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POSiTIONED for

GROWTH Annual Report 2013


OUR

MISSION

We are a multi-product healthcare company that serves the needs of the mother and child. We deliver the highest of quality standards in service and product offerings. We maximise all stakeholders’ value by engaging all employees to enable the Company to achieve its fullest potential.

OUR

VALUES

As a company, and as individuals working collectively, we value integrity, honesty, openness, pursuit of excellence, creativity, constructive self-criticism, continuous selfimprovement, and mutual respect. We are committed to our clients and partners, and have a passion for innovation. We embrace big challenges and pride ourselves on seeing them through. We hold ourselves accountable to our clients, shareholders, employees and regulators by honouring our commitments, providing results and striving for the highest quality.


CONTENTS

02 Corporate Profile 04 Chairman’s Message 06 CEO’s Message 08 Milestones 09 Corporate Social Responsibility 11 Financial Highlights

15 Board of Directors 18 Senior Management 19 Group Structure 20 Corporate Information 21 Corporate Governance Report 31 Financial Contents

CORDLIFE GROUP LIMITED Annual Report 2013

01


CORPORATE

PROFILE

Cordlife completed the acquisition of the cord blood and cord tissue banking businesses and assets in India, the Philippines, Hong Kong and Indonesia. 02

Positioned for growth

L

isted on the Mainboard of the Singapore Exchange Securities Trading Limited (“SGX-ST”) on March 29, 2012, we are the larger of only two private cord blood banks in Singapore and the second largest in Hong Kong^. Cordlife Group Limited (“Cordlife”, and together with our subsidiaries, the “Group”) is a dominant, pioneering and award-winning company. Homegrown in Singapore and incorporated in May 2001, we occupy a unique space in the healthcare industry, being one of the first private cord blood banks to be established in Asia. Over the past 12 years, our enterprising spirit, inspiring values and track record have firmly placed us as one of the industry leaders. Prior to our listing on SGX-ST, we demerged on June 30, 2011, from Life Corporation Limited (“LCL”) (previously known as Cordlife Limited), which is listed on the Australian Securities Exchange. The rationale was to enhance shareholder value by giving shareholders the opportunity to directly participate in the developed businesses owned by our Group which are cash-flow positive. Previously, the developing businesses owned by LCL and its subsidiaries required continued cash investments from the developed


businesses. Following the demerger, our Group owned the developed businesses in Singapore and Hong Kong, and was granted the right of first refusal (“ROFR”) to acquire LCL’s businesses in India, the Philippines and Indonesia. Cordlife subsequently completed the acquisition of the cord blood and cord tissue banking businesses and assets in India, the Philippines, Hong Kong and Indonesia from LCL in June 2013. At Cordlife, our ethos is to safeguard the future of our clients by providing a quality system and reliable cord blood banking services for parents seeking a lifetime protection for their child. Our processing and storage facilities in Singapore and Hong Kong are accredited by AABB (formerly known as American Association of Blood Banks), the world’s gold standard in cord blood banking, since 2005 and 2011 respectively. We pride ourselves on stringent, international standards in the collection, processing, testing, cryo-preservation and storage of a child’s cord blood stem cells. In July 2013, Cordlife India became the third AABB accredited facility, after Singapore and Hong Kong. In March 2011, we launched our umbilical cord tissue banking service in Hong Kong to provide parents with an additional choice of storing their child’s umbilical cord tissue, which is a rich source of mesenchymal and epithelial stem cells and may potentially help repair the body in different ways. In May 2013, Cordlife Technologies Pte Ltd (“CTPL”), a wholly-owned subsidiary of Cordlife, launched umbilical cord tissue banking service in Singapore†. Through the Group’s collaborative relationships or arrangements with major private hospitals such as Thomson Medical and Parkway East Hospital, Cordlife has continued to increase public awareness of its cord blood banking services in Singapore. The Group completed the acquisition of a 10% shareholding interest in China Cord Blood Corporation (“CCBC”), the largest cord blood banking operator in China which holds majority shares in the Beijing, Guangdong and Zhejiang Cord Blood Banks, and an approximately 20% share in Shandong Cord Blood Bank. As a testament to our pioneering status, we have achieved many other “firsts”. We were one of the first private cord blood banks in Singapore and Hong Kong to release cord blood units for transplants and other therapeutic use. In Singapore, Cordlife was the first private cord blood bank to have released cord blood units for cerebral palsy. In addition, in April 2013, Cordlife became the first private cord blood bank in Asia to have launched SEPAX® 2, a Swiss-made automated stem cell processing system that maximises automation while ensuring consistently high cell recoveries. We are honoured to be recognised for our quality services through various accolades and awards, including: Best Medical Service Award 2010 by Capital CEO Supreme Brand Awards; Top Pregnant/Baby Products Award 2011 by Pregnancy Magazine; Outstanding Financial Strength Cord Blood Bank 2012 by Quamnet Outstanding Enterprise Awards; Most Popular Brand Award 2010 – The Most Popular Cord Blood Bank by TVB Weekly; U-Choice Lifestyle Brand Award 2010 by Metroinfo FM99.7; Baby & Kid Brands Awards Year 2013, “My Favourite Cord Blood Bank” by Hong Kong Economic Times; and Baby Kingdom Top 10 Family Brand Award 2012*. In 2012, we were awarded the prestigious SIAS Investors’ Choice Awards as runner-up in the “Most Transparent Company Award 2012” New Issues Category. In August 2013, we were presented with Merit Award for the Singapore Corporate Awards 2013, “Best Investor Relations Award”.

As a testament to our pioneering status, we have achieved many other

‘firsts’

With our strong, experienced and focused management team, led by industry veterans and supported by a highly efficient and talented group of 538 staff across the region, we continue to be a trailblazer in this field.

The storage and banking of umbilical cord tissue services provided is currently not licensed by the Ministry of Health, Singapore and this service is provided on a research/clinical trial basis.

^ According to industry data found in Deloitte & Touche Financial Advisory Services Limited report dated April 10, 2013 * Awarded to Cordlife Hong Kong

CORDLIFE GROUP LIMITED Annual Report 2013

03


chairman’s

message As at June 30, 2013, the Group maintained a strong balance sheet, with cash and cash equivalents of S$23.3 million and a low gearing of 0.08 times. We are well-positioned to pursue future growth opportunities, leveraging on our strong balance sheet position. Based on the strong performance, we are pleased to propose a final, 1-tier tax exempt dividend of 1.0 S Cent, payable on November 15, 2013. This is in addition to the interim dividend of 1.0 S Cent that was distributed on April 5, 2013. The total dividend of 2.0 S Cents represented a dividend payout ratio of 34.5% for FY2013. This is line with our commitment to reward shareholders.

Dr. Ho Choon Hou

Chairman and Non-Executive Director

Quality - First and Foremost

In spite of the above financial results, the Quality of our service cannot be compromised for economic gains. In 2013, Cordlife India attained AABB accreditation, a testament to the Company’s commitment to adopting vigorous standards. With this accreditation, the Group now has 3 AABB accredited facilities, namely Singapore, Hong Kong and India. It is also for this hallmark of quality that mothers have chosen Cordlife to act as a custodian for the cord blood and tissues of their precious baby’s cells. Dear Valued Shareholders, On behalf of the Board of Directors of Cordlife, it is my pleasure to present our annual report for the financial year ended June 30, 2013. We achieved good results for the financial year, with net profit for the full year (“FY2013”) increasing by 94.7% to S$13.5 million year-on-year (YOY) on the back of healthy revenue growth, strong margins as well as a S$2.7 million one-time disposal gain. Even after the one-off disposal gain of S$2.7 million, the non-recurring costs of S$1.0 million in FY2013, and the IPO expenses of S$1.9 million recorded in FY2012 were excluded, net profit after tax would still have increased by 33.6% to S$11.8 million year-on-year.

04

Positioned for growth

Growth via Economies of Scale and Scope

We are looking to tap into the growth story of emerging Asian nations and expand our geographical footprint in Asia as part of our horizontal growth plans to derive economies of scale. In terms of our vertical growth, the Company is also transitioning into a multi-product healthcare company catering to the mother and child segment. In addition to providing cord blood and tissue banking services, the Company is looking to provide other complementary products and services that cater to the mother and child segment, which will see us benefit from economies of scope. On September 4, 2013, the Group announced that it has entered into a conditional sale and purchase agreement with certain vendors to acquire a 19.92% interest in StemLife Berhad (“StemLife”), a company listed on Bursa Malaysia for an aggregate consideration of RM29.58 million. Through


the strategic stake in StemLife, the Group will capitalise on economies of scale and scope in all its service and product offerings and potentially work with StemLife to offer its services and products to the Group’s existing markets. In addition, the Group will be able to further enhance revenue and cost synergies. On June 28, 2013, the Group announced that it has completed the acquisition of Australia-listed Life Corporation Limited’s (“LCL”) (previously known as Cordlife Limited) cord blood and cord tissue banking businesses and assets in India, the Philippines, Hong Kong and Indonesia (the “CSCT Acquisition”) for an aggregate consideration of A$5.5 million. On November 12, 2012, we completed the acquisition of 10% of issued shares in NYSE-listed China Cord Blood Corporation (“CCBC”) and the disposal of our 10% indirect stake in China Stem Cells (South) Company Limited (“CSCS”). The above transactions present Cordlife with the opportunity and platform to expand our geographical reach in the region. In addition to expanding the Group’s geographical footprint as part of the Group’s horizontal growth plans, the Company is focused on growing vertically in terms of the scope of services provided to clients, and offering complementary services to its clients. In March 2011, the Group launched umbilical cord tissue banking service in Hong Kong, offering an additional service that allows customers to collect and store their child’s umbilical cord tissue, which is a rich source of mesenchymal and epithelial stem cells and may potentially help repair the body in different ways. This new service was also launched in May 2013 in Singapore† and August 2013 in the Philippines. Leveraging on Excellent Industry Prospects

According to the latest government statistics, the total number of births in Singapore was 42,600 in 2012, representing a 7.4% increase from the 39,654 births in 2011. Total fertility rate improved from 1.2 to 1.29 over the same period1. Given the Singapore government’s push to encourage Singaporeans to marry and have children, analysts expect a perk-up in birth rates from 2014, which could benefit Cordlife2. Key initiatives in the S$2 billion Marriage & Parenthood Package rolled out in January 2013 include enhanced support for medical costs related to childbirth, such as an increase in the Baby Bonus cash scheme and extension of the Child Development Account (CDA), which many of Cordlife’s clients tap into to pay for its services.

1 2

In a report dated April 10, 2013 (the “Deloitte Report”) by Deloitte & Touche Financial Advisory Services Limited (“Deloitte”), Singapore and Hong Kong are shown to have high penetration rates of private cord blood banking at approximately 19% in 2011. In Singapore, the projected penetration level is expected to reach 26% by 2015, mainly driven by effective marketing activities by established companies, and increasing public awareness and acceptance levels. The private cord blood banking segment’s incremental cord blood storage growth is projected at a Compound Annual Growth Rate (CAGR) of 9% from 2011 to 2015. The CSCT Acquisition will enable the Company to enlarge its geographical footprint in Asia, and capitalise on the tremendous growth opportunities in these economies driven by the rising affluence of the middle-class in Asia. According to the Deloitte Report, the 2007–2011 CAGR of annual incremental storage units for private cord blood banks in Indonesia, the Philippines and India are at 38% for Indonesia, and 35% for the Philippines and India respectively. The cord blood and cord tissue banking operations in India, the Philippines and Indonesia have developed rapidly, on the back of the fast-rising middle class in these countries seeking better healthcare options for their children. In China, the penetration rate of private cord blood banking is still low at 2.2% in 2011, indicating much room to grow for the sector, which is expected to do so at a forecast CAGR of 23% by 2015, according to the Deloitte Report. The China’s middleclass population is estimated to grow from 290 million in 2011 to a projected 590 million by 2025, which means a progressively larger customer pool for cord blood bank operations. A Word of Appreciation

On behalf of the Board of Directors, I would like to express my appreciation to our business partners, associates and longterm and existing shareholders for their support. We will also like to thank our management and staff for their dedication throughout the year. I am grateful to my fellow Board members for their advice and guidance in the past year. Last but not least, I would also like to extend my sincere thanks to parents who have entrusted their babies’ cord blood and cord tissue with us.

