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CIRCULAR DATED 1 FEBRUARY 2019
THIS CIRCULAR IS ISSUED BY DECLOUT LIMITED (THE “COMPANY”). THIS CIRCULAR IS IMPORTANT AS ITCONTAINS THE RECOMMENDATION OF THE INDEPENDENT DIRECTORS (AS DEFINED HEREIN) AND THE ADVICEOF THE INDEPENDENT FINANCIAL ADVISER. THIS CIRCULAR REQUIRES YOUR IMMEDIATE ATTENTION. PLEASEREAD IT CAREFULLY.
If you are in any doubt about its contents or the action you should take, you should consult your stockbroker, bankmanager, solicitor, accountant, tax adviser or other professional advisers immediately.
If you have sold or transferred all your shares in the capital of the Company held through The Central Depository (Pte)Limited (“CDP”), you need not forward this Circular to the purchaser or transferee as arrangements will be made by CDPfor a separate Circular to be sent to the purchaser or transferee. If you have sold or transferred all your shares in the capitalof the Company represented by physical share certificate(s), you should at once hand this Circular to the purchaser ortransferee or to the bank, stockbroker or agent through whom you effected the sale or transfer, for onward transmissionto the purchaser or transferee.
This Circular has been prepared by the Company and its contents have been reviewed by the Company’s continuingsponsor, SAC Capital Private Limited (“Sponsor”), for compliance with the relevant rules of the Singapore ExchangeSecurities Trading Limited (“SGX-ST”). The Sponsor has not independently verified the contents of this Circular. ThisCircular has not been examined or approved by the SGX-ST and the SGX-ST assumes no responsibility for the contentsof this Circular, including the correctness of any of the statements or opinions made or reports contained in this Circular.
The contact person for the Sponsor is Ms. Lee Khai Yinn (Tel: (65) 6232 3210) at 1 Robinson Road, #21-00 AIA Tower,Singapore 048542.
DECLOUT LIMITED(Incorporated in the Republic of Singapore)
(Company Registration Number: 201017764W)
CIRCULAR TO SHAREHOLDERS
in relation to the
VOLUNTARY CONDITIONAL CASH OFFER
by
KPMG CORPORATE FINANCE PTE LTD(Incorporated in the Republic of Singapore)
(Company Registration Number: 198500417D)
for and behalf of
EXEO GLOBAL PTE. LTD.(Incorporated in the Republic of Singapore)
(Company Registration Number: 201839325W)
to acquire all the Offer Shares (as defined herein)
Independent Financial Adviser to the Independent Directors
PROVENANCE CAPITAL PTE. LTD.(Incorporated in the Republic of Singapore)
(Company Registration Number: 200309056E)
SHAREHOLDERS SHOULD NOTE THAT ACCEPTANCES MUST BE RECEIVED BY THE CLOSE OF
OFFER AT 5.30 P.M. (SINGAPORE TIME) ON 4 MARCH 2019, OR SUCH LATER DATE(S) AS MAY BE
ANNOUNCED FROM TIME TO TIME BY OR ON BEHALF OF THE OFFEROR.
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS . . . . . . . . . . . . . . . . . . . . 10
INDICATIVE TIMELINE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
LETTER TO SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2. THE OFFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3. INFORMATION ON THE OFFEROR AND KYOWA EXEO . . . . . . . . . . . . . . . . . . . . . 26
4. IRREVOCABLE UNDERTAKINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5. RATIONALE FOR THE OFFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6. LISTING STATUS, COMPULSORY ACQUISITION AND THE OFFEROR’S
INTENTIONS RELATING TO THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7. FINANCIAL EVALUATION OF THE OFFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8. DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9. CONFIRMATION OF FINANCIAL RESOURCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10. DIRECTORS’ INTERESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
11. ADVICE AND RECOMMENDATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
12. OVERSEAS SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
13. INFORMATION PERTAINING TO SRS INVESTORS . . . . . . . . . . . . . . . . . . . . . . . . . 43
14. ACTION TO BE TAKEN BY SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
15. CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
16. DOCUMENTS AVAILABLE FOR INSPECTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
17. DIRECTORS’ RESPONSIBILITY STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
18. ADDITIONAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
APPENDIX A – LETTER FROM THE IFA TO THE INDEPENDENT DIRECTORS IN
RESPECT OF THE OFFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
APPENDIX B – ADDITIONAL GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . B-1
APPENDIX C – ADDITIONAL INFORMATION ON THE OFFEROR AND KYOWA
EXEO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-1
CONTENTS
1
APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE
GROUP FOR FY2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D-1
APPENDIX E – UNAUDITED FINANCIAL INFORMATION OF THE GROUP FOR
3QFY2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-1
APPENDIX F – LETTER FROM THE IFA IN RELATION TO THE FORECAST
STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
APPENDIX G – LETTER FROM AUDITORS OF THE COMPANY IN RELATION TO
THE FORECAST STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . G-1
APPENDIX H – BASES AND ASSUMPTIONS OF THE FORECAST STATEMENTS . . . . H-1
APPENDIX I – EXTRACTS FROM THE COMPANY’S CONSTITUTION . . . . . . . . . . I-1
CONTENTS
2
Except where the context otherwise requires, the following definitions apply throughout this
Circular:
“3QFY2018” : The 9-month period ended 30 September 2018
“ACRA” : Accounting and Corporate Regulatory Authority of
Singapore
“Business Day” : A day (other than a Saturday, a Sunday or a gazette public
holiday) on which commercial banks are open for business
in Singapore
“Catalist Rules” : The SGX-ST Listing Manual Section B: Rules of Catalist,
as amended or modified from time to time
“CDP” : The Central Depository (Pte) Limited
“Circular” : This circular to Shareholders dated 1 February 2019 in
relation to the Offer, enclosing, inter alia, the IFA Letter
“Closing Date” : 5.30 p.m. (Singapore time) on 4 March 2019, or such later
date(s) as may be announced from time to time by or on
behalf of the Offeror, such date being the last day for the
lodgement of acceptances of the Offer
“Code” : The Singapore Code on Take-overs and Mergers, as
amended or modified from time to time
“Companies Act” : The Companies Act (Chapter 50 of Singapore), as
amended or modified from time to time
“Company” : DeClout Limited
“Company Securities” : (a) Shares; (b) securities which carry voting rights in the
Company; and (c) convertible securities, warrants, options
(including any options granted under any employee share
scheme of the Company) and derivatives in respect of any
Shares or securities which carry voting rights in the
Company
“Concert Group” : The parties acting or deemed to be acting in concert with
the Offeror
“Conflicted Directors” : Has the meaning ascribed to it in Section 11.2 of this
Circular
“Constitution” : The constitution of the Company, as amended or modified
from time to time
DEFINITIONS
3
“Directors” : The directors of the Company as at the Latest Practicable
Date, and “Director” means any one of them
“ESOS” : DeClout Employee Share Option Scheme approved and
adopted by the Shareholders on 5 October 2012 (as
amended from time to time)
“ESOS Options” : Options granted under the ESOS
“FAA” : The Form of Acceptance and Authorisation for the Offer
Shares in respect of the Offer which forms part of the Offer
Document and which is issued to Shareholders whose
Shares are deposited with the CDP
“FAT” : The Form of Acceptance and Transfer for the Offer Shares
in respect of the Offer which forms part of the Offer
Document and which is issued to Shareholders whose
Shares are not deposited with the CDP
“Financial Adviser” : KPMG Corporate Finance Pte Ltd, the financial adviser to
the Offeror in relation to the Offer
“Forecast Statements” : Has the meaning ascribed to it in Appendix F of this
Circular
“FY” : Financial year ended or ending, as the case may be,
31 December
“FY2015” : Financial year ended 31 December 2015
“FY2016” : Financial year ended 31 December 2016
“FY2017” : Financial year ended 31 December 2017
“Group” : The Company and its subsidiaries
“HRA Litigation” : The litigation by H.R.A. Corporation (SG) Pte. Ltd. against
the Company as announced by the Company on 11 July
2017, 18 July 2017, 24 October 2017, 7 November 2017
and 20 March 2018
“Independent Directors” : The Directors who are considered independent for the
purposes of the Offer, being Mr Poh Boon Kher Melvin,
Mr Ho Chew Thim and Mr Hew Koon Chan
“Independent Financial
Adviser” or “IFA”
: Provenance Capital Pte. Ltd., the independent financial
adviser to the Independent Directors in connection with the
Offer
DEFINITIONS
4
“IFA Letter” : Has the meaning ascribed to it in Section 11.1 of this
Circular
“Interested Person” : As defined in the Note on Rule 24.6 of the Code and read
with the Note on Rule 23.12 of the Code, an interested
person, in relation to a company, is:
(a) a director, chief executive officer, or substantial
shareholder of the company;
(b) the immediate family of a director, the chief executive
officer, or a substantial shareholder (being an
individual) of the company;
(c) the trustees, acting in their capacity as such trustees,
of any trust of which a director, the chief executive
officer, or a substantial shareholder (being an
individual) and his immediate family is a beneficiary;
(d) any company in which a director, the chief executive
officer, or a substantial shareholder (being an
individual) together and his immediate family together
(directly or indirectly) have an interest of 30% of more;
(e) any company that is the subsidiary, holding company
or fellow subsidiary of the substantial shareholder
(being a company); or
(f) any company in which a substantial shareholder
(being a company) and any of the companies listed in
(e) above together (directly or indirectly) have an
interest of 30% or more
“Irrevocable
Undertakings”
: The irrevocable undertakings from each of the Undertaking
Shareholders to, inter alia, accept the Offer in respect of all
Shares held by each of them respectively
“Kyowa Exeo” : Kyowa Exeo Corporation
“Latest Practicable Date” : 25 January 2019, being the latest practicable date prior to
the printing of this Circular
“Lyndenra Loan” : The one-year S$9.25 million loan extended by Lyndenra
Investments Pte. Ltd. (“Lyndenra”) to vCargo Cloud Pte.
Ltd. (“VCC”) at an interest rate of 8.0% per annum,
pursuant to a loan agreement dated 20 August 2018
entered into between Lyndenra and VCC
DEFINITIONS
5
Lyndenra is a company in which Mr Poh Boon Kher Melvin
(who is a Director) and his immediate family together
(directly or indirectly) have an interest of 30% or more and
accordingly is an Interested Person. The abovementioned
loan is an interested party transaction where the amount at
risk to the Company is less than 3% of the Group’s audited
net tangible assets and therefore not disclosable under
Rule 905 of the Catalist Rules
“Management
Arrangements”
: Has the meaning ascribed to it in Section 11.2 of this
Circular
“Market Day” : A day on which the SGX-ST is open for trading of securities
“Minimum Acceptance
Condition”
: The condition that the Offeror receives valid acceptances
in respect of such number of Offer Shares which, when
taken together with the Shares owned, controlled or agreed
to be acquired by the Offeror and its Concert Group, would
result in the Offeror and its Concert Group holding such
number of Shares carrying more than 50% of the voting
rights attributable to the issued Shares (excluding any
treasury shares), by the Closing Date
“Offer” : The voluntary conditional cash offer made by the Financial
Adviser, for and on behalf of the Offeror, on the Offer
Announcement Date
“Offer Announcement” : The offer announcement made on 7 January 2019 by the
Financial Adviser, for and on behalf of the Offeror, of the
Offeror’s firm intention to undertake the Offer
“Offer Announcement
Date”
: 7 January 2019, being the date of the Offer Announcement
“Offer Document” : The offer document dated 21 January 2019, including the
FAA and FAT, and any supplemental documents as may be
issued by or on behalf of the Offeror from time to time
“Offer Price” : S$0.13 in cash for each Offer Share
“Offer Shares” : All the issued Shares to which the Offer relates, as more
particularly described in Section 2.1 of this Circular
“Offeror” : Exeo Global Pte. Ltd.
DEFINITIONS
6
“Offeror Securities” : Ordinary shares in the capital of the Offeror, equity share
capital of the Offeror and other securities which carry
substantially the same rights in the Offeror, and convertible
securities, warrants, options and derivatives in respect of
such shares or securities
“Overseas Shareholders” : Shareholders whose addresses are outside Singapore, as
shown on the Register or, as the case may be, in the
records of the CDP
“Procurri” : Procurri Corporation Limited
“PSP” : DeClout Performance Share Plan approved and adopted
by the Shareholders on 5 October 2012 (as amended from
time to time)
“Register” : The register of holders of Shares, as maintained by the
Registrar
“Registrar” : Tricor Barbinder Share Registration Services (a division
of Tricor Singapore Pte. Ltd.), which is located at
80 Robinson Road, #11-02, Singapore 068898
“Relevant Acceptance
Forms”
: The FAA and/or the FAT (as the case may be)
“Relevant Period” : The period commencing on 7 October 2018, being the date
falling three months prior to the Offer Announcement Date,
and ending on the Latest Practicable Date
“SFA” : The Securities and Futures Act (Chapter 289 of
Singapore), as amended or modified from time to time
“SGX-ST” : The Singapore Exchange Securities Trading Limited
“SGXNET” : A system network used by listed companies to send
information and announcements to the SGX-ST or any
other system networks prescribed by the SGX-ST
“Shareholders” : Persons who are registered as holders of Shares in the
Register and Depositors who have Shares entered against
their names in the Depository Register
“Share Awards” : Share awards granted under the PSP
“Shares” : Issued and paid-up ordinary shares in the capital of the
Company
“SRS” : The Supplementary Retirement Scheme
DEFINITIONS
7
“SRS Investors” : Investors who have purchased Shares using their SRS
contributions pursuant to SRS
“Substantial Shareholder” : A person who has an interest in not less than 5% of the
total number of issued voting Shares
“Unconditional
Announcement”
: The announcement made on 23 January 2019 by the
Financial Adviser, for and on behalf of the Offeror, that,
inter alia, the Offer is declared unconditional in all respects
“Undertaking
Shareholders”
: Mr Wong Kok Khun, 3rd Space Pte Ltd, Ms Kow Ya,
Ms Cheryl Tan Choo Huang and Mr Poh Boon Kher Melvin
“S$” and “cents” : Singapore dollars and cents respectively, being the
currency of Singapore
“%” or “per cent.” : Per centum or percentage
Acting in Concert and Associates. Unless otherwise defined, the expressions “acting in
concert” and “associates” shall have the same meanings as ascribed to them respectively in the
Code.
Announcements and Notices. References to the making of an announcement or the giving of
notice by the Company shall include the release of an announcement by the Company or its
agents, for and on behalf of the Company, to the press or the delivery of or transmission by
telephone, telex, facsimile, SGXNET or otherwise of an announcement to the SGX-ST. An
announcement made otherwise than to the SGX-ST shall be notified to the SGX-ST
simultaneously.
Capitalised Terms in Extracts. Statements which are reproduced in their entirety from the Offer
Document, the IFA Letter and the Constitution are set out in this Circular within quotes and italics,
and capitalised terms used within these reproduced statements shall bear the same meanings as
attributed to them in the Offer Document, the IFA Letter and the Constitution respectively.
Depository Related Terms. The terms “Depositor”, “Depository Agent” and “Depository
Register” shall have the meanings ascribed to them respectively in Section 81SF of the SFA.
Expressions. Words importing the singular shall, where applicable, include the plural and vice
versa. Words importing a single gender shall, where applicable, include any or all genders.
References to persons shall, where applicable, include corporations.
Headings. The headings in this Circular are inserted for convenience only and shall be ignored
in construing this Circular.
Rounding. Any discrepancies in the figures in this Circular between the listed amounts and the
totals thereof are due to rounding. Accordingly, the figures shown as totals in this Circular may not
be an arithmetic aggregation of the figures that precede them.
Shareholders. References to “you”, “your” and “yours” in this Circular are, as the context so
determines, to Shareholders.
DEFINITIONS
8
Statutes. Any reference in this Circular to any enactment or statutory provision is a reference to
that enactment or statutory provision as for the time being amended or re-enacted, unless the
context otherwise requires. Any word defined under the Companies Act, the Code, the Catalist
Rules, the SFA or any modification thereof and not otherwise defined in this Circular shall, where
applicable, have the same meaning as ascribed to it under the Companies Act, the Code, the
Catalist Rules, the SFA or any statutory modification thereof, as the case may be, unless the
context otherwise requires.
Subsidiary and Related Corporation. The terms “subsidiary” and “related corporation” shall
have the meanings ascribed to them in Sections 5 and 6 of the Companies Act respectively.
Time and Date. Any reference to a time of day and date in this Circular is made by reference to
Singapore time and date respectively unless otherwise stated.
Total Number of Shares and Percentage as at the Latest Practicable Date. In this Circular, the
total number of Shares is a reference to a total of 666,001,586 Shares in issue as at the Latest
Practicable Date (excluding treasury shares) based on a search conducted at the ACRA, unless
the context otherwise requires. Unless otherwise specified, all references to a percentage
shareholding in the capital of the Company in this Circular are based on 666,001,586 Shares in
issue as at the Latest Practicable Date (excluding treasury shares) based on a search conducted
at the ACRA.
DEFINITIONS
9
All statements other than statements of historical facts included in this Circular are or may be
forward-looking statements. Forward-looking statements include but are not limited to those using
words such as “aim”, “seek”, “expect”, “anticipate”, “believe”, “estimate”, “intend”, “project”,
“plan”, “strategy”, “forecast” and similar expressions or future or conditional verbs such as “if”,
“will”, “would”, “should”, “could”, “may” and “might”. These statements reflect the Company’s
current expectations, beliefs, hopes, intentions or strategies regarding the future and assumptions
in light of currently available information. Such forward-looking statements are not guarantees of
future performance or events and involve known and unknown risks and uncertainties.
Accordingly, actual results may differ materially from those described in such forward-looking
statements. Shareholders should not place undue reliance on such forward-looking statements,
and neither the Company nor the IFA guarantees any future performance or event, or undertakes
any obligation to update publicly or revise any forward looking statements, subject to compliance
with all applicable laws and regulations and/or the rules of the SGX-ST and/or any other regulatory
or supervisory body or agency.
CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS
10
Date of despatch of the Offer Document : 21 January 2019
Date of despatch of this Circular : 1 February 2019
Closing Date : 5.30 p.m. (Singapore time) on 4 March 2019
or such later date(s) as may be announced
from time to time by or on behalf of the
Offeror.
Date of settlement of consideration for
valid acceptances of the Offer
: (a) In respect of acceptances of the Offer
which are complete and valid in all
respects and are received on or before
the date on which the Offer becomes or
is declared to be unconditional in all
respects, within seven (7) Business Days
of the date of the Offer becomes or is
declared to be unconditional in all
respects; or
(b) In respect of acceptances of the Offer
which are complete and valid in all
respects and are received after the Offer
becomes or is declared to be
unconditional in all respects, but before
the Offer closes, within seven (7)
Business Days of the date of such
receipt.
Please refer to Section 1 of Appendix V of the
Offer Document for further information.
INDICATIVE TIMELINE
11
DECLOUT LIMITED(Incorporated in the Republic of Singapore)
(Company Registration Number: 201017764W)
Directors: Registered Office:
Mr Wong Kok Khun (Chairman and
Group Chief Executive Officer)
Ms Kow Ya (Executive Director)
Ms Cheryl Tan Choo Huang (Executive Director (Finance))
Mr Poh Boon Kher Melvin (Non-Executive Director)
Mr Ho Chew Thim (Lead Independent Director)
Mr Hew Koon Chan (Independent Director)
29 Tai Seng Avenue
#05-01
Natural Cool Lifestyle Hub
Singapore 534119
1 February 2019
To: Shareholders of the Company
Dear Sir/Madam
VOLUNTARY CONDITIONAL CASH OFFER BY THE FINANCIAL ADVISER, FOR AND ON
BEHALF OF THE OFFEROR, FOR THE OFFER SHARES
1. INTRODUCTION
1.1 Offer Announcement
On 7 January 2019, the Financial Adviser, for and on behalf of the Offeror, announced, interalia, that the Offeror would make a voluntary conditional cash offer for the Offer Shares, in
accordance with Rule 15 of the Code.
1.2 Offer Document
Shareholders should by now have received a copy of the Offer Document and the Relevant
Acceptance Forms, which set out, inter alia, the terms and conditions of the Offer. The
principal terms and conditions of the Offer are set out on pages 7 to 10 of the Offer
Document. Shareholders are advised to read the terms and conditions of the Offer
contained in the Offer Document carefully.
Offer related announcements of the Offeror and the Offer Document are available for
download from the website of the SGX-ST at www.sgx.com.
1.3 Unconditional Announcement
On 23 January 2019, the Financial Adviser, for and on behalf of the Offeror, announced,
inter alia, that the Offer has become unconditional as to acceptances and is declared
unconditional in all respects on 22 January 2019.
1.4 Purpose of this Circular
The purpose of this Circular is to provide Shareholders with relevant information pertaining
to the Company and the Offer, the advice of the IFA to the Independent Directors and the
recommendation of the Independent Directors with regard to the Offer.
LETTER TO SHAREHOLDERS
12
Shareholders should read the Offer Document, this Circular and the IFA Letter
carefully and consider the recommendation of the Independent Directors and the
advice of the IFA to the Independent Directors on the Offer before deciding on
whether to accept or reject the Offer. If you are in any doubt in relation to this Circular
or as to the action you should take, you should consult your stockbroker, bank
manager, solicitor, accountant, tax adviser or other professional advisers
immediately.
2. THE OFFER
2.1 Terms of the Offer
The Offer is made by the Financial Adviser, for and on behalf of the Offeror, on the principal
terms set out in Section 2 of the Offer Document, extracts of which are set out below. Unless
otherwise defined, all terms and expressions used in the extracts below shall have the
same meanings as those defined in the Offer Document.
“2. THE OFFER
2.1 Consideration
For each Offer Share: S$0.13 in cash (the “Offer Price”)
The Offer Shares will be acquired (a) fully paid, (b) free from all liens, equities,
mortgages, charges, encumbrances, rights of pre-emption and other third party rights
and interests of any nature whatsoever (“Encumbrances”), and (c) together with all
rights, benefits and entitlements attached thereto as at the Offer Announcement Date
and thereafter attaching thereto (including the right to receive and retain all dividends,
other distributions and return of capital (“Distributions”) which may be announced,
declared, paid or made thereon by the Company on or after the Offer Announcement
Date).
Without prejudice to the foregoing, the Offer Price has been determined on the basis
that the Offer Shares will be acquired with the right to receive any Distribution that may
be declared, paid or made by the Company on or after the Offer Announcement Date.
In the event any Distribution is or has been declared, paid or made by the Company
on or after the Offer Announcement Date to a Shareholder who validly accepts or has
validly accepted the Offer, the Offer Price payable to such accepting Shareholder shall
be reduced by an amount which is equal to the amount of such Distribution depending
on when the settlement date in respect of the Offer Shares tendered in acceptance by
Shareholders pursuant to the Offer falls, as follows:
(a) if such settlement date falls on or before the books closure date for the
determination of entitlements to the Distribution (the “Books Closure Date”), the
Offeror shall pay the relevant accepting Shareholders the unadjusted Offer Price
for each Offer Share, as the Offeror will receive the Distribution in respect of such
Offer Shares from the Company; or
(b) if such settlement date falls after the Books Closure Date, the Offer Price shall be
reduced by an amount which is equal to the amount of the Distribution in respect
of each Offer Share, as the Offeror will not receive the Distribution in respect of
such Offer Shares from the Company.
LETTER TO SHAREHOLDERS
13
2.2 Offer Shares
The Offer is extended, on the same terms and conditions, to:
(a) all the Shares, other than those Shares held, directly or indirectly, by the Offeror
as at the date of the Offer; and
(b) all new Shares unconditionally issued or to be issued pursuant to:
(i) the valid exercise, prior to the Closing Date, of ESOS Options pursuant to
the ESOS; and
(ii) the valid vesting and release, prior to the Closing Date, of Awards pursuant
to the PSP.
For the purposes of the Offer, the expression the “Offer Shares” will include all such
Shares.
2.3 Conditional Offer
The Offer is conditional upon the Offeror having received, by the Closing Date, valid
acceptances in respect of such number of Offer Shares which, when taken together
with the Shares owned, controlled or agreed to be acquired by the Offeror and parties
acting in concert with it (either before or during the Offer and pursuant to the Offer or
otherwise), will result in the Offeror and parties acting in concert with it holding such
number of Shares carrying more than 50% of the voting rights attributable to the
issued share capital of the Company as at the Closing Date (the “Acceptance
Condition”).
Accordingly, the Offer will not become or be capable of being declared to be
unconditional as to acceptances unless, at any time prior to the Closing Date, the
Offeror has received valid acceptances in respect of such number of Offer Shares
which, when taken together with the Shares owned, controlled or agreed to be
acquired before or during the Offer and pursuant to the Offer or otherwise, by or on
behalf of the Offeror and parties acting in concert with the Offeror, will result in the
Offeror and parties acting in concert with the Offeror holding such number of Shares
representing more than 50% of the maximum potential issued shares in the Company.
For this purpose, the “maximum potential issued shares in the Company” means
the total number of Shares which would be in issue (excluding treasury shares) had all
the outstanding ESOS Options been validly exercised and on the basis that there are
no outstanding Awards as at the date of such declaration.
Save for the Acceptance Condition, the Offer will be unconditional in all other
respects.
LETTER TO SHAREHOLDERS
14
2.4 No Options Offer
As at the Latest Practicable Date, based on the latest information available to the
Offeror, there are 2,790,697 outstanding ESOS Options. Under the rules of the ESOS,
the ESOS Options are not freely transferable by the holders thereof. In view of this
restriction, the Offeror will not make an offer to acquire the ESOS Options in
connection with the Offer (although, as stated above, the Offer will be extended to all
new Shares unconditionally issued or to be issued pursuant to the valid exercise, prior
to the close of the Offer, of the ESOS Options).
2.5 No Awards Offer
As at the Latest Practicable Date, based on the latest information available to the
Offeror, there are no outstanding Awards and accordingly, the Offeror will not be
required to make any offer to acquire any Awards in connection with the Offer.
2.6 Warranty
Acceptance of the Offer will be deemed to constitute an unconditional and irrevocable
warranty by the accepting Shareholder that each Offer Share tendered in acceptance
of the Offer is sold by the accepting Shareholder, as or on behalf of the beneficial
owner(s) thereof, (a) fully paid, (b) free from Encumbrances, and (c) together with all
rights, benefits and entitlements attached thereto as at the Offer Announcement Date
and thereafter attaching thereto (including the right to receive and retain all
Distributions which may be announced, declared, paid or made thereon by the
Company on or after the Offer Announcement Date).”
2.2 Duration of the Offer
The duration of the Offer is set out in Section 2.7 of the Offer Document and Section 6 of
the Unconditional Announcement, extracts of which are set out below.
“2.7 Duration of the Offer
(a) Closing Date
Except insofar as the Offer may be withdrawn with the consent of the SIC and
every person released from any obligation incurred thereunder, the Offer will
remain open for acceptances by Shareholders for a period of at least 28 days
from the date of posting of this Offer Document.
Accordingly, the Offer will close at 5.30 p.m. (Singapore time) on
18 February 2019 or such later date(s) as may be announced from time to
time by or on behalf of the Offeror.
LETTER TO SHAREHOLDERS
15
(b) Offer to Remain Open for 14 Days after being Declared Unconditional as toAcceptances
Pursuant to Rule 22.6 of the Code, if the Offer becomes or is declared to beunconditional as to acceptances, the Offer will remain open for acceptance fornot less than 14 days after the date on which it would otherwise have closed, inorder to give those Shareholders who have not accepted the Offer theopportunity to do so. This requirement does not apply if, before the Offerbecomes or is declared to be unconditional as to acceptances, the Offeror hasgiven notice in writing to the Shareholders at least 14 days before the specifiedClosing Date that the Offer will not be open for acceptance beyond that date,provided that such notice may not be given, or if already given, will not becapable of being enforced in a competitive situation. If a declaration that the Offeris unconditional as to acceptances is confirmed in accordance with paragraph2(a) of Appendix V to this Offer Document, such period of not less than 14 daysduring which the Offer shall remain open for acceptance will run from the date ofsuch confirmation, or the date on which the Offer would otherwise have expired,whichever is later.
(c) Final Day Rule
Pursuant to Rule 22.9 of the Code, the Offer (whether revised or not) will not becapable of becoming or being declared to be unconditional as to acceptancesafter 5.30 p.m. (Singapore time) on the 60th day after the date this OfferDocument is initially posted or of being kept open after the expiry of such period,unless it has previously become or been declared to be unconditional as toacceptances, except with the permission of the SIC. The SIC will considergranting such permission in circumstances including but not limited to where acompeting offer has been announced.
(d) Revision
Pursuant to Rule 20.1 of the Code, the Offer, if revised, will remain open foracceptance for a period of at least 14 days from the date of posting of the writtennotification of the revision to Shareholders. In any case, where the terms arerevised, the benefit of the Offer (as so revised) will be made available to each ofthe Shareholders, including those who had previously accepted the Offer.
(e) Subsequent Closing Date
If there is an extension of the Offer, pursuant to Rule 22.4 of the Code, anyannouncement of an extension of the Offer will state the next closing date or if theOffer is unconditional as to acceptances, a statement may be made that the Offerwill remain open until further notice. In the latter case, those Shareholders whohave not accepted the Offer will be notified in writing at least 14 days before theOffer is closed.
(f) No Obligation to Extend Offer
The Offeror is not obliged to extend the Offer if the Acceptance Condition is notfulfilled by 5.30 p.m. (Singapore time) on the Closing Date(s).
...
6. EXTENSION OF OFFER AND CLOSING DATE
In accordance with Rule 22.6 of the Code, if the Offer becomes or is declared to beunconditional as to acceptances, the Offer must remain open for acceptance for notless than 14 days after the date on which the Offer would otherwise have closed.Accordingly, KPMG wishes to announce, for and on behalf of the Offeror, that theClosing Date of the Offer is extended from 5.30 p.m. (Singapore time) on 18 February2019 to 5.30 p.m. (Singapore time) on 4 March 2019 (or such later date(s) as maybe announced from time to time by or on behalf of the Offeror).”
LETTER TO SHAREHOLDERS
16
2.3 Details of the Offer
The details of the Offer are set out in Section 2.8 and Appendix V of the Offer Document,
extracts of which are set out below.
“2.8 Details of the Offer
Appendix V to this Offer Document sets out further details on (a) the settlement of the
consideration for the Offer, (b) the requirements relating to the announcement of the
level of acceptances of the Offer, and (c) the right of withdrawal of acceptances of the
Offer.
...
APPENDIX V – DETAILS OF THE OFFER
1. SETTLEMENT
Subject to the Offer becoming or being declared to be unconditional in all respects in
accordance with its terms and the receipt by the Offeror from accepting Shareholders
of valid acceptances, complete in all respects and in accordance with the instructions
given in this Offer Document, the FAAs, the FATs and/or the terms and conditions for
Electronic Acceptance (as the case may be) and in the case of a depositor, the receipt
by the Offeror of confirmation satisfactory to it that the relevant number of Offer
Shares are standing to the credit of the “Free Balance” of the depositor’s Securities
Account at the relevant time(s), remittances in the form of S$ cheques drawn on a
bank in Singapore for the appropriate amounts will be despatched, pursuant to Rule
30 of the Code, to the accepting Shareholder (or, in the case of a Shareholder holding
share certificate(s) which is not deposited with CDP, his designated agent (if any)) by
ordinary post and at the risk of the accepting Shareholder or in such manner as he may
have agreed with CDP for payment of any cash distribution as soon as practicable but
in any event:
(a) in respect of acceptances of the Offer which are complete and valid in all
respects and are received on or before the date on which the Offer becomes or
is declared to be unconditional in all respects, within seven (7) business days of
that date; or
(b) in respect of acceptances of the Offer which are complete and valid in all
respects and are received after the Offer becomes or is declared to be
unconditional in all respects, but before the Offer closes, within seven (7)
business days of the date of such receipt.
2. ANNOUNCEMENTS
(a) Pursuant to Rule 28.1 of the Code, by 8.00 a.m. (Singapore time) on the dealing
day (the “Relevant Day”) immediately after the day on which the Offer is due to
expire, or becomes or is declared to be unconditional as to acceptances, or is
revised or extended (if applicable), the Offeror will announce and simultaneously
inform the SGX-ST of the total number of Shares (as nearly as practicable):
(i) in respect of which valid acceptances of the Offer have been received;
(ii) held by the Offeror and any party acting in concert with it before the Offer
Period; and
LETTER TO SHAREHOLDERS
17
(iii) acquired or agreed to be acquired by the Offeror and any party acting in
concert with it during the Offer Period,
and will specify the percentages of the total number of Shares represented by
such numbers.
(b) Under Note 5 on Rule 28.1 of the Code, purchases made through the SGX-ST by
the Offeror and parties acting in concert with it with no pre-agreement or collusion
between the parties to such transactions or their agents, may be counted towards
satisfying the Acceptance Condition. All other purchases by the Offeror and
parties acting in concert with it (i.e. off market purchases) may only be counted
when fully completed and settled.
(c) Under Rule 28.2 of the Code, if the Offeror is unable, within the time limit, to
comply with paragraph 2(a) above, the SIC will consider requesting the SGX-ST
to suspend dealings in the Shares until the relevant information is given.
(d) In this Offer Document, references to the making of any announcement or the
giving of notice by the Offeror include the release of an announcement by KPMG
or advertising agents, for and on behalf of the Offeror, to the press or the delivery
of or transmission by telephone or facsimile or through SGXNET or otherwise of
an announcement to the SGX-ST. An announcement made otherwise than to the
SGX-ST shall be notified simultaneously to the SGX-ST.
(e) In computing the number of Offer Shares represented by acceptances, the
Offeror will at the time of making an announcement take into account
acceptances which are valid in all respects. Acceptances of the Offer will only be
treated as valid for the purposes of the Acceptance Condition if the relevant
requirements of Rule 28.1 of the Code are met.
3. RIGHT OF WITHDRAWAL
(a) Except as expressly provided in this Offer Document and the Code, acceptances
of the Offer shall be irrevocable.
(b) If the Offer has become or been declared unconditional as to acceptances, but
the Offeror fails to comply with any of the requirements of Rule 28.1 of the Code
by 3.30 p.m. (Singapore time) on the Relevant Day, then immediately thereafter:
(i) any Shareholder holding Offer Shares which are deposited with CDP and
accepting the Offer will be entitled to withdraw his acceptance by written
notice to Exeo Global Pte. Ltd. c/o The Central Depository (Pte) Limited, 9
North Buona Vista Drive, #01-19/20, The Metropolis, Singapore 138588;
and
(ii) any Shareholder holding Offer Shares which are not deposited with CDP
and accepting the Offer will be entitled to withdraw his acceptance by
written notice to Exeo Global Pte. Ltd. c/o Tricor Barbinder Share
Registration Services, 80 Robinson Road, #11-02, Singapore 068898.
Such notice of withdrawal shall be effective only when actually received by the
Offeror.
LETTER TO SHAREHOLDERS
18
(c) Subject to Rule 22.9 of the Code, this right of withdrawal may be terminated notless than eight (8) days after the Relevant Day by the Offeror confirming (if thatbe the case) that the Offer is still unconditional as to acceptances and bycomplying with Rule 28.1 of the Code. For the purpose of the 14-day periodreferred to in Rule 22.6 of the Code (referred to in paragraph 2.7(b) of this OfferDocument), such period will run from the date of such confirmation (if given), orthe date on which the Offer would otherwise have expired, whichever is later.
(d) A Shareholder who accepts the Offer will be entitled to withdraw his acceptanceafter 14 days from the first Closing Date, if the Offer has not by then becomeunconditional as to acceptances. Such entitlement to withdraw will beexercisable until the Offer becomes or is declared to be unconditional as toacceptances.
(e) In a competitive situation, if one (1) offer becomes unconditional as toacceptances, then Shareholders who have tendered their acceptances for thecompeting offer (the “Unsuccessful Offer”) can, if they wish, immediatelywithdraw their acceptances for the Unsuccessful Offer.
(f) A Shareholder who has tendered acceptances under the Offer may withdraw hisacceptances within eight (8) days of notification by the Offeror of any revision ofthe Acceptance Condition.”
2.4 Procedures for Acceptance
The procedures for acceptance are set out in Section 2.9 and Appendix VI of the Offer
Document, extracts of which are set out below.
“2.9 Procedures for Acceptance
Appendix VI to this Offer Document sets out the procedures for acceptance of theOffer.
...
APPENDIX VI – PROCEDURES FOR ACCEPTANCE OF THE OFFER
1. PROCEDURES FOR ACCEPTANCE OF THE OFFER BY DEPOSITORS WHOSESECURITIES ACCOUNTS ARE AND/OR WILL BE CREDITED WITH OFFERSHARES
(a) Depositors whose Securities Accounts are credited with Offer Shares
If you have Offer Shares standing to the credit of the “Free Balance” yourSecurities Account, you are entitled to receive this Offer Document together withthe FAA. If you wish to accept the Offer, you should complete and sign theaccompanying FAA in accordance with the provisions and instructions in thisOffer Document and the provisions and instructions printed on the FAA (whichprovisions and instructions shall be deemed to form part of the terms of the Offer)and submit the duly completed and signed original FAA, either by hand to:
EXEO GLOBAL PTE. LTD.c/o The Central Depository (Pte) Limited9 North Buona Vista Drive#01-19/20The MetropolisSingapore 138588
LETTER TO SHAREHOLDERS
19
or by post in the enclosed pre-addressed envelope at your own risk, to:
EXEO GLOBAL PTE. LTD.c/o The Central Depository (Pte) LimitedRobinson Road Post OfficeP.O. Box 1984Singapore 903934
so as in either case to arrive not later than 5.30 p.m. (Singapore time) on theClosing Date.
If you have sold or transferred all your Offer Shares, you need not forward thisOffer Document and/or the FAA to the purchaser or the transferee (the“Purchaser”) as arrangements will be made by CDP for a separate OfferDocument and FAA to be sent to the Purchaser. Purchasers should note that CDPwill, on behalf of the Offeror, send a copy of this Offer Document and the FAA byordinary post at the Purchasers’ own risk to their respective addresses as theyappear in the records of CDP.
If you wish to accept the Offer, you must insert in Part A of the FAA the numberof Offer Shares already standing to the credit of the “Free Balance” of yourSecurities Account in respect of which the Offer is accepted.
If you are a depository agent as defined under Section 81SF of the SFA, you mayaccept the Offer via the SGX-SFG Service provided by CDP as listed in the Termsand Conditions for User Services for Depository Agents (“ElectronicAcceptance”). Such Electronic Acceptances must be submitted not later than5.30 p.m. (Singapore time) on the Closing Date. CDP has been authorised bythe Offeror to receive Electronic Acceptances on its behalf. Such ElectronicAcceptances submitted will be deemed irrevocable and subject to each of theterms and conditions contained in the FAA and this Offer Document as if the FAAhas been duly completed, signed in its originality and submitted to CDP.
Subject to paragraph 1(b) below:
(i) (A) if the number of Offer Shares inserted in Part A of the FAA or submittedthrough Electronic Acceptance exceeds the number of Offer Sharesstanding to the credit of the “Free Balance” of your Securities Accountas at 5.00 p.m. (Singapore time) on the date of receipt of the FAA byCDP (the “Date of Receipt”) or, in the case where the Date of Receiptis on the Closing Date, as at 5.30 p.m. (Singapore time) on the ClosingDate (provided always that the Date of Receipt is on or before theClosing Date); or
(B) if no such number of Offer Shares is inserted in Part A of the FAA,
then you are deemed to have accepted the Offer in respect of all the OfferShares already standing to the credit of the “Free Balance” of yourSecurities Account as at 5.00 p.m. (Singapore time) on the Date of Receiptor, in the case where the Date of Receipt is on the Closing Date, as at 5.30p.m. (Singapore time) on the Closing Date (provided always that the Date ofReceipt is on or before the Closing Date); and
LETTER TO SHAREHOLDERS
20
(ii) if, at the time of verification by CDP of the FAA on the Date of Receipt, ifparagraph 1(a)(i)(A) above applies, and there are outstanding settlementinstructions with CDP to receive further Shares into the “Free Balance” ofyour Securities Account (“Unsettled Buy Position”), and the Unsettled BuyPosition settles such that the Shares in the Unsettled Buy Position aretransferred to the “Free Balance” of your Securities Account at any timeduring the period the Offer is open, up to 5.30 p.m. on the Closing Date(“Settled Shares”), you shall be deemed to have accepted the Offer inrespect of the balance number of Shares inserted in Part A of the FAA whichhave not yet been accepted pursuant to paragraph 1(a)(i)(A) above, or thenumber of Settled Shares, whichever is less.
(b) Depositors whose Securities Accounts will be credited with Offer Shares
If you have purchased Offer Shares on the SGX-ST and such Offer Shares arein the process of being credited to the “Free Balance” of your Securities Account,you should also receive this Offer Document together with a FAA. If you wish toaccept the Offer in respect of such Offer Shares, you should, after the “FreeBalance” of your Securities Account has been credited with such number of OfferShares, complete, sign and submit the duly completed and signed original of theaccompanying FAA in accordance with the provisions and instructions in thisOffer Document and the provisions and instructions printed on the FAA (whichprovisions and instructions shall be deemed to form part of the terms of the Offer)and submit the duly completed and signed FAA, either by hand to:
EXEO GLOBAL PTE. LTD.c/o The Central Depository (Pte) Limited9 North Buona Vista Drive#01-19/20The MetropolisSingapore 138588
or by post in the enclosed pre-addressed envelope at your own risk, to:
EXEO GLOBAL PTE. LTD.c/o The Central Depository (Pte) LimitedRobinson Road Post OfficeP.O. Box 1984Singapore 903934
so as in either case to arrive not later than 5.30 p.m. (Singapore time) on theClosing Date.
If you purchase Offer Shares on the SGX-ST, your acceptance in respect of suchOffer Shares will be rejected if the “Free Balance” of your Securities Account isnot credited with such Offer Shares by 5.00 p.m. (Singapore time) on the Date ofReceipt (if the FAA is received by CDP prior to the Closing Date) or 5.30 p.m.(Singapore time) on the Closing Date (if the FAA is received by CDP on theClosing Date), save where you had indicated the number of Offer Shares youwish to tender in acceptance of the Offer in Part A of the FAA and there is anUnsettled Buy Position at the time of verification by CDP of the FAA on the Dateof Receipt. If the Unsettled Buy Position does not settle by 5.30 p.m. on theClosing Date, your acceptance in respect of such Shares will be rejected.
LETTER TO SHAREHOLDERS
21
None of the Offeror, KPMG or CDP accepts any responsibility or liability inrelation to such rejection, including the consequences thereof.
(c) Depositors whose Securities Accounts are and will be credited with OfferShares
If you already have Offer Shares standing to the credit of the “Free Balance” ofyour Securities Account, and if you have also purchased additional Offer Shareson the SGX-ST that are in the process of being credited to the “Free Balance” ofyour Securities Account, you may accept the Offer in respect of the Offer Sharesstanding to the credit of the “Free Balance” of your Securities Account but inrespect of the additional Offer Shares purchased which are in the process ofbeing credited to the “Free Balance” of your Securities Account, you may acceptthe Offer in respect of such additional Offer Shares only after the “Free Balance”of your Securities Account has been credited with such number of Offer Shares.The provisions set out above shall apply in the same way to your acceptance(s).
(d) General
For reasons of confidentiality, CDP will not entertain telephone enquiries relatingto the number of Offer Shares standing to the credit of the “Free Balance” in yourSecurities Account. You can verify the number of Offer Shares standing to thecredit of the “Free Balance” in your Securities Account (i) through CDP Online ifyou have registered for CDP Internet Access Service or (ii) through CDP PhoneService if you have a T-Pin. Alternatively, you may proceed to CDP in person withyour identity card or passport to verify the number of Offer Shares standing to thecredit of the “Free Balance” in your Securities Account.
Blocked Balance
CDP will, upon receipt on behalf of the Offeror of the duly completed and signedoriginal FAA or Electronic Acceptance, and all other relevant documents (if any),transfer the Offer Shares in respect of which you have accepted the Offer fromthe “Free Balance” of your Securities Account to the “Blocked Balance” of yourSecurities Account until the consideration for the Offer Shares has beendespatched to you.
Except as specifically provided for in this Offer Document and the Code,acceptance of the Offer is irrevocable.
Receipt
No acknowledgement will be given for submissions made by post, deposited atboxes located at CDP’s premises or by hardcopies at CDP’s counters. Allcommunications, notices, documents and payments will be sent by ordinary postat the risk of the person(s) entitled thereto to the mailing address appearing in therecords of CDP. Settlement of the consideration under the Offer will be subject tothe receipt of confirmation satisfactory to the Offeror that the Offer Shares towhich the FAA relates are credited to the “Free Balance” of your SecuritiesAccount and such settlement cannot be made until all relevant documents havebeen properly completed and lodged with EXEO GLOBAL PTE. LTD. c/o TheCentral Depository (Pte) Limited, by hand at 9 North Buona Vista Drive,#01-19/20, The Metropolis, Singapore 138588 or by post at your own risk usingthe enclosed pre-addressed envelope to Robinson Road Post Office, P.O. Box1984, Singapore 903934.
LETTER TO SHAREHOLDERS
22
Notification
In the event that the Offer becomes or is being declared to be unconditional in all
respects in accordance with its terms, CDP will send you a notification letter
stating the number of Offer Shares debited from the “Free Balance” of your
Securities Account together with payment of the Offer Price by way of a S$
cheque drawn on a bank in Singapore for the appropriate amount, or in such
other manner as you may have agreed with CDP for the payment of any cash
distributions.
Return of Offer Shares
In the event that the Offer does not become or is not being declared to be
unconditional in all respects in accordance with its terms, CDP will return the
aggregate number of Offer Shares in respect of which you have accepted the
Offer and tendered for acceptance under the Offer to the “Free Balance” of your
Securities Account as soon as possible but, in any event, within 14 days from the
lapse of the Offer.
No Securities Account
If you do not have any existing Securities Account in your name at the time of
acceptance of the Offer, your acceptance as contained in the FAA will be
rejected.
If you are a depositor whose Securities Account is or will be credited with Offer
Shares but you do not receive this Offer Document and/or the FAA, you may
obtain this Offer Document and/or the FAA upon production of satisfactory
evidence that you are a Shareholder or have purchased the Offer Shares on the
SGX-ST (as the case may be) from The Central Depository (Pte) Limited, at
9 North Buona Vista Drive, #01-19/20, The Metropolis, Singapore 138588.
2. PROCEDURES FOR ACCEPTANCE OF THE OFFER BY SHAREHOLDERS WHO
HOLD OFFER SHARES WHICH ARE NOT DEPOSITED WITH CDP
If you hold Offer Shares which are not deposited with CDP, you are entitled to receive
this Offer Document together with the FAT. If you wish to accept the Offer, you should
complete and sign the FAT (which is available upon request from Exeo Global Pte. Ltd.
c/o Tricor Barbinder Share Registration Services at 80 Robinson Road, #11-02,
Singapore 068898) in accordance with the provisions and instructions in this Offer
Document including the provisions and instructions printed on the FAT (which
provisions and instructions shall be deemed to form part of the terms of the Offer) and
submit with the relevant share certificate(s) and/or other document(s) of title and/or
any other relevant document(s) required by the Offeror by hand or by post, at your
own risk, to:
EXEO GLOBAL PTE. LTD.
c/o Tricor Barbinder Share Registration Services
80 Robinson Road, #11-02
Singapore 068898
LETTER TO SHAREHOLDERS
23
so as to arrive not later than 5.30 p.m. (Singapore time) on the Closing Date.
If the number of Offer Shares in respect of acceptances for the Offer as inserted byyou in the FAT exceeds the number of Offer Shares represented by the sharecertificate(s) and/or other document(s) of title accompanying the FAT, or if no suchnumber of Offer Shares is inserted by you, then you shall be deemed to have acceptedthe Offer in respect of all the Offer Shares as represented by the share certificate(s)and/or other document(s) of title accompanying the FAT.
General
If your Offer Shares are represented by share certificate(s) which are not registeredwith the Company in your own name, you must send in, at your own risk, the relevantshare certificate(s), other document(s) of title and/or other relevant documentsrequired by the Offeror together with a duly completed and signed original FATaccompanied by transfer form(s), duly completed and executed by the person(s)registered with the Company as the holder of the Offer Shares and stamped, with theparticulars of the transferee left blank (to be completed by the Offeror or a personauthorised by it).
It is your responsibility to ensure that the FAT is properly completed in all respects. TheOfferor, KPMG and/or the Share Registrar will be entitled in their sole and absolutediscretion to reject any acceptance which does not comply with the provisions andinstructions contained herein and in the FAT, or (subject to the preceding paragraph)which is not accompanied by the relevant share certificate(s), other document(s) oftitle and/or any other relevant document(s) required by the Offeror, or which isotherwise incomplete, incorrect, unsigned, signed but not in its originality or invalid inany respect. Any decision to reject the FAT on the grounds that it has beenincompletely, incorrectly or invalidly signed, completed or submitted, unsigned orsigned but not in its originality will be final and binding, and none of the Offeror, KPMGor the Share Registrar accepts any responsibility or liability for the consequences ofsuch a decision.
Except as specifically provided for in this Offer Document and the Code,acceptance of the Offer is irrevocable.
Receipt
No acknowledgement of receipt of any FAT, share certificate(s), other document(s) oftitle, transfer form(s) and/or any other relevant document(s) required by the Offeror willbe given.
All communications, notices, certificates, documents and remittances will be sent byordinary post at your sole risk.
Notification
In the event the Offer becomes or is being declared to be unconditional in all respectsin accordance with its terms, payment will be sent to you (or your designated agent or,in the case of joint accepting Shareholders who have not designated any agent, to theone first named in the register of members of the Company) by ordinary post at youraddress as it appears in the register of members of the Company at your own risk (orto such different name and address as may be specified by you in the FAT and at yourown risk), by way of a S$ cheque drawn on a bank in Singapore for the appropriateamount.
LETTER TO SHAREHOLDERS
24
Return of Offer Shares
In the event that the Offer does not become or is not being declared to be
unconditional in all respects in accordance with its terms, the FAT and other
documents (including share certificate(s)) will be returned to you at the address stated
in the FAT, or if none is stated, to you (or in the case of joint accepting Shareholders,
to the first named in the register of members of the Company) at the relevant address
set out in the register of members of the Company by ordinary post at your own risk
as soon as possible but, in any event, within 14 days from the lapse of the Offer.
If you are a Shareholder who holds Offer Shares which are not deposited with CDP but
you do not receive the FAT, you may obtain such a FAT upon production of satisfactory
evidence that you are a Shareholder, from Exeo Global Pte. Ltd. c/o Tricor Barbinder
Share Registration Services at 80 Robinson Road, #11-02, Singapore 068898.
3. OTHER RELEVANT INFORMATION IN RESPECT OF THE PROCEDURES FOR
ACCEPTANCE
Scripless and Scrip Offer Shares
If you hold share certificate(s) of some of the Offer Shares beneficially owned by you
and if you have deposited the rest of the Offer Shares beneficially owned by you with
CDP, you are required to complete, sign and submit at your own risk, the signed
original FAT in respect of the Offer Shares represented by share certificate(s) and the
signed original FAA in respect of the Offer Shares which are deposited with CDP, if you
wish to accept the Offer in respect of all such Offer Shares. Both the FAT and the FAA
must be completed, signed and accompanied by the relevant documents and
submitted to the Offeror in accordance with the respective procedures for acceptance
set out in paragraphs 1 and 2 of this Appendix VI.
Deposit Time
If you hold share certificate(s) of the Offer Shares beneficially owned by you and you
wish to accept the Offer in respect of such Offer Shares, you should not deposit the
share certificate(s) with CDP during the period commencing on the date of this Offer
Document and ending on the Closing Date (both dates inclusive) as your Securities
Account may not be credited with the relevant number of Offer Shares in time for you
to accept the Offer.
Discretion
If you wish to accept the Offer, it is your responsibility to ensure that the FAA and/or
the FAT, as the case may be, is properly completed in all respects, submitted with
original signature(s) and all required documents are provided. The Offeror, KPMG,
CDP and/or the Share Registrar will be entitled, at their sole and absolute discretion,
to reject any acceptance which does not comply with the provisions and instructions
contained herein and in the FAA and/or the FAT, as the case may be, or which is
otherwise incomplete, incorrect, unsigned, signed but not in its originality or invalid in
any respect.
ANY DECISION TO REJECT ANY ACCEPTANCE WILL BE FINAL AND BINDING,
AND NONE OF THE OFFEROR, KPMG, CDP OR THE SHARE REGISTRAR
ACCEPTS ANY RESPONSIBILITY OR LIABILITY FOR THE CONSEQUENCES OF
SUCH A DECISION.
LETTER TO SHAREHOLDERS
25
Acceptances Received on Saturday, Sunday and Public Holidays
Acceptances in the form of the FAA and/or the FAT received by the Offeror, KPMG,
CDP and/or the Share Registrar, on a Saturday, Sunday or public holiday will only be
processed and validated on the next business day.
Evidence of Title
Submission of the duly completed and signed original FAA and/or FAT through CDP
and/or the Share Registrar and/or, as the case may be, the Offeror or KPMG, shall be
conclusive evidence in favour of the Offeror, KPMG, CDP and the Share Registrar of
the right and title of the person(s) signing it to deal with the same and with the Offer
Shares to which it relates.
Personal Data Privacy
By completing and delivering a FAA and/or a FAT, each person (a) consents to the
collection, use and disclosure of his personal data by the Share Registrar, Securities
Clearing and Computer Services (Pte) Ltd, CDP, the SGX-ST, the Offeror, KPMG and
the Company (the “Relevant Persons”) for the purpose of facilitating his acceptance
of the Offer, and in order for the Relevant Persons to comply with any applicable laws,
listing rules, regulations and/or guidelines, (b) warrants that where he discloses the
personal data of another person, such disclosure is in compliance with applicable law,
and (c) agrees that he will indemnify the Relevant Persons in respect of any penalties,
liabilities, claims, demands, losses and damages as a result of his breach of such
warranty.”
2.5 Closing Date
Shareholders should note the Closing Date of 5.30 p.m. (Singapore time) on 4 March 2019
or such later date(s) as may be announced from time to time by or on behalf of the Offeror.
3. INFORMATION ON THE OFFEROR AND KYOWA EXEO
Section 4 of the Offer Document sets out certain information on the Offeror and Kyowa
Exeo, extracts of which are set out below. Additional information on the Offeror and Kyowa
Exeo extracted from Appendices II and III of the Offer Document is set out in Appendix C
of this Circular.
“4. INFORMATION ON THE OFFEROR AND KYOWA EXEO
4.1 The Offeror is a private company limited by shares incorporated in Singapore on
20 November 2018. As at the Latest Practicable Date, the Offeror has an issued and
paid-up capital of S$6,000,000, consisting of 6,000,000 ordinary shares. The Offeror
is a wholly-owned subsidiary of Kyowa Exeo and serves as a regional head office,
administrative office and subsidiary management office of Kyowa Exeo.
LETTER TO SHAREHOLDERS
26
The board of directors of the Offeror comprises:
(a) Mr. Yoshiaki Matsuzaka;
(b) Mr. Yasuo Otsubo;
(c) Mr. Yuichi Koyama;
(d) Mr. Fumitoshi Imaizumi; and
(e) Mr. Tan Seow Leng.
Appendix II to this Offer Document sets out certain additional information on the
Offeror.
4.2 Kyowa Exeo is a leading Japanese conglomerate in the construction and supply of
telecommunications infrastructure, electrical, civil and environmental engineering
services, systems solutions and integration services.
Appendix III to this Offer Document sets out certain additional information on Kyowa
Exeo.”
4. IRREVOCABLE UNDERTAKINGS
Section 6 of the Offer Document sets out certain information relating to the Irrevocable
Undertakings received by the Offeror, extracts of which are set out below.
“6. IRREVOCABLE UNDERTAKINGS
6.1 As at the Latest Practicable Date, certain Shareholders (the “Undertaking
Shareholders”) have provided irrevocable undertakings (the “Irrevocable
Undertakings”) to the Offeror to, inter alia, accept the Offer in respect of an aggregate
of 335,248,267 Shares, representing approximately 50.34% of the total number of
issued Shares (which, for the avoidance of doubt, excludes any issued and paid-up
ordinary shares held by the Company as treasury shares) or approximately 50.13% of
the maximum potential issued shares in the Company.
LETTER TO SHAREHOLDERS
27
Details of the Undertaking Shareholders and the number of Shares to be tendered in
acceptance of the Offer by each Undertaking Shareholder pursuant to their respective
Irrevocable Undertakings are as follows:
Undertaking Shareholder
Number of
Shares to be
tendered in
acceptance of
the Offer
Percentage
of the total
number of
issued
Shares(1)
Percentage
based on
maximum
potential
issued
shares(2)
Poh Boon Kher Melvin 81,825,400 12.29% 12.23%
3rd Space Pte Ltd(3) 53,044,570 7.96% 7.93%
Wong Kok Khun(3) 29,077,000 4.37% 4.35%(4)
Ng Chuen Guan 22,185,000 3.33% 3.32%
Chua Hock Choon 21,951,600 3.30% 3.28%
Chua Chye Lee 21,195,100 3.18% 3.17%
Toe Teow Heng 20,290,700 3.05% 3.03%
Kow Ya 18,067,100 2.71% 2.70%(4)
Oan Chim Seng 16,306,300 2.45% 2.44%
Woo Kok Sin 16,153,900 2.43% 2.42%
Leow Chin Bee 11,140,000 1.67% 1.67%
Koh Su San 8,962,500 1.35% 1.34%
Johan Djaja 6,566,700 0.99% 0.98%
Lim Swee Yong 3,709,000 0.56% 0.55%
Cheryl Tan Choo Huang 2,641,700 0.40% 0.39%
Tay Koong Phong 1,359,822 0.20% 0.20%
Chan Allen 771,875 0.12% 0.12%
Total 335,248,267 50.34% 50.13%
Notes:
(1) Based on the Company’s issued capital of 666,001,586 Shares (excluding 5,267,388 treasury shares)
as at the Latest Practicable Date. Percentages are rounded to the nearest two (2) decimal places.
(2) Based on the maximum potential issued shares in the Company of 668,792,283 Shares as at the Latest
Practicable Date (assuming all the outstanding Options had been validly exercised and on the basis
that there are no outstanding Awards). Percentages are rounded to the nearest two (2) decimal places.
(3) 3rd Space Pte Ltd is wholly-owned by Wong Kok Khun. Wong Kok Khun is deemed to have an interest
in the Shares held by 3rd Space Pte Ltd by virtue of Section 7 of the Companies Act.
(4) Excludes the 2,232,558 ESOS Options held by Wong Kok Khun and the 558,139 ESOS Options held
by Kow Ya, on the basis of his/her undertaking that such ESOS Options will be surrendered for
cancellation under each of their respective Irrevocable Undertakings.
LETTER TO SHAREHOLDERS
28
6.2 Each Irrevocable Undertaking will terminate or lapse if the Offer is withdrawn orlapses, or fails to become or be declared to be unconditional in all respects forwhatever reason, other than as a result of a breach by any of the UndertakingShareholders of any of his or her obligations under the relevant IrrevocableUndertaking.
6.3 Save for the Irrevocable Undertakings, as at the Latest Practicable Date, neither theOfferor nor any party acting in concert with the Offeror has received any irrevocableundertaking from any other party to accept or reject the Offer.
6.4 As at the Latest Practicable Date, the number of Shares owned, controlled or agreedto be acquired by the Offeror and parties acting in concert with it, together with thetotal number of Shares to which the Irrevocable Undertakings relate, is an aggregateof 405,598,667 Shares, representing approximately 60.90% of the total number ofShares (which, for the avoidance of doubt, excludes any issued and paid-up ordinaryshares held by the Company as treasury shares) or approximately 60.65% of themaximum potential issued shares in the Company.”
5. RATIONALE FOR THE OFFER
The full text of the rationale for the Offer has been extracted from Section 5 of the Offer
Document, extracts of which are set out below.
“5. RATIONALE FOR THE OFFER
5.1 Greater Management Flexibility
The Offeror is making the Offer with a view to delisting the Company from the SGX-STand exercising any rights of compulsory acquisition that may arise under Section215(1) of the Companies Act. The Offeror believes that privatising the Company willgive the Offeror and the management of the Company more flexibility to manage thebusiness of the Company, optimise the use of its management and capital resourcesand facilitate the implementation of any operational change.
5.2 Kyowa Exeo’s Ability to Drive Future Growth in the Company
Following completion of the acquisition and delisting of the Company from theSGX-ST, Kyowa Exeo intends to leverage its scale, capability and know-how toimprove the Company’s performance. Additionally, Kyowa Exeo, through the Offerorwhich is its wholly-owned subsidiary, intends to contribute additional capital for thepurposes of making additional investments in the Company in order to enable futuregrowth.
5.3 Compliance Costs of Maintaining Listing
In maintaining its listed status, the Company incurs compliance and associated costs.In the event that the Company is delisted from the SGX-ST, the Company will be ableto save on expenses relating to the maintenance of a listed status and focus itsresources on its business operations.
LETTER TO SHAREHOLDERS
29
5.4 The Proposed Transaction is in Line with Kyowa Exeo’s Acquisition Strategy
Kyowa Exeo is a leading provider of telecommunication infrastructure services and
systems solutions in Japan. The acquisition of the Company is in line with Kyowa
Exeo’s regional growth strategy, and will provide Kyowa Exeo with a strong platform
for expansion in the urban infrastructure and systems solutions industries throughout
Southeast Asia.
As such, given that the Company is a leading provider of information technology
infrastructure and cloud services in Singapore, the acquisition of the Company is in
line with Kyowa Exeo’s aforesaid regional growth strategy. The Company will provide
Kyowa Exeo with a strong platform to enter the Singapore market, a business hub in
Asia.
Further, with the acquisition of the Company, Kyowa Exeo would be better able to
achieve long-term stable growth through a more diversified portfolio of information and
communication technologies (ICT) businesses.
5.5 Offer Price at a Premium to Traded Prices at Different Time Periods over the
12 Months Prior to the Last Trading Day
The Offer Price represents a premium of approximately 18.18% over the last
transacted price per Share of S$0.110 on 3 January 2019, being the Last Trading Day.
When compared to the benchmark prices of the Shares up to and including the Last
Trading Day, the Offer Price also represents a premium of approximately 28.71%,
47.73%, 52.94% and 51.16% over the VWAP per Share for the one (1)-month, three
(3)-month, six (6)-month and 12-month periods, respectively.
Further, the Offer Price is at a premium ranging from 18.18% to 85.71% to the daily
closing prices of the Shares on the SGX-ST over the 12 months prior to the Last
Trading Day as illustrated below:
Source: Bloomberg L.P.
LETTER TO SHAREHOLDERS
30
We note that the Shares were last transacted above the Offer Price of S$0.13 on
12 July 2017. The Company has also not declared any dividends since its listing on
SGX-ST.
The Offer presents Shareholders with a clean cash exit opportunity to realise their
entire investment in Shares at a premium over the prevailing trading prices of the
Shares without incurring brokerage and other trading costs.”
6. LISTING STATUS, COMPULSORY ACQUISITION AND THE OFFEROR’S INTENTIONS
RELATING TO THE COMPANY
Section 9 of the Offer Document sets out the intentions of the Offeror relating to the listing
status of the Company, compulsory acquisition and the Offeror’s intentions for the
Company, extracts of which are set out below. Shareholders are advised to read the
extracts below carefully and note the Offeror’s future plans for the Company.
“9. LISTING STATUS AND COMPULSORY ACQUISITION
9.1 Listing Status
Pursuant to Rule 1104 of the Catalist Rules, upon an announcement by the Offeror
that acceptances have been received pursuant to the Offer that bring the holdings
owned by the Offeror and parties acting in concert with it to above 90% of the total
number of issued Shares (excluding any Shares held in treasury), the SGX-ST may
suspend the trading of the Shares in the Ready and Unit Share markets until it is
satisfied that at least 10% of the total number of issued Shares (excluding any Shares
held in treasury) are held by at least 200 Shareholders who are members of the public.
