 50,000 132,000 – 132,000Ng Tiak Soon 50,000 132,000 – 132,000Oded Lendner 50,000 145,000 – 145,000Lim Hon Mann Joseph 250,000 250,000 – 250,000

Total 450,000 (1) 791,000 – 791,000

(1) These options are exercisable between the periods from 30 April 2012 to 29 April 2016 at the exercise price

of 14.9 cents (SGD), if the vesting conditions are met.

Since the commencement of the ESOS and the PSP till the end of the financial year:

• No options have been granted to the controlling shareholders of the Company;

• No participant other than the above-named directors has received 5% or more of the total options available under the ESOS;

• No options have been granted at a discount; and

• No shares have been awarded under the PSP.




RESIGNATION AND APPOINTMENT OF CONTINUING SPONSOR (“SPONSOR”)

The Board of Directors of Kinergy Ltd. (the “Company”) has appointed PrimePartners Corporate Finance Pte. Ltd. (“PPCF”) as its Company’s Sponsor with effect from 1 November 2011. The previous Sponsor, Shooklin Advisory Services Pte Ltd (“SLAS”), terminated its appointment as continuing sponsor because SLAS has ceased its business in acting as a continuing sponsor.

AUDIT COMMITTEE

The Audit Committee (the “AC”) carried out its function in accordance with Section 201B(5) of the Singapore Companies Act, Cap. 50, including the following:

• Reviewed the audit plans of the internal and external auditors of the Company, and reviewed the internal auditors’ evaluation of the adequacy of the Company’s system of internal accounting controls and the assistance given by the Company’s management to the external and internal auditors;

• Reviewed the half yearly and annual financial statements and the auditors’ report on the annual financial statements of the Company before their submission to the Board of Directors for approval;

• Reviewed effectiveness of the Company’s material internal controls, including financial, operational and compliance controls and risk management via reviews carried out by the internal auditors;

• Met with the external auditors, other committees, and management in separate executive sessions to discuss any matters that these groups believe should be discussed privately with the AC;

• Reviewed legal and regulatory matters that may have a material impact on the financial statements, related compliance policies and programmes and any reports received from regulators;

• Reviewed the cost effectiveness and the independence and objectivity of the external auditors;

• Reviewed the nature and extent of non-audit services provided by the external auditors;

• Recommended to the Board of Directors the external auditors to be nominated, approved the compensation of the external auditors, and reviewed the scope and results of the audit;

• Reported actions and minutes of the AC to the Board of Directors with such recommendations as the AC considered appropriate; and

• Reviewed interested person transactions in accordance with the requirements of the Singapore Exchange Securities Trading Limited Listing Manual.

The AC, having reviewed all non-audit services provided by the external auditors to the Group, is satisfied that the nature and extent of such services would not affect the independence of the external auditors. The AC has also conducted a review of interested person transactions.

The AC convened two (2) meetings during the year with full attendance from all members. The AC has also met with internal and external auditors, without the presence of the Company’s management, at least once a year.




AUDIT COMMITTEE (CONT’D)

Apart from duties listed above, the AC shall commission and review the findings of internal investigations into matters where there is any suspected fraud or irregularity, or failure of internal controls or infringement of a Singapore law, rule or regulation which has or is likely to have a material impact on the Group’s operating results and/or financial position.

The AC recommends to the Board of Directors the nomination of Ernst & Young LLP as external auditors at the forthcoming annual general meeting of the Company.

Further details regarding the AC are disclosed in the Report on Corporate Governance.

AUDITORS

Ernst & Young LLP have expressed their willingness to accept re-appointment as auditors.

On behalf of the Board of Directors,

Lim Kuak Choi LeslieDirector

Foo Kaw JeeDirector

Singapore30 March 2012



STATEMENT BY DIRECTORSPursuant to Section 201(15) of the Singapore Companies Act, Cap. 50

We, Lim Kuak Choi Leslie and Foo Kaw Jee, being two of the directors of Kinergy Ltd., do hereby state that, in the opinion of the directors,

(a) the accompanying balance sheets, consolidated statement of comprehensive income, statements of changes in equity, and consolidated statement of cash flow together with the notes thereto are drawn up 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 2011, and the results of the business, changes in equity and cash flow of the Group and the changes in equity of the Company for the year ended on that date; 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 Board of Directors,

Lim Kuak Choi LeslieDirector

Foo Kaw JeeDirector

Singapore30 March 2012


INDEPENDENT AUDITORS’ REPORTTo the members of Kinergy Ltd.