The storage and banking of umbilical cord tissue services provided is currently not licensed by the Ministry of Health, Singapore and this service is provided on a research/clinical trial basis. Source: Department of Statistics, Singapore Web Site. http://www.singstat.gov.sg/statistics/latest_data.html#16. Accessed September 25, 2013. Source: The Straits Times, January 21, 2013, “White Paper ‘to benefit property, transport’” CORDLIFE GROUP LIMITED Annual Report 2013

05


ceo’s

message Selling and marketing expenses increased by 12.9% or S$0.9 million, to further raise clients’ awareness for the purpose of client acquisition. Administrative expenses increased by 11.3% or S$1.0 million. In FY2012, the Group had incurred an amount of S$1.9 million relating to IPO expenses. Excluding the IPO expenses, administrative expenses increased by 40.4% or S$2.9 million from S$7.3 million in FY2012 to S$10.2 million in FY2013. This was due to approximately S$1.0 million of one-time non-recurring costs consisting of S$0.5 million of professional fees, S$0.3 million in travel expenses relating to the launch of umbilical cord tissue banking service and S$0.2 million relating to the move to the new office premise. There was also an increase in headcount and staff cost, as well as an increase in compliance costs. In addition, as a growth company, the Group has been stepping up its expansion and client acquisition plans, which incurred higher administrative and selling and marketing expenses.

Mr. Yee Pinh Jeremy

Executive Director and Chief Executive Officer

Net profit after tax jumped 94.7% from S$6.9 million in FY2012 to S$13.5 million in FY2013. Excluding the one-off disposal gain of S$2.7 million and one-time non-recurring costs of S$1.0 million in FY2013, and the IPO expenses of S$1.9 million recorded in the income statement in FY2012, net profit after tax would still have increased by 33.6% year-on-year. As at June 30, 2013, the Group maintained a strong balance sheet, with cash and cash equivalents of S$23.3 million and a low gearing of 0.08 times. This provides the Group with strong headroom for future growth. Net Asset Value (NAV) increased close to 9.0% at 33.33 S Cents as at June 30, 2013, as compared to 30.58 S Cents as at June 30, 2012.

Dear Valued Shareholders,

On behalf of the Board and Management, I am pleased to present Cordlife’s FY2013 performance and operations review. Financial Review

Revenue increased by 14.6% from S$30.3 million in FY2012 to S$34.7 million in FY2013. The increase in revenue was due mainly to an increase in the number of client deliveries, from approximately 7,200 in FY2012 to 7,700 in FY2013. The rise in client deliveries was due to an increase in awareness of the benefits of cord blood and tissue banking. This was a result of the Group’s undertaking of more educational outreach programmes. Gross profit increased by 17.6% or S$3.8 million due to the increase in new client deliveries. Gross profit margin increased slightly from 71% in FY2012 to 73% in FY2013. Cost of sales increased by 7.2%, in line with the increase in revenue. The Group’s share of results of associates increased by 31.7% or S$0.6 million. This was derived from a four-month contribution from the Group’s 10% indirect shareholding in CSCS and an eight-month contribution from the Group’s 10% direct stake in CCBC. As a result of the Group’s disposal of CSCS, in November 2012, the Group realised a gain of approximately S$2.7 million.

06

Positioned for growth

Building for the Future

While the Group continues to seek opportunities for expansion, the Group still remains focused on delivering the highest quality standards to its clients. In July 2013, the Group’s Indian subsidiary, Cordlife Sciences India Pvt. Ltd. attained accreditation from AABB, an international, not-for-profit association representing individuals and institutions involved in the field of transfusion medicine and cellular therapies. It has been granted the International Certificate of Accreditation for activities relating to the processing, storage and distribution of cord blood. With this AABB accreditation, the Group is confident of further increasing our share of the private cord blood banking business in the fast growing Indian market. We officially launched Asia’s largest private cord blood storage facility with the inauguration of its new premises at A’Posh Bizhub in Yishun in April 2013. Our new, larger cord blood processing and storage facility in Singapore has the storage capacity to house up to 650,000 cord blood units, making it the largest private cord blood storage facility in Asia. Our first and foremost mandate is to serve parents who seek a lifetime protection for their children through the storage of their children’s umbilical cord blood and tissue units. We understand the importance of saving something so precious and take great care to adhere to stringently-monitored protocols.


The new facility also enables us to further entrench our leadership position in the industry and benefit from economies of scale. In addition, the 23,000 square feet facility is also the first private facility in Asia to adopt Sepax® 2, a Swiss-made automated stem cell processing system that maximises automation while ensuring consistently high cell recoveries. We own our own local cord blood storage and processing facilities in the various countries of operation. The facility in Singapore is fully-owned; while facilities in other countries have long term leases locked-in. As a result, the Group is able to drive long-term fixed costs downwards, thereby maintaining high, consistent margins. This will also allow us more headroom for growth as we expand in Singapore and in overseas markets. In addition, the matching of local operating costs with local operating revenue serves as a natural hedge for foreign currency exposure. In March 2011, the Group launched umbilical cord tissue banking service in Hong Kong, offering an additional service that allows customers to collect and store their child’s umbilical cord tissue, which is a rich source of mesenchymal and epithelial stem cells and may potentially help repair the body in different ways. In May 2013, Cordlife Technologies Pte Ltd (“CTPL”), a whollyowned subsidiary of Cordlife Group, launched umbilical cord tissue banking service in Singapore†. In Hong Kong and Singapore, the provision of umbilical cord tissue banking service† that we launched in March 2011 and May 2013 respectively, has been met with healthy market acceptance. We will leverage on our strong position of being amongst the market leaders for private cord blood banks in this territory to deepen our market penetration for both cord blood banking and umbilical cord tissue banking. We recently announced the proposed acquisition of a 19.92% interest in StemLife Berhad on September 4, 2013, which will enable us to capitalise on the tremendous growth opportunities in Malaysia driven by rising affluence and greater health awareness. We also unlock value for our shareholders with our agreements with NYSE-listed CCBC by disposing our 10% indirect equity stake in CSCS, which holds the entire equity interest in Guangzhou Municipality Tianhe Nuoya Bio-engineering Co., Ltd. (“Guangzhou Tianhe Nuoya”). The remaining 90% equity interest in CSCS is currently indirectly held by CCBC. The proceeds of this disposal, in addition to approximately US$ 4 million, was then re-invested into CCBC, the largest cord blood banking operator in the People’s Republic of China (“PRC”).

The completion of the acquisition of Australia-listed Life Corporation Limited’s (“LCL”) (previously known as Cordlife Limited) cord blood and cord tissue banking businesses and assets in India, the Philippines, Hong Kong and Indonesia represents another key milestone in our Group’s expansion plans, in line with Cordlife’s strategy to expand its geographical reach in Asia. The transactions are accretive going forward and allow Cordlife to expand our Asian geographical footprint in Asia and leverage on the strong growth in these nations. Looking Ahead

Moving forward, we actively seek opportunities to broaden our service offerings and expand our geographical coverage in the region through strategic acquisitions and partnerships with similar businesses that are profitable and form a good fit with Cordlife’s culture and standards. The new offering, umbilical cord tissue banking service, launched on Mother’s Day on May 12, 2013, was the first such service to be launched in Singapore. As an industry leader in newborn stem cell banking and the larger of only two cord blood banking service providers in Singapore, we are pleased to be the first to offer expectant parents here the additional option of storing their children’s precious stem cells from cord tissue. Launching this new offering with our long-time esteemed partner, Thomson Medical, was in line with Cordlife’s plans to grow via complementary services and through partnerships and collaborations. This service was also subsequently offered to the rest of the hospitals in Singapore 2 months later. Overall, we remain focused on our key strategy to grow through collaborative networks, accretive acquisitions and providing secondary and complementary services. Apart from forging closer ties with CCBC through mutually beneficial relationships, we have arrangements with major private hospitals and clinics in all countries that the Group operates in. Cordlife is currently transitioning into a multi-product healthcare company, with new products in the pipeline catering to the mother and child segment, on top of its existing core businesses in cord blood banking and umbilical cord tissue banking. Growth is only possible through the interaction of economies of scale and scope, where product adjacencies are expounded through common operating leverage. Based on this growth strategy, the Group will be on the lookout for strategic but accretive acquisitions and partnerships in the region. Going forward, the Group is cautiously optimistic that its strong market position and brand equity, coupled with favourable industry factors, will benefit the Group in the next 12 months. Barring any unforeseen circumstances, the Group expects to remain profitable for FY2014.

The storage and banking of umbilical cord tissue services provided is currently not licensed by the Ministry of Health, Singapore and this service is provided on a research/clinical trial basis. CORDLIFE GROUP LIMITED Annual Report 2013

07


MILESTONES In January 2012, began the process of establishing a branch office in Shenzhen to undertake marketing activities in Guangdong province

Due to strong growth in demand for Cordlife’s cord blood banking services, the Group moved to its fully-owned, 23,000sqft office and laboratory facility in A’Posh Bizhub, Yishun. The facility is capable of storing up to 650,000 cord blood units

Entered into a subscription agreement to invest S$1.5 million in CS Cell Technologies Pte. Ltd., which holds 85% of Cordlife Sciences India Pvt. Ltd.

Launched Cordlife Care360° Shield programme in Singapore First in Asia to introduce SEPAX® 2 automated processing technology to Singapore market

Listed on Mainboard of SGX-ST on March 29, 2012

LISTED on

SGX-ST

Acquired 10% of CCBC and disposed 10% indirect equity stake in Guangzhou Tianhe Nuoya. CCBC is listed on the NYSE and China’s largest cord blood banking operator

2013 2012

Launched provision of umbilical cord tissue banking services in Singapore in May 2013 under its wholly-owned subsidiary, Cordlife Technologies Pte Ltd. The storage and banking of umbilical cord tissue services provided is currently not licensed by the Ministry of Health, Singapore and this service is provided on a research/clinical trial basis Completed the acquisition of the cord blood and cord tissue banking businesses and assets in India, the Philippines, Hong Kong and Indonesia from LCL (previously known as CBB) in June 2013 India facility accredited by AABB in July 2013

Awarded SIAS Investors’ Choice Awards: Runner-up in the “Most Transparent Company Award 2012” New Issues Category First in Hong Kong to release a cord blood unit for treatment of neuroblastoma in January 2011 Launched provision of umbilical cord tissue banking services in Hong Kong in March 2011 Launched Hong Kong facility at Hong Kong Science Park to cater to growth in demand

2011

Hong Kong facility accredited by AABB in October 2011

First in Singapore to release a cord blood unit for treatment of neuroblastoma in March 2010 Cordlife Hong Kong and 10% indirect stake in Guangzhou Tianhe Nuoya were transferred to the Group in 2010 On October 30, 2009, CBB invested 10% indirect equity stake in Guangzhou Tianhe Nuoya, a company engaged in providing cord blood banking services in Guangdong province

Cordlife demerges from CBB on June 30, 2011; entered into ROFR agreement to acquire relevant businesses in Indonesia, the Philippines and India Launched Cordlife Care360° Safeguard programme in Singapore

2010 2009

First in Singapore to release a cord blood unit for cerebral palsy in September 2009

Launched Singapore facility in April 2008 at Science Park II location due to strong growth in demand for Cordlife’s cord blood banking services Cygenics Limited was renamed Cordlife Limited (“CBB”) in June 2007 Cordlife Hong Kong achieved ISO:9001 in August 2007

2008 2007 2005

Holding company Cygenics Limited listed on Australian Securities Exchange in June 2004 Cordlife expanded cord blood banking facility in Singapore at Camden Medical Centre in September 2004

Cordlife became the first private cord blood bank in Singapore to release a cord blood unit in November 2002

08

Positioned for growth

Singapore facility obtained its AABB accreditation in September 2005

2004 2003

Cordlife received licence to operate from Ministry of Health, Singapore in June 2002

Entered Hong Kong and the PRC markets, Cordlife began operating through Cordlife Hong Kong in March 2005

Merged with Cytomatrix LLC in April 2003

2002 2001

Company incorporated on May 2, 2001


CORPORATE

SOCIAL RESPONSIBILITY

Cordlife supported LLF’s walkathon in May 2013.

A

t Cordlife, we care about and share parents’ interest in alleviating the pain and suffering of their children stricken with illnesses. We understand the pain that parents experience when their child has been diagnosed with a life-threatening illness; and the joy when their child has been given a new lease of life with a stem cell transplant. Values like caring for others and treasuring lives are embedded deeply into all of us at Cordlife. By initiating and partaking in Corporate Social Responsibility (“CSR”) activities, it is our hope that we will be able to contribute to the bettering of our communities.