Rule 1303(1) of the Catalist Rules provides that if the Offeror succeeds in garnering
acceptances exceeding 90% of the total number of issued Shares (excluding any
Shares held in treasury), thus causing the percentage of the total number of issued
Shares (excluding any Shares held in treasury) held in public hands to fall below 10%,
the SGX-ST will suspend trading of the Shares only at the close of the Offer.
Under Rule 724(1) of the Catalist Rules, if the percentage of the Shares held in public
hands falls below 10%, the Company must, as soon as practicable, notify its sponsor
of that fact and announce that fact, and the SGX-ST may suspend trading of all the
Shares. Rule 724(2) of the Catalist Rules states that the SGX-ST may allow the
Company a period of three (3) months, or such longer period as the SGX-ST may
agree, to raise the percentage of the Shares held in public hands to at least 10%,
failing which the Company may be removed from the Official List.
9.2 Compulsory Acquisition
Pursuant to Section 215(1) of the Companies Act, in the event that the Offeror
acquires not less than 90% of the total number of issued Shares (other than those
already held by the Offeror, its related corporations or their respective nominees as at
the date of the Offer and excluding any Shares held in treasury), the Offeror would be
entitled to exercise the right to compulsorily acquire all the Shares from Shareholders
who have not accepted the Offer at a price equal to the Offer Price.
LETTER TO SHAREHOLDERS
31
In addition, pursuant to Section 215(3) of the Companies Act, if the Offeror acquires
such number of Shares which, together with the Shares held by it, its related
corporations and their respective nominees, comprise 90% or more of the total number
of issued Shares, the Shareholders who have not accepted the Offer will have a right
to require the Offeror to acquire their Shares at the Offer Price. Such Shareholders
who wish to exercise such a right are advised to seek their own independent legal
advice.
9.3 Offeror’s Intentions
The Offeror intends to make the Company its wholly-owned subsidiary and does
not intend to maintain the listing status of the Company. Accordingly, the
Offeror, if and when entitled, intends to exercise its rights of compulsory
acquisition under Section 215(1) of the Companies Act and does not intend to
take any step for the public float to be restored and/or for any trading
suspension of the Shares by the SGX-ST to be lifted in the event that, inter alia,
less than 10% of the total number of issued Shares (excluding any Shares held
in treasury) are held in public hands. In addition, the Offeror also reserves the right
to seek a voluntary delisting of the Company from the SGX-ST pursuant to Rules 1307
and 1308 of the Catalist Rules.
Subject to normal business conditions, the Offeror does not intend to (a) make major
changes to the business of the Company or its management team, (b) re-deploy the
fixed assets of the Company or (c) discontinue the employment of the employees of
the Company and of its subsidiaries, other than in the normal course of business.
Nonetheless, the intentions of the Offeror for the Company as set out above involve
known and unknown risks, uncertainties and other factors, many of which are outside
the control of the Offeror, and there is no assurance that the current intentions will be
carried into effect. The Offeror further reserves the right and discretion, subsequent to
the Offer, to undertake a review of the operations, management and financial position
of the Group and evaluate various strategic options. Accordingly, the Offeror retains
the flexibility at any time to alter its plans as aforesaid, restructure the management or
shareholdings of the Group, or consider any options or opportunities which may
present themselves, or which may be required, and which the Offeror may regard to
be in the interest of the Group, the Company and/or the Offeror.”
LETTER TO SHAREHOLDERS
32
7. FINANCIAL EVALUATION OF THE OFFER
Section 8 of the Offer Document sets out certain information on the financial evaluation of
the Offer, extracts of which are set out below.
“8. FINANCIAL EVALUATION OF THE OFFER
The Offer Price represents the following premia over the historical traded prices of the
Shares:
Description
Share Price
(S$)(1)(2)
Premium over
Share Price(3)
(%)(4)
(a) Last transacted price per Share on 3 January
2019 (being the Last Trading Day)
0.110 18.18
(b) VWAP of the Shares traded on the SGX-ST
for the one (1)-month period prior to and
including the Last Trading Day
0.101 28.71
(c) VWAP of the Shares traded on the SGX-ST
for the three (3)-month period prior to and
including the Last Trading Day
0.088 47.73
(d) VWAP of the Shares traded on the SGX-ST
for the six (6)-month period prior to and
including the Last Trading Day
0.085 52.94
(e) VWAP of the Shares traded on the SGX-ST
for the 12-month period prior to and
including the Last Trading Day
0.086 51.16
Notes:
(1) Source: Bloomberg L.P.
(2) The VWAP is calculated based on the daily VWAP turnover divided by VWAP volume of the Shares as
extracted from Bloomberg L.P.
(3) Computed based on the Share prices which were rounded to the nearest three (3) decimal places.
(4) Percentages rounded to the nearest two (2) decimal places.
We note that the Share price of the Company has not exceeded the Offer Price since
the lifting of trading halt on 8 January 2019.”
LETTER TO SHAREHOLDERS
33
8. DISCLOSURES
Section 1 of Appendix IV of the Offer Document sets out certain information relating to
disclosure of interests, extracts of which are set out below.
“1. DISCLOSURE OF INTERESTS
1.1 Holdings in Company Securities
(a) As at the Latest Practicable Date, based on the latest information available to theOfferor, save for the Irrevocable Undertakings and as disclosed below, none ofthe Offeror, its directors or any of the parties acting or deemed to be acting inconcert with the Offeror is interested in, owns, controls or has agreed to acquireany Company Securities:
Name
Number of
Shares
Percentage of
the total number
of issued
Shares(1)
Percentage
based on
maximum
potential issued
shares(2)
Exeo Global Pte. Ltd. 70,350,400 10.56% 10.52%
Notes:
(1) Based on the Company’s issued capital of 666,001,586 Shares (excluding 5,267,388 treasury
shares) as at the Latest Practicable Date. Percentages are rounded to the nearest two (2)
decimal places.
(2) Based on the maximum potential issued shares in the Company of 668,792,283 Shares as at the
Latest Practicable Date (assuming all the outstanding Options had been validly exercised and on
the basis that there are no outstanding Awards). Percentages are rounded to the nearest two (2)
decimal places.
(b) As at the Latest Practicable Date, based on the latest information available to theOfferor, save as set out in paragraph 6 of this Offer Document, none of theUndertaking Shareholders owns, controls or has agreed to acquire any CompanySecurities.
1.2 Dealings in Company Securities
Based on the latest information available to the Offeror, save as disclosed below, noneof the Offeror, its directors, or any of the parties acting or deemed to be acting inconcert with the Offeror has dealt for value in the Company Securities during theperiod commencing three (3) months prior to the Offer Announcement Date andending on the Latest Practicable Date:
Name
Date of
Transaction
Number of
Shares Acquired
Transacted
Price per Share
Exeo Global Pte. Ltd. 8 January 2019 62,861,200 S$0.13
Exeo Global Pte. Ltd. 9 January 2019 2,993,600 S$0.13
Exeo Global Pte. Ltd. 10 January 2019 948,400 S$0.13
Exeo Global Pte. Ltd. 11 January 2019 884,900 S$0.13
Exeo Global Pte. Ltd. 14 January 2019 2,662,300 S$0.13
LETTER TO SHAREHOLDERS
34
1.3 Undertakings to accept or reject the Offer
(a) As at the Latest Practicable Date, save for the Irrevocable Undertakings, no
person has given any undertaking to the Offeror or any party acting in concert
with it, to accept or reject the Offer.
(b) Based on the latest information available to the Offeror, save as disclosed below,
none of the Undertaking Shareholders has dealt for value in the Company
Securities during the period commencing three (3) months prior to the Offer
Announcement Date and ending on the Latest Practicable Date:
Name
Date of
Transaction
Number
of Shares
Acquired
Number
of Shares
Sold
Transacted
Price per
Share(1)
Toe Teow Heng 8 October 2018 3,175,600 – S$0.084
Johan Djaja 9 October 2018 2,896,700 – S$0.085
Toe Teow Heng 9 October 2018 1,354,400 – S$0.083
Toe Teow Heng 10 October 2018 1,700,000 – S$0.083
Toe Teow Heng 11 October 2018 901,000 – S$0.081
Toe Teow Heng 12 October 2018 200,000 – S$0.083
Chua Chye Lee 15 October 2018 9,680,000 – S$0.093
Chua Hock Choon 15 October 2018 10,000,000 – S$0.090
Toe Teow Heng 15 October 2018 2,500 – S$0.082
Leow Chin Bee 15 October 2018 10,000,000 – S$0.090
Ng Chuen Guan 15 October 2018 2,285,000 – S$0.084
Ng Chuen Guan 16 October 2018 3,215,000 – S$0.084
Ng Chuen Guan 17 October 2018 380,000 – S$0.084
Chua Chye Lee 18 October 2018 932,000 – S$0.083
Chua Hock Choon 18 October 2018 1,000,000 – S$0.083
Ng Chuen Guan 18 October 2018 2,000,000 – S$0.084
Tay Koong Phong 18 October 2018 – 150,000 S$0.083
Ng Chuen Guan 19 October 2018 260,000 – S$0.083
Tay Koong Phong 19 October 2018 – 300,000 S$0.085
Ng Chuen Guan 22 October 2018 900,000 – S$0.083
Ng Chuen Guan 23 October 2018 1,260,000 – S$0.083
Toe Teow Heng 23 October 2018 197,500 – S$0.082
Chua Hock Choon 26 October 2018 2,893,300 – S$0.081
LETTER TO SHAREHOLDERS
35
Name
Date of
Transaction
Number
of Shares
Acquired
Number
of Shares
Sold
Transacted
Price per
Share(1)
Toe Teow Heng 26 October 2018 200,000 – S$0.080
Toe Teow Heng 31 October 2018 346,000 – S$0.079
Toe Teow Heng 1 November 2018 59,700 – S$0.080
Toe Teow Heng 2 November 2018 91,900 – S$0.080
Toe Teow Heng 7 November 2018 40,000 – S$0.080
Ng Chuen Guan 3 December 2018 85,000 – S$0.097
Ng Chuen Guan 5 December 2018 328,000 – S$0.097
Ng Chuen Guan 6 December 2018 448,100 – S$0.096
Ng Chuen Guan 7 December 2018 50,000 – S$0.097
Ng Chuen Guan 10 December 2018 400,000 – S$0.097
Ng Chuen Guan 11 December 2018 185,000 – S$0.096
Ng Chuen Guan 24 December 2018 293,900 – S$0.101
Ng Chuen Guan 27 December 2018 190,000 – S$0.099
Ng Chuen Guan 28 December 2018 100,000 – S$0.101
Ng Chuen Guan 31 December 2018 105,000 – S$0.101
Note:
(1) Rounded to the nearest three (3) decimal places.
1.4 Arrangements of the kind referred to in Note 7 on Rule 12 of the Code
As at the Latest Practicable Date, save for the Irrevocable Undertakings and
Management Arrangements, neither the Offeror nor any party acting in concert with it
has entered into any arrangement of the kind referred to in Note 7 on Rule 12 of the
Code, including indemnity or option arrangements and any agreement or
understanding, formal or informal, of whatever nature, relating to the Shares which
may be an inducement to deal or refrain from dealing in the Shares.
LETTER TO SHAREHOLDERS
36
1.5 No agreement in connection with or dependent on the Offer
As at the Latest Practicable Date, save for the Irrevocable Undertakings and
Management Arrangements, there is no agreement, arrangement or understanding
between (a) the Offeror or any party acting in concert with it, and (b) any of the present
or recent directors of the Company, or any of the present or recent Shareholders, or
any other person that has any connection with or dependence upon the Offer.
1.6 Transfer of Offer Shares
As at the Latest Practicable Date, there is no agreement, arrangement or
understanding whereby any of the Offer Shares acquired by the Offeror pursuant to
the Offer will be transferred to any other person. The Offeror, however, reserves the
right to transfer any of the Shares to any of its related corporations (as defined in the
Companies Act) or for the purpose of granting security in favour of financial institutions
which have extended or which may extend credit facilities to it from time to time.
1.7 No payment or benefit to directors of the Company
As at the Latest Practicable Date, save for the Management Arrangements, there is no
agreement, arrangement or understanding for payment or other benefit being made or
given to any director of the Company or to any director of any corporation which is by
virtue of Section 6 of the Companies Act deemed to be related to the Company, as
compensation for loss of office or otherwise in connection with the Offer.
1.8 No security interest over or borrowing/lending of Company Securities
As at the Latest Practicable Date, none of the Offeror or any party acting in concert
with it has (a) granted a security interest over any Company Securities to another
person, whether through a charge, pledge or otherwise, (b) borrowed from another
person any Company Securities (excluding borrowed Company Securities which have
been on-lent or sold), or (c) lent any Company Securities to another person.”
9. CONFIRMATION OF FINANCIAL RESOURCES
Section 11 of the Offer Document sets out certain information on the confirmation of
financial resources, extracts of which are set out below.
“11. CONFIRMATION OF FINANCIAL RESOURCES
KPMG, as financial adviser to the Offeror in connection with the Offer, confirms that
sufficient financial resources are available to the Offeror to satisfy full acceptance of
the Offer by the holders of the Offer Shares on the basis of the Offer Price.”
LETTER TO SHAREHOLDERS
37
10. DIRECTORS’ INTERESTS
Details of the Directors including, inter alia, the Directors’ direct and deemed interests in the
Company Securities and Offeror Securities as at the Latest Practicable Date are set out in
Appendix B of this Circular.
11. ADVICE AND RECOMMENDATIONS
11.1 General
Shareholders should read and carefully consider the recommendations of the Independent
Directors and the advice of the IFA to the Independent Directors dated 1 February 2019,
which is set out in Appendix A of this Circular (“IFA Letter”), before deciding whether to
accept or reject the Offer.
11.2 Independence of Directors
Mr Poh Boon Kher Melvin, Mr Ho Chew Thim and Mr Hew Koon Chan are considered
independent for the purposes of making a recommendation on the Offer.
The SIC has on 23 January 2019 ruled that each of Mr Wong Kok Khun, Ms Kow Ya and
Ms Cheryl Tan Choo Huang (collectively, the “Conflicted Directors”) is exempted from the
requirement under Rule 24.1 of the Code to make a recommendation to the Shareholders
in respect of the Offer, as each of them will be receiving management incentives from the
Offeror and faces a conflict of interest in relation to the Offer. Section 7 of the Offer
Document sets out certain information on the management incentives, extracts of which are
set out below.
“7. MANAGEMENT ARRANGEMENTS
7.1 As the Offeror intends and desires that there be continuity of management and
minimal interruption of the business of the Group, the Offeror has entered into a
management incentive plan (the “MIP”) with Mise En Plas Private Limited
(“Management Co”), a company incorporated by management personnel of the
Company, pursuant to which the following arrangements (the “Management
Arrangements”) will come into effect upon the Offer turning unconditional:
(a) Management Co will receive (i) a fixed retention incentive sum of up to
S$3,000,000 over a three (3)-year period provided certain management
personnel remain as employees of the Group and (ii) bonus payout of up to
S$19,000,000 contingent upon the achievement of certain financial performance
targets in the financial years ending 31 December 2019, 31 December 2020,
31 December 2021 and 31 December 2022; and
(b) Management Co has provided certain representations, warranties and
indemnities in respect of the Group in favour of the Offeror, for which
Management Co may incur liability (including a reduction in the payout under the
MIP).
7.2 The SIC has confirmed that the Management Arrangements do not constitute
prohibited special deals for the purposes of Rule 10 of the Code, subject to the
independent financial adviser to the Company publicly stating its opinion that the
terms of the Management Arrangements are fair and reasonable so far as
Shareholders are concerned in the context of Rule 10 of the Code.”
LETTER TO SHAREHOLDERS
38
The Conflicted Directors must, however, still assume responsibility for the accuracy of facts
stated or opinions expressed in documents and advertisements issued by, or on behalf of,
the Company in connection with the Offer.
Shareholders should read and consider carefully the advice of the IFA to the Independent
Directors in respect of the Offer as set out in the IFA Letter and the recommendation of the
Independent Directors set out in Section 11.4 below before deciding whether or not to
accept the Offer.
11.3 Advice of the IFA to the Independent Directors and Opinion of the IFA on the
Management Arrangements
(a) IFA. Provenance Capital Pte. Ltd. has been appointed as the independent financial
adviser to advise the Independent Directors in respect of the Offer. Shareholders
should consider carefully the recommendation of the Independent Directors and the
advice of the IFA to the Independent Directors before deciding whether to accept or
reject the Offer. The IFA’s advice is set out in its letter dated 1 February 2019, which
is set out in Appendix A of this Circular.
(b) Factors taken into consideration by the IFA. In arriving at its recommendation and
opinion (as the case may be), the IFA has taken into account several key
considerations, set forth in paragraphs 8, 9 and 10 of the IFA Letter. Shareholders
should read paragraphs 8, 9 and 10 of the IFA Letter in conjunction with, and in the
context of, the full text of the IFA Letter.
(c) Advice of the IFA. After having regard to the considerations set out in the IFA Letter,
and based on the circumstances of the Company and the information as at the Latest
Practicable Date, the IFA has made certain recommendations to the Independent
Directors and provided its opinion on the Management Arrangements, an extract of
which is set out below. Shareholders should read the extract in conjunction with, and
in the context of, the full text of the IFA Letter. Unless otherwise defined or the context
otherwise requires, all terms and expressions used in the extract below shall have the
same meanings as those defined in the IFA Letter.
“10. OUR RECOMMENDATION TO THE INDEPENDENT DIRECTORS ON THE
OFFER AND OUR OPINION ON THE MANAGEMENT INCENTIVE PLAN
In arriving at our recommendation in respect of the Offer, we have taken into
account, reviewed and deliberated on the following key considerations which we
consider to be pertinent in our assessment of the Offer:
(a) Historical share price performance and trading activity of the Shares;
(b) Financial analysis of the Group;
(c) Comparison with recently completed privatisation of companies listed on the
SGX-ST;
(d) Comparison of valuation ratios of selected listed companies which are
broadly comparable with the Group;
(e) Distribution track record of the Company; and
(f) Other relevant considerations in relation to the Offer.
Based on our analysis and after having considered carefully the
information available to us as at the Latest Practicable Date, overall we are
LETTER TO SHAREHOLDERS
39
of the view that the financial terms of the Offer are fair and reasonable.
Accordingly, we advise the Independent Directors to recommend
Shareholders to ACCEPT the Offer.
Shareholders who wish to realise their investments in the Company can
also choose to sell their Shares in the open market if they can obtain a price
higher than the Offer Price (after deducting transaction costs).
Overall, based on our evaluation of the terms of the Management
Arrangements, understanding of the Management Arrangements from
Management and the information made available to us as at the Latest
Practicable Date, we are of the opinion that the terms of the Management
Arrangements are fair and reasonable so far as Shareholders are concerned
in the context of Rule 10 of the Code.
In rendering the above advice, we have not given regard to the specific
investment objectives, financial situation, tax position, risk profiles or particular
needs and constraints of any individual Shareholder. As each individual
Shareholder would have different investment objectives and profiles, we would
advise that any individual Shareholder who may require specific advice in relation
to his investment objectives or portfolio should consult his legal, financial, tax or
other professional adviser immediately. The Independent Directors should advise
Shareholders that the opinion and advice of Provenance Capital should not be
relied upon by any Shareholder as the sole basis for deciding whether or not to
accept the Offer.
Our recommendation is addressed to the Independent Directors for their benefit,
in connection with and for the purposes of their consideration of the Offer and
may not be used or relied on for any other purposes (other than for the purpose
of the Offer) without the prior written consent of Provenance Capital. The
recommendation to be made by the Independent Directors to Shareholders in
respect of the Offer shall remain the responsibility of the Independent Directors.
This Letter is governed by, and construed in accordance with, the laws of
Singapore, and is strictly limited to the matters stated herein and does not apply
by implication to any other matter.”
11.4 Recommendations of the Independent Directors
The Independent Directors, having considered carefully the terms of the Offer and the
advice given by the IFA in the IFA Letter, concur with the advice of the IFA in respect of the
Offer. Accordingly, the Independent Directors recommend that Shareholders ACCEPT the
Offer, unless Shareholders can obtain a price higher than the Offer Price in the open
market, taking into account the related expenses such as brokerage and trading costs.
11.5 No Regard to Specific Objectives
In rendering the advice and the recommendations above, both the IFA and the Independent
Directors have not had regard to the specific investment objectives, financial situation, tax
status, risk profiles or unique needs and constraints of any individual Shareholder. As
different Shareholders would have different investment objectives and profiles, the
Independent Directors recommend that any individual Shareholder who may require advice
LETTER TO SHAREHOLDERS
40
in the context of his specific investment portfolio should consult his stockbroker, bank
manager, solicitor, accountant, tax adviser or other professional advisers immediately.
SHAREHOLDERS ARE ADVISED TO READ THE FULL TEXT OF THE IFA LETTER
WHICH IS SET OUT IN APPENDIX A OF THIS CIRCULAR CAREFULLY.
12. OVERSEAS SHAREHOLDERS
12.1 Availability of Offer
The availability of the Offer to Shareholders whose addresses are outside Singapore, as
shown on the Register or in the Depository Register (as the case may be), being the
Overseas Shareholders, may be affected by the laws of the relevant overseas jurisdiction.
Overseas Shareholders should refer to Section 10 of the Offer Document, extracts of which
are set out below.
“10. OVERSEAS SHAREHOLDERS
The availability of the Offer to Shareholders whose addresses are outside of
Singapore as shown on the register of members of the Company or in the records of
CDP (as the case may be) (each, an “Overseas Shareholder”) may be affected by the
laws of the relevant overseas jurisdictions in which they are located. Accordingly,
Overseas Shareholders should inform themselves of, and observe, any applicable
requirements in the relevant overseas jurisdictions. Overseas Shareholders should
also exercise caution in relation to the Offer, as this Offer Document, the FAA and the
FAT have not been reviewed by any regulatory authority in any overseas jurisdiction.
Where there are potential restrictions on sending this Offer Document, the FAAs
and/or the FATs to any overseas jurisdiction, the Offeror, KPMG and CDP each
reserves the right not to send these documents to Shareholders in such
overseas jurisdictions. For the avoidance of doubt, the Offer is open to all
Shareholders, including those to whom the Offer Document, the FAAs and/or the
FATs have not been, or may not be, sent.
Copies of this Offer Document and any formal documentation relating to the Offer are
not being, and must not be, directly or indirectly, mailed or otherwise forwarded,
distributed or sent in or into or from any jurisdiction where the making of or the
acceptance of the Offer would violate the law of that jurisdiction (a “Restricted
Jurisdiction”) and will not be capable of acceptance by any such use, instrumentality
or facility within any Restricted Jurisdiction and persons receiving such documents
(including custodians, nominees and trustees) must not mail or otherwise forward,
distribute or send them in or into or from any Restricted Jurisdiction.
The Offer (unless otherwise determined by the Offeror and permitted by applicable law
and regulation) will not be made, directly or indirectly, in or into, or by the use of mails
of, or by any means or instrumentality (including without limitation, telephonically or
electronically) of interstate or foreign commerce of, or any facility of a national, state
or other securities exchange of, any Restricted Jurisdiction, and the Offer will not be
capable of acceptance by any such use, means, instrumentality or facilities.
Overseas Shareholders may, nonetheless, obtain copies of this Offer Document, the
FAAs and/or the FATs and any related documents, during normal business hours and
LETTER TO SHAREHOLDERS
41
up to 5.00 p.m. (Singapore time) on the Closing Date, from the Offeror through its
receiving agent, CDP (if he is a depositor) at 9 North Buona Vista Drive, #01-19/20,
The Metropolis, Singapore 138588, or the Share Registrar (if he is a scripholder),
Tricor Barbinder Share Registration Services at 80 Robinson Road, #11-02, Singapore
068898.
Alternatively, an Overseas Shareholder may write to the Offeror through CDP (if he is
a depositor) at Robinson Road Post Office, P.O. Box 1984, Singapore 903934, or the
Share Registrar (if he is a scripholder) at the address listed above, to request for this
Offer Document, the FAA and/or the FAT and any related documents to be sent to an
address in Singapore by ordinary post at the Overseas Shareholder’s own risk, up to
three (3) Market Days prior to the Closing Date.
It is the responsibility of any Overseas Shareholder who wishes to (a) request for this
Offer Document, the FAAs and/or the FATs and/or any related documents, or (b)
accept the Offer, to satisfy himself as to the full observance of the laws of the relevant
jurisdiction in that connection, including the obtaining of any governmental or other
consent which may be required, and compliance with all necessary formalities or legal
requirements and the payment of any taxes, imposts, duties or other requisite
payments due in such jurisdiction. Such Overseas Shareholder shall be liable for any
such taxes, imposts, duties or other requisite payments payable and the Offeror and
any person acting on its behalf (including KPMG) shall be fully indemnified and held
harmless by such Overseas Shareholder for any such taxes, imposts, duties or other
requisite payments as the Offeror and/or any person acting on its behalf (including
KPMG) may be required to pay. In (i) requesting for this Offer Document, the FAAs
and/or the FATs and any related documents and/or (ii) accepting the Offer, the
Overseas Shareholder represents and warrants to the Offeror and KPMG that he is in
full observance of the laws of the relevant jurisdiction in that connection, and that he
is in full compliance with all necessary formalities or legal requirements. Any
Overseas Shareholder who is in any doubt about his position should consult his
professional adviser in the relevant jurisdiction.
The Offeror and KPMG each reserves the right to notify any matter, including the fact
that the Offer has been made, to any or all Overseas Shareholders by announcement
to the SGX-ST or notice and if necessary, by paid advertisement in a daily newspaper
published and circulated in Singapore, in which case such notice shall be deemed to
have been sufficiently given notwithstanding any failure by any Shareholder to receive
or see such announcement, notice or advertisement.”
12.2 Copies of Circular
This Circular may not be sent to Overseas Shareholders due to potential restrictions on
sending such documents to the relevant overseas jurisdictions. Any affected Overseas
Shareholder may, nevertheless, obtain copies of this Circular during normal business hours
up to the Closing Date, from the Registrar, download a copy of this Circular from the website
of the SGX-ST at www.sgx.com, or make a request to the Registrar for this Circular to be
sent to an address in Singapore by ordinary post at his own risk, up to five (5) Market Days
prior to the Closing Date.
LETTER TO SHAREHOLDERS
42
13. INFORMATION PERTAINING TO SRS INVESTORS
Section 13.3 of the Offer Document sets out information pertaining to SRS Investors,
extracts of which are set out below.
“13.3 SRS Investors
SRS Investors should receive further information on how to accept the Offer fromtheir respective SRS Agent Banks directly. SRS Investors are advised to consult theirrespective SRS Agent Banks should they require further information, and if they arein any doubt as to the action they should take, SRS Investors should seekindependent professional advice. SRS Investors who wish to accept the Offer are toreply to their respective SRS Agent Banks by the deadline stated in the letter fromtheir respective SRS Agent Banks, which may be earlier than the Closing Date. SRSInvestors will receive the Offer Price payable in respect of their Offer Shares validlytendered in acceptance of the Offer through appropriate intermediaries in theirrespective SRS investment accounts.”
14. ACTION TO BE TAKEN BY SHAREHOLDERS
Shareholders who wish to accept the Offer must do so not later than the Closing Date or
such later date(s) as may be announced from time to time by or on behalf of the Offeror,
abiding by the procedures for the acceptance of the Offer as set out in Appendix VI of the
Offer Document, and in the accompanying FAA and/or FAT.
Acceptances should be completed and returned as soon as possible and, in any event, so
as to be received, on behalf of the Offeror, by the CDP (in respect of the FAA) or the
Registrar (in respect of the FAT), as the case may be, not later than the Closing Date or
such later date(s) as may be announced from time to time by or on behalf of the Offeror.
Shareholders who do not wish to accept the Offer need not take any further action in
respect of the Offer Document, the FAA and/or the FAT which have been sent to them.
15. CONSENTS
The IFA has given and has not withdrawn its written consent to the issue of this Circular with
the inclusion of the IFA Letter in Appendix A of this Circular and the letter from the IFA
dated 1 February 2019 in relation to the Forecast Statements in Appendix F of this Circular,
and the references to its name in the form and context in which it appears in this Circular.
Ernst & Young LLP, named as the auditors of the Company, has given and has not
withdrawn its written consent to the issue of this Circular with the inclusion herein of the
independent auditor’s report in relation to the audited financial statements of the Group for
FY2017 and the letter from the auditors dated 1 February 2019 in relation to the Forecast
Statements in Appendix G of this Circular, and the references to its name in the form and
context in which it appears in this Circular.
16. DOCUMENTS AVAILABLE FOR INSPECTION
Copies of the following documents may be inspected at the Company’s registered office at
29 Tai Seng Avenue, #05-01 Natural Cool Lifestyle Hub, Singapore 534119 during normal
business hours from the date of this Circular up to and including the date of the Closing
Date:
(a) the Constitution of the Company;
LETTER TO SHAREHOLDERS
43
(b) the annual reports of the Company for FY2015, FY2016 and FY2017;
(c) the unaudited financial information of the Group for 3QFY2018 as set out in
Appendix E of this Circular;
(d) the IFA Letter as set out in Appendix A of this Circular;
(e) the letter from the IFA dated 1 February 2019 as set out in Appendix F of this Circular
in relation to the Forecast Statements;
(f) the letter from the auditors of the Company dated 1 February 2019 as set out in
Appendix G of this Circular in relation to the Forecast Statements;
(g) the bases and assumptions of the Forecast Statements as set out in Appendix H of
this Circular; and
(h) the letters of consent referred to in Section 15 of this Circular.
17. DIRECTORS’ RESPONSIBILITY STATEMENT
Save for (a) the Appendices A, C, F, and G of this Circular, (b) information extracted in toto
from the Offer Document and the Unconditional Announcement and (c) information relating
to the Offeror, the Concert Group and the Offer, the Directors (including any who may have
delegated detailed supervision of this Circular) hereby jointly and severally accept full
responsibility for the accuracy of information contained in this Circular and confirm, having
made all reasonable inquiries, that to the best of their knowledge, opinions expressed in this
Circular have been arrived at after due and careful consideration and there are no other
facts not contained in this Circular, the omission of which would make any statement in this
Circular misleading.
Where any information in this Circular has been extracted or reproduced from published or
otherwise publicly available source, the sole responsibility of the Directors has been to
ensure, through reasonable enquiries, that such information has been accurately extracted
from such sources and/or reproduced in this Circular in its proper form and context.
18. ADDITIONAL INFORMATION
The attention of the Shareholders is also drawn to the Appendices which form part of this
Circular.
Yours faithfully
For and on behalf of the Board of Directors of
DECLOUT LIMITED
Wong Kok Khun
Chairman and Group Chief Executive Officer
LETTER TO SHAREHOLDERS
44
APPENDIX A – LETTER FROM THE IFATO THE INDEPENDENT DIRECTORS IN RESPECT OF THE OFFER
PROVENANCE CAPITAL PTE. LTD. 1
PROVENANCE CAPITAL PTE. LTD. (Company Registration Number: 200309056E)
(Incorporated in the Republic of Singapore) 96 Robinson Road #13-01 SIF Building
Singapore 068899
1 February 2019 To: The Independent Directors of DeClout Limited (deemed to be independent in respect of the Offer)
Mr Ho Chew Thim (Lead Independent Director) Mr Hew Koon Chan (Independent Director) Mr Poh Boon Kher Melvin (Non-Executive Non-Independent Director)
Dear Sirs, VOLUNTARY CONDITIONAL CASH OFFER FOR DECLOUT LIMITED BY EXEO GLOBAL PTE. LTD. Unless otherwise defined or the context otherwise requires, all terms used herein have the same meanings as defined in the circular to the shareholders of DeClout Limited (“Shareholders”) dated 1 February 2019 (“Circular”). 1. INTRODUCTION 1.1 Offer Announcement Date
Offer Announcement Date KPMGOffer Announcement Offeror
Offerand paid- Shares
Company the offer price of S$0.13 in cash Offer Price other Offer Shares in accordance
with the Singapore Code on Take- Code The Offeror is a wholly-owned Kyowa Exeo
TSEmarket capitalisation of approximately ¥312.9 billion (S$3.9 billion*) as at the Offer Announcement Date. * based on the foreign exchange rate of ¥100:S$1.2471 on the Offer Announcement Date as extracted from published information by Bloomberg L.P. and is provided solely for information only. The Offer, when made, will be extended, on the same terms and conditions, to all new Shares
OptionsESOS
Awards y under the DeClout Performance Share PSP
issued Shares (excluding 5,267,388 treasury shares), 2,790,697 Options and no outstanding Awards. The Offer will be conditional upon the Offeror having received, by the close of the Offer, valid acceptances in respect of such number of Shares which, together with Shares owned, controlled or agreed to be acquired by the Offeror and parties in concert with it either before or during the Offer and pursuant to the Offer or otherwise, will result in the Offeror and parties acting in concert with it holding such number of Shares representing more than 50% of the
mum potential
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APPENDIX A – LETTER FROM THE IFATO THE INDEPENDENT DIRECTORS IN RESPECT OF THE OFFER
PROVENANCE CAPITAL PTE. LTD. 2
(excluding the treasury shares) had all the outstanding Options been validly exercised and on the basis that there are no outstanding Awards as at the date Acceptance Condition As at the Offer Announcement Date, the Offeror has received irrevocable undertakings
Irrevocable Undertakings Undertaking Shareholdershold, in aggregate, 335,248,267 Shares, representing approximately 50.34% of the total number of issued Shares and 50.13% of the maximum potential issued shares of the Company, to, inter alia, accept the Offer in respect of all their Shares. As at the Offer Announcement Date, the Offeror does not own any Shares.
1.2 Subsequent to the Offer Announcement Date On 21 January 2019, KPMG announced, for and on behalf of the Offeror, that the formal offer document dated 21 January Offer Document ) which contains, inter alia, details of the Offer have been despatched to Shareholders on even date. Shareholders should have by now received a copy of the Offer Document. The Offer Document is also available on the SGXNET.
On 23 January 2019, the Offer has been declared to be unconditional in all respects as the Offeror has received valid acceptances in respect of such number of Offer Shares which, when taken together with the Shares owned, controlled or agreed to be acquired by the Offeror and parties acting in concert with it (either before or during the Offer and pursuant to the Offer or otherwise), result in the Offeror and parties acting in concert with it holding such number of Shares carrying more than 50% of the voting rights attributable to the maximum potential issued shares in the Company. The Company has confirmed that, as at 25 January 2019, being the Latest Practicable Date referred to in the Circular, all the outstanding Options have been cancelled. Hence, the number of Shares which is the subject of the Offer is 666,001,586 Shares, being the number of issued Shares (excluding 5,267,388 treasury shares).
Based on public disclosures made by or on behalf of the Offeror, the total number of (a) Shares owned, controlled or agreed to be acquired by the Offeror and parties acting in concert with it; and (b) valid acceptances to the Offer, amounted to an aggregate of 509,746,388 Shares, representing 76.54% of the total number of issued Shares as at the Latest Practicable Date.
1.3 Our role as Independent Financial Adviser to the Offer Arising from the above, the Company has appointed Provenance Capital Pte. Ltd.
Provenance Capital IFA to advise the directors who are considered independent in respect of the Offer, for the purpose of making their recommendation to the Shareholders in relation to the Offer. In connection with the Offer, as the Offeror intends and desires that there be continuity of management and minimal interruption of the business of the Company and its subsidiaries
Group Management Incentive Plan management arrangements Management Arrangements after the close of the Offer, to encourage key members of the management team of the Company to continue to render their services to the Group.
SIC such Management Arrangements do not constitute prohibited special deals for the purposes of Rule 10 of the Code, subject to the IFA publicly stating that in its opinion the terms of the Management Arrangements are fair and reasonable so far as the Shareholders are concerned in the context of Rule 10 of the Code. As IFA in relation to the Offer, we will also opine on the Management Arrangements pursuant to Rule 10 of the Code.
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APPENDIX A – LETTER FROM THE IFATO THE INDEPENDENT DIRECTORS IN RESPECT OF THE OFFER
PROVENANCE CAPITAL PTE. LTD. 3
Pursuant to the confirmations sought by the Company, the SIC had, on 23 January 2019, ruled that (a) Mr Wong Kok Khun, who is the Chairman and Group Chief Executive Officer; (b) Ms Kow Ya, who is the Executive Director of the Company; and (c) Ms Cheryl Tan Choo Huang, who is the Executive Director of the Company, are exempted from the requirements to make a recommendation to the Shareholders on the Offer as each of them will be receiving management incentives from the Offeror and faces a conflict of interest in relation to the Offer. The Company has confirmed to us that the remaining Directors, namely, Mr Ho Chew Thim, Mr Hew Koon Chan and Mr Poh Boon Kher Melvin are deemed independent in respect of the Offer
Independent Directors This Letter is therefore addressed to the Independent Directors and sets out, inter alia, our evaluation of the financial terms of the Offer, our recommendations on the Offer, and our evaluation and opinion on the terms of the Management Arrangements pursuant to Rule 10 of the Code. This Letter forms part of the Circular which provides, inter alia, details of the Offer, the Management Arrangements and the recommendations of the Directors on the Offer.
2. TERMS OF REFERENCE
Provenance Capital has been appointed as the IFA to advise the Independent Directors in respect of their recommendation to the Shareholders in relation to the Offer and to opine on the terms of the Management Arrangements pursuant to Rule 10 of the Code.
We have confined our evaluation and assessment to the financial terms of the Offer and the Management Arrangements and have not taken into account the commercial risks or commercial merits of the Offer and the Management Arrangements. In addition, we have not been requested to, and we do not express any advice or give any opinion on the merits of the Offer relative to any other alternative transaction. We were not involved in the negotiations pertaining to the Offer and the Management Arrangements nor were we involved in the deliberations leading up to the decision to put forth the Offer to the Shareholders and the terms of the Management Arrangements. The scope of our appointment does not require us to conduct a comprehensive independent review of the business, operations or financial condition of the Company and/or the Group, or express, and we do not express, a view on the future growth prospects, value and earnings potential of the Company and the Group. Such review or comments, if any, remains the responsibility of the Directors although we may draw upon their views or make such comments in respect thereof (to the extent deemed necessary or appropriate by us) in arriving at our opinion as set out in the Letter. The opinion set forth herein is based solely on publicly available information as well as information provided by the Directors, and is predicated upon the economic and market conditions prevailing as at 25 January 2019, being the Latest Practicable Date as referred to in the Circular. This Letter therefore does not reflect any projections on the future financial performance of the Group and we do not express any views as to the prices at which the Shares may trade after the close of the Offer.
We have not been requested or authorised to solicit, and we have not solicited, any indications of interest from any third party with respect to the Shares. In this regard, we have not addressed the relative merits of the Offer in comparison with any alternative transaction the Company may consider in the future. Therefore, we do not express any views in these areas in arriving at our recommendation.
In formulating our opinion and recommendation, we have held discussions with the Directors
Management and have relied to a considerable extent on the information set out in the Circular, other public information collated by us and the information, representations, opinions, facts and statements provided to us, whether written or verbal, by the Company and its other professional advisers. Whilst care has been exercised in reviewing the information we have relied upon, we have not independently verified the information both written and verbal and accordingly cannot and do not make any representation or warranty, expressly or impliedly, in respect of, and do not accept any responsibility for, the
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APPENDIX A – LETTER FROM THE IFATO THE INDEPENDENT DIRECTORS IN RESPECT OF THE OFFER
PROVENANCE CAPITAL PTE. LTD. 4
accuracy, completeness or adequacy of such information. Nonetheless, we have made reasonable enquiries and exercised our judgement on the reasonable use of such information and have found no reason to doubt the accuracy or reliability of such information. The Directors have confirmed, having made all reasonable enquiries and to the best of their respective knowledge, information and belief, all material information in connection with the Offer and the Management Arrangements, the Company and/or the Group have been disclosed to us, that such information is true, complete and accurate in all material respects and that there is no other material information or fact, the omission of which would cause any information disclosed to us or the facts of or in relation to the Company and/or the Group stated in the Circular to be inaccurate, incomplete or misleading in any material respect. The Directors have jointly and severally accepted full responsibility for such information described herein. Accordingly, no representation or warranty, expressed or implied, is made and no responsibility is accepted by us concerning the accuracy, completeness or adequacy of such information.
We have not made an independent evaluation or appraisal of the assets and liabilities of the Company and/or the Group (including without limitation, property, plant and equipment) and no valuation was commissioned by the Company for the purpose of the Offer. The information we had relied on in the assessment of the Offer were based on market, economic, industry, monetary and other conditions prevailing as at the Latest Practicable Date, which may change significantly over a relatively short period of time. We assume no responsibility to update, revise or reaffirm our opinion or assumptions in light of any subsequent development after the Latest Practicable Date that may affect our opinion or assumptions contained herein. Shareholders should take note of any announcements relevant to their consideration of the Offer, as the case may be, which may be released or published after the Latest Practicable Date.
In rendering our advice and giving our recommendation, we did not have regard to the specific investment objectives, financial situation, tax position, risk profiles or unique needs and constraints of any Shareholder. As each Shareholder may have different investment profiles and objectives, we advise the Directors to recommend that any Shareholder who may require specific advice in relation to his investment portfolio or objective should consult his stockbroker, bank manager, solicitor, accountant, tax adviser or other professional adviser immediately.
The Company has been separately advised by its own professional advisers in the preparation of the Circular (other than this Letter). We have had no role or involvement and have not and will not provide any advice (financial or otherwise) in the preparation, review and verification of the Circular (other than this Letter). Accordingly, we take no responsibility for and express no view, whether expressed or implied, on the contents of the Circular (other than this Letter).
Whilst a copy of this Letter may be reproduced in the Circular, neither the Company, the Directors nor any Shareholder may reproduce, disseminate or quote this Letter (or any part thereof) for any other purposes, other than for the purpose of the Offer, at any time and in any manner, without the prior written consent of Provenance Capital in each specific case.
Our opinion is addressed to the Independent Directors for their benefit and deliberation of the Offer. The recommendation made to the Shareholders in relation to the Offer shall remain the responsibility of the Directors. Our opinion on the Management Arrangements is addressed to the Independent Directors for their benefit and in the context of Rule 10 of the Code.
Our recommendation to the Independent Directors in relation to the Offer and our opinion on the Management Arrangements should be considered in the context of the entirety of this Letter and the Circular.
3. THE OFFER
The detailed terms and conditions of the Offer are set out in Section 2 and Appendix V to the Offer Document. The key terms of the Offer are set out below for your reference.
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APPENDIX A – LETTER FROM THE IFATO THE INDEPENDENT DIRECTORS IN RESPECT OF THE OFFER
PROVENANCE CAPITAL PTE. LTD. 5
3.1 Offer Price
The consideration for each Offer Share is S$0.13 in cash. The Offer Shares will be acquired: (a) fully paid; (b) free from all Encumbrances (as defined in the Offer Document); and (c) together with all rights, benefits and entitlements attached thereto as at the Offer
Announcement Date and thereafter attaching thereto (including the right to receive and retain all dividends, other distribut Distributionsbe announced, declared, paid or made thereon by the Company on or after the Offer Announcement Date.
In the event any Distribution is or has been declared, paid or made by the Company on or after the Offer Announcement Date to a Shareholder who validly accepts or has validly
Accepting ShareholderShares accepted pursuant to the Offer falls after the books closure date for the determination of entitlements to such Distribution, the Offer Price for each Share shall be
Adjusted Offer Priceeach Share, as the Offeror will not receive the Distribution in respect of such Share from the Company.
Since the Offer Announcement Date and up to the Latest Practicable Date, we note that the Company has not made or declared any Distribution. The Company has also confirmed that it has not made or declared any Distribution.
3.2 Offer Shares
The Offer is extended to all the Offer Shares in accordance with Rule 15 of the Code and subject to the terms and conditions set out in the Offer Announcement and the Offer Document. The Offer Shares refer to all issued Shares of the Company (excluding treasury shares) and all new Shares issued pursuant to the exercise of any outstanding Options and valid vesting of Awards. We note that the Company has confirmed that all the outstanding Options have been cancelled and there are no outstanding Awards as at the Latest Practicable Date. Hence, the number of Shares which is the subject of the Offer is 666,001,586 Shares, being the number of issued Shares (excluding 5,267,388 treasury shares) as at the Latest Practicable Date.
3.3 Acceptance Condition
The Offer is conditional upon the Offeror having received, by the close of the Offer, valid acceptances in respect of such number of Offer Shares which, when taken together with the Shares owned, controlled or agreed to be acquired by the Offeror and parties acting in concert with it (either before or during the Offer and pursuant to the Offer or otherwise), will result in the Offeror and parties acting in concert with it holding such number of Shares carrying more than 50% of the voting rights attributable to the issued share capital of the Company as at the close
Acceptance Condition Save for the Acceptance Condition, the Offer is unconditional in all other respects. As at the Offer Announcement Date, the Offeror has received Irrevocable Undertakings from the Undertaking Shareholders to accept the Offer in respect of their aggregate holdings of 335,248,267 Shares, representing 50.34% of the total number of issued Shares.
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APPENDIX A – LETTER FROM THE IFATO THE INDEPENDENT DIRECTORS IN RESPECT OF THE OFFER
PROVENANCE CAPITAL PTE. LTD. 6
On 23 January 2019, based on the acceptances of the Offer (including acceptances by some of the Undertaking Shareholders) and the purchases of Shares made by the Offeror in the open market, the Offeror had declared that the Offer has become unconditional in all respects. Based on public disclosures made by or on behalf of the Offeror, the total number of (a) Shares owned, controlled or agreed to be acquired by the Offeror and parties acting in concert with it; and (b) valid acceptances to the Offer, amounted to an aggregate of 509,746,388 Shares, representing 76.54% of the total number of issued Shares as at the Latest Practicable Date.
3.4 Warranty Acceptance of the Offer will be deemed to constitute an unconditional and irrevocable warranty
by the accepting Shareholder that each Offer Share tendered in acceptance of the Offer is sold by the accepting Shareholder, as or on behalf of the beneficial owner(s) thereof, (a) fully paid, (b) free from all Encumbrances and (c) together with all rights, benefits and entitlements attached thereto as of the Offer Announcement Date and thereafter attaching thereto, including but not limited to all voting rights, the right to receive and retain all Distributions (if any) which falls on or after the Offer Announcement Date.
3.5 Duration of the Offer
(a) Closing Date
Except insofar as the Offer may be withdrawn with the consent of the SIC and every person released from any obligation incurred thereunder, the Offer will remain open for acceptances by Shareholders for a period of at least 28 days from the date of despatch of the Offer Document.
Accordingly, as disclosed in the Offer Document, the Offer will close at 5.30 p.m.
(Singapore time) on 18 February 2019 or such later date(s) as may be announced from time to time by or on behalf of the Offeror.
(b) Extension of Closing Date On 23 January 2019, the Offer was declared to have become unconditional in all
respects.
In accordance with Rule 22.6 of the Code, if the Offer becomes or is declared to be unconditional as to acceptances, the Offer must remain open for acceptance for not less than 14 days after the date on which the Offer would otherwise have closed. Accordingly, KPMG announced, for and on behalf of the Offeror, that the Closing Date of the Offer is extended from 5.30 p.m. (Singapore time) on 18 February 2019 to 5.30 p.m. (Singapore time) on 4 March 2019 (or such later date(s) as may be announced from time to time by or on behalf of the Offeror).
3.6 Further details of the Offer
Further details of the Offer, including details on (a) the settlement of the consideration for the Offer; (b) the requirements relating to the announcement(s) of the level of acceptances of the Offer; (c) the right of withdrawal of acceptances of the Offer; and (d) procedures for acceptance of the Offer are set out in Appendices V and VI to the Offer Document.
4. INFORMATION ON THE OFFEROR AND PARTIES ACTING IN CONCERT WITH IT 4.1 Offeror and parties acting in concert with it As disclosed in the Offer Document, the Offeror is a private company limited by shares and
incorporated in Singapore on 20 November 2018. The Offeror has an issued and paid-up capital of S$6,000,000 comprising 6,000,000 ordinary shares. The board of directors of the Offeror
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comprises Mr Yoshiaki Matsuzaka, Mr Yasuo Otsubo, Mr Yuichi Koyama, Mr Fumitoshi Imaizumi and Mr Tan Seow Leng.
The Offeror is a wholly-owned subsidiary of Kyowa Exeo, a company listed on the TSE with a
market capitalisation of Kyowa Exeo is ¥312.9 billion (S$3.9 billion) as at the Offer Announcement Date. The Offeror serves as a regional head office, administrative office and subsidiary management office of Kyowa Exeo. Kyowa Exeo is a leading Japanese conglomerate in the construction and supply of telecommunications infrastructure, electrical, civil and environmental engineering services, systems solutions and integration services.
As at the Offer Announcement Date, the Offeror does not own any Shares.
On 23 January 2019, based on the acceptances of the Offer (including acceptances by some of the Undertaking Shareholders) and the purchases of Shares made by the Offeror in the open market, the Offer was declared to have become unconditional in all respects. Based on public disclosures made by or on behalf of the Offeror, the total number of (a) Shares owned, controlled or agreed to be acquired by the Offeror and parties acting in concert with it; and (b) valid acceptances to the Offer, amounted to an aggregate of 509,746,388 Shares, representing 76.54% of the total number of issued Shares as at the Latest Practicable Date.
Further details relating to the Offeror and parties acting in concert with the Offeror are set out in Appendices II and III to the Offer Document.
4.2 Irrevocable Undertakings
Pursuant to the Irrevocable Undertakings, the Undertaking Shareholders who hold, in aggregate, 335,248,267 Shares, representing approximately 50.34% of the total number of issued Shares, have undertaken to, inter alia, accept the Offer in respect of all their Shares. Each Irrevocable Undertaking will terminate or lapse if the Offer is withdrawn or lapses, or fails to become or be declared to be unconditional in all respects for whatever reason, other than as a result of a breach by any of the Undertaking Shareholders of any of his or her obligations under the relevant Irrevocable Undertaking. The list of Undertaking Shareholders and the number of Shares to be tendered for acceptance of the Offer by each of the Undertaking Shareholder is as follows:
Names of Undertaking Shareholders
Number of Shares to be tendered in acceptance of the Offer
Percentage shareholding in the Company (1)
Poh Boon Kher Melvin 81,825,400 12.29% 3rd Space Pte Ltd(3) 53,044,570 7.96% Wong Kok Khun(3) 29,077,000 4.37%(4)
Ng Chuen Guan 22,185,000 3.33% Chua Hock Choon 21,951,600 3.30% Chua Chye Lee 21,195,100 3.18% Toe Teow Heng 20,290,700 3.05% Kow Ya 18,067,100 2.71%(4) Oan Chim Seng 16,306,300 2.45% Woo Kok Sin 16,153,900 2.43% Leow Chin Bee 11,140,000 1.67% Koh Su San 8,962,500 1.35% Johan Djaja 6,566,700 0.99% Lim Swee Yong 3,709,000 0.56% Cheryl Tan Choo Huang 2,641,700 0.40% Tay Koong Phong 1,359,822 0.20% Chan Allen 771,875 0.12% Total 335,248,267 50.34%(2)
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Notes: (1) Based on 666,001,586 issued Shares (excluding treasury shares) as at the Latest Practicable Date;
(2) Does not add up due to rounding; (3) 3rd Space Pte Ltd is wholly-owned by Mr Wong Kok Khun, who is therefore deemed to have an interest in the
Shares held by 3rd Space Pte Ltd by virtue of Section 7 of the Companies Act; and (4) Excludes Options held by him/her, on the basis of his/her undertaking that such Options will be surrendered for
cancellation under each of their respective Irrevocable Undertakings. As at the Latest Practicable Date, the Company had confirmed that all outstanding Options have been cancelled.
We note that the Offeror has disclosed that save for the Irrevocable Undertakings, neither the Offeror nor any party acting in concert with the Offeror has received any irrevocable undertaking from any party to accept or reject the Offer. Further details of the Irrevocable Undertakings are set out in Section 6 of the Offer Document.
5. INFORMATION ON THE COMPANY AND THE GROUP 5.1 The Company is a limited liability company incorporated and domiciled in Singapore, and listed
on the Catalist board SGX-ST on 24 October 2012.
As at the Latest Practicable Date, the board of directors of the Company comprises the following: (a) Mr Wong Kok Khun (Chairman and Group Chief Executive Officer); (b) Ms Kow Ya (Executive Director); (c) Ms Cheryl Tan Choo Huang (Executive Director (Finance)); (d) Mr Ho Chew Thim (Lead Independent Director); (e) Mr Hew Koon Chan (Independent Director); and (f) Mr Poh Boon Kher Melvin (Non-Executive Director).
As at the Latest Practicable Date, the Company has 666,001,586 issued Shares excluding 5,267,388 treasury shares. As at the Offer Announcement Date, the Company has 2,790,697 outstanding Options granted under the ESOS, entitling holders of such Options to subscribe to a total of 2,790,697 new Shares at the exercise price of S$0.1881 each. We note that the exercise price of these Options are higher than the Offer Price. The Company has confirmed that as at the Latest Practicable Date, these Options have been cancelled. Accordingly, as at the Latest Practicable Date, the Company does not have any outstanding instruments convertible into, rights to subscribe for, or options in respect of, Shares or securities which carry voting rights in the Company. Based on the Offer Price of S$0.13 and the number of issued Shares (excluding treasury shares) as at the Latest Practicable Date, the implied market capitalisation of the Company is approximately S$86.58 million.
Additional information on the Company and the Group is set out in Appendix I to the Offer Document.
5.2 The principal activities of the Company are those of investment holding, strategic management
and corporate shared services.
escribed itself as a global builder of next-generation Information and Communications Technologies companies which invests in, incubates and scales companies to become global or regional market leaders. Its business is to identify disruptive trends, incubate, scale and harvest high-growth technology companies. This had led to its successes in 2016 via the spin-off of Procurri Corporation Limited
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Procurri Procurri GroupSGX-ST and the trad Acclivis
he Group can be categorised into two segments, namely: (a) IT Infra
This segment forms the building blocks of all technology and marketplace companies, providing business relating to, including but not limited to, the supply, management and maintenance of IT equipment and telecommunication equipment, provision of IT and network services and the provision of network and security solutions to all companies.
The main entities of the Group under IT Infra segment were Procurri, which was approximately 47%-owned by the Group, and its 75%-owned subsidiary, Beaqon Pte.
Beaqon Beaqon Group
Procurri Group
results under the basis of de-facto control as the Company was the single largest shareholder of Procurri and the remaining approximately 53% of the ordinary shares of
Procurri Shares Procurri is listed on the Mainboard of the SGX-ST. On 4 January 2019, the Company announced that it had sold 48 million Procurri Shares, representing 16.86% shareholding interest in Procurri to two independent third parties. Following the sale, the Company continues to hold 29.62% shareholding interest in Procurri but will cease to consolidate the results of the Procurri Group going forward, and instead will account for such results using the equity method. The above disposal of Procurri Shares was transacted at S$0.32 for each Procurri Share
ordinary general meeting held on 14 November 2018 where approval was sought for the proposed disposal, in whole or in part, of the Procurri Shares at the sole discretion of the Directors, at or above S$0.32 each. Such authority conferred on the Directors will lapse by the next annual general meeting of the Company, unless renewed or until it is varied or revoked by the Company in a general meeting, whichever is the earlier. With respect to the remaining Procurri Shares held by the Company, we understand from Management and note from the announcement by Procurri on 7 January 2019 that due diligence by interested third parties on Procurri is ongoing and that, inter alia, the interested third party is considering a possible transaction on Procurri, including various forms of implementing the possible transaction (or any part thereof). Procurri has also highlighted that there is no certainty that the possible transaction on Procurri or any part thereof will be consummated. Beaqon Group In view of the current status of Procurri, the Beaqon Group is presently the core business group under the IT Infra segment. Prior to 24 August 2018, the Company had owned 75% of Beaqon and Beaqon had, in
TJ SystemsCompany announced the completion of the acquisition on 24 August 2018 of the remaining stake in Beaqon from Mr Dean Chua Chye Lee and, through Beaqon, the remaining stake in TJ Systems from Mr Jimmy Leow Chin Bee. The acquisition of the remaining 25% stake in TJ Systems was satisfied by the issuance of new shares in Beaqon, representing 7.14% of the enlarged number of shares of Beaqon. Consequently, the Company and Mr Dean Chua Chye Lee in Beaqon were diluted to 69.64% and 23.22% respectively. Then the Company acquired the 30.36% interests in
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Beaqon from Mr Dean Chua Chye Lee (23.22%) and Mr Jimmy Leow Chin Bee (7.14%), making Beaqon a wholly-owned subsidiary of the Company. Mr Dean Chua Chye Lee is a director of both Beaqon and TJ Systems, and Mr Jimmy Leow Chin Bee is the Managing Director of TJ Systems. The aggregate consideration for the acquisition of the 30.36% interests in Beaqon was S$9.4 million, which is payable by a combination of cash payment of S$5 million, up to 1-year of deferred payment of S$2 million in cash, and a deferred payment of S$2.4 million in cash or new Shares or treasury shares of DeClout at approximately S$0.11 each, as determined by the Company at its discretion. In addition, subject to the earn-out milestones being achieved for the first year and second year and the continued employment of Mr Dean Chua Chye Lee, Mr Jimmy Leow Chin Bee and Mr Spring Chua Hock Choon with the Beaqon Group, the Company will pay up to S$1.8 million in cash in each year and/or in new Shares equivalent based on the issue price of S$0.11 each, as determined by the Company at its discretion. Mr Spring Chua Hock Choon is a director and acting CEO of the Beaqon Group. In brief, among other things, the first earn-out
NTAby at least S$5 million as at 31 December 2018 compared to its audited NTA as at 31 December 2017, and the second earn-out milestone is when the Beaqon Group increases its audited NTA by at least S$6 million as at 31 December 2019 compared to its audited NTA as at 31 December 2018.
9M2018 the Company had accounted as equity the potential issuances of new Shares for the acquisition of the 30.36% interests in Beaqon of S$2.4 million and the first and second year earn-out of S$1.8 million each, totally S$6.0 million. However, in view of the Offer, Management has informed us that the Company will not be issuing the above new Shares but instead will be paying the amounts to the vendors in cash. The above adjustment will have an impact on the pro forma NAVsee Section 8.2.2 of this Letter for further information. As mentioned above, with the change of status of Procurri from a subsidiary to an associated company and a possible transaction with respect to Procurri, the Beaqon Group has become the main operating business under the IT Infra segment. Accordingly, the Offeror has agreed to establish a Management Incentive Plan which sets certain bonus payout to the management team upon the Beaqon Group achieving certain key
KPIs financial years from 2019 to 2022.
(b) VDC
This segment provides business of domain-focused platforms and communities with net-work effects that define business and lifestyle trends, such as the E-commerce, E-trade and E-logistics solutions.
Pr Corous360
Corous360 GroupVCC
subsid VCC Group
On 17 December 2018, the Company announced the proposed disposal of its 100% interest in Corous360 in return for a 12.5% shareholding interest in Grand Centrex
GCL GCL Groupconsideration of S$21.9 million. At the time of the announcement, the Company had estimated a gain on disposal of Corous360 of S$70,000 based on the financial position of Corous360 Group as at 30 September 2018. The Company expects the completion of the proposed disposal of Corous360 to be completed in due course.
CBU
released on 5 March 2018, that a major prong of its corporate recovery efforts would be to sharpen focus on the IT Infra and VDC segments operated by its subsidiaries, the
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Beaqon Group and the VCC Group. Management is of the view that the corporate development outlined above, including the sale of part or whole of Procurri, the acquisition of remaining stakes in Beaqon and the disposal of Corous360, are in line with its corporate strategy. The 12.5% investment in GCL Group is to be held under DeClout
DeClout Investments, the Group seeks to potentially enhance shareholder value in the event of a potential exit or harvest of its investee companies in the future. VCC is a 50.01%-owned subsidiary of the Group. The VCC Group is an infocomm technology solutions and service provider in Asia, specialising in technological solutions for governments and enterprises worldwide, in the domain of trade and logistics. It provides e-trade and e-freight solutions through VCC CamelONETM platform. While the revenue and profit contribution from the VCC Group had been relatively small in the past, the e-logistics and e-trade business of the VCC Group are beginning to gain traction. Management, however, cautioned that the potential growth of the VCC Group requires significant funding and the outstanding loan in the VCC Group may become due for repayment as a result of the current Offer being declared or becoming unconditional in all respects. Similar to the Beaqon Group, the Offeror has set in the Management Incentive Plan certain bonus payout to the management team upon the VCC Group achieving certain KPIs over the next 4 financial years from 2019 to 2022.
Salient information on the Management Incentive Plan is set out in Section 6 below and our evaluation of the terms of the Management Arrangements pursuant to Rule 10 of the Code is set out in Section 9 of this Letter.
6. MANAGEMENT INCENTIVE PLAN As disclosed in the Offer Document, as the Offeror intends and desires that there be continuity of management and minimal interruption of the business of the Group, the Offeror had entered
Management Cocompany incorporated by management personnel of the Company, pursuant to which the following Management Arrangements will come into effect upon the Offer turning unconditional: (a) Management Co will receive (i) a fixed retention incentive sum of up to S$3 million over
a 3-year period provided certain management personnel remain as employees of the Group; and (ii) bonus payout of up to S$19 million contingent upon the achievement of certain financial performance targets in the financial years ending 31 December 2019
FY2019 FY2020 FY2021December FY2022
(b) Management Co has provided certain representations, warranties and indemnities in
respect of the Group in favour of the Offeror, for which Management Co may incur liability (including a reduction in the payout under the Management Incentive Plan).
The SIC has confirmed that the Management Arrangements do not constitute prohibited special deals for the purposes of Rue 10 of the Code, subject to the IFA publicly stating its opinion that the terms of the Management Arrangements are fair and reasonable so far as Shareholders are concerned in the context of Rule 10 of the Code. The Company has given us an execution version of the Management Incentive Plan for the purpose of our evaluation of the terms of the Management Incentive Plan pursuant to Rule 10 of the Code.
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Salient terms of the Management Incentive Plan Set out below are the salient information on the Management Arrangements based on our understanding with Management and the execution version of the Management Incentive Plan
MIP (i) The MIP is to be entered into between the Offeror and Management Co, a company
incorporated in Singapore;
(ii) Management Co is owned by the Management Personnel in equal proportion and the directors of Management Co are Mr Wong Kok Khun and Ms Cheryl Tan Choo Huang, who shall administer the MIP. The share ownership of Management Co is for administrative convenience and has no bearing on the share of bonus payout to each of the Management Personnel. The bonus payout will be from the Offeror to Management Co in accordance with, inter alia, the achievement of the KPIs and the directors of Management Co will administer the distribution of the bonus payout to each of the Management Personnel in accordance with their performance achieved;
(iii) The Management Personnel who are eligible to participate in the MIP are the key
management of the Group as set out below:
Management Personnel Current designation in the Group
Mr Vesmond Wong Kok Khun Chairman & Group CEO of DeClout
Mr Spring Chua Hock Choon
CEO of Beaqon Group
Mr Dean Chua Chye Lee SVP, Sales & Business Development of Beaqon
Mr Jimmy Leow Chin Bee SVP, Sales & Business Development of TJ Systems, subsidiary of Beaqon Group
Ms Kow Ya Executive director of DeClout
Ms Cheryl Tan Choo Huang Executive Director (Finance) of DeClout
Mr Lim Swee Yong Head of Corporate Office of DeClout and CEO of DeClout Investments
Mr Desmond Tay Koong Phong CEO of VCC
Mr Allen Chan
COO of VCC
(iv) The Management Incentive Plan shall be effective on the date on which the Offer is being
declared unconditional; (v) The Offeror shall pay a retention bonus to Management Co of S$1 million each after the
end of FY2019, FY2010 and FY2021 (totalling up to S$3 million) for so long as certain key Management Personnel Key Persons remain as employees of the Group. The retention bonus payable shall be reduced by one-third for every Key Person who ceases to be employed by the Group at the end of each relevant financial year;
(vi) Management Co shall be entitled to bonus payout in accordance with the pre-determined parameters, in the form of certain financial targets of the various key business units for each of the financial years for FY2019, FY2020, FY2021 and FY2022. The Offeror shall pay the bonus to Management Co after the vesting date on which the Offeror confirms to Management Co that it is satisfied that the relevant KPI(s) in such financial year have been achieved. The maximum bonus payout in each of the respective financial year ranges from S$3.0 million to S$6.5 million, totalling S$19.0 million. The bonus payout is set against each of the KPI(s) established for the business units. As an illustration, if one out of 4 KPI(s) is met, the bonus payout is 25% of the maximum bonus payout in such financial year. In addition, the bonus payment is proportionate to the percentage satisfaction of such KPI, subject to at least 80% of such KPI target having been met. As
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an illustration, if 80% of one of the KPI targets is met, the bonus payout to Management Co will amount to 80% x (25% x S$ amount of maximum bonus payout);
(vii) If any Management Personnel resigns from the Company, Management Co shall use all
reasonable endeavours to find a suitable replacement in order to mitigate the effect of such resignation on the ability of Management Co to fulfil the KPIs; and
(viii) In the event of a breach by Management Co of any representations, warranties,
covenants or undertakings or in the event that the Offeror has any claim against Management Co, the bonus payout to Management Co shall be reduced by the claim amount which is equivalent to the actual amount of losses, liabilities, reasonable costs and expenses that the Offeror or the Group incurs or is liable for, provided that the aggregate claim amount for all claims shall not exceed the lower of: (1) S$9.5 million or (2) the aggregate amount of bonus payout to Management Co. For the avoidance of doubt, there shall not be any claim by the Offeror if there is no bonus payout to Management Co. In the event that the claim amount is more than the bonus payout
Excess Amountpaid out or applied as a reduction of vested bonus payout in subsequent financial years.