REPORT ON THE FINANCIAL STATEMENTS

We have audited the accompanying financial statements of Kinergy Ltd. (the “Company”) and its subsidiary companies (collectively, the “Group”) set out on pages 28 to 83, which comprise the balance sheets of the Group and the Company as at 31 December 2011, the statements of changes in equity of the Group and the Company, and the consolidated statement of comprehensive income and consolidated statement of cash flow of the Group for the 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; and transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair profit and loss accounts and balance sheets and to maintain accountability of assets.

Auditors’ 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 judgment, including the assessment of the risk of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

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

Opinion

In our opinion, the consolidated financial statements of the Group and the balance sheet and statement of changes in equity of the Company are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2011 and the results, changes in equity and cash flow of the Group and the changes in equity of the Company for the year ended on that date.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

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

Ernst & Young LLPPublic Accountants and Certified Public AccountantsSingapore30 March 2012



CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFor the financial year ended 31 December 2011

Note 2011 2010$’000 $’000

Revenue 3 162,695 171,555Cost of sales (141,542) (148,802)

Gross profit 21,153 22,753Other income 4 152 282

Other items of expenseSales and marketing expenses (5,184) (5,958)General and administrative expenses (7,819) (8,395)Interest expense 5 (461) (705)

7,841 7,977Share of results of an associated company 12 200 206

Profit before taxation 6 8,041 8,183Taxation 7 (859) (772)

Profit for the financial year 7,182 7,411

Other comprehensive income:

Foreign currency translation 1,552 (1,153)

Total comprehensive income for the year attributable to the equity holders of the Company 8,734 6,258

Earnings per share attributable to the equity holders of the Company (cents per share) 8

Basic 5.61 5.79

Diluted 5.46 5.72

The accompanying accounting policies and explanatory notes form an integral part of the financial statements.



BALANCE SHEETSAs at 31 December 2011

Group CompanyNote 2011 2010 2011 2010

$’000 $’000 $’000 $’000

Non-current assetsFixed assets 9 11,046 11,763 1,245 1,476Land use rights 9 220 213 – –Development costs 10 – – – –Club memberships 17 19 17 19Investment in subsidiaries 11 – – 16,917 16,917Investment in an associated company 12 1,186 1,115 677 677

Current assetsInventories 13 39,304 31,784 26,239 22,297Trade receivables 14 17,616 19,741 12,082 14,407Other receivables and deposits 15 1,070 2,909 195 1,120Prepayments 414 597 271 287Amounts due from subsidiaries 16 – – 347 990Cash and bank balances and fixed deposits 22 9,676 14,541 5,804 8,282

68,080 69,572 44,938 47,383

Current liabilitiesTrade payables 17 22,643 27,855 6,684 7,837Other payables and accruals 18 5,855 4,953 3,848 3,745Provision for warranty 19 1,467 824 1,386 779Amounts due to subsidiaries 16 – – 10,750 15,290Hire purchase creditors 20 198 421 198 421Bank borrowings 21 8,038 12,765 2,010 5,170Bank overdraft 22 73 – 73 –Provision for taxation 85 159 – –

38,359 46,977 24,949 33,242

Net current assets 29,721 22,595 19,989 14,141Non-current liabilitiesHire purchase creditors 20 313 398 313 398Bank borrowings 21 912 1,910 912 1,910Deferred tax liabilities 7 190 242 – –

Net assets 40,775 33,155 37,620 30,922

Represented by:

Equity attributable to the equity holders of the CompanyShare capital 23(a) 29,450 29,447 29,450 29,447Treasury shares 23(b) (14) (25) (14) (25)Reserves 11,339 3,733 8,184 1,500