Cordlife Group’s participation in Leukemia & Lymphoma Foundation Walkathon During the year in review, Cordlife Group Limited adopted Leukemia & Lymphoma Foundation (“LLF”) as its official charitable organisation. The foundation aims to help subsidise the costs or needy patients who have been diagnosed with leukaemia and lymphoma and help them to a complete cure. It also establishes patient-care groups and provides counseling and support to the patients and their families. In May 2013, Cordlife participated as a main sponsor for the LLF Walkathon, contributing a total of S$29,845. Held at the Singapore Zoo, the event was a successful one as it managed to garner its target of 1,150 participants. The proceeds raised will be used to help pay for either fully or in part, all costs related to treatment of leukemia, lymphoma and similar blood-related disorders including high costs of transplant, chemotherapy as well as specific drug costs. LLF had its humble beginnings in 2003 when it helped one lymphoma patient regain his life. Today, the foundation has

been able to help more than 400 needy cases and the numbers are growing. Unlike most cancers, leukemia and lymphoma tend to affect patients in the prime of their lives and impose heavy economic burdens on both patients and their families. The financial impact on survivors can be devastating if they are not employed, do not have adequate health insurance or do not have savings or other financial resources. The cost of cancer care is particularly high for those who require expensive long-term care, including rehabilitation or long stays in a hospital. Cordlife hopes that with its contribution to LLF, the awareness of blood cancer and blood disorders in Singapore will be raised and assist the LLF patients. Hong Kong Children’s Skin Foundation Wine Auction Charity Dinner For a second consecutive year, Cordlife Hong Kong, a subsidiary of the Group, participated in the Hong Kong Children’s Skin Foundation (“HKCSF”) Wine Auction Charity Dinner held in June 2013. Together with HKCSF, a total of HK$350,000 was raised. The funds raised will be used for the establishment and support the operation of an Advanced Skin, Scar and Wound Care Centre dedicated to the clinical support of children in Hong Kong. This dedicated centre will be the first of its kind in Asia to focus on chronic, disabling conditions that result in wounds and scars and other congenital skin conditions that cause a significant reduction in the quality of life of patients and families. Examples of such conditions are epidermolysis bullosa, which causes repeated wounds and constant pain, severe keloid and post-burn scars that limit function, and congenital skin conditions such as giant hairy naevae and hamartomas. It is our hope that our support in the HKCSF Wine Auction Charity Dinner will go a long way to help the Foundation establish an Advanced Skin and Wound Care Centre in Hong Kong. CORDLIFE GROUP LIMITED Annual Report 2013

09


GROWING

OUR financials Tapping into growth story of emerging Asian nations, expanding our geographical footprint in Asia. Redefining our space to the mother and child segment.

10

Positioned for growth


FINANCIAL

HIGHLIGHTS increasing revenue and profits FY 2009

FY 2010

FY 2011

FY 2012

FY 2013

Total Revenue (S$’ mil)

23.2

29.0

26.7

30.3

34.7

Gross Profit (S$’ mil)

17.0

21.4

19.3

21.5

25.3

Gross Profit Margin (%)

73.3

73.6

72.2

71.1

73.0

Net Profit excluding one-off items* (S$’ mil)

6.5

8.4

8.5

8.8

11.8

Earnings per Share (S Cents)

4.10

5.48

5.62

4.03

5.80

*One-off items include a disposal gain of S$2.7 million and one-time non-recurring costs of S$1.0 million in FY2013 and IPO expenses of S$1.9 million recorded in the income statement in FY2012

Rising Revenue: Primarily driven by increase in number of client deliveries, due to successful educational efforts that raised awareness of the benefits of private cord blood banking services.

CAGR=8.4%

S$’mil 40

34.7

35

29.0

30 25

23.2

26.7

30.3

20 15 10 5 0

FY 2009

FY 2010

FY 2011

FY 2012

FY 2013

Gross Margin increased slightly from 71% in FY2012 to 73% in FY2013. Gross Margin remained high and stable, averaging 72.6% for the past five years from FY2009 to FY2013.

CAGR=8.3%

S$’mil 30

25.3

25 20

21.4 17.0

19.3

21.5

15 10 5 0

FY 2009

FY 2010

FY 2011

FY 2012

FY 2013

CORDLIFE GROUP LIMITED Annual Report 2013

11


FINANCIAL

HIGHLIGHTS Increasing Profitability: Full year net profit up on the back of healthy revenue growth, strong margins as well as a S$2.7 million one-time disposal gain

CAGR=15.7%

S$’mil

13.5

14 12 10 8 6

8.4

8.5

FY 2010

FY 2011

6.5

6.9

4 2 0

FY 2009

FY 2012

FY 2013

Increasing Profitability: Even excluding one-off items, net profit grew 33.6% in FY2013

CAGR=12.7% S$’mil

11.8**

12 10 8 6

8.4

8.5

8.8*

FY 2010

FY 2011

FY 2012

6.5

4 2 0

FY 2009

FY 2013

* For a consistent full-year comparison, FY2012 net profit is shown here without one-off IPO expenses recorded in the income statement in FY2012. Including IPO expenses, FY2012 net profit would amount to S$6.9 million ** For a consistent full-year comparison, FY2013 net profit is shown here without one-off disposal gain of S$2.7 million and one-time non-recurring costs of S$1.0 million. Including the one-off items, FY2013 net profit would amount to S$13.5 million

Rising Equity: Over the past 5 financial years, NAV/share has grown at a 13.2% CAGR

CAGR=13.2%

S$’mil 35 30 25 20

26.9 17.9

30.6

33.3

21.9

15 10 5 0

12

FY 2009

Positioned for growth

FY 2010

FY 2011

FY 2012

FY 2013


Strong Balance Sheet with Headroom for Growth: Well-poised for further market penetration and expansion at home and overseas As at June 30, 2013

S$ ’000

Cash and cash equivalents*

23,328

Total Assets

120,449

Total Liabilities

42,886

Total Equity

77,563

Gearing Ratio**

0.08x

*Inclusive of S$15.0 million in fixed deposits, S$0.3 million in short term investments and exclusive of pledged fixed deposits of S$0.3 million **Book value of debt/Total book value of equity

Dividends: Exceeded the intended distribution of dividends of at least 25% of FY2011 and FY2012 profits attributable to shareholders for FY2012 and FY2013

A TOTAL dividend of 2.0 S Cents per ordinary share for FY2013

A FINAL dividend of 1.0 S Cent^

Payable on November 15, 2013

An INTERIM dividend of 1.0 S Cent

Paid out on April 5, 2013

^ Subject to approval from shareholders at the Annual General Meeting.

CORDLIFE GROUP LIMITED Annual Report 2013

13


Growing our

people

Guided by strong leadership and set with clear directions and strategies, together with vast experience and knowledge, the Group is poised for growth.

14

Positioned for growth


board of

directors

1

2

1. Dr. Ho Choon Hou Chairman and Non-Executive Director

2. Mr. Yee Pinh Jeremy Executive Director and Chief Executive Officer

Dr. Ho Choon Hou was appointed as a Director of the Company in June 2011. Dr. Ho is currently an Executive Director at Southern Capital Group Limited, a private equity firm, where he is responsible for the origination and execution of investments.

Mr. Yee Pinh Jeremy was appointed the Chief Executive Officer of the Company in June 2011. He has been an Executive Director of the Company since January 2004. As Executive Director and Chief Executive Officer, Mr. Yee is responsible for identifying and implementing company-wide business growth strategies and organisational structures, and directly oversees all aspects of the Group’s growth and operating functions. With the Company’s 10% acquisition of China Cord Blood Corporation (“CCBC”) in November 2012, Mr. Yee was nominated by the Company to sit in the Board of Directors of CCBC as an independent director.

Dr. Ho graduated with a Bachelor of Medicine & Bachelor of Surgery (Honours) from The University of Sheffield, as well as a Master of Medicine (Surgery) from the National University of Singapore. He also obtained his Master of Business Administration (Honours) from The University of Chicago (The Graduate School of Business). Dr. Ho is an Independent Director of Advanced Holdings Ltd. and Mclean Bhd.

Mr. Yee was the Chief Financial Officer of Life Corporation Limited (“LCL”) (previously known as Cordlife Limited) prior to the demerger from LCL in June 2011. From 2004 to 2011, Mr. Yee was directly responsible for LCL’s financial function, including statutory filings, accounting audits, finance controls and treasury. From 2002 to 2003, Mr. Yee was Director of Corporate Development and later Chief Operating Officer of our Company, where he was responsible for its overall corporate development activities. Mr. Yee obtained his Bachelor of Arts in Economics and Social Studies from Victoria University of Manchester in 1994. He also holds a Bachelor of Commerce (Prof Accounting) and a Master of Commerce received from the Murdoch University in 2009 and University of Sydney in 1996, respectively. In addition, Mr. Yee also holds a Master of Business Administration obtained from the Nanyang Technological University in 2011 in which he also received the 2011 Furama Ltd Endowed Book Prize Award. He also obtained a Master of Business Administration from the University of Chicago Booth School of Business in 2012. Mr. Yee was last re-elected as a Director in October 2012. CORDLIFE GROUP LIMITED Annual Report 2013

15


board of

directors

3

4

3. Ms. Jin Lu Non-Executive Director

4. Mr. Ho Sheng Lead Independent Director

Ms. Jin Lu was appointed as a Director of the Company in July 2011. From 2000 to 2012, Ms. Jin was Executive Director of Golden Meditech Holdings Limited, where she was responsible for the general administration and daily operations of the company.

Mr. Ho Sheng was appointed as a Director of the Company in July 2011. He is also an independent director of SingaporeListed Ying Li International Real Estate Limited. In addition, Mr. Ho is a member of the International Advisory Panel and Strategic Advisor to global IT company, HCL Limited.

Ms. Jin obtained her Bachelor in Foreign Language and Executive Master of Business Administration from the Beijing International Studies University (北京第二外国语学院) and Peking University (北京大学) in 1987 and 2005 respectively.

In 2003, Mr. Ho co-founded EMBA Club Ltd, Beijing, and was responsible for spearheading and executing projects undertaken by Chinese state-owned enterprises. From 2001 to 2003, he was Senior Vice President, Investments, at Citigroup Global Markets Singapore Pte. Ltd., where he provided investment advisory services to government-linked companies located in Singapore, government ministries and agencies as well as corporations and institutions around the ASEAN region. From 1990 to 1997, Mr. Ho was Executive Director and Board Member at UBS Warburg & Associates (Singapore) Pte Ltd, where he was responsible for marketing securities to large institutional clients and the reporting functions of the company to the SGX-ST and the Monetary Authority of Singapore. Mr. Ho obtained his Bachelor of Economics from the University of Tasmania in 1987. He also holds a Master of Applied Finance from the Macquarie University. In addition, Mr. Ho is also an Associate of The Institute of Chartered Secretaries and Administrators, United Kingdom, and Senior Associate of the Financial Services Institute of Australasia. Mr. Ho was last re-elected as a Director in October 2012.

16

Positioned for growth


5

6

5. Dr. Goh Jin Hian Independent Director

6. Mr. Ng Tiak Soon Independent Director

Dr. Goh Jin Hian was appointed as a Director of the Company in July 2011. Dr. Goh is currently Executive Consultant of ParkwayHealth, Singapore, a position he held since April 2011, where he advises and assists in hospital and other projects. He is currently the Executive Director of IAG Healthsciences Pte Ltd and IAG-Pacific Group Pte Ltd, where he is responsible for overseeing the business and strategic directions of the companies. The former company operates complementary Chinese medicine facilities and sets up clinic management systems in Singapore and China, whilst the latter company is in the oil and gas industry, focusing on oil trading and ship management.

Mr. Ng Tiak Soon was appointed as a Director of the Company in November 2011. He retired in June 2005 as a senior partner of Ernst & Young LLP, where he had joined since 1986, and later, he remained with Ernst & Young LLP as a Senior Advisor until June 2008. During his tenure with Ernst & Young LLP, he held various positions which include Head of Banking, Head of an audit group, Partner-in-charge of audit quality review and Chief Financial Officer.

Dr. Goh obtained his Bachelor of Medicine and Bachelor of Surgery from the National University of Singapore in 1992. He also holds a Master of Business Administration from The University of Hull. In addition, Dr. Goh completed The Wharton Advanced Management Program in 2005.

Mr. Ng is an independent director of 800 Super Holdings Limited and St James Holdings Limited. He is currently a non-practicing member of the Institute of Certified Public Accountants as well as a member of Association of Chartered Certified Accountants, United Kingdom, and a member of the Singapore Institute of Directors. Mr. Ng previously held directorship in Kinergy Ltd. Mr. Ng ceased to be a director of Kinergy Ltd when it was delisted from the Catalist Board of the SGX-ST on March 22, 2013.

CORDLIFE GROUP LIMITED Annual Report 2013

17


senior

management Ms. Thet Hnin Yi Chief Financial Officer Ms. Thet Hnin Yi is responsible for all areas of financial and accounting functions of our Group, including financial reporting, management reporting and budgeting. Her job scope also includes supporting the senior management team in their strategic decision making process, as well as any pricing, marketing, corporate finance and corporate risk management policies undertaken by them. She liaises with external auditors in relation to the auditing and accounting matters of our Group. Ms. Thet joined our Group in June 2011, following the demerger of our Company from Life Corporation Limited (“LCL”) (previously known as Cordlife Limited). She had joined LCL in December 2007 as Senior Finance Manager, where, inter alia, she supported the senior management team in their strategic decision making process and corporate risk management of the business. Prior to joining LCL, Ms. Thet held various positions at Ernst & Young LLP from 2001 to 2007, including the position of Audit Manager and with her last position as a Training Manager where she was responsible for providing training to audit assistants and seniors. From 1997 to 2001, she also held various positions at Tan Wee Tin & Co., her last position being Audit Supervisor, where she was responsible for the auditing of small and medium enterprises and multinational companies. Ms. Thet obtained her Diploma in Accountancy from Ngee Ann Polytechnic in 1997. She is also a fellow of The Association of Chartered Certified Accountants, United Kingdom, and a non-practising member of the Institute of Certified Public Accountants of Singapore. Ms. Gwendolene Yeo Teck Geok Senior Director, Singapore and Hong Kong Ms. Gwendolene Yeo Teck Geok is responsible for all functional and business units for the Cordlife businesses in Singapore and Hong Kong. Prior to joining our Group in December 2002 as Clients Relations Executive, where her job scope included counselling direct consumers with regards to the benefits of cord blood banking, she was Project Manager and subsequently Senior Project Manager at Equinox Art & Design Pte Ltd from June 2000 to December 2002, where she was responsible for the business development functions of the company.