As the Offer has become unconditional in all respects as at 23 January 2019, the Management Incentive Plan is deemed to have become effective on that date.
7. RATIONALE FOR THE OFFER AND THE INTENTION OF THE OFFEROR
The full text of the Offeror's rationale for the Offer is set out in Sections 5 and 9.3 of the Offer Document.
is as follows:
(a) the Offeror is making the Offer with a view to delisting the Company from the SGX-ST
and exercising its right of compulsory acquisition that may arise under Section 215(1) of the Companies Act. The Offeror believes that privatising the Company will provide the Offeror and Management with more flexibility to, inter alia, manage the Group;
(b) following the completion of the acquisition and delisting of the Company from the SGX-ST, Kyowa Exeo intends to leverage its scale, capability and know-how to improve the
also intends to contribute additional capital in the Company to fund its future growth;
(c) the Company will be able to save on expenses related to maintaining a listing status on the SGX-ST;
(d) the acquisition of the Company is in line with Kyowa Exeo and the Company will provide Kyowa Exeo with a strong platform to enter the Singapore market; and
(e) the Offer presents Shareholders with a clean cash exit opportunity to realise their investment in the Shares at a premium above prevailing trading prices without incurring brokerage and other trading costs.
Following from the above, the Offeror is making the Offer with the intention of making the Company its wholly-owned subsidiary and does not intend to maintain the listing status of the Company. Hence, the Offeror, if and when entitled, intends to exercise its right of compulsory acquisition under Section 215(1) of the Companies Act and does not intend to take any step for the public float to be restored and/or for any trading suspension of the Shares by the SGX-ST to be lifted in the event that, inter alia, less than 10% of the total number of issued Shares (excluding any Shares held in treasury) are in public hands.
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The Offeror also reserves its right to seek a voluntary delisting of the Company from the SGX-ST pursuant to Rules 1307 and 1308 of the Catalist Rules. The Offeror has stated that, subject to normal business conditions, it does not intend to: (i) make major changes to the business of the Company or its management team;
(ii) re-deploy the fixed assets of the Company; or
(iii) discontinue the employment of the employees of the Company and of its subsidiaries,
other than in the normal course of business. The Offeror also stated that the intentions of the Offeror for the Company as set out above involve known and unknown risks, uncertainties and other factors, many of which are outside the control of the Offeror, and there is no assurance that the current intentions will be carried into effect. The Offeror further reserves the right and discretion, subsequent to the Offer, to undertake a review of the operations, management and financial position of the Group and evaluate various strategic options. Accordingly, the Offeror retains the flexibility at any time to alter its plans as aforesaid, restructure the management or shareholdings of the Group, or consider any options or opportunities which may present themselves, or which may be required, and which the Offeror may regard to be in the interest of the Group, the Company and/or the Offeror.
8. ASSESSMENT OF THE FINANCIAL TERMS OF THE OFFER
In evaluating and assessing the financial terms of the Offer, we have taken into account the pertinent factors set out below which we consider to have a significant bearing on our assessment:
(a) Historical share price performance and trading activity of the Shares; (b) Financial analysis of the Group; (c) Comparison with recently completed privatisation of companies listed on the SGX-ST; (d) Comparison of valuation ratios of selected listed companies which are broadly
comparable with the Group;
(e) Distribution track record of the Company; and
(f) Other relevant considerations in relation to the Offer. 8.1 Historical share price performance and trading activity of the Shares
The Company had a significant stake in Procurri, and had treated and consolidated the results of the Procurri Group as its subsidiary. On 7 September 2018, Procurri had first announced and the Company had also released an announcement reflecting the same Procurri Announcement , that Procurri had received an unsolicited, non-binding indication of interest from a third party to acquire Procurri Shares by way of a possible voluntary general offer, subject to, amongst others, due diligence. The last transacted price on the Procurri Shares on 6 September 2018 prior to the above announcement was S$0.26 and the last transacted price of the Shares on the same date was S$0.08. Both counters of Procurri and DeClout were halted for trading on the SGX-ST on 7 September 2018. On the next trading day after the lifting of the trading halt, Procurri Shares and the Shares were last transacted at S$0.305 and S$0.084 respectively.
disposal of the Procurri Shares, in whole or in part at the sole discretion of the Directors, at or
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above S$0.32 each. On 15 November 2018, Procurri Shares and the Shares were last transacted at S$0.29 and S$0.085 respectively. The events on the Procurri Shares have some but did not appear to have a significant impact on the market price of the Shares. We note that market price of the Shares gravitated slightly towards S$0.10 in November and December 2018. On 4 January 2019, the Company announced that it had sold 48 million Procurri Shares, representing 16.86% shareholding interest in Procurri to two independent third parties, at S$0.32 for each Procurri Share. On the next trading day on 7 January 2019, Procurri Shares were last transacted at S$0.29. The Shares were last transacted at S$0.11 on 3 January 2019 prior to the trading halt on the Shares in the afternoon. The Shares continued to be halted until after the release of the Offer Announcement on the Shares at S$0.13 each on 7 January 2019. After trading on the Shares had resumed on 8 January 2019, the Shares were transacted at or around S$0.13, presumably supported by the Offer Price. In view of the significant events in relation to the Procurri Shares which may cause, directly or indirectly, an impact on the market price of the Shares, we have evaluated the price performance and trading liquidity of the Shares based on the 1-year period from 7 September 2017 and up to 6 Last Undisturbed Trading Datethen to the Latest Practicable Date (collectively the Period Under Review . Share Price Chart We set out below a chart showing the Offer Price relative to the daily last transacted prices and trading volume of the Shares for the Period Under Review:
Price movement and trading volume of the Shares for the Period Under Review
Vol
ume
(mil)
Pric
e (S
$)
Source: Bloomberg L.P. As can be seen from the share price chart above, the Shares have traded consistently below the Offer Price for the Period Under Review. Based on the volume-weighted average price
VWAP of the Shares of S$0.086 over the last 1 year prior and up to the Last Undisturbed Trading Date, the Offer Price is at a premium of 51.2% above the VWAP price. Since the Last Undisturbed Trading Date to the Offer Announcement Date, the VWAP of the Shares was at S$0.087 during this period. The Offer Price represents a premium of 49.4% above the VWAP price.
Offer Price: S$0.130
Offer Announcement
Date: 7 January 2019
Last Undisturbed Trading Date:
6 September 2018
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Since the Offer Announcement Date and up to the Latest Practicable Date, the Shares had traded up to the Offer Price, presumably supported by the Offer Price. Daily trading volume on the Shares during this period had increased compared to the average daily trading volume prior to the release of the Offer Announcement which are attributable mainly to the purchases made by the Offeror. Based on the dealing disclosures by the Offeror, the Offeror had acquired, in aggregate, 112,045,900 Shares at S$0.13 per Share since the Offer Announcement and up to the Latest Practicable Date. The purchases by the Offeror in the open market had accounted for approximately 79.8% of the total volume of 140.3 million Shares traded during the above period, and represent approximately 16.82% of the total number of issued Shares. Market Statistics In addition to the share price chart above, we have tabulated below selected statistical information on the share price performance and trading liquidity of the Shares for the Period Under Review:
Reference period
Highest traded price (S$)
Lowest traded price (S$)
VWAP(1) (S$)
Premium/ (Discount)
of Offer Price over/ (to) VWAP
(%)
Number of traded days(2)
Average daily
trading volume(3)
('000)
Average daily
trading volume as a percentage
of free float(4)
(%)
Prior and up to the Last Undisturbed Trading Date Last 1 year 0.103 0.065 0.086 51.2 174 194 0.05
Last 6 months 0.097 0.065 0.082 58.5 86 239 0.06
Last 3 months 0.090 0.065 0.078 66.7 41 285 0.07
Last 1 month 0.088 0.070 0.078 66.7 18 631 0.15
6 September 2018 (Last Undisturbed Trading Date)
0.083 0.080 0.081 60.5 1 201 0.05
After the Last Undisturbed Trading Date and up to the Offer Announcement Date From 10 September 2018 to 3 January 2019 (last trading day prior to the trading halt in the afternoon of 3 January 2019)
0.110 0.072 0.087 49.4 74 836 0.21
3 January 2019 (last trading day prior to the trading halt in the afternoon on 3 January 2019)
0.110 0.101 0.106 22.6 1 2,929 0.72
After the Offer Announcement Date and up to the Latest Practicable Date
From 8 January 2019 to the Latest Practicable Date
0.131 0.129 0.130 0.0 14 10,024 2.46
Latest Practicable Date 0.130 0.130 0.130 0.0 1 615 0.15
Source: Bloomberg L.P. Notes: (1) The VWAP for the respective periods are calculated based on the daily VWAP turnover divided by VWAP
volume as extracted from Bloomberg L.P. VWAP turnover is computed based on the aggregate daily turnover value of the Shares and VWAP volume is computed based on the aggregate daily trading volume of the Shares for the respective periods. Off market transactions are excluded from the calculation;
(2) Traded days refer to the number of days on which the Shares were traded on the SGX-ST during the period; (3) The average daily trading volume of the Shares is computed based on the total volume of Shares traded on
the SGX-ST (excluding off market transactions) during the relevant periods, divided by the number of days
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when the SGX-ST was open for trading (excluding days with full day trading halts/suspension on the Shares) during that period; and
(4) Free float refers to the Shares other than those directly and deemed held by the Directors and substantial
Shareholders of the Company. For the purpose of computing the average daily trading volume as a percentage of free float, we have used the free float of approximately 407.6 million Shares based on the free float of 61.20% as disclosed on the annual report of the Company for the financial year ended 31 December 2017.
We observe the following with regard to the share price performance of the Company for the Period Under Review: (a) Over the 1-year period prior and up to the Last Undisturbed Trading Date, the Shares
have traded between a low of S$0.065 and a high of S$0.103. The Offer Price represents a premium of S$0.065 (or 100.0%) above the lowest transacted price and a premium of S$0.027 (or 26.2%) above the highest transacted price of the Shares;
(b) The Offer Price represents a premium of approximately 51.2%, 58.5%, 66.7% and 66.7%
above the VWAP of the Shares for 1-year, 6-month, 3-month and 1-month periods prior and up to the Last Undisturbed Trading Date respectively;
(c) Since the Last Undisturbed Trading Date to the Offer Announcement Date, the VWAP of
the Shares was at S$0.087 during this period. The Offer Price represents a premium of 49.4% above the VWAP price;
(d) The Offer Price represents a premium of approximately 22.6% above the VWAP of the
Shares of S$0.106 on 3 January 2019, being the day when the Shares were last traded prior to the trading halt in the afternoon on 3 January 2019; and
(e) Since the Offer Announcement and up to the Latest Practicable Date, the Shares have
traded up to S$0.131 and mostly at S$0.13 per Share. The Shares were last transacted at S$0.13 on 25 January 2019, being the Latest Practicable Date. The market Share price is presumably supported by the Offer Price.
We observe the following with regards to the trading liquidity of the Shares:
(i) Over the 1-year period prior and up to Last Undisturbed Trading Date, trading liquidity on
the Shares was low. The average daily trading volume of the Shares for the 1-year, 6-month, 3-month and 1-month periods prior and up to the Last Undisturbed Trading Date represent 0.05%, 0.06%, 0.07% and 0.15% of the free float of the Shares respectively;
(ii) For the period following the Last Undisturbed Trading Date and up to 3 January 2019 (being the last trading day prior to the trading halt in the afternoon on that day), the Shares were more actively traded. The average daily trading volume of the Shares was approximately 0.8 million Shares, representing approximately 0.21% of the free float of the Shares; and
(iii) During the period following the release of the Offer Announcement and up to the Latest
Practicable Date, the average daily trading volume on the Shares was much higher at approximately 10.0 million Shares, representing 2.46% of the free float of the Shares. Of the total volume of 140.3 million Shares traded during this period, 112,045,900 Shares (or approximately 79.8%) were attributable to purchases made by the Offeror.
8.2 Financial analysis of the Group 8.2.1 Financial performance of the Group
Since the listing of the Company on the Catalist board of the SGX-ST in October 2012, the Group had reported profits for the following 4 financial years, from FY2013 to FY2016, achieving profit attributable to owners of the Company of between S$1.71 million in FY2014 and S$7.76 million in FY2016. In FY2017, the Group reported a loss attributable to owners of the Company of S$16.4 million. The financial performance of the Group had been affected by
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various factors including the acquisition and disposal of businesses, one-off write-offs and impairments. The key financial information of the Group for FY2013 to FY2017, and for the 9 months ended 30 September 2018 is shown below for your reference.
Audited Unaudited
S$'000 FY2013 FY2014 FY2015 FY2016 FY2017 9M2018 Profit/(Loss) attributable to owners of the Company
1,940 1,708 4,978 7,758 (16,448) 969
which were affected by the following items:
Other income
690 1,821 2,536 28,836 7,066 3,348
Other charges, net
(444) (1,845) (2,357) (5,792) (19,204) (3,665)
Administrative expenses
(17,105) (29,835) (47,738) (72,636) (65,553) (50,438)
Source: Company’s annual reports for FY2014, FY2015, FY2016 and FY2017 and the unaudited financial results of the Group for 9M2018 FY2016 was a successful year for the Group as it successfully spun-off two businesses within the IT Infra segment, namely the S$156.8 million listing of Procurri on the Mainboard of the SGX-ST in July 2016 and divestment of Acclivis for up to S$75 million in November 2016, for which it recognised a gain on disposal of S$21.8 million under Other Income. In FY2017, the Group faced challenges on various fronts. Financial results were affected by the absence of contribution from Acclivis after its disposal, the restructuring of Corous360 which involved scaling down its operations and eventually deconsolidating the results of the e-commerce unit of the Corous360 Group. The net loss incurred in FY2017 was also affected by the one-off write-offs and impairments of S$11.5 million which included a one-off downward adjustment of S$4.9 million in relation to the sale of Acclivis and a one-off net charges of S$6.6 million from the restructuring of Corous360 under Other Charges. Excluding the one-off items, the Group would have narrowed its net loss to S$4.9 million instead of S$16.4 million in FY2017. In terms of the breakdown of the share of operational profit/(loss) by business units, Beaqon was the only profit contributor, contributing profits of S$3.5 million compared to the combined losses of S$8.4 million from the other business units and corporate office, resulting in the net loss from operations of S$4.9 million. The losses incurred by the other business units were Corous360 (S$5.0 million), Procurri (S$1.3 million), VCC (S$1.1 million) and corporate office (S$1.0 million). Corporate and Business Update On 5 March 2018, the Company announced the blueprint for corporate recovery in its CBU which sets out 4 key strategic initiatives which include (a) sharpening its focus of competencies to consolidate and build a strong foundation; (b) capitalising on existing data opportunities to generate new revenue streams; (c) accelerating DeClout investments to identify complementary opportunities; and (d) improving corporate cost efficiencies. With the strategic review, the Company had on various occasions during 2018 made similar statements that the Group is expected to reduce its losses over the course of 2018 and return to profitability in FY2018. The Company had identified Beaqon Group and VCC Group as its key business units for potential growth. The Company also does not expect further significant losses from Corous360 following the restructuring of Corous360. In addition, the Company was committed to implement measures to reduce corporate expenses, including salary pay-cuts of the Chairman and Group CEO and senior management and managers.
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n the Group returning to profitability for FY2018 are
deemed as forecast st Forecast StatementsStatements are required to be examined and reported on by the Auditors, Ernst & Young LLP, and ourselves, as the IFA, underlying the Forecast Statements are set out in Appendix H to the Circular. The extracts of the Forecast Statements and the report from the Auditors and our report on the Forecast Statements are attached as Appendices G and F to the Circular. 9M2018 For 9M2018, the Group reported a profit attributable to owners of the Company of approximately S$1.0 million compared to a loss of S$8.6 million in the corresponding period of the previous fi 9M2017 . We observed that the better performance of the Group for 9M2018 was due to various factors: (a) improved performance by the Procurri Group in 9M2018 which achieved a profit of S$3.7
million compared to a loss of S$1.5 million in 9M2017, and positive contribution from the Beaqon business unit;
(b) other net charges were lower at S$3.7 million in 9M2018 compared to S$10.0 million in
9M2017 due mainly to the absence of impacts from the divestment of Acclivis and the restructuring of Corous360; and
(c) overall, administrative expenses was higher at S$50.4 million in 9M2018 compared to
S$46.6 million in 9M2017 due mainly to the increase in administrative expenses of the VCC Group and Proccuri Group in line with their business expansion, and the absence of write-backs of S$4.9 million in corporate office costs made in 9M2017 in relation to the cancellation of planned staff-related incentives and development programs which were provided for in FY2016. There was a S$3.6 million cost savings from the restructuring of the business of Corous360 and a decrease of S$2.5 million mainly from corporate office which was derived from the cost tightening measures which the Company has undertaken in line with its CBU. However, these costs reduction was insufficient to reduce the overall net increase in administrative expenses of the Group for 9M2018.
Post 9M2018 and up to the Latest Practicable Date On 17 December 2018, the Company announced the disposal of its 100% interest in Corous360, pending completion which is expected to occur in due course. Following the completion of the disposal of Corous360, the Company will cease to consolidate the results of Corous360. On 4 January 2019, the Company announced the disposal of 16.86% out of its 46.48% interest in Procurri. Following the sale, the Company will cease to consolidate the results of Procurri Group and instead will account its 29.62% interest in Procurri using the equity method. Pro forma results of the Group for 9M2018 In view of the above, the profile of the financial performance of the Group immediately following the completion of the above disposals may be quite different from before. In addition, Management has informed us that there are other factors which are likely to affect the financial performance and financial position of the Group as a consequence of the disposals and the Offer. Accordingly, we have requested the Company to estimate the pro forma financial results of the Group for 9M2018 on the assumption that the disposals of 16.86% of Procurri and 100% of Corous360 had been completed as at 1 January 2018, before and after taking into consideration the consequential one-off effects of the disposals and other one-off item that was
Adjustments
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The breakdown of the pro forma financial results of the Group for 9M2018 is as follows:
Pro forma results of the Group for 9M2018
Loss attributable to owners of the Company (after deconsolidating results of Procurri and Corous360)
(1,201)
Add: Share of results of the Procurri Group (29.62%)(1)
1,086
Pro forma loss of the Group (before Adjustments) (115)
Adjustments due to one-off items:
Add: Gain on disposal of Procurri Shares(1) 3,914
Fair value gain on remaining Procurri Shares(1) 6,875
Gain on disposal of Corous360(2)
70
Less: Impairment of IT assets(3)
Acceleration of interest expenses on the S$10 million loan(4)
Acceleration of interest expenses on the S$9.25 million loan(5)
Provision for estimated litigation and related costs(6)
(2,292)
(500)
(299)
(1,030)
Pro forma profit of the Group (after Adjustments) 6,623
Source: Management Notes:
(1) Gain on sale of 48 million Procurri Shares at S$0.32 each, and fair value of the remaining Procurri Shares at
the same disposal price of S$0.32 each. As mentioned above, the Company will account for the remaining interest in Procurri as an associated company and its results using the equity method;
(2) Gain on disposal of Corous360 is estimated at S$70,000 based on the net asset value of Corous360 as at 30
September 2018; (3) Estimated impairment of non-income generating IT assets pursuant to the divestment of Corous360 and partial
divestment of the Procurri Shares; (4) Accelerated interest expenses (fully paid) in relation to the S$10 million loan which is secured on the Procurri
Shares pursuant to the partial divestment of the Procurri Shares; (5) Potential acceleration of interest expenses in relation to a one-year S$9.25 million loan extended by a related
party of a director of the Company to VCC which may become due for repayment upon the current Offer becoming unconditional . The interest expense amount payable under thi audited NTA and is therefore not disclosable under Rule 905 of the Catalist Rules; and
(6) Estimated litigation and related costs in relation to the litigation by H.R.A. Corporation (SG) Pte. Ltd. against
the Company which was first announced by the Company on 11 July 2017. Historical Price- PER PER illustrates the valuation ratio of the curits consolidated basic earnings per share as stated in its financial statements. The PER is affected by, inter alia, the capital structure of a company, its tax position as well as its accounting policies relating to depreciation and intangible assets. The historical PER is commonly used for the purpose of illustrating the profitability and hence the valuation of a company as a going concern. On a historical basis, the Group had incurred a significant loss after tax attributable to owners of the Company of S$16.4 million for FY2017 and reported a small profit attributable to owners of the Company of S$1.0 million for 9M2018. Hence, assessment of the valuation of the Group
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(implied by the Offer Price) which is based on the historical earnings approach would not be meaningful as the Group would be loss- T12MSeptember 2018. Similarly, on a pro forma basis, the Group has estimated a pro forma loss (before Adjustments) of S$0.115 million for 9M2018 and a slightly higher loss of S$0.153 million on an annualised basis for FY2018. Hence, assessment of the valuation of the Group (implied by the Offer Price) based on the pro forma earnings approach is also not meaningful in view of the loss-making position (before Adjustments). Based on the pro forma profit (after Adjustments) of S$6.6 million for 9M2018 and S$8.8 million on an annualised basis for FY2018. The implied PER would be 9.8 times. However, this is also not appropriate for the purpose of evaluating the Offer Price as the pro forma profit (after Adjustments) is significantly affected by the one-off items described above.
8.2.2 Financial position of the Group
A summary of the unaudited financial position of the Group as at 30 September 2018 is set out below:
S$'000 Unaudited
as at 30 September 2018 ASSETS Non-current assets 94,524 Current assets 167,633 Total assets 262,157
LIABILITIES
Current liabilities 114,710 Non-current liabilities 24,859 Total liabilities 139,569
EQUITY Equity attributable to owners of the Company 85,770 Non-controlling interests 36,818 Total equity 122,588
NAV of the Group 85,770 NTA of the Group 53,925
Number of issued Shares (excluding treasury shares) as at 30 September 2018 663,252,486
NAV per share (S$) 0.1293 NTA per Share (S$) 0.0813
Source: The Company’s unaudited financial results of the Group for 9M2018 Assets As at 30 September 2018, the Group has total assets of S$262.2 million comprising non-current assets of S$94.5 million (36.1% of total assets) and current assets of S$167.6 million (63.9% of total assets). The main non-current assets of the Group are property, plant and equipment PPE of S$39.1 million (41.4% of non-current assets), intangible assets of S$31.8 million (33.7% of non-current assets) and investment in associates of S$20.1 million (21.3% of non-current assets). The main current assets of the Group are trade and other receivables of S$91.8 million (54.8% of current assets), cash and bank balance of S$34.9 million (20.8% of current assets) and inventories of S$23.3 million (13.9% of current assets).
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Liabilities Total liabilities of S$139.6 million comprise mainly trade and other payables of S$57.3 million (41.0% of total liabilities), loans and borrowings totalling S$51.1 million (36.6% of total liabilities) and other liabilities (mainly advanced billings) totalling S$22.3 million (16.0% of total liabilities). Equity/NAV/NTA Equity attributable to the owners of the Company of S$85.8 million comprises mainly share capital S$114.5 million and negative other reserves of S$28.5 million. NAV per Share as at 30 September 2018 was S$0.1293 based on 663,252,486 outstanding Shares (excluding treasury shares) as at 30 September 2018. After deducting the intangible assets of S$31.8 million, the NTA of the Group is S$53.9 million as at 30 September 2018, representing NTA per Share of S$0.0813. Subsequently on 17 December 2018, the Company transferred 2,749,100 Shares from treasury shares to various eligible participants of the PSP in connection with the vesting of the 2,749,100 Awards. As a result, the number of issued Shares (excluding treasury shares) increased to 666,001,586. Accordingly, based on the total number of issued Shares (excluding treasury shares) of 666,001,586 as at the Latest Practicable Date, the adjusted NAV per Share and adjusted NTA per Share are S$0.1288 and S$0.0810 respectively. Pro forma financial position of the Group as at 30 September 2018
As described in Section 8.2.1 above, similar to the financial results of the Group, the profile of
the financial position of the Group may be quite different as a result of subsequent events that
Corous360 and 16.86% interest in Procurri. We have similarly requested the Company to estimate the pro forma financial position of the Group as at 30 September 2018 on the assumption that (a) the disposals had been completed as at 30 September 2018; and (b) all identified one-off items had been crystallised and determined as of that date.
The pro forma NAV/NTA (after Adjustments) of the Group as at 30 September 2018 is
computed as follows:
Pro forma NAV/NTA of the Group as at 30 September 2018
Unaudited NAV of the Group as at 30 September 2018
85,770
Taking into consideration the following:
Add: Deconsolidation of Procurri, gain on disposal of Procurri Shares and fair value gain on the remaining Procurri Shares(1)
10,611(2)
Deconsolidation of Corous360 and gain on disposal of Corous360(3) 70
Less: Impairment of IT assets(4)
Acceleration of interest expenses on the S$10 million loan(5)
Acceleration of interest expenses on the S$9.25 million loan(6)
Provision for estimated litigation and related costs(7)
Payout in relation to the acquisition of interests in Beaqon Group(8)
(2,292)
(500)
(299)
(1,030)
(6,000)
Pro forma NAV of the Group 86,330
Less: intangibles (18,559)
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Pro forma NAV/NTA of the Group as at 30 September 2018
Pro forma NTA of the Group 67,771
Number of issued Shares (excluding treasury shares) as at the Latest Practicable Date
666,001,586
Pro forma NAV per Share (S$) 0.1296
Pro forma NTA per Share (S$) 0.1018
Source: Management
Notes: (1) Includes gain on sale of 48 million Procurri Shares at S$0.32 each, and fair value of the remaining Procurri
Shares at the same disposal price of S$0.32 each. The Company will account for the remaining interest in Procurri as an associated company;
(2) Net of negative other reserves of Procurri amounting to S$0.178 million; (3) Gain on disposal of Corous360 is estimated at S$70,000 based on the net asset value of Corous360 as at 30
September 2018; (4) Estimated impairment of non-income generating IT assets pursuant to the divestment of Corous360 and partial
divestment of the Procurri Shares; (5) Accelerated interest expenses (fully paid) in relation to the S$10 million loan which is secured on the Procurri
Shares pursuant to the partial divestment of the Procurri Shares; (6) Potential acceleration of interest expenses in relation to a one-year S$9.25 million loan extended by a related
party of a director of the Company to VCC which may become due for repayment upon the current Offer becoming unconditional . The interest expense amount payable under thi audited NTA and is therefore not disclosable under Rule 905 of the Catalist Rules;
(7) Estimated litigation and related costs in relation to the litigation by H.R.A. Corporation (SG) Pte. Ltd. against
the Company which was first announced by the Company on 11 July 2017; and (8) As described in Section 5.2(a) of this Letter
the potential payout to the vendors in relation to the acquisition by the Company of interests in the Beaqon Group will be made in cash instead of the issuance of new Shares.
Fair value of the Procurri Shares based on market share price For the purpose of the computation of the pro forma NAV and NTA of the Group as at 30
price of S$0.32 each. However, we observed that the market price of the Procurri Shares did not trade up to the
obtained in relation to the disposal of the Procurri Shares at not less than S$0.32 each on 14 November 2018 and the Company had completed part of the disposal of the Procurri Shares at S$0.32 each on 4 January 2019. As at the Latest Practicable Date, the Procurri Shares were last transacted at S$0.305 each. In view of the above, we have also considered using the current market share price of the Procurri Shares to determine the fair value of Procurri Shares, and the impact it may have on the pro forma NAV and NTA of the Group as at 30 September 2018. Our assessment is as follows: Had the remaining 84,319,978 Procurri Shares held by the Company been fair valued at the market share price of S$0.305 each as at the Latest Practicable Date, the fair value gain arising from the Procurri Shares would be lower by S$1.26 million, or S$0.0019 per Share.
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APPENDIX A – LETTER FROM THE IFATO THE INDEPENDENT DIRECTORS IN RESPECT OF THE OFFER
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Accordingly, the pro forma NAV and NTA per Share (based on the current market price of the Procurri Shares) would be S$0.1277 and S$0.0999 instead of S$0.1296 and S$0.1018 respectively, which are based on the fair value price of S$0.32 for each Procurri Shares. Valuation of the PPE As at 30 September 2018, PPE of the Group was S$39.1 million of which more than 80% relates to plant and equipment. Freehold land and buildings, leasehold improvements and restoration costs amounted to, in aggregate, S$4.9 million as at 30 September 2018. Following the deconsolidation of the Procurri Group, the pro forma PPE of the Group would be reduced to approximately S$13.6 million which comprises majority of plant and equipment. Property related asset is in relation to the 2 industrial property units held by the Group of approximately S$3.3 million as at 30 September 2018 and is therefore not material in the context of the implied market capitalisation of the Company based on the Offer Price. In addition, Management is of the view that there is no material difference between the market value of the property related asset compared to the net book value of such asset as at 30 September 2018. Price-to- P/NTA
The net asset backing of the Group is measured by its NAV, NTA or revalued NAV, revalued NTA value. The NAV and NTA based valuation approach provides an estimate of the value of a company assuming the hypothetical sale of all its assets over a reasonable period of time and would be more relevant for asset-based companies or where the subject company intends to realise or convert the uses of all or most of its assets. Such a valuation approach would be particularly appropriate when applied in circumstances where the business is to cease operations or where the profitability of the business being valued is not sufficient to sustain an earnings-based valuation. The NAV based valuation approach shows the extent to which the value of each Share is
intangible assets from the NAV and the NTA based valuation approach shows the extent to which the value of each Share is backed by its net tangible assets. Based on the adjusted NAV per Share of S$0.1288 per Share as at 30 September 2018, the Offer Price represents a P/NAV ratio of 1.01 times, that is, the Offer Price is at a slight premium of 0.9% above the adjusted NAV per Share. Based on the adjusted NTA per Share of S$0.0810 per Share as at 30 September 2018, the Offer Price represents a P/NTA ratio of 1.60 times, that is, the Offer Price is at a premium of 60.5% above the adjusted NTA per Share. Based on the pro forma NAV per Share of S$0.1296 per Share as at 30 September 2018, the Offer Price represents a P/NAV ratio of 1.00 times, that is, the Offer Price is at a slight premium of 0.3% above the pro forma NAV per Share. Based on the pro forma NTA per Share of S$0.1018 per Share as at 30 September 2018, the Offer Price represents a P/NTA ratio of 1.28 times, that is, the Offer Price is at a premium of 27.7% above the pro forma NTA per Share. For the purpose of evaluating the Offer, we have used the P/NAV and P/NTA ratios of 1.00 and 1.28 times respectively based on the pro forma financial position of the Group as at 30 September 2018 as it takes into consideration the events that have happened and/or are expected to crystallise and the amounts of which can be reasonably determined.
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APPENDIX A – LETTER FROM THE IFATO THE INDEPENDENT DIRECTORS IN RESPECT OF THE OFFER
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In our evaluation of the financial terms of the Offer, we have also considered whether there is any other asset which should be valued at an amount that is materially different from that which was recorded in the statement of financial position of the Group as at 30 September 2018, and whether there are factors which have not been otherwise disclosed in the financial statements of the Group that are likely to impact the NAV as at 30 September 2018. In respect of the above, the Board of Directors and the Management have confirmed to us that as at the Latest Practicable Date, to the best of their knowledge and belief, and save for the announcements made by the Company since 30 September 2018 to the Latest Practicable Date, and the disclosures in Sections 8.2.1 and 8.2.2 of this Letter and in Section 6 of Appendix B to the Circular:
(a) there are no material differences between the fair
respective book values as at 30 September 2018 which would have a material impact on the NAV of the Group;
(b)
at 30 September 2018, there are no other contingent liabilities, bad or doubtful debts or material events which are likely to have a material impact on the NAV of the Group as at the Latest Practicable Date;
(c) there are no litigation, claim or proceeding pending or threatened against the Company
or any of its subsidiaries or of any fact likely to give rise to any proceeding which might materially and adversely affect the financial position of the Company and its subsidiaries taken as a whole;
(d) there are no intangible assets which ought to be disclosed in the statement of financial
position of the Group in accordance with the Singapore Financial Reporting Standards (International) and which have not been so disclosed and where such intangible assets would have had a material impact on the overall financial position of the Group; and
(e) there are no material acquisitions or disposals of assets by the Group between 30
September 2018 and the Latest Practicable Date nor does the Group have any plans for any such impending material acquisition or disposal of assets, conversion of the use of
8.3 Comparison with recently completed privatisation of companies listed on the SGX-ST
We note that the intention of the Offeror is to delist the Company from the SGX-ST and, if and when entitled, it will also exercise its right of compulsory acquisition under Section 215(1) of the Companies Act to privatise the Company. In assessing the reasonableness of the Offer Price in light of the above stated intention of the Offeror, we have compared the financial terms of the Offer with those of selected successful privatisation transactions that were announced and completed since January 2017 and up to the Latest Practicable Date, which were carried out either by way of voluntary delisting exit offers under Rule 1307 of the Listing Manual, offers being made by way of a scheme of arrangement under Section 210 of the Companies Act or general takeover offers under the Code where the offeror has stated its intentions to delist the listed company from the SGX-ST
Precedent Privatisation Transactions This analysis serves as a general indication of the relevant premium/discount that the offerors had paid in order to acquire the target companies without having regard to their specific industry characteristics or other considerations, and the comparison sets out:
(a) the premium or discount represented by each of the respective offer prices to the last
transacted prices and VWAPs over the 1-month and 3-month periods prior to the announcement of the Precedent Privatisation Transactions; and
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(b) the premium or discount represented by each of the respective offer prices to the NAV/NTA of the respective target companies, where applicable. We note that certain transactions had undertaken revaluations and/or adjustments to their assets which may have a material impact on their latest announced book values. In this respect, we have compared the offer price with the revalued NAV, revalued NTA or adjusted NAV or adjusted NTA of the Precedent Privatisation Transactions, where applicable.
We wish to highlight that the target companies listed in the Precedent Privatisation Transactions as set out in the analysis below may not be directly comparable to the Group in terms of market capitalisation, size of operations, composition of business activities, asset base, geographical spread, track record, operating and financial leverage, risk profile, liquidity, accounting policies, future prospects and other relevant criteria. Each transaction must be judged on its own commercial and financial merits. The premium or discount that an offeror pays in any particular privatisation transaction varies in different specific circumstances depending on, inter alia, factors such as the intention of the offeror, the potential synergy the offeror can gain by acquiring the target, the prevailing market conditions and sentiments, attractiveness and
assets to be acquired, the availability of substantial cash reserves, the liquidity in the trading of ence of competing bids for the target
company, and the existing and desired level of control in the target company. The list of the Precedent Privatisation Transactions is by no means exhaustive and as such any comparison made only serves as an illustration. Conclusions drawn from the comparisons made may not necessarily reflect the perceived or implied market valuation of the Company.
Premium/(Discount) of Offer Price
over/(to)
Name of company
Sector
Date of announce-
ment
Last
transacted price prior
to announce-ment (%)
1 month VWAP prior to
announce-ment (%)
3 month VWAP prior to
announce-ment (%)
Price-to-NTA / NAV
(times)
Auric Pacific Group Limited
Distributor of fast-moving consumer goods, food manufacturing and retailing, restaurants and food court management
7 Feb 2017 13.4 17.7 23.8 1.5(1)
Global Premium Hotels Limited
Development and operation of hotels in the economy-tier to mid-tier class
23 Feb 2017 14.1 18.1 21.7 0.5(2)
CWT Limited Provider of integrated logistics solutions in logistics services, commodity marketing, financial and engineering services
9 Apr 2017 5.9 6.4 14.8 1.5(3)
Nobel Design Holdings Ltd
Provider of interior design, renovation, and furnishing services for residential, office and commercial properties
3 May 2017 8.5 9.4 15.9 0.7(4)
Changtian Plastic & Chemical Limited
Manufacture and trading of chemical-based products
29 May 2017 45.3 46.6 48.2 0.4(5)
China Flexible Packaging Holdings Limited
Manufacturing and sale of plastic packaging films, synthetic papers, and high barrier films.
19 Jun 2017 23.2 24.3 28.2 0.8(6)
Global Logistic Properties Limited
Development and management of logistic facilities
14 Jul 2017 64.1 67.4 72.4 1.1(7)
Fischer Tech Limited
Manufacturing of precision plastic injection moulds, high precision plastic injection moulding, laser marking and decorative finishing for engineering components
27 Jul 2017 31.3 46.9 63.6 1.5(8)
GP Batteries International Limited
Development, manufacturing and distribution of primary and rechargeable batteries
11 Aug 2017 62.5 62.9 62.7 0.8(9)
Poh Tiong Choon Logistics Limited
Provider of logistic services 20 Sep 2017 1.6 30.1 41.3 1.2(10)
Rotary Engineering Limited
Oil and gas infrastructure services company
2 Oct 2017 20.1 19.3 25.1 1.3(11)
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Premium/(Discount) of Offer Price
over/(to)
Name of company
Sector
Date of announce-
ment
Last
transacted price prior
to announce-ment (%)
1 month VWAP prior to
announce-ment (%)
3 month VWAP prior to
announce-ment (%)
Price-to-NTA / NAV
(times)
Cogent Holdings Limited
Transportation and storage services
3 Nov 2017 164.9(20) 160.2(20) 167.9(20) 1.2(12)
Vard Holdings Limited
Develops systems, equipment, and provides design and engineering services to the maritime industry
13 Nov 2017 0.0 (0.9) 2.5 0.9(13)
CWG International Ltd.
Development of real estate properties.
28 Dec 2017 27.5 29.5 29.2 0.4(14)
Tat Hong Holdings Limited
Rental and sale of cranes 11 Jan 2018 42.9 47.5 49.1 0.7(15)
Lee Metal Group Ltd
Supplies and import reinforcement steel bars and steel plates as well as fabricates and manufactures cut-and-bend reinforcement steel bars and steel welded mesh
21 Feb 2018 9.1 14.1 21.4 1.0(16)
Wheelock Properties (Singapore) Limited
Property development 19 Jul 2018 22.7 29.0 22.7 0.8(17)
LTC Corporation Limited
Steel trading, property development, property rental and retail operations
7 Sep 2018 (1.1) 1.3 2.2 0.5(18)
Cityneon Holdings Limited
Interior architecture 29 Oct 2018 4.1 6.9 11.9 4.5(19)(20)
High 164.9 160.2 167.9 4.5
Low (1.1) (0.9) 2.2 0.4
Mean 22.0 26.5 30.9 0.9
Median 17.1 21.8 24.5 0.9
Company (implied by the Offer Price)
6 Sep 2018 (Last
Undisturbed Trading Date)
62.5 66.7 66.7 1.00 (based on pro forma NAV as at
30 Sep 2018)
1.28
(based on pro forma NTA as at
30 Sep 2018)
Source: SGX-ST announcements and circulars to shareholders in relation to the Precedent Privatisation Transactions Notes: (1) Based on the revalued NTA per share of Auric Pacific Group Limited as at 31 December 2016;
(2) Based on the revalued NAV per share of Global Premium Hotels Limited as at 31 December 2016; (3) Based on the NAV per share of CWT Limited as at 30 June 2017; (4) Based on the revalued NAV per share of Nobel Design Holdings Limited as at 31 March 2017; (5) Based on the revalued NTA per share of Changtian Plastic & Chemical Limited as at 31 March 2017; (6) Based on the revalued NTA per share of China Flexible Packaging Holdings Limited as at 30 June 2017; (7) Based on the revalued NAV per share of Global Logistic Properties Limited as at 30 June 2017;
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(8) Based on the adjusted revalued NTA per share of Fischer Tech Limited as at 31 March 2017; (9) Based on the revalued NAV per share of GP Batteries International Limited as at 30 June 2017; (10) Based on the revalued NAV per share of Poh Tiong Choon Logistics Limited as at 30 June 2017; (11) Based on the revalued NAV per share of Rotary Engineering Limited as at 30 September 2017; (12) Based on the revalued NAV per share of Cogent Holdings Limited as at 30 September 2017; (13) Based on the revalued NAV per share of Vard Holdings Limited as at 31 March 2018; (14) Based on the midpoint of the revalued NAV per share of CWG International Ltd. as at 31 December 2017; (15) Based on the NAV per share of Tat Hong Holdings Limited as at 31 December 2017; (16) Based on the revalued NAV per share of the Lee Metal Group Ltd as at 31 March 2018; (17) Based on the revalued NAV per share of Wheelock Properties (Singapore) Limited as at 30 June 2018; (18) Based on the revalued NAV per share of LTC Corporation Limited as at 30 June 2018; (19) Based on the NAV per share of Cityneon Holdings Limited as at 30 September 2018; and (20) Excluded as statistical outlier in the mean and median computations.
Based on the above, we note that:
(a) The premia implied by the Offer Price over the last transacted price, VWAP for the 1-month period and 3-month period prior to the Last Undisturbed Trading Date are within the range, and substantially higher than the mean and median of the corresponding premia of the Precedent Privatisation Transactions; and
(b) The P/NAV and P/NTA ratios of 1.00 and 1.28 times respectively implied by the Offer
Price are within the range, higher than the mean and median of the corresponding Price-to-NAV/NTA ratios of the Precedent Privatisation Transactions.
Shareholders should also note that the above comparison with the Precedent Privatisation Transactions is purely for illustrative purposes only.
8.4 Comparison of valuation ratios of selected listed companies which are broadly comparable with the Group
VDC. For the purpose of assessing the Offer Price, we have attempted to compare the valuation ratios of the Company implied by the Offer Price with those of selected companies listed on the SGX-ST, Bursa Malaysia, ) and Stock Exchange of Hong Kong SEHK that are involved in businesses which can be considered as broad proxies to the principal business of the portfolio companies of the Group, that is, listed companies that are engaged in the IT Infra and VD Comparable Peer Companiescomparison, we have selected Comparable Peer Companies with a market capitalisation of approximately S$1 billion and below as at the Offer Announcement Date as broad proxies to the Group. There are only six such Comparable Peer Companies.
We have had discussions with Management about the suitability and reasonableness of the selected Comparable Peer Companies acting as a basis for comparison with the Group. Relevant information has been extracted from Bloomberg L.P., publicly available annual reports and/or public announcements of the selected Comparable Peer Companies. We make no representations or warranties, expressed or implied, as to the accuracy or completeness of such information. The accounting policies of the selected Comparable Peer Companies with respect to the values for which the assets, revenue or cost are recorded may differ from that of the Group.
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We wish to highlight that the selected Comparable Peer Companies are not exhaustive and it should be noted that there may not be any listed company that is directly comparable with the Group in terms of location, business activities, customer base, size of operations, asset base, geographical spread of activities, geographical markets, track record, financial performance, operating and financial leverage, future prospects, liquidity, quality of earnings, accounting policies, risk profile and other relevant criteria. As such, any comparison made herein is necessarily limited and it may be difficult to place reliance on the comparison of valuation statistics for the selected Comparable Peer Companies. Therefore, any comparison made serves only as an illustrative guide. A brief description of the selected Comparable Peer Companies, as extracted from Bloomberg L.P. is set out below:
Company name
Stock Exchange
Principal Business
TeleChoice International Limited
TeleChoice
SGX-ST Mainboard
TeleChoice International Limited provides mobile network engineering services and solutions. TeleChoice also imports, markets and distributes tele-communication equipment and electronic products. TeleChoice provides after sales support, public mobile data and location tracking services, radio paging services and international direct dial services.
OCK Group Berhad OCK
Bursa Malaysia
OCK is principally involved in the provision of telecommunications network services. OCK's product/service offering comprehensively covers services from the telecommunications network services market: network planning, design and optimization, network deployment, network operations and maintenance, energy management, infrastructure management and others.
Interlink Communication Public Company Limited
Interlink
SET Interlink imports and distributes cabling accessories such as fiber optic cable, LAN cable, connector, media converter and rack cabinet from AMP, LINK, KRONE and its own brand Interlink. Interlink also acts as a contractor for cabling, networking, and communication system and a solution provider for computer, information and communication system.
Synnex Thailand Public Company Limited
Synnex
SET Synnex distributes computer products. Synnex distributes computer components and peripherals, servers and storage devices, security products, computer software and consumables.
Comba Telecom Systems Holdings Ltd
Comba
SEHK Comba is a wireless coverage solutions provider in China. Comba researches, develops, produces, and sells wireless coverage products including repeaters, antennas, and RF passive accessories. In addition, Comba provides project survey and design, project management, installation, maintenance, and other after-sales services.
Digital China Holdings Ltd
Digital China
SEHK Digital China, through its subsidiaries, distributes information technology products and provides system integration service in China. Digital China also develops and distributes networking and software products.
Source: Bloomberg L.P. For the purpose of our evaluation and for illustration, we have made comparison between the Group and the selected Comparable Peer Companies using the following bases: (i) The T12M PER is commonly used for the purpose of illustrating
the profitability and hence the valuation of a company as a going concern; and
(ii) The P/NAV ratio or NAV approach is used to show the extent to which the value of each share is backed by its net assets. The NAV approach of valuing a group of companies is based on the aggregate value of all the assets of the group in their existing condition, after deducting the sum of all liabilities of the group. NTA is derived by deducting intangible assets from the NAV and the NTA based approach shows the extent to which the value of each Share is backed by its net tangible assets.
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Company name
Last financial year end
Market capitalisation as at the Offer
Announcement Date (S$'million)
T12M PER(1) (times)
P/NAV(2) (times)
P/NTA(2) (times)
TeleChoice 31 Dec 2017 97.7 15.1 1.4 1.8
OCK 31 Dec 2017 120.5 15.1 0.9 1.5
Interlink 31 Dec 2017 98.7 44.9(5) 0.9 0.9
Synnex 31 Dec 2017 395.4 13.4 3.2(5) 3.2(5)
Comba 31 Dec 2017 632.1 n.m.(4) 0.9 1.2
Digital China 31 Dec 2017 1,012.8 n.m.(4) 0.6 0.9
High 44.9 3.2 3.2
Low 13.4 0.6 0.9
Mean 14.5 0.9 1.3
Median 15.1 0.9 1.2
Company (implied by the Offer Price)
31 Dec 2017
86.6
n.m.(3)
1.00
(based on pro forma NAV as at
30 September 2018)
1.28
(based on pro forma NTA as at 30 September
2018)
Source: Bloomberg L.P., annual reports and latest publicly available financial information on the Comparable Peer
Companies Notes: (1) The PERs of the Comparable Companies were computed based on (a) their respective latest published T12M
earnings, as set out in their latest available financial results as at the Latest Practicable Date, adjusted for exceptional items; and (b) their market capitalisation as at the Offer Announcement Date;
(2) The P/NAV and P/NTA ratios of the Comparable Peer Companies are computed based on their respective NAV and NTA values as set out in their latest published financial statements available as at the Offer Announcement Date;
(3) n.m. denotes not meaningful as the Group is loss-making on T12M results and pro forma annualised results
(before Adjustments) for FY2018; (4) n.m. denotes not meaningful as these companies are loss-making; and
(5) Excluded as statistical outlier for the computation of mean and median. Based on the above, we note that: (a) The PER comparison is not meaningful for comparison purposes as the Group is loss-
making for T12M as shown in Section 8.2.1 of this Letter; (b) The P/NAV ratio of 1.00 time implied by the Offer Price is within the range of the P/NAV
ratios of the Comparable Peer Companies, above the mean and median P/NAV ratios of the Comparable Peer Companies; and
(c) The P/NTA ratio of 1.28 times implied by the Offer Price is within the range of the P/NTA
ratios of the Comparable Peer Companies and close to the mean and median P/NTA ratios of the Comparable Peer Companies.
Shareholders should also note that the above comparison with the Comparable Peer Companies is purely for illustrative purposes only.
8.5 Distribution track record of the Company
We note that the Company did not declare or pay any dividends to its Shareholders since its listing on the Catalist board of SGX-ST on 24 October 2012 and up to the Latest Practicable
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APPENDIX A – LETTER FROM THE IFATO THE INDEPENDENT DIRECTORS IN RESPECT OF THE OFFER
PROVENANCE CAPITAL PTE. LTD. 31
Date, in spite of the profits achieved during FY2013 to FY2016. No dividend was declared for FY2017 as the Group was in a loss-making position.
t have a dividend policy and the Board may consider a dividend policy at an appropriate time. We note that the Company had undertaken the following equity related exercises during this period: In 2013, the Company had undertaken a 1 for 2 rights issue at the issue price of S$0.11
per rights share. In 2016 ff-market equal access
offer to buy back up to 23,000,000 Shares, representing 3.4% of the total number of issued Shares then, at S$0.315 each. The exercise was completed in early January 2017.
We wish to highlight that the above distribution analysis of the Company serves only as an
distribution policy. There is no assurance that the Company will pay distributions in the future and/or maintain the level of distributions paid in the past periods.
8.6 Other relevant considerations in relation to the Offer
8.6.1 The Offer has become unconditional in all respects
On 23 January 2019, the Offeror announced that the Offer has become unconditional in all respects. Based on public disclosures made by or on behalf of the Offeror, the total number of (a) Shares owned, controlled or agreed to be acquired by the Offeror and parties acting in concert with it; and (b) valid acceptances to the Offer, amounted to an aggregate of 509,746,388 Shares, representing 76.54% of the total number of issued Shares as at the Latest Practicable Date.
8.6.2 Likelihood of competing offers is remote
The Directors have confirmed that, as at the Latest Practicable Date, apart from the Offer being made by the Offeror, no alternative offer or proposal from any third party has been received. We also note that there is no publicly available evidence of any alternative offer for the Shares from any third party. As the Offer has become unconditional in all respects and the Kyowa Exeo group will be the major Shareholder of the Company after the Offer, the likelihood of a competing offer from any third party is remote.
8.6.3 As stated in Section 5 of the Offer Document, following the completion of the acquisition and delisting of the Company from the SGX-ST, Kyowa Exeo intends to leverage its scale, capability and know- also intends to contribute additional capital in the Company to fund its future growth. In the event that the capital contribution is in the form of equities or equity linked securities and Shareholders do not or could not participate on a pro rata basis, such Shareholders will suffer a dilution in their shareholding interests in the Company.
8.6.4 Directors intention with respect to their Shares
Among the board of directors of the Company, 3 are Executive Directors and who have given their respective Irrevocable Undertakings to accept the Offer and are participants of the
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Management Incentive Plan, and the remaining 3 are deemed Independent Directors in respect of the Offer. Of these 3 Independent Directors, Mr Poh Boon Kher Melvin has also given his Irrevocable Undertaking to accept the Offer in respect of all his holdings in the Shares. As disclosed in Section 11.4 of the Circular, the Independent Directors concur with our views on the terms of the Offer and our recommendation on the Offer. As disclosed in Section 7.2 of Appendix B to the Circular, Mr Ho Chew Thim and Mr Hew Koon Chan who hold 723,000 and 37,000 Shares respectively, have informed the Company that they intend to accept the Offer in respect of all their Shares.
8.6.5 Intention of the Offeror regarding listing status and compulsory acquisition
The Offeror intends to make the Company its wholly-owned subsidiary and does not intend to maintain the listing status of the Company. In the event that the Offeror becomes entitled to exercise its right under Section 215(1) of the Companies Act, the Offeror intends to exercise its right to compulsorily acquire all the Shares not acquired under the Offer. The Offeror will then proceed to delist the Company from the SGX-ST. Pursuant to Section 215(1) of the Companies Act, in the event that the Offeror acquires not less than 90% of the total number of issued Shares (other than those already held by the Offeror, its related corporations or their respective nominees as at the date of the Offer and excluding any Shares held in treasury), the Offeror would be entitled to exercise the right to compulsorily acquire all the Shares from Shareholders who have not accepted the Offer at a price equal to the Offer Price. In addition, pursuant to Section 215(3) of the Companies Act, if the Offeror acquires such number of Shares which, together with the Shares held by it, its related corporations and their respective nominees, comprise 90% or more of the total number of issued Shares, the Shareholders who have not accepted the Offer will have the right to require the Offeror to acquire their Shares at the Offer Price. Such Shareholders who wish to exercise their rights under Section 215(3) of the Companies Act are advised to seek their own independent legal advice. Pursuant to the Catalist Rules, in the event that the public float of the Company falls below 10% during the Offer period, the SGX-ST will suspend trading of the Shares at the close of the Offer. Given the intention of the Offeror to delist from the SGX-ST, the Offeror has disclosed in the Offer Document that it does not intend to take any action to increase the public float of the Company for the purpose of maintaining the listing status of the Company on the SGX-ST. The Offeror already owns, together with all valid acceptances in respect of the Offer, Shares representing 76.54% of the total number of issued Shares as at the Latest Practicable Date. Shareholders should therefore take note of any further announcements by the Offeror which may be relevant to their consideration of the Offer which may be released or published after the Latest Practicable Date.
8.6.6 Commentary by the Company in the results announcement for 9M2018
We note that the Group had, in the 9M2018 results announcement, included a commentary on th is reproduced in italics below:
“In the six months since the Group announced the Corporate and Business Update (“CBU”) on 5 March 2018, both its business segments have gained further momentum in the corporate recovery efforts. 1. For the VDC segment, VCC will continue to expand the reach and capabilities of its CamelONE™ platform:
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- On 1 August 2018, VCC announced the launch of the CamelONE eCargo Marketplace, an online logistics- and trade-related service booking portal that helps freight forwarders and small and medium enterprises shippers improve productivity and lower costs through the efficient use of unutilised cargo space; - On 11 October 2018, VCC announced that it had inked a deal for a Single Window project in Gabon, bringing the number of countries connected via CamelONE in Asia and Africa to 15; and - On 31 October 2018, VCC announced that it had commenced work on CamelONE Trade Finance, a unified portal to aggregate trade finance products from nine leading banks on the Singapore Government’s Networked Trade Platform. The portal is scheduled to go live in June 2019. 2. In the IT Infra segment, the Group’s 100%-owned Beaqon Group (“Beaqon”) will continue to focus on its neutral hosting services in Indonesia which offer higher EBITDA margins compared to its traditional business. As at 30 September 2018, Beaqon has 33 neutral hosting sites and the revenue contribution from these sites is expected to increase. 3. The Group’s 47%-held Procurri Group (“Procurri”) has drawn interest from potential investors. As announced on 7 September 2018, Procurri has received an unsolicited, non-binding indication of interest from a third party to acquire shares of Procurri by way of a possible voluntary general offer, subject to due diligence and other conditions. Subsequently on 14 November 2018, the Company held an extraordinary general meeting and successfully obtained shareholders’ approval for a proposed disposal, in whole or in part, of its stake in Procurri. If the transaction is completed, on assumption that the Company’s entire stake in Procurri is disposed in whole on 30 June 2018 at the minimum disposal price of S$0.32 per share, the proposed disposal is expected to result in an accounting gain of approximately S$11.5 million at the Group level and S$21.5 million at the Company level. The Company intends to use the net proceeds of approximately S$42.1 million to repay the Group’s external borrowings (up to S$22.8 million) and to fund investments and transactions involving mergers and acquisitions (up to S$19.3 million). The proposed disposal of the stake in Procurri, together with the intended use of the disposal proceeds, are in line with DeClout’s four-stage business model whereby Procurri has reached the harvest stage and is ready for monetisation. 4. DeClout Investments made its maiden investment in Vi Dimensions Pte. Ltd. which was announced on 28 September 2018 under the third instalment of the National Research Foundation Singapore’s Early Stage Venture Fund (“ESVFIII”). With the funding, Vi Dimensions seeks to continue and further accelerate its business expansion plans in U.S. and Europe. The investment also allows Beaqon to leverage on Vi Dimensions’ unique offering in the areas of security surveillance and smart-city solutions, as it seeks to evolve into a leading Digital Network Infrastructure Solutions Provider in Southeast Asia. The proceeds from the sale of Procurri’s shares will allow DeClout Investments to continue the business cycle to re-invest in new ventures with strong growth potential. In view of the current corporate recovery efforts and business growth, the Group is on track to being profitable for FY2018.”
The above statement that, inter alia, the Group is on track to being profitable for FY2018 is one of the various Forecast Statements made by the Company during 2018. Please also see our description in Section 8.2.1 of this Letter under the
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ion with the Offer, pursuant to the Code, these Forecast Statements are required to be examined and reported on by the Auditors and ourselves, as the IFA, under Rule 25 of the Code. The Auditors had examined the Forecast Statements in accordance with the Singapore Standards on Assurance Engagement applicable to the examination of prospective financial information. Based on their examination of the evidence supporting the assumptions, nothing has come to their attention to cause them to believe that the assumptions do not provide a reasonable basis for the Forecast Statements. Further, in their opinion, the Forecast Statements are properly prepared on the basis of such assumptions and are consistent with the accounting policies normally adopted by the Group which are in accordance with Singapore Financial Reporting Standards (International). On our part, we are of the view that the Forecast Statements had been issued by the Board of Directors of the Company after due and careful inquiry. Please refer to our letter on the Forecast Statements and the letter from the Auditors as set out in Appendices F and G to the Circular respectively.
9. EVALUATION OF THE MANAGEMENT INCENTIVE PLAN
As disclosed in Sections 1.3 and 6 of this Letter, the SIC had ruled that the Management Arrangements do not constitute prohibited special deals for the purposes of Rue 10 of the Code, subject to the IFA publicly stating that in its opinion the terms of the Management Arrangements are fair and reasonable so far as Shareholders are concerned in the context of Rule 10 of the Code. The salient terms of the Management Incentive Plan are set out in Section 6 of this Letter.
The Offeror believes the retention of the Management -Offer is critical to the continuity as well as growth and development of the business and operations of the Company and the Management Arrangements are meant to ensure and encourage such continuity. Our evaluation of the Management Incentive Plan is set out below.
(i) As Management team is considered as critical for the Group going forward after the
acquisition by the Offeror, the Management Arrangement where the bonus payout is to Management Co as a whole is logical to ensure that the KPIs to be met will be the effort of the Management team collectively;
(ii) Among members of the Management team, various Management Personnel are involved in different business units and some are across different business units, a direct co-relation between the individuals and the KPIs achieved may not be obvious. In addition, any potential claims by the Offeror against Management Co as provided for in the MIP that may arise over the relevant financial years may complicate the attributable bonus payout to each of the Management Personnel. Hence, the Management Personnel have agreed among themselves to have the directors of Management Co to administer the MIP and bonus payout to each of the Management Personnel. The equal shareholding interest of the Management Personnel in Management Co serves as an administrative convenience to recognise their participation in the MIP;
(iii) The Management Team comprises the 9 key Management Personnel as set out in
Section 6(iii) of this Letter and these are presently the key management of the Group; (iv) The Offer has been declared unconditional in all respects on 23 January 2019.
Accordingly, the MIP became effective on 23 January 2019;
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(v) The 3 Key Persons are considered by the Offeror to be critical to business of the Group. Hence the payment of retention bonus to Management Co in relation to these 3 Key Persons over the next 3 financial years, and in the event that if any one of the 3 Key Persons were to resign at the end of each relevant financial year, the retention bonus payable by the Offeror to Management Co will be proportionately reduced by one-third;
(vi) Bonus payout to Management Co is in accordance with the pre-determined KPIs for each of the next 4 financial years which serves to align the economic interests of Management Personnel with the Group and work towards retention and incentivisation of the Management Personnel. We note that the KPIs are (a) not cumulative over the years, that is, the KPIs achieved or not achieved with respect to one financial year is not aggregated with subsequent financial years to determine the resultant bonus payout; (b) are not off-settable across KPIs, that is, target achieved for a KPI is not set-off against missed targets for another KPI, and (c) at least 80% of the KPI target must be met to be entitled to the proportionate bonus payout as shown in the illustration in Section 6(iv) of this Letter;
(vii) As the Offeror views the deliverables of the KPIs from the Management Team as a whole,
Management Co is responsible to find suitable replacement for any resignations which may affect the ability of Management Co to fulfil the KPIs; and
(viii) The MIP provides for potential claims to be made by the Offeror against Management Co
in the event of a breach by Management Co of any representations, warranties, covenants or undertakings, which can reduce the bonus payout to Management Co, subject to the aggregate claim amount not exceeding the lower of: (aa) S$9.5 million or (bb) the aggregate amount of bonus payout to Management Co. For the avoidance of doubt, there shall not be any claim by the Offeror if there is no bonus payout to Management Co. In the event that the claim amount is more than the bonus payout, such excess amount will be repaid from bonus payout previously paid out or applied as a reduction of vested bonus payout in subsequent financial years. In a maximum bonus payout situation and a maximum claim situation, Management Co will receive in aggregate over the 4 financial years, S$3 million retention bonus and S$9.5 million bonus payout.
Overall, based on our evaluation of the terms of the Management Incentive Plan, understanding of the Management Arrangements from Management and the information made available to us as at the Latest Practicable Date, we are of the opinion that the terms of Management Arrangements are fair and reasonable so far as Shareholders are concerned in the context of Rule 10 of the Code.
10. OUR RECOMMENDATION TO THE INDEPENDENT DIRECTORS ON THE OFFER AND
OUR OPINION ON THE MANAGEMENT INCENTIVE PLAN
In arriving at our recommendation in respect of the Offer, we have taken into account, reviewed and deliberated on the following key considerations which we consider to be pertinent in our assessment of the Offer: (a) Historical share price performance and trading activity of the Shares; (b) Financial analysis of the Group; (c) Comparison with recently completed privatisation of companies listed on the SGX-ST;
(d) Comparison of valuation ratios of selected listed companies which are broadly
comparable with the Group; (e) Distribution track record of the Company; and
(f) Other relevant considerations in relation to the Offer.
A-35
APPENDIX A – LETTER FROM THE IFATO THE INDEPENDENT DIRECTORS IN RESPECT OF THE OFFER
PROVENANCE CAPITAL PTE. LTD. 36
Based on our analysis and after having considered carefully the information available to us as at the Latest Practicable Date, overall we are of the view that the financial terms of the Offer are fair and reasonable. Accordingly, we advise the Independent Directors to recommend Shareholders to ACCEPT the Offer. Shareholders who wish to realise their investments in the Company can also choose to sell their Shares in the open market if they can obtain a price higher than the Offer Price (after deducting transaction costs). Overall, based on our evaluation of the terms of the Management Arrangements, understanding of the Management Arrangements from Management and the information made available to us as at the Latest Practicable Date, we are of the opinion that the terms of the Management Arrangements are fair and reasonable so far as Shareholders are concerned in the context of Rule 10 of the Code. In rendering the above advice, we have not given regard to the specific investment objectives, financial situation, tax position, risk profiles or particular needs and constraints of any individual Shareholder. As each individual Shareholder would have different investment objectives and profiles, we would advise that any individual Shareholder who may require specific advice in relation to his investment objectives or portfolio should consult his legal, financial, tax or other professional adviser immediately. The Independent Directors should advise Shareholders that the opinion and advice of Provenance Capital should not be relied upon by any Shareholder as the sole basis for deciding whether or not to accept the Offer.