Total equity 40,775 33,155 37,620 30,922




STATEMENTS OF CHANGES IN EQUITYFor the financial year ended 31 December 2011

Attributable to equity holders of the Company

Group

Share capital

(Note 23)Treasury shares

Share option reserve

Statutory reserve (2)

Translation reserve (3)

(Accumulated losses)/revenue reserve

Total reserves

Total equity

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

2010

At 1 January 2010 29,447 – – 1,694 340 (4,606) (2,572) 26,875Comprehensive income for the year (1) – – – – (1,153) 7,411 6,258 6,258Transfer to statutory reserve – – – 524 – (524) – –Grant of equity-settled share options (Note 25) – – 47 – – – 47 47Purchase of treasury shares (Note 23(b)) – (25) – – – – – (25)

At 31 December 2010 29,447 (25) 47 2,218 (813) 2,281 3,733 33,155

2011

At 1 January 2011 29,447 (25) 47 2,218 (813) 2,281 3,733 33,155Comprehensive income for the year (1) – – – – 1,552 7,182 8,734 8,734Issuance of new shares (Note 23(a)) 3 – – – – – – 3Dividends on ordinary shares (Note 24) – – – – – (1,278) (1,278) (1,278)Transfer to statutory reserve – – – 423 – (423) – –Grant of equity-settled share options (Note 25) – – 158 – – – 158 158Treasury shares reissued pursuant to the ESOS (Note 23(b)) – 28 (8) – – – (8) 20Purchase of treasury shares (Note 23(b)) – (17) – – – – – (17)

At 31 December 2011 29,450 (14) 197 2,641 739 7,762 11,339 40,775

1. Included in comprehensive income is an amount of net translation gain recognised directly to equity amounted

to $1,552,000 (2010: net translation loss of $1,153,000). Total comprehensive income for the year amounted

to $8,734,000 (2010: $6,258,000).

2. In accordance with the Foreign Enterprise Law applicable to the subsidiary in the People’s Republic of China

(“PRC”), the subsidiary is required to make appropriation to a Statutory Reserve Fund (“SRF”). At least 10% of

the statutory after tax profits as determined in accordance with the applicable PRC accounting standards and

regulations must be allocated to the SRF until the cumulative total of the SRF reaches 50% of the subsidiary’s

registered capital. Subject to approval from the relevant PRC authorities, the SRF may be used to offset any

accumulated losses or increase the registered capital of the subsidiary. The SRF is not available for dividend

distribution to shareholders.

3. The translation reserve is used to record exchange differences arising from the translation of the financial

statements of foreign operations whose functional currencies are different from that of the Group’s presentation

currency.




STATEMENTS OF CHANGES IN EQUITY (CONT’D)For the financial year ended 31 December 2011

CompanyShare capital

(Note 23)Treasury

shares

(Accumulated losses)/

revenue reserveShare option

reserve Total equity$’000 $’000 $’000 $’000 $’000

2010

At 1 January 2010 29,447 – (3,982) – 25,465Comprehensive income for the year – – 5,435 – 5,435Grant of equity-settled share options (Note 25) – – – 47 47Purchase of treasury shares (Note 23(b)) – (25) – – (25)

At 31 December 2010 29,447 (25) 1,453 47 30,922

2011

At 1 January 2011 29,447 (25) 1,453 47 30,922Comprehensive income for the year – – 7,812 – 7,812Issuance of new shares (Note 23(a)) 3 – – – 3Dividends on ordinary shares (Note 24) – – (1,278) – (1,278)Treasury shares reissued pursuant to the ESOS (Note 23(b)) – 28 – (8) 20Grant of equity-settled share options (Note 25) – – – 158 158Purchase of treasury shares (Note 23(b)) – (17) – – (17)

At 31 December 2011 29,450 (14) 7,987 197 37,620




CONSOLIDATED STATEMENT OF CASH FLOWFor the financial year ended 31 December 2011

2011 2010$’000 $’000

Cash flow from operating activities:Profit before taxation 8,041 8,183Adjustments for: Depreciation and amortisation 2,349 2,390 Impairment of club membership 2 1 Allowance for inventory obsolescence 1,372 640 Write-back of allowance for inventory obsolescence (743) (436) Interest expense 461 705 Interest income (45) (20) Gain on disposal of fixed assets (28) (77) Share of results of an associated company (200) (206) Grant of equity-settled share options 158 47 Currency realignment 502 (351)