18

Positioned for growth

From July 1998 to January 2000, Ms. Yeo was a Presentation Scheduler at ESPN Star Sports, where she co-ordinated and ensured compliance of all on-air promo scheduling with in-house rules and regulations along with advertisers’ requirements as per the contractual agreements. Ms. Yeo obtained her Diploma in Mass Communication from Ngee Ann Polytechnic in 1998. She also holds a Bachelor in Arts from the Royal Melbourne Institute of Technology, which she received in 2000, where she was top student in her cohort. Mr. Jonathan Liau Yen San Senior Director, India, Indonesia and Philippines Mr. Jonathan Liau is responsible for all functional and business units within India, Indonesia and the Philippines operations of our Company. He was appointed in September 2013 as Senior Director, responsible for the businesses in India, Indonesia and the Philippines, following the completion of the Group’s acquisition of LCL’s cord blood and cord tissue banking businesses and assets in India, the Philippines, Hong Kong and Indonesia. Prior to that, he served as LCL’s Chief Operating Officer. He had joined LCL in 2004 as Business and Technology Development Executive, where he was responsible for its technology division. In 2006, he was promoted to Business and Technology Development Manager, in-charge of all technology and quality assurance projects for the Hong Kong market. He took on the roles of Head of Business Development and Corporate Development Director in 2008 and 2010 respectively before becoming LCL’s Chief Operating Officer, 2011. Mr. Liau obtained his Master of Biochemical Engineering with Bioprocess Management from University College London, United Kingdom, in 2004. In addition to being awarded first class honours and Dean’s list at his time in University College in London, he also obtained the Lonza Biologics Prize for best bioprocess studies in 2002 and the Kitson Prize, 2004, for outstanding graduating student. He also obtained the Master of Business Administration from University of Chicago, Booth School of Business, United States in 2013.


group

structure CORDLIFE GROUP LIMITED

• Incorporated in Singapore • Listed on the Mainboard of the Singapore Stock Exchange Securities Trading Limited

Cordlife Technologies Pte Ltd (formerly known as CLS Services Pte Ltd)

Cordlife (Hong Kong) Limited

• Incorporated in Singapore • 100% owned by Cordlife Group Limited

• Incorporated in Hong Kong • 100% owned by Cordlife Group Limited

Shanghai Cordlife Biomedical Research Co., Ltd

China Cord Blood Corporation

CS Cell Technologies Pte Ltd

Cordlife Stem Cell Technology Ltd

• Incorporated in the People’s Republic of China • 100% owned by Cordlife Group Limited

• Incorporated in Singapore • 100% owned by Cordlife Group Limited

• Listed on New York Stock Exchange • 10% interest by Cordlife Group Limited

• Incorporated in Hong Kong • 100% owned by Cordlife Group Limited

Cordlife Sciences (India) Pvt Ltd

• Incorporated in India • 85% owned by CS Cell Technologies Pte Ltd

Cordlife Medical Phils Inc

• Incorporated in the Philippines • 99.99% owned by CS Cell Technologies Pte Ltd

CORDLIFE GROUP LIMITED Annual Report 2013

19


corporate

information

BOARD OF DIRECTORS:

INDEPENDENT AUDITORS:

Dr. Ho Choon Hou (Chairman and Non-Executive Director) Mr. Yee Pinh Jeremy (Executive Director and Chief Executive Officer) Ms. Jin Lu (Non-Executive Director) Mr. Ho Sheng (Lead Independent Director) Dr. Goh Jin Hian (Independent Director) Mr. Ng Tiak Soon (Independent Director)

Ernst & Young LLP Public Accountants and Chartered Accountants One Raffles Quay North Tower, Level 18 Singapore 048583

COMPANY SECRETARIES: Ms. Ang Siew Koon, ACIS Ms. Low Siew Tian, ACIS REGISTERED OFFICE: 1 Yishun Industrial Street 1 A’Posh Bizhub, #06-01 / 09, Singapore 768160 http://www.cordlife.com REGISTRATION NUMBER: 200102883E SHARE REGISTRAR AND SHARE TRANSFER OFFICE: Tricor Barbinder Share Registration Services 80 Robinson Road #02-00 Singapore 068898

Partner-in-charge: Mr. Terry Wee Hiang Bing (appointed since financial year ended June 30, 2013) SOLICITORS TO THE COMPANY: WongPartnership LLP 12 Marina Boulevard Level 28 Marina Bay Financial Centre Tower 3 Singapore 018982 BANKERS: DBS Bank Ltd. Malayan Banking Berhad - Singapore Branch INVESTOR RELATIONS: Mr. Kamal Samuel / Mr. Gabriel Tan Financial PR Pte Ltd No. 4 Robinson Road, #04-01 The House of Eden Singapore 048543 Tel: (65) 6438 2990

The initial public offering of Cordlife Group Limited’s shares was sponsored by PrimePartners Corporate Finance Pte. Ltd. (“Issue Manager”). The Issue Manager assumes no responsibility for the contents of this Annual Report.

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Positioned for growth


corporate

governance report

CORDLIFE GROUP LIMITED (the “Company”) recognises the importance of good corporate governance practice to the healthy growth of the Company and its subsidiaries (the “Group”) and is committed to high standards of corporate governance within the Group to advance its mission to create value for the Group’s customers and shareholders. This Corporate Governance Report describes the Group’s corporate governance practices and sets out the manner in which the Group has applied the principles and the extent of compliance with the guidelines as set out in the Code of Corporate Governance 2005 (the “Code”), and where applicable, the Listing Manual of the Singapore Exchange Securities Trading Limited (“SGX-ST”). In the opinion of the Board, the Company has generally complied with all of the provisions set out in the Code during the financial year ended 30 June 2013 (“FY2013”). Board Matters Principle 1: The Board’s Conduct of Affairs The Board currently comprises the following persons: Non-Executive Directors: Dr. Ho Choon Hou (Chairman of the Board) Jin Lu Executive Director: Yee Pinh Jeremy Independent Directors: Ho Sheng Dr. Goh Jin Hian Ng Tiak Soon (each a “Director”, and collectively the “Board” or “Directors”) The Board oversees the Group’s overall policies, strategies and objectives, key operational initiatives, performance and measurement, internal control and risk management, major funding and investment proposals, financial performance reviews and corporate governance practices. The approval of the Board is required for matters such as, amongst other matters, corporate restructuring, mergers and acquisitions, major investments and divestments, material acquisitions and disposals of assets, major corporate policies on key areas of operations, share issuance, dividend and other returns to shareholders, acceptances of bank facilities, annual budget, release of the Group’s quarterly and full year results and interested person transactions of a material nature. The Board meets on a regular basis and such scheduled meetings coincide with the announcement of the Group’s quarterly results. In addition to the scheduled meetings, ad-hoc Board meetings are also convened as and when they are deemed necessary in between the scheduled meetings. The Articles of Association of the Company provide that the Directors may convene meetings by way of telephone conference, video conference, audio visual or similar means. When a physical Board meeting is not possible, timely communication with members of the Board is achieved through electronic means and the circulation of written resolutions for approval by the relevant members of the Board or Board committees. To assist in the execution of its responsibilities and in the discharge of its oversight functions, the Board is supported by three Board committees namely, the Nominating Committee, the Remuneration Committee and the Audit Committee. These committees have written mandates and operating procedures, which are reviewed on a regular basis. Further information on each of the three Board committees is set out below.

CORDLIFE GROUP LIMITED Annual Report 2013

21


corporate

governance report The nature of the Directors’ appointment to the Board and the details of their membership on the Board committees are set out below: Name of Director Board Audit Committee Dr. Ho Choon Hou Yee Pinh Jeremy Jin Lu Ho Sheng Dr. Goh Jin Hian Ng Tiak Soon

Chairman and Non-Executive Director Executive Director and Chief Executive Officer Non-Executive Director Lead Independent Director Independent Director Independent Director

Member N.A. N.A. Member N.A. Chairman

Remuneration Committee

Nominating Committee

N.A. N.A. Member N.A. Chairman Member

N.A. Member N.A. Chairman Member N.A.

The attendances of each Board member at the meetings of the Board and other committees in respect of the financial period ended 30 June 2013 are as follows:

Board

Audit Committee

Remuneration Committee

Nominating Committee

Name of Director

No. of meetings attended

No. of meetings attended

No. of meetings attended

No. of meetings attended

Dr. Ho Choon Hou Yee Pinh Jeremy Jin Lu Ho Sheng Dr. Goh Jin Hian Ng Tiak Soon

6/6 6/6 6/6 6/6 6/6 6/6

4/4 N.A. N.A. 4/4 N.A. 4/4

N.A. N.A. 2/3* N.A. 3/3 3/3

N.A. 2/2 N.A. 2/2 2/2 N.A.

* Ms Jin Lu did not attend one of the RC Meetings held during the year as the key agenda item of that Meeting was to discuss the extra remuneration for Dr Ho Choon Hou and Ms Jin Lu. Ms Jin Lu had volunteered to excuse herself from the Meeting to enable the RC members to discuss freely the agenda item without her presence. A formal letter is provided to each Director upon his or her appointment, setting out the Director’s duties and obligations. The Board also ensures that incoming Directors, when appointed, receive an orientation that includes a briefing by the management of the Company (“Management”) on the Group’s structure, businesses, operations and policies. All Directors are also given the opportunity to visit the Group’s operational facilities and meet with the Management. With a view to ensuring that the Directors are kept abreast of the latest changes in laws, regulations, rules and changing commercial risks and accounting standards, the Directors attend training courses conducted by professional organisations from time to time. Principle 2: Board Composition and Guidance The Board is comprised of six Directors of whom one is an Executive Director, two are non-executive non-independent Directors, and three are independent Directors. The Board constantly examines its size with a view to determining the number for effective decision-making. The Board is of the view that its current size is appropriate to facilitate effective decision-making. The Nominating Committee reviews the independence of each director annually, bearing in mind the circumstances set forth in the Code. The Board and the Nominating Committee are also of the view that the current Board comprises Directors who bring with them a wealth of expertise and experience in areas such as accounting, finance, business or management experience and industry knowledge, strategic planning experience and customer-based experience or knowledge. Its composition enables the Management to benefit from a diverse and objective perspective on any issues raised before the Board. Key information on the Directors is set out on pages 15 to 17 of this Annual Report.