Our recommendation is addressed to the Independent Directors for their benefit, in connection with and for the purposes of their consideration of the Offer and may not be used or relied on for any other purposes (other than for the purpose of the Offer) without the prior written consent of Provenance Capital. The recommendation to be made by the Independent Directors to Shareholders in respect of the Offer shall remain the responsibility of the Independent Directors. This Letter is governed by, and construed in accordance with, the laws of Singapore, and is strictly limited to the matters stated herein and does not apply by implication to any other matter.
Yours faithfully For and on behalf of PROVENANCE CAPITAL PTE. LTD. Wong Bee Eng Chief Executive Officer
A-36
1. DIRECTORS
The names, addresses and descriptions of the Directors as at the Latest Practicable Date are
set out below:
Name Address Description
Mr Wong Kok Khun c/o 29 Tai Seng Avenue
#05-01
Natural Cool Lifestyle Hub
Singapore 534119
Chairman and Group Chief
Executive Officer
Ms Kow Ya c/o 29 Tai Seng Avenue
#05-01
Natural Cool Lifestyle Hub
Singapore 534119
Executive Director
Ms Cheryl Tan
Choo Huang
c/o 29 Tai Seng Avenue
#05-01
Natural Cool Lifestyle Hub
Singapore 534119
Executive Director
(Finance)
Mr Poh Boon Kher Melvin c/o 29 Tai Seng Avenue
#05-01
Natural Cool Lifestyle Hub
Singapore 534119
Non-Executive Director
Mr Ho Chew Thim c/o 29 Tai Seng Avenue
#05-01
Natural Cool Lifestyle Hub
Singapore 534119
Lead Independent Director
Mr Hew Koon Chan c/o 29 Tai Seng Avenue
#05-01
Natural Cool Lifestyle Hub
Singapore 534119
Independent Director
2. REGISTERED OFFICE OF THE COMPANY
The registered office of the Company is at 29 Tai Seng Avenue, #05-01 Natural Cool Lifestyle
Hub, Singapore 534119.
3. PRINCIPAL ACTIVITIES OF THE COMPANY
The Company was incorporated in Singapore on 21 August 2010 and is listed on the Catalist
of the SGX-ST. The principal activities of the Company relate to investment holding, strategic
management and corporate shared services.
4. SHARE CAPITAL OF THE COMPANY
4.1 Number and Class of Shares
The Company has only one class of Shares, being ordinary shares. The Shares are quoted
and listed on the Official List of the Catalist of the SGX-ST. As at the Latest Practicable Date,
based on a search conducted at the ACRA, the total issued and paid-up share capital of the
Company is approximately S$114,825,511.093 comprising 666,001,586 Shares (excluding
treasury shares). The Company holds 5,267,388 treasury shares.
APPENDIX B – ADDITIONAL GENERAL INFORMATION
B-1
4.2 Rights of Shareholders in respect of capital, dividends and voting
The rights of Shareholders in respect of capital, dividends and voting are contained in the
Constitution. An extract of the relevant provisions in the Constitution relating to the rights of
Shareholders in respect of capital, dividends and voting is reproduced in Appendix I of this
Circular. The Constitution is available for inspection at the registered address of the
Company at 29 Tai Seng Avenue, #05-01 Natural Cool Lifestyle Hub, Singapore 534119.
Capitalised terms and expressions not defined in the extract have the meanings ascribed to
them in the Constitution and/or the Companies Act.
4.3 Number of Shares issued since the end of the last financial year
As at the Latest Practicable Date, no new Shares have been issued by the Company since
31 December 2018, being the end of the last financial year.
4.4 Convertible instruments
As at the Latest Practicable Date, there are no outstanding instruments convertible into,
rights to subscribe for, and options in respect of, Shares and securities which carry voting
rights affecting Shares.
5. SUMMARY OF FINANCIAL INFORMATION
5.1 Consolidated statements of comprehensive income
A summary of the audited consolidated statement of comprehensive income of the Group for
FY2015, FY2016 and FY2017 and the unaudited financial information of the Group for
3QFY2018 is set out below.
FY2015 FY2016 FY2017 3QFY2018
S$’000 S$’000 S$’000 S$’000
Revenue 279,466 304,022 273,485 229,129
Cost of sales (209,769) (225,640) (200,111) (156,824)
Gross profit 69,697 78,382 73,374 72,305
Other items of income
Other income 2,536 28,836 7,066 3,348
Other items of expense
Other charges, net (2,357) (5,792) (19,204) (3,665)
Selling expenses (11,700) (12,240) (11,184) (13,020)
Administrative Expenses (47,738) (72,636) (65,553) (50,438)
Finance costs (2,699) (4,716) (2,321) (1,808)
Share of results of associates and joint
venture 221 (148) (97) 424
Profit/(loss) before tax 7,960 11,686 (17,919) 7,146
Income tax expense (253) (2,179) (2,581) (4,625)
Profit/(loss) for the year/period, net of
tax 7,707 9,507 (20,500) 2,521
APPENDIX B – ADDITIONAL GENERAL INFORMATION
B-2
FY2015 FY2016 FY2017 3QFY2018
S$’000 S$’000 S$’000 S$’000
Other comprehensive income:
Items that may be reclassified
subsequently to profit or loss:
Foreign currency translation (748) (2,562) (470) 39
Other comprehensive income for the
year/period, net of tax (748) (2,562) (470) 39
Total comprehensive income for the
year 6,959 6,945 (20,970) 2,560
Profit/(loss) attributable to:
Owners of the Company 4,978 7,758 (16,448) 969
Non-controlling interests 2,729 1,749 (4,052) 1,552
7,707 9,507 (20,500) 2,521
Total comprehensive income
attributable to:
Owners of the Company 4,462 6,053 (16,725) 1,047
Non-controlling interests 2,497 892 (4,245) 1,513
6,959 6,945 (20,970) 2,560
The above summary should be read together with the annual reports of the Company for
FY2015, FY2016 and FY2017 and relevant financial statements, copies of which are
available for inspection at the registered office of the Company at 29 Tai Seng Avenue,
#05-01 Natural Cool Lifestyle Hub, Singapore 534119 during normal business hours.
The unaudited financial information of the Group for 3QFY2018 is set out in fuller detail in
Appendix E of this Circular.
5.2 Statement of financial position
A summary of the audited consolidated statement of financial position of the Group as at
31 December 2017 is set out below.
S$’000
Non-current assets
Property, plant and equipment 36,099
Investment in associates 19,666
Investment in a joint venture *
Intangible assets 31,564
Finance lease receivables 2,037
Deferred tax assets 1,991
Total non-current assets 91,357
APPENDIX B – ADDITIONAL GENERAL INFORMATION
B-3
S$’000
Current assets
Inventories 28,277
Trade and other receivables 75,577
Amount due from customers for contract work-in-progress 6,333
Derivative financial asset 1,044
Finance lease receivables 1,433
Other financial receivable 1,483
Other assets 7,543
Cash and bank balances 31,537
153,227
Assets held for sale 2,900
Total current assets 156,127
Total assets 247,484
Current liabilities
Trade and other payables 52,131
Amount due to customers for contract work-in-progress 1,491
Other liabilities 21,509
Loans and borrowings 27,674
Income tax payables 3,853
Total current liabilities 106,658
Net current assets 49,469
Non-current liabilities
Deferred tax liabilities 975
Trade and other payables 11
Other liabilities 821
Loans and borrowings 12,671
Provisions 1,073
Total non-current liabilities 15,551
Total liabilities 122,209
Net assets 125,275
Equity attributable to owners of the Company
Share capital 114,456
Treasury shares (3,308)
Retained earnings 2,695
Other reserves (25,460)
Equity attributable to owners of the Company 88,383
Non-controlling interests 36,892
Total equity 125,275
Total equity and liabilities 247,484
* Amount less than S$1,000
The above summary should be read together with the annual report for FY2017, the audited
consolidated statements of financial position of the Group for FY2017, which are set out in
Appendix D of this Circular, and the related notes thereto.
APPENDIX B – ADDITIONAL GENERAL INFORMATION
B-4
5.3 Significant accounting policies
A summary of the significant accounting policies of the Group is set out in Note 2 to the
audited consolidated financial statements of the Group for FY2017, which are reproduced in
Appendix D of this Circular.
Save as disclosed in this Circular and publicly available information on the Group (including
but not limited to that contained in the audited consolidated financial statements of the Group
for FY2017 and that contained in the unaudited financial information of the Group for
3QFY2018), there are no significant accounting policies or any points from the notes to the
financial statements which are of major relevance for the interpretation of the accounts.
5.4 Changes in accounting policies
The Group has applied the same accounting policies and methods of computation as with
those in the audited financial statements of the Group for the financial year ended
31 December 2017, except for the adoption of Singapore Financial Reporting Framework
(International) (“SFRS(I)”), a new financial reporting framework identical to the International
Financial Reporting Standards. The Group adopted SFRS(I) on 1 January 2018, including
improvements to SFRS(I) and Interpretations of SFRS(I) that are mandatory for financial
years beginning on or after 1 January 2018, and in the nine months ended 30 September
2018, where applicable. On transition to SFRS(I), the Group elected the option to deem
cumulative translation differences for foreign operations to be zero on 1 January 2017, and
accordingly, the gain or loss that will be recognised on a subsequent disposal of the foreign
operations will exclude cumulative translation differences that arose before 1 January 2017.
The Group reclassified the foreign currency translation reserve to the opening retained
earnings as at 1 January 2017. Other than the effects of the matter as described above and
the impact on adoption of SFRS(I)15 Revenue from Contracts with Customers and SFRS(I)9
Financial Instruments, the Group expects that the adoption of the SFRS(I) will have no
material impact on the financial statements in the year of initial application. The adoption of
these new/revised standards and interpretations applicable for the financial year beginning
1 January 2018 did not result in significant change to the Group’s accounting policies and did
not have a material impact on the Group’s results.
6. MATERIAL CHANGES IN FINANCIAL POSITION
Save for:
(a) information disclosed in this Circular, publicly available information on the Company
(including but not limited to announcements released by the Company in respect of its
financial results such as the unaudited financial information of the Group for 3QFY2018
as announced on 14 November 2018 and set out in Appendix E of this Circular) and the
operational performance of the Group for the 3-month period ended 31 December 2018;
(b) estimated impairment of S$2,292,000 arising from non-income generating IT assets
pursuant to the Company’s proposed divestment of Corous360 Pte. Ltd. and the partial
divestment of Procurri shares;
(c) accelerated interest expenses of S$500,000 paid in relation to the S$10 million loan
secured on Procurri shares pursuant to the partial divestment of Procurri shares;
APPENDIX B – ADDITIONAL GENERAL INFORMATION
B-5
(d) potential acceleration of interest expenses of S$299,000 payable in relation to the
Lyndenra Loan upon the Offer becoming unconditional;
(e) estimated litigation and related costs of S$1,030,000 in relation to the HRA Litigation;
and
(f) the potential payout of S$6,000,000 to the vendors in relation to the acquisition by the
Company of the (then) remaining interest in Beaqon Pte. Ltd. in cash instead of the
issuance of new shares, which the Company had previously accounted for as equity
(i.e. issuance of new shares) in the Company’s 3QFY2018 unaudited financial results,
there are no known material changes in the financial position of the Company as at the Latest
Practicable Date since 31 December 2017, being the date to which the Company’s last
published audited financial statements were made up.
7. DISCLOSURE OF INTERESTS OF THE COMPANY AND THE DIRECTORS
7.1 Shareholdings and dealings
As at the Latest Practicable Date:
(a) the Company does not have any direct or deemed interests in any Offeror Securities;
(b) none of the Directors has any direct or deemed interests in any Offeror Securities;
(c) each of the Company and the Directors have not dealt for value in any Offeror Securities
during the Relevant Period;
(d) save as disclosed below and in this Circular, as at the Latest Practicable Date, none of
the Directors has any direct or deemed interests in any Company Securities:
Interests in Shares
Name Direct Interest Deemed Interest Total Interest
No. of Shares %(1) No. of Shares %(1) No. of Shares %(1)
Mr Ho Chew Thim 723,000 0.11 – – 723,000 0.11
Mr Hew Koon Chan 37,000 0.01 – – 37,000 0.01
Note:
(1) Calculated based on a total of 666,001,586 Shares (excluding treasury shares) as at the Latest
Practicable Date and rounded to the nearest two (2) decimal places.
APPENDIX B – ADDITIONAL GENERAL INFORMATION
B-6
(e) save as disclosed below, none of the Directors has dealt for value in any Company
Securities during the Relevant Period:
Director Transaction Date
Nature of
Transaction
Number of Company
Securities Traded
Aggregate
Transaction Price
(S$)
Ms Kow Ya17 December
2018
Vesting of
Share Awards
pursuant to
the PSP
604,200 Shares Nil
Ms Cheryl Tan
Choo Huang
17 December
2018
Vesting of
Share Awards
pursuant to
the PSP
604,200 Shares Nil
Mr Wong Kok Khun 22 January 2019Acceptance
of Offer
58,018,770 Shares
comprising 18,953,800
Shares held by Mr Wong
Kok Khun and
39,064,970 Shares held
by 3rd Space Pte Ltd(1)
S$7,542,440.10
Ms Kow Ya 22 January 2019Acceptance
of Offer18,067,100 Shares S$2,348,723.00
Ms Cheryl Tan
Choo Huang22 January 2019
Acceptance
of Offer2,641,700 Shares S$343,421.00
Mr Poh Boon Kher
Melvin22 January 2019
Acceptance
of Offer81,825,400 Shares S$10,637,302.00
Mr Wong Kok Khun 23 January 2019Acceptance
of Offer
24,102,800 Shares
comprising 10,123,200
Shares held by Mr Wong
Kok Khun and 13,979,600
Shares held by 3rd Space
Pte Ltd(1)
S$3,133,364.00
Mr Wong Kok Khun 25 January 2019
Cancellation
of ESOS
Options
pursuant
to his
Irrevocable
Undertaking
2,232,558
ESOS OptionsNil
Ms Kow Ya 25 January 2019
Cancellation
of ESOS
Options
pursuant
to her
Irrevocable
Undertaking
558,139
ESOS OptionsNil
Note:
(1) 3rd Space Pte Ltd is wholly-owned by Mr Wong Kok Khun. Mr Wong Kok Khun is deemed to have an
interest in the Shares held by 3rd Space Pte Ltd by virtue of Section 7 of the Companies Act.
APPENDIX B – ADDITIONAL GENERAL INFORMATION
B-7
7.2 Directors’ intentions in relation to the Offer
The following Directors who have direct or deemed interests in the Shares have informed the
Company of their intentions in respect of the Offer as follows:
(a) Mr Wong Kok Khun and his wholly-owned company 3rd Space Pte Ltd have each given
an Irrevocable Undertaking to, inter alia, accept the Offer in respect of all the Shares
held by each of them, and had so accepted the Offer on 22 January 2019 and
23 January 2019;
(b) Ms Kow Ya has given an Irrevocable Undertaking to, inter alia, accept the Offer in
respect of all the Shares held by her, and had so accepted the Offer on 22 January
2019;
(c) Ms Cheryl Tan Choo Huang has given an Irrevocable Undertaking to, inter alia, accept
the Offer in respect of all the Shares held by her, and had so accepted the Offer on
22 January 2019;
(d) Mr Poh Boon Kher Melvin has given an Irrevocable Undertaking to, inter alia, accept the
Offer in respect of all the Shares held by him, and had so accepted the Offer on
22 January 2019;
(e) Mr Ho Chew Thim has informed the Company that he intends to accept the Offer in
respect of his own Shares; and
(f) Mr Hew Koon Chan has informed the Company that he intends to accept the Offer in
respect of his own Shares.
7.3 Directors’ service contracts
As at the Latest Practicable Date, (a) there are no service contracts between any Director or
proposed director with the Company or any of its subsidiaries with more than 12 months to
run, which the employing company cannot, within the next 12 months, terminate without
payment of compensation; and (b) there are no such service contracts entered into or
amended between any of the Directors or proposed director with the Company or any of its
subsidiaries during the period between the start of six (6) months preceding the Offer
Announcement Date and the Latest Practicable Date.
7.4 Arrangements affecting directors
As at the Latest Practicable Date:
(a) save for the Management Arrangements, there are no payments or other benefits which
will be made or given to any Director or any director of any corporation, which is by
virtue of Section 6 of the Companies Act, deemed to be related to the Company, as
compensation for loss of office or otherwise in connection with the Offer;
(b) save for the Irrevocable Undertakings and the Management Arrangements, there are no
agreements or arrangements made between any Director and any other person in
connection with or conditional upon the outcome of the Offer; and
APPENDIX B – ADDITIONAL GENERAL INFORMATION
B-8
(c) save as disclosed in Section 7.1 (Shareholdings and dealings) of this Appendix B, the
Irrevocable Undertakings and the Management Arrangements, none of the Directors
has a material personal interest, whether direct or indirect, in any material contract
entered into by the Offeror.
8. DISCLOSURE OF INTERESTS OF THE INDEPENDENT FINANCIAL ADVISER
None of the IFA or any of the funds whose investments are managed by the IFA on a
discretionary basis, owns or controls any Company Securities as at the Latest Practicable
Date, or has dealt with any Company Securities during the Relevant Period.
9. MATERIAL CONTRACTS WITH INTERESTED PERSONS
As at the Latest Practicable Date, save for the Lyndenra Loan, there have been no material
contracts (not being contracts entered into during the ordinary course of business carried on
by the Company) entered into by the Company or any of its subsidiaries with Interested
Persons, during the three (3) years preceding the Offer Announcement Date and ending on
the Latest Practicable Date.
10. MATERIAL LITIGATION
As at the Latest Practicable Date, save in respect of the HRA Litigation:
(a) neither the Company nor any of its subsidiaries is engaged in any material litigation or
arbitration proceedings, as plaintiff or defendant, which might materially and adversely
affect the financial position of the Company and its subsidiaries taken as a whole; and
(b) the Directors are not aware of any litigation, claim or proceeding pending or threatened
against the Company or any of its subsidiaries or of any fact likely to give rise to any
proceeding which might materially and adversely affect the financial position of the
Company and its subsidiaries taken as a whole.
APPENDIX B – ADDITIONAL GENERAL INFORMATION
B-9
This page has been intentionally left blank.
The following information on the Offeror has been extracted from Appendix II of the Offer
Document and set out below.
“APPENDIX II – ADDITIONAL INFORMATION ON THE OFFEROR
1. DIRECTORS OF THE OFFEROR
The names, addresses and descriptions of the directors of the Offeror as at the Latest
Practicable Date are as follows:
Name Address Description
Mr. Fumitoshi Imaizumi 3-29-20 Shibuya, Shibuya-ku, Tokyo
150-0002, Japan
Managing Director
Mr. Yasuo Otsubo 3-29-20 Shibuya, Shibuya-ku, Tokyo
150-0002, Japan
Director
Mr. Yuichi Koyama 3-29-20 Shibuya, Shibuya-ku, Tokyo
150-0002, Japan
Director
Mr. Yoshiaki Matsuzaka 3-29-20 Shibuya, Shibuya-ku, Tokyo
150-0002, Japan
Director
Mr. Tan Seow Leng 17 Soon Lee Road, Singapore
628080
Director
2. REGISTERED OFFICE OF THE OFFEROR
The registered office of the Offeror is at 80 Robinson Road #02-00, Singapore 068898.
3. PRINCIPAL ACTIVITIES OF THE OFFEROR
The Offeror serves as a regional head office, administrative office and subsidiary
management office of Kyowa Exeo.
4. SUMMARY OF FINANCIAL INFORMATION
As the Offeror was recently incorporated on 20 November 2018, no audited financial
statements of the Offeror have been prepared since the date of its incorporation. As no
audited financial statements of the Offeror have been prepared to date, there are no
significant accounting policies to be noted.
5. MATERIAL CHANGES IN FINANCIAL POSITION
As at the Latest Practicable Date, save as a result of the making and financing of the Offer,
there have been no known material changes in the financial position of the Offeror since the
date of its incorporation.”
APPENDIX C – ADDITIONAL INFORMATION
ON THE OFFEROR AND KYOWA EXEO
C-1
The following information on Kyowa Exeo has been extracted from Appendix III of the Offer
Document and set out below.
“APPENDIX III – ADDITIONAL INFORMATION ON KYOWA EXEO
1. DIRECTORS OF KYOWA EXEO
The names, addresses and descriptions of the directors of Kyowa Exeo as at the Latest
Practicable Date are as follows:
Name Address Description
Mr. Fuminori Kozono c/o Kyowa Exeo Corporation
29-20 Shibuya 3-chome,
Shibuya-ku, Tokyo, Japan
Representative Director
and President
Mr. Tetsuya Funabashi c/o Kyowa Exeo Corporation
29-20 Shibuya 3-chome,
Shibuya-ku, Tokyo, Japan
Representative Director
and Vice President
Mr. Tsutomu Ota c/o Kyowa Exeo Corporation
29-20 Shibuya 3-chome,
Shibuya-ku, Tokyo, Japan
Representative Director
and Executive Operating
Officer
Mr. Yoshiaki Matsuzaka c/o Kyowa Exeo Corporation
29-20 Shibuya 3-chome,
Shibuya-ku, Tokyo, Japan
Director and Executive
Operating Officer
Mr. Noritsugu Totani c/o Kyowa Exeo Corporation
29-20 Shibuya 3-chome,
Shibuya-ku, Tokyo, Japan
Director and Executive
Operating Officer
Mr. Yasuo Otsubo c/o Kyowa Exeo Corporation
29-20 Shibuya 3-chome,
Shibuya-ku, Tokyo, Japan
Director and Managing
Operating Officer
Mr. Tomohiro Kurosawa c/o Kyowa Exeo Corporation
29-20 Shibuya 3-chome,
Shibuya-ku, Tokyo, Japan
Director and Managing
Operating Officer
Mr. Yuichi Koyama c/o Kyowa Exeo Corporation
29-20 Shibuya 3-chome,
Shibuya-ku, Tokyo, Japan
Director and Managing
Operating Officer
Mr. Yuki Sakuyama c/o Kyowa Exeo Corporation
29-20 Shibuya 3-chome,
Shibuya-ku, Tokyo, Japan
Director
Ms. Kumiko Kitai c/o Kyowa Exeo Corporation
29-20 Shibuya 3-chome,
Shibuya-ku, Tokyo, Japan
Independent Director
Mr. Kazuteru Kanazawa c/o Kyowa Exeo Corporation
29-20 Shibuya 3-chome,
Shibuya-ku, Tokyo, Japan
Independent Director
APPENDIX C – ADDITIONAL INFORMATION
ON THE OFFEROR AND KYOWA EXEO
C-2
Name Address Description
Mr. Yasushi Kohara c/o Kyowa Exeo Corporation
29-20 Shibuya 3-chome,
Shibuya-ku, Tokyo, Japan
Independent Director
Mr. Wataru Hashimoto c/o Kyowa Exeo Corporation
29-20 Shibuya 3-chome,
Shibuya-ku, Tokyo, Japan
Director
Mr. Toshihiko Kumamoto c/o Kyowa Exeo Corporation
29-20 Shibuya 3-chome,
Shibuya-ku, Tokyo, Japan
Director
Mr. Toshiro Ue c/o Kyowa Exeo Corporation
29-20 Shibuya 3-chome,
Shibuya-ku, Tokyo, Japan
Director
2. REGISTERED OFFICE OF KYOWA EXEO
The registered office of Kyowa Exeo is at 29-20 Shibuya 3-chome, Shibuya-ku, Tokyo
150-0002, Japan.
3. PRINCIPAL ACTIVITIES OF KYOWA EXEO
Kyowa Exeo is a leading Japanese conglomerate in the construction and supply of
telecommunications infrastructure, electrical, civil and environmental engineering services,
systems solutions and integration services.
4. SUMMARY OF FINANCIAL INFORMATION
A summary of the financial information relating to Kyowa Exeo for FY2016, FY2017, FY2018
and 2Q2019 is set out below. The summary financial information should be read together
with the audited consolidated financial statements of Kyowa Exeo as set out in the corporate
reports (which are the equivalent of annual reports) of Kyowa Exeo for FY2016, FY2017 and
FY2018 (copies of which are available for inspection as set out in paragraph 4 of
Appendix IV to this Offer Document). In addition, the financial information for 2Q2019 should
be read in conjunction with the audited consolidated financial statements of Kyowa Exeo for
2Q2019 (copies of which are available for inspection as set out in paragraph 4 of
Appendix IV to this Offer Document).
APPENDIX C – ADDITIONAL INFORMATION
ON THE OFFEROR AND KYOWA EXEO
C-3
Consolidated Income Statements of Kyowa Exeo
A summary of the consolidated income statements of Kyowa Exeo for FY2016, FY2017,
FY2018 and 2Q2019 is set out below:
Financial year ended 31 March
(Audited)Audited
as at
30 September
2018
JPY’M
FY2016
JPY’M
FY2017
JPY’M
FY2018
JPY’M
Revenue 287,437 298,825 312,669 132,889
Exceptional Items 100 (152) 827 378
Net Profit/(loss) before tax 18,512 20,721 26,448 8,932
Net profit/(loss) after tax 12,222 13,739 18,054 5,795
Minority interests 37 (50) 61 (104)
Net earnings per share
(in JPY)(1) 125.90 145.24 189.42 62.07
Net dividends per share
(in JPY)(1)(2) 38.00 46.00 50.00 32.00
Notes:
(1) Rounded to the nearest two (2) decimal places.
(2) Net dividends per share declared in respect of each of the FY2016, FY2017 and FY2018. Such information
has been extracted from the corporate reports (which are the equivalent of annual reports) of Kyowa Exeo for
FY2016, FY2017 and FY2018.
APPENDIX C – ADDITIONAL INFORMATION
ON THE OFFEROR AND KYOWA EXEO
C-4
Consolidated Balance Sheet of Kyowa Exeo
The audited consolidated balance sheet of Kyowa Exeo as at 31 March 2018 and the
audited consolidated balance sheet of Kyowa Exeo as at 30 September 2018 are
summarised below:
Audited as at
31 March 2018
JPY’M(1)
Audited as at
30 September 2018
JPY’M(1)
Current assets 156,280 128,815
Non-current assets 107,351 116,402
Total assets 263,632 245,218
Current liabilities 63,161 45,137
Non-current liabilities 24,369 22,209
Total liabilities 87,531 67,347
NET ASSETS 176,101 177,870
Share capital 161,682 162,756
Reserves 13,891 14,704
Subscription rights to shares 285 290
Non-controlling interests 242 119
TOTAL EQUITY 176,101 177,870
Note:
(1) Rounded to the nearest whole number.
5. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies of Kyowa Exeo (in Japanese) are available for inspection as set out
in paragraph 4 of Appendix IV to this Offer Document. An English translation of the
significant accounting policies of Kyowa Exeo is also set out in Appendix VII to this Offer
Document.
6. MATERIAL CHANGES IN FINANCIAL POSITION
As at the Latest Practicable Date, save for any publicly available information on Kyowa Exeo,
there have been no known material changes in the financial position of Kyowa Exeo
subsequent to 30 September 2018, being the date of its last published audited accounts.”
APPENDIX C – ADDITIONAL INFORMATION
ON THE OFFEROR AND KYOWA EXEO
C-5
This page has been intentionally left blank.
The audited consolidated financial statements of the Group for FY2017 which are set out below
have been reproduced from the Company’s annual report for FY2017, and were not specifically
prepared for inclusion in this Circular.
All capitalised terms used in Note 2 to the audited consolidated financial statements of the Group
for FY2017 set out below shall have the same meanings given to them in the annual report of the
Company for FY2017.
A copy of the annual report of the Company for FY2017 is available for inspection at the registered
address of the Company at 29 Tai Seng Avenue, #05-01 Natural Cool Lifestyle Hub,
Singapore 534119, during normal business hours until the Closing Date.
APPENDIX D – AUDITED CONSOLIDATED FINANCIAL
STATEMENTS OF THE GROUP FOR FY2017
D-1
Directors’ Statement
The directors present their statement to the members together with the audited consolidated financial statements of DeClout Limited (the “Company”) and its subsidiaries (collectively, the “Group”) and the balance sheet and statement of changes in equity of the Company for the financial year ended 31 December 2017.
OPINION OF THE DIRECTORS
In the opinion of the directors,
(i) the consolidated financial statements of the Group and the balance sheet and statement of changes in equity of the Company are drawn up so as to give a true and fair view of the financial position of the Group and of the Company as at 31 December 2017 and the financial performance, changes in equity and cash flows of the Group and changes in equity of the Company for the year ended on that date, and
(ii) 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.
DIRECTORS
The directors of the Company in office at the date of this statement are:
Wong Kok Khun Kow YaCheryl Tan Choo HuangHo Chew ThimHew Koon ChanCh’ng Li-Ling
ARRANGEMENTS TO ENABLE DIRECTORS TO ACQUIRE SHARES AND DEBENTURES
Except as described in paragraph below, neither at the end of nor at any time during the financial year was the Company a party to any arrangement 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.
D-2
APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
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, Chapter 50 (the “Act”), an interest in shares and share options of the Company and related corporations (other than wholly-owned subsidiaries) as stated below:
Direct interest Deemed interest
Name of directors and entity in which a director has interests
At beginning of the
financial year
At end of the
financial year
At 21 days after
financial year
At beginning of the
financial year
At end of the
financial year
At 21 days after
financial year
The Company Ordinary shares
Wong Kok Khun 27,877,500 28,077,000 28,077,000 55,019,570 (1) 53,044,570 (1) 53,044,570 (1)
Kow Ya 16,800,000 16,996,900 16,996,900 – – –Cheryl Tan Choo Huang 1,630,000 1,571,500 1,571,500 – – –Ho Chew Thim 550,000 723,000 723,000 – – –Hew Koon Chan 50,000 37,000 37,000 – – –Ch’ng Li-Ling 250,000 418,000 418,000 – – –
Direct interest Deemed interest
Name of directors and entity in which a director has interests
At beginning of the
financial year
At end of the
financial year
At beginning of the
financial year
At end of the
financial year
The Company Options granted under DeClout Employee Share Option Scheme
Wong Kok Khun 2,232,558 2,232,558 – –Kow Ya 558,139 558,139 – – Shares awards granted under DeClout Performance Share Plan
Kow Ya 1,266,000 1,070,200 – –Cheryl Tan Choo Huang 466,000 1,070,200 – –Ho Chew Thim 191,000 – – –Hew Koon Chan 187,000 – – –Ch’ng Li-Ling 168,000 – – –
(1) Wong Kok Khun holds 100% of the issued and paid up share capital of 3rd Space Pte. Ltd. (“3rd Space”). By virtue of his control of the exercise of not less than 20% of the votes attached to the voting shares in 3rd Space, Wong Kok Khun is deemed to be interested in the shares of the Company held by 3rd Space.
By virtue of section 7 of the Act, Wong Kok Khun is deemed to have interests in the shares of all the subsidiaries held by the Company.
Except as disclosed in this report, no director who held office at the end of the financial year had interests in shares, share options, warrants or debentures of the Company, or of related corporations, either at the beginning of the financial year, or date of appointment if later, or at the end of the financial year.
Except as disclosed in this statement, there was no change in any of the above-mentioned interests in the Company between the end of the financial year and 21 January 2018.
Directors’ Statement
D-3
APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
SHARES OPTIONS AND AWARDS
DeClout Employee Share Option Scheme (“DeClout ESOS”)
The DeClout ESOS was approved pursuant to a written resolution passed by the shareholders on 5 October 2012.
The DeClout ESOS is administered by the Remuneration Committee (the “RC”) whose members at the date of this statement are:
- Ho Chew Thim (Chairman of the RC and independent and non-executive director)- Hew Koon Chan (Independent and non-executive director)- Ch’ng Li-Ling (Independent and non-executive director)
Subject to the absolute discretion of the RC, options may be granted to the following Groups of participants under the DeClout ESOS:
- group employees;
- group directors (including Group executive directors, Group non-executive directors and independent directors); and
- controlling shareholders or associates of controlling shareholder who fall within the above categories (subject to the rules of the DeClout ESOS).
The grant of options to each controlling shareholders or associates of controlling shareholders shall be subject to specific approval by the independent shareholders in a general meeting.
The aggregate number of shares arising from options which the RC may grant on any date, when added to (i) the number of shares issued and issuable and/or transferred or transferable in respect of all options granted thereunder, and (ii) all shares issued and issuable and/or transferred or transferable in respect of all options granted or awards granted under any other share incentive schemes or share plans adopted by the Company for the time being in force, including the awards granted under the DeClout Performance Share Plan shall not exceed 15% of the issued share capital (excluding treasury shares and subsidiary holdings) of the Company on the date preceding the offering date.
Offers for the grant of options may be made at any time at the discretion of the RC, in accordance with the SGX-ST Catalist Listing Manual. The options are exercisable within 6 to 9 years from the commencement of the exercise period.
The exercise price for each option shall be determined by the RC at its absolute discretion, and fixed by the RC at:
- a price (“Market Price”) equal to the average of the last dealt price for the shares on Catalist for the five consecutive market days immediate preceding the relevant date of grant of the relevant option; or
- a price which is set at a discount to the Market Price, the quantum of such discount to be determined by the RC in its absolute discretion, provided that the maximum discount which may be given in respect of any option shall not exceed 20% of the Market Price (or such other percentage or amount as may be determined by the RC and prescribed or permitted for the time being by the SGX-ST), and the prior approval of shareholders have been obtained at a general meeting, in a separate resolution, for the grant of options under the scheme at a discount not exceeding the maximum discount as aforesaid.
Directors’ Statement
D-4
APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
SHARES OPTIONS AND AWARDS (cont’d)
DeClout Employee Share Option Scheme (“DeClout ESOS”) (cont’d)
The table below summarises the number of options that were outstanding, their exercise price as at the end of the reporting year as well as the movement during the reporting year.
Exercise periodFrom To
Number of options
outstanding as at
beginning of the year
Number of options granted
during the year
Number of options exercised/ cancelled/
lapsed during the year
Number of options
outstanding as at end of
the year
Exercise price
$
10 May 2015 9 May 2023 1,506,976 – (167,442) 1,339,534 0.1881 *10 May 2016 9 May 2023 1,506,976 – (167,442) 1,339,534 0.1881 *10 May 2017 9 May 2023 2,232,557 – (446,510) 1,786,047 0.1881 *2 January 2015 1 January 2024 600,000 – – 600,000 0.12902 January 2016 1 January 2024 600,000 – – 600,000 0.12902 January 2017 1 January 2024 800,000 – – 800,000 0.1290
7,246,509 – (781,394) 6,465,115
* Adjusted pursuant to the completion of the Rights Issue in 2013
The information on directors (holding office at the date of this statement) of the Group participating in DeClout ESOS is as follows:
Participants
Aggregate options
granted since the start
of the plan to end of year
Aggregate options
exercised/cancelled/lapsed
since the start of plan to
end of year
Aggregate options
outstanding as at
end of year
Directors Wong Kok Khun 669,767 – 669,767(a)
669,767 – 669,767(b)
893,024 – 893,024(c)
Kow Ya 167,442 – 167,442(a)
167,442 – 167,442(b)
223,255 – 223,255(c)
2,790,697 – 2,790,697
(a) Adjusted exercise price of $0.1881. Exercise period from 10 May 2015 to 9 May 2023.
(b) Adjusted exercise price of $0.1881. Exercise period from 10 May 2016 to 9 May 2023.
(c) Adjusted exercise price of $0.1881. Exercise period from 10 May 2017 to 9 May 2023.
No participant has received 5% or more of the total options and performance shares available under DeClout ESOS and DeClout PSP schemes.
During the reporting year, no option was granted at a discount.
At the end of the reporting year, there were no unissued shares of the Company or any subsidiary under options.
Directors’ Statement
D-5
APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
SHARES OPTIONS AND AWARDS (cont’d)
DeClout Performance Share Plan (“DeClout PSP”)
The Group operates a Performance Share Plan, the DeClout PSP, which was approved pursuant to a written resolution passed by the shareholders on 5 October 2012.
The DeClout PSP is administered by the Awards Committee, whose members are currently members of the RC.
The participants of the DeClout PSP are similar to those of the DeClout ESOS. The shares awarded to each controlling shareholders or associates of controlling shareholders shall be subject to specific approval by the independent shareholders in a general meeting.
The total number of shares which may be issued or transferred pursuant to the awards granted under the DeClout PSP, when added to (i) the number of shares issued or issuable and/or transferred or transferrable in respect of all awards granted thereunder; and (ii) all shares issued or issuable and/or transferred or transferrable under any other share incentive schemes adopted by the Company for the time being in force, shall not exceed 15% of the issued share capital (excluding treasury shares and subsidiary holdings) of the Company on the day preceding the relevant award date.
The table below summarises the number of PSP that were outstanding, their fair value price as at the end of the reporting year, as well as the movement during the reporting year.
Grant date
Number of PSP
outstanding as at beginning
of year
Number of PSP
granted during
the year
Number of shares
issued during
the year
Number of PSP
forfeited during
the year
Number of PSP
outstanding as at
end of year
Market price
$
13 August 2014 2,400,000 – (2,400,000) – – 0.2651 October 2014 2,400,000 – (1,600,000) (800,000) – 0.26013 January 2015 2,500,000 – (2,500,000) – – 0.23024 March 2015 500,000 – (500,000) – – 0.24514 August 2015 870,000 – (435,000) – 435,000 0.23020 May 2016 1,944,000 – (546,000) (466,000) 932,000 0.2254 July 2016 5,435,000 – (2,300,000) – 3,135,000 0.22018 July 2016 466,000 – – – 466,000 0.22519 May 2017 – 4,664,400 – (1,311,100) 3,353,300 0.166
16,515,000 4,664,400 (10,281,000)* (2,577,100) 8,321,300
* 10,281,000 treasury shares were reissued upon the vesting of PSP granted pursuant to the DeClout PSP.
The information on directors (holding office at the date of this statement) of the Group participating in DeClout PSP is as follows:
Participants
Aggregate PSP granted
since the start of the plan to
end of year
PSP granted
during the year
Aggregate PSP vested
since the start of the plan to
end of year
Aggregate PSP forfeited/
cancelled/ lapsed during
the year
Aggregate PSP
outstanding as at end
of year
DirectorsKow Ya 2,670,200 604,200 (1,600,000) – 1,070,200Cheryl Tan Choo Huang 1,536,200 604,200 (466,000) – 1,070,200Ho Chew Thim 688,700 247,700 (441,000) (247,700)* –Hew Koon Chan 678,700 241,700 (437,000) (241,700)* –Ch’ng Li-Ling 635,500 217,500 (418,000) (217,500)* –
6,209,300 1,915,300 (3,362,000) (706,900) 2,140,400
* The independent directors were granted a total of 706,900 performance shares as part of their share-based directors’ fees on 19 May 2017, and had voluntarily
waived the rights to the performance shares on 16 October 2017.
The Company has no controlling shareholders as defined in the SGX-ST Catalist Listing Manual and hence there were no participants who are controlling shareholders of the Company and their associates for the purposes of the DeClout ESOS and DeClout PSP.
Directors’ Statement
D-6
APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
AUDIT COMMITTEE
The members of the Audit Committee (the “AC”) at the date of this statement are as follow:
Hew Koon Chan (Chairman of the AC and independent and non-executive director)Ho Chew Thim (Independent and non-executive director)Ch’ng Li-Ling (Independent and non-executive director)
The AC carried out its functions specified by Section 201B(5) of the Act, the SGX-ST Catalist Listing Manual and the Code of Corporate Governance. Among other functions, it performed the following:
- reviewed with the independent external auditors their audit plan;
- reviewed with the independent external auditors their evaluation of the Company’s internal accounting controls relevant to the statutory audit, and their report on the financial statements and the assistance given by the Company’s officers to them;
- reviewed with the internal auditors the scope and results of the internal audit procedures (including those relating to financial, operational and compliance controls and risk management) and the assistance given by the management to the internal auditors; and
- reviewed the interested person transactions (as defined in Chapter 9 of the SGX-ST Catalist Listing Manual).
Other functions performed by the AC are described in the corporate governance report in the annual report of the Company. It also includes an explanation of how independent auditors’ objectivity and independence is safeguarded where the independent auditors provide non-audit services.
Further details regarding the AC are disclosed in the Corporate Governance Report in the annual report of the Company.
AUDITORS
Ernst & Young LLP have expressed their willingness to accept re-appointment as auditors.
On behalf of the board of directors,
Wong Kok KhunDirector
Cheryl Tan Choo HuangDirector
23 March 2018
Directors’ Statement
D-7
APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
Independent Auditor’s Report to the Members of DeClout Limited For the financial year ended 31 December 2017
REPORT ON THE FINANCIAL STATEMENTS
OPINION
We have audited the financial statements of DeClout Limited (the Company) and its subsidiaries (the Group), which comprise the consolidated statement of financial position of the Group and the statement of financial position of the Company as at 31 December 2017, the statement of changes in equity of the Group and the Company and the consolidated income statement, consolidated statement of comprehensive income and consolidated cash flow statement of the Group for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements of the Group, the balance sheet and the statement of changes in equity of the Company are properly drawn up in accordance with the provisions of the Companies Act, Chapter 50 (the Act) and Financial Reporting Standards in Singapore (FRSs) so as to give a true and fair view of the consolidated financial position of the Group and the financial position of the Company as at 31 December 2017 and of the consolidated financial performance, consolidated changes in equity and consolidated cash flows of the Group and changes in equity of the Company for the year ended on that date.
BASIS FOR OPINION
We conducted our audit in accordance with Singapore Standards on Auditing (SSAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Group in accordance with the Accounting and Corporate Regulatory Authority (ACRA) Code of Professional Conduct and Ethics for Public Accountants and Accounting Entities (ACRA Code) together with the ethical requirements that are relevant to our audit of the financial statements in Singapore, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ACRA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.
We have fulfilled our responsibilities described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial statements.
(1) Revenue recognition
Trading revenue
The Group recognised revenue from sale of goods of $185,787,000 during the financial year. We identified the appropriateness of the timing of revenue recognition arising from high trading volume in the last quarter of the financial year to be a higher audit risk area. This coupled with the significance of revenue recognised, we determined revenue recognition to be a key audit matter.
As part of our audit procedures, we evaluated the appropriateness in application of the Group’s revenue recognition accounting policies. We obtained an understanding of management’s internal controls over the revenue recognition process and placed attention on the operating effectiveness of such controls on the timing of the revenue recognition. We performed testing of revenue by vouching to supporting documents based on a sampling of the revenue transactions to test that the related revenue and trade receivables are recorded in the correct accounting period. We sent confirmations on a sampling basis to customers to confirm the sales transactions.
We performed sales cut−off test to establish that revenue are recorded in the correct period as well as subsequent review of credit notes issued to customers to ascertain that revenue were recognised in the correct period. We also analysed gross margins and trend analysis, and compared them against prior year actual results. Lastly, we considered the adequacy of the disclosures in respect of revenue in Note 4 to the financial statements.
D-8
APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
KEY AUDIT MATTERS (cont’d)
Contract revenue
The Group also recognised revenue from contracts using the percentage of completion (“POC”) method. This method is used for long-term contracts, which requires recognition of revenues and gross profit systematically during the periods of project, based on stage of completion.
$15,251,000. The stage of completion is determined by reference to reports from external quantity surveyor.
security systems. The amount of revenue recognised in 2017 was $11,082,000. The stage of completion is determined by reference to actual cost incurred to date as a percentage of the total estimated costs for the contract.
The POC method involves the use of significant judgement and estimates including estimates of total budgeted costs, the progress towards completion and the remaining costs to completion for each project. In addition, revenue, cost and gross profit realised on the contracts can vary from the Group’s original estimates because of changes in conditions. As such, we determined this to be key audit matter.
Our audit procedures include understanding and evaluating the design of internal controls with respect to the Group’s project management, the project results estimation process, and accounting for the contracts. We tested the mathematical accuracy of contract revenues, costs and profits based on the percentage of completion calculations. We assessed the estimates of costs to complete for significant contracts, obtained an understanding of the performance and status of the contracts through discussion with contract project managers, and where appropriate, corroborated explanations by examination of evidence, such as customer correspondence and receipt of milestone payments. We reviewed the project files and discussed with management the progress of significant contracts to determine if there are any adverse changes such as delays, penalties or overruns that could have a material impact on the estimation of contract revenues, costs as well as the overall profitability of the contracts which would require the recognition of foreseeable losses or liquidated damages on such contracts. In the case where stage of completion is determined by reference to reports from external quantity surveyor, we performed audit procedures on the reports to establish that percentage of completion has been acknowledged and agreed by the customer. We also assessed the adequacy of the disclosures in respect of revenue in Note 4 to the financial statements.
(2) Accounting for acquisition and disposal of interest in investees
(a) Business combination between Procurri LLC and Congruity LLC
During the financial year ended 2017, the Group through one of its subsidiaries entered into an agreement with Congruity LLC in which the Group subscribed to a 51% equity interest in the Rockland Congruity LLC (“Rockland”) to acquire maintenance parts from Congruity LLC. The Group has accounted for the transaction as a business combination. Management performed Purchase Price Allocation (“PPA”) exercise by allocating the purchase price into various identifiable assets and liabilities acquired from the new business.
We determined this to be a key audit matter based on the quantitative materiality of the acquisition. In addition, significant management judgment is required in assessing whether the Group has control over Rockland and whether the transaction meets the definition of business combination.
Our audit procedures in response to the above transaction include review of the shareholders’ agreement to obtain an understanding of the transaction and the key terms to:
a) establish that the Group has power to direct the relevant activities of Rockland;
b) assess that the substance of the transaction meets the definition of business;
c) assess management’s process of identifying and ascribing the fair value to the acquired assets and assumed liabilities. We tested the identification of intangible assets based on our discussion with management and our understanding of the business of the acquired company. We also involved our internal specialists in assessing management’s identification and fair value measurement of the acquired assets and assumed liabilities.
Amongst other procedures, we evaluated the timing and appropriateness of the accounting treatment and consideration of the acquisition based on the contractual agreement for the acquisition. We also assessed the adequacy of the related disclosures in Note 13 to the financial statements.
Independent Auditor’s Report to the Members of DeClout Limited For the financial year ended 31 December 2017
D-9
APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
KEY AUDIT MATTERS (cont’d)
(2) Accounting for acquisition and disposal of interest in investees (cont’d)
(b) Restructuring of Corous Group
During the financial year ended 2017, the Group swapped its 26% of interest in Epicsoft Asia Pte Ltd (“EPA”) and Play-E Pte Ltd (“Play-E”) for additional 25% interest in Corous360 Pte Ltd (“Corous360”) which own 100% of PT Max Interactives Technologies. Following this restructuring exercise, the Group’s effective shareholding interests in the EPA and the Play-E decreased from 75% to 49%. At the same time, Corous360 effectively becomes a wholly owned subsidiary of the Company after this transaction. All transactions occurred contemporaneously and are interdependent on each other.
For dilution of interest in Play-E and EPA, management has accounted for it as a loss in control of subsidiaries. The retained interest in Play-E and EPA was recognised as investment in associates and measured at fair value upon initial recognition. A gain of $1,387,000 has been recorded in the profit or loss.
The additional 25% interests acquired from non-controlling interest was accounted for as transaction with equity owners without a change in control. The difference of $10,470,000 between the fair value of consideration given up over the carrying value of non-controlling interest share of Corous360 was accounted for within capital reserve.
We determined this to be a key audit matter based on the quantitative materiality of the restructuring and significant management judgments made in determining the substance of this transaction and fair value of the Group’s retained interest in Play-E and EPA. As part of our audit procedures, we reviewed the agreements to obtain an understanding of the transaction and the key terms and evaluated the appropriateness of classifying Play-E and EPA as associates after the transaction. Management determined the fair value of the retained interests in Play-E and EPA using a discounted cash flow approach. We reviewed the management’s valuation methodologies and assessed the key assumptions and inputs used in measuring the fair value of the associates and gain from the disposal of subsidiary. In addition, we further collaborated the determined fair value with our understanding of the market valuation approach that is widely applied by companies within the industry (market comparable approach), and assessed the historical transaction price that the Group has paid to acquire Play-E and EPA previously.
Amongst other procedures, we evaluated the timing and appropriateness of the accounting treatment and consideration of the restructuring based on the contractual agreement. We also assessed the adequacy of the related disclosures in Note 13 to the financial statements.
(3) Impairment assessment of goodwill
As at 31 December 2017, the goodwill is carried at $27,151,000 which represents 30% of the total non-current assets and 22% of total equity. We considered the audit of management’s annual impairment test of goodwill to be a key audit matter because the assessment process was complex and involved significant management judgement.
As disclosed in Note 16, the Group allocated goodwill to 5 cash-generating units (“CGUs”). Each CGU represents the smallest group of assets that independently generates cash flow and whose cash flow is largely independent of the cash flows generated by other assets. The recoverable amounts of the identified CGUs have been determined based on value in use calculations using cash flow projections approved by management.
We assessed the valuation method used by management and evaluated the key assumptions used in the impairment test, in particular the revenue growth and terminal growth rates and discount rates. We considered the robustness of management’s budgeting process by comparing the actual financial performance against previously forecasted results. We evaluated the revenue growth and terminal growth rates by benchmarking them to future economic data such as economic growth and expected inflation rates. We involved our internal valuation specialists to assess the discount rates used by the Group. We reviewed management’s analysis of the sensitivity of the value in use calculations to changes in the key assumptions. We also reviewed the adequacy of the Group’s disclosures on the goodwill impairment test in Note 16 to the financial statements.
Independent Auditor’s Report to the Members of DeClout Limited For the financial year ended 31 December 2017
D-10
APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
KEY AUDIT MATTERS (cont’d)
(4) Impairment assessment of trade receivables
The Group’s trade receivable balances were significant as they represent 44% of the total current assets in the consolidated balance sheet. The total trade receivables and related allowance for impairment of trade receivables amounted to $68,163,000 and $836,000 respectively as at 31 December 2017. Trade receivables impairment assessment requires significant management judgment in assessing the trade debtors’ ability to pay. As such, we determined that this is a key audit matter.
The collectability of trade receivables is a key element of the Group’s working capital management, which is managed on an ongoing basis by management. We assessed the Group’s processes and controls relating to the monitoring of trade receivables and considered aging to identify collection risks. We sent trade receivable confirmations on a sampling basis. On a sampling basis, we also reviewed for collectability by way of obtaining evidence of subsequent receipts from debtors as well as reviewing the past payment history and credit worthiness of debtors. We had discussions with management on the recoverability of the long outstanding debts. We also evaluated management’s assumptions and estimates used to determine the trade receivables impairment amount through analysis of aging of receivables, assessment of material overdue individual trade receivables and where applicable, review of customers’ payment history and correspondences between the Group and the customers. We assessed the adequacy of the Group’s disclosures on the trade receivables and the related risks such as credit risk and liquidity risk in Notes 20 and 35 to the financial statements.
(5) Inventories write-down
The Group’s total inventories and the related write-down to net realisable value (“NRV”) amounted to $28,277,000 and $2,708,000 respectively as at 31 December 2017. The Group’s inventories mainly consist of computer hardware and peripheral equipment, which are subject to risks of obsolescence due to technological advancements or changes in consumers’ preference. The determination of inventory write-down to NRV requires management to exercise judgement in identifying slow-moving and obsolete inventories and make estimates of write-down required. As such, we determined that this is a key audit matter.
As part of our procedures, we obtained the inventory ageing report and discussed with management their procedures to identify slow-moving and obsolete inventories and assess adequacy of slow-moving and obsolete inventories write-down to net realisable value (“NRV”). We selected samples of inventories and tested that they were stated at the lower of cost and NRV by verifying to market prices of products with similar technical specifications, and or subsequent year-end sales price of the inventories. We also assessed the adequacy of the disclosures related to inventories in Note 19 to the financial statements.
(6) Consolidation of a subsidiary with less than 50% ownership
As at 31 December 2017, the Company held 47% in Procurri Corporation Limited (“Procurri), which is a public company listed on the Singapore Stock Exchange since July 2016. Prior to the initial public offering (“IPO”) of Procurri in July 2016, the Company held 69% in Procurri and accounted it as a subsidiary. As of 31 December 2017, the Company’s equity ownership in Procurri was 47%, which was less than 50% ownership. The Company continued to consolidate Procurri since the IPO and for the year ended 31 December 2017, although the Company owns less than 50% of the ownership interest and voting power of Procurri.
Management considers the proportion of its ownership interests and voting rights as well as the Company’s overall exposure to variable returns. Management assessed and determined that Procurri continues to be consolidated as a subsidiary on the basis of de facto control as the Company is the single largest shareholder of Procurri, and the remaining 53% of the shareholding in Procurri is widely distributed and held by a large number of shareholders. We determined that this is a key audit matter as this judgment has significant effect on the amounts recognised in the consolidated financial statements. As such, we determined that this is a key audit matter.
We evaluated management’s assessment on the accounting position to consolidate Procurri Group based on financial reporting standards. We inquired with management and corroborated the evidence through our observations during the audit. We also assessed the adequacy of the disclosures in Notes 3 and 13 to the financial statements
Independent Auditor’s Report to the Members of DeClout Limited For the financial year ended 31 December 2017
D-11
APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
OTHER INFORMATION
Management is responsible for the other information. The other information comprises information included in the Annual Report, but does not include the financial statements and our auditor’s report thereon.
Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
RESPONSIBILITIES OF MANAGEMENT AND DIRECTORS 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 Act and FRSs, 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 financial statements and to maintain accountability of assets.
In preparing the financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
The directors’ responsibilities include overseeing the Group’s financial reporting process.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with SSAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:
perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
disclosures made by management.
Independent Auditor’s Report to the Members of DeClout Limited For the financial year ended 31 December 2017
D-12
APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS (cont’d)
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.
the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
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 subsidiary corporations incorporated in Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act.
The engagement partner on the audit resulting in this independent auditor’s report is Chan Yew Kiang.
Ernst & Young LLPPublic Accountants and Chartered AccountantsSingapore
23 March 2018
Independent Auditor’s Report to the Members of DeClout Limited For the financial year ended 31 December 2017
D-13
APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
Consolidated Statement of Comprehensive Income For the financial year ended 31 December 2017
Note Group
2017$’000
2016$’000
Revenue 4 273,485 304,022Cost of sales (200,111) (225,640)
Gross profit 73,374 78,382 Other items of income Other income 5 7,066 28,836 Other items of expense Other charges, net 6 (19,204) (5,792)Selling expenses (11,184) (12,240)Administrative expenses (65,553) (72,636)Finance costs 7 (2,321) (4,716)Share of results of associates and joint venture (97) (148)
(Loss)/profit before tax 8 (17,919) 11,686Income tax expense 10 (2,581) (2,179)
(Loss)/profit for the year, net of tax (20,500) 9,507 Other comprehensive income: Items that may be reclassified subsequently to profit or loss: Foreign currency translation (470) (2,562)
Other comprehensive income for the year, net of tax (470) (2,562)
Total comprehensive income for the year (20,970) 6,945 (Loss)/profit attributable to: Owners of the Company (16,448) 7,758Non-controlling interests (4,052) 1,749
(20,500) 9,507 Total comprehensive income attributable to: Owners of the Company (16,725) 6,053Non-controlling interests (4,245) 892
(20,970) 6,945 (Loss)/earnings per share attributable to owners of the Company (cents per share) Basic 11 (2.53) 1.23Diluted 11 (2.53) 1.18
The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
D-14
APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
Balance SheetsAs at 31 December 2017
The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
Note Group Company 2017
$’0002016
$’0002017
$’0002016
$’000
Non-current assets Property, plant and equipment 12 36,099 23,381 568 2,577Investment in subsidiaries 13 – – 62,093 69,718Investment in associates 14 19,666 2,000 – –Investment in a joint venture 15 * – – –Intangible assets 16 31,564 57,935 – –Finance lease receivables 17 2,037 1,677 – –Other financial receivable 18 – 1,621 – –Deferred tax assets 10 1,991 3,327 – –Trade and other receivables 20 – – 2,500 – 91,357 89,941 65,161 72,295
Current assets Inventories 19 28,277 28,555 – –Trade and other receivables 20 75,577 90,866 11,932 59,150Amount due from customers for contract work-in-progress 21 6,333 3,171 – –Derivative financial asset 23 1,044 – – –Finance lease receivables 17 1,433 1,299 – –Other financial receivable 18 1,483 – – –Other assets 22 7,543 5,177 243 338Cash and bank balances 24 31,537 65,413 4,831 19,376 153,227 194,481 17,006 78,864
Assets held for sale 12 2,900 – – –Total current assets 156,127 194,481 17,006 78,864
Total assets 247,484 284,422 82,167 151,159
Current liabilities Trade and other payables 25 52,131 57,557 3,628 14,317Amount due to customers for contract work-in-progress 21 1,491 120 – –Other liabilities 26 21,509 4,748 – –Loans and borrowings 27 27,674 41,482 6,119 6,548Income tax payables 3,853 1,500 – – 106,658 105,407 9,747 20,865
Net current assets 49,469 89,074 7,259 57,999
Non-current liabilities Deferred tax liabilities 10 975 1,120 – –Trade and other payables 25 11 277 – –Other liabilities 26 821 1,422 – –Loans and borrowings 27 12,671 9,013 1,750 375Provisions 28 1,073 1,065 266 238 15,551 12,897 2,016 613
Total liabilities 122,209 118,304 11,763 21,478
Net assets 125,275 166,118 70,404 129,681
Equity attributable to owners of the Company Share capital 29 114,456 114,456 114,456 114,456Treasury shares 29 (3,308) – (3,308) –Retained earnings 2,695 18,545 (40,510) 10,264Other reserves 30 (25,460) (9,706) (234) 4,961 88,383 123,295 70,404 129,681Non-controlling interests 36,892 42,823 – –Total equity 125,275 166,118 70,404 129,681
Total equity and liabilities 247,484 284,422 82,167 151,159
* Amount less than $1,000
D-15
APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
Statements of Changes in Equity For the financial year ended 31 December 2017
The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
Attributable to owners of the Company
Group
Share capital
(Note 29)$’000
Treasury shares
(Note 29)$’000
Other reserves
(Note 30)$’000
Retained earnings
$’000
Equity attributable
to owners of the
Company$’000
Non-controlling
interests$’000
Total equity$’000
Balance as at 1 January 2017 114,456 – (9,706) 18,545 123,295 42,823 166,118
Loss for the year – – – (16,448) (16,448) (4,052) (20,500)Other comprehensive income, net of tax Foreign currency translation – – (277) – (277) (193) (470)
Total comprehensive income for the year – – (277) (16,448) (16,725) (4,245) (20,970) Contributions by and distributions to owners Purchase of treasury shares – (8,977) – – (8,977) – (8,977)Issuance of treasury shares pursuant to PSP – 3,221 (3,221) – – – –Issuance of ordinary shares pursuant to PSP – – (921) – (921) 921 –Issuance of treasury shares pursuant to satisfaction of contingent consideration – 2,566 (2,566) – – – –Transfer of expired and unissued share based payment reserve to retained earnings – – (598) 598 – – –Share buy-back expense * (118) – – (118) – (118)Share-based payments – – 2,299 – 2,299 – 2,299Dividends paid to non-controlling shareholders of subsidiary – – – – – (701) (701) Changes in ownership interests in subsidiaries Disposal of subsidiaries – – (10,470) – (10,470) (1,906) (12,376)Contributions from non-controlling shareholders of subsidiaries – – – – – * *
Total transactions with owners in their capacity as owners – (3,308) (15,477) 598 (18,187) (1,686) (19,873)
Balance as at 31 December 2017 114,456 (3,308) (25,460) 2,695 88,383 36,892 125,275
* Amount less than $1,000
D-16
APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
Statements of Changes in Equity For the financial year ended 31 December 2017
Attributable to owners of the Company
Group
Share capital
(Note 29)$’000
Other reserves
(Note 30)$’000
Retained earnings
$’000
Equity attributable
to owners of the
Company$’000
Non-controlling
interests$’000
Total equity$’000
Balance as at 1 January 2016 86,953 (15,911) 10,787 81,829 21,708 103,537
Profit for the year – – 7,758 7,758 1,749 9,507Other comprehensive income, net of tax Foreign currency translation – (1,705) – (1,705) (857) (2,562)
Total comprehensive income for the year – (1,705) 7,758 6,053 892 6,945 Contributions by and distributions to owners Issuance of ordinary shares for acquisitions of subsidiaries 7,300 – – 7,300 – 7,300Issuance of ordinary shares for acquisitions of non-controlling interests of subsidiaries without a change in control 17,838 – – 17,838 – 17,838Issuance of ordinary shares pursuant to PSP 2,294 (2,294) – – – –Issuance of ordinary shares pursuant to ESOS 103 (40) – 63 – 63Share issuance expense (32) – – (32) – (32)Share-based payments – 2,520 – 2,520 – 2,520 Changes in ownership interests in subsidiaries Acquisition of subsidiaries – 1,215 – 1,215 2,129 3,344Disposal of subsidiaries – 391 – 391 (5,935) (5,544)Dividends paid to non-controlling shareholders of subsidiaries – – – – (61) (61)Contributions from non-controlling shareholders of subsidiaries – – – – 37,018 37,018Acquisitions/disposal of non-controlling interests of subsidiaries without a change in control – 6,118 – 6,118 (12,928) (6,810)
Total transactions with owners in their capacity as owners 27,503 7,910 – 35,413 20,223 55,636
Balance as at 31 December 2016 114,456 (9,706) 18,545 123,295 42,823 166,118
D-17
APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
Statements of Changes in Equity For the financial year ended 31 December 2017
Company
Share capital
(Note 29)$’000
Treasury shares
(Note 29)$’000
Retained earnings
$’000
Other reserves
(Note 30)$’000
Total equity$’000
Balance at 1 January 2017 114,456 – 10,264 4,961 129,681Loss for the year, representing total comprehensive income for the year – – (51,372) – (51,372) Contributions by and distributions to owners Purchase of treasury shares – (8,977) – – (8,977)Issuance of treasury shares pursuant to PSP – 3,221 – (3,221) –Issuance of treasury shares pursuant to satisfaction of contingent consideration – 2,566 – (2,566) –Transfer of expired and unissued share based payment reserve to retained earnings – – 598 (598) –Share buy-back expense – (118) – 1,190 1,072
Balance at 31 December 2017 114,456 (3,308) (40,510) (234) 70,404
Balance at 1 January 2016 86,953 – (5,163) 3,769 85,559Profit for the year, representing total comprehensive income for the year – – 15,427 – 15,427 Contributions by and distributions to owners Issuance of ordinary shares for acquisition of subsidiaries 25,138 – – 1,215 26,353Issuance of ordinary shares pursuant to PSP 2,294 – – (2,294) –Issuance of ordinary shares pursuant to ESOS 103 – – (40) 63Share issuance expense (32) – – – (32)Share-based payments – – – 2,311 2,311
Balance at 31 December 2016 114,456 – 10,264 4,961 129,681
The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
D-18
APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
Consolidated Cash Flow StatementFor the financial year ended 31 December 2017
Group 2017
$’0002016
$’000
Cash flows from operating activities (Loss)/profit before tax (17,919) 11,686Adjustments for: Depreciation of plant and equipment 9,634 6,732 Amortisation of intangible assets 2,360 3,289 Loss/(gain) on disposal of plant and equipment 141 (1,020) Gain on disposal of subsidiaries (1,387) (21,878) Gain on re-measurement of an associate pursuant to a step-up acquisition – (2,898) Plant and equipment written off 539 98 Share-based payments 2,299 2,520 Share of results of associates and joint venture 97 148 Interest income (375) (325) Interest expenses 2,321 4,716 Fair value gain on derivative financial asset (1,044) – Gain on bargain purchase – (1,110) Impairment loss on investment in associates – 1,550 Impairment of intangible assets 5,782 – Net fair value (gain)/loss on derivatives (590) 247 Exchange differences (1,656) (1,189)
Operating cash flows before changes in working capital 202 2,566Decrease/(increase) in inventories 217 (9,126)Increase in amount due from customers for contract work-in-progress, net (1,791) (3,051)Decrease in trade and other receivables 5,329 2,233Increase in finance lease and other financial receivables (357) (5,382)Increase in other assets (2,675) (907)Increase in other liabilities 16,871 2,408(Decrease)/increase in trade and other payables (3,507) 1,065
Cash flows generated from/(used in) operations 14,289 (10,194)Income taxes paid (1,744) (1,575)
Net cash flows generated from /(used in) operating activities 12,545 (11,769) Cash flows from investing activities Purchase of property, plant and equipment (6,057) (12,386)Proceeds from disposal of property, plant and equipment 1,114 1,403Additions to intangible assets (836) (248)Net outflows from acquisitions of subsidiaries (Note 13) (21,645) (3,016)Net cash on disposal of subsidiaries (2,620) 25,831Net cash on disposal of an associate 2,000 –Interest received 375 325
Net cash flows (used in)/generated from investing activities (27,669) 11,909
The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
D-19
APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
Consolidated Cash Flow StatementFor the financial year ended 31 December 2017
Group 2017
$’0002016
$’000
Cash flows from financing activities Share buy-back/issuance expense (118) (32)Share buy-back (8,977) –Proceeds from issuance of Employee Share Option Scheme – 63Contributions from non-controlling interests – 37,018Acquisitions of non-controlling interests – (1,063)Dividends paid to non-controlling interests (701) (61)Release/(placement) of fixed deposits pledged for bank facilities 485 (3,066)Proceeds from loans and borrowings 142,770 162,064Repayments of loans borrowings (149,765) (152,664)Interest paid (1,914) (2,503)
Net cash flows (used in)/generated from financing activities (18,220) 39,756 Net (decrease)/increase in cash and cash equivalents (33,344) 39,896Effect of exchange rate changes on cash and cash equivalents 501 (189)Cash and cash equivalents at beginning of the financial year 61,409 21,702
Cash and cash equivalents at end of the financial year (Note 24) 28,566 61,409
The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
D-20
APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
Notes to the Financial Statements For the financial year ended 31 December 2017
1. CORPORATE INFORMATION
DeClout Limited (the “Company”) is a limited liability company incorporated and domiciled in Singapore. The Company is listed on the Catalist Board of the Singapore Exchange Securities Trading Limited (“SGX-ST”).