Operating cash flow before changes in working capital 11,869 10,876Increase in inventories (8,149) (9,904)Decrease in receivables 4,147 6,074(Decrease)/increase in payables (3,667) 2,239

Cash generated from operations 4,200 9,285Interest expense paid (461) (705)Interest income received 45 20Income tax paid (985) (625)

Net cash flow generated from operating activities 2,799 7,975

Cash flow from investing activities:Purchase of fixed assets (1) (906) (1,808)Proceeds from disposal of fixed assets 137 330Dividend from an associated company 178 242

Net cash flow used in investing activities (591) (1,236)

Cash flow from financing activities:Repayments to hire-purchase creditors (455) (637)(Repayment of)/proceeds from bank loans (5,725) 1,975Dividends paid on ordinary shares (1,278) –Proceeds from issuance of new shares 3 –Proceeds from reissuance of treasury shares 20 –Purchase of treasury shares (17) (25)Decrease/(increase) in fixed deposit pledged with bank 1,245 (263)

Net cash flow (used in)/generated from financing activities (6,207) 1,050

Net (decrease)/increase in cash and cash equivalents (3,999) 7,789Cash and cash equivalents at beginning of financial year 13,296 5,075Effects of exchange rate changes on cash and cash equivalents 306 432

Cash and cash equivalents at end of financial year (Note 22) 9,603 13,296

(1) During the year, the Group acquired fixed assets with an aggregate cost of $1,053,000 (2010: $2,314,000).

These purchases were made by cash payments of $906,000 (2010: $1,808,000) and by way of hire purchase

of $147,000 (2010: $506,000).




NOTES TO THE FINANCIAL STATEMENTS31 December 2011

1. CORPORATE INFORMATION

Kinergy Ltd. is a limited liability company incorporated in Singapore and is listed on the Singapore Exchange of Securities Trading Limited Dealing and Automated Quotation System (“SGX Catalist”).

The registered office and principal place of business of the Company is located at Blk 5002 Ang Mo Kio Ave 5, #03-03 Techplace II, Singapore 569871.

The principal activities of the Company and its subsidiary companies are to provide contract manufacturing, design, engineering and assembly for the electronics industry, and the design, manufacture and sale of automated machines, apparatus, systems, equipment and precision moulds and dies. There have been no significant changes in the nature of these activities during the financial year.

The Company operates in Singapore and the subsidiary companies operate in the People’s Republic of China (PRC), the United States of America and the Philippines.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.1 Basis of preparation

The consolidated financial statements of the Group and the balance sheet and statement of changes in equity of the Company have been prepared in accordance with Singapore Financial Reporting Standards (FRS).

The financial statements have been prepared on a historical cost basis except as disclosed in the accounting policies below.

The financial statements are presented in Singapore Dollars (SGD or $) and all values are rounded to the nearest thousand ($’000) except when otherwise indicated.

2.2 Changes in accounting policies

The accounting policies adopted are consistent with those of the previous financial year except in the current financial year, the Group has adopted all the new and revised standards and Interpretations of FRS (INT FRS) that are effective for annual periods beginning on or after 1 January 2011. The adoption of these standards and interpretations did not have any effect on the financial performance or position of the Group and the Company.



NOTES TO THE FINANCIAL STATEMENTS (CONT’D)31 December 2011

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

2.3 Standards issued but not yet effective

The Group has not adopted the following standards and interpretations that have been issued but are not yet effective:

Description

Effective for annual period beginning

on or after

Amendments to FRS 107 Disclosures – Transfers of Financial Assets 1 July 2011Amendments to FRS 12 Deferred Tax – Recovery of Underlying Assets 1 January 2012Amendments to FRS 1 – Presentation of Items of Other Comprehensive Income 1 July 2012Revised FRS 19 Employee Benefits 1 January 2013Revised FRS 27 Separate Financial Statements 1 January 2013Revised FRS 28 Investments in Associates and Joint Ventures 1 January 2013FRS 110 Consolidated Financial Statements 1 January 2013FRS 111 Joint Arrangements 1 January 2013FRS 112 Disclosure of Interest in Other Entities 1 January 2013FRS 113 Fair Value Measurements 1 January 2013

The directors expect that the adoption of the standards and interpretations above will have no material impact on the financial statements in the period of initial application.