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Positioned for growth


corporate

governance report

While all the Directors share an equal responsibility for the Company’s operations, the role of the independent, non-executive Directors is crucial in helping to develop proposals on Company strategies and to ensure that the strategies proposed by the Management are constructively challenged. The non-executive Directors are also responsible for reviewing the performance of the Management in meeting agreed goals and objectives and monitoring the reporting of performance. Principle 3: Chairman and Chief Executive Officer To ensure a clear division of responsibilities and a balance of power and authority within the Company, the role of the Chairman and the Chief Executive Officer (“CEO”) of the Company are undertaken by Dr. Ho Choon Hou and Mr. Yee Pinh Jeremy respectively. The Chairman, Dr. Ho Choon Hou, is a non-independent non-executive Director. He manages the business of the Board and the Board committees. He approves the agendas for the Board meetings and exercises control over, amongst others, the quality, quantity, accuracy and timeliness of information flow between the Board and Management of the Company. He facilitates timely communication between the Board and Management, between the Company and its shareholders and amongst the Board members inter se, with a view to encouraging constructive relations and dialogue between them. Mr. Yee Pinh Jeremy, is the Executive Director and CEO. He manages the businesses of the Group and implements the decisions made by the Board. The CEO is responsible for the day-to-day operations of the Group, the formulation of the Group’s strategic directions and expansion plans and managing the Group’s overall business development strategies. The performance and appointment of the Chairman and the CEO are reviewed periodically by the Nominating Committee and the remuneration packages of the Chairman and the CEO are reviewed periodically by the Remuneration Committee. With the segregation of duties between the Chairman and the CEO, the Board believes that there are adequate safeguards in place to prevent an uneven concentration of power and authority in a single individual. Principle 4: Board Membership The Nominating Committee (“NC”), regulated by a set of written terms of reference endorsed by the Board, comprises a majority of independent directors including its Chairman: Ho Sheng (Independent Director) (Chairman of the NC) Dr. Goh Jin Hian (Independent Director) Yee Pinh Jeremy (Executive Director) The functions of the NC include, amongst others: 1. reviewing the nomination for the re-election of Directors, including the independent Directors, having regard to each Directors’ contribution and performance, taking into consideration each Directors’ contribution and performance at Board meetings, including attendance and participation; 2. ensuring that all Directors submit themselves for re-election at regular intervals; 3. determining annually, and as and when circumstances require, whether or not a Director is independent; 4. deciding whether or not a Director is able to and has been adequately carrying out his or her duties as a Director of the Company. Where a Director has multiple board representations, the NC will evaluate whether the Director is able to and has adequately carried out his or her duties as director of the Company; and 5. reviewing and approving any nominations for the appointment to the Board including the disclosure of the search and nomination process. The NC has in place a process for selection and appointment of new directors which includes identification of potential candidates, evaluation of candidates’ skills, knowledge and experience and assessment of candidates’ suitability. The Directors do not currently have a fixed term of office. Pursuant to Articles 94 and 95 of the Company’s Articles of Association, every Director is required to retire from office once every three years. One-third of Directors who have served the longest since their most recent election (or, if their number is not a multiple of three, the number nearest to but not less than one-third) must

CORDLIFE GROUP LIMITED Annual Report 2013

23


corporate

governance report retire from office. Pursuant to Article 100 of the Company’s Articles of Association, the Directors who were newly appointed by the Board since the last annual general meeting (“AGM”) will have to retire at the forthcoming AGM. The retiring Directors are eligible to offer themselves for re-election. Pursuant to the Company’s Articles of Association, Dr. Ho Choon Hou and Ms. Jin Lu will retire at the forthcoming AGM. In this regard, the NC, having considered the attendance and participation of the Directors at the Board and Board committee meetings, in particular, their contribution to the business and operations of the Company, has recommended the re-election of Dr. Ho Choon Hou and Ms. Jin Lu, the retiring Directors at the forthcoming AGM and who being eligible, had offered themselves for reelection. The Board has concurred with the NC’s recommendation. Each member of the NC shall abstain from voting on any resolutions and making any recommendations and/or participating in any deliberations of the NC in respect of his or her re-election as Director. The NC is satisfied that sufficient time and attention are being given by the Directors to the affairs of the Group, notwithstanding that some of the Directors have multiple board representations. Principle 5: Board Performance The Board acknowledges the importance of a formal assessment of Board performance. It has adopted a formal system of evaluating Board performance with the use of evaluation forms to assess the effectiveness of the Board and Board Committees and the contribution by each Director. All Directors are required to complete the evaluation questionnaire annually. The evaluation of the Board’s performance as a whole deals with matters on Board composition, information flow to the Board, Board procedures and Board accountability. Factors such as the structure, size and processes of the Board and the Board’s access to information, management and the effectiveness of the Board’s oversight of the Company’s performance are applied to evaluate the performance of the Board as a whole. The evaluation of the performance of an individual director deals with matters on an individual director’s attendance at meetings, observance of the individual directors’ duties towards the Company and the individual director’s know-how and interaction with fellow directors. The evaluation of Board performance is conducted annually to identify areas of improvement and as a form of good Board management practice. The last Board of Directors’ evaluation was conducted in August 2013 and the results have been presented to the NC for discussion. The NC is satisfied that the Board has been effective as a whole and that each and every Director has contributed to the effective functioning of the Board. In addition, the NC is also satisfied that sufficient time and attention has been given by the Directors to the affairs of the Company, notwithstanding that some of the directors have multiple board representations. Principle 6: Access to Information Board members are provided with complete, adequate and timely information on Board affairs and issues that require the Board’s attention and decision. All Directors have independent access to the Group’s senior management and the company secretary. All Directors are provided with complete and adequate information prior to Board meetings and on an ongoing basis. The information provided includes, amongst others, background or explanatory information relating to matters to be brought before the Board, copies of disclosure documents, budgets, forecasts and monthly internal financial statements. The company secretary and her assistant attend all Board and Board Committees meetings and provide corporate secretarial support to the Board, ensure adherence to Board procedures and compliance with the relevant rules and regulations of the Memorandum and Articles of Association of the Company, the Companies Act (Chapter 50 of Singapore), the Listing Manual of the SGX-ST (“Listing Manual”) and all other relevant rules and regulations which are applicable to the Company. Any decision to appoint or remove the company secretary can only be taken by the Board as a whole. If the Directors need independent professional advice to fulfill their duties, such advice will be obtained from the professional entity approved by the Board and the cost of such professional advice will be borne by the Company.

24

Positioned for growth


corporate

governance report remuneration Matters Principle 7: Remuneration Committee The Remuneration Committee (“RC”) regulated by a set of written terms of reference endorsed by the Board, comprises one non-executive non-independent Director and two independent Directors: Dr. Goh Jin Hian (Independent Director) (Chairman of the RC) Ng Tiak Soon (Independent Director) Jin Lu (Non-Executive Director) The functions of the RC include, amongst others: 1.

reviewing and approving the policy for determining the remuneration of executives of the Group, including that of the Executive Director, CEO and other key management executives;

2.

ensuring a formal and transparent procedure for developing policy on executive remuneration;

3.

reviewing the remuneration framework (including Directors’ fees) for the Board and the key management personnel within the Group;

4.

reviewing the ongoing appropriateness and relevance of the executive remuneration policy and other executive benefit programmes;

5.

considering and reviewing the remuneration package and service contract terms for each of the Directors and key management personnel (including salaries, allowances, bonuses, payments, options, benefits in kind, retirement rights, severance packages and service contracts) having regard to the executive remuneration policy for each of the companies within the Group;

6.

considering and approving termination payments, retirement payments, gratuities, ex-gratia payments, severance payments and other similar payments in the event of termination or retirement of the executive Directors and key management personnel; and

7.

determining, reviewing and approving the design of all option plans, stock plans and/or other equity based plans that the Group proposes to implement, to determine, on an annual basis, whether any awards will be made under the rules of such plans, to review and approve each award as well as the total proposed awards under each plan in accordance with the rules governing each plan and to review, approve and keep under review performance indicators and/or the fulfillment of performance indicators in accordance with the rules set out under such plans.

Principle 8: Level and Mix of Remuneration As noted above, one of the responsibilities of the RC is to review the remuneration framework of the Board and key management personnel in the Group, and to consider and review the remuneration package and/or service contract terms for each of the Directors and key management personnel. In setting the remuneration package of the Executive Director, the Company makes a comparative study of the packages of executive directors in comparable industries and takes into account the performance of the Company and that of the Directors. The independent Directors do not have service agreements with the Company. The independent Directors and non-executive Directors are paid a basic, fixed Director’s fee, which is determined by the Board, apposite to the level of their contributions and taking into account factors such as the time spent and the effort and the individual responsibilities of each independent or nonexecutive Director. Such fees are subject to the approval of the shareholders at each AGM. In addition, Dr. Ho Choon Hou and Ms. Jin Lu, both of whom are non-executive Directors of the Company, are also paid consultancy fees in respect of their services performed for the Group above and beyond the scope of their Directors’ fees. The consultancy fees paid to Dr. Ho Choon Hou and Ms. Jin Lu for FY2013 are $52,500 and $35,000 respectively. Each member of the RC shall abstain from voting on any resolution and making any recommendation and/or participating in any deliberation in respect of his or her own remuneration.

CORDLIFE GROUP LIMITED Annual Report 2013

25


corporate

governance report Principle 9: Disclosure on Remuneration A breakdown showing the level and mix of each individual Director’s remuneration for FY2013 is disclosed in the table below: Salary (%)

Bonus (%)

Allowances (%)

Fees (%)

Total (%)

CEO, Executive Director

30

67

3

100

Chairman, Non-Executive Non-Independent Director Independent Director Independent Director Non-Executive, Non-Independent Director Independent Director

100

100

– – –

– – –

– – –

100 100 100

100 100 100

100

100

79 70 74

6 23 16

15 7 10

– – –

100 100 100

60 76

34 16

6 8

– –

100 100

Directors Above $500,000 Yee Pinh Jeremy $250,000 and below Dr. Ho Choon Hou(1) Ho Sheng Goh Jin Hian Jin Lu(2) Ng Tiak Soon KEY EXECUTIVES $250,000 and below Gernalia Satianegara Gwendolene Yeo Teck Geok Lee Mei Suan (Stella) Thet Hnin Yi Poon Sok Hoon Jessie

Lab Director – Singapore General Manager – Singapore Deputy General Manager – Singapore Financial Controller –Singapore Deputy Financial Controller – Singapore

Notes: (1) A sum of $52,500 was paid to Dr. Ho Choon Hou in FY2013 for consultancy services rendered. (2) A sum of $35,000 was paid to Ms. Jin Lu in FY2013 for consultancy services rendered. None of the Directors or employees are related by blood or marriage to one another nor are they related to any of the substantial shareholders of the Company. Accountability and audit Principle 10: Accountability of the Board and Audit In presenting the annual and quarterly financial statements and announcements of financial results to shareholders, the Board aims to provide shareholders with a balanced and understandable assessment of the Company and the Group’s performance, position and prospects. In this regard, Management provides all Directors with detailed management accounts of the Company and the Group’s performance, financial position and prospects on a timely basis. Principle 11: Audit Committee The Audit Committee (“AC”), regulated by a set of written terms of reference, comprises of three Directors, the majority of whom are independent: Ng Tiak Soon (Independent Director) (Chairman of the AC) Ho Sheng (Independent Director) Dr. Ho Choon Hou (Non-Executive Director)

26

Positioned for growth


corporate

governance report The functions of the AC include, amongst others: 1.

reviewing the significant financial reporting issues and judgments so as to ensure the integrity of the financial statements and any formal announcements relating to financial performance;

2.

reviewing the scope and results of the audit and its cost effectiveness, and the independence and objectivity of the external auditors;

3.

reviewing, with the external auditors of the Company, the audit plan, the scope of work of the external auditors, the evaluation by the external auditors of the system of internal accounting controls, the external auditor’s letter to Management and the Management’s response, and the results of the audits conducted by the internal and external auditors;

4.

reviewing the quarterly, half-yearly and annual financial statements and results announcements before submission to the Board for approval, focusing in particular, on changes in accounting policies and practices, major risk areas, significant adjustments resulting from the audit, the going concern statement, compliance with financial reporting standards as well as compliance with the Listing Manual and any other statutory/regulatory requirements;

5.

reviewing the effectiveness and adequacies of the Group’s internal controls and procedures, including accounting and financial controls and procedures and ensure co-ordination between the external auditors and the Management, reviewing the assistance given by the Management to the auditors, and discuss problems and concerns, if any, arising from the interim and final audits, and any matters which the auditors may wish to discuss (in the absence of our Management where necessary);

6.

reviewing any interested person transactions to ensure that procedures are followed in accordance with the internal control measures which the Group has adopted;

7.

reviewing and discussing with the external auditors any suspected fraud or irregularity, or suspected infringement of any relevant laws, rules or regulations, which has or is likely to have a material impact on the Company’s operating results or financial position, and the Management’s response thereto;

8.

commissioning of an audit of the internal control and accounting systems of the Group until such time the AC is satisfied that the Group’s internal controls are robust and effective enough to mitigate the Group’s internal control weaknesses (if any);

9.

making recommendations to the Board on the appointment or re-appointment of the external auditors and matters relating to resignation or dismissal of the auditors, and approving the remuneration and terms of engagement of the external auditors;

10. reviewing the appointments of, and remuneration of persons (upon appointment and upon renewal of their respective service contracts), occupying managerial positions who are related to the Directors or the controlling shareholders; 11. reviewing and approving transactions falling within the scope of Chapter 9 and Chapter 10 of the Listing Manual (if any); 12. reviewing any potential conflicts of interest; 13. reviewing the adequacy of potential business risk management processes; 14. reviewing and approve all hedging policies and instruments (if any) to be implemented by the Group; 15. undertaking such other reviews and projects as may be requested by the Board and report to the Board its findings from time to time on matters arising and requiring the attention of the AC; 16. reviewing and establishing procedures for receipt, retention and treatment of whistle blowing report(s) received by the Group, which may relate to criminal offences involving the Group or its employees, questionable accounting, auditing, business, safety or other matters that impact negatively on the Group; and 17. generally to undertake such other functions and duties as may be required by any applicable laws, regulations, statutes and the Listing Manual, and by such amendments made thereto from time to time.