The registered office and principal place of business of the Company is located at 29 Tai Seng Avenue, #05-01 Natural Cool Lifestyle Hub, Singapore 534119.
The principal activities of the Company are those of investment holding, strategic management and corporate shared services. The principal activities of the subsidiaries, associates and joint venture are disclosed in Note 13 to 15 to the financial statements.
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 the historical cost basis except as disclosed in the accounting policies below.
The financial statements are presented in Singapore Dollars (“SGD” or “$”) and all values in the tables are rounded to the nearest thousand ($’000), except when otherwise indicated.
Convergence with International Financial Reporting Standards
For annual financial period beginning on or after 1 January 2018, Singapore-incorporated companies listed on the Singapore Exchange will apply Singapore Financial Reporting Framework (International) (“SFRS(I)”), a new financial reporting framework identical to International Financial Reporting Standards. The Group will adopt SFRS(I) on 1 January 2018.
On transition to SFRS(I), the Group expects to elect the option to deem cumulative translation differences for foreign operations to be zero on 1 January 2017, and accordingly, the gain or loss that will be recognised on a subsequent disposal of the foreign operations will exclude cumulative translation differences that arose before 1 January 2017. The Group expects to reclassify an amount of $1,801,000 of foreign currency translation reserve to the opening retained earnings as at 1 January 2017.
Other than the effects of the matter as described above and the impact on adoption of the SFRS(I) 15 and SFRS(I) 9, the Group expects that adoption of SFRS(I) will have no material impact on the financial statements in the year of initial application. The Group expects the impact of adopting SFRS(I) 15 and SFRS(I) 9 will be similar to the impact on adoption of FRS 115 and FRS 109 as disclosed in Note 2.3.
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 which are effective for annual financial periods beginning on or after 1 January 2017. The adoption of these standards did not have any material effect on the financial performance or position of the Group and the Company.
D-21
APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
2.3 Standards issued but not yet effective
The Group has not adopted the following standards applicable to the Group that have been issued but not yet effective:
Description
Effective for annual
periods on or after
Amendments to FRS 102 Classification and Measurement of Share-based Payment Transactions 1 January 2018FRS 109 Financial Instruments 1 January 2018FRS 115 Revenue from Contracts with Customers 1 January 2018FRS 116 Leases 1 January 2019Amendments to FRS 28 Investments in Associates and Joint Ventures 1 January 2018INT FRS 122 Foreign Currency Transactions and Advance Considerations 1 January 2018INT FRS 123 Uncertainty over Income Tax Treatments 1 January 2019Amendments to FRS 109 Prepayment Features with Negative Compensation 1 January 2019Amendments to FRS 28 Long-term Interests in Associates and Joint Ventures 1 January 2019
As disclosed in Note 2.1, the Group will adopt SFRS(I) on 1 January 2018. Upon adoption of SFRS(I) on 1 January 2018, the SFRS(I) equivalent of the above standards that are effective on 1 January 2018 will be adopted at the same time.
Except for SFRS(I) 9, SFRS(I) 15 and SFRS(I) 16, the directors expect that the adoption of the SFRS(I) equivalent of the above standards will have no material impact on the financial statements in the year of initial application. The nature of the impending changes in accounting policy on adoption of SFRS(I) 9, SFRS(I) 15 and SFRS(I) 16 are described below.
SFRS(I)15 Revenue from Contracts with Customers
SFRS(I)15 establishes a five-step model to account for revenue arising from contracts with customers, and introduces new contract cost guidance. Under SFRS(I)15, revenue is recognised at an amount that reflects the consideration which an entity expects to be entitled in exchange for transferring goods or services to a customer. The new revenue standard is effective for annual periods beginning on or after 1 January 2018.
The Group has performed a preliminary impact assessment of adopting SFRS(I)15 based on currently available information. This assessment may be subject to changes arising from ongoing analysis until the Group adopts SFRS(I)15 in 2018.
The Group plans to apply the changes in accounting policies retrospectively to each reporting year presented, using the full retrospective approach. The Group also plans to apply the following practical expedient:
- For completed contracts, the Group plans not to restate completed contracts that begin and end within the same year or are completed contracts at 1 January 2017.
The Group expects the following impact upon adoption of SFRS(I)15:
- Accounting for certain costs incurred in obtaining a contract – certain costs which are currently expensed may need to be recognised as a contract asset under SFRS(I)15.
The Group incurred commissions costs to employees as target incentives on the sales contract and currently recognises such commissions as expense when incurred. Under SFRS(I)15, the Group will capitalise such commissions as incremental costs to obtain a contract with a customer if these costs are recoverable. These costs are amortised to profit or loss as the Group recognises the related revenue.
Upon adoption of SFRS(I)15, the Group expects to capitalise such contract asset with a related decrease to marketing and distribution expense for the financial year ended 31 December 2017.
Notes to the Financial Statements For the financial year ended 31 December 2017
D-22
APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
2.3 Standards issued but not yet effective (cont’d)
SFRS(I)9 Financial Instruments
SFRS(I)9 introduces new requirements for classification and measurement of financial assets, impairment of financial assets and hedge accounting, and is effective for annual periods beginning on or after 1 January 2018. Financial assets are classified according to their contractual cash flow characteristics and the business model under which they are held. The impairment requirements in SFRS(I)9 are based on an expected credit loss model and replace the FRS 39 incurred loss model.
The Group plans to adopt the new standard on the required effective date without restating prior periods’ information and recognises any difference between the previous carrying amount and the carrying amount at the beginning of the annual reporting period at the date of initial application in the opening retained earnings.
The Group has performed a preliminary impact assessment of adopting SFRS(I)9 based on currently available information. (a) Classification and measurement
The Group does not expect significant changes to the measurement basis arising from adopting the new classification and measurement model under SFRS(I)9.
(b) Impairment
SFRS(I)9 requires the Group and the Company to record expected credit losses on all of its debt securities, loans, trade receivables and financial guarantees, either on a 12-month or lifetime basis. The Group expects to apply the simplified approach and record lifetime expected losses on all trade receivables.
Upon application of the expected credit loss model, the Group does not expect material impact on the results.
The Group has performed a preliminary impact assessment of the adoption of SFRS(I)9 and expects that the adoption of SFRS(I)9 will not have significant impact to the financial performance or position of the Group.
SFRS(I)16 Leases
SFRS(I)16 requires lessees to recognise most leases on balance sheets to reflect the rights to use the leased assets and the associated obligations for lease payments as well as the corresponding interest expense and depreciation charges. The standard includes two recognition exemption for lessees – leases of ‘low value’ assets and short-term leases. The new standard is effective for annual periods beginning on or after 1 January 2019.
As disclosed in Note 33, the Group had entered into agreements for the rental of computer equipment, office premises, data centre racks and other office equipment. These rental terms are negotiated for an average term of one to four years and will be recognised on the balance sheet under SFRS(I)16.
The Group is currently assessing the impact of the new standard and plans to adopt the new standard on the required effective date. The Group expects the adoption of the new standard will result in increase in total assets and total liabilities, EBITDA and gearing ratio.
Notes to the Financial Statements For the financial year ended 31 December 2017
D-23
APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
2.4 Basis of consolidation and business combinations
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.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it:
- de-recognises the assets (including goodwill) and liabilities of the subsidiary at their carrying amounts at the date when control is lost;
- de-recognises the carrying amount of any non-controlling interest;- de-recognises the cumulative translation differences recorded in equity;- recognises the fair value of the consideration received;- recognises the fair value of any investment retained;- recognises any surplus or deficit in profit or loss;- re-classifies the Group’s share of components previously recognised in other comprehensive income to profit or loss
or retained earnings, as appropriate.
Business combinations and goodwill
Business combinations are accounted for by applying the acquisition method. Identifiable assets acquired and liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Acquisition-related costs are recognised as expenses in the periods in which the costs are incurred and the services are received.
Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability, will be recognised in profit or loss. In business combinations achieved in stages, previously held equity interests in the acquiree are remeasured to fair value at the acquisition date and any corresponding gain or loss is recognised in profit or loss.
The Group elects for each individual business combination, whether non-controlling interest in the acquiree (if any), that are present ownership interests and entitle their holders to a proportionate share of net assets in the event of liquidation, is recognised on the acquisition date at fair value, or at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets. Other components of non-controlling interests are measured at their acquisition date fair value, unless another measurement basis is required by another FRS.
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
2.4 Basis of consolidation and business combinations (cont’d)
Business combinations and goodwill (cont’d)
Any excess of the sum of the fair value of the consideration transferred in the business combination, the amount of non-controlling interest in the acquiree (if any), and the fair value of the Group’s previously held equity interest in the acquiree (if any), over the net fair value of the acquiree’s identifiable assets and liabilities is recorded as goodwill. In instances where the latter amount exceeds the former, the excess is recognised as gain on bargain purchase in profit or loss on the acquisition date.
Goodwill is initially measured at cost. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rates at the date of balance sheet.
For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to the Group’s cash-generating units that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.
Where goodwill forms part of a cash-generating unit and part of the operation within that cash-generating unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative fair values of the operations disposed of and the portion of the cash-generating unit retained.
The cash-generating units to which goodwill have been allocated is tested for impairment annually and whenever there is an indication that the cash-generating unit may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of each cash-generating unit (or group of cash-generating units) to which the goodwill relates.
2.5 Transactions with non-controlling interests
Non-controlling interest represents the equity in subsidiaries not attributable, directly or indirectly, to owners of the Company.
Changes in the Company’s ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. In such circumstances, the carrying amounts of the controlling and non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interest is adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company.
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
2.6 Foreign currency
The financial statements are presented in Singapore Dollars, which is also the Company’s functional currency. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency.
Transactions and balances
Transactions in foreign currencies are measured in the respective functional currencies of the Company and its subsidiaries and are recorded on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the end of the reporting period. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was measured.
Exchange differences arising on the settlement of monetary items or on translating monetary items at the end of the reporting period are recognised in profit or loss under Other Charges.
Consolidated financial statements
For consolidation purpose, the assets and liabilities of foreign operations are translated into SGD at the rate of exchange ruling at the end of the reporting period and their profit or loss are translated at the exchange rates prevailing at the date of the transactions. The exchange differences arising on the translation are recognised in other comprehensive income. On disposal of a foreign operation, the component of other comprehensive income relating to that particular foreign operation is recognised in profit or loss.
2.7 Subsidiaries
A subsidiary is an investee that is controlled by the Group. The Group controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.
In the Company’s separate financial statements, investment in subsidiaries are accounted for at cost less any allowance for impairment in value.
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
2.8 Joint ventures and associates
A joint arrangement is a contractual arrangement whereby two or more parties have joint control. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. To the extent the joint arrangement provides the Group with rights to the net assets of the arrangement, the arrangement is a joint venture.
An associate is an entity over which the Group has the power to participate in the financial and operating policy decisions of the investee but does not have control or joint control of those policies.
The Group account for its investments in joint venture and associates using the equity method from the date on which it becomes a joint venture or associate.
On acquisition of the investment, any excess of the cost of the investment over the Group’s share of the net fair value of the investee’s identifiable assets and liabilities is accounted as goodwill and is included in the carrying amount of the investment. Any excess of the Group’s share of the net fair value of the investee’s identifiable assets and liabilities over the cost of the investment is included as income in the determination of the entity’s share of the joint venture or associate’s profit or loss in the period in which the investment is acquired.
Under the equity method, the investment in joint venture and associates are carried in the balance sheets at cost plus post-acquisition changes in the Group’s share of net assets of the joint venture or associates. The profit or loss reflects the share of results of the operations of the joint venture or associates. Distributions received from joint venture or associates reduce the carrying amount of the investment. Where there has been a change recognised in other comprehensive income by the associates, the Group recognises its share of such changes in other comprehensive income. Unrealised gains and losses resulting from transactions between the Group and joint venture or associate are eliminated to the extent of the interest in the joint venture or associates.
When the Group’s share of losses in a joint venture or associate equals or exceeds its interest in the joint venture or associate, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the joint venture or associate.
After application of the equity method, the Group determines whether it is necessary to recognise an additional impairment loss on the Group’s investment in joint venture or associates. The Group determines at the end of each reporting period whether there is any objective evidence that the investment in the joint venture or associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the joint venture or associate and its carrying value and recognises the amount in profit or loss.
The financial statements of the joint venture or associates are prepared as the same reporting date as the Company. Where necessary, adjustments are made to bring the accounting policies in line with those of the Group.
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
2.9 Revenue
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured, regardless of when the payment is made. Revenue is measured at the fair value of consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty. Sale of goods
Revenue from sale of goods is recognised upon the transfer of significant risk and rewards of ownership of the goods to the customer, usually on delivery of goods. Revenue is not recognised to the extent where there are significant uncertainties regarding recovery of the consideration due, associated costs or the possible return of goods.
Rendering of services / Games hosting
Revenue from rendering of services and games hosting are recognised when the service is rendered.
Rental income
Rental income arising from operating leases on equipment is accounted for on a straight-line basis over the lease terms. The aggregate costs of incentives provided to lessees are recognised as a reduction of rental income over the lease term on a straight-line basis.
Multi-element arrangements
Certain multi-element arrangements are offered whereby the sale of equipment is bundled together with services to be rendered over a specified period of time. With such multiple element arrangements, the amount recognised as revenue upon the sale of the equipment is the fair value of the equipment in relation to the fair value of the arrangement taken as a whole. The revenue relating to the service element, which represents the fair value of the servicing arrangement in relation to the fair value of the arrangement, is recognised over the service period. The fair values of each element are determined based on the current market price of each of the elements when sold separately.
Contract revenue
Contract revenue corresponds to the initial amount of revenue agreed in the contract and any variations in contract work, claims and incentive payments to the extent that it is probable that they will result in revenue; and they can be reliably measured. See Note 2.22 for the accounting policy on construction contracts.
Equipment rental and leasing income
Equipment rental and leasing income arising from operating leases on equipment is accounted on a straight-line basis over the lease terms. The aggregate costs of incentives provided to lessees are recognised as a reduction of rental income over the lease term on a straight-line basis.
Finder’s fee
Finder’s fee is a commission paid to a facilitator of a transaction. Revenue from finder’s fee is recognised when the Group’s right to receive payment is established.
Interest income
Interest income is recognised using the effective interest method.
Dividend income
Dividend income is recognised when the Group’s right to receive payment is established.
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
2.10 Employee benefits
Defined contributions plans
The Group participates in the national pension schemes as defined by the laws of the countries in which it has operations. In particular, the Singapore companies in the Group make contributions to the Central Provident Fund scheme in Singapore, a defined contribution pension scheme. Contributions to defined contribution pension schemes are recognised as an expense in the period in which the related service is performed.
2.11 Share-based compensation
DeClout ESOS
For the equity-settled share-based compensation transactions, the value of the employee services received in exchange for the grant of the options is recognised as an expense with a corresponding increase in the share-based payment reserve. The total amount to be expensed on a straight-line basis over the vesting period is measured by reference to the fair value of the options granted ignoring the effect of non-market conditions such as profitability and sales growth targets. Non-market vesting conditions are taken into account when estimating the fair value of the options. The fair value is measured using binomial lattice model. The expected lives used in the model are adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. At each end of the reporting year, a revision is made on the number of options that are expected to vest. It recognises the impact of the revision of original estimates, if any, in profit or loss with a corresponding adjustment to equity. The proceeds received net of any directly attributable transaction costs are credited to share capital when the options are exercised. Cancellations of grants of equity instruments during the vesting period (other than a grant cancelled by forfeiture when the vesting conditions are not satisfied) are accounted for as an acceleration of vesting, therefore any amount unrecognised that would otherwise have been charged is recognised immediately in profit or loss.
DeClout PSP
Benefits to employees are provided in the form of share-based payment transactions, whereby employees render services in exchange for shares or rights over shares (‘‘equity-settled transactions’’). The fair value of the employee services rendered is measured by reference to the fair value of the shares awarded or rights granted. These are fair valued based on the market price of the entity’s shares. This fair value amount is charged to profit or loss over the vesting period of the share-based payment scheme, with the corresponding increase in equity. The value of the charge is adjusted in profit or loss over the remainder of the vesting period to reflect expected and actual quantities vesting, with the corresponding adjustment made in equity. Cancellations and waivers of grants of equity instruments during the vesting period (other than a grant cancelled by forfeiture when the vesting conditions are not satisfied) are accounted for as an acceleration of vesting, therefore any amount unrecognised that would otherwise have been charged is recognised immediately in profit or loss.
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
2.12 Leases
As lessee
Finance leases which transfer to the Group substantially all the risks and rewards incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Any initial direct costs are also added to the amount capitalised. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to profit or loss. Contingent rents, if any, are charged as expenses in the periods in which they are incurred.
Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term.
Operating lease payments are recognised as an expense in profit or loss on a straight-line basis over the lease term. The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis.
As lessor
Leases where the Group has transferred substantially all risks and rewards incidental to ownership of the leased assets to the lessees, are classified as finance leases.
The leased asset is de-recognised and the present value of the lease receivable is recognised on the balance sheet. The difference between the gross receivable and the present value of the lease receivable is recognised as unearned finance income.
Each lease payment received is applied against the gross receivable in the finance lease receivable to reduce both the principal and the unearned finance income.
Initial direct cost incurred by the Group in negotiating and arranging finance leases are added to finance lease receivables and recognised as an expense in profit or loss over the lease term on the same basis as the lease income.
The recognition of finance income is based on a pattern reflecting a constant periodic rate of return on the lessor’s net investment in the finance lease receivable.
Leases in which the Group does not transfer substantially all the risks and rewards of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same bases as rental income. The accounting policy for rental income is set out in Note 2.9. Contingent rents are recognised as revenue in the period in which they are earned.
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
2.13 Taxes
Current income tax
Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the end of the reporting period, in the countries where the Group operates and generates taxable income.
Current income taxes are recognised in profit or loss except to the extent that the tax relates to items recognised outside profit or loss, either in other comprehensive income or directly in equity. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Deferred tax
Deferred tax is provided using the liability method on temporary differences at the end of the reporting period between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred tax liabilities are recognised for all temporary differences, except:
- Where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
- In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised except:
- Where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
- In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at the end of each reporting period and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the end of each reporting period.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity and deferred tax arising from a business combination is adjusted against goodwill on acquisition.
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
2.13 Taxes (cont’d)
Sales tax
Revenues, expenses and assets are recognised net of the amount of sales tax except:
- Where the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and
- Receivables and payables that are stated with the amount of sales tax included.
2.14 Property, plant and equipment
All items of property, plant and equipment are initially recorded at cost. Restoration costs are included as part of cost of the obligation for restoration is incurred as a consequence of acquiring or using the asset. Subsequent to recognition, property, plant and equipment other than freehold land and buildings are measured at cost less accumulated depreciation and any accumulated impairment losses.
Freehold land has an unlimited useful life and therefore is not depreciated.
Depreciation is computed on a straight-line basis over the estimated useful lives of the assets as follows:
Freehold buildings - 50 yearsLeasehold improvements - 5 – 10 yearsRestoration costs - 5 yearsPlant and equipment - 3 – 6 yearsMotor vehicles - 5 – 10 years
The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.
The residual value, useful life and depreciation method are reviewed at each financial year-end, and adjusted prospectively, if appropriate.
An item of property, plant and equipment is de-recognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on de-recognition of the asset is included in profit or loss in the year the asset is de-recognised.
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
2.15 Intangible assets
Intangible assets acquired separately are measured initially at cost. Following initial acquisition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Internally generated intangible assets, excluding capitalised development costs, are not capitalised and expenditure is reflected in profit or loss in the year in which the expenditure is incurred.
The useful lives of intangible assets are assessed as either finite or indefinite.
Intangible assets with finite useful lives are amortised over the estimated useful lives and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method are reviewed at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates.
Amortisation is computed on a straight-line basis over the estimated useful lives of the assets as follows:
Customer relationship - 3 – 15 yearsCustomer contracts - 3 – 5 yearsPayment gateway - 5 yearsTechnical know-how - 5 – 7 yearsDeferred development costs - 3 years
Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in profit or loss when the asset is de-recognised.
Research and development costs
Research costs are expensed as incurred. Deferred development costs arising from development expenditures on an individual project are recognised as an intangible asset when the Group can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the availability of resources to complete and the ability to measure reliably the expenditures during the development.
Following initial recognition of the deferred development costs as an intangible asset, it is carried at cost less accumulated amortisation and any accumulated impairment losses. Amortisation of the intangible asset begins when development is complete and the asset is available for use. Deferred development costs have a finite useful life and are amortised over the period of expected sales from the related project on a straight-line basis.
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
2.16 Impairment of non-financial assets
The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when an annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable amount.
An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs of disposal and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
Impairment losses are recognised in profit or loss.
A previously recognised impairment loss is reversed 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. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increase cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised previously. Such reversal is recognised in profit or loss. Impairment loss on goodwill is not reversed in a subsequent period.
2.17 Financial instruments
Financial assets
Initial recognition and measurement
Financial assets are recognised when, and only when, the Group becomes a party to the contractual provisions of the financial instrument. The Group determines the classification of its financial assets at initial recognition.
When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs.
Subsequent measurement
The subsequent measurement of financial assets depends on their classification as follows:
Loans and receivables
Non-derivative financial assets with fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method, less impairment. Gains and losses are recognised in profit or loss when the loans and receivables are de-recognised or impaired, and through the amortisation process.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss includes derivative financial instruments entered into by the Group.
Subsequent to initial recognition, financial assets at fair value through profit or loss are measured at fair value. Any gains or losses arising from changes in fair value of the financial assets are recognised in profit or loss. Net gains or net losses on financial assets at fair value through profit or loss include exchange differences, interest and dividend income.
Derivatives embedded in host contracts are accounted for as separate derivatives and recorded at fair value if their economic characteristics and risks are not closely related to those of the host contracts and the host contracts are not measured at fair value with changes in fair value recognised in profit or loss. These embedded derivatives are measured at fair value with changes in fair value recognised in profit or loss. Reassessment only occurs if there is a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required.
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
2.17 Financial instruments (cont’d)
Financial assets (cont’d)
De-recognition
A financial asset is de-recognised where the contractual right to receive cash flows from the asset has expired. On de-recognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that had been recognised in other comprehensive income is recognised in profit or loss.
Financial liabilities
Initial recognition and measurement
Financial liabilities are recognised when, and only when, the Group becomes a party to the contractual provisions of the financial instrument. The Group determines the classification of its financial liabilities at initial recognition.
All financial liabilities are recognised initially at fair value plus in the case of financial liabilities not at fair value through profit or loss, directly attributable transaction costs.
Subsequent measurement
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading. Financial liabilities are classified as held for trading if they are acquired for the purpose of selling in the near term. This category includes derivative financial instruments entered into by the Group that are not designated as effective hedging instruments.
Subsequent to initial recognition, financial liabilities at fair value through profit or loss are measured at fair value. Any gains or losses arising from changes in fair value of the financial liabilities are recognised in profit or loss.
Financial liabilities carried at amortised cost
After initial recognition, financial liabilities that are not carried at fair value through profit or loss are subsequently measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the liabilities are de-recognised, and through the amortisation process.
De-recognition
A financial liability is de-recognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a de-recognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss.
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
2.18 Convertible redeemable preference shares
Convertible redeemable preference shares outstanding as at year end are accounted for as financial liability with an embedded equity conversion derivative based on the terms of the contract.
On issuance of the convertible redeemable preference shares, the embedded option is recognised at its fair value as derivative liability with subsequent changes in fair value recognised in profit or loss. The remainder of the proceeds is allocated to liability component that is carried at amortised cost until the liability is extinguished on conversion or redemption.
When an equity conversion option is exercised, the carrying amounts of the liability component and the equity conversion option are de-recognised with a corresponding recognition of share capital.
2.19 Exchangeable loans
Exchangeable loans are accounted for as financial asset with an embedded equity conversion derivative based on the terms of the contract.
On acceptance of the exchangeable loans, the embedded option is recognised at its fair value as derivative asset with subsequent changes in fair value recognised in profit or loss. The remainder of the proceeds is allocated to asset component that is carried at amortised cost until the asset is extinguished on conversion or redemption.
When an equity conversion option is exercised, the carrying amounts of the asset component and the equity conversion option are de-recognised with a corresponding recognition of cost of investment.
2.20 Fair value hierarchy
The Group categorises fair value measurements using a fair value hierarchy that is dependent on the valuation inputs used as follows:
- Level 1 – Quoted prices (unadjusted) in active market for identical assets or liabilities that the Group can access at the measurement date,
- Level 2 – Inputs other that quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, and
- Level 3 – Unobservable inputs for the asset or liability.
Fair value measurements that use inputs of different hierarchy levels are categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
2.21 Impairment of financial assets
The Group assesses at each reporting date whether there is any objective evidence that a financial asset is impaired.
Financial assets carried at amortised cost
For financial assets carried at amortised cost, the Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be recognised are not included in a collective assessment of impairment.
If there is objective evidence that an impairment loss on financial assets carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account. The impairment loss is recognised in profit or loss.
When the asset becomes uncollectible, the carrying amount of impaired financial asset is reduced directly or if an amount was charged to the allowance account, the amounts charged to the allowance account are written off against the carrying value of the financial asset.
To determine whether there is objective evidence that an impairment loss on financial assets has been incurred, the Group considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments.
If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that the carrying amount of the asset does not exceed its amortised cost at the reversal date. The amount of reversal is recognised in profit or loss.
2.22 Construction contracts
The Group principally operates fixed price contracts. Contract revenue and contract costs are recognised as revenue and expenses respectively by reference to the stage of completion of the contract activity at the end of the reporting period (the percentage of completion method), when the outcome of a construction contract can be estimated reliably.
When the outcome of a construction contract cannot be estimated reliably (principally during early stages of a contract), contract revenue is recognised only to the extent of contract costs incurred that are likely to be recoverable and contract costs are recognised as expense in the period in which they are incurred.
An expected loss on the construction contract is recognised as an expense immediately when it is probable that total contract costs will exceed total contract revenue.
In applying the percentage of completion method, revenue recognised corresponds to the total contract revenue (as defined below) multiplied by the actual completion rate based on the proportion of total contract costs (as defined below) incurred to date and the estimate costs to complete.
Contract revenue – Contract revenue corresponds to the initial amount of revenue agreed in the contract and any variations in contract work, claims and incentive payments to the extent that it is probable that they will result in revenue; and they can be reliably measured.
Contract costs – Contract costs include costs that relate directly to the specific contract and costs that are attributable to contract activity in general and can be allocated to the contract.
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
2.23 Inventories
Inventories are stated at the lower of cost (first-in-first-out basis or specific identification method) and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business and the estimated costs necessary to make the sale. Where necessary, allowance is provided for damaged, obsolete and slow moving items to adjust the carrying value of inventories to the lower of cost and net realisable value.
2.24 Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and on hand, and demand deposits that are readily convertible to known amount of cash and which are subject to an insignificant risk of changes in value. These also include bank overdrafts that form an integral part of the Group’s cash management.
2.25 Provisions
General
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and the amount of the obligation can be estimated reliably.
Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of economic resources will be required to settle the obligation, the provision is reversed. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
Warranty provisions
Provisions for warranty-related costs are recognised when the product is sold or service provided. Initial recognition is based on historical experience. The initial estimate of warranty-related costs is revised annually.
2.26 Share capital and share issuance expenses
Proceeds from issuance of ordinary shares are recognised as share capital in equity. Incremental costs directly attributable to the issuance of ordinary shares are deducted against share capital.
2.27 Segment reporting
For management purposes, the Group is organised into operating segments based on their products and services which are independently managed by the respective segment managers responsible for the performance of the respective segments under their charge. The segment managers report directly to the management of the Company who regularly review the segment results in order to allocate resources to the segments and to assess the segment performance. Additional disclosures on each of these segments are shown in Note 37, including the factors used to identify the reportable segments and the measurement basis of segment information.
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
2.28 Government grants
Government grants are recognised when there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. Where the grant relates to an asset, the fair value is recognised as deferred capital grant on the balance sheet and is amortised to profit or loss over the expected useful life of the relevant asset by equal annual instalments.
Where loans or similar assistance are provided by governments or related institutions with an interest rate below the current applicable market rate, the effect of this favourable interest is regarded as additional government grant.
2.29 Financial guarantee
A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument.
Financial guarantees are recognised initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequent to initial recognition, financial guarantees are recognised as income in profit or loss over the period of the guarantee. If it is probable that the liability will be higher than the amount initially recognised less amortisation, the liability is recorded at the higher amount with the difference charged to profit or loss.
2.30 Treasury shares
The Group’s own equity instruments, which are reacquired (treasury shares) are recognised at cost and deducted from equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Group’s own equity instruments. Any difference between the carrying amount of treasury shares and the consideration received, if reissued, is recognised directly in equity. Voting rights related to treasury shares are nullified for the Group and no dividends are allocated to them respectively.
2.31 Non-current assets held for sale
Non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Non-current assets and disposal groups are classified as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. A component of the Group is classified as a ‘discontinued operation’ when the criteria to be classified as held for sale have been met or it has been disposed of and such a component represents a separate major line of business or geographical area of operations or is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations.
Property, plant and equipment once classified as held for sale are not depreciated or amortised.
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
2.32 Contingencies
A contingent liability is:
a) a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group; or
b) a present obligation that arises from past events but is not recognised because:
(i) It is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or
(ii) The amount of the obligation cannot be measured with sufficient reliability.
A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group.
Contingent liabilities and assets are not recognised on the balance sheet of the Group, except for contingent liabilities assumed in a business combination that are present obligations and which the fair values can be reliably determined.
3. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES
The preparation of the Group’s consolidated financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the end of each reporting period. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in the future periods.
3.1 Judgements made in applying accounting policies
In the process of applying the Group’s accounting policies, management has made the following judgement which has the most significant effect on the amounts recognised in the consolidated financial statements:
Consolidation of entities in which the Group holds less than 50%
In determining whether the Group controls the investee, the Group considers its holding of voting rights and dispersion of holdings of the other shareholders in accordance with the requirement of the accounting standards. The Group considers Procurri Corporation Limited and its subsidiaries (the “Procurri Group”), as a controlled subsidiary as of 31 December 2017 on basis of de facto control, being the single largest shareholder owning effective equity interest of 47% (2016: 47%). As such, the Group has the power to exercise effective control on Procurri Group that most significantly affect its economic performance and has the exposure or rights to receive benefits from Procurri Group from its involvement.
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
3. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES (cont’d)
3.2 Key sources of estimation uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at the end of the reporting period are discussed below. The Group based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising beyond the control of the Group. Such changes are reflected in the assumptions when they occur.
(a) Accounting for business combinations
In accounting for business combinations using the purchase price allocation method, judgement is required in determining the identification of the acquired assets and liabilities and allocating the purchase price into the various identifiable assets and liabilities acquired from the new business. The fair value measurement of assets and liabilities identified during acquisition is based on management’s assessment of fair values. Fair value is the estimated amount for which these assets and liabilities could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction and involved appropriate valuation techniques where fair value is not readily observable from market data. In making this judgement and estimates, the Group evaluates, among other factors, the amount and timing of future cash flows expected from the assets and liabilities. During the financial year, the Group acquired one subsidiary as disclosed in Note 13 to the financial statements.
In accounting for group restructuring, judgement is required in determining the substance of this transaction and fair value of the Group’s retained interest in the subsidiaries disposed. During the financial year, the Group swapped its 26% of equity interest of Episoft Asia Pte Ltd (“EPA”) and Play-E Pte Ltd (“Play-E”) for additional 25% interest in Corous360 Pte Ltd (“Corous360”) as disclosed in Note 13 to the financial statements.
(b) Impairment of intangible assets
As disclosed in Note 16 to the financial statements, the recoverable amounts of the cash generating units to which goodwill and intangible assets have been allocated to are determined based on the fair value less cost of disposal or value in use, where appropriate. The assessment of recoverable amounts require use of judgment and estimates. The key assumptions applied in the determination of the value in use including a sensitivity analysis, are disclosed and further explained in Note 16 to the financial statements. The carrying amount of intangible assets as at 31 December 2017 is disclosed in Note 16.
(c) Impairment of receivables
The Group and the Company assess at 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 flows are estimated based on historical loss experience for assets with similar credit risk characteristics. The carrying amount of the Group’s receivables at the end of the reporting period is disclosed in Note 20 to the financial statements.
(d) Allowance for inventories
Inventory is stated at the lower of cost and net realisable value (NRV). The determination of allowance for inventory write-down to NRV requires management to exercise judgement in identifying slow-moving and obsolete inventories and make estimates of provision required. The carrying amount of inventory at the end of the reporting period is disclosed in Note 19 to the financial statements.
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
3. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES (cont’d)
3.2 Key sources of estimation uncertainty (cont’d)
(e) Construction contracts
The Group recognises contract revenue by reference to the stage of completion of the contract activity at the end of each reporting period, when the outcome of a construction contract can be estimated reliably. The stage of completion is measured by reference to the proportion that contract costs incurred for work performed to date to the estimated total contract costs. Significant assumptions are required to estimate the total contract costs and the recoverable variation works that affect the stage of completion. In making these estimates, management has relied on past experience and knowledge of the project engineers. The carrying amounts of assets and liabilities arising from construction contracts at the end of each reporting period are disclosed in Note 21 to the financial statements. If the estimated total contract cost had been 5% higher than management estimate, the carrying amount of the assets and liabilities arising from construction contracts would have been $320,000 (2016: $159,000) higher and $75,000 (2016: $6,000) higher respectively.
4. REVENUE
Group 2017
$’0002016
$’000
Trading sales 185,787 221,472Rendering of services 58,341 63,104Contract revenue 26,333 13,777Rental and leasing 2,787 4,984Games hosting – 685Others 237 –
273,485 304,022
5. OTHER INCOME
Group 2017
$’0002016
$’000
Gain on disposal of subsidiaries (Note 13) 1,387 21,878Gain on re-measurement of an associate pursuant to a step-up acquisition – 2,898Gain on bargain purchase – 1,110Rental income 273 188Interest income 375 325Government grants 242 445Recovery of freight costs 593 479Sales of other ancillary services 1,009 504Fair value gain on derivative financial assets 1,044 –Settlement relating to disposal of subsidiary 182 –Provision writeback relating disposal of subsidiary 486 –Insurance writeback relating to disposal of subsidiary 1,200 –Others 275 1,009
7,066 28,836
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
6. OTHER CHARGES, NET
Group 2017
$’0002016
$’000
Items of expense Amortisation of intangible assets (Note 16) (1,822) (2,751)Allowance for impairment on trade receivables (Note 20) (1,257) (144)Bad debts written off (441) –Inventories written down (2,708) (2,783)Prepayment written off – (189)Plant and equipment written off and impaired (539) (98)Foreign exchange gain, net (1,339) 1,119(Loss)/gain on disposal of plant and equipment (141) 1,020Impairment of intangible assets (5,782) –Impairment loss on associate (Note 14) – (1,550)Write-down of other receivables upon final settlement of disposal of subsidiary (4,852) –Fair value adjustment for assets held for sale (83) –Others (842) (202)
(19,806) (5,578) Items of income Fair value gain/(loss) on embedded derivatives on convertible redeemable preference shares 590 (247)Others 12 33
602 (214)
(19,204) (5,792)
7. FINANCE COSTS
Group 2017
$’0002016
$’000
Interest expense on loans and borrowings 2,110 3,079Imputed interest expense on redeemable exchangeable loan fully exchanged during the financial year – 1,514Imputed interest expense of convertible redeemable preference shares 211 123
2,321 4,716
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
8. (LOSS)/PROFIT BEFORE TAX
The following items have been included in arriving at (loss)/profit before tax:
Group 2017
$’0002016
$’000
Audit fees: - Auditors of the Company 408 420 - Other auditors 626 455Non-audit fees: - Auditors of the Company 155 130 - Other auditors 297 203Employee benefits expense (Note 9) 53,749 64,326Rental of premises 5,610 4,671Depreciation of property, plant and equipment 9,634 6,732Amortisation of intangible assets 2,360 3,289Professional fees 2,789 2,131
9. EMPLOYEE BENEFITS EXPENSE
Group 2017
$’0002016
$’000
Directors’ fees 176 271Salaries, allowances, bonuses and commissions 43,806 55,052Contributions to defined contribution plans 3,290 3,553Share-based payments (Note 31) 2,299 2,520Other benefits 4,178 2,930
53,749 64,326 The employee benefits expense is included under: Administrative expenses 37,929 47,027Cost of sales 5,986 7,599Selling expenses 9,834 9,700
53,749 64,326
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
10. INCOME TAX EXPENSE
Major components of income tax expense recognised in profit or loss includes:
Group 2017
$’0002016
$’000
Current tax expense: Current tax expense (1,452) (2,655)Over provision in respect of prior years 50 6
(1,402) (2,649)Deferred tax (expense)/credit: Deferred tax credit (1,366) 951Over/(under) provision in respect of prior years 187 (481)
(1,179) 470
Income tax expense recognised in profit or loss (2,581) (2,179)
Relationship between tax expense and accounting profit
A reconciliation between tax expense and the product of accounting profit multiplied by the applicable corporate tax rate for the years ended 31 December 2017 and 2016 is as follows:
Group 2017
$’0002016
$’000
(Loss)/profit before tax (17,919) 11,686 Tax at the domestic rates applicable to (loss)/profits in the countries where the Group operates 2,229 (2,605)Non-deductible items (4,193) (4,414)Income not subjected to tax 1,986 4,047Tax exemptions 93 156Tax incentives 43 1,412Benefits from previously unrecognised tax losses 138 389Merger and acquisition allowance (9) 19Deferred tax assets not recognised (1,795) (668)Deferred tax assets written off (1,451) –Over/(under) provision in respect of prior years 237 (475)Share of results of associates 16 32Effect of changes in tax rates 113 –Group relief – 74Others 12 (146)
Total income tax expense (2,581) (2,179)
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
10. INCOME TAX EXPENSE (cont’d)
Relationship between tax expense and accounting profit (cont’d)
Group 2017
$’0002016
$’000
Deferred tax credit recognised in profit or loss includes: Differences in amortisation of intangible assets 313 (158)Differences in depreciation for tax purposes (614) (229)Unutilised tax losses (919) 829Unutilised capital allowances (466) 75Provision 524 (22)Other temporary differences (17) (25)
Total deferred tax credit recognised in profit or loss (1,179) 470
Deferred tax balance in balance sheets: Deferred tax (liabilities)/assets: Arising from acquisitions of subsidiaries (32) (345)Excess of tax values over net book value of plant and equipment/ (net book value of plant and equipment over tax values) (1,430) (816)Unutilised tax losses 1,180 2,099Unutilised capital allowances 411 877Unutilised merger and acquisition allowances 18 131Provision 870 346Other temporary differences (1) (85)
1,016 2,207
Presented in the balance sheets as follow: Deferred tax assets 1,991 3,327Deferred tax liabilities (975) (1,120)
1,016 2,207
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
10. INCOME TAX EXPENSE (cont’d)
Changes in corporate tax rate are as follows:
- United States: from 40% to 27% (1 January 2018 onwards)- United Kingdom: from 20% to 19% (1 April 2017 onwards) to 17% (1 April 2020 onwards)
Unrecognised tax losses
At the end of the reporting period, the Group has tax losses of approximately $7,933,000 (2016: $366,000) available for offset against future taxable profits of certain subsidiaries in which the losses arose, for which no deferred tax assets is recognised due to uncertainty of its recoverability. The use of these tax losses is subject to the agreement of the tax authorities and compliance with certain provisions of the tax legislation of the respective countries in which certain subsidiaries operate.
Unrecognised temporary differences relating to investments in subsidiaries and associates
The Group has not recognised deferred tax liability in respect of undistributed profits of subsidiaries because the distribution is controlled and there is currently no intention for the profits to be remitted to Singapore.
Such temporary differences for which no deferred tax liability has been recognised amounted to $13,670,000 (2016: $11,253,000). The deferred tax liability is estimated to be $1,366,000 (2016: $2,593,000).
11. (LOSS)/EARNINGS PER SHARE
The basic earnings per share is calculated by dividing profit, net of tax attributable to owners of the Company by the weighted average number of ordinary shares outstanding during the financial year.
The diluted earnings per share is calculated by dividing profit, net of tax attributable to owners of the Company by the weighted average number of ordinary shares outstanding during the financial year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.
The following tables reflect the profit and share data used in the computation of basic and diluted earnings per share for the years ended 31 December:
2017$’000
2016$’000
(Loss)/profit, net of tax attributable to owners of the Company (16,448) 7,758
No. of shares
‘000
No. of shares
‘000 Weighted average number of ordinary shares for basic earnings per share computation 650,898 631,220Effect of dilutions: - Share options 273 994- Contingently issuable performance shares 10,205 13,937- Contingently issuable shares pursuant to acquisition of a subsidiary – 13,500
Weighted average number of ordinary shares for diluted earnings per share computation 661,376 659,651
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
12. PROPERTY, PLANT AND EQUIPMENT
Group
Freehold land and
buildings$’000
Leasehold improvements
$’000
Restorationcosts
$’000
Plant and equipment
$’000
Motor vehicles
$’000Total
$’000
Cost: At 1 January 2016 6,300 3,646 238 22,194 141 32,519Additions – 3,695 13 11,681 83 15,472Arising from acquisitions of subsidiaries – 64 7 267 146 484Disposals – (1,064) – (3,556) (2) (4,622)Arising from disposal of subsidiaries – (91) – (8,085) (16) (8,192)Write off – (166) – (2,968) – (3,134)Exchange differences – (108) – (123) (9) (240)
At 31 December 2016 and 1 January 2017 6,300 5,976 258 19,410 343 32,287Additions – 296 71 11,743 39 12,149Arising from acquisitions of business – – – 16,755 – 16,755Disposals – – – (4,325) (146) (4,471)Arising from disposal of subsidiaries – (138) – (148) – (286)Write off – (626) – (1,407) – (2,033)Reclassification to asset held for sales (2,900) – – – – (2,900)Transfer (17) (86) 53 95 – 45Fair value adjustments (83) – – – – (83)Exchange differences – 22 (53) (93) (4) (128)
At 31 December 2017 3,300 5,444 329 42,030 232 51,335
Accumulated depreciation and impairment loss: At 1 January 2016 – 2,362 202 10,505 (8) 13,061Depreciation for the year 16 1,176 56 5,400 84 6,732Disposals – (674) – (2,607) (1) (3,282)Write off – (152) – (2,884) – (3,036)Arising from disposal of subsidiaries – – – (4,403) – (4,403)Exchange differences – (86) – (75) (5) (166)
At 31 December 2016 and 1 January 2017 16 2,626 258 5,936 70 8,906Depreciation for the year 16 1,226 39 8,301 52 9,634Impairment loss – – – 12 – 12Disposals – – – (1,880) (43) (1,923)Write off – (266) – (1,299) – (1,565)Arising from disposal of subsidiaries – (30) – (60) – (90)Transfer (16) (9) (11) 448 – 412Exchange differences – 2 – (150) (2) (150)
At 31 December 2017 16 3,549 286 11,308 77 15,236 Net book value:
At 31 December 2016 6,284 3,350 – 13,474 273 23,381
At 31 December 2017 3,284 1,895 43 30,722 155 36,099
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
12. PROPERTY, PLANT AND EQUIPMENT (cont’d)
Company
Leasehold improvements
$’000
Restorationcosts
$’000
Plant and equipment
$’000Total
$’000
Cost: At 1 January 2016 1,768 238 471 2,477Additions 989 – 1,909 2,898
At 31 December 2016 and 1 January 2017 2,757 238 2,380 5,375Additions 103 – 90 193Disposals – – (1,808) (1,808)
At 31 December 2017 2,860 238 662 3,760 Accumulated depreciation: At 1 January 2016 1,433 199 314 1,946Depreciation for the year 574 39 239 852
At 31 December 2016 and 1 January 2017 2,007 238 553 2,798Depreciation for the year 465 – 531 996Disposals – – (602) (602)
At 31 December 2017 2,472 238 482 3,192 Net book value:
At 31 December 2016 750 – 1,827 2,577
At 31 December 2017 388 – 180 568
The depreciation expense is included under:
Group 2017
$’0002016
$’000
Cost of sales 5,860 2,999Administrative expenses 3,774 3,733
9,634 6,732
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
12. PROPERTY, PLANT AND EQUIPMENT (cont’d)
Purchase of plant and equipment (non-cash) by means of finance lease and other payables
There were acquisitions of plant and equipment by the Group with a total cost of $2,991,000 (2016: $2,608,000) and $1,066,000 (2016: $1,567,000) acquired by means of finance leases and other payables.
Assets held under finance leases
The carrying amounts of plant and equipment of the Group held under finance leases as at 31 December 2017 are $4,012,000 (2016: $1,146,000).
Assets kept for maintenance service contracts
Plant and equipment includes maintenance parts such as spare parts and stand-by equipment. The carrying amount at 31 December 2017 are $21,701,000 (2016: $6,278,000).
Assets pledged as security
Three (2016: Three) freehold properties with carrying value of $6,184,000 (2016: $6,284,000) are pledged as security for certain bank loans.
Reclassification to assets held for sale
The Group has entered into an option agreement to sell its freehold property at 49 Tannery Lane #02-02 with selling price of $2,900,000. The option agreement was exercised on 15 December 2017 and the sale was agreed and expected to be completed in April 2018.
13. INVESTMENT IN SUBSIDIARIES
Company 2017
$’0002016
$’000
Cost at the beginning of the year 69,718 67,661Acquisition of subsidiary – 14,295Additional investment in subsidiaries 25,720 1,063Impairment losses (1) (33,345) –Disposal of investment in subsidiaries – (13,301)
Cost at the end of the year 62,093 69,718 Total cost comprising: Quoted equity shares at cost 20,657 20,657Unquoted equity shares at cost 41,436 49,061
(1) During the year, the Company assessed the carrying amount of its investments and impaired to its estimated recoverable amount
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
13. INVESTMENT IN SUBSIDIARIES (cont’d)
Details of subsidiaries
The subsidiaries held by the Company are listed below:
Percentage of equity held
Name of subsidiary/ Principal place of business Principal activities
2017%
2016%
Held by DeClout Limited:
Corous360 Pte. Ltd. (“Corous360”) (a)
Singapore
Provision of payment solutions to e-commerce business
100 75
Beaqon Pte. Ltd. (“Beaqon”) (a)
SingaporeTelecommunications resellers and third parties telecommunications providers
75 75
Procurri Corporation Limited (“Procurri Corp”) (a)(h)
Singapore
Business of supply, rental and maintenance and servicing of computer hardware and peripherals equipment and investment holding
47 47
DeClout (Shanghai) Co., Ltd. (c)
ChinaBusiness of supply, rental and maintenance and servicing of computer hardware and peripherals equipment
100 100
vCargo Cloud Pte Ltd (“vCargo Cloud”) (a)(i)
Singapore
Business of supply of trading and logistics IT solutions
50 50
DeClout Investments Pte Ltd (a)
SingaporeInvestment holding and accelerator of startups 100 100
Held through Corous360:
Corous360 Sdn. Bhd. (c)
MalaysiaDormant 100 100
PT Corous Three Sixty (c)
IndonesiaDormant 100 100
Netipay Pte. Ltd. (“Netipay”) (d)
SingaporeDormant 100 100
PT Max Interactives Technologies (“Maxitech”) (c)(k)
Indonesia
Business of provision of mobile cellular, radio paging and other wireless telecommunications activities
100 100
Epicsoft Asia Pte. Ltd. (“Epicsoft Asia”) ( j)
Singapore
Distribution of game softwares, game codes, and other related consumer products
– 100
Corous360 Information Technology (Shenzhen) Company Limited(“Corous360 Shenzhen”) (g)
China
Research and development in IT related activities and provision of IT consultancy services
– 100
Play-E Pte. Ltd. (“Play-E”) ( j)
SingaporeDistribution of game softwares, game codes, and other related consumer products
– 100
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
13. INVESTMENT IN SUBSIDIARIES (cont’d)
Details of subsidiaries (cont’d)
Percentage of equity held
Name of subsidiary/ Principal place of business Principal activities
2017%
2016%
Held through Play-E:
Play-E (Taiwan) Pte. Ltd. (“Play-E Taiwan”) ( j)
Taiwan
Distribution of game softwares, game codes, and other related consumer products
– 75
PLAYe Hong Kong Limited (“PlayE Hong Kong”) ( j)
Hong Kong
Distribution of game softwares, game codes, and other related consumer products
– 75
Held through Epicsoft Asia:
Playworks Pte. Ltd. (“Playworks”) ( j)
Singapore
Digital entertainment platform developer and operator
– 100
Held through Beaqon:
Asia Wiring Systems Pte. Ltd. (“AWS Singapore”) (a)
Singapore
General importers and exporters of electronics and related equipment
100 100
Pacific Wave Pte. Ltd. (“Pacific Wave”) (a)
Singapore
Supply of components and services to telecommunication/cellular industry
100 100
TJ Systems (S) Pte. Ltd. (“TJ Systems”) (a)
Singapore
General importer and exporter of electrical and electronic systems, devices and related items as well as designing, manufacturing, operating of electrical equipment and systems and related products
75 75
PT. DHost Telekomunikasi Nusantara (“PT. DHost”) (k)
Indonesia
Engage in neutral hosting business 100 –
Held through AWS Singapore:
PT AWS Distribution (c)
IndonesiaGeneral importers and exporters of electronics and related equipment
100 100
AWS Wire Works (Thailand) Co. Ltd (c)
ThailandSales of electric wires and cables, spare parts related to such products
100 100
Notes to the Financial Statements For the financial year ended 31 December 2017
D-52
APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
13. INVESTMENT IN SUBSIDIARIES (cont’d)
Details of subsidiaries (cont’d)
Percentage of equity held
Name of subsidiary/ Principal place of business Principal activities
2017%
2016%
Held through Procurri Corp:
Procurri Singapore Pte. Ltd.(“Procurri Singapore”) (a)
Singapore
Business of supply, rental and maintenance and servicing of computer hardware and peripherals equipment
100 100
Procurri Malaysia Sdn. Bhd. (“Procurri Malaysia”) (c)
Malaysia
Sales of all kinds of computer systems and hardware, provision of maintenance and related services, and rental of computer parts and fully configured servers
100 100
Procurri Asia Pacific Pte. Ltd.(“Procurri Asia Pacific”) (a)
Singapore
Business of supply, rental and maintenance and servicing of computer hardware and peripherals equipment
100 100
ASVIDA UK Limited (c)
United KingdomInvestment holding 100 100
Procurri India Private Limited (c)(f)
IndiaBusiness of hardware sales, maintenance and services
100 –
Held through Procurri Asia Pacific:
Procurri Beijing Co, Ltd (c)
China Repair and maintenance of computer hardware and peripherals, and data processing equipment; computer network and system integration design, installation, commissioning, maintenance, and the provision of technical advice and services; data processing; enterprise management consulting; and wholesale, import and export of computer hardware and peripheral equipment.
100 100
Held through ASVIDA UK Limited:
Procurri LLC (e)
United StatesBusiness of provision of IT solutions 100 100
Procurri Europe Limited (“Procurri Europe”) (b)
(formerly known as Tinglobal Holdings Limited)United Kingdom
Investment holding 100 100
Held through Procurri Europe:
Procurri UK Ltd (b)
United KingdomEngage in the global market for the refurbishment and subsequent sale of second user and reconfigured mid-range to high end IT equipment
100 100
Notes to the Financial Statements For the financial year ended 31 December 2017
D-53
APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
13. INVESTMENT IN SUBSIDIARIES (cont’d)
Details of subsidiaries (cont’d)
Percentage of equity held
Name of subsidiary/ Principal place of business Principal activities
2017%
2016%
Held through Procurri LLC:
Procurri S. DE R.L DE C.V (e)
MexicoBusiness of provision of IT solutions 100 100
Rockland Congruity LLC (“Rockland”) (e)
United States
Engage in IT hardware and enterprise support by offering independent maintenance and IT support services in the Americas
51 –
Held through Procurri UK Ltd:
EAF Supply Chain Holdings Limited (b)
United KingdomInvestment holding 100 100
Held through EAF Supply Chain Holdings Limited:
EAF Supply Chain Limited (b)
United KingdomDistribution of IT spare parts 100 100
Held through vCargo Cloud:
vCargo Cloud Kenya Limited (d)(f)
AfricaBusiness of supply of trading and logistics IT solutions
100 –
vCargo Cloud (Shanghai) Co, LTD (d)(f) China
Business of supply of trading and logistics IT solutions
100 –
(a) Audited by Ernst & Young LLP in Singapore
(b) Audited by member firms of EY Global in the respective countries
(c) These subsidiaries are not significant to the Group and are audited by other firms of accountants
(d) Not audited, as it is not significant to the Group for financial year ended 31 December 2017
(e) Audited by Moore Stephens Tiller LLC
(f) Incorporated during the year
(g) Disposed during the year
(h) Entity consolidated under de-facto control. Determining whether the Group has control over Procurri Group requires management consideration of the proportion of its ownership interest and voting rights, the decision making authority as well as the Group’s overall exposure to variable returns in accordance with SFRS 10, Consolidated Financial Statements. Management assessed and determined that the Company continued to have de facto control over Procurri Group on the basis that the Company is the single largest shareholder of Procurri, and the remaining 53% of the ordinary shares of Procurri are owned by large number of shareholders
(i) 50.01% of equity held
( j) Became associated companies after effective equity held reduced to 49% during the year
(k) The Group considers these entities as a subsidiary as it has the power to exercise effective control on these entities that most significantly affect its economic performance and has the exposure or rights to receive benefits from these entities from its involvement
Notes to the Financial Statements For the financial year ended 31 December 2017
D-54
APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
13. INVESTMENT IN SUBSIDIARIES (cont’d)
Acquisitions of subsidiary
On 23 January 2017, Procurri Corp and its subsidiaries (“Procurri Group”), through one of its subsidiaries, Procurri LLC, entered into an operating agreement with Congruity LLC (“Congruity”) to provide a platform for the sale of refurbished technology hardware and to provide third party IT maintenance and support services to customers.
Procurri LLC and Congruity incorporated a Delaware Limited Liability Company, Rockland Congruity LLC (“Rockland”) in which Procurri LLC subscribed to a 51% equity interest in Rockland for US$51. Procurri LLC has acquired from Congruity US$3.5 million of inventories for trading purpose and US$12 million of maintenance parts required for Procurri Group’s third party maintenance business. The President of Rockland is appointed by Congruity, however, Procurri LCC has the ability to direct the relevant activities of Rockland through its 51% equity interest and other rights over financial and operational matters given in the operating agreement.
The material terms under the agreement are as follows:
a) Congruity has assigned to Procurri Group rights to distributions in respect of its 49% interest in Rockland, for the period of two years commencing from date of incorporation of Rockland to 31 December 2018.
b) A call option has been granted to Procurri Group to acquire the remaining 49% membership interest in Rockland from Congruity at an agreed formula with reference to Rockland’s 2018 audited financials.
c) In the event that the audited net tangible assets (“NTA”) of Rockland at 31 December 2018 is less than US$9.7million, Congruity shall pay the NTA shortfall, being the difference between US$9.7million and the actual FY2018 NTA, in cash to Rockland contemporaneous with Procurri Group’s purchase of the remaining 49% membership interest in Rockland.
Procurri Group has accounted for the transaction as a business combination due to the following reasons:
purpose of the business.
conducted by Rockland.
Transaction costs
Transaction costs related to the acquisition of $43,000 have been recognised in the profit or loss.
Impact of the acquisition on profit or loss
From the acquisition date, Rockland has contributed $33,084,000 of revenue and $4,554,000 of net profit after tax to the Group’s loss for the year. If the business combination has taken place at the beginning of the year, there is no change to the revenue and loss after tax of the Group which remained at $273,485,000 and $20,500,000 respectively.
The fair value of identifiable assets acquired and liabilities as at the acquisition date were:
Rockland$’000
Fair value of identifiable assets and liabilities Property, plant and equipment 16,755Inventories 4,890
Purchase consideration representing net cash outflow from acquisition of subsidiary 21,645
There were no customer contracts novated to Rockland. Procurri Group has also assessed the value of customer relationship to be not material. There were no liabilities acquired as Rockland is newly incorporated.
Notes to the Financial Statements For the financial year ended 31 December 2017
D-55
APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
13. INVESTMENT IN SUBSIDIARIES (cont’d)
Disposal of subsidiaries
The carrying value of assets and liabilities of subsidiaries disposed and the effects of the disposal were as follows:
Group
Corous360 Shenzhen
$’000
EPA & Play-E Group$’000
Total$’000
Carrying value of assets and liabilities Property, plant and equipment – 196 196Intangible assets – 19,324 19,324Deferred tax assets – 113 113Inventories – 3,315 3,315Trade and other receivables 19 13,378 13,397Other assets – 309 309Income tax payables – (11) (11)Trade and other payables (2) (4,014) (4,016)Other financial liabilities – (4,374) (4,374)Deferred tax liabilities – (104) (104)Other liabilities – (111) (111)Cash and cash equivalents 65 2,637 2,702
82 30,658 30,740Less: Non-controlling interests – (45) (45)
Net assets disposed 82 30,613 30,695 Sale consideration 82 – 82Net assets de-recognised (82) (30,613) (30,695)Fair value of retained interest – 19,752 19,752Fair value of interest disposed – 12,330 12,330Cumulative reserves in respect of the net assets of the subsidiary reclassified from equity on loss of control of subsidiary – (82) (82)
Gain on disposal – 1,387 1,387 Cash proceeds received 82 – 82Cash and cash equivalents disposed (65) (2,637) (2,702)
Net cash on disposal of subsidiary 17 (2,637) (2,620)
Disposal of Epicsoft Asia Pte. Ltd. and Play-E Pte. Ltd.
In September 2017, Corous360 entered into a conditional sale and purchase agreement with Play-E Corporation Pte. Ltd. in relation to the disposal of the entire equity interests of Epicsoft Asia Pte. Ltd. (“EPA”, and together with its subsidiary, the “EPA Group”) and Play-E Pte. Ltd. (“Play-E”, and together with its subsidiaries, the “Play-E Group”). Consequently, the Group’s effective shareholding interests in the EPA Group and the Play-E Group respectively decreased from 75.3% to 49.0% and its retained interest recognised as an investment in associate. This transaction was accounted for as a loss of control of subsidiaries. A gain of $1,387,000 has been recorded in the profit or loss. Separately, the Company acquired 24.7% of Corous360 which own 100% of Maxitech, representing the remaining equity interest held by non-controlling interest (the “Restructuring”). This transaction is accounted for as an equity transaction with non-controlling interest. The difference between the fair value of EPA Group and Play-E Group given up and the carrying value of non-controlling interest acquired, amounting to $10,470,000 was recorded within equity. This transaction, together with the dilution of interests in EPA Group and Play-E Group above, collectively referred to as the “Restructuring”. There was no actual cash receipts/ payments from this restructuring.
Notes to the Financial Statements For the financial year ended 31 December 2017
D-56
APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
13. INVESTMENT IN SUBSIDIARIES (cont’d)
Interest in subsidiaries with material non-controlling interest (NCI)
Proportion of ownership interest held
by NCI
(Loss)/profit allocated to NCI during
the year$’000
Accumulated NCI at
the end of the year
$’000
2017Procurri Corporation Pte. Ltd. and its subsidiaries (“Procurri Group”) 53.1% (1,450) 33,894Beaqon Pte. Ltd. and its subsidiaries (“Beaqon Group”) 25.0% – 2,911Corous360 Pte. Ltd. and its subsidiaries (“Corous Group”) – (1,449) – 2016 Procurri Corporation Pte. Ltd. and its subsidiaries (“Procurri Group”) 52.7% 2,506 35,268Beaqon Pte. Ltd. and its subsidiaries (“Beaqon Group”) 25.0% – 2,911Corous360 Pte. Ltd. and its subsidiaries (“Corous Group”) 24.7% – 3,358
The non-controlling interests of Beaqon Pte Ltd and Corous360 Pte Ltd have irrevocably and absolutely assigned to the Company all voting rights, dividend rights and claims to any profit or loss attributable in Beaqon Pte Ltd (until 31 December 2017) and Corous360 Pte Ltd (until 31 December 2016) respectively. Accordingly, no profit has been allocated to NCI.