2.4 Significant accounting estimates and judgments

The preparation of the Group’s consolidated financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenue, expenses, assets and liabilities, and the disclosure of contingent liabilities at the end of each reporting period. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future periods.

(a) Key sources of estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the end of each reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

(i) Useful lives of fixed assets

Fixed assets are depreciated on a straight-line basis over their estimated economic useful lives. Management estimates the useful lives of these fixed assets to be within 3 to 40 years. The carrying amount of the Group’s fixed assets at 31 December 2011 was $11,046,000 (2010: $11,763,000). Changes in the expected level of usage and technological developments could impact the economic useful lives of these assets, therefore future depreciation charges could be revised.





2.4 Significant accounting estimates and judgements (cont’d)

(a) Key sources of estimation uncertainty (cont’d)

(ii) Impairment of non-financial assets

An impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. The fair value less costs to sell calculation is based on available data from binding sales transactions in an arm’s length transaction of similar assets or observable market prices less incremental costs for disposing the asset. The value in use calculation is based on a discounted cash flow model. The cash flows are derived from the budget for the next five years and do not include restructuring activities that the Group is not yet committed to or significant future investments that will enhance the asset’s performance of the cash generating unit being tested. The recoverable amount is most sensitive to the discount rate used for the discounted cash flow model as well as the expected future cash inflows and the growth rate used for extrapolation purposes.

(iii) Impairment of loans and receivables

The Group assesses at the end of each reporting period whether there is any objective evidence that a financial asset is impaired. To determine whether there is objective evidence of impairment, the Group considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments.

Where there is objective evidence of impairment, the amount and timing of future cash flow are estimated based on historical loss experience for assets with similar credit risk characteristics. The carrying amount of the Group’s loans and receivables at the end of the reporting period is disclosed in various notes to the financial statements.

(iv) Net realisable value of inventories

This estimate is based on the current market conditions and the historical experience of selling products of similar nature. It could change significantly as a result of competitors’ actions or technological developments. Management assesses the estimations at the end of each reporting period.

(v) Provision for warranty

A provision is recognised for expected warranty claims on products sold during the year, based on past experience of the level of returns. Assumptions used to calculate the provision for warranty are based on current sales levels and current information available about returns based on the past level of returns.

During the year, management has made a provision for warranty of 1.25% on Precision Tooling division (“PTD”) sales, 0.5% on Center Engineering division (“CED”) sales and 5% on a contract manufacturing project.

Accordingly, $1,467,000 (2010: $824,000) of provision was made at year-end for the Group.





2.4 Significant accounting estimates and judgments (cont’d)

(b) Judgments made in applying accounting policies

In the process of applying the Group’s accounting policies, management has made the following judgments, apart from those involving estimations, which have significant effect on the amounts recognised in the consolidated financial statements.

Income taxes

The Group has exposure to income taxes in several jurisdictions. Significant judgement is involved in determining the Group-wide provision for income taxes. There are certain transactions and computations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for expected tax 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 recognised, such differences will impact the income tax and deferred tax provisions in the year in which such determination is made. The carrying amounts of the Group’s tax payables and deferred tax liabilities at 31 December 2011 were $85,000 (2010: $159,000) and $190,000 (2010: $242,000) respectively.

2.5 Basis of consolidation and business combinations

(a) Basis of consolidation

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at the end of the reporting period. The financial statements of the subsidiaries used in the preparation of the consolidated financial statements are prepared for the same reporting date as the Company. Consistent accounting policies are applied to like transactions and events in similar circumstances.

All intra-group balances, income and expenses and unrealised gains and losses resulting from intra-group transactions and dividends are eliminated in full.

Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases.

Losses within a subsidiary are attributed to the non-controlling interest even if that results in a deficit balance.





2.5 Basis of consolidation and business combinations (cont’d)

(a) Basis of consolidation (cont’d)

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group

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