CORDLIFE GROUP LIMITED Annual Report 2013

27


corporate

governance report Apart from the duties listed above, the AC is also authorised by the Board to investigate into any matter within its terms of reference or, where appropriate, review the findings of internal investigations into matters where there is any suspected fraud or irregularity, or failure of internal controls or infringement of any Singapore law, rules or regulations which has or is likely to have a material impact on the Group’s operating results and/or financial position. Each member of the AC shall abstain from reviewing any particular transaction or voting on such resolution in respect of which he or she is or may be interested in. The Board is of the view that all the members of the AC are appropriately qualified to discharge their responsibilities. The AC held four meetings in FY2013. These meetings were attended by the CEO and the Financial Controller of the Company at the invitation of the AC. The Group’s external auditors were also present at the relevant junctures during these meetings. The AC has also met with the external and internal auditors, without the presence of management. The AC has met with the Group’s external auditors, Messrs Ernst & Young LLP (“EY”), to discuss the results of EY’s audit of the Group for FY2013 and the evaluation of the Group’s system of internal controls. The AC has also reviewed the Group’s fullyear results announcement, the financial statements of the Company and the consolidated financial statements of the Group for FY2013 prior to its recommendation to the Board for approval. In addition, the AC, having reviewed the non-audit services provided by the external auditors, EY, for FY2013, is satisfied with the independence and objectivity of EY as the external auditors to the Group. The total amount of audit fees paid to EY during FY2013 is $207,000 out of which $161,000 was for audit services and $46,000 was for non-audit services. The AC has recommended the re-appointment of EY as the external auditors at the forthcoming AGM. Principle 12: Internal Controls The Group maintains a system of internal controls for all companies within the Group, but recognises that no internal control system will preclude all errors and irregularities. The system is designed to manage rather than to eliminate the risk of failure to achieve business objectives. The controls are to provide reasonable, but not absolute assurance to safeguard shareholders’ investments and the Group’s assets. The Group has in place a formal risk management framework to monitor the key risks impacting the Group’s businesses. Based on the internal controls established and maintained by the Group, work performed by the internal and external auditors and reviews performed by Management, various Board committees and the Board, the AC and the Board are of the opinion that the Group’s internal controls, including financial, operational and compliance controls, and risk management systems are adequate as at 30 June 2013. The AC will continue to assist the Board to review the effectiveness of the internal audit function annually with a view to improving and enhancing the Company’s internal controls and risk management system. The Company has also developed a whistle blowing policy. This policy provides well-defined and accessible channels in the Group through which employees may raise concerns about improper conduct within the Group. Principle 13: Internal Audit The Board recognises the importance of the internal audit function which, being independent of Management, is one of the principal means by which the AC is able to carry out its responsibilities effectively. Messrs PricewaterhouseCoopers LLP (“PWC”) is the existing internal auditor of the Group. PWC primarily reports to the Chairman of the AC and has unfettered access to all of the Group’s documents, records, properties and personnel. The AC reviews the internal auditor on an annual basis, and is satisfied, based on the last review, that the internal audit function is adequately resourced and has the appropriate standing within the Company.

28

Positioned for growth


corporate

governance report Communication with shareholders Principles 14: Communication with the Shareholders

The Company strives for timeliness and transparency in its disclosures to the shareholders and the public and is also committed to gathering the views of its shareholders and to address their concerns, where possible. In addition to the regular dissemination of information through SGXNET on a timely basis, the Company also responds to enquiries from investors, analysts, fund managers and the press. However, the Company does not practise selective disclosure as all price-sensitive information is always released timely through SGXNET for the information of all shareholders. In the event of any inadvertent disclosure made to a selected group, the Company makes the same disclosure publicly to all others as soon as practicable via SGXNET and through any other practicable means including the use of Internet websites. Principle 15: Greater Shareholder Participation The AGM is the principal forum for dialogue and interaction with all shareholders. The Board welcomes shareholders to voice their views and ask the Board questions regarding the Company and the Group at the AGM. A shareholder who is entitled to attend and vote at the AGM may either vote in person or vote by proxy by sending in the instrument of proxy at least forty-eight hours before the time of the general meeting. The chairmen of the Board committees and key management personnel are invited to attend the annual general meetings of the Company and are present and available to address questions at general meetings. In addition, the external auditors of the Company are also present to address shareholders’ queries about the conduct of the audit and the preparation and content of the auditors’ report. Each item of special business included in the notice of the meeting will be accompanied by an explanation of the effects of a proposed resolution. Unless the resolutions proposed at a meeting are interdependent and linked so as to form one significant proposal, separate resolutions shall be proposed for substantially separate issues at the meeting. The Company will also prepare minutes of general meetings that include substantial comments or queries from shareholders and responses from the Board and Management, and will make such minutes or notes available to shareholders upon their request. additional information DEALINGS IN SECURITIES [Listing Manual, Rule 1207(19)] In line with Rule 1207(19) of the Listing Manual as well as insider trading laws in Singapore, the Company has in place a policy prohibiting share dealings by Directors and employees of the Company for two weeks before the announcement of the Company’s first three quarter results and one month before the release of the Company’s full-year financial results. The Directors and employees are also expected to observe insider trading laws at all times, even when dealing in securities outside of the prohibited periods. In addition, the Directors, Management and officers of the Group are discouraged from dealing in the Company’s securities on short-term considerations. INTERESTED PERSON TRANSACTIONS [Listing Manual, Rule 907] There were no interested person transactions in FY2013. MATERIAL CONTRACTS [Listing Manual, Rule 1207(8)] There were no material contracts of the Company or its subsidiaries involving the interest of the Chairman, the CEO, the Director or controlling shareholder subsisting at the end of the financial year.

CORDLIFE GROUP LIMITED Annual Report 2013

29


corporate

governance report AUDITING FIRMS [Listing Manual, Rule 1207(6)(c)] The Group has complied with Rule 712 and Rule 715 in relation to auditing firms. USE OF IPO PROCEEDS [Listing Manual, Rule 1207(20)] As at 30 June 2013, the Group has utilised approximately $13.0 million of the IPO Proceeds as follows:

Intended Use of IPO Proceeds

Estimated amount $ (in millions)

Estimated percentage of gross proceeds raised from the IPO

Amount utilised $ (in millions)

Percentage of gross proceeds raised from the IPO

Development and expansion of business and operations in Singapore and overseas

16.6

55.9%

8.3

27.9%

Renovation of new headquarters and facility at Yishun, A’Posh Bizhub

3.0

10.1%

1.0

3.4%

Investments in infrastructure relating to information technology

2.0

6.7%

Working capital and general corporate purposes

4.7

15.8%

Expenses incurred in connection with the IPO

3.4

11.5%

3.7

12.5%

29.7

100.0%

13.0

43.8%

Note: (1) The numbers in the table above may not exactly add due to rounding. As disclosed previously, the actual expenses incurred by the Company in connection with the IPO was approximately $3.7 million. The Company intends to reduce accordingly the amount set aside for working capital and general corporate matters from $4.7 million to $4.4 million. The expenses incurred by the Company in connection with the renovation of new headquarters and facility at Yishun was $1.0 million. The Company intends to re-deploy the balance of approximately $2.0 million for working capital and general corporate purposes.

30

Positioned for growth


Financial Contents Directors’ Report

32

Statement by Directors

35

Independent Auditor's Report

36

Consolidated Statement of Comprehensive Income

37

Statements of Financial Position

38

Statements of Changes in Equity

40

Consolidated Statement of Cash Flows

42

Notes to the Financial Statements

44

Statistics of Shareholdings

88

Notice of Annual General Meeting

90

Proxy Form


directors’

report The Directors are pleased to present their report to the members together with the audited consolidated financial statements of Cordlife Group Limited (the “Company”) and its subsidiaries (collectively, the “Group”) and the statement of financial position and statement of changes in equity of the Company for the financial year ended 30 June 2013. Directors The Directors of the Company in office at the date of this report are: Dr Ho Choon Hou Mr Yee Pinh Jeremy Mr Ho Sheng Dr Goh Jin Hian Ms Jin Lu Mr Ng Tiak Soon Arrangements to enable Directors to acquire shares and debentures Neither at the end of nor at any time during the financial year was the Company a party to any arrangement whose objects are, or one of whose objectives is, to enable the Directors of the Company to acquire benefits by means of the acquisition of shares or debentures of the Company or any other body corporate. Directors’ interests in shares and debentures The following Directors, who held office at the end of the financial year, had, according to the register of Directors’ shareholdings required to be kept under Section 164 of the Singapore Companies Act, Cap. 50, an interest in shares and share options of the Company and related corporations (other than wholly-owned subsidiaries) as stated below: Name of Directors and company in which interests are held Cordlife Group Limited

At beginning of the year

At end of the year

Ordinary shares Mr Yee Pinh Jeremy Dr Ho Choon Hou Ms Jin Lu

1,526,034

1,651,034

589,061

624,061

1,650,000

650,000

There was no change in any of the above-mentioned interests in the Company between the end of the financial year and 21 July 2013. 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 at the end of the financial year.

32

Positioned for growth


directors’

report Directors’ contractual benefits Except as disclosed in Note 29 of the financial statements, since the end of the previous financial year, no Director of the Company has received or become entitled to receive a benefit by reason of a contract made by the Company or a related corporation with the Director, or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest. Option to take up unissued shares During the financial year, no option to take up unissued shares of the Company was granted. Option exercised During the financial year, no shares of the Company were issued by virtue of the exercise of option to take up unissued shares of the Company. Unissued shares under option At the end of the financial year, there were no unissued shares of the Company under option. Audit committee The audit committee (AC) carried out its functions in accordance with section 201B (5) of the Singapore Companies Act, Chapter. 50, including the following: --

Reviews the audit plans of the internal and external auditors of the Company, and reviews the internal auditor’s evaluation of the adequacy of the Company’s system of internal accounting controls and the assistance given by the Company’s management to the external and internal auditors;

--

Reviews the quarterly and annual financial statements and the auditor’s report on the annual financial statements of the Company before their submission to the board of Directors;

--

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

--

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

--

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

--

Reviews the cost effectiveness and the independence and objectivity of the external auditor

--

Reviews the nature and extent of non-audit services provided by the external auditor;

--

Recommends to the board of Directors the external auditor to be nominated, approves the compensation of the external auditor, and reviews the scope and results of the audit;

--

Reports actions and minutes of the AC to the board of Directors with such recommendations as the AC considers appropriate; and

--

Reviews interested person transactions in accordance with the requirements of the Singapore Exchange Securities Trading Limited’s Listing Manual.

CORDLIFE GROUP LIMITED Annual Report 2013

33


directors’

report The AC, having reviewed all non-audit services provided by the external auditor to the Group, is satisfied that the nature and extent of such services would not affect the independence of the external auditor. The AC has also conducted a review of interested person transactions. The AC convened four meetings during the year with full attendance from all members. The AC has also met with internal and external auditors, without the presence of the Company’s management, at least once a year. Further details regarding the AC are disclosed in the Corporate Governance Report. Auditor Ernst & Young LLP have expressed their willingness to accept reappointment as auditor.

On behalf of the board of Directors:

Dr Ho Choon Hou Director

Mr Yee Pinh Jeremy Director

Singapore 27 September 2013

34

Positioned for growth


statement by

directors We, Dr Ho Choon Hou and Mr Yee Pinh Jeremy, being two of the Directors of Cordlife Group Limited, do hereby state that, in the opinion of the Directors: (i)

the accompanying consolidated statement of comprehensive income, statements of financial position, statements of changes in equity, and consolidated statement of cash flows together with notes thereto are drawn up so as to give a true and fair view of the state of affairs of the Group and of the Company as at 30 June 2013 and the results of the business, changes in equity and cash flows of the Group and the changes in equity of the Company for the year ended on that date, and

(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.

On behalf of the board of Directors:

Dr Ho Choon Hou Director

Mr Yee Pinh Jeremy Director

Singapore 27 September 2013

CORDLIFE GROUP LIMITED Annual Report 2013

35


independent

auditor's report For the financial year ended 30 June 2013 To the Members of Cordlife Group Limited

Report on the financial statements We have audited the accompanying financial statements of Cordlife Group Limited (the “Company”) and its subsidiaries (the “Group”) set out on pages 37 to 87, which comprise the statements of financial position of the Group and the Company as at 30 June 2013, the statements of changes in equity of the Group and the Company and the consolidated statement of comprehensive income and consolidated statement of cash flows of the Group for the year then ended, and a summary of significant accounting policies and other explanatory information. Management’s responsibility for the financial statements Management is responsible for the preparation of financial statements that give a true and fair view in accordance with the provisions of the Singapore Companies Act, Chapter 50 (the “Act”) and Singapore Financial Reporting Standards, and for devising and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair profit and loss accounts and balance sheets and to maintain accountability of assets. Auditor’s responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements of the Group and the statement of financial position and statement of changes in equity of the Company are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Group and of the Company as at 30 June 2013 and the results, changes in equity and cash flows of the Group and the changes in equity of the Company for the year ended on that date. Report on Other Legal and Regulatory Requirements In our opinion, the accounting and other records required by the Act to be kept by the Company and by those subsidiaries incorporated in Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act.