Summarised financial information about subsidiaries with material NCI
2017 Procurri
Group$’000
Beaqon Group $’000
Corous Group$’000
Summarised balance sheets Current assets 96,141 47,201 –Current liabilities (66,310) (37,600) –
Net current assets 29,831 9,601 – Non-current assets 44,430 11,101 –Non-current liabilities (10,419) (2,720) –
Net non-current assets 34,011 8,381 –
Assets held for sale – 2,900 –
Net assets 63,842 20,882 – Summarised statement of comprehensive income Revenue 181,822 70,747 17,528(Loss)/profit before tax (2,276) 3,902 (5,852)(Loss)/profit after tax (2,749) 3,502 (5,864)Other comprehensive income (270) (85) (105)Total comprehensive income (3,019) 3,417 (5,969) Summarised other financial information Net decrease in cash flows (10,599) (808) (3,375)Acquisition of property, plant and equipment (5,675) (3,328) (11)
Notes to the Financial Statements For the financial year ended 31 December 2017
D-57
APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
13. INVESTMENT IN SUBSIDIARIES (cont’d)
Interest in subsidiaries with material non-controlling interest (NCI) (cont’d)
Summarised financial information about subsidiaries with material NCI (cont’d)
2016 Procurri
Group$’000
Acclivis Group$’000
Beaqon Group $’000
Corous Group$’000
Summarised balance sheets Current assets 89,225 – 41,556 30,351Current liabilities (42,764) – (35,118) (52,821)
Net current assets/(liabilities) 46,461 – 6,438 (22,470) Non-current assets 27,858 – 13,635 30,656Non-current liabilities (7,236) – (2,608) (2,087)
Net non-current assets 20,622 – 11,027 28,569
Net assets 67,083 – 17,465 6,099 Summarised statement of comprehensive income Revenue 135,750 44,206 72,752 58,034Profit/(loss) before tax 7,614 4,797 3,129 (4,266)Profit/(loss) after tax 5,139 4,480 3,212 (3,734)Other comprehensive income (3,063) – 81 225Total comprehensive income 2,076 4,480 3,293 (3,509) Summarised other financial information Net increase in cash flows 25,074 – 1,226 3,554Acquisition of property, plant and equipment 7,569 2,286 1,732 941
14. INVESTMENT IN ASSOCIATES
Group 2017
$’0002016
$’000
Play-E Corporation Pte Ltd (“Play-E Corp”) 19,666 –AWS Distribution Phils Corp. (“AWS PH”) – 2,000
19,666 2,000
During the year, the Group’s effective shareholding interests in the EPA Group and the Play-E Group respectively decreased from 75.3% to 49.0% and its retained interest recognised as an investment in associate as disclosed in Note 13.
During the year, AWS PH was disposed at a consideration of $2,000,000.
Notes to the Financial Statements For the financial year ended 31 December 2017
D-58
APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
14. INVESTMENT IN ASSOCIATES (cont’d)
The details of the associates are listed below:
Percentage of equity held
Name of associates/Principal place of business Principal activities
2017%
2016%
Held through Asia Wiring Systems Pte. Ltd.:
AWS Distribution Phils Corp. (a)
PhilippinesGeneral importers and exporters of electronic and related equipment
– 40
Held through Corous360 Pte. Ltd.:
Play-E Corporation Pte Ltd (a)
SingaporeDistribution of game softwares, game codes, and other related consumer products
49 –
(a) Not significant to the Group and are audited by other firms of accountants
The summarised financial information of associates which are both considered strategic to the Group due its principal activities, not adjusted for proportion ownership interest held by the Group, is as follows:
Play-ECorp2017
$’000
AWSPH
2016$’000
Summarised balance sheets Current assets 17,857 11,153Non-current assets 38,921 194
Total assets 56,778 11,347 Current liabilities 6,854 2,510Non-current liabilities – –
Total liabilities 6,854 2,510 Group’s share of net assets 24,463 3,535Impairment on an associate – (1,550)Fair value adjustment on recognition as associate (4,797) –Others – 15
19,666 2,000 Summarised statement of comprehensive income Revenue 16,450 (a) 10,573(Loss)/profit after tax, representing total comprehensive income (174) (a) 470
(a) Results after the Restructuring
15. INVESTMENT IN A JOINT VENTURE
The Group has a 50% (2016: 50%) interest in the ownership and voting rights in a joint venture, DeClout Ventures Pte Ltd that is held through DeClout Investments Pte Ltd, its wholly-owned subsidiary. This joint venture was incorporated in Singapore in 2016. The Group jointly controls the venture with other partner under the contractual agreement and requires unanimous consent for all major decisions over the relevant activities.
Notes to the Financial Statements For the financial year ended 31 December 2017
D-59
APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
16. INTANGIBLE ASSETS
GroupGoodwill
$’000
Customer relationship
$’000
Customer contracts
$’000
Technical know-how
$’000
Payment gateway
$’000
Games related &
Trademarks$’000
Deferred development
costs$’000
Total$’000
Cost At 1 January 2016 53,548 4,590 1,821 2,598 3,229 – – 65,786Additions – – – – 343 – – 343Disposals – – (246) – – – – (246)Arising from acquisitions of subsidiaries 15,653 2,278 25 2,078 – 782 – 20,816Disposal of subsidiaries (12,723) (3,845) (25) – – (782) – (17,375)Write off (4,215) (882) – – – – – (5,097)Exchange differences (1,461) (348) – – – – – (1,809)
At 31 December 2016 and 1 January 2017 50,802 1,793 1,575 4,676 3,572 – – 62,418Additions – – – – – – 836 836Disposal of subsidiaries (18,268) (658) (1,575) – – – – (20,501)Write off (5,604) – – – – – – (5,604)Exchange differences 221 39 – – – – – 260
At 31 December 2017 27,151 1,174 – 4,676 3,572 – 836 37,409
Accumulated amortisation and impairment At 1 January 2016 4,215 1,725 321 – 1,502 – – 7,763Amortisation for the year – 1,382 541 589 731 46 – 3,289Disposal – – (246) – – – – (246)Write off (4,215) (882) – – – – – (5,097)Disposal of subsidiaries – (1,178) – – – (46) – (1,224)Exchange differences – (2) – – – – – (2)
At 31 December 2016 and 1 January 2017 – 1,045 616 589 2,233 – – 4,483Amortisation for the year – 513 350 895 602 – – 2,360Impairment for the year 5,604 41 – – 137 – – 5,782Disposal of subsidiaries – (214) (963) – – – – (1,177)Reclassification – (600) – – 600 – – –Write off (5,604) – – – – – – (5,604)Exchange differences – 4 (3) – – – – 1
At 31 December 2017 – 789 – 1,484 3,572 – – 5,845 Net book value At 31 December 2016 50,802 748 959 4,087 1,339 – – 57,935
At 31 December 2017 27,151 385 – 3,192 – – 836 31,564
Notes to the Financial Statements For the financial year ended 31 December 2017
D-60
APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
16. INTANGIBLE ASSETS (cont’d)
The amortisation expense is charged under:
Group 2017
$’0002016
$’000
Cost of sales 538 538Other charges, net (Note 6) 1,822 2,751
At the end of the year 2,360 3,289
Goodwill
Goodwill from the acquisitions has been allocated to the following cash generating units:
Group 2017
$’0002016
$’000
Name of cash generating units: Platform business – 18,267Maxitech – 5,604Tinglobal 9,554 9,335Procurri Malaysia 2,645 2,645Pacific Wave 411 411TJ Systems 1,701 1,700vCargo Cloud 12,840 12,840
27,151 50,802
Maxitech
Maxitech’s initial plan was to partner with existing micro financing companies in Indonesia, with E money license which function like a “walking bank“. The application of E money license with the Indonesian Authority commenced in the previous year. As at 31 August 2017 (during the Restructuring) as disclosed in Note 13, the application process was close to finalisation stage as the authority has sent representatives to perform final audit at Maxitech’s office. Management has received positive indicators from the authority and were confident that the final approval of the E money license will be granted soon after the restructuring. On that basis, the Group proceeded into the Corous Restructuring exercise which effectively exchanged 26% stake in Play-E and EPA for additional 25% effective interest of Maxitech.
However, from October 2017 up to December 2017, the Indonesian Authority has slowed down on their correspondences with Maxitech and management has followed up with Indonesia Authority but to no avail.
Management has considered a set of discounted cash flow using a scenario without E money license. In this case, management was unable to start its plan on the micro-financing platform and have to rely on the traditional SMS Short Code business. Based on this as a likely scenario, the discounted cash flow of Maxitech indicated full impairment of the goodwill.
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
16. INTANGIBLE ASSETS (cont’d)
Tinglobal
The recoverable amount was determined based on the value in use method. The value in use was measured by management using a discounted cash flow model covering a five-year period (2016: five-year period). Cash flow projections were based on a three-year budget and plans approved by management. Cash flow projections have been extrapolated on the basis at 2% to 15% (2016: 20% to 31%) growth rate on revenue. A terminal growth rate of 1% (2016: 1%) was used on cash flows after the fifth year. The terminal growth rate does not exceed the long-term average growth rate of the sector. The discount rate applied (weighted average cost of capital “WACC” gross of tax effect) was 8.00% (2016: 7.00%) taking into account time value of money, individual risk of underlying assets and is comparable to market participants. No impairment charge was recognised as the carrying amount of the goodwill was lower than its recoverable amount. Management believes that no reasonably possible change in any of the above key assumptions would cause the carrying value to materially exceed the recoverable amount.
Procurri Malaysia
The recoverable amount was determined based on the value in use method. The value in use was measured by management using a discounted cash flow model covering a five-year period (2016: five-year period). Cash flow projections were based on a three-year budget and plans approved by management. Cash flow projections have been extrapolated on the basis at -3% to 15% (2016: 20% to 39%) growth rate on revenue. A terminal growth rate of 1% (2016: 1%) was used on cash flows after the fifth year. The terminal growth rate does not exceed the long-term average growth rate of the sector. The discount rate applied (weighted average cost of capital “WACC” gross of tax effect) was 8.00% (2016: 10.00%) taking into account time value of money, individual risk of underlying assets and is comparable to market participants. No impairment charge was recognised as the carrying amount of the goodwill was lower than its recoverable amount. Management believes that no reasonably possible change to any of the above key assumptions would cause the carrying value to materially exceed the recoverable amount.
Pacific Wave
The recoverable amount was determined based on the value in use method. The value in use was measured by management using a discounted cash flow model covering a three-year period (2016: three-year period). Cash flow projections were based on a three-year budget and plans approved by management on a 15% (2016: 15%) growth rate. A terminal growth rate of 2% (2016: 2%) was used. The terminal growth rate does not exceed the long-term average growth rate of the sector. The discount rate applied (WACC) was 12% (2016: 12%) taking into account time value of money, individual risk of underlying assets and is comparable to market participants. No impairment charge was recognised as the recoverable amount is higher than the carrying amount of the goodwill. The carrying value will not materially exceed its recoverable amount due to reasonable possible changes in any of the above key assumptions.
TJ Systems
The recoverable amount was determined based on the value in use method. The value in use was measured by management using a discounted cash flow model covering a three-year period (2016: three-year period). Cash flow projections were based on a three-year budget and plans approved by management on a 15% (2016: 15%) growth rate. A terminal growth rate of 2% (2016: 2%) was used. The terminal growth rate does not exceed the long-term average growth rate of the sector. The discount rate applied (WACC) was 12% (2016: 12%) taking into account time value of money, individual risk of underlying assets and is comparable to market participants. No impairment charge was recognised as the recoverable amount was higher than carrying amount of the goodwill. The carrying value will not materially exceed its recoverable amount due to reasonable possible changes in any of the above key assumptions.
vCargo Cloud
The recoverable amount was determined based on the value in use method. The value in use was measured by management using a discounted cash flow model covering a five-year period. Cash flow projections were based on a five-year budget and plans approved by management. Cash flow projections have been extrapolated on the basis at 17% to 86% growth rate on revenue. A terminal growth rate of 1% was used. The terminal growth rate does not exceed the long-term average growth rate of the sector. The discount rate applied (WACC) was 12% taking into account time value of money, individual risk of underlying assets and is comparable to market participants. No impairment charge was recognised as the recoverable amount was higher than carrying amount of the goodwill. The carrying value will not materially exceed its recoverable amount due to reasonable possible changes in any of the above key assumptions.
Notes to the Financial Statements For the financial year ended 31 December 2017
D-62
APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
17. FINANCE LEASE RECEIVABLES
Group
Minimum payments
$’000
Finance charges
$’000
Present value
$’000
2017Minimum lease payments receivable: Due within one year 1,550 (117) 1,433 Due between two to five years 2,070 (33) 2,037
Total 3,620 (150) 3,470 2016 Minimum lease payments receivable: Due within one year 1,466 (167) 1,299 Due between two to five years 1,782 (105) 1,677
Total 3,248 (272) 2,976
The average lease term is two to five years (2016: two to five years). The average effective interest rate is 1.69% to 6.78% (2016: 2.35% to 7.72%) per year. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental receipts. The fair value of the finance lease receivables approximates the carrying value.
18. OTHER FINANCIAL RECEIVABLE
Group 2017
$’0002016
$’000
Other financial receivable: - Non-current – 1,621 - Current 1,483 –
1,483 1,621
Nominal value of exchangeable loan 1,350 1,350Embedded derivatives – (35)
1,350 1,315Interest accreted 185 100Unrealised foreign exchange (52) 206Fair value loss on derivatives – (35)Embedded derivatives – 35
1,483 1,621
The exchangeable loan is exchangeable to ordinary shares in Games First International Corp (“Games First”). The exchange terms are based on an agreed formula with a discount on the valuation of shares in Games First. In the event the exchangeable loan is not exchanged into ordinary shares of Games First, the loan will be repayable on 31 August 2018. The interest rate on the exchangeable loan is 5% per annum. There has been no conversion as at year ended 31 December 2017.
The fair values of the asset component and the embedded derivatives were measured at date the exchangeable loan was issued (Level 3). The valuation of exchangeable loan is based on various inputs including current loan face value, risk free rate, maturity date, exchange price, IPO discount factor and probability of exchange. The interest income recognised in the profit or loss is calculated using the effective interest rate method at 6% to the asset component for the period the exchangeable loan was issued.
Notes to the Financial Statements For the financial year ended 31 December 2017
D-63
APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
19. INVENTORIES
Group 2017
$’0002016
$’000
Finished goods (at cost or net realisable value) 28,277 28,555
Cost of inventories charged to profit or loss 143,232 166,296
20. TRADE AND OTHER RECEIVABLES
Group Company 2017
$’0002016
$’0002017
$’0002016
$’000
Trade receivables (current) Outside parties (a) 68,163 66,341 – –Less allowance for impairment (836) (587) – –
67,327 65,754 – –Associates 44 4,492 – –Unbilled receivables 2,081 616 – –
69,452 70,862 – –
Other receivables (current) Outside parties 2,342 17,758 1,130 16,386Sales tax receivables 1,013 1,052 – –Tax recoverable 2,168 – – –Advances to staff 511 773 – –Indemnification assets 421 421 – –Subsidiaries (b) – – 10,802 42,764Less: allowance for impairment (330) – – –
6,125 20,004 11,932 59,150
Trade and other receivables (current) 75,577 90,866 11,932 59,150 Trade and other receivables (non-current) Subsidiaries (b) – – 2,500 – Total trade and other receivables 75,577 90,866 14,432 59,150Add: Finance lease receivables 3,470 2,976 – –Add: Other financial receivable (c) 1,483 1,621 – –Add: Other assets (refundable deposits) 1,401 1,218 159 251Add: Cash and bank balances 31,537 65,413 4,831 19,376Less: Sales tax receivables (1,013) (1,052) – –Less: Tax recoverable (2,168) – – –
Total loans and receivables 110,287 161,042 19,422 78,777
(a) Included within trade receivables from outside parties are factored receivables of $3,480,000 (2016: $2,726,000) transferred to a factoring bank
(b) The amounts due from subsidiaries are non-trade in nature, unsecured, interest free and repayable on demand
(c) Exclude embedded derivatives
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
20. TRADE AND OTHER RECEIVABLES (cont’d)
Receivables that are past due but not impaired
The Group has the following trade receivables that are past due at the end of the reporting period but not impaired. These receivables are unsecured and the analysis of their aging at the end of the reporting period is as follows:
Group 2017
$’0002016
$’000
Trade receivables past due but not impaired Less than 30 days 10,992 14,25230 - 60 days 6,560 8,01061 - 90 days 5,327 4,974Over 90 days 12,256 12,159
35,135 39,395
Receivables that are impaired
The Group’s trade and other receivables that are assessed to be impaired at the end of the reporting period and the movement of the allowance accounts used to record the impairment are as follows:
Group 2017
$’0002016
$’000
Trade and other receivables – nominal amounts 1,998 587Less: Allowance for impairment (1,166) (587)
832 – Movements in allowance for impairment Balance at beginning of the year 587 582Charge for the year (Note 6) 1,257 144Written off (662) (139)Others (16) –
Balance at end of the year 1,166 587
Trade and other receivables that are individually assessed to be impaired at the end of the reporting period relate to debtors that are in significant financial difficulties and have defaulted on payments. These receivables are not secured by any collateral or credit enhancements.
Indemnification assets
Included in other receivables, the indemnification assets arising from acquisition of EAF Supply Chain Holdings Limited (“EAF”) in 2016 relates to indemnification from previous shareholders of EAF for dilapidations claim in respect of a leasehold premises and a potential claim from a supplier, approximately amounted to $421,000 (2016: $421,000). Provision for claims is disclosed in Note 28. The indemnification will be released in August 2018.
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
21. AMOUNT DUE FROM/(TO) CUSTOMERS FOR CONTRACT WORK-IN-PROGRESS
Group 2017
$’0002016
$’000
Aggregate amount of costs incurred and recognised profits (less recognised losses) to date 42,211 13,310Less: Progress billings (37,369) (10,259)
4,842 3,051 Gross amount due from customers for contract work-in-progress 6,333 3,171Gross amount due to customers for contract work-in-progress (1,491) (120)
4,842 3,051
22. OTHER ASSETS
Group Company 2017
$’0002016
$’0002017
$’0002016
$’000
Refundable deposits 1,401 1,218 159 251Prepayments 5,879 3,532 84 87Advances to suppliers 258 97 – –Others 5 330 – –
7,543 5,177 243 338
23. DERIVATIVE FINANCIAL ASSET
Group 2017
$’0002016
$’000
Call option, representing total financial asset at fair value through profit or loss 1,044 – This call option arose from the acquisition of Congruity by Procurri Corp (refer to Note 13). As the NTA shortfall can only be recovered if the Procurri Group exercises the call option to purchase the 49% interest in Rockland, it is factored in as part of the value of the call option. The fair value is estimated using price earnings ratio of comparable companies similar to Rockland business and the probability of meeting Rockland NTA target (level 3 of the fair value hierarchy). Had the price earnings ratio increased or decreased by 0.5 times, the fair value gain will increase by $1,667,000 or decrease by $1,044,000 respectively. Had the probability of meeting NTA target increased or decreased by 10%, the fair value gain will increase or decrease by $172,000.
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
24. CASH AND BANK BALANCES
Group Company 2017
$’0002016
$’0002017
$’0002016
$’000
Cash and bank balances 31,537 65,413 4,831 19,376Less: Bank overdrafts (Note 27) – (548) – –Less: Pledged deposits (a) (1,521) (456) – –Less: Fixed deposit (1,450) (3,000) – –
Cash and cash equivalents 28,566 61,409 4,831 19,376
(a) These amounts held by the bank as security for trust receipts and bank overdrafts (Note 27)
Cash at bank earns interest at floating rate based on bank deposit rate. The effective interest rate as at 31 December 2017 for the Group was 0.6% (2016: 0.5%). Fixed deposit is made for a period of twelve months (2016: six months) and earns interest at 1.21% (2016: 1.08%).
25. TRADE AND OTHER PAYABLES
Group Company 2017
$’0002016
$’0002017
$’0002016
$’000
Trade payables (current) Outside parties 24,694 25,739 – –Accrued liabilities 7,754 5,007 – –
32,448 30,746 – –Other payables (current) Outside parties 1,676 3,281 362 225Accrued liabilities 17,555 22,626 2,847 11,378Sales tax payable 437 – – –Subsidiaries (a) – – 419 2,714Associates 15 – * –Directors of subsidiary (d) – 904 – –
19,683 26,811 3,628 14,317
Trade and other payables (current) 52,131 57,557 3,628 14,317
Other payables (non-current) Directors of subsidiary (b) – 250 – –Outside parties 11 27 – –
Trade and other payables (non-current) 11 277 – –
Total trade and other payables 52,142 57,834 3,628 14,317Add: Loans and borrowings (c) 40,345 50,116 7,869 6,923Less: Sales tax payable (437) – – –
Total financial liabilities carried at amortised cost 92,050 107,950 11,497 21,240
* Amount less than $1,000
(a) The amounts owing to subsidiaries are non-trade in nature, unsecured, interest-free and is repayable on demand
(b) The amounts owing to directors of subsidiary are non-trade in nature, unsecured, interest-free and is only repayable after 31 December 2017 (FY2016)
(c) Excludes embedded derivatives
(d) The amounts owing to directors of subsidiary are non-trade in nature, unsecured, interest-free and is repayable on demand (FY2016)
Notes to the Financial Statements For the financial year ended 31 December 2017
D-67
APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
26. OTHER LIABILITIES
Group 2017
$’0002016
$’000
Advanced billings, current 21,509 4,748Advanced billings, non-current 821 1,422
Total 22,330 6,170
27. LOANS AND BORROWINGS
Group Company 2017
$’0002016
$’0002017
$’0002016
$’000
Current Bank loans 13,513 12,805 6,119 6,201Bank overdrafts – 548 – –Finance lease obligations 1,660 1,024 – 347Trade receivables factoring 3,480 2,726 – –Trust receipts 7,411 23,802 – –Convertible redeemable preference shares 1,360 – – –Others 250 577 – –
Current, total 27,674 41,482 6,119 6,548 Non-current Bank loans 9,575 5,760 1,750 –Convertible redeemable preference shares – 1,149 – –Finance lease obligations 3,096 1,330 – 375Embedded derivative – 379 – –Others – 395 – –
Non-current, total 12,671 9,013 1,750 375
Total 40,345 50,495 7,869 6,923
Bank loans Group Company
2017$’000
2016$’000
2017$’000
2016$’000
Current Bank loans (secured) 2,579 297 1,083 167Bank loans (unsecured) 10,934 12,508 5,036 6,034
Current, total 13,513 12,805 6,119 6,201 Non-current Bank loans (secured) 1,750 1,498 1,750 –Bank loans (unsecured) 7,825 4,262 – –
Non-current, total 9,575 5,760 1,750 –
Total 23,088 18,565 7,869 6,201
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
27. LOANS AND BORROWINGS (cont’d)
Bank loans (secured) are secured by corporate guarantee by subsidiaries, fixed deposits and/or freehold properties of the Group. It is repayable in 24 to 240 (2016: 24 to 240) monthly instalments or based on agreed repayment schedule. The amount bears effective interest rates ranging between 0.75% over the bank’s commercial financing rate and 2.5% over the 3 months SWAP rate (2016: 0.75% over the bank’s commercial financing rate and 2.5% over the 3 months SWAP rate) per annum.
Bank loans (unsecured) are covered by a corporate guarantee by the Company and/or its subsidiary and repayable in 3 to 36 (2016: 6 to 48) monthly instalments or rollover at each repayment date. The amount bears effective interest rates ranging between 3.23% to 6.75% (2016: 4.5%) per annum.
The term loans are subject to floating rate of interest and thus, is a reasonable approximation of the fair value.
During the current financial year, Procurri Group breached the covenants of term loans and trust receipt facilities amounting to $9,358,000 and $2,563,000 respectively. Procurri Group did not fulfil the requirement to maintain the earnings before interest, tax, depreciation and amortisation against the debt servicing ratio for a term loan and the fixed charge coverage for a trust receipts facility. Waiver were obtained from the respective banks before 31 December 2017.
Revolving loans
Revolving loans are unsecured and covered by a corporate guarantee by the Company (2016: by the Company) and repayable upon maturity. The amount bears effective interest rate of 3.75% (2016: 3.01% to 4.28%) per annum.
Bank overdrafts
Bank overdrafts bear effective interest rate of 2.5% to 2.8% per annum in 2016. They are secured by pledged deposits. There is no bank overdraft in 2017.
Convertible redeemable preference shares
Group 2017
$’0002016
$’000
Nominal value of convertible redeemable preference shares issued, representing net proceeds 2,000 2,000Embedded derivatives identified (98) (98)Repayment (1,221) (1,221)Interest accreted 679 468
Liability component at end of the year 1,360 1,149
On 30 May 2014, Corous360 has issued 2,000,000 convertible redeemable preference shares (“CRPS”) at an issue price of $1.00 per CRPS to an investor for an aggregate consideration of $2.0 million. CRPS holder has no voting rights. The CRPS are convertible to ordinary shares in Corous360 in the event of (i) an IPO; or (ii) a trade sale or (iii) a merger and acquisition of Corous360, in accordance to the terms and conditions of the subscription agreement. The conversion rates are based on an agreed formula. In the event that the CRPS are not converted into ordinary shares of Corous360, Corous360 shall redeem the CRPS in the following manner (i) redeem 50% of the CRPS in cash at any time between 30 November 2014 and 30 November 2015; and the remaining 50% of the CRPS in cash on 30 May 2018. Corous360 shall be obliged to redeem the CRPS at an amount equal to $1.00 per CRPS plus any applicable interest. The interest rate upon redemption is 8% per annum. 50% of the CRPS was redeemed on 30 November 2015.
The proceeds received from the CRPS have been allocated between the liability element and an embedded derivative, which represents the fair value of the embedded option to convert liability to shares in Corous360. The fair values of the liability component and the embedded derivatives were measured at date the CRPS was issued (Level 3).
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
27. LOANS AND BORROWINGS (cont’d)
Convertible redeemable preference shares (cont’d)
The valuation of convertible redeemable preference shares is based on various inputs including current CRPS face value, risk free rate, maturity date, IPO discount factor and probability of conversion. The interest expense recognised in the profit or loss is calculated using the effective interest rate method at 8% to the liability component for the period the CRPS were issued. Had the probability of conversion increased/decreased by 10%, profit or loss will decrease/increase by $44,000 respectively.
In current year, the probability of Corous360 for IPO, trade sale or merger and acquisition is minimal, and there was no planned deal for Corous360 after the restructuring. Hence, CRPS will be treated as interest bearing loan payable and the embedded derivatives for such loan is not material.
Finance lease obligations
Group
Minimum payments
$’000
GroupFinance charges
$’000
Present value
$’000
Minimum payments
$’000
CompanyFinance charges
$’000
Present value
$’000
2017Minimum lease payments payable: Due within one year 1,826 (166) 1,660 – – – Due between two to five years 3,347 (251) 3,096 – – –
Total 5,173 (417) 4,756 – – – 2016 Minimum lease payments payable: Due within one year 1,091 (67) 1,024 400 (53) 347 Due between two to five years 1,356 (35) 1,321 400 (25) 375 Due after five years 11 (2) 9 – – –
Total 2,458 (104) 2,354 800 (78) 722
The Group leases certain of its plant and equipment under finance lease obligations. The average lease term is three years (2016: two to seven years). The interest rate for finance lease obligations is approximately 2% to 2.35% (2016: 2.35% to 7.83%) per annum. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments. The obligations under finance leases are secured by the lessor’s charge over the leased assets. The fair value of the finance lease payables approximates the carrying value.
Trade receivables factoring
Trade receivables factoring is secured by a charge over trade receivables balances of $3,480,000 (2016: $2,726,000) on a recourse basis (Note 20). The interest rate for the trade receivables factoring is 1.85% (2016: 2.1%) per annum.
Trust receipts
Trust receipts are guaranteed by a corporate guarantee given by the Company and/or secured by fixed deposit of $nil (2016: $868,000). The interest rate for the trust receipts approximates 3.22% to 4.27% (2016: 2.55% to 3.62%) per annum.
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
27. LOANS AND BORROWINGS (cont’d)
A reconciliation of liabilities arising from financing activities is as follows:
2016
$’000Cash flows
$’000
Acquisition of plant and
equipment$’000
Disposal of subsidiaries
$’000
Foreign exchange
movements$’000
Others$’000
2017$’000
Bank loans 18,565 4,670 – – (147) – 23,088Convertible redeemable preference shares 1,528 – – – – (168) 1,360Finance lease obligations 2,354 (588) 2,990 – – – 4,756Trade receivables factoring 2,726 754 – – – – 3,480Trust receipts 23,802 (11,848) – (4,374) (169) – 7,411Others 1,520 17 – – – (1,287) 250
Total loans and borrowings 50,495 (6,995) 2,990 (4,374) (316) (1,455) 40,345
28. PROVISIONS
Group Company 2017
$’0002016
$’0002017
$’0002016
$’000
Provision for reinstatement 266 238 266 238Provision for claims 807 827 – –
1,073 1,065 266 238
Group Company 2017
$’0002016
$’0002017
$’0002016
$’000
Movements
At beginning of the year 1,065 382 238 238Additions 28 757 28 –Reversal (32) – – –Disposal of subsidiary – (74) – –Exchange rate difference 12 – – –
At end of the year 1,073 1,065 266 238
The provision for reinstatement costs is based on the present value of costs to be incurred to remove leasehold improvements from leased properties. The estimate is based on quotations from external contractors. The remaining lease period is one to two years (2016: one to two years).
Provision for claims arises from acquisition of subsidiary relating to dilapidations claim in respect of a leasehold premise and a potential claim from a supplier, approximately amounted to $477,000 (2016: $499,000) and $260,000 (2016: $258,000) respectively.
Indemnification assets amounting to $421,000 (2016: $421,000) which arose from acquisition of subsidiary relating to indemnification from shareholders of EAF for dilapidations claim in respect of a leasehold premises and a potential claim from supplier, is recognised under other receivables from third parties (Note 20).
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
29. SHARE CAPITAL AND TREASURY SHARES
a) Share capital
2017 2016 Number of
issued shares
Share capital$’000
Number of issued shares
Share capital$’000
Ordinary shares of no par value
Balance at 1 January 671,268,974 114,456 538,617,530 86,953Issue of ordinary shares – – 123,263,060 25,138Issue of ordinary shares pursuant to acquisition of subsidiaries, associates and non-controlling interests – – 9,053,500 2,294Issue of ordinary shares pursuant to the DeClout Performance Share Plan (Note 30) – – 334,884 103Share issuance expense – – – (32)
Balance at 31 December 671,268,974 114,456 671,268,974 114,456
The holders of ordinary shares are entitled to receive dividends as and when declared by the Company. All ordinary shares carry one vote per share without restrictions. The ordinary shares have no par value.
b) Treasury shares
Number of
shares
Treasury shares$’000
Treasury shares of no par value
Balance at 1 January 2016, 31 December 2016 – – Acquired during the financial year and related share buy-back expense 32,990,488 (9,095) Issued pursuant to DeClout Performance Share Plan (10,281,000) 3,221 Issued pursuant to settlement of contingent consideration (10,125,000) 2,566
Balance at 31 December 2017 12,584,488 (3,308)
Treasury shares relate to ordinary shares of the Company that is held by the Company.
The Company acquired 32,990,488 (2016: nil) shares in the Company through an Equal Access Offer and purchases on the Singapore Exchange during the financial year. The total amount paid to acquire the shares was $9,095,000 (2016: nil) and this was presented as a component within shareholders’ equity.
The Company reissued 10,281,000 (2016: nil) treasury shares pursuant to its performance share plans at a weighted average cost of $3,221,000.
The Company transferred 10,125,000 (2016: nil) treasury shares pursuant to vCargo Cloud Pte. Ltd. (“VCC”) achieving the targets as set out in the Acquisition Agreement entered into between the Company and Visiflex Pte. Ltd in 2016. The total amount of the treasury shares transferred as additional consideration shares of acquisition of VCC was $2,566,000.
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
30. OTHER RESERVES
Group
Other reserve
$’000
Foreign currency
translation reserve
$’000
Capital reserve
$’000
Share-based payment
reserve (Note 31)
$’000Total
$’000
2017 At beginning of the year (2,250) (1,801) (9,610) 3,955 (9,706)Share-based payments (Note 31) – – – 2,299 2,299Disposal of subsidiaries – – (10,470) – (10,470)Issuance of treasury shares pursuant to contingent consideration (Note 29) – – (2,566) – (2,566)Issuance of treasury shares pursuant to PSP (Note 29) – – (743) (2,478) (3,221)Issuance of PSP (Note 31) – – (51) (870) (921)Transfer of expired and unissued share based payment reserve to retained earnings – – – (598) (598)Exchange differences – (277) – – (277)
At end of the year (2,250) (2,078) (23,440) 2,308 (25,460) 2016 At beginning of the year (2,250) (643) (16,787) 3,769 (15,911)Share-based payments (Note 31) – – – 2,520 2,520Acquisitions of subsidiaries – – 1,215 – 1,215Disposal of subsidiaries – 547 (156) – 391Acquisitions/disposal of non-controlling interests of subsidiaries without a change in control, net – – 6,118 – 6,118Issuance of PSP (Note 31) – – – (2,294) (2,294)Issuance of ESOS (Note 31) – – – (40) (40)Exchange differences – (1,705) – – (1,705)
At end of the year (2,250) (1,801) (9,610) 3,955 (9,706)
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
30. OTHER RESERVES (cont’d)
Company
Capital reserve
$’000
Share-based payment
reserve (Note 31)
$’000Total
$’000
2017 At beginning of the year 1,215 3,746 4,961Share-based payments (Note 31) – 1,190 1,190Issuance of treasury shares pursuant to contingent consideration (2,566) – (2,566)Issuance of PSP (Note 31) (743) (2,478) (3,221)Transfer of expired and unissued share based payment reserve to retained earnings – (598) (598)
At end of the year (2,094) 1,860 (234) 2016 At beginning of the year – 3,769 3,769Share-based payments (Note 31) – 2,311 2,311Acquisitions of subsidiary 1,215 – 1,215Issuance of PSP (Note 31) – (2,294) (2,294)Issuance of ESOS (Note 31) – (40) (40)
At end of the year 1,215 3,746 4,961
Other reserve
Other reserve comprises the difference between the purchase consideration and the share capital of the subsidiaries under the pooling-of-interest method of accounting.
Capital reserve
Capital reserve comprises the difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received, and any difference between the value of equity instrument issued and fair value of consideration paid or received.
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
31. SHARE-BASED COMPENSATION
Group Company 2017
$’0002016
$’0002017
$’0002016
$’000
Employee share option scheme 629 668 629 668Performance share plan 1,679 3,287 1,231 3,078
Share-based payment reserve 2,308 3,955 1,860 3,746
Employee share option scheme
In 2012, the Company introduced a share incentive plan for its employees, namely the DeClout Employee share option scheme (“DeClout ESOS”). The DeClout ESOS was approved pursuant to a written resolution passed by the shareholders on 5 October 2012.
The DeClout ESOS is administered by the Remuneration Committee (“the RC”) whose members are:
- Ho Chew Thim (Chairman of the RC and independent and non-executive director)- Hew Koon Chan (Independent and non-executive director)- Ch’ng Li-Ling (Independent and non-executive director)
Subject to the absolute discretion of the RC, options may be granted to the following Groups of participants under the DeClout ESOS:
- group employees;
- group directors (including group executive directors, group non-executive directors and independent directors); and
- controlling shareholders or associates of controlling shareholder who fall within the above categories (subject to the rules of the DeClout ESOS).
The grant of options to each controlling shareholders or associates of controlling shareholders shall subject to specific approval by the independent shareholders in a general meeting.
The aggregate number of shares which the RC may grant the options on any date, when added to (i) the number of shares issued and issuable and/or transferred or transferable in respect of all options granted thereunder, and (ii) all shares issued and issuable and/or transferred or transferable in respect of all options granted or awards granted under any other share incentive schemes or share plans adopted by the Company for the time being in force, including the awards granted under the DeClout Performance Share Plan shall not exceed 15% of the issued share capital (excluding treasury shares) of the Company on the date preceding the offering date.
Offers for the grant of options may be made at any time from time to time at the discretion of the RC. The options are exercisable within 6 to 9 years from the commencement of the exercise period.
The exercise price for each option shall be determined by the RC at its absolute discretion, and fixed by the RC at:
- a price (“Market Price”) equal to the average of the last dealt price for the shares on Catalist for the five (5) consecutive market days immediate preceding the relevant date of grant of the relevant Option; or
- a price which is set at a discount to the Market Price, the quantum of such discount to be determined by the RC in its absolute discretion, provided that the maximum discount which may be given in respect of any option shall not exceed 20% of the Market Price (or such other percentage or amount as may be determined by the RC and prescribed or permitted for the time being by the SGX-ST), and the prior approval of shareholders have been obtained at a general meeting, in a separate resolution, for the grant of options under the scheme at a discount not exceeding the maximum discount as aforesaid.
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
31. SHARE-BASED COMPENSATION (cont’d)
The table below summarises the number of options that were outstanding, their exercise price as at the end of the reporting year as well as the movement during the reporting year.
Exercise periodFrom To
Number of options
outstanding as at beginning
of the year
Number of options granted
during the year
Number of options exercised/ cancelled/
lapsed during the year
Number of options
outstanding as at end of
the year
Exercise price
$
201710 May 2015 9 May 2023 1,506,976 – (167,442) 1,339,534 0.1881 *10 May 2016 9 May 2023 1,506,976 – (167,442) 1,339,534 0.1881 *10 May 2017 9 May 2023 2,232,557 – (446,510) 1,786,047 0.1881 *2 January 2015 1 January 2024 600,000 – – 600,000 0.12902 January 2016 1 January 2024 600,000 – – 600,000 0.12902 January 2017 1 January 2024 800,000 – – 800,000 0.1290
7,246,509 – (781,394) 6,465,115
2016 10 May 2015 9 May 2023 1,674,418 – (167,442) 1,506,976 0.1881 *10 May 2016 9 May 2023 1,674,418 – (167,442) 1,506,976 0.1881 *10 May 2017 9 May 2023 2,232,557 – – 2,232,557 0.1881 *2 January 2015 1 January 2024 600,000 – – 600,000 0.12902 January 2016 1 January 2024 600,000 – – 600,000 0.12902 January 2017 1 January 2024 800,000 – – 800,000 0.1290
7,581,393 – (334,884) 7,246,509
* Adjusted pursuant to the completion of the Rights Issue in 2013
At the end of the reporting year, there were no unissued shares of the Company or any subsidiary under option.
The estimate of the grant date fair value of each option issued is based on a binomial lattice model. In order to approximate the expectations that would be reflected in a current market or negotiated exchange price for these options, the calculations take into consideration factors like behavioural considerations and non-transferability of the options granted.
Employee share option scheme reserve
Group and Company 2017
$’0002016
$’000
Balance at beginning of the year 668 541Expense recognised in profit or loss 56 167Issuance of ESOS (Note 30) – (40)Cancelled/lapsed during the year (95) –
Balance at end of the year 629 668
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
31. SHARE-BASED COMPENSATION (cont’d)
Performance share plan
The Group operates a Performance Share Plan (“DeClout PSP”) which was approved pursuant to a written resolution passed by the shareholders on 5 October 2012. The DeClout PSP is administered by the Awards Committee whose members are currently members of the RC.
The participants of the DeClout PSP are similar to those of the DeClout ESOS. The share awards to each controlling shareholders or associates of controlling shareholders shall be subject to specific approval by the independent shareholders in a general meeting.
The total number of shares which may be issued or transferred pursuant to the awards granted under the DeClout PSP, when added to (i) the number of shares issued or issuable and/or transferred or transferrable in respect of all awards granted thereunder; and (ii) all shares issued or issuable and/or transferred or transferrable under any other share incentive schemes adopted by the Company for the time being in force, shall not exceed 15% of the issued share capital (excluding treasury shares) of the Company on the day preceding the relevant award date.
The number of shares to be issued will depend on the achievement of pre-determined targets at the end of the defined performance period. The shares have a vesting period of up to three years. The fair value of the awards granted was based on the last traded price of the Company’s shares on the date of grant.
The table below summarises the number of PSP that were outstanding, their fair value price as at the end of the reporting year, as well as the movement during the reporting year.
Grant date
Number of PSP
outstanding as at beginning
of year
Number of PSP
granted during
the year
Number of shares issued during
the year
Number of PSP
forfeitedduring
the year
Number of PSP
outstanding as at
end of year
Market price
$
2017 13 August 2014 2,400,000 – (2,400,000) – – 0.2651 October 2014 2,400,000 – (1,600,000) (800,000) – 0.26013 January 2015 2,500,000 – (2,500,000) – – 0.23024 March 2015 500,000 – (500,000) – – 0.24514 August 2015 870,000 – (435,000) – 435,000 0.23020 May 2016 1,944,000 – (546,000) (466,000) 932,000 0.2254 July 2016 5,435,000 – (2,300,000) – 3,135,000 0.22018 July 2016 466,000 – – – 466,000 0.22519 May 2017 – 4,664,400 – (1,311,100) 3,353,300 0.166
16,515,000 4,664,400 (10,281,000) (2,577,100) 8,321,300 2016 1 July 2014 1,000,000 – (1,000,000) – – 0.2808 July 2014 525,000 – (525,000) – – 0.28513 August 2014 4,200,000 – (1,800,000) – 2,400,000 0.2651 October 2014 4,800,000 – (2,400,000) – 2,400,000 0.26013 January 2015 5,000,000 – (2,500,000) – 2,500,000 0.23024 March 2015 500,000 – – – 500,000 0.24514 August 2015 1,232,500 – (362,500) – 870,000 0.23020 May 2016 – 1,944,000 – – 1,944,000 0.2254 July 2016 – 5,435,000 – – 5,435,000 0.22018 July 2016 – 932,000 (466,000) – 466,000 0.225
17,257,500 8,311,000 (9,053,500) – 16,515,000
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
31. SHARE-BASED COMPENSATION (cont’d)
Performance share plan reserve
Group Company 2017
$’0002016
$’0002017
$’0002016
$’000
Balance at beginning of the year 3,287 3,228 3,078 3,228Expense recognised in profit or loss 2,243 2,353 1,134 2,144Issuance of PSP (Note 30) (3,348) (2,294) (2,478) (2,294)Waived and lapsed during the year (503) – (503) –
Balance at end of the year 1,679 3,287 1,231 3,078
32. RELATED PARTY TRANSACTIONS
Significant related party transactions
In addition to the transactions and balances disclosed elsewhere in the notes to the financial statements, this item includes the following:
Group 2017
$’0002016
$’000
Sales to related parties – non-controlling shareholder – 1,000Sales to related parties – entities controlled by non-controlling shareholder 5,098 22,060Sales to associate 1,246 7,394Purchases from related parties – non-controlling shareholder 150 8,187
The above related party transactions are with companies in which non-controlling shareholders, certain subsidiaries’ directors or key management personnel have interest in.
Key management compensation
Group 2017
$’0002016
$’000
Salaries and other short-term employee benefits 3,371 6,919Share-based payments 996 1,405
4,367 8,324
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
32. RELATED PARTY TRANSACTIONS (cont’d)
Key management compensation (cont’d)
The above amounts are included under employee benefits expense. Included in the above amounts are the following items:
Group 2017
$’0002016
$’000
Key management compensation comprises the following: Fees to directors of the Company 307 (1)(2) 449Remuneration of directors of the Company 1,540 4,686Fees to other key management personnel 80 –Remuneration of other key management personnel 2,440 3,189
4,367 (1) 8,324
Note :
(1) The independent directors were granted 706,900 performance shares amounting to $117,000 for FY2017. The independent directors had on 16 October 2017 waived the rights to the performance shares. The waiver of the rights to the performance shares is accounted for as a cancellation under FRS 102 and the amount of $117,000 has been expensed as share-based payment (under employee benefits expense) in the profit or loss statements. Net directors’ fees paid by the Company in FY2017 is $176,000
(2) This fee is inclusive of directors’ fees of $130,000 (in cash and share-based) paid by other subsidiaries within the Group in FY2017
Key management personnel are the directors and those persons having authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly.
The information on directors and key management personnel participating in DeClout ESOS is as follows:
Participants
Number of options
outstanding as at beginning of
the year
Number of options
granted during
the year
Number of options exercised/ cancelled/
lapsed during the year
Number of options
outstanding as at end of the year
2017 Directors 2,790,697 – – 2,790,697Other key management personnel 3,455,812 – (781,394) 2,674,418
6,246,509 – (781,394) 5,465,115 2016 Directors 2,790,697 – – 2,790,697Other key management personnel 3,790,696 – (334,884) 3,455,812
6,581,393 – (334,884) 6,246,509
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
32. RELATED PARTY TRANSACTIONS (cont’d)
The information on directors and key management personnel participating in DeClout PSP is as follows:
Participants
Number of PSP outstanding as
at beginning of the year
or date of appointment
Number of PSP granted
during the year
Number of PSP issued/
forfeited during
the year
Number of PSP outstanding as
at end of the year
2017 Directors 2,278,000 1,915,300 (2,052,900) 2,140,400Other key management personnel 6,037,000 2,749,100 (4,305,200) 4,480,900
8,315,000 4,664,400 (6,358,100) 6,621,300 2016 Directors 2,125,000 1,944,000 (1,791,000) 2,278,000Other key management personnel 5,832,500 3,367,000 (3,162,500) 6,037,000
7,957,500 5,311,000 (4,953,500) 8,315,000
33. COMMITMENTS
Operating lease commitments – as lessee
At the end of the financial year, the total of future minimum lease payment commitments under non-cancellable operating leases is as follows:
Group 2017
$’0002016
$’000
Not later than one year 3,057 3,303Later than one year and not later than five years 5,170 6,864More than five years 1,983 510
10,210 10,677
Operating lease payments are for rentals payable for computer equipment, office premises, data centre racks and rental for its photocopier machine. The lease rental terms are negotiated for an average term of one to six years (2016: one to four years).
Operating lease commitments – as lessor
At the end of the financial year, the total future minimum lease receivables committed under operating leases are as follows:
Group 2017
$’0002016
$’000
Not later than one year 914 1,716Later than one year and not later than five years 1,451 1,430
2,365 3,146 Operating lease income commitments are for the managed services receivable and rentals receivable for certain plant and equipment. The lease rental terms are negotiated for an average term of one month to five years (2016: one month to five years).
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
33. COMMITMENTS (cont’d)
Capital commitments
Estimated amounts committed at the end of the financial year for future capital expenditure but not recognised in the financial statements are as follows:
Group 2017
$’0002016
$’000
Capital commitments in respect of plant and equipment – 550
34. CONTINGENCIES
The Company
On 11 July 2017, a writ of summons and statement of claim (the “Claim”) was filed against the Company, amongst others, by a third party (the “Claimant”), claiming that the Company had or ought to have had knowledge about the Claimant’s beneficial interest in the shares held by another shareholder of Acclivis Technologies and Solutions Pte Ltd, and that consequently the Company had assisted in causing loss to the Claimant. The Company successfully obtained an order to strike out the Claim on 24 October 2017. On appeal, 20 March 2018, the Court allowed the Claimant to have the Claim reinstated in an amended form. The Company’s position is that the Claim is baseless and unmeritorious, and has instructed its lawyers accordingly. The Company will be taking all measures necessary to resist and refute these baseless and unmeritorious claims.
Procurri LLC
Procurri Group’s subsidiary Procurri LLC is potentially exposed to a litigation case of one of its customers. The claims in the lawsuit arose out of the alleged sale of hardware which contained allegedly unlicensed software by Procurri’s customer to the plaintiff. Procurri LLC supplied the hardware and has not been named directly as a party to the lawsuit, although it has been made aware of the case. As at the date of the financial statement, Procurri Group is unable to establish the amount or range of potential loss, if any, arising from the above.
35. FINANCIAL INSTRUMENT: INFORMATION ON FINANCIAL RISKS
Financial risk management
The Group and the Company is exposed to financial risks arising from its operations and the use of financial instruments. The key financial risks include credit risk, liquidity risk, interest rate risk and foreign currency risk. The management reviews and agrees policies and procedures for the management of these risks. The Audit Committee provides independent oversight to the effectiveness of the risk management process. It is, and has been throughout the current and previous financial year, the Group’s policy that no trading in derivatives for speculative purposes shall be undertaken.
The following sections provide details regarding the Group’s and Company’s exposure to the above-mentioned financial risks and the objectives, policies and processes for the management of these risks.
There has been no change to the Group’s exposure to these financial risks or the manner in which it manages and measures the risks.
Credit risk
Credit risk is the risk of loss that may arise on outstanding financial instruments should a counterparty default on its obligations. The Group’s exposure to credit risk arises primarily from trade and other receivables. For other financial assets (including cash and short-term deposits), the Group minimises credit risk by dealing exclusively with high credit rating counterparties.
The Group’s objective is to seek continual revenue growth while minimising losses incurred due to increased credit risk exposure. The Group trades only with recognised and creditworthy third parties. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant. For transactions that do not occur in the country of the relevant operating unit, the Group does not offer credit terms without the approval of the management.
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
35. FINANCIAL INSTRUMENT: INFORMATION ON FINANCIAL RISKS (cont’d)
Credit risk (cont’d)
Credit risk concentration profile
At the end of the reporting period, approximately 15% (2016: 8%) of the Group’s trade receivables were due from a customer.
Financial assets that are neither past due nor impaired
Trade and other receivables that are neither past due nor impaired are with creditworthy debtors with good payment record with the Group. Cash and short-term deposits that are neither past due nor impaired are placed with or entered into with reputable financial institutions with high credit ratings and no history of default.
Financial assets that are either past due or impaired
Information regarding trade and other receivables that are either past due or impaired is disclosed in Note 20.
Liquidity risk
Liquidity risk is the risk that the Group or the Company will encounter difficulty in meeting financial obligations due to shortage of funds. The Group’s and the Company’s exposure to liquidity risk arises primarily from mismatches of the maturities of financial assets and liabilities. The Group’s and the Company’s objective is to maintain a balance between continuity of funding and flexibility through the use of stand-by credit facilities.
Analysis of financial instruments by remaining contractual maturities
The table below summarises the maturity profile of the Group’s financial assets and liabilities at the end of the reporting year based on contractual undiscounted repayment obligations.
Group
Less than 1 year$’000
2 to 5 years$’000
More than 5 years
$’000Total
$’000
2017Finance lease receivables 1,550 2,070 – 3,620Trade and other receivables (excluding tax related assets) 72,396 – – 72,396Other financial receivables 1,483 – – 1,483Other assets (refundable deposits) 1,401 – – 1,401Amount due from customers for contract work-in-progress 6,333 – – 6,333Cash and cash equivalents 31,537 – – 31,537
114,700 2,070 – 116,770 Gross borrowings commitments (28,453) (13,333) – (41,786)Trade and other payables (excluding tax related payables) (51,694) (11) – (51,705)Amounts due to customers for contract work-in-progress (1,491) – – (1,491)
(81,638) (13,344) – (94,982)
Total net undiscounted financial assets/(liabilities) 33,062 (11,274) – 21,788 2016 Finance lease receivables 1,466 1,782 – 3,248Trade and other receivables (excluding tax related assets) 89,814 – – 89,814Other financial receivables – 1,734 – 1,734Other assets (refundable deposits) 1,218 – – 1,218Amount due from customers for contract work-in-progress 3,171 – – 3,171Cash and cash equivalents 65,413 – – 65,413
161,082 3,516 – 164,598 Gross borrowings commitments (42,200) (8,385) (917) (51,502)Trade and other payables (excluding tax related payables) (57,557) (277) – (57,834)Amounts due to customers for contract work-in-progress (120) – – (120)
(99,877) (8,662) (917) (109,456)
Total net undiscounted financial assets/(liabilities) 61,205 (5,146) (917) 55,142
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
35. FINANCIAL INSTRUMENT: INFORMATION ON FINANCIAL RISKS (cont’d)
Liquidity risk (cont’d)
Analysis of financial instruments by remaining contractual maturities (cont’d)
Company
Less than 1 year$’000
2 to 5 years$’000
Total$’000
2017Trade and other receivables (excluding tax related assets) 11,932 2,500 14,432Other assets (refundable deposits) 159 – 159Cash and cash equivalents 4,831 – 4,831
16,922 2,500 19,422 Gross borrowings commitments (6,218) (1,797) (8,015)Trade and other payables (excluding tax related payables) (3,628) – (3,628)
(9,846) (1,797) (11,643)
Total net undiscounted financial assets 7,076 703 7,779
2016Trade and other receivables (excluding tax related assets) 59,150 – 59,150Other assets (refundable deposits) 251 – 251Cash and cash equivalents 19,376 – 19,376
78,777 – 78,777 Gross borrowings commitments (6,785) (400) (7,185)Trade and other payables (excluding tax related payables) (14,317) – (14,317)
(21,102) (400) (21,502)
Total net undiscounted financial assets/(liabilities) 57,675 (400) 57,275 The undiscounted amounts on the bank borrowings with fixed and floating interest rates are determined by reference to the conditions existing at the reporting date.
The above amounts disclosed in the maturity profile are the contractual undiscounted cash flows and such undiscounted cash flows differ from the amount included in the statements of financial position. When the counterparty has a choice of when an amount is paid, the liability is included on the basis of the earliest date on which it can be required to pay.
Financial guarantee contracts
For financial guarantee contracts, the maximum earliest period in which the guarantee could be called is disclosed. At the end of the reporting year no claims on the financial guarantees are expected. The following table shows the maturity profile of the contingent liabilities from financial guarantees:
Group 2017
$’0002016
$’000
Corporate guarantee to banks in favour of loans and bank facilities taken up by subsidiaries and associates and are repayable Within one year 7,339 22,300Between two to five years 906 2,605
8,245 24,905
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
35. FINANCIAL INSTRUMENT: INFORMATION ON FINANCIAL RISKS (cont’d)
Interest rate risk
The interest rate risk exposure is from changes in fixed rate and floating interest rate and it mainly concerns financial liabilities which are both fixed rate and floating rate.
Group Company 2017
$’0002016
$’0002017
$’0002016
$’000
Financial assets Fixed rate – 2,975 – – Financial liabilities Fixed rate 15,905 30,950 7,869 6,756Floating rate 24,440 19,545 – 167
40,345 50,495 7,869 6,923
Sensitivity analysis for interest rate risk
At the end of reporting year, if the interest rates have been 100 (2016: 100) basis points lower/higher with all other variables held constant, the Group’s profit before tax would have been $244,000 (2016: $195,000) higher/lower, arising mainly as a result of lower/higher interest expense on floating rate loans and borrowings. The assumed movement in basis points for interest rate sensitivity analysis is based on current observable market environment, showing a higher volatility as in prior years.
Foreign currency risk
The Group has transactional currency exposures arising from sales or purchases that are denominated in a currency other than the respective functional currencies of Group entities, primarily SGD, United States Dollars (USD), British Pound (GBP), Malaysian Ringgit (Ringgit) and Renminbi (RMB). The foreign currencies in which these transactions are denominated are mainly USD. The Group’s trade receivable and trade payable balances at the end of the reporting period have similar exposures. The Group also hold cash and short-term deposits denominated in foreign currency for working capital purposes. At the end of the reporting period, such foreign currency balances are mainly in USD.
Analysis of amounts denominated in non-functional currencies:
United States Dollar (“USD”)
Group
2017$’000
2016$’000
Financial assets Cash and bank balances 558 4,565Trade and other receivables 4,007 20,010
Total 4,565 24,575 Financial liabilities Trade and other payables (4,702) (10,734)Loans and borrowings (1,066) (1,450)
Total (5,768) (12,184)
Net financial (liabilities)/assets (1,203) 12,391
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
35. FINANCIAL INSTRUMENT: INFORMATION ON FINANCIAL RISKS (cont’d)
Foreign currency risk (cont’d)
Sensitivity analysis for foreign currency risk
The following table demonstrates the sensitivity of the Group’s profit before tax to a reasonably possible change in the USD exchange rates against the respective functional currencies of the Group entities, with all other variables held constant.
Group 2017
$’0002016
$’000
SGD/USD – strengthened 10% (2016: 10%) 120 (1,239) – weakened 10% (2016: 10%) (120) 1,239
36. CAPITAL MANAGEMENT
The objectives when managing capital are to safeguard the reporting entity’s ability to continue as a going concern so that it can continue to provide returns for owners and benefits for other stakeholders. The management sets the amount of capital to meet its requirements and the risk taken. There were no changes in the approach to capital management during the reporting year. The management manages the capital structure and makes adjustment to it where necessary or possible in the light of changes in conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the management may adjust the amount of dividends and return capital to owners, issue new shares, or sell assets to reduce debt. Capital comprises all components of equity.
The management monitors the capital on the basis of the debt-to-capital ratio. This ratio is calculated as net debt divided by capital. Net debt is calculated as total borrowings less cash and bank balances.
Group 2017
$’0002016
$’000
Total loans and borrowings (Note 27) 40,345 50,495Less: Cash and bank balances (Note 24) (31,537) (65,413)
Net debt/(cash) 8,808 (14,918)
Total equity 125,275 166,118
Debt-to-capital ratio 7% - #
#: not meaningful
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
37. SEGMENT INFORMATION
Information about reportable segment profit or loss, assets and liabilities
For management purposes, the Group is organised into the following major strategic operating segments that offer different products and services: (1) IT infrastructure sales and services, (2) vertical domain clouds and (3) corporate. Such a structural organisation is determined by the nature of risks and returns associated with each business segment and defines the management structure as well as the internal reporting system. It represents the basis on which the management reports the primary segment information. They are managed separately because each business requires different strategies.
The segments and the types of products and services are as follows:
(a) IT infrastructure sales and services (“IT Infra”)
This segment forms the building blocks of all technology and marketplace companies, providing business relating to, including but not limited to, the supply, management and maintenance of IT equipment and telecommunication equipment, provision of IT and network services, and the provision of network and security solutions to all companies.
(b) Vertical domain clouds (“VDCs”)
This segment provides business of domain-focused platforms and communities with net-work effects that define business and lifestyle trends, such as the E-commerce, E-trade and E-logistics solutions.
(c) Corporate
This segment comprises business of corporate income such as dividend income, rental income and shared-service recovery fees derived from subsidiary companies.
Inter-segment sales are measured on the basis that the entity actually used to price the transfers. Internal transfer pricing policies of the Group are as far as practicable based on prices agreed between the parties. The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies.
The management reporting system evaluates performances based on a number of factors. The primary profitability measurement to evaluate segment’s operating results comprises two major financial indicators: (1) earnings from operations before depreciation, amortisation, interests, income taxes, impairment of goodwill and gain on bargain purchase (called “EBITDA”) and (2) profit before tax.
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
37. SEGMENT INFORMATION (cont’d)
Profit or loss from continuing operations and reconciliations
The following tables illustrate the information about the reportable segment profit or loss, assets and liabilities:
IT Infra$’000
VDCs$’000
Corporate$’000
Total$’000
2017Revenue by segment Total revenue by segment 277,533 21,417 – 298,950Inter-segment sales (25,379) (86) – (25,465)
Revenue from third parties 252,154 21,331 – 273,485 EBITDA 13,080 (4,842) (6,060) 2,178Amortisation of intangible assets (917) (1,278) (165) (2,360)Depreciation of property, plant and equipment (8,369) (293) (972) (9,634)Finance costs (1,207) (654) (460) (2,321)Impairment of intangible assets – (5,782) – (5,782)
Loss before tax 2,587 (12,849) (7,657) (17,919)Income tax expense (2,581)
Loss, net of tax (20,500)Loss attributable to non-controlling interests 4,052
Loss attributable to owners of the Company (16,448)
2016Revenue by segment Total revenue by segment 266,794 66,078 – 332,872Inter-segment sales (21,463) (7,387) – (28,850)
Revenue from third parties 245,331 58,691 – 304,022 EBITDA 25,607 (3,285) 4,541 26,863Amortisation of intangible assets (1,963) (1,361) 35 (3,289)Depreciation of property, plant and equipment (5,657) (248) (827) (6,732)Finance costs (1,613) (849) (2,254) (4,716)Impairment loss on investment in associate (1,550) – – (1,550)Gain on bargain purchase 1,110 – – 1,110
Profit before tax 15,934 (5,743) 1,495 11,686Income tax expense (2,179)
Profit, net of tax 9,507Profit attributable to non-controlling interests (1,749)
Profit attributable to owners of the Company 7,758
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
37. SEGMENT INFORMATION (cont’d)
Assets and reconciliations
IT Infra$’000
VDCs$’000
Corporate$’000
Unallocated$’000
Total$’000
2017 Total assets for reportable segment 199,607 39,101 6,785 – 245,493Deferred tax assets – – – 1,991 1,991
Total assets 199,607 39,101 6,785 1,991 247,484 2016 Total assets for reportable segment 170,002 72,417 38,676 – 281,095Deferred tax assets – – – 3,327 3,327
Total assets 170,002 72,417 38,676 3,327 284,422
Liabilities and reconciliations
IT Infra$’000
VDCs$’000
Corporate$’000
Unallocated$’000
Total$’000
2017Total liabilities for reportable segment 102,177 3,097 12,107 – 117,381Deferred and current tax liabilities – – – 4,828 4,828
Total liabilities 102,177 3,097 12,107 4,828 122,209 2016 Total liabilities for reportable segment 73,219 23,699 18,766 – 115,684Deferred and current tax liabilities – – – 2,620 2,620
Total liabilities 73,219 23,699 18,766 2,620 118,304
Other material items and reconciliations
IT Infra$’000
VDCs$’000
Corporate$’000
Total$’000
Impairment of assets 2017 26 5,793 – 5,8192016 1,550 – – 1,550 Expenditures for non-current assets 2017 11,870 913 187 12,9702016 11,586 1,332 2,897 15,815
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2017
37. SEGMENT INFORMATION (cont’d)
Geographical information
Revenue and non-current assets information based on the geographical locations of the Group are as follow:
Revenue Non-current assets 2017
$’0002016
$’0002017
$’0002016
$’000
Singapore 117,158 187,977 72,273 68,646Americas 81,948 60,418 481 503Europe 66,327 37,437 11,560 10,073Others 8,052 18,190 3,015 4,094
273,485 304,022 87,329 83,316
Non-current assets information presented above consist of property, plant and equipment, intangible assets and investment in associates as presented in the balance sheets.
Information about major customers
Revenue from one major customer amounted to 6% and 24% (2016: 3% and 25%) of revenue recorded by the IT and VDCs segment respectively.
38. EVENTS AFTER THE END OF THE REPORTING YEAR
(a) On 1 January 2018, Procurri Corporation Limited announced an internal reorganisation exercise to streamline the corporate group structure for its subsidiaries domiciled in the United Kingdom (the “Reoganisation Exercise”).
As part of the Reorganisation Exercise, the existing assets, liabilities and undertakings of Procurri UK Limited (“PUK”) and EAF Supply Chain Limited (“EAFSC”) have been hived-up to Procurri Europe Limited (“PEUR”) with the intention that PEUR will act as the new trading company for the Group in the United Kingdom, effective as of 1 January 2018.
PUK, EAF Supply Chain Holdings Limited and EAFSC will be voluntary liquidated.
(b) On 15 January 2018, Procurri Corporation Limited has allotted and issued 512,500 new ordinary shares to certain directors pursuant to the vesting of share awards granted under Procurri Corporation Performance Share Plan.
(c) On 29 January and 2 March 2018, the Company issued a total of 4,278,000 ordinary shares from its treasury shares pursuant to the vesting of share awards granted under DeClout Performance Share Plan.
39. AUTHORISATION OF FINANCIAL STATEMENTS
The financial statements for the year ended 31 December 2017 were authorised for issue in accordance with a resolution of the Directors on 23 March 2018.
Notes to the Financial Statements For the financial year ended 31 December 2017
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APPENDIX E – UNAUDITED FINANCIAL INFORMATIONOF THE GROUP FOR 3QFY2018
1(a)
30-Sep-18 30-Sep-17 Change 30-Sep-18 30-Sep-17 Change$'000 $'000 % $'000 $'000 %
Revenue 73,349 73,399 (0.1) 229,129 203,863 12.4 Cost of sales (49,449) (54,581) (9.4) (156,824) (152,123) 3.1 Gross profit 23,900 18,818 27.0 72,305 51,740 39.7
Other items of incomeOther income 735 2,318 (68.3) 3,348 5,240 (36.1)
Other items of expenseOther charges, net (1,525) (1,801) (15.3) (3,665) (10,031) (63.5) Selling expenses (3,673) (2,775) 32.4 (13,020) (7,846) 65.9 Administrative expenses (17,257) (17,448) (1.1) (50,438) (46,605) 8.2 Finance costs (688) (531) 29.6 (1,808) (1,526) 18.5 Share of results of associates 617 - N.M. 424 (1) N.M.Profit / (loss) before tax 2,109 (1,419) N.M. 7,146 (9,029) N.M.Income tax expense (1,176) (2,400) (51.0) (4,625) (2,574) 79.7 Profit / (loss), net of tax 933 (3,819) N.M. 2,521 (11,603) N.M. Profit / (loss), net of tax attributable to:Owners of the Company 407 (2,998) N.M. 969 (8,647) N.M.Non-controlling interests 526 (821) N.M. 1,552 (2,956) N.M.
933 (3,819) N.M. 2,521 (11,603) N.M.
FOR THE THIRD QUARTER ("3Q2018") AND NINE MONTHS ("9M2018") ENDED 30 SEPTEMBER 2018
DECLOUT LIMITED(Registration No: 201017764W)
PART I - INFORMATION REQUIRED FOR QUARTERLY (Q1, Q2 & Q3), HALF-YEAR AND FULL YEAR ANNOUNCEMENTS
This announcement has been prepared by the Company and its contents have been reviewed by the Company’s sponsor, SAC Capital Private Limited(“Sponsor”), for compliance with the relevant rules of the Singapore Exchange Securities Trading Limited (“SGX-ST”). The Sponsor has not independentlyverified the contents of this announcement. This announcement has not been examined or approved by the SGX-ST and the SGX-ST assumes noresponsibility for the contents of this announcement including the correctness of any of the statements or opinions made or reports contained in thisannouncement.
The contact person for the Sponsor is Ms Lee Khai Yinn (Tel: (65) 6232 3210) at 1 Robinson Road, #21-00 AIA Tower, Singapore 048542.
An income statement and statement of comprehensive income, or a statement of comprehensive income, for the group,together with a comparative statement for the corresponding period of the immediately preceding financial year.
Nine Months Ended
N.M. - Not meaningful
GroupThird Quarter Ended
UNAUDITED FINANCIAL STATEMENTS AND DIVIDEND ANNOUNCEMENT
Group
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APPENDIX E – UNAUDITED FINANCIAL INFORMATIONOF THE GROUP FOR 3QFY2018
30-Sep-18 30-Sep-17 Change 30-Sep-18 30-Sep-17 ChangeNote $'000 $'000 % $'000 $'000 %
Statement of comprehensive income
Other comprehensive income
Foreign currency translation 1 (115) 268 N.M. 39 (129) N.M.Other comprehensive income for the period, net of tax (115) 268 N.M. 39 (129) N.M.
Total comprehensive income for the period 818 (3,551) N.M. 2,560 (11,732) N.M.
Total comprehensive income attributable to:Owners of the Company 396 (2,844) N.M. 1,047 (8,752) N.M.Non-controlling interests 422 (707) N.M. 1,513 (2,980) N.M.Total comprehensive income for the period 818 (3,551) N.M. 2,560 (11,732) N.M.
Notes to Income StatementNote
Other incomeInterest income 97 108 (10.2) 280 330 (15.2) Gain on bargain purchase 2 - - N.M. 925 - N.M.Net gain on disposal of subsidiaries 3 3 1,386 (99.8) 3 1,387 (99.8) Others 4 635 824 (22.9) 2,140 3,523 (39.3)
735 2,318 (68.3) 3,348 5,240 (36.1)
Other charges, netAllowance for impairment on trade receivables 5 559 387 44.4 1,143 507 125.4 Plant and equipment written off - 6 N.M. 4 21 (81.0) Provision for stock obsolescence 6 927 828 12.0 2,270 1,796 26.4 Foreign exchange loss / (gain) 7 (63) (48) 31.3 (494) 1,134 N.M.(Gain) / loss on disposal of property, plant and equipment 8 (133) 50 N.M. (116) 127 N.M.Amortisation of intangible assets 9 210 415 (49.4) 796 1,453 (45.2) Others 10 25 163 (84.7) 62 4,993 (98.8)
1,525 1,801 (15.3) 3,665 10,031 (63.5)
Other itemsAmortisation of intangible assets (included in cost of sales) 9 - 166 N.M. - 466 N.M.Depreciation of plant and equipment 11 2,722 2,477 9.9 7,803 6,971 11.9 Interest expenses 12 688 531 29.6 1,808 1,526 18.5
N.M. - Not meaningful
Notes
(3) The gain of $1.4m in 3Q2017 and 9M2017 arose from the restructuring exercise pertaining to the e-commerce business unit in 3Q2017.
(9) The decreases in amortisation expense in 3Q2018 and 9M2018 resulted mainly from the disposal of certain intangibles in conjunction with the restructuring exercise pertaining to the e-commerce business unit in 3Q2017.
Third Quarter Ended Nine Months Ended
(1) Under other comprehensive income, the amounts represented foreign exchange differences which arose from the translation of the Group'snet asset of foreign operations in America, Europe and Indonesia. The loss of $0.1m in 3Q2018 arose mainly from the weakening of IndonesianRupiah (IDR) against Singapore dollar ($) by 4.2%, while the gain of $0.3m in 3Q2017 resulted from the strengthening of the British Pound(GBP) against $ by 2.7%. In 9M2017, the loss of $0.1m resulted mainly from the weakening of US Dollar (USD) against $ by 6.2%.
(6) The increases in provision for stock obsolescence of $0.1m and $0.5m in 3Q2018 and 9M2018 respectively, were mainly from the ProcurriGroup due to an increase in aged inventories.
(7) In 9M2018, the foreign exchange gain of $0.5m in 9M2018 arose mainly from the revaluation of certain subsidiaries’ receivables denominatedin USD which had strengthened against the $ by 2.3%, as opposed to a loss of $1.1m in 9M2017 whereby USD weakened against the $ by6.2%.
(4) The decreases of $0.2m and $1.4m in 3Q2018 and 9M2018 respectively, arose mainly from the absence of one-off write-back of provisionspertaining to the divestment of Acclivis Technologies and Solutions Pte Ltd ("ATS").
GroupGroup
(2) The gain on bargain purchase of $0.9m in 9M2018 arose from the acquisition of a 60%-stake in PT. Gatotkaca Trans Systemindo (“GTS”) bythe Company's 50.01% subsidiary, vCargo Cloud Pte. Ltd. ("VCC") in April 2018, based on provisional purchase price allocation ("PPA").
(10) The decrease of $4.9m in 9M2018 arose mainly from the absence of previous year's one-off downward adjustment to the total considerationpertaining to the divestment of ATS.
(5) The increases of $0.2m and $0.6m in 3Q2018 and 9M2018 respectively, were mainly from Procurri Corporation Limited and together with itssubsidiaries ("Procurri Group"), due to an increase in the average age of receivables.
(8) The gain of $0.1m in 3Q2018 and 9M2018 arose mainly from the disposal of property by GTS, an indirect subsidiary of the Company.
(11) The higher depreciation of plant and equipment in 3Q2018 and 9M2018 were mainly from the Procurri Group due to additional depreciationcharge on the maintenance parts equipment procured for the maintenance business.
(12) The higher interest expense in 3Q2018 and 9M2018 arose from an increase in loans and borrowings to support the Group's businessgrowth.
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APPENDIX E – UNAUDITED FINANCIAL INFORMATIONOF THE GROUP FOR 3QFY2018
1(b)(i)
30-Sep-18 31-Dec-17 30-Sep-18 31-Dec-17$'000 $'000 $'000 $'000
Non-current assetsProperty, plant and equipment 39,088 36,099 305 568 Investment in subsidiaries - - 73,348 62,093 Investment in associates 20,125 19,666 - - Investment in a joint venture 250 * - - Intangible assets 31,845 31,564 - - Finance lease receivables 1,438 2,037 - - Deferred tax assets 1,768 1,991 - - Trade and other receivables - - - 2,500 Other assets 10 - - - Total non-current assets 94,524 91,357 73,653 65,161
Current assetsInventories 23,321 28,277 - - Trade and other receivables 91,840 75,577 10,862 11,932 Amount due from customers for contract work-in-progress 4,285 6,333 - - Derivative financial asset 1,011 1,044 - - Finance lease receivables 1,144 1,433 - - Other financial receivable 1,583 1,483 - - Other assets 9,556 7,543 300 243 Cash and bank balances 34,893 31,537 3,697 4,831
167,633 153,227 14,859 17,006 Assets held for sale - 2,900 - - Total current assets 167,633 156,127 14,859 17,006
Total assets 262,157 247,484 88,512 82,167
EquityShare capital 114,456 114,456 114,456 114,456 Treasury shares (2,107) (3,308) (2,107) (3,308) Retained earnings / (accumulated losses) 1,932 814 (43,624) (40,510) Other reserves (28,511) (23,659) 2,890 (234) Equity attributable to owners of the Company 85,770 88,303 71,615 70,404 Non-controlling interests 36,818 36,892 - - Total equity 122,588 125,195 71,615 70,404 Non-current liabilities Deferred tax liabilities 814 975 - - Trade and other payables 12 11 - - Other liabilities 2,329 821 - - Loans and borrowings 20,344 12,671 10,900 1,750 Provisions 1,360 1,073 266 266 Total non-current liabilities 24,859 15,551 11,166 2,016
Current liabilitiesTrade and other payables 57,308 52,131 4,331 3,628 Amount due to customers for contract work-in-progress 1,067 1,491 - - Other liabilities 19,979 21,509 - - Loans and borrowings 30,801 27,674 1,400 6,119 Income tax payables 5,555 3,853 - - Total current liabilities 114,710 106,658 5,731 9,747
Total liabilities 139,569 122,209 16,897 11,763
Total equity and liabilities 262,157 247,404 88,512 82,167
* Amount less than $1,000
A statement of financial position (for the issuer and group), together with a comparative statement as at the end of the immediately preceding financial year.
Group Company
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APPENDIX E – UNAUDITED FINANCIAL INFORMATIONOF THE GROUP FOR 3QFY2018
1(b)(ii)
Group Secured Unsecured Total Secured Unsecured Total$'000 $'000 $'000 $'000 $'000 $'000
Amount repayable in one year or less, on demand 24,509 6,292 30,801 14,350 13,324 27,674 Amount repayable after one year 13,621 6,723 20,344 2,864 9,807 12,671
38,130 13,015 51,145 17,214 23,131 40,345
Details of collaterals
The above borrowings of $38.1m are secured by the following:
1. Term loans of $5.7m secured by charges over freehold properties and corporate guarantees issued by the Company and some of itssubsidiaries.
As at 30-Sep-18 As at 31-Dec-17
In relation to the aggregate amount of the group's borrowings and debt securities, specify the following as at the end of the currentfinancial period reported on with comparative figures as at the end of the immediately preceding financial year.
3. Third-party loan of $10.3m secured by charges over an aggregate of 132,319,978 shares of Procurri Corporation Limited held by theCompany, and corporate guarantees issued by some of the Company's subsidiaries.
2. Trade facilities of $11.6m comprising trust receipts and trade receivables factoring. Trust receipts are secured by fixed deposits and corporateguarantees given by the Company. Trade receivables factoring is secured by a charge over trade receivable balances on a recourse basis.
5. Finance lease obligations of $1.3m secured by charges over the leased assets.
4. Third-party loan of $9.2m secured by charges over a corporate guarantee issued by the Company.
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APPENDIX E – UNAUDITED FINANCIAL INFORMATIONOF THE GROUP FOR 3QFY2018
1(c)
30-Sep-18 30-Sep-17 30-Sep-18 30-Sep-17$'000 $'000 $'000 $'000
Cash flows from operating activities Profit / (loss) before tax 2,109 (1,419) 7,146 (9,029) Depreciation of plant and equipment 2,722 2,477 7,803 6,971 Amortisation of intangible assets 210 581 796 1,919 (Gain) / loss on disposal of property, plant and equipment, net (133) 50 (116) 127 Plant and equipment written off - 6 4 21 Share-based payments 170 694 521 1,686 Interest income (97) (108) (280) (330) Interest expenses 688 531 1,808 1,526 Share of results of associates (617) - (424) 1 Gain on bargain purchase - - (925) - Gain on disposal of subsidiaries (3) (1,386) (3) (1,387) Exchange differences 217 (111) 994 (1,616) Operating cash flows before changes in working capital 5,266 1,315 17,324 (111)
Decrease / (increase) in inventories 4,059 327 4,712 (2,206) (Increase) / decrease in amount due from customers for contract work-in-progress (715) (2,081) 1,624 (2,716) Decrease / (increase) in trade and other receivables 4,465 792 (14,080) 1,284 Decrease in finance lease and other financial receivables 737 1,702 788 2,354 (Increase) / decrease in other assets (1,630) 903 (1,854) (4,889) Increase / (decrease) in trade and other payables 744 7,990 880 (12,416) (Decrease) / increase in other liabilities (3,585) 2,234 643 15,767 Cash generated from / (used in) operations 9,341 13,182 10,037 (2,933) Income taxes paid (1,150) (302) (3,285) (2,056) Net cash flows generated from / (used in) operating activities 8,191 12,880 6,752 (4,989)
Cash flows from investing activitiesPurchase of property, plant and equipment (2,788) (11,260) (10,420) (14,259) Proceeds from disposal of property, plant and equipment 3,142 860 3,440 998 Proceeds from disposal of assets held for sale - - 2,900 - Investment in joint venture (250) - (250) - Additions to intangible assets (385) - (1,065) - Net inflows from acquisition of a subsidiary - - 323 - Net cash on disposal of subsidiaries - (2,637) - (2,620) Net cash on disposal of an associate - - - 2,000 Interest received 97 108 280 330 Net cash flows used in investing activities (184) (12,929) (4,792) (13,551)
Cash flows from financing activitiesShare issuance expense - - - (118) Share buy-back - - - (8,977) Acquisition of non-controlling interests of a subsidiary (7,000) - (7,000) - Dividends paid to non-controlling interests - - - (701) Disposal of previously acquired fair valued assets (44) - (44) - (Placement) / release of fixed deposits pledged for bank facilities (2,738) 158 (4,166) 1,852 Proceeds from loans and borrowings 43,575 31,823 124,375 101,832 Repayments of loans and borrowings (34,921) (34,426) (114,383) (113,239) Interest paid (426) (567) (1,674) (1,666) Net cash flows used in financing activities (1,554) (3,012) (2,892) (21,017)
Net increase / (decrease) in cash and cash equivalents 6,453 (3,061) (932) (39,557) Effect of exchange rate changes on cash and cash equivalents (1) 87 (17) 406 Cash and cash equivalents at beginning of financial period 21,165 25,232 28,566 61,409 Cash and cash equivalents at end of financial period 27,617 22,258 27,617 22,258
Cash and cash equivalents comprise the following:Cash and bank balances 34,893 24,469 34,893 24,469 Less: Bank overdrafts (139) (607) (139) (607) Less: Fixed deposits pledged as collateral for banker's guarantee (185) (185) (185) (185) Less: Fixed deposits pledged as collateral for banking facilities (6,952) (1,419) (6,952) (1,419) Cash and cash equivalents 27,617 22,258 27,617 22,258
Nine Months EndedGroupGroup
Third Quarter Ended
A statement of cash flows (for the Group), together with a comparative statement for the corresponding period of the immediatelypreceding financial year.
E-6
APPENDIX E – UNAUDITED FINANCIAL INFORMATIONOF THE GROUP FOR 3QFY2018
1(d)(i)
GroupTotal
Equity
Attributable to Owners
of the Company
Share Capital
Treasury Shares
Other Reserves
Retained Earnings
Non-Controlling
Interests $'000 $'000 $'000 $'000 $'000 $'000
At 1 July 2018 128,644 89,177 114,456 (2,183) (24,621) 1,525 39,467
Total comprehensive income for the period 818 396 - - (11) 407 422
Contributions by and distributions to owners
- - - 76 (76) - -
Share-based payments 170 124 - - 124 - 46
Disposal of previously acquired fair valued assets (44) - - - - - (44)
Changes in ownership interests in subsidiaries
Acquisition of non-controlling interests of a subsidiary (7,000) (3,927) - (3,927) - (3,073)
At 30 September 2018 122,588 85,770 114,456 (2,107) (28,511) 1,932 36,818
At 1 July 2017 (as previously stated) 149,133 109,284 114,456 (5,948) (12,120) 12,896 39,849
- - - - 1,801 (1,801) -
At 1 July 2017 (as restated) 149,133 109,284 114,456 (5,948) (10,319) 11,095 39,849
Total comprehensive income for the period (3,551) (2,844) - - 154 (2,998) (707)
Contributions by and distributions to owners
- - - 74 (74) - -
Share-based payments 694 694 - - 694 - -
Changes in ownership interests in subsidiaries
Disposal of subsidiaries (12,375) (10,469) - - (10,469) - (1,906)
At 30 September 2017 133,901 96,665 114,456 (5,874) (20,014) 8,097 37,236
At 1 January 2018 (as previously stated) 125,275 88,383 114,456 (3,308) (25,460) 2,695 36,892
- - - - 1,801 (1,801) -
(80) (80) - - - (80) -
At 1 January 2018 (as restated) 125,195 88,303 114,456 (3,308) (23,659) 814 36,892
Total comprehensive income for the period 2,560 1,047 - - 78 969 1,513
Contributions by and distributions to owners
Issuance of treasury shares pursuant to DeClout PSP - - - 1,201 (1,201) - -
- (14) - - (14) - 14
Share-based payments 521 361 - - 361 - 160
- - - - (149) 149 -
Disposal of previously acquired fair valued assets (44) - - - - - (44)
Changes in ownership interests in subsidiaries
Acquisition of subsidiaries 1,356 - - - - - 1,356
Acquisition of non-controlling interests of a subsidiary (7,000) (3,927) - - (3,927) - (3,073)
At 30 September 2018 122,588 85,770 114,456 (2,107) (28,511) 1,932 36,818
At 1 January 2017 (as previously stated) 166,118 123,295 114,456 - (9,706) 18,545 42,823
- - - - 1,801 (1,801) -
At 1 January 2017 (as restated) 166,118 123,295 114,456 - (7,905) 16,744 42,823
Total comprehensive income for the period (11,732) (8,752) - - (105) (8,647) (2,980)
Contributions by and distributions to owners
Purchase of treasury shares (8,977) (8,977) - (8,977) - - -
- - - 3,221 (3,221) - -
Dividends paid to non-controlling interests (701) - - - - - (701)
Share issuance expense (118) (118) - (118) - - -
Share-based payments 1,686 1,686 - - 1,686 - -
Changes in ownership interests in subsidiaries
Disposal of subsidiaries (12,375) (10,469) - - (10,469) - (1,906)
At 30 September 2017 133,901 96,665 114,456 (5,874) (20,014) 8,097 37,236
For the third quarter ended 30 September
Issuance of ordinary shares pursuant to PSP
A statement (for the Issuer and Group) showing either (i) all changes in equity or (ii) changes in equity other than those arising fromcapitalisation issues and distributions to shareholders, together with a comparative statement for the corresponding period of theimmediately preceding financial year.
For the nine months ended 30 September
Effect of adoption of SFRS(I)
Issuance of treasury shares pursuant to PSP
Effect of adoption of SFRS(I)
Effect of adoption of SFRS(I)9
Effect of adoption of SFRS(I)
Issuance of treasury shares pursuant to DeClout Performance Share Plan ("PSP")
Transfer of expired and unissued share-based payment reserve to retained earnings
Issuance of treasury shares pursuant to DeClout PSP
E-7
APPENDIX E – UNAUDITED FINANCIAL INFORMATIONOF THE GROUP FOR 3QFY2018
1(d)(i)
Company Total EquityShare Capital
Treasury Shares
Other Reserves
Retained Earnings
$'000 $'000 $'000 $'000 $'000
At 1 July 2018 68,744 114,456 (2,183) (1,371) (42,158)
Total comprehensive income for the period (1,466) - - - (1,466)
Contributions by and distributions to owners
Issuance of treasury shares pursuant to DeClout PSP - - 76 (76) -
Share-based payments 82 - - 82 -
Changes in ownership interests in subsidiaries
Acquisition of non-controlling interests of a subsidiary 4,255 - - 4,255 -
At 30 September 2018 71,615 114,456 (2,107) 2,890 (43,624)
At 1 July 2017 119,144 114,456 (5,948) 2,361 8,275
Total comprehensive income for the period (1,001) - - - (1,001)
Contributions by and distributions to owners
Issuance of treasury shares pursuant to PSP - - 74 (74) -
Share-based payments 337 - - 337 -
At 30 September 2017 118,480 114,456 (5,874) 2,624 7,274
At 1 January 2018 70,404 114,456 (3,308) (234) (40,510)
Total comprehensive income for the period (3,263) - - - (3,263)
Contributions by and distributions to owners
Issuance of treasury shares pursuant to DeClout PSP - - 1,201 (1,201) -
Share-based payments 219 - - 219 -
- - - (149) 149
Changes in ownership interests in subsidiaries
Acquisition of non-controlling interests of a subsidiary 4,255 - - 4,255 -
At 30 September 2018 71,615 114,456 (2,107) 2,890 (43,624)
At 1 January 2017 129,681 114,456 - 4,961 10,264
Total comprehensive income for the period (2,990) - - - (2,990)
Contributions by and distributions to owners
Purchase of treasury shares (8,977) - (8,977) - -
Issuance of treasury shares pursuant to PSP - - 3,221 (3,221) -
Share issuance expense (118) - (118) - -
Share-based payments 884 - - 884 -
At 30 September 2017 118,480 114,456 (5,874) 2,624 7,274
Transfer of expired and unissued share-based payment reserve to retained earnings
A statement (for the Issuer and Group) showing either (i) all changes in equity or (ii) changes in equity other than those arising fromcapitalisation issues and distributions to shareholders, together with a comparative statement for the corresponding period of theimmediately preceding financial year.
For the nine months ended 30 September
For the third quarter ended 30 September
E-8
APPENDIX E – UNAUDITED FINANCIAL INFORMATIONOF THE GROUP FOR 3QFY2018
1(d)(ii)
A) Changes in share capital during the financial period
Issued and Paid-up Share Capital$'000
114,456
There were no changes to the issued and paid-up capital of the Company during 9M2018.
B) Shares options - employee share option scheme
Outstanding Options as atExercise
Price30-Sep-18 $ From To
837,209 0.1881 10-May-15 9-May-23837,209 0.1881 10-May-16 9-May-23
1,116,279 0.1881 10-May-17 9-May-23600,000 0.1290 2-Jan-15 1-Jan-24600,000 0.1290 2-Jan-16 1-Jan-24800,000 0.1290 2-Jan-17 1-Jan-24
4,790,697
C) Performance share plan
D) Treasury shares
Total number of treasury sharesTotal number of ordinary shares including treasury shares% of treasury shares over total number of ordinary shares 1.2% 3.4%
1(d)(iii)
1(d)(iv)
$'000
As at 1 January 2018 3,308 Transfer of treasury shares pursuant to DeClout PSP (1,125) As at 31 March 2018 2,183 Movement in treasury shares - As at 30 June 2018 2,183 Transfer of treasury shares pursuant to DeClout PSP (76) As at 30 September 2018 2,107
12,584,488
As at 30 Sep 2017
In 9M2018, the Company did not issue any shares under the employee share option scheme (“ESOS”). The number of options issued under theESOS which lapsed during 3Q2018 and 9M2018 amounted to nil and 1,674,418 respectively.
Exercisable Period
(4,278,000)
The total number of issued shares excluding treasury shares as at 30 September 2018 was 663,252,486 (31 December 2017: 658,684,486).
Balance as at 31 December 2017, 31 March 2018, 30 June 2018 and 30 September 2018
Number of Ordinary Shares
As at 30 Sep 2018
671,268,974
(290,000)
A statement showing all sales, transfers, cancellation and/or use of treasury shares as at the end of the current financial periodreported on.
Save as disclosed above, the Company has no other outstanding convertibles and subsidiary holdings as at 30 September 2018 and 30September 2017.
8,306,488 -
8,306,488
8,016,488 22,709,488 671,268,974 671,268,974
Number of Treasury Shares
8,016,488
The shares to be issued pursuant to the awards are subject to certain performance conditions to be satisfied by the respective participants. Oncethe performance conditions are satisfied, the shares shall be released to the respective participants after the respective performance periods.
As at 30 September 2018, the number of outstanding awards granted under the performance share plan ("PSP") was 3,149,100 (30 September2017: 10,898,400). In 3Q2018 and 9M2018, the Company transferred 290,000 shares and 4,278,000 shares from treasury shares for the vestingand release of share awards under the PSP. The number of share awards under the PSP lapsed during 3Q2018 and 9M2018 amounted to niland 604,200 share awards respectively.
Details of any changes in the Company's share capital arising from rights issue, bonus issue, share buy-backs, exercise of shareoptions or warrants, conversion of other issues of equity securities, issue of shares for cash or as consideration for acquisition or forany other purpose since the end of the previous period reported on. State the number of shares that may be issued on conversion ofall the outstanding convertibles, if any, against the total number of issued shares excluding treasury shares and subsidiary holdings ofthe issuer, as at the end of the current financial period reported on and as at the end of the corresponding period of the immediatelypreceding financial year. State also the number of shares held as treasury shares and the number of subsidiary holdings, if any, andthe percentage of the aggregate number of treasury shares and subsidiary holdings held against the total number of sharesoutstanding in a class that is listed as at the end of the current financial period reported on and as at the end of the correspondingperiod of the immediately preceding financial year.
Total number of issued shares excluding treasury shares as at the end of the current financial period and as at the end of theimmediately preceding year.
Under ESOS, options to subscribe for 4,790,697 shares remained outstanding as at 30 September 2018 (30 September 2017: 7,023,254).Details of the outstanding options as at 30 September 2018 are as follows:
E-9
APPENDIX E – UNAUDITED FINANCIAL INFORMATIONOF THE GROUP FOR 3QFY2018
1(d)(v)
2
The figures have not been audited or reviewed by the Company’s auditors.
3
Not applicable.
4
5
Please refer to item 4 above.
6
Third Quarter Ended30-Sep-18 30-Sep-17 30-Sep-18 30-Sep-17
Basic earnings per share (cents) 0.06 (0.46) 0.15 (1.33) Weighted average number of shares ('000) 662,521 651,316 662,521 651,316
Fully diluted earnings per share (cents) 0.06 (0.46) 0.14 (1.33) Weighted average number of shares ('000) 699,546 651,316 699,546 651,316
7
a) current financial period reported on; and b) immediately preceding financial year.
30-Sep-18 31-Dec-17 30-Sep-18 31-Dec-17
12.93 13.42 10.80 10.69 663,252 658,684 663,252 658,684
The adoption of these new / revised standards and interpretations applicable for the financial year beginning 1 January 2018 did not result insignificant change to the Group’s accounting policies and did not have a material impact on the Group’s results.
Nine Months Ended
Group Company
Number of shares in issue excluding treasury shares ('000)
The Group has consistently applied the same accounting policies and methods of computation in the financial statements for the current financialperiod compared with those of the audited financial statements for the financial year ended 31 December 2017, except for the adoption ofSingapore Financial Reporting Framework (International) (“SFRS(I)”), a new financial reporting framework identical to the International FinancialReporting Standards. The Group adopted SFRS(I) on 1 January 2018, including improvements to SFRS(I) and Interpretations of SFRS(I) thatare mandatory for financial years beginning on or after 1 January 2018, and in the nine months ended 30 September 2018, where applicable.
On transition to SFRS(I), the Group elected the option to deem cumulative translation differences for foreign operations to be zero on 1 January2017, and accordingly, the gain or loss that will be recognised on a subsequent disposal of the foreign operations will exclude cumulativetranslation differences that arose before 1 January 2017. The Group reclassified the foreign currency translation reserve to the opening retainedearnings as at 1 January 2017.
Other than the effects of the matter as described above and the impact on adoption of SFRS(I)15 Revenue from Contracts with Customers andSFRS(I)9 Financial Instruments , the Group expects that the adoption of the SFRS(I) will have no material impact on the financial statements inthe year of initial application.
Whether the same accounting policies and methods of computation as in the issuer’s most recently audited annual financialstatements have been applied.
A statement showing all sales, transfers, cancellation and/or use of subsidiary holdings as at the end of the current financial periodreported on.
Where the figures have been audited or reviewed, the auditors’ report (including any qualifications or emphasis of matter).
Net asset value (for the Issuer and Group) per ordinary share based on the total number of issued shares excluding treasury shares ofthe issuer at the end of the:-
Group
Net asset value per share (cents)
Group
Whether the figures have been audited or reviewed, and in accordance with which auditing standard or practice.
Not applicable. The Company does not have subsidiary holdings.
Earnings per ordinary share of the Group for the current financial period reported on and the corresponding period of theimmediately preceding financial year, after deducting any provision for preference dividends.
If there are any changes in the accounting policies and methods of computation, including any required by an accounting standard,what has changed, as well as the reasons for, and the effect of, the change.
E-10
APPENDIX E – UNAUDITED FINANCIAL INFORMATIONOF THE GROUP FOR 3QFY2018
8
Review of performance for third quarter ended 30 September 2018 ("3Q2018")
3Q2018 3Q2017 Change (%)70,651 68,986 2.4 2,698 4,413 (38.9)
73,349 73,399 (0.1)
23,060 19,008 21.3 840 (190) N.M.
23,900 18,818 27.0
32.6% 27.6%31.1% -4.3%32.6% 25.6%
Total
Gross Profit ($'000)IT InfraVDCTotal
VDCTotal
The Group’s revenue decreased 0.1% or $0.1m from $73.4m in 3Q2017 to $73.3m in 3Q2018. Revenue from the IT Infrastructure Sales andServices ("IT Infra") segment increased 2.4% or $1.7m, mainly from the Procurri Group due to better performance from Asia Pacific and Northand South America (the "Americas"). For the Vertical Domain Clouds ("VDC") segment, revenue decreased 38.9% or $1.7m mainly due to theabsence of revenue arising from the restructuring exercise pertaining to the e-commerce business unit in 3Q2017. For the VDC segment, themain contributor of 3Q2018 revenue was from the e-logistics and e-trade business, vCargo Cloud Pte Ltd ("VCC"), which grew 192.8% from$0.8m in 3Q2017 to $2.4m in 3Q2018, mainly from higher sales of the Trade Declaration Services in Singapore and first-time contributions fromits newly acquired 60%-held subsidiary in Indonesia, GTS.
Gross profit for the Group increased 27.0% or $5.1m from $18.8m in 3Q2017 to $23.9m in 3Q2018. The major contributor was the IT Infrasegment which grew by 21.3% or $4.1m, mainly contributed by Procurri Group in line with the increase in revenue and higher margins. Despite alower revenue base, the VDC segment recorded a gross profit of $0.8m in 3Q2018 mainly due to VCC, as compared to a gross loss in 3Q2017.On a Group basis, gross profit margin ("GPM") increased by 7.0 percentage points mainly due to a higher GPM from IT Infra segment.
Other income decreased by 68.3% or $1.6m due to absence of gains in previous year which comprised $1.4m net gain from the restructuringexercise pertaining to the e-commerce business unit in 3Q2017, and a one-off write-back of provision pertaining to the divestment of ATS.
Revenue ($'000)
- Increase of $0.3m from Procurri Group manly due to an increase in staff costs.
Gross Profit Margin (%)IT Infra
a) any significant factors that affected the turnover, costs, and earnings of the Group for the current financial period reported on,including (where applicable) seasonal or cyclical factors; and
IT InfraVDC
The share of associates' profits of $0.6m was mainly from PlayE Corporation Pte Ltd ("PlayE Corp").
Finance costs increased by 29.6% or $0.2m from $0.5m in 3Q2017 to $0.7m in 3Q2018, mainly due to an increase in loans and borrowings tosupport the business growth.
Administrative expenses decreased by $0.2m due to the following:
- $0.9m of cost savings due to the exit from direct participation in the e-commerce business of Corous360 Pte Ltd and together with its subsidiaries (the "Corous360 Group"), partially offset by:
The Group recorded a profit before tax of $2.1m in 3Q2018 as compared to a loss of $1.4m in 3Q2017, representing a positive swing of $3.5m.The sharp reversal was mainly driven by an increase in gross profit of $5.1m and share of associates' profits of $0.6m, partially offset by adecrease in other income of $1.6m and a net increase in expenses of $0.6m mainly due to higher selling expenses incurred to drive the businessgrowth. The tax expense of $1.2m in 3Q2018, representing an effective tax rate of 55.8%, was mainly for profits generated from the IT Infrasegment. The high effective tax rate was mainly due to Procurri Group's tax provision on deemed US income that arose from the Global PartsCentre's charges to the America's maintenance business. The tax expense in 3Q2017 also included $1.8m arising from the de-recognition ofdeferred tax assets ("DTA") relating to tax losses following the restructuring of the non-performing unit in VDC segment.
Correspondingly, the Group reversed to a profit after tax of $0.9m in 3Q2018 from a $3.8m loss after tax in 3Q2017, representing a positiveswing of $4.7m.
Profit after tax attributable to owners of the Company ("PATMI") improved by $3.4m from a loss of $3.0m in 2Q2017 to a profit of $0.4m in3Q2018.
b) any material factors that affected the cash flow, working capital, assets or liabilities of the Group during the current financial periodreported on.
A review of the performance of the Group, to the extent necessary for a reasonable understanding of the Group’s business. Itmust include a discussion of the following:-
Other charges decreased by 15.3% or $0.3m which comprised $0.2m from the gain of $0.1m on disposal of property by GTS as compared to aloss of $0.1m in previous year, a decrease in amortisation of $0.2m mainly due to the restructuring exercise pertaining to the e-commercebusiness unit in 3Q2017, and a decrease of $0.1m due to the absence of one-off other charges in previous year, partially offset by an increase of$0.3m from provision for stock obsolescence and allowance for impairment on trade receivables mainly from the Procurri Group.
Selling expenses increased by 32.4% or $0.9m from $2.8m in 3Q2017 to $3.7m in 3Q2018, mainly from the Procurri Group due to higher salescommission in line with the growth in gross profit and increase in commission rate from tiered commission plan.
- Increase of $0.4m from VCC and together with its subsidiaries (the "VCC Group") in line with its expansion plans; and
E-11
APPENDIX E – UNAUDITED FINANCIAL INFORMATIONOF THE GROUP FOR 3QFY2018
Review of performance for nine months ended 30 September 2018 ("9M2018")
9M2018 9M2017 Change (%)222,843 183,848 21.2
6,286 20,015 (68.6) 229,129 203,863 12.4
70,075 51,187 36.9 2,230 553 303.3
72,305 51,740 39.7
31.4% 27.8%35.5% 2.8%31.6% 25.4%
Finance costs increased by 18.5% or $0.3m from $1.5m in 9M2017 to $1.8m in 9M2018, mainly due to an increase in loans and borrowings tosupport the business growth.
Gross Profit ($'000)
Gross Profit Margin (%)IT Infra
IT InfraVDCTotal
The Group recorded a profit before tax of $7.1m in 9M2018 as compared to a loss of $9.0m in 9M2017, representing a positive swing of $16.1m.The sharp reversal was mainly driven by an increase in gross profit of $20.6m and share of associates' profits of $0.4m, partially offset by adecrease in other income of $1.9m and a net increase of $2.9m in expenses mainly from higher selling and administrative expenses incurred todrive the business growth. The tax expense of $4.6m in 9M2018, representing an effective tax rate of 64.7%, was mainly for profits generatedfrom the IT Infra segment. The high effective tax rate was mainly due to Procurri Group's tax provision on deemed US income that arose fromthe Global Parts Centre's charges to the America's maintenance business. The tax expense of $2.6m in 9M2017 included an amount of $1.8marising from the de-recognition of DTA relating to tax losses following the restructuring of the non-performing unit in VDC segment.
The share of associates' profits of $0.4m was mainly from PlayE Corp.
Selling expenses increased by 65.9% or $5.2m from $7.8m in 9M2017 to $13.0m in 9M2018, mainly from the Procurri Group due to higher salescommission in line with the growth in gross profit and increase in commission rate from tiered commission plan.
Other charges decreased by 63.5% or $6.4m which comprised the non-recurrence of previous year's downward adjustment of $4.9m to the totalconsideration pertaining to the divestment of ATS, a decrease of $1.6m which arose from foreign exchange gains of $0.5m in 9M2018 ascompared to foreign exchange losses of $1.1m in 9M2017, a decrease of $0.2m which arose from a $0.1m gain on disposal of property ascompared to a loss on disposal of $0.1m in 9M2017, and a decrease of $0.7m in amortisation expense, partially offset by increases in provisionfor stock obsolescence and allowance for impairment on trade receivables totaling $1.1m, mainly from the Procurri Group.
IT InfraVDCTotal
Correspondingly, the Group reversed to a profit after tax of $2.5m in 9M2018 from a $11.6m loss after tax in 9M2017, representing a positiveswing of $14.1m.
Administrative expenses increased by 8.2% or $3.8m from $46.6m in 9M2017 to $50.4m in 9M2018. The increase was due to:
PATMI improved by $9.6m from a loss of $8.6m in 9M2017 to a profit of $1.0m in 9M2018.
- Absence of write-backs of $4.9m in corporate office costs made in previous year arising mainly from the cancellation of planned staff-relatedincentives and development programs which provisions were made in 2016;
- Increase of $3.5m from Procurri Group which included maiden expenses of $2.3m from Rockland Congruity LLC ("Rockland") (being 7 monthsin 9M2017 as compared to 9 months in 9M2018), and the remaining $1.2m mainly from staff costs (excluding Rockland) as a result of meritincrease; partially offset by:
- $3.6m of cost savings due to the exit from direct participation in the e-commerce business of Corous360 Group; and
- Decrease of $2.5m mainly from corporate office which was derived from the cost tightening measures that the Company has undertaken.
- Increase of $1.5m from VCC Group in line with its expansion plans; and
Other income decreased by 36.1% or $1.9m which comprised $1.4m mainly arising from the absence of one-off write-back of provisions in9M2017 pertaining to the divestment of ATS, and $1.4m from the absence of net gain from the restructuring exercise pertaining to the e-commerce business unit in 3Q2017, partially offset by the $0.9m gain on bargain purchase pertaining to the acquisition of GTS.
As highlighted in the 5 March 2018 Corporate and Business Update, the Group is sharpening focus of its business units. These effortscontributed to a 12.4% or $25.2m growth in revenue from $203.9m in 9M2017 to $229.1m in 9M2018. Revenue from the IT Infra segmentincreased 21.2% or $39.0m, of which $35.0m was contributed by Procurri Group due to better performance from the Asia Pacific and theAmericas, while $4.0m was mainly contributed by Beaqon Pte Ltd ("Beaqon") and its subsidiaries ("Beaqon Group") which included first-timerevenue contributions from higher-margin neutral hosting services in Indonesia. For the VDC segment, revenue decreased by 68.6% or $13.7mmainly due to the absence of contributions arising from the restructuring exercise pertaining to the e-commerce business unit in 3Q2017. Themain revenue contributor of VDC segment in 9M2018 was from the e-logistics and e-trade business, VCC, which grew 114.7% from $2.4m in9M2017 to $5.2m in 9M2018. The 114.7% growth in VCC’s revenue in 9M2018 compared to 9M2017 reflects the commencement ofcontributions from the Phase 2 implementation of the National Single Window project in Cambodia, higher sales of the Trade DeclarationServices in Singapore as well as maiden contributions of its newly acquired 60%-held Indonesian subsidiary, GTS.
Gross profit for the Group increased 39.7% or $20.6m from $51.7m in 9M2017 to $72.3m in 9M2018, mainly due to stronger performance by theIT Infra segment which grew by 36.9% or $18.9m, in line with growth in revenue. Despite a lower revenue base, gross profit from the VDCsegment increased by 303.3% or $1.7m mainly from VCC. On a Group basis, GPM increased by 6.2 percentage points mainly due to higherGPMs from both the IT Infra and VDC segments.
Revenue ($'000)
VDCTotal
E-12
APPENDIX E – UNAUDITED FINANCIAL INFORMATIONOF THE GROUP FOR 3QFY2018
Review of financial position
Non-current assets
Liabilities
Review of cash flows
b) The increase of $0.3m in investment in joint venture relates to DeClout Ventures Pte. Ltd., an indirect joint venture company of the Group.
j) The assets held for sale as at 31 December 2017, which relates to the option agreement exercised by the Group to sell its freehold property,decreased by $2.9m as the sale was completed in 9M2018.
m) The increase in negative other reserves of $3.1m comprises (i) $3.9m relating to the acquisition of remaining non-controlling interests ofBeaqon, (ii) issuance of treasury shares pursuant to DeClout PSP of $1.2m; and (iii) $0.2m transfer of expired and unissued share basedpayment reserve to retained earnings, partially offset by $1.8m of translation reserves transferred to retained earnings due to the adoption ofSFRS(I), and provision for share-based payments of $0.4m.
i) The movement in cash and bank balances is illustrated in the statement of cash flows and review of cash flows.
d) Inventories decreased by $5.0m due to better inventory turnover derived from a strong revenue base in 9M2018.
iii) Net cash used in financing activities in 9M2018 was $2.9m. This was mainly due to a cash outflow of $7.0m pertaining to the acquisition ofremaining non-controlling interests of Beaqon, placement of fixed deposits pledged for bank facilities of $4.2m and interest paid of $1.7m,partially offset by net proceeds from loans and borrowings of $10.0m.
o) Loans and borrowings (both current and non-current) increased by $10.8m due to additional financing required to support the Group'sbusiness growth.
During 9M2018, the Group's cash and cash equivalents decreased by $1.0m (after adjusting for the effect of exchange rate changes) from$28.6m as at 31 December 2017 to $27.6m as at 30 September 2018. The significant cash movements during 9M2018 were as follows:
l) The decrease in treasury shares of $1.2m represents the amount transferred out as shares pursuant to the vesting and release of shareawards under the DeClout PSP.
Equity
k) Share capital remained unchanged as compared to the amount as at 31 December 2017.
h) Other assets increased by $2.0m mainly due to higher advance payments made to suppliers in respect of ongoing projects.
i) Net cash generated from operating activities in 9M2018 amounted to $6.8m. This was mainly due to an operating cash inflow (before changesin working capital) of $17.3m, decreases in inventories, contract work-in-progress and finance lease receivables totaling $7.1m, and increases intrade and other payables and other liabilities of $1.5m, partially offset by an increase in trade and other receivables of $14.1m arising from higherbillings driven by revenue growth, an increase in other assets of $1.8m and taxes paid of $3.3m.
ii) Net cash used in investing activities in 9M2018 was $4.8m, comprising purchases of plant and equipment of $10.4m mainly from theacquisition of assets for the neutral hosting business under Beaqon Group, additions to intangible assets of $1.1m arising from the capitalisationof development costs and investment in joint venture of $0.3m, partially offset by proceeds of $2.9m from the disposal of assets previouslyclassified under held for sale as at 31 December 2017, proceeds of $3.4m from the disposal of property, plant and equipment, net cash inflow of$0.3m from the acquisition of GTS and interest received of $0.3m.
q) Income tax payables increased by $1.7m mainly from the Procurri Group.
p) Trade and other payables (current) increased by $5.2m mainly from the Procurri Group.
n) Provisions (non-current) increased by $0.3m mainly due to the acquisition of GTS.
f) The decrease in the amount due from customers for contract work-in-progress (net) of $1.6m represents part of the progress billings as at 31December 2017 which have been recognised as revenue during the period.
a) Property, plant and equipment increased by $3.0m mainly due to acquisition of GTS and the purchase of assets for the neutral hostingbusiness under Beaqon Group, partially offset by the disposal of property by GTS and depreciation charge for the period.
g) Finance lease receivables (both current and non-current) increased by $0.9m mainly from the Procurri Group.
e) Trade and other receivables increased by $16.3m mainly from the Procurri Group driven by a strong revenue base in 9M2018.
c) The increase in intangible assets of $0.3m arose mainly from the capitalisation of development costs totaling $1.1m, partially offset byamortisation charge for the period.
Current assets
E-13
APPENDIX E – UNAUDITED FINANCIAL INFORMATIONOF THE GROUP FOR 3QFY2018
9
10
11 Dividend
(a) Current Financial Period Reported On
Any dividend declared for the current financial period reported on?
None.
(b) Corresponding Period of the Immediately Preceding Financial Year
Any dividend declared for the corresponding period of the immediately preceding financial year?
None.
(c)
Not applicable. (d) Book closure date
Not applicable.
Not applicable. No forecast or prospect statement had been previously disclosed to shareholders for the third quarter and nine months ended 30September 2018.
Where a forecast, or a prospect statement, has been previously disclosed to shareholders, any variance between it and the actualresults.
A commentary at the date of the announcement of the significant trends and competitive conditions of the industry in which the Groupoperates and any known factors or events that may affect the Group in the next reporting period and the next 12 months.
Date payable
In the six months since the Group announced the Corporate and Business Update (“CBU”) on 5 March 2018, both its business segments havegained further momentum in the corporate recovery efforts.
1. For the VDC segment, VCC will continue to expand the reach and capabilities of its CamelONE™ platform: - On 1 August 2018, VCC announced the launch of the CamelONE eCargo Marketplace, an online logistics- and trade-related service booking portal that helps freight forwarders and small and medium enterprises shippers improve productivity and lower costs through the efficient use of unutilised cargo space; - On 11 October 2018, VCC announced that it had inked a deal for a Single Window project in Gabon, bringing the number of countries connected via CamelONE in Asia and Africa to 15; and - On 31 October 2018, VCC announced that it had commenced work on CamelONE Trade Finance, a unified portal to aggregate trade finance products from nine leading banks on the Singapore Government’s Networked Trade Platform. The portal is scheduled to go live in June 2019.
2. In the IT Infra segment, the Group’s 100%-owned Beaqon Group (“Beaqon”) will continue to focus on its neutral hosting services in Indonesiawhich offer higher EBITDA margins compared to its traditional business. As at 30 September 2018, Beaqon has 33 neutral hosting sites and therevenue contribution from these sites is expected to increase.
3. The Group’s 47%-held Procurri Group (“Procurri”) has drawn interest from potential investors. As announced on 7 September 2018, Procurrihas received an unsolicited, non-binding indication of interest from a third party to acquire shares of Procurri by way of a possible voluntarygeneral offer, subject to due diligence and other conditions. Subsequently on 14 November 2018, the Company held an extraordinary generalmeeting and successfully obtained shareholders’ approval for a proposed disposal, in whole or in part, of its stake in Procurri.
If the transaction is completed, on assumption that the Company’s entire stake in Procurri is disposed in whole on 30 June 2018 at the minimumdisposal price of S$0.32 per share, the proposed disposal is expected to result in an accounting gain of approximately S$11.5 million at theGroup level and S$21.5 million at the Company level.
The Company intends to use the net proceeds of approximately S$42.1 million to repay the Group’s external borrowings (up to S$22.8 million)and to fund investments and transactions involving mergers and acquisitions (up to S$19.3 million).
The proposed disposal of the stake in Procurri, together with the intended use of the disposal proceeds, are in line with DeClout’s four-stagebusiness model whereby Procurri has reached the harvest stage and is ready for monetisation.
4. DeClout Investments made its maiden investment in Vi Dimensions Pte. Ltd. which was announced on 28 September 2018 under the thirdinstalment of the National Research Foundation Singapore’s Early Stage Venture Fund (“ESVFIII”).
With the funding, Vi Dimensions seeks to continue and further accelerate its business expansion plans in U.S. and Europe. The investment alsoallows Beaqon to leverage on Vi Dimensions’ unique offering in the areas of security surveillance and smart-city solutions, as it seeks to evolveinto a leading Digital Network Infrastructure Solutions Provider in Southeast Asia.
The proceeds from the sale of Procurri’s shares will allow DeClout Investments to continue the business cycle to re-invest in new ventures withstrong growth potential.
In view of the current corporate recovery efforts and business growth, the Group is on track to being profitable for FY2018.
E-14
APPENDIX E – UNAUDITED FINANCIAL INFORMATIONOF THE GROUP FOR 3QFY2018
12 If no dividend has been declared (recommended), a statement to that effect.
No dividend has been declared or recommended for the third quarter and nine months ended 30 September 2018.
13
14
15
BY ORDER OF THE BOARD
Lin Moi HeyangCompany Secretary14 November 2018
The Company confirms that it has procured the Undertakings from all its Directors and Executive Officers in the format set out in Appendix 7Hpursuant to Rule 720(1) of the Catalist Rules.
Confirmation pursuant to Rule 720 (1) of the Catalist Rules
To the best of their knowledge, nothing has come to the attention of the Board of Directors of DeClout Limited, which may render the unauditedinterim financial statements of the Group and the Company for the third quarter and nine months ended 30 September 2018 to be false ormisleading in any material aspect.
If the Group has obtained a general mandate from shareholders for Interested Person Transactions (IPTs), the aggregatevalue of such transactions as required under Rule 920(1)(a)(ii) of the Catalist Rules. If no IPT mandate has been obtained, astatement to that effect.
Confirmation pursuant to Rule 705 (5) of the Catalist Rules
The Group has not obtained a general mandate from shareholders for IPTs.
APPENDIX F – LETTER FROM THE IFAIN RELATION TO THE FORECAST STATEMENTS
PROVENANCE CAPITAL PTE. LTD. 1
PROVENANCE CAPITAL PTE. LTD. (Company Registration Number: 200309056E)
(Incorporated in the Republic of Singapore) 96 Robinson Road #13-01 SIF Building
Singapore 068899
1 February 2019 The Board of Directors DeClout Limited 29 Tai Seng Ave #05-01 Natural Cool Lifestyle Hub Singapore 534119 Dear Sirs/Mdm, IFA REPORT ON FORECAST STATEMENTS MADE BY THE COMPANY BEFORE THE OFFER PERIOD IN RELATION TO THE VOLUNTARY CONDITIONAL CASH OFFER FOR DECLOUT LIMITED BY EXEO GLOBAL PTE. LTD. Unless otherwise defined or the context otherwise requires, all terms used herein have the same meanings as defined in the circular to the shareholders of DeClout Limited (“Shareholders”) dated 1 February 2019 (“Circular”) and our IFA Letter to the Independent Directors dated 1 February 2019 in relation to the Offer. This letter has been prepared for inclusion in the Circular in connection with the Offer pursuant to Rule 25 of the Code. The Company had on various occasions, before the commencement of the Offer, issued statements which are deemed as profit forecasts Forecast Statements under Rule 25 of the Code. Such Forecast Statements point to a similar expectation by the Company that the Group will return to profitability for the financial year ending 31 December 2018 FY2018 . Extracts of the Forecast Statements in chronological order are set out below: (i) In the Corporate and Business Update CBU by the Company on the SGXNET on 5
March 2018 and the presentation slides on the CBU:
“The Group expects to reduce its losses over the course of 2018 and return to profitability in FY2018 as i) it does not expect significant further losses from Corous360 post-restructuring; ii) in the absence of major impairments and exceptional items, and iii) in view of further reductions in expenses.”
(ii) In the Chairman and Group CEO message in the annual report for the financial year
FY2017 , released by the Company on the SGXNET on 13 April 2018:
“With this strategic review, I am confident that we are entering FY2018 on a firm footing. The Group is expected to reduce its losses over the course of 2018 and return to profitability in FY2018, and we will take pivotal steps to enhance and unlock shareholder value.”
“I am confident that DeClout will return to profitability in FY2018 and emerge stronger in the coming year as we set in motion key business strategies which will help us ride through the changing market landscape.”
F-1
APPENDIX F – LETTER FROM THE IFAIN RELATION TO THE FORECAST STATEMENTS
PROVENANCE CAPITAL PTE. LTD. 2
(iii) In the commentary of the unaudited financial results of the Group for the first quarter ended 31 March 2018 1Q2018 announced by the Company on 26 April 2018, related press release and presentation slides on the financial performance of the Group for FY2017 and 1Q2018 released by the Company on 30 April 2018:
“The improved set of results in 1Q2018 underscore the Group’s progress in returning to profitability in FY2018, in line with its four-pronged strategy outlined in the CBU.”
(iv) In the commentary of the unaudited financial results of the Group for the second quarter and half
year ended 30 June 2018 announced by the Company on 8 August 2018 and related press release:
“Barring unforeseen circumstances, the Group is on track to being profitable for FY2018.”
(v) In the commentary of the unaudited financial results of the Group for the third quarter and nine
months ended 30 September 2018 announced by the Company on 14 November 2018:
“In view of the current corporate recovery efforts and business growth, the Group is on track to being profitable for FY2018.”
We have discussed the key bases and assumptions underlying the Forecast Statements with the Management as reproduced in Appendix H to the Circular. We have also considered the letter dated 1 February 2019 and addressed to the Board Board by Ernst & Young LLP, the auditors of the Company, in relation to their review of the Forecast Statements. We have relied on the accuracy and completeness of all financial and other information provided to us and assumed such accuracy and completeness for the purposes of providing this letter. We have not independently verified the information both written and verbal and accordingly cannot and do not make any representation or warranty, expressly or impliedly, in respect of, and do not accept any responsibility for, the accuracy, completeness or adequacy of such information. We have not undertaken any independent evaluation or appraisal of any of the assets or liabilities of the Company or the Group. Save as provided in this letter, we do not express any other opinion on the Forecast Statements. Based on the above discussions with the Management and having considered the letter dated 1 February 2019 from Ernst & Young LLP in relation to the Forecast Statements, we are of the view that the Forecast Statements (for which the Directors are solely responsible) had been issued by the Board after due and careful enquiry. This letter is addressed to the Board for the sole purpose of complying with Rule 25 of The Singapore Code on Take-overs and Mergers, and we do not accept any responsibility to any other person (other than the Board) in respect of, arising from or in connection with this letter. Yours faithfully For and on behalf of PROVENANCE CAPITAL PTE. LTD. Wong Bee Eng Chief Executive Officer
F-2
APPENDIX G – LETTER FROM AUDITORS OF THE COMPANYIN RELATION TO THE FORECAST STATEMENTS
G-1
The Board of Directors Declout Limited 29 Tai Seng Avenue #05-01 Natural Cool Lifestyle Hub Singapore 534119
1 February 2019
Independent auditor’s letter in relation to the Forecast Statements in the Financial Statement Announcemeents
Dear Sirs: This letter is prepared for the purposes of Rule 25.3 of the Singapore Code on Take-overs and Mergers (the “Code”) in connection with the offeree circular (“Offeree Circular”) despatched by DeClout Limited (the “Company”) in relation to the voluntary conditional cash offer (“Offer”) for all of the issued and paid-up ordinary shares in the capital of the Company, other than those already owned, controlled or agreed to be acquired by Exeo Global Pte. Ltd. (the “Offeror”), its related corporations, and their respective nominees, in accordance with Rule 15 of the Code. This letter has been prepared for inclusion in the Offeree Circular.
We have examined the Forecast Statements, relating to the profit forecast of the Company and its subsidiaries (“Group”) for the financial year ending 31 December 2018, set out below:
Extract from Corporate and Business Updates:
“The Group expects to reduce its losses over the course of 2018 and return to profitability in FY2018 as i) it does not expect significant further losses from Corous360 post-restructuring; ii) in the absence of major impairments and exceptional items, and iii) in view of further reductions in expenses.”
Extract from Chairman and Group CEO’s message in Annual Report:
“With this strategic review, I am confident that we are entering FY2018 on a firm footing. The Group is expected to reduce its losses over the course of 2018 and return to profitability in FY2018, and we will take pivotal steps to enhance and unlock shareholder value.”
“I am confident that DeClout will return to profitability in FY2018 and emerge stronger in the coming year as we set in motion key business strategies which will help us ride through the changing market landscape.”
APPENDIX G – LETTER FROM AUDITORS OF THE COMPANYIN RELATION TO THE FORECAST STATEMENTS
G-2
The Board of Directors Page 2 Declout Limited 1 February 2019
Extract from Section 10 of First Quarter announcement:
“The improved set of results in 1Q2018 underscore the Group’s progress in returning to profitability in FY2018, in line with its four-pronged strategy outlined in the CBU.”
Extract from Section 10 of Second Quarter announcement:
“Barring unforeseen circumstances, the Group is on track to being profitable for FY2018.”
Extract from Section 10 of Third Quarter announcement:
“In view of the current corporate recovery efforts and business growth, the Group is on track to being profitable for FY2018.”
We have examined the Forecast Statements in accordance with the Singapore Standards on Assurance Engagements applicable to the examination of prospective financial information. The Directors are solely responsible for the Forecast Statements including the completeness of the Forecast Statements and assumptions on which the Forecast Statements is based.
Based on our examination of the evidence supporting the assumptions as set out in Appendix H to the Circular, nothing has come to our attention to cause us to believe that these assumptions do not provide a reasonable basis for the Forecast Statements. Further, in our opinion, the Forecast Statements are properly prepared on the basis of such assumptions and is consistent with the accounting policies normally adopted by the Group which are in accordance with Singapore Financial Reporting Standards (International).
Actual results are likely to be different from the Profit Forecast since anticipated events frequently do not occur as expected and the variation may be material. This letter is not to be used for any other purpose and shall not be distributed to any other parties, save that the Company may append this letter to the Offeree Circular which it will issue to its shareholders in connection with the Offer made by the Offeror for the Company.
Yours faithfully
Ernst & Young LLP Public Accountants and Chartered Accountants Singapore
The Forecast Statements were not made in connection with the Offer.
The first Forecast Statement was made in connection with the Company’s blueprint for corporate
recovery in its Corporate Business Update dated 5 March 2018 (“CBU”) which outlined the
Group’s 4 key strategic initiatives as its forward growth strategies.
The Forecast Statements, for which the Directors are solely responsible, were arrived at on the
bases consistent with the accounting policies normally adopted by the Company and were made
on the following assumptions:
• There will be no material change in the existing political, economic, regulatory, or legal
conditions affecting the activities of the Group, the industry and the countries in which the
Group operates.
• There will be no material changes to the Group structure, management and the existing
principal activities of the Group.
• There will be no material changes in the competitive environment in which the Group
operates.
• There will be no material change in the relationships the Group has with major suppliers,
customers and financial institutions which may affect the Group’s financial performance.
• The core business units identified in the CBU will have improved revenue contribution with
no significant deterioration of margins.
• There will be no significant losses from the e-commerce business unit of Corous360, as the
Group had exited from the direct participation in the e-commerce business in end of FY2017.
• There will be no material change in the key management personnel who may impact the
Group’s business, operations and future viability.
• There will be no material change in the operating cost structure of the Group, including the
existing employment benefits and incentive scheme of the Group, other than the cost-
tightening measures which the Company has committed to as outlined in its CBU.
• There will be no material one-off item that has adverse impact on the Group’s financial
performance.
• There will be no exceptional circumstances that require material provision to be made by the
Group in respect of any contingent liability, litigation, or arbitration threatened or otherwise,
abnormal bad debts or unexpected termination of contracts, except for the potential litigation
related costs that may arise in relation to the HRA Litigation which the Group does not expect
such costs to have significant adverse impact on its financial performance that will reverse
the position set out in the Forecast Statements.
APPENDIX H – BASES AND ASSUMPTIONS OF
THE FORECAST STATEMENTS
H-1
• There will be no major acquisitions of assets by the Group, save for those acquisitions
carried out in the ordinary course of business.
• There will be no material change to the budgeted capital expenditure of the Group.
• There will be no adverse changes to the tax legislations of the countries in which the Group
has operations.
• There will be no material change in the accounting policies of the Group.
• There will be no material changes in the prevailing foreign currency exchange rates that will
adversely affect the Group’s results.
• There will be no material change in inflation rates.
APPENDIX H – BASES AND ASSUMPTIONS OF
THE FORECAST STATEMENTS
H-2
The provisions in the Constitution relating to rights of Shareholders in respect of capital, dividends
and voting are reproduced below.
All capitalised terms used in the following extracts shall have the same meanings ascribed to them
in the Constitution and/or the Companies Act, a copy of which is available for inspection at the
registered office of the Company at 29 Tai Seng Avenue, #05-01 Natural Cool Lifestyle Hub,
Singapore 534119, during normal business hours until the Closing Date.
(A) RIGHTS IN RESPECT OF CAPITAL
SHARES
5. Subject to the Statutes, this Constitution and the Listing Manual, no
shares may be issued by the Directors without the prior approval of
the Company in General Meeting but subject thereto and to this
Constitution relating to new shares and to any special right attached
to any share for the time being issued, the Directors may allot and
issue shares, or grant options over or otherwise dispose of the same
to such persons on such terms and conditions (including such
consideration) and at such time as the Directors determine, provided
always that the rights attaching to shares of a class other than
ordinary shares shall be expressed in the resolution creating the
same.
6(1). The Company in General Meeting may by Ordinary Resolution
authorise the Directors to exercise any power of the Company to
issue shares, such authority being confined to a particular exercise
of that power or generally. Any such authority may be unconditional
or subject to conditions and shall continue in force until the
conclusion of the Annual General Meeting commencing next after
the date on which the approval was given or the expiration of the
period within which the next Annual General Meeting after that date
is required by law to be held whichever is the earlier but may be
previously revoked or varied by the Company in General Meeting,
provided always that no shares may be issued to transfer a
controlling interest without prior approval of the Company in General
Meeting.
6(2). Subject to the terms and conditions of any application for shares, the
Directors shall allot shares applied for within ten (10) Market Days of
the closing date (or such other period as may be approved by the
SGX-ST) of any such application. The Directors may, at any time
after the allotment of any share but before any person has been
entered in the Register as the holder thereof or before such share is
entered against the name of a Depositor in the Depository Register,
as the case may be, recognise a renunciation thereof by the allottee
in favour of some other person and may accord to any allottee of
such share a right to effect such renunciation upon and subject to
such terms and conditions as the Directors may think fit.
Shares undercontrol ofCompany inGeneralMeeting.
Authority ofDirectors toissue shares.
APPENDIX I – EXTRACTS FROM THE COMPANY’S CONSTITUTION
I-1
7(1). Any share in the Company may be issued with such preferred,
qualified, deferred or other special rights, privileges and conditions
or such restrictions, whether in regard to dividend, return of capital,
voting or otherwise, as the Company may from time to time by
Ordinary Resolution determine, and subject to the Statutes, the
Company may issue preference shares which are or, at the option of
the Company, are liable to be redeemed on such terms and in such
manner as the Company before the issue thereof may by Ordinary
Resolution determine, provided always that the total number of
issued preference shares shall not exceed the total number of
issued ordinary shares at any time.
7(2). The Company may issue shares for which no consideration is
payable to the Company.
8. The Company shall have the power to issue further preference
capital ranking equally with or in priority to the preference capital
then already issued and the rights conferred upon the holders of
preference shares shall not, unless otherwise expressly provided by
the conditions of issue of such shares, be deemed to be altered by
the creation or issue of such further preference capital ranking
equally with or in priority thereto.
9. Subject to the provisions of the Statutes, all or any of the special
rights or privileges for the time being attached to any preference
share for the time being issued may from time to time (whether or not
the Company is being wound up) be modified, affected, altered or
abrogated and preference capital other than redeemable preference
shares may be repaid if authorised by a Special Resolution passed
by holders of such preference shares at a special meeting called for
the purpose. To any such special meeting, all Regulations of this
Constitution as to General Meetings of the Company shall mutatis
mutandis apply but so that the necessary quorum shall be two (2)
persons at least holding or representing by proxy not less than
one-third of the issued preference shares concerned and that every
holder of the preference shares concerned shall be entitled on a poll
to one vote for every such share held by him and that any holder of
the preference shares concerned present either in person or by
proxy may demand a poll, provided always that where the necessary
majority for such a Special Resolution is not obtained at the meeting,
consent in writing if obtained from holders of three-fourths of the
preference shares concerned within two (2) months of the meeting
shall be as valid and effectual as a Special Resolution carried at the
meeting.
10. Preference shares may be issued subject to such limitation thereof
as may be prescribed by the Exchange. Preference shareholders
shall have the same rights as ordinary Members as regards the
receiving of notices, reports and financial statements and the
attending of General Meetings of the Company. Preference
shareholders shall also have the right to vote at any General
Meeting convened for the purpose of reducing the capital of the
Company mayissue shareswith preferred,qualified,deferred andother specialrights.
Issue ofshares for noconsideration.
Issue offurtherpreferenceshares.
Alteration ofrights ofpreferenceshareholders.
Rights ofpreferenceshareholders.
APPENDIX I – EXTRACTS FROM THE COMPANY’S CONSTITUTION
I-2
Company or winding up or sanctioning the sale of the undertaking of
the Company or where the proposal to be submitted to the General
Meeting directly affects their rights and privileges or when the
dividend on the preference shares is more than six (6) months in
arrears. The total number of issued preference shares shall not at
any time exceed the total number of issued ordinary shares.