Ernst & Young LLP Public Accountants and Chartered Accountants

Singapore 27 September 2013

36

Positioned for growth


consolidated statement of

comprehensive income

For the financial year ended 30 June 2013

Note

2013 $’000

Revenue

4

2012 $’000

(Restated)*

34,702

30,275

Cost of sales

(9,373)

(8,743)

Gross profit

25,329

21,532

28

75

Other operating income Gain on disposal of associate

10

Selling and marketing expenses Administrative expenses

2,729

(7,801)

(6,909)

(10,197)

(9,164)

Share of results of associates

10

2,753

2,091

Fair value gain on investment properties

12

1,134

138

– 157

Negative goodwill on acquisition of associate Finance income

5

492

Finance costs

6

(46)

Profit before income tax

7

14,559

Income tax

8

(1,075)

Profit for the year

13,484

(2) 7,780 (854) 6,926

Other comprehensive income: Foreign currency translation

(419)

Total comprehensive income for the financial year, net of tax

462

13,065

7,388

13,484

6,926

13,484

6,926

13,065

7,388

13,065

7,388

5.80

4.03

Profit for the financial year attributable to: Non-controlling interest Owners of the Company

Total comprehensive income for the financial year attributable to: Non-controlling interest Owners of the Company

Earnings per share (cents per share): Basic and diluted

9

* Interest income relating to non-current trade receivables has been reclassified from finance income to revenue (Note 36).

The accompanying accounting policies and explanatory notes form an integral part of the financial statements. CORDLIFE GROUP LIMITED Annual Report 2013

37


statements of

financial position As at 30 June 2013

Note Non-current assets

Group

2013

Company

2012

2013

2012

$’000

$’000

$’000

$’000

27,965

17,664

25,701

Investment in associate

10

Investment in subsidiaries

28

21,304

15,166

Property, plant and equipment

11

7,606

6,052

6,053

4,998

Investment properties

12

5,330

5,330

Intangible assets

13

1,785

35

136

35

Convertible bond

14

1,500

1,500

Trade receivables

15

38,743

24,258

35,823

23,857

Other receivables

16

434

214

221

Fixed deposits

17

11,500

11,500

11,500

11,500

93,363

61,223

106,068

57,056

Current assets Cash and cash equivalents

18

7,986

12,945

3,492

10,098

Fixed deposits

17

3,500

6,000

3,500

6,000

Pledged fixed deposits

17

334

Short term investments

19

342

Trade receivables

15

12,121

8,588

8,012

8,320

Other receivables

16

1,083

661

803

574

Prepayments

1,285

529

624

373

Inventories

20

435

417

156

365

Amounts owing by subsidiaries

21

1,476

1,032

27,086

29,140

18,063

26,762

120,449

90,363

124,131

83,818

2,781

4,239

2,386

Total assets Current liabilities Trade and other payables

22

7,505

Amounts payable for acquisition of subsidiaries

28

3,182

3,182

Deferred revenue

23

5,055

4,281

3,585

3,526

Amounts owing to subsidiaries

21

243

97

Tax payable

1,138

1,092

1,128

1,076

Interest-bearing borrowings

24

271

111

271

111

Finance lease liabilities

27

6

17,151

8,271

12,648

7,196

9,935

20,869

5,415

19,566

Net current assets

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

38

Positioned for growth


statements of

financial position As at 30 June 2013

Note

Group

2013 $’000

Non-current liabilities Other payables

Company

2012

2013

2012

$’000

$’000

$’000

160

202

Deferred revenue

23

19,457

8,181

13,360

4,622

Amounts owing to subsidiary

21

21,335

Interest-bearing borrowings

24

5,926

2,453

5,926

2,453

192

97

177

60

25,735

10,933

40,798

7,135

Total liabilities

42,886

19,204

53,446

14,331

Net assets

77,563

71,159

70,685

69,487

53,548

53,548

53,548

53,548

Deferred tax liabilities

Capital and reserves Share capital

25 (a)

Treasury shares

25 (b)

Accumulated profit Other reserves Non-controlling interests Total equity Total equity and liabilities

26

(103)

26,176

19,205

(2,013)

(1,594)

(103)

16,818

15,517

422

422

77,563

71,159

70,685

69,487

120,449

90,363

124,131

83,818

(45)

The accompanying accounting policies and explanatory notes form an integral part of the financial statements. CORDLIFE GROUP LIMITED Annual Report 2013

39


statements of

changes in equity For the financial year ended 30 June 2013

Foreign

Share

Treasury

Accumulated profit

$’000

$’000

$’000

capital

Shares

currency

Non-

reserve

Merger

reserve

Acquisition

translation

controlling interest

Total

$’000

$’000

$’000

$’000

$’000

$’000

Capital

reserve

reserve

Group Balance at 1 July 2011 Profit for the year

25,677

16,933

568

534

(2,184)

(974)

40,554

6,926

6,926

462

462

6,926

462

7,388

29,700

29,700

(1,829)

(1,829)

(4,654)

(4,654)

27,871

(4,654)

23,217

53,548

19,205

568

534

(2,184)

(512)

71,159

13,484

13,484

(646)

(646)

227

227

13,484

(419)

13,065

Other comprehensive income - Net effect of foreign currency translation

Total comprehensive income for the financial year, net of tax

Contributions by and

distributions to owners

Issuance of shares pursuant to the IPO

IPO expenses taken to equity Dividends (Note 33) Total contributions by and distributions to owners

Balance at 30 June 2012 and 1 July 2012

Profit for the year Other comprehensive income - Net effect of foreign currency translation

- Share of other comprehensive income of associate

Total comprehensive income for the financial year, net of tax

Purchase of treasury shares (Note 25)

Acquisition of subsidiaries (Note 28)

(103)

Dividends (Note 33)

Total contributions

(103)

53,548

(103)

Balance at 30 June 2013

(45)

(6,513)

(6,513)

(6,513)

(45)

(6,661)

568

534

26,176

(2,184)

(931)

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

40

Positioned for growth

(103)

(45)

(45)

77,563


statements of

changes in equity

For the financial year ended 30 June 2013

Company Balance at 1 July 2011

Share capital

Treasury shares

Accumulated profit

Capital reserve

Total

$’000

$’000

$’000

$’000

$’000

25,677

15,311

422

41,410

Profit for the year

4,860

4,860

Total comprehensive income for the financial year, net of tax

4,860

4,860

Issuance of shares pursuant to the IPO

29,700

29,700

IPO expenses taken to equity

(1,829)

(1,829)

Contributions by and distributions to owners

Dividends (Note 33)

(4,654)

(4,654)

Total contributions by and distributions to owners

27,871

(4,654)

23,217

Balance at 30 June 2012 and 1 July 2012

53,548

15,517

422

69,487

Profit for the year

7,814

7,814

Total comprehensive income for the financial year, net of tax

7,814

7,814

Purchase of treasury shares (Note 25)

(103)

(103)

Dividends (Note 33)

(6,513)

(6,513)

Total contributions by and distributions to owners

(103)

(6,513)

(6,616)

53,548

(103)

16,818

Contributions by and distributions to owners

Balance at 30 June 2013

422

70,685

The accompanying accounting policies and explanatory notes form an integral part of the financial statements. CORDLIFE GROUP LIMITED Annual Report 2013

41


consolidated statement of

cash flows

For the financial year ended 30 June 2013

Note Cash flows from operating activities: Profit before income tax Adjustments for:

2013

$’000

2012

$’000

14,559

7,780

Depreciation of property, plant and equipment

10

726

663

Loss on disposal of property, plant and equipment

10

34

Amortisation of intangible assets Interest income

Interest expense

Impairment loss on trade receivables and bad debts written off Gain on disposal of associate

Share of results of associates

Negative goodwill on acquisition of associate Fair value gain on investment properties IPO expenses

Unrealised exchange loss

12 5

6

7

39

(492)

(157)

444

210

46

10

(2,729)

12

(1,134)

10

7

Operating cash flows before changes in working capital Changes in working capital:

Increase in trade receivables

Increase in other receivables, deposits and prepayments

(2,753) (138) –

9

2

(2,091) –

1,902 –

8,611

8,327

(10,350)

(3,394)

(394)

Decrease/(increase) in inventories

18

166

(583) (189)

Increase in trade and other payables

1,838

9,442

2,901

Cash generated from operations

9,313

7,726

Increase in deferred revenue Interest received

332

Interest paid

(46)

Income tax paid

(934)

Net cash flows generated from operating activities Cash flows from investing activities:

Purchase of property, plant and equipment Purchase of investment properties Purchase of intangible assets

Investment in convertible bond

(1,762)

(2,363)

13

(150)

(42)

12

14

10

Purchase of treasury shares

25

Acquisition of subsidiaries

Net cash flows used in investing activities

10

28

(4,196)

Positioned for growth

(1,500)

2,500

(16,190)

1,500

20,614

(25,701)

(103)

(1,568)

(1,556) (10,422)

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

42

(1,748)

11

Proceeds from disposal of associate

Acquisition of assets (Note A)

(2)

6,033

14

Acquisition of associate

57

8,665

Redemption of convertible bond

Transfer from/(to) fixed deposits, net

664

(20,095)


consolidated statement of

cash flows

For the financial year ended 30 June 2013

Note Cash flows from financing activities: Repayments of finance lease liabilities

2013

2012

$’000

$’000

(6)

Pledged fixed deposits

(17)

(297)

Proceeds from interest-bearing borrowings

3,828

Repayment of interest-bearing borrowings

(195)

Proceeds from issue of shares

Share issue cost

– 1,837 (91) 29,700 (3,731)

(6,513)

(4,654)

Net cash (used in)/generated from financing activities

(3,183)

23,044

Net (decrease)/increase in cash and cash equivalents

(4,940)

8,982

Cash and cash equivalents at beginning of the financial year

12,945

3,995

Dividends paid

33

Effects of exchange rate changes on the balance of cash and cash equivalents Cash and cash equivalents at end of the financial year

(19) 18

7,986

(32) 12,945

Notes to Consolidated Statement of Cash Flows A. Acquisition of assets

Trade receivables Property, plant and equipment Deferred revenue Cash outflow on acquisition

11

2013

2012

$’000

$’000

1,842

37

(311)

1,568

On 28 June 2013, the Group acquired assets and liabilities from Australia-listed Life Corporation Limited’s (formerly known as Cordlife Limited) subsidiary, P.T. Cordlife Indonesia. Refer to Note 28 for more details.

The accompanying accounting policies and explanatory notes form an integral part of the financial statements. CORDLIFE GROUP LIMITED Annual Report 2013

43


notes to the

financial statements For the financial year ended 30 June 2013

1.

Corporate information The Company is a limited liability company incorporated and domiciled in Singapore and is listed on the Singapore Exchange Securities Trading Limited (“SGX-ST”). The Company’s registered office and principal place of business is located at 1 Yishun Industrial Street 1, #06-01/09, A’Posh Bizhub, Singapore 768160. The principal activities of the Company are investment holding and the provision of cord blood banking services, which involves the processing and storage of stem cells. The principal activities of the subsidiaries are disclosed in Note 28 to the financial statements.

2.

Summary of significant accounting policies 2.1 Basis of preparation The consolidated financial statements of the Group have been prepared in accordance with Singapore Financial Reporting Standards (“FRS”). The financial statements have been prepared on a historical cost basis except as disclosed in the accounting policies below. The financial statements are presented in Singapore Dollars (SGD or $), and all values are rounded to the nearest thousand ($’000) except otherwise indicated. 2.2 Changes in accounting policies The accounting policies adopted are consistent with those of the previous financial year except in the current financial year, the Group has adopted all the new and revised standards that are effective for annual periods beginning on or after 1 July 2012. The adoption of these standards did not have any effect on the financial performance or position of the Group and the Company. 2.3 Standards issued but not yet effective The Group has not adopted the following standards and interpretations that have been issued but not yet effective:

Description

44

Effective for annual periods beginning on or after

Revised FRS 19 Employee Benefits

1 January 2013

Amendments to FRS 107 Disclosures – Offsetting Financial Assets and Financial Liabilities

1 January 2013

FRS 113 Fair Value Measurement

1 January 2013

Improvements to FRSs 2012

1 January 2013

– Amendment to FRS 1 Presentation of Financial Statements

1 January 2013

– Amendment to FRS 16 Property, Plant and Equipment

1 January 2013

– Amendment to FRS 32 Financial Instruments: Presentation

1 January 2013

Positioned for growth


notes to the

financial statements

For the financial year ended 30 June 2013

2.

Summary of significant accounting policies (cont’d) 2.3 Standards issued but not yet effective (cont’d)

Effective for annual periods beginning on or after

Description Revised FRS 27 Separate Financial Statements

1 January 2014

Revised FRS 28 Investments in Associates and Joint Ventures

1 January 2014

Amendments to FRS 32 Offsetting Financial Assets and Financial Liabilities

1 January 2014

Amendments to FRS 36 Recoverable Amount Disclosure for Non-Financial Assets

1 January 2014

FRS 110 Consolidated Financial Statements

1 January 2014

FRS 111 Joint Arrangements

1 January 2014

FRS 112 Disclosure of Interests in Other Entities

1 January 2014

Amendments to the transition guidance of FRS 110 Consolidated Financial Statements, FRS 111 Joint Arrangements and FRS 112 Disclosure of Interests in Other Entities

1 January 2014

Amendments to FRS 110, FRS 112 and FRS 27: Investment Entities

1 January 2014

The Directors expect that the adoption of the standards and interpretations above will have no material impact on the financial statements in the period of initial application. 2.4 Basis of consolidation and business combinations (a) Transfer of entities under common control The pooling of interest method involves the following: --

The assets and liabilities of the combining entities are reflected at their carrying amounts.

--

No adjustments are made to reflect the fair values, or recognise any new assets or liabilities.

--

No goodwill is recognised as a result of the combination.

--

Any difference between the consideration paid/transferred and the equity ‘acquired’ is reflected within the equity as merger reserve.

--

The consolidated statement of comprehensive income reflects the results of the combining entities for the full year, irrespective of when the combination took place.

--

Comparatives are presented as if the entities had always been combined since the date the entities had come under common control.

CORDLIFE GROUP LIMITED Annual Report 2013

45


notes to the

financial statements For the financial year ended 30 June 2013

2.

Summary of significant accounting policies (cont’d) 2.4 Basis of consolidation and business combinations (cont’d) (b) Basis of consolidation Basis of consolidation from 1 July 2010 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.

Basis of consolidation prior to 1 July 2010 Certain of the above-mentioned requirements were applied on a prospective basis. The following differences, however, are carried forward in certain instances from the previous basis of consolidation:

46

-

Acquisition of non-controlling interests, prior to 1 July 2010, were accounted for using the parent entity extension method, whereby, the difference between the consideration and the book value of the share of the net assets acquired were recognised in goodwill.

-

Losses incurred by the Group were attributed to the non-controlling interest until the balance was reduced to nil. Any further losses were attributed to the Group, unless the non-controlling interest had a binding obligation to cover these. Losses prior to 1 July 2010 were not reallocated between non-controlling interest and the owners of the Company.

Positioned for growth


notes to the

financial statements

For the financial year ended 30 June 2013

2.

Summary of significant accounting policies (cont’d) 2.4 Basis of consolidation and business combinations (cont’d) (c) Business combinations from 1 July 2010 Acquisitions of subsidiaries, other than those under common control, 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. When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree. 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 accordance with FRS 39 either in profit or loss or as a change to other comprehensive income. If the contingent consideration is classified as equity, it is not remeasured until it is finally settled within equity. 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) is recognised on the acquisition date at fair value, or at the non-controlling interest’s proportionate share of the acquiree identifiable net assets. 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. (d) Business combinations prior to 1 July 2010 In comparison to the above mentioned requirements, the following differences applied: Business combinations are accounted for by applying the purchase method. Transaction costs directly attributable to the acquisition formed part of the acquisition costs. The non-controlling interest (formerly known as minority interest) was measured at the proportionate share of the acquiree’s identifiable net assets. Business combinations achieved in stages were accounted for as separate steps. Adjustments to those fair values relating to previously held interests are treated as a revaluation and recognised in equity. Any additional acquired share of interest did not affect previously recognised goodwill. When the Group acquired a business, embedded derivatives separated from the host contract by the acquiree are not reassessed on acquisition unless the business combination results in a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required under the contract. Contingent consideration was recognised if, and only if, the Group had a present obligation, the economic outflow was more likely than not and a reliable estimate was determinable. Subsequent adjustments to the contingent consideration were recognised as part of goodwill.

CORDLIFE GROUP LIMITED Annual Report 2013

47


notes to the

financial statements For the financial year ended 30 June 2013

2.

Summary of significant accounting policies (cont’d) 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, and are presented separately in the consolidated statement of comprehensive income and within equity in the consolidated balance sheet, separately from equity attributable 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 attributable to owners of the Company. 2.6 Foreign currency The Group’s consolidated 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. (a) 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 determined. 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 except for exchange differences arising on monetary items that form part of the Group’s net investment in foreign operations, which are recognised initially in other comprehensive income and accumulated under foreign currency translation reserve in equity. The foreign currency translation reserve is reclassified from equity to profit or loss of the Group on disposal of the foreign operation. (b) 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 statement of comprehensive income 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 Property, plant and equipment All items of property, plant and equipment are initially recorded at cost. Such cost includes the cost of replacing part of the property, plant and equipment and borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying property, plant and equipment. The accounting policy for borrowing costs is set out in Note 2.19. The cost of an item of property, plant and equipment is recognised as an asset if, and only if, it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. Subsequent to recognition, property, plant and equipment are measured at cost less accumulated depreciation and any accumulated impairment losses. When significant parts of property, plant and equipment are required to be replaced in intervals, the Group recognises such parts as individual assets with specific useful lives and depreciation, respectively. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the property, plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in profit or loss as incurred.

48

Positioned for growth


notes to the

financial statements

For the financial year ended 30 June 2013

2.

Summary of significant accounting policies (cont’d) 2.7 Property, plant and equipment (cont’d) Depreciation of an asset begins when it is available for use and is computed on a straight-line basis over the estimated useful lives of the assets as follows: Furniture and fittings Laboratory equipment Office equipment Motor vehicle Leasehold improvement Leasehold building

– – – – – –

3 to 5 years 5 to 7 years 3 years 3 years 5 to 7 years 60 years

Assets under construction included in property, plant and equipment are not depreciated as these assets are not yet available for use. 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 derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset is included in profit or loss in the year the asset is derecognised. 2.8 Investment properties Investment properties are properties that are owned by the Group in order to earn rentals or for capital appreciation, or both, rather than for use in the production or supply of goods or services, or for administrative purposes, or in the ordinary course of business. Investment properties comprise completed investment properties and properties that are being constructed or developed for future use as investment properties. Properties held under operating leases are classified as investment properties when the definition of investment properties is met and they are accounted for as finance leases. Investment properties are initially measured at cost, including transaction costs. The carrying amount includes the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met. Subsequent to initial recognition, investment properties are measured at fair value which reflects market conditions at the end of the reporting period. Gains or losses arising from changes in the fair values of investment properties are included in profit or loss in the year in which they arise. Investment properties are derecognised when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gain or loss on the retirement or disposal of an investment property is recognised in profit or loss in the year of retirement or disposal. Transfers are made to or from investment property only when there is a change in use. For a transfer from investment property to owner-occupied property, the deemed cost for subsequent accounting is the fair value at the date of change in use. For a transfer from owner-occupied property to investment property, the property is accounted for in accordance with the accounting policy for property, plant and equipment set out in Note 2.7 up to the date of change in use.

CORDLIFE GROUP LIMITED Annual Report 2013

49


notes to the

financial statements For the financial year ended 30 June 2013

2.

Summary of significant accounting policies (cont’d) 2.9 Intangible assets (a) Goodwill Goodwill is initially measured at cost. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of 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. The cash-generating unit to which goodwill has 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. Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised in profit or loss. Impairment losses recognised for goodwill are not reversed in subsequent periods. 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. (b) Other intangible assets Intangible assets acquired separately are measured initially at cost. The cost of intangible assets acquired in a business combination is their fair value as at the date of acquisition. Following initial acquisition, intangible assets are measured at cost less accumulated amortisation and any accumulated impairment losses. 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. The amortisation expense on intangible assets with finite lives is recognised in profit or loss in the expense category consistent with the function of the intangible asset. Other intangible assets are stated at cost less accumulated amortisation and any accumulated impairment losses. Amortisation of an asset is computed on a straight-line basis over the estimated useful lives of the assets as follows: Computer software

3 years

Customer contracts

3 to 18 years

Gains or losses arising from derecognition 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 derecognised. 2.10 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 such indication exists or when an annual impairment assessment 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 to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely

50

Positioned for growth


notes to the

financial statements

For the financial year ended 30 June 2013

2.

Summary of significant accounting policies (cont’d) 2.10 Impairment of non-financial assets (cont’d) 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. In assessing value in use, the estimated future cash flows expected to be generated by the asset are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples or other available fair value indicators. Impairment losses are recognised in profit or loss in those expense categories consistent with the function of the impaired asset. An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the asset’s or cash-generating unit’s recoverable amount. 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 increased amount 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. 2.11 Subsidiaries A subsidiary is an entity over which the Group has the power to govern the financial and operating policies so as to obtain benefits from its activities. In the Company’s separate financial statements, investments in subsidiaries are accounted for at cost less impairment losses. 2.12 Associates An associate is an entity, not being a subsidiary or a joint venture, in which the Group has significant influence. An associate is equity accounted for from the date the Group obtains significant influence until the date the Group ceases to have significant influence over the associate. The Group’s investment in associates are accounted for using the equity method. Under the equity method, the investment in associates is carried in the statement of financial position at cost plus post-acquisition changes in the Group’s share of net assets of the associates. Goodwill relating to associates is included in the carrying amount of the investment and is neither amortised nor tested individually for impairment. Any excess of the Group’s share of the net fair value of the associate’s identifiable asset, liabilities and contingent liabilities over the cost of the investment is included as income in the determination of the Group’s share of results of the associate in the period in which the investment is acquired. The profit or loss reflects the share of the results of operations of the associates. 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 the associate are eliminated to the extent of the interest in the associates. The Group’s share of the profit or loss of its associates is the profit attributable to equity holders of the associate and, therefore is the profit or loss after tax and non-controlling interests in the subsidiaries of associates. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the 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 its associates. The Group determines at the end of each reporting period whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount in the consolidated statement of comprehensive income. CORDLIFE GROUP LIMITED Annual Report 2013

51


notes to the

financial statements For the financial year ended 30 June 2013

2.

Summary of significant accounting policies (cont’d) 2.12 Associates (cont’d) The financial statements of the associates are prepared as of the same reporting date as the Company. Where necessary, adjustments are made to bring the accounting policies in line with those of the Group. Upon loss of significant influence over the associate, the Group measures and recognises any retained investment at its fair value. Any difference between the carrying amount of the associate upon loss of significant influence and the fair value of the aggregate of the retained investment and proceeds from disposal is recognised in profit or loss. 2.13 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: (i) Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated upon initial recognition at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. This category includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships as defined by FRS 39. Derivatives, including separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments. 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 held for trading or designated at fair value through 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. (ii) 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 derecognised or impaired, and through the amortisation process.

52

Positioned for growth


notes to the

financial statements

For the financial year ended 30 June 2013

2.

Summary of significant accounting policies (cont’d) 2.13 Financial assets (cont’d) Derecognition A financial asset is derecognised where the contractual right to receive cash flows from the asset has expired. On derecognition 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. Regular way purchase or sale of a financial asset All regular way purchases and sales of financial assets are recognised or derecognised on the trade date i.e., the date that the Group commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace concerned. 2.14 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 assets 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. Financial assets carried at cost If there is objective evidence (such as significant adverse changes in the business environment where the issuer operates, probability of insolvency or significant financial difficulties of the issuer) that an impairment loss on financial assets carried at 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 current market rate of return for a similar financial asset. Such impairment losses are not reversed in subsequent periods. CORDLIFE GROUP LIMITED Annual Report 2013

53


notes to the

financial statements For the financial year ended 30 June 2013

2.

Summary of significant accounting policies (cont’d) 2.15 Cash and cash equivalents Cash and cash equivalents comprise cash at bank and on hand and short term deposits that are held for the purpose of meeting short term commitments and not for investment purposes and are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. 2.16 Inventories Inventories are stated at the lower of cost and net realisable value, determined on a weighted average cost basis; and mainly consist of materials used in the provision of cord blood and umbilical cord tissue banking services. 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. Net realisable value is the estimated selling price in the ordinary course of business less estimated costs of completion and the estimated costs necessary to make the sale. 2.17 Provisions 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 each reporting date 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. 2.18 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 After initial recognition, financial liabilities other than derivatives, are measured at amortised cost using the effective interest rate method. Gains and losses are recognised in profit or loss when the liabilities are derecognised, and through the amortisation process. Derecognition A financial liability is derecognised 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 derecognition 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.

54

Positioned for growth


notes to the

financial statements

For the financial year ended 30 June 2013

2.

Summary of significant accounting policies (cont’d) 2.19 Borrowing costs Borrowing costs are capitalised as part of the cost of a qualifying asset if they are directly attributable to the acquisition, construction or production of that asset. Capitalisation of borrowing costs commences when the activities to prepare the asset for its intended use or sale are in progress and the expenditures and borrowing costs are incurred. Borrowing costs are capitalised until the assets are substantially completed for their intended use or sale. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. 2.20 Employee benefits (a) Defined contribution plan The Group participates in the national pension schemes as defined by the laws of the countries in which it has operations. The Singapore companies in the Group make