11. If by the conditions of allotment of any share, the whole or part of the
amount or issue price thereof shall be payable by instalments, every
such instalment shall, when due, be paid to the Company by the
holder for the time being of the share or his legal personal
representative.
12. The Company may pay a commission to any person in consideration
of his subscribing, or agreeing to subscribe, whether absolutely or
conditionally, for any share in the capital of the Company but such
commission shall not exceed ten per cent (10%) of the price at which
the shares are issued or an amount equivalent thereof. Any such
commission may be paid in whole or in part in cash or fully or partly
paid shares of the Company as may be arranged, and the Company
may, in addition to, or in lieu of, such commission, in consideration
of any person so subscribing or agreeing to subscribe, or of his
procuring or agreeing to procure subscriptions, whether absolute or
conditional, for any share in the Company, confer on any such
person an option call within a specified time for a specified number
or amount of shares in the Company at a specified price. The
payment or agreement to pay a commission or the conferring of an
option shall be in the discretion of the Directors on behalf of the
Company. The requirements of the Statutes shall be observed, as
far as applicable.
12A. Where any shares are issued for the purpose of raising money to
defray the expenses of the construction of any works or buildings or
the provision of any plant which cannot be made profitable for a
lengthened period, the Company may pay interest on so much of
that share capital (except treasury shares) as is for the time being
paid up for the period and charge the same to capital as part of the
cost of the construction of the works or buildings or the provision of
the plant, subject to the conditions and restrictions mentioned in the
Act.
12B. Any expenses (including brokerage or commission) incurred directly
by the Company in the issue of new shares may be paid out of the
proceeds of the issue or the Company’s share capital. Such
payment shall not be taken as reducing the amount of share capital
of the Company.
13(1). The Company shall not be bound to register more than three
persons as the joint holders of any share except in the case of
executors, administrators or trustees of the estate of a deceased
Member.
Instalments ofshares.
Commissionforsubscribing.
Power tocharge intereston capital.
Payment ofexpenses inissue ofshares.
Joint holders.
APPENDIX I – EXTRACTS FROM THE COMPANY’S CONSTITUTION
I-3
13(2). Subject to Regulation 13(1), any two or more persons may be
registered as joint holders of any share and the joint holders of a
share shall be severally as well as jointly liable for the payment of all
instalments and calls and interest (if any) due in respect of such
share.
13(3). The joint holder first named in the Register or the Depository
Register, as the case may be, shall as regards voting, proxy, service
of notices and delivery of certificates and dividend warrants, be
deemed to be the sole owner of such share.
14. No person shall be recognised by the Company as holding any share
upon any trust, and the Company shall not be bound by or be
required in any way to recognise (even when having notice thereof)
any equitable, contingent, future or partial interest in any share or
any other rights in respect of any share other than an absolute right
to the entirety thereof in the person (other than the depository)
entered in the Register as the registered holder or in the person
whose name is entered in the Depository Register in respect of that
share, as the case may be, except only where this Constitution
otherwise provides or as required by the Statutes or pursuant to any
order of Court.
15. No person shall exercise any rights of a Member in respect of a
share until his name shall have been entered in the Register as the
registered holder thereof or in the Depository Register in respect of
such share, as the case may be, and, unless the Directors otherwise
determine, such person shall have paid all calls and other moneys
for the time being due and payable on any share held by him.
16. No part of the funds of the Company shall be employed by the
Directors or the Company in the acquisition of shares in the
Company or in lending on the security of shares in the Company
unless permitted by the Statutes.
SHARE CERTIFICATE
17. Every certificate for shares shall be issued under the Seal or the
Share Seal of the Company, as provided in Regulation 131(2), or
executed as a deed in accordance with the Act.
18. Every certificate of shares shall specify the number and class of the
shares in respect of which it is issued, whether the shares are fully
or partly paid up and the amount (if any) unpaid on the shares. No
share certificate shall be issued representing shares of more than
one (1) class.
19. Every person whose name is entered as a registered holder in the
Register shall be entitled without payment to receive within ten (10)
Market Days (or such other period as may be approved by the
Exchange) after the closing date for applications to subscribe for a
new issue of shares and within fifteen (15) Market Days (or such
No trustsrecognised.
Exercise ofrights ofMembers.
Company notto deal with itsown shares.
Authenticationof certificates.
Certificatesshall specifynumber ofshares.
Registeredholder’s rightto certificate.
APPENDIX I – EXTRACTS FROM THE COMPANY’S CONSTITUTION
I-4
other period as may be approved by the Exchange) after lodgement
of a registrable transfer one (1) certificate under the Seal in respect
of each class of shares held by him for all his shares in that class or
several certificates in reasonable denominations each for one or
more of his shares in any one class subject to such person’s prior
payment of two Singapore Dollars (or such other sum as the
Directors shall from time to time determine having regard to any
limitation thereof as the Exchange may prescribe) for every
certificate after the first and such stamp duty as is payable on such
certificate unless otherwise directed by the Directors, provided
always that in the case of joint registered holders, the Company
shall not be bound to issue more than one certificate and delivery of
such certificate to the joint holder first named in the Register shall be
sufficient delivery to all such holders.
20(1). Where only some of the shares comprised in any share certificate
are transferred, the old certificate shall be cancelled and a new
certificate for the balance of such shares shall be issued in lieu
thereof without charge.
20(2). Any two or more certificates representing shares of any one class
held by any person whose name is entered in the Register may be
cancelled at his request and a single new certificate for such shares
issued in lieu thereof without charge.
20(3). Any share certificate representing shares of any class held by any
person whose name is entered in the Register may be surrendered
by such person for cancellation and at his request the Company may
issue in lieu thereof two or more share certificates representing such
shares in such proportions as such person may specify, and the
Directors may comply with such request if they think fit. Such person
shall pay a maximum of two Singapore Dollars for each share
certificate issued in lieu of a share certificate surrendered for
cancellation or such other fee as the Directors may from time to time
determine, taking into consideration any limitation thereof as may be
prescribed by the Exchange.
20(4). Subject to the Statutes, if any share certificate shall be defaced,
worn out, destroyed, stolen or lost, it may be renewed on such
evidence being produced and a letter of indemnity or undertaking (if
required) being given by the registered holder, transferee, person
entitled, purchaser, member company of the Exchange or on behalf
of its or their client(s) as the Directors shall require and in the case
of defacement or wearing out on delivery up of the old certificate and
in any case on payment of such sum not exceeding two Singapore
Dollars as the Directors may from time to time require (or such other
amount as may be permitted under the Statutes). In the case of theft,
destruction or loss the registered holder or the person entitled to
whom such renewed certificate is given shall also bear the loss and
pay to the Company all expenses incidental to the investigations by
the Company of the evidence of such theft, destruction or loss.
Issue ofreplacementcertificates.
APPENDIX I – EXTRACTS FROM THE COMPANY’S CONSTITUTION
I-5
20(5). Where shares are registered jointly in the names of several persons,
any such request may be made by any one of the registered joint
holders.
21. The certificates of shares registered in the names of two or more
persons shall be delivered to the joint holder first named in the
Register and the delivery of a certificate to such person shall be
sufficient delivery to all.
LIEN ON SHARES
22. The Company shall have a first and paramount lien on every share
(not being a fully-paid share) and all dividends or interests from time
to time declared in respect thereof for all moneys (whether presently
payable or not) called or payable at a fixed time, in respect of that
share and for all moneys which the Company may be called upon by
law to pay in respect of the shares of the Member or the deceased
Member. The Directors may however waive any lien which has
arisen and may resolve that any share shall for any limited period be
exempt wholly or partially from the provisions of this Regulation 22.
23. For the purpose of enforcing such lien the Directors may sell all or
any of the shares subject thereto in such manner as they think fit,
and no sale shall be made until such time as the moneys are
presently payable, and until a notice in writing stating the amount
due and demanding payment, and giving notice of intention to sell in
default, shall have been served in such a manner as the Directors
shall think fit on the holder for the time being of the share or the
person (if any) entitled by transmission to the shares, and default in
payment shall have been made by him or them for seven days after
such notice.
24. The net proceeds of any such sale shall be applied in or towards the
satisfaction of the amount due, and the residue (if any) shall be paid
to the person whose share has been sold, his executors,
administrators, trustees or assignees or as he shall direct.
25. To give effect to any such sale the Directors may authorise some
person to transfer or to effect the transfer, as the case may be, of the
shares sold to the purchaser.
CALLS ON SHARES
26. The Directors may from time to time make calls upon the Members
in respect of any money unpaid on their shares or on any class of
shares and not by the conditions of allotment thereof made payable
at fixed times, and each Member shall (subject to his having been
given at least fourteen days’ notice specifying the time or times and
place of payment) pay to the Company at the time or times and place
so specified the amount called on his shares. A call may be made
payable by instalments. A call may be revoked or postponed as the
Directors may determine. A call shall be deemed to have been made
at the time when the resolution of the Directors authorising the call
was passed.
Delivery ofsharecertificates.
Company’slien on shares.
Right toenforce lien bysate.
Application ofproceeds ofsale.
How sale tobe effected.
Powers ofDirectors tomake calls.
APPENDIX I – EXTRACTS FROM THE COMPANY’S CONSTITUTION
I-6
27. The joint holders of a share shall be jointly and severally liable to pay
all calls and interest (if any) in respect thereof.
28. If before or on the day appointed for payment thereof a call payable
in respect of a share is not paid, the person from whom the amount
of the call is due shall pay interest on such amount at the rate of
eight per cent (8%) per annum from the day appointed for payment
thereof to the time of actual payment, but the Directors shall have
power to waive payment of such interest or any part thereof.
29. Any sum which by the terms of allotment of a share is made payable
upon issue or at any fixed date and any instalment of a call shall for
all purposes of this Constitution be deemed to be a call duly made
and payable on the date fixed for payment, and in case of non-
payment the Regulations of this Constitution as to payment of
interest and expenses, forfeiture and the like, and all the other
relevant Regulations of this Constitution or the Statutes shall apply
as if such sum were a call duly made and notified as hereby
provided.
30. The Directors may from time to time make arrangements on the
issue of shares for a difference between the holders of such shares
in the amount of calls to be paid and in the time of payment of such
calls.
31. The Directors may, if they think fit, receive from any Member willing
to advance the same all or any part of the moneys uncalled and
unpaid upon any share held by him, and upon all or any part of the
moneys so advanced may (until the same would, but for the
advance, become payable) pay interest at such rate not exceeding
(unless the Company in General Meeting shall otherwise direct)
eight per cent (8%) per annum as may be agreed upon between the
Directors and the Member paying the sum in advance. Capital paid
on shares in advance of calls shall not, whilst carrying interest,
confer a right to participate in profits.
FORFEITURE OF SHARES
32. If any Member fails to pay the whole or any part of any call or
instalment of a call on or before the day appointed for the payment
of the same or any interest thereon, the Directors may at any time
thereafter during such time as the call or instalment or interest
remains unpaid serve a notice on such Member requiring him to pay
the same, together with any interest (including interest upon
interest) and expenses that may have been incurred by the
Company by reason of such non-payment.
33. The notice shall name a further day (not being less than fourteen
days from the date of service of the notice) and a place on and at
which such call or instalment and such interest and expenses as
aforesaid are to be paid. The notice shall also state that in the event
of non-payment at or before the time and at the place appointed, the
shares in respect of which the call was made or instalment or
interest is payable shall be liable to be forfeited.
Joint andseveralliability.
Interest onunpaid calls.
Sums payableunder terms ofallotment to bedeemed calls.
Difference incalls betweenvariousholders.
Payment ofcall inadvance.
Notice to begiven ofintendedforfeiture.
Form ofnotice.
APPENDIX I – EXTRACTS FROM THE COMPANY’S CONSTITUTION
I-7
34. If the requirements of any notice as aforesaid are not complied with,
any share in respect of which the notice has been given, may at any
time thereafter, before payment of all such calls or instalments,
interests and expenses due in respect thereof, be forfeited by a
resolution of the Directors to that effect. Such forfeiture shall include
ail dividends declared in respect of the forfeited shares and not
actually paid before the forfeiture. The Directors may accept a
surrender of any share liable to be forfeited hereunder.
35. Any share so forfeited or surrendered shall be deemed to be the
property of the Company, and the Directors may sell, re-allot, or
otherwise dispose of the same in such manner as they think fit. The
Company may receive the consideration, if any, given for the share
on any sale or disposition thereof and may execute a transfer of the
share in favour of the person to whom the share is sold or disposed.
36. The Directors may at any time before any share so forfeited or
surrendered shall have been sold, re-allotted or otherwise disposed
of, annul the forfeiture or surrender thereof upon such conditions as
they think fit.
37. For the purpose of giving effect to any sale of forfeited or
surrendered shares, the Directors may authorise some person to
transfer or to effect the transfer of, as the case may be, the shares
sold to the purchaser.
38. Any Member whose shares shall have been forfeited or surrendered
shall cease to be a Member in respect of the forfeited or surrendered
shares but shall, notwithstanding such forfeiture or surrender, be
liable to pay, and shall forthwith pay to the Company all calls,
instalments, interest and expenses owing upon or in respect of such
shares at the time of forfeiture or surrender, together with interest
thereon from the time of forfeiture or surrender until payment, at the
rate of eight per cent (8%) per annum and the Directors may enforce
the payment of such moneys or any part thereof if they think fit, but
shall not be under any obligation so to do. Any residue after the
satisfaction of the unpaid calls, accrued interest and expenses shall
be paid to the person whose shares have been forfeited or
surrendered, his executors, administrators or assignees or as he
shall direct.
39(1). A statutory declaration in writing that the declarant is a Director or
the Secretary, and that a share has been duly forfeited, surrendered
or sold to satisfy a lien of the Company on a date stated in the
declaration shall be conclusive evidence of the facts therein stated
as against all persons claiming to be entitled to the share. Such
declaration and the receipt by the Company of the consideration (if
any) given for the share on the sale, re-allotment or disposal thereof
together with the share certificate, where the same be required,
delivered to a purchaser or (where the purchaser is a Depositor) to
the Depository or the allottee thereof, as the case may be, shall
(subject to the execution of a transfer if the same be required)
constitute a good title to the share.
If notice notcomplied withshares may beforfeited.
Sale etc offorfeited andsurrenderedshares.
Power toannulforfeiture.
Transfer offorfeited orsurrenderedshares.
Liability onforfeitedshare.
Declaration byDirector orSecretaryconclusive offact offorfeiture.
APPENDIX I – EXTRACTS FROM THE COMPANY’S CONSTITUTION
I-8
39(2). (a) In the event of such sale, re-allotment or disposal, where the
person (the “Relevant Person”) to whom the share is sold,
re-allotted or disposed of is not a Depositor, the share shall be
registered in the Register in the name of the Relevant Person and,
where the Relevant Person is a Depositor, the Company shall
procure that his name be entered in the Depository Register in
respect of the share so sold, re-allotted or disposed of.
(b) The Relevant Person shall not be bound to see to the
application of the purchase money (if any) nor shall his title
to the share be affected by any irregularity or invalidity in
the proceedings relating to the forfeiture, surrender, sale,
re-allotment or disposal of the share.
39(3). In the event of a forfeiture of shares or a sale of shares to satisfy the
Company’s lien thereon the Member or other person who prior to
such forfeiture or sale was entitled thereto shall be bound to deliver
and shall forthwith deliver to the Company the certificate or
certificates held by him for the shares so forfeited or sold.
TRANSFER OF SHARES
40. There shall be no restriction on the transfer of fully paid shares
(except where required by law or by the rules, bye-laws or listing
rules of the Exchange). All transfers of shares may be effected by
way of book-entry in the Depository Register, provided always that
the legal title in the shares may be transferred by the registered
holders thereof by an instrument of transfer in the form approved by
the Exchange. The instrument of transfer shall be left at the Office
accompanied by the certificate of the shares to be transferred and
such other evidence (if any) as the Directors may reasonably require
to show the right of the transferor to make the transfer. The
transferor shall be deemed to remain the registered holder of the
shares until the name of the transferee is entered in the Register in
respect thereof.
41. The instrument of transfer shall be signed both by the transferor and
by the transferee, and it shall be witnessed, provided always that an
instrument of transfer in respect of which the transferee is the
Depository or its nominee (as the case may be) shall be effective
although not signed or witnessed by or on behalf of the Depository
or its nominee (as the case may be).
42. Shares of different classes shall not be comprised in the same
instrument of transfer.
43. No share shall in any circumstances be transferred to any infant,
bankrupt or person who is mentally disordered but nothing herein
contained shall be construed as imposing on the Company any
liability in respect of the registration of such transfer if the Company
has no actual knowledge of the same.
Certificate ofshares to bedelivered tothe Company.
Shares to betransferable.
Instrument oftransfer.
Only shares ofsame class tobe in sameinstrument.
Restriction ontransfer.
APPENDIX I – EXTRACTS FROM THE COMPANY’S CONSTITUTION
I-9
44(1). All instruments of transfer which are registered shall be retained by
the Company, but any instrument of transfer which the Directors may
refuse to register shall (except in any case of fraud) be returned to
the party presenting the same.
44(2). The Company shall be entitled to destroy:–
(a) all instruments of transfer which have been registered at any
time after the expiration of six (6) years from the date of
registration thereof;
(b) all dividend mandates and notifications of change of address at
any time after the expiration of six (6) years from the date of
recording thereof; and
(c) all share certificates which have been cancelled at any time
after the expiration of six (6) years from the date of the
cancellation thereof.
44(3). It shall be conclusively presumed in favour of the Company that
every entry in the Register purporting to have been made on the
basis of an instrument of transfer or other document so destroyed
was duly and properly made and that:
(a) every instrument of transfer so destroyed was a valid and
effective instrument duly and properly registered;
(b) every share certificate so destroyed was a valid and effective
certificate duly and properly cancelled; and
(c) every other document hereinbefore mentioned so destroyed
was a valid and effective document;
44(4). Regulations 44(2) and 44(3) shall apply only to the destruction of a
document in good faith and without notice of any claim (regardless
of the parties thereto) to which the document might be relevant.
44(5). Nothing contained in this Regulation 44 shall be construed as
imposing upon the Company any liability in respect of the
destruction of any such document earlier than as aforesaid or in any
other circumstance which would not attach to the Company in the
absence of this Regulation 44, and references in this Regulation 44
to the destruction of any document include references to the
disposal thereof in any manner.
45. The Directors may decline to register any instrument of transfer
unless:–
(a) all or any part of the stamp duty (if any) payable on each share
transfer and such fee not exceeding two Singapore Dollars for
each transfer or such other sum as may from time to time be
prescribed by the Exchange is paid to the Company; and
Retention ofInstrument oftransfer anddisposal ofdocuments.
Fees relatingto transfers.
APPENDIX I – EXTRACTS FROM THE COMPANY’S CONSTITUTION
I-10
(b) such fee not exceeding two Singapore Dollars as the Directors
may from time to time determine is paid to the Company in
respect of the registration of any instrument of transfer,
probate, letters of administration, certificate of marriage or
death, power of attorney or any document relating to or
affecting the title to the shares.
46. The Directors may in their sole discretion refuse to register the
transfer of shares or allow the entry of or against a person’s name in
the Depository Register in respect of shares transferred or to be
transferred to such person:–
(a) which are not fully paid up; or
(b) on which the Company has a lien.
47. If the Directors refuse to register any transfer of any share they shall,
where required by the Statutes, serve on the transferor and
transferee, within ten (10) Market Days (or such period as the
Directors may determine having regard to any limitation thereof as
may be prescribed by the Exchange from time to time) after the date
on which the application for a transfer of shares was lodged with the
Company, a notice in writing informing each of them of such refusal
and of the facts which are considered to justify the refusal.
48. The Register may be closed at such times and for such periods as
the Directors may from time to time determine, provided always that
the Register shall not be closed for more than thirty days in any year,
and provided always that the Company shall give prior notice of such
closure as may be required to the Exchange stating the period and
purpose or purposes for which such closure is to be made.
TRANSMISSION OF SHARES
49(1). In the case of the death of a Member the survivor where the
deceased was a joint holder, and the legal personal representative
of the deceased who was a sole or only surviving holder, or where
such legal representative is entered in the Depository Register in
respect of the shares of the deceased Member who was a Depositor,
shall be the only person recognised by the Company as having any
title to his shares.
49(2). Nothing herein contained shall release the estate of a deceased
Member from any liability in respect of any share solely or jointly
held by him.
50. Any person becoming entitled to the legal title in a share in
consequence of the death or bankruptcy of a person whose name is
entered in the Register may upon producing such evidence of his
title as the Directors may require, have the right either to be
registered himself as the holder of the share, upon giving to the
Company notice in writing of such intent, or to make such transfer
Power ofDirectors torefuse toregister.
Notice ofrefusal to besent byCompany.
Closure of theRegister.
Transmissionof shares.
Rights ofregistrationand transferupon demiseor bankruptcyof Member.
APPENDIX I – EXTRACTS FROM THE COMPANY’S CONSTITUTION
I-11
thereof as such deceased or bankrupt person could have made, but
the Directors shall in either case have the same right to refuse or
suspend registration as they would have had in the case of such
transfer by such deceased or bankrupt person before the death or
bankruptcy, as the case may be.
51. Save as otherwise provided in this Constitution, a person becoming
entitled to a share pursuant to Regulations 49(1) and 50, shall have
the right to receive and give a discharge for any dividends or other
moneys payable in respect of the share, but he shall have no right
to receive notice or to attend or vote at General Meetings of the
Company, or (save as aforesaid) to any of the rights or privileges of
a Member until he shall have been registered as a Member in the
Register or his name shall have been entered in the Depository
Register, as the case may be, provided always that the Directors
may at any time give notice requiring any such person to elect either
to be registered himself or transfer the share, and if the notice is not
complied with within ninety days of the date of such notice, the
Directors may thereafter withhold payment of all dividends or other
moneys payable in respect of the share until the requirements of the
notice have been complied with.
PURCHASE OF OWN SHARES
52(1). Subject to and in accordance with the provisions of the Act, the
Company may purchase or otherwise acquire ordinary shares
issued by it on such terms as the Company may think fit and in the
manner prescribed by the Act.
52(2). All shares purchased by the Company shall (unless held as treasury
shares in accordance with the provisions of the Act) be deemed to
be cancelled. The Company shall not exercise any right in respect of
treasury shares other than as provided by the Act. Subject thereto,
the Company may hold or deal with its treasury shares in the manner
authorized by, or prescribed pursuant to, the Act.
STOCK
53. The Company in General Meeting may by Ordinary Resolution
convert any paid-up shares into stock and may from time to time
reconvert such stock into paid-up shares.
54. When any shares have been converted into stock the several
holders of such stock may transfer their respective interests therein
or any part of such interests in such manner as the Company in
General Meeting shall direct, but in default of any direction then in
the same manner and subject to the same regulations as and
subject to which the shares from which the stock arose might
previously to conversion have been transferred or as near thereto as
circumstances will admit. But the Directors may if they think fit from
time to time fix the minimum amount of stock transferable.
Personregisteredundertransmissionclause entitledto dividends.
Company maypurchase itsown shares.
TreasuryShares.
Conversion ofshares tostock.
Stockholdersentitled totransferinterest.
APPENDIX I – EXTRACTS FROM THE COMPANY’S CONSTITUTION
I-12
55. The several holders of stock shall be entitled to participate in the
dividends and profits of the Company according to the amount of
their respective interests in such stock and such interests shall, in
proportion to the amount thereof, confer on the holders thereof
respectively the same rights, privileges and advantages for the
purposes of voting at General Meetings of the Company and for
other purposes as if they held the shares from which the stock arose,
but so that none of such rights, privileges or advantages, except the
participation in the dividends, profits and assets of the Company,
shall be conferred by any such aliquot part of consolidated stock as
would not, if existing in shares, have conferred such rights,
privileges or advantages.
56. All such provisions of this Constitution as are applicable to paid-up
shares shall apply to stock and in all such provisions the words
“shares” shall include “stock”, and “Depositor”, “Member” and
“shareholder” shall include “stockholder”.
INCREASE OF CAPITAL
57. The Company in General Meeting may from time to time by Ordinary
Resolution, whether ail the shares for the time being issued have
been fully paid up or not, increase its capital by the creation and
issue of new shares, such aggregate increase to be of such amount
and to be divided into shares of such respective amounts as the
Company by the resolution authorising such increase shall direct.
58(1). Subject to any direction to the contrary that may be given by the
Company in General Meeting or except as permitted under the
Listing Manual, all new shares shall before issue be offered to such
persons who as at the date of the offer are entitled to receive notices
from the Company of General Meetings in proportion, as far as
circumstances permit, to the number of the existing shares to which
they are entitled. The offer shall be made by notice specifying the
number of shares offered, and limiting a time within which the offer,
if not accepted, will be deemed to be declined, and after the
expiration of that time, or on the receipt of an intimation from the
person to whom the offer is made that he declines to accept the
shares offered, the Directors may dispose of those shares in such
manner as they think fit most beneficial to the Company. The
Directors may likewise so dispose of any new shares which (by
reason of the ratio which the new shares bear to shares held by
persons entitled to an offer of new shares) cannot, in the opinion of
the Directors, be conveniently offered under this Regulation 58(1).
Stockholdersentitled toprofits.
Definitions.
Power toincreasecapital.
Issue of newshares toMembers andNotice ofissue.
APPENDIX I – EXTRACTS FROM THE COMPANY’S CONSTITUTION
I-13
58(2). Notwithstanding Regulation 58(1), the Company may by Ordinary
Resolution in General Meeting give to the Directors a general
authority, either unconditionally or subject to such conditions as may
be specified in the Ordinary Resolution, to:
(i) (a) issue shares in the capital of the Company whether by
way of rights, bonus or otherwise;
and/or
(b) 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 warrants, debentures or other instruments convertible
into shares; and
(ii) notwithstanding the authority conferred by the Ordinary
Resolution may have ceased to be in force, issue shares in
pursuance of any Instrument made or granted by the Directors
while the Ordinary Resolution was in force.
provided that:
(A) the aggregate number of shares to be issued pursuant to the
Ordinary Resolution (including shares to be issued in
pursuance of Instruments made or granted pursuant to the
Ordinary Resolution) shall be subject to such limits and manner
of calculation as may be prescribed by SGX-ST;
(B) in exercising the authority conferred by the Ordinary
Resolution, the Company shall comply with the Listing Manual
(unless such compliance is waived by the SGX-ST) and this
Constitution; and
(C) unless revoked or varied by the Company in General Meeting,
the authority conferred by the Ordinary Resolution shall not
continue in force beyond the conclusion of the Annual General
Meeting of the Company next following the passing of the
Ordinary Resolution, or the date by which such Annual General
Meeting of the Company is required by law to be held, or the
expiration of such other period as may be prescribed by the Act
whichever is the earliest.
59. Subject to any directions that may be given in accordance with the
powers contained in this Constitution, any capital raised by creation
of new shares shall be considered as part of the original capital and
all new shares shall be subject to the same provisions with reference
to the payment of calls, transfer, transmission, forfeiture, lien and
otherwise as if it had been part of the original capital.
Issue of newshares up tofifty per cent(50%).
New capitalconsideredpart of originalcapital.
APPENDIX I – EXTRACTS FROM THE COMPANY’S CONSTITUTION
I-14
ALTERATION OF CAPITAL
60(1). The Company may by Ordinary Resolution:–
(a) consolidate and divide all or any of its share capital; or
(b) cancel the number of shares which at the date of the passing of
the Ordinary Resolution have not been taken or agreed to be
taken by any person or which have been forfeited and diminish
its share capital in accordance with the Act; or
(c) sub-divide its existing shares or any of them. The Ordinary
Resolution by which the sub-division is effected may determine
that, as between the holders of the resulting shares, one or
more of such shares may have any such preferred, deferred or
other special rights or be subject to any restriction as the
Company has power to attach to unissued or new shares; or
(d) subject to the provisions of this Constitution and the Act,
convert its share capital or any class of shares from one
currency to another currency; or
(e) (notwithstanding the authority conferred by the Ordinary
Resolution may have ceased to be in force) issue shares in
pursuance of any instrument made or granted by the Directors
while the Ordinary Resolution was in force.
60(2). The Company may by Special Resolution reduce its share capital or
any other undistributable reserves in any manner and with and
subject to any requirement authorised and consent required by law.
60(3). The Company may by Special Resolution subject to and in
accordance with the Act, convert any class of shares into any other
class of shares.
MODIFICATION OF CLASS RIGHTS
61. Subject to the Statutes and save as provided by this Constitution, all
or any of the special rights or privileges attached to any class of
shares in the capital of the Company for the time being issued may,
at any time, as well before as during liquidation, be modified,
affected, altered or abrogated, either with the consent in writing of
the holders of not less than three-fourths of the issued shares of the
class or with the sanction of a Special Resolution passed at a
separate General Meeting, but so that the quorum thereof shall be
not less than two (2) persons personally present and holding or
representing by proxy one-third of issued shares of the class, and
that any holder of shares of the class, present in person or by proxy,
shall on a poll be entitled to one vote for each share of the class held
or represented by him, and if at any adjourned General Meeting of
such holders such quorum as aforesaid is not present, any two
holders of shares of the class who are personally present shall be a
quorum. The Directors shall comply with the provisions of Section
186 of the Act as to forwarding a copy of any such consent or
Resolution to the Registrar of Companies.
Alteration ofcapital.
Power toreduce capital.
Power toconvertshares.
Modification ofclass rights.
APPENDIX I – EXTRACTS FROM THE COMPANY’S CONSTITUTION
I-15
(B) RIGHTS IN RESPECT OF VOTING
GENERAL MEETINGS
66. In addition to any other General Meetings, a General Meeting shall
be held once at least in every calendar year, at such time and place
as may be determined by the Directors, but so that no more than
fifteen (15) months shall be allowed to elapse between any two such
General Meetings but in any event before the expiry of four (4)
months from the close of the financial year of the Company, or such
other period as may be prescribed under the Statutes or by the
SGX-ST from time to time. If required by the listing rules of the
Exchange, all General Meetings shall be held in Singapore, unless
prohibited by relevant laws and regulations of the jurisdiction of the
Company’s incorporation, or unless such requirement is waived by
the Exchange.
67. The abovementioned General Meetings shall be called Annual
General Meetings. All other General Meetings shall be called
Extraordinary General Meetings.
68. The First Annual General Meeting of the Company shall be held at
such time within a period of not more than eighteen months from the
date of incorporation of the Company and at such time and place as
the Directors may determine.
69. The Directors may call an Extraordinary General Meeting of the
Company whenever they think fit in accordance with the Statutes.
70. The Directors shall, on the request of the holders of not less than ten
per cent (10%) of the issued share capital of the Company upon
which all calls or other sums then due have been paid and
disregarding any of the Company’s paid-up shares held as treasury
shares, forthwith proceed to convene an Extraordinary General
Meeting of the Company, and in the case of such request the
following provisions shall have effect:–
(a) The request must state the objects of the General Meeting and
must be signed by the requestor and deposited at the Office,
and may consist of several documents in like form each signed
by one or more requestor.
(b) If the Directors do not proceed to cause a General Meeting to
be held within twenty-one (21) days from the date of the
request being so deposited, the requestor or any of them
representing more than one-half of the voting rights of all of
them may themselves convene the General Meeting, but any
General Meeting so convened shall not be held after three (3)
months from the date of the deposit.
GeneralMeetings.
AnnualGeneralMeetings.
First AnnualGeneralMeeting.
Directorsmay callExtraordinaryGeneralMeetings.
ExtraordinaryGeneralMeetingscalled onrequisition ofshareholders.
APPENDIX I – EXTRACTS FROM THE COMPANY’S CONSTITUTION
I-16
(c) In the case of a General Meeting at which a resolution is to be
proposed as a Special Resolution the Directors shall be
deemed not to have duly convened the General Meeting if they
do not give such notice as is required by the Statutes.
(d) Any General Meeting convened under this Regulation by the
requestor shall be convened in the same manner as nearly as
possible as that in which General Meetings are to be convened
by Directors.
71. Any Annual General Meeting and any Extraordinary General
Meeting at which it is proposed to pass a Special Resolution or (save
as provided by the Statutes) a resolution of which special notice has
been given to the Company, shall be called by twenty-one (21) days’
notice in writing at the least and an Annual General Meeting or any
other Extraordinary General Meeting, by fourteen (14) days’ notice
in writing at the least. The period of notice shall in each case be
exclusive of the day on which it is served or deemed to be served
and of the day on which the General Meeting is to be held and shall
be given in manner hereinafter mentioned to all Members other than
such as are not under the provisions of this Constitution entitled to
receive such notices from the Company, Provided that a General
Meeting notwithstanding that it has been called by a shorter notice
than that specified above shall be deemed to have been duly called
if it is so agreed:–
(a) in the case of an Annual General Meeting by all the Members
entitled to attend and vote thereat; and
(b) in the case of an Extraordinary General Meeting by a majority
in number of the Members having a right to attend and vote
thereat, being a majority together holding not less than ninety-
five per cent (95%) of the total voting rights of all the Members
having a right to vote at thereat.
So long as the shares of the Company are listed on the Exchange,
at least fourteen (14) days’ notice of any General Meeting shall be
given by advertisement in the daily press and in writing to the
Exchange, Provided Always that in the case of any Extraordinary
General Meeting at which it is proposed to pass a Special
Resolution, at least twenty-one (21) days’ notice in writing of such
Extraordinary General Meeting shall be given to the Exchange.
Whenever any General Meeting is adjourned for fourteen (14) days
or more, at least seven (7) days’ notice of the place and hour of such
adjourned General Meeting shall be given in like manner Provided
Always that when a General Meeting is adjourned for thirty (30) days
or more, notice of the adjourned General Meeting shall be given as
in the case of an original General Meeting.
Notice ofGeneralMeeting.
APPENDIX I – EXTRACTS FROM THE COMPANY’S CONSTITUTION
I-17
71A(1). Every notice calling a General Meeting shall specify the place and
the day and hour of the General Meeting, and there shall appear with
reasonable prominence in every such notice a statement that a
Member entitled to attend and vote is entitled to appoint a proxy to
attend and to vote instead of him and that proxy need not be a
Member.
71A(2). In the case of an Annual General Meeting, the notice shall also
specify the General Meeting as such.
71A(3). In the case of any General Meeting at which business other than
routine business is to be transacted, the notice shall specify the
general nature of such business, and if any resolution is to be
proposed as a Special Resolution, the notice shall contain a
statement to that effect.
71A(4). Any notice of a General Meeting to consider special business shall
be accompanied by a statement regarding the effect of any
proposed resolution on the Company in respect of such special
business.
71A(5). Routine business shall mean and include only business transacted
at an Annual General Meeting of the following classes, that is to
say:–
(a) declaring dividends;
(b) receiving and adopting the financial statements, the Directors’
statement, the Auditor’s report and other documents required
to be attached or annexed to the financial statements;
(c) appointing or re-appointing the Auditor and fixing the
remuneration of the Auditor or determining the manner in which
such remuneration is to be fixed; and
(d) appointing or re-appointing Directors in place of those retiring
by rotation or otherwise and fixing the remuneration of the
Directors.
72. Any Member entitled to be present and vote at a General Meeting or
his proxy may submit any resolution to any General Meeting,
provided that at least for the prescribed time before the day
appointed for the General Meeting he shall have served upon the
Company a notice in writing by him containing the proposed
resolution, and stating his intention to submit the same. The
prescribed time abovementioned shall be such that, between the
date that the notice is served and the day appointed for the General
Meeting, there shall be not less than three (3) nor more than
fourteen (14) intervening days.
Contents ofnotice ofGeneralMeeting.
Notice ofAnnualGeneralMeeting.
Nature ofspecialbusiness to bespecified andSpecialResolution tobe specified.
Statementregardingeffect ofspecialbusiness.
Routinebusiness.
Membersmay submitresolution toGeneralMeeting ongiving noticeto Company.
APPENDIX I – EXTRACTS FROM THE COMPANY’S CONSTITUTION
I-18
73. Upon receipt of any such notice as in the last preceding Regulation
mentioned, the Secretary shall include in the notice of the General
Meeting in any case where the notice of intention is received before
the notice of the General Meeting is issued, and shall in any other
case issue as quickly as possible to the Members notice that such
resolution will be proposed.
74. The accidental omission to give any notice to or non-receipt of any
notice by any Member shall not invalidate the General Meeting or
any resolution passed or proceedings at any such General Meeting.
PROCEEDINGS AT GENERAL MEETINGS
75. All business shall be deemed special that is transacted at an
Extraordinary General Meeting and also all business that is
transacted at an Annual General Meeting with the exception of the
routine business set out in Regulation 71A(5).
76. Save as is herein otherwise provided, two Members present in
person or by proxy shall be a quorum for a General Meeting and no
business shall be transacted at any General Meeting unless the
quorum is present at the commencement of the business. A
corporation being a Member shall be deemed to be personally
present if represented in accordance with the provisions of
Regulation 91.
77. If within half an hour from the time appointed for the General
Meeting a quorum is not present, the General Meeting, if convened
upon the requisition of Members, shall be dissolved; in any other
case it shall stand adjourned to the same day in the next week, at the
same time and place. At the adjourned General Meeting, any two or
more Members present in person or by proxy shall be a quorum.
78. The Chairman (if any) of the Board of Directors shall preside as
Chairman at every General Meeting, but if there be no such
Chairman, or if at any General Meeting he shall not be present within
fifteen minutes after the time appointed for holding the same, or shall
be unwilling to act as Chairman, the Members present shall choose
some Director or, if no Director be present or if all the Directors
present decline to take the chair, one of themselves to be Chairman
of the General Meeting.
79. The Chairman may with the consent of any General Meeting at
which a quorum is present (and shall if so directed by the General
Meeting), adjourn the General Meeting from time to time and from
place to place, but no business shall be transacted at any adjourned
General Meeting other than the business left unfinished at the
General Meeting from which the adjournment took place.
80(1). If required by the listing rules of the Exchange, all resolutions at
General Meetings shall be voted by poll (unless such requirement is
waived by such stock exchange).
Secretary togive notice toMembers.
Accidentalomission togive notice.
Specialbusiness.
Quorum.
If quorum notpresent.
Chairman.
Adjournment.
Mandatorypolling.
APPENDIX I – EXTRACTS FROM THE COMPANY’S CONSTITUTION
I-19
80(2). Subject to Regulation 80(1), at any General Meeting a resolution put
to the vote of the General Meeting shall be decided on a show of
hands by the Members present in person and entitled to vote, unless
before or upon the declaration of the result of the show of hands a
poll be demanded by:–
(a) the Chairman of the General Meeting; or
(b) at least five (5) Members present in person or by proxy and
entitled to vote; or
(b) a Member or Members present in person or by proxy, holding or
representing, as the case may be:–
i. not less than five per cent (5%) of the total voting rights of
all Members entitled to vote at the General Meeting; or
ii. shares in the Company conferring a right to vote at the
General Meeting being shares on which an aggregate
sum has been paid up equal to not less than five per cent
(5%) of the total sum paid up on all the shares conferring
that right.
81(1). Where a poll is taken, it shall be taken in such manner as the
Chairman directs, and the results of the poll shall be deemed to be
the resolution of the General Meeting at which the poll was taken.
The Chairman of the General Meeting may (and if required by the
listing rules of the Exchange or if so directed by the General
Meeting, shall) appoint at least one (1) scrutineer who shall be
independent of the persons undertaking the polling process and may
adjourn the General Meeting to some place in Singapore and time
fixed by him for the purpose of declaring the result of the poll.
81(2). No poll shall be taken on the election of a Chairman of a General
Meeting or on a question of adjournment. A poll taken on any other
question shall be taken at such time as the Chairman of the General
Meeting directs.
82. A demand for a poll made pursuant to Regulation 80 shall not
prevent the continuance of the General Meeting for the transaction
of any business, other than the question on which the poll has been
demanded. Unless a poll be so demanded, a declaration by the
Chairman of the General Meeting that a resolution has been carried,
or has been carried by a particular majority, or lost, or not carried by
a particular majority shall be conclusive, and an entry to that effect
in the minute book of the Company shall be conclusive evidence
thereof, without proof of the number or proportion of the votes
recorded in favour of or against such resolution. A demand for a poll
may be withdrawn only with the approval of the General Meeting.
Method ofvoting wheremandatorypolling notrequired.
Chairman’sdirection asto poll.
Declaration ofChairmanconclusive.
APPENDIX I – EXTRACTS FROM THE COMPANY’S CONSTITUTION
I-20
83(1). No objection shall be raised as to the admissibility of any vote except
at the General Meeting or adjourned General Meeting, as the case
may be, at which the vote objected to is or may be given, tendered
or cast, and every vote not disallowed at such General Meeting shall
be valid for all purposes. Any such objection shall be referred to the
Chairman of the General Meeting whose decision shall be final and
conclusive.
83(2). If any votes shall be counted which ought not to have been counted,
or might have been rejected, the error shall not vitiate the result of
the voting unless it be pointed out at the same General Meeting, or
at any adjournment thereof, and unless in the opinion of the
Chairman at the General Meeting or at any adjournment thereof as
the case may be, it shall be of sufficient importance to vitiate the
result of the voting.
84. In case of an equality of votes, whether on a show of hands or on a
poll, the Chairman of the General Meeting at which the show of
hands or poll takes place, as the case may be, shall have a second
or casting vote in addition to the vote or votes to which he may be
entitled to as a Member or as a proxy of a Member.
VOTES OF MEMBERS
85(1). Subject to and without prejudice to any special privileges or
restriction as to voting for the time being attached to any special
class of shares for the time being forming part of the capital of the
Company:–
(a) every Member who is present in person or by proxy shall have
one vote on a show of hands, provided that:–
i. in the case of a Member who is not a relevant intermediary
and is represented by two proxies, only one of the two
proxies as determined by that Member or, failing such
determination, by the Chairman of the General Meeting
(or by a person authorised by him) in his sole discretion
shall be entitled to vote on a show of hands; and
ii. in the case of a Member who is a relevant intermediary
and who is represented by two or more proxies, each
proxy shall be entitled to vote on a show of hands.
(b) every Member who is present in person or by proxy, in case of
a poll, shall have one vote for every share which he holds or
represents and upon which all calls or other sums due thereon
to the Company have been paid.
Objection toadmissibility.
In the eventof equalityof votes.
Voting rights.
APPENDIX I – EXTRACTS FROM THE COMPANY’S CONSTITUTION
I-21
85(2). For the purpose of determining the number of votes which a
Member, being a Depositor, or his proxy may cast at any General
Meeting upon a poll being called, the number of shares held or
represented shall, in relation to the shares of that Depositor, be the
number of shares entered against his name in the Depository
Register as at seventy-two (72) hours before the time appointed for
the holding of the General Meeting or adjourned General Meeting as
certified by the Depository to the Company. A Member who is
bankrupt shall not, while his bankruptcy continues, be entitled to
exercise his rights as a Member, or attend, vote or act at any
General Meeting.
86. In the case of joint holders of a share, any one of such persons may
vote and be reckoned in a quorum at any General Meeting either
personally or by proxy as if he were solely entitled thereto, but if
more than one of such persons are present at a General Meeting,
the vote of the senior who tenders a vote, whether in person or by
proxy, shall be accepted to the exclusion of the votes of the other
joint holders and, for this purpose, seniority shall be determined by
the name which stands first on the Register or, as the case may be,
the name which appears first in the Depository Register in respect of
the joint holding. Several executors or administrators of a deceased
Member in whose name any share stands shall for the purpose of
this Regulation be deemed joint holders thereof.
87. Unless the Directors otherwise determine, no person other than a
Member who shall have paid everything for the time being due from
him and payable to the Company in respect of his shares, shall be
entitled to be present or to vote on any resolution either personally
or by proxy at any General Meeting.
88. A Member who is mentally disordered, or in respect of whom an
order has been made by any Court having jurisdiction in lunacy, may
vote, whether on a show of hands or on a poll by the committee,
curator bonis, or other person in the nature of committee or curator
bonis appointed by that Court, and any such committee, curator
bonis, or other person may, on a poll, vote by proxy.
89(1). On a poll, votes may be given either personally or by proxy and a
person entitled to more than one vote need not use all his votes or
cast all the votes he uses in the same way.
89(2). Subject to this Constitution and the Statutes, the Directors may, at
their sole discretion, approve and implement, subject to such
security measures as may be deemed necessary or expedient, such
voting methods to allow Members who are unable to vote in person
at any General Meeting the option to vote in absentia, including but
not limited to voting by mail, electronic mail or facsimile.
90(1). A proxy need not be a Member.
Rights of jointholders.
Members onlyentitled to voteupon fullpayment.
Votes ofMembers whoare mentallydisordered.
Votepersonally orby proxy.
Vote inAbsentia.
Proxies.
APPENDIX I – EXTRACTS FROM THE COMPANY’S CONSTITUTION
I-22
90(2). A Member shall not be entitled to appoint more than two (2) proxies
to attend and vote at the same General Meeting, provided always
that where the Member is a Depositor, the Company shall be entitled
and bound:–
(a) to reject any instrument of proxy lodged if the Depositor is not
shown to have any shares entered against his name in the
Depository Register as at seventy-two (72) hours before the
time appointed for the holding of the General Meeting or the
adjourned General Meeting as certified by the Depository to the
Company;
(b) to accept as the maximum number of votes which in aggregate
the proxy or proxies appointed by the Depositor is or are able
to cast on a poll a number which is the number of shares
entered against the name of that Depositor in the Depository
Register as at seventy-two (72) hours before the time
appointed for the holding of the General Meeting or the
adjourned General Meeting as certified by the Depository to the
Company, whether that number be greater or smaller than the
number specified in any instrument of proxy executed by or on
behalf of that Depositor; and
(c) in determining rights to vote and other matters in respect of a
completed instrument of proxy submitted to it, to have regard to
the instructions (if any) given by and the notes (if any) set out
in the instrument of proxy.
90(3). In any case where a form of proxy appoints more than one proxy, the
proportion of the shareholding concerned to be represented by each
proxy shall be specified in the form of proxy. If no proportion is
specified, the Company shall be entitled to treat the first named
proxy as representing the entire number of shares entered against
his name in the Depository Register and any second named proxy as
an alternate to the first named or at the Company’s option to treat
the instrument of proxy as invalid.
90(4). Save as otherwise provided in the Act:–
(a) a Member who is not a relevant intermediary may appoint not
more than two (2) proxies to attend, speak and vote at the
same General Meeting. Where such Member’s form of proxy
appoints more than one proxy, the proportion of the
shareholding concerned to be represented by each proxy shall
be specified in the form of proxy; and
(b) a Member who is a relevant intermediary may appoint more
than two (2) proxies to attend, speak and vote at the same
General Meeting, but each proxy must be appointed to exercise
the rights attached to a different share or shares held by such
Member. Where such Member’s form of proxy appoints more
than two (2) proxies, the number and class of shares in relation
to which each proxy has been appointed shall be specified in
the form of proxy.
Sharesentered inDepositoryRegister.
Notes andinstructions.
Appointmentof proxies.
APPENDIX I – EXTRACTS FROM THE COMPANY’S CONSTITUTION
I-23
91. Any corporation which is a Member may, by resolution of its directors
or other governing body, authorise any person to act as its
representative at any General Meetings of the Company or any class
of Members of the Company, and such representative shall be
entitled to exercise the same powers on behalf of the corporation
which he represents as if he had been an individual shareholder.
92. An instrument appointing a proxy shall be in writing in any usual or
common form (including the form approved from time to time by the
Depository) or in any other form which the Directors may approve
and:–
92(1). in the case of an individual shall be:–
(a) signed by the shareholder or his attorney if the instrument of
proxy is delivered personally or sent by post; or
(b) authorised by that individual through such method and in such
manner as may be approved by the Directors, if the instrument
of proxy is submitted by electronic communication; and
92(2). in the case of a corporation shall be:–
(a) either given under its common seal (or by the signatures of
authorised persons in the manner set out under the Act as an
alternative to sealing) or signed on its behalf by an attorney or
a duly authorised officer of the corporation if the instrument of
proxy is delivered personally or sent by post; or
(b) authorised by that corporation through such method and in
such manner as may be approved by the Directors, if the
instrument of proxy is submitted by electronic communication.
The Directors may, for the purposes of electronic communication,
designate procedures for authenticating any such instrument, and
any such instrument not so authenticated by use of such procedures
shall be deemed not to have been received by the Company.
92(3). The Directors may, in their absolute discretion:–
(a) approve the method and manner for an instrument appointing a
proxy to be authorised; and
(b) designate the procedure for authenticating an instrument
appointing a proxy,
as contemplated in Regulations 92(1)(b) and 92(2)(b), for
application to such Members or class of Members as they may
determine, where the Directors do not so approve and designate in
relation to a Member (whether of a class or otherwise), Regulation
92(1)(a) and/or (as the case may be) Regulation 92(2)(a) shall apply.
Corporationmay appointrepresentative.
Execution ofinstrument ofproxy.
Directors mayapprovemethod andmanner, anddesignateprocedure, forelectroniccommunication.
APPENDIX I – EXTRACTS FROM THE COMPANY’S CONSTITUTION
I-24
92(4). An instrument appointing a proxy or the power of attorney or other
authority, if any:–
(a) if sent personally or by post, must be left at the Office or such
other place (if any) as is specified for the purpose in the notice
convening the General Meeting; or
(b) if submitted by electronic communication, must be received
through such means as may be specified for that purpose in or
by way of note to or in any document accompanying the notice
convening the General Meeting,
and in either case not less than seventy-two (72) hours before the
time appointed for the holding of the General Meeting or adjourned
General Meeting to which it is to be used and in default shall not be
treated as valid. The deposit of an instrument appointing a proxy
does not preclude the Member concerned from attending and voting
in person at the General Meeting, as well as for any adjournment of
the General Meeting to which it relates. In such an event, the
appointment of the proxy or proxies is deemed to be revoked by the
Member concerned at the point when the Member attends the
General Meeting.
92(5). The Directors may, in their absolute discretion, and in relation to
such Members or class of Members as they may determine, specify
the means through which instruments appointing a proxy may be
submitted by electronic communication, as contemplated in
Regulation 92(4)(b). Where the Directors do not so specify in
relation to a Member (whether of a class or otherwise), Regulation
92(4)(a) shall apply.
92(6). The instrument of proxy shall, unless the contrary is stated thereon,
be valid as well for any adjournment of the General Meeting as for
the General Meeting to which it relates, Provided that an instrument
of proxy relating to more than one General Meeting (including any
adjournment thereof) having once been so delivered for the
purposes of any General Meeting shall not require again to be
delivered for the purposes of any subsequent General Meeting to
which it relates.
93. Where an instrument appointing a proxy is signed on behalf of the
shareholder by an attorney, the letter or the power of attorney or
other authority, if any, or a duly certified copy thereof shall (failing
previous registration with the Company) if required by law, be duly
stamped and be deposited at the Office, not less than seventy-two
(72) hours before the time appointed for holding the General
Meeting or adjourned General Meeting at which the person named in
the instrument proposes to vote and in default the instrument of
proxy shall not be treated as valid.
94. The signature on an instrument of proxy need not be witnessed.
Deposit ofproxies.
Directors mayspecify meansfor electroniccommunication.
Authority tosigninstrumentappointingproxy to bedeposited withCompany.
No witnessneeded forinstrument ofproxy.
APPENDIX I – EXTRACTS FROM THE COMPANY’S CONSTITUTION
I-25
95. A vote given in accordance with the terms of an instrument of proxy
shall be valid notwithstanding the previous death of the principal or
revocation of the proxy or transfer of the share in respect of which
the vote is given, provided always that no notice in writing of the
death or revocation or transfer shall have been received by the
Company at the Office at least seventy-two (72) hours before the
time fixed for holding the General Meeting.
96. An instrument appointing a proxy shall be deemed to confer
authority to demand or join in demanding a poll, to move any
resolution or amendment thereto and to speak at the General
Meeting.
97. Where the capital of the Company consists of shares of different
monetary denominations, voting rights shall be prescribed in such
manner that a unit of capital in each class, when reduced to a
common denominator, shall carry the same voting power when such
right is exercisable.
(C) RIGHTS IN RESPECT OF DIVIDENDS
DIVIDENDS
134. Subject to any rights or restrictions attached to any shares or class
of shares and except as otherwise permitted by the Act:–
(a) all dividends shall be declared and paid in proportion to the
number of shares held by a Member but where shares are
partly paid all dividends must be apportioned and paid
proportionately to the amounts paid or credited as paid on the
partly paid shares; and
(b) all dividends shall be apportioned and paid proportionately to
the amounts so paid or credited as paid during any portion or
portions of the period in respect of which the dividend is paid,
but if any share is issued on terms providing that it shall rank for
dividend as from a particular date such share shall rank for
dividend accordingly.
For the purposes of this Regulation, no amount paid or credited as
paid on a share in advance of a call shall be treated as paid on the
share.
135. The Company in General Meeting may by Ordinary Resolution
declare a dividend on or in respect of any share to the Members
according to their rights and interest in the profits and may fix the
time for payment. No larger dividend shall be declared than is
recommended by the Directors but the Company in General Meeting
may declare a smaller dividend.
136. No dividend shall be payable except out of the profits of the
Company. No dividend shall carry interest.
When vote byproxy validthoughauthorityrevoked.
Instrumentdeemed toconferauthority.
Voting inrespect ofshares ofdifferentmonetarydenominations.
Appropriationof profits.
Declaration ofdividend.
Dividendpayable out ofprofits.
APPENDIX I – EXTRACTS FROM THE COMPANY’S CONSTITUTION
I-26
137. The declaration of the Directors as to the net profits of the Company
shall be conclusive.
138. The Directors may from time to time pay to the Members such
interim dividends as in their judgment the position of the Company
justifies provided no such dividends shall be declared more than
once in six (6) months.
139. The Directors may retain any dividends on or in respect of a share
on which the Company has a lien and may apply the same in or
towards satisfaction of the debts, liabilities, or engagements in
respect of which the lien exists.
140. A transfer of shares shall not pass the right to any dividend declared
thereon before the registration of the transfer or the entry of the
shares against the Depositor’s name in the Depository Register, as
the case may be.
141. Any General Meeting declaring a dividend may direct payment of
such dividend wholly or in part by the distribution of specific assets,
and in particular of wholly or partly paid-up shares, debentures, or
debenture stock of the Company, or wholly or partly paid-up shares,
debentures, or debenture stock of any other company, or in any one
or more of such ways.
(1) The Directors may further resolve in the case of ordinary
shares in the Company, that members entitled to such dividend
be entitled to elect to receive an allotment of ordinary shares
credited as fully paid in lieu of cash in respect of the whole or
such part of the dividend, as the Directors may think fit. In such
case, the following provisions shall apply:–
(a) the basis of any such allotment shall be determined by the
Directors;
(b) the Directors shall determine the manner in which
members shall be entitled to elect to receive an allotment
of ordinary shares credited as fully paid in lieu of cash in
respect of the whole or such part of any dividend in
respect of which the Directors shall have passed such a
resolution as aforesaid, and the Directors may make such
arrangements as to the giving of notice to members,
providing for forms of election for completion by members
(whether in respect of a particular dividend or dividends or
generally), determining the procedure for making such
elections or revoking the same and the place at which and
the latest date and time by which any forms of election or
other documents by which elections are made or revoked
must be lodged, and otherwise make all such
arrangements and do all such things, as the Directors
consider necessary or expedient in connection with the
provisions of this Regulation;
Declarationconclusive.
Interimdividend.
Debts may bededucted.
Effect oftransfer.
Dividend inspecie.
APPENDIX I – EXTRACTS FROM THE COMPANY’S CONSTITUTION
I-27
(c) the right of election may be exercised in respect of the
whole of that portion of the dividend in respect of which
the right of election has been accorded provided that the
Directors may determine, either generally or in any
specific case, that such right shall be exercisable in
respect of the whole or any part of that portion; and
(d) the dividend (or that part of the dividend in respect of
which a right of election has been accorded) shall not be
payable in cash on ordinary shares in respect whereof the
share election has been duly exercised (the “elected
ordinary shares”) and in lieu and in satisfaction thereof
ordinary shares shall be allotted and credited as fully paid
to the holders of the elected ordinary shares on the basis
of allotment determined as aforesaid for such purpose
(notwithstanding any provision of the Regulations to the
contrary), the Directors shall be empowered to do all
things necessary and convenient for the purpose of
implementing the aforesaid including, without limitation,
the making of each necessary allotment of shares and of
each necessary appropriation, capitalization, application,
payment and distribution of funds which may be lawfully
appropriated, capitalized, applied, paid or distributed for
the purpose of the allotment and without prejudice to the
generality of the foregoing the Directors may (a) capitalize
and apply the amount standing to the credit of any of the
Company’s reserve accounts or any sum standing to the
credit of the profit and loss account or otherwise for
distribution as the Directors may determine, such sum as
may be required to pay up in full the appropriate number
of ordinary shares for allotment and distribution to and
amongst the holders of the elected ordinary shares on
such basis, or (b) apply the sum which would otherwise
have been payable in cash to the holders of the elected
ordinary shares towards payment of the appropriate
number of ordinary shares for allotment and distribution to
and among the holders of the elected ordinary shares on
such basis.
(2) (a) The ordinary shares allotted pursuant to the provisions of
paragraph (1) of this Regulation shall rank pari passu in
all respects with the ordinary shares then in issue save
only as regards participation in the dividend which is the
subject of the election referred to above (including the
right to make the election referred to above) or any other
distributions, bonuses or rights paid, made, declared or
announced prior to or contemporaneous with the payment
or declaration of the dividend which is the subject of the
election referred to above, unless the Directors shall
otherwise specify.
APPENDIX I – EXTRACTS FROM THE COMPANY’S CONSTITUTION
I-28
(b) The Directors may do all acts and things considered
necessary or expedient to give effect to any appropriation,
capitalization application, payment and distribution of
funds pursuant to this Regulation, with full power to make
such provisions as they think fit in the case of fractional
entitlements to shares (including, notwithstanding any
provision to the contrary in these Regulations, provisions
whereby in whole or in part, fractional entitlements are
disregarded or rounded up or down, or whereby the
benefit of fractional entitlements accrues to the Company
rather than the members) and to authorize any person to
enter on behalf of all the members interested into an
agreement with the Company providing for any such
appropriation, capitalization, application, payment and
distribution of funds and matters incidental thereto and
any agreement made under such authority shall be
effective and binding on all concerned.
142. The Directors may retain the dividends payable upon shares in
respect of which any person is under the provisions as to the
transmissions of shares hereinbefore contained entitled to become
a Member, or which any person under those provisions is entitled to
transfer until such person shall become a Member in respect of such
shares or shall duly transfer the same.
143. In case several persons are registered in the Register or entered in
the Depository Register, as the case may be, as the holders of any
share, any resolution of the Directors or the Company in General
Meeting declaring a dividend on shares of any class may specify that
the dividend shall be payable to such persons at the close of
business on a particular date and thereupon the dividend shall be
payable in accordance with their respective holdings so registered.
Any person registered in the Register or in the Depository Register,
as the case may be, as the holder or joint holder of any share or is
entitled jointly to a share in consequence of the death or bankruptcy
of the holder may give effectual receipts for dividends, bonuses,
other moneys payable or properties distributable and payment on
account of dividends on or in respect of such shares.
144. Notice of declaration of any dividend, whether interim or otherwise,
may be given by advertisement.
145. Unless otherwise directed, any dividend may be paid by cheque,
dividend warrant or Cashiers’ Order, sent through the post to the
registered address appearing in the Register or the Depository
Register, as the case may be, of the Member or person entitled, or
where two or more persons are registered in the Register or entered
in the Depository Register, as the case may be, as joint holders or
are entitled to the dividend as a result of the death or bankruptcy of
the holder, to that one whose name shall stand first on the Register
or the Depository Register, as the case may be, in respect thereof
and every cheque, dividend warrant or Cashiers’ Order so sent shall
Power toretaindividends.
Payment toand receipt byjoint holders.
Notice ofdividend.
Payment bypost.
APPENDIX I – EXTRACTS FROM THE COMPANY’S CONSTITUTION
I-29
be made payable to the order of the person to whom it is sent or to
any person and address as such Member(s) or persons(s) may
direct in writing. The Company shall not be responsible for the loss
of any cheque, dividend warrant or Cashiers’ Order, which shall be
sent by post duly addressed to and at the sole risk of the Member or
person for whom it is intended. Payment of the cheque, dividend
warrant or Cashiers’ Order by the bank upon which they are
respectively drawn shall be a full and valid discharge to the
Company. Notwithstanding the Regulations of this Constitution,
payment by the Company to the Depository of any dividend payable
to a Depositor shall also be a full and valid discharge of the
Company from liability to the Depositor in respect of that payment to
the extent of the payment made to the Depository.
146. The payment by the Directors of any unclaimed dividends or other
moneys payable on or in respect of a share into a separate account
shall not constitute the Company a trustee in respect thereof. All
dividends remaining unclaimed after one (1) year from the date of
declaration of such dividend may be invested or otherwise made use
of by the Directors for the benefit of the Company and any dividend
unclaimed after a period of six (6) years from the date of declaration
of such dividend may be forfeited and if so shall revert to the
Company but the Directors may at any time thereafter at their
absolute discretion annul any such forfeiture and pay the dividend
so forfeited to the person entitled thereto prior to the forfeiture. If the
Depository returns any such dividend or moneys to the Company,
the relevant Depositor shall not have any right or claim in respect of
such dividend or moneys against the Company if a period of six (6)
years has elapsed from the date of the declaration of such dividend
or the date on which such other moneys are first payable. For the
avoidance of doubt no Member shall be entitled to any interest,
share of revenue or other benefit arising from any unclaimed
dividends, however and whatsoever.
BONUS ISSUE, CAPITALISATION OF PROFITS AND RESERVES
147(1). The Company in General Meeting may, upon the recommendation of
the Directors, resolve that it is desirable to capitalise any part of the
amount for the time being standing to the credit of the Company’s
reserve funds or to the credit of the profit and loss account or
otherwise available for distribution; and accordingly that such sum
be set free for distribution amongst the holders of shares in the
Register or in the Depository Register, as the case may be, who
would have been entitled thereto if distributed by way of dividends
and in the same proportions on condition that the same be not paid
in cash but be applied either in or towards paying up any amounts for
the time being unpaid on any shares held by such Members
respectively or paying up in full unissued shares or debentures of
the Company to be allotted and distributed credited as fully paid up
to and amongst such holders or to their nominees in the proportion
aforesaid or partly in the one way and partly in the other and the
Directors shall give effect to such resolution.
Unclaimeddividends.
Capitalisationof profits andreserves.
APPENDIX I – EXTRACTS FROM THE COMPANY’S CONSTITUTION
I-30
147(2). Whenever such resolution as aforesaid shall have been passed, the
Directors shall make all appropriations and applications of the
amounts resolved to be capitalised thereby and all allotments and
issues of fully paid shares or debentures, if any, and generally shall
do all acts and things required to give effect thereto with full power
to the Directors to make such provision for the satisfaction of the
right of the holders of such shares in the Register or in the
Depository Register, as the case may be, under such resolution to a
fractional part of a share by the issue of fractional certificates or by
payment in cash or otherwise as they think fit and also to authorise
any persons to enter on behalf of such holders entitled thereto or
their nominees into an agreement with the Company providing for
the allotment to them respectively credited as fully paid up of any
further shares to which they may be entitled upon such
capitalisation; and any agreement made under such authority shall
be effective and binding on all such holders and their nominees.
RESERVE FUND
148. The Directors may, before declaring any dividend or bonus in
respect of any class of shares out of or in respect of the earnings or
profits of the Company for any yearly or other period, cause to be
reserved or retained and set aside out of such sums as they may
determine to form a reserve fund to meet contingencies or
depreciation in the value of the property of the Company, or for
equalising dividends or for special dividends or for distribution of
bonuses or for repairing, improving and maintaining any of the
property of the Company, or for such other purposes the Directors
shall, in their absolute discretion, think conducive to the interest of
the Company.
Formation andobject ofReserve Fund.
APPENDIX I – EXTRACTS FROM THE COMPANY’S CONSTITUTION
I-31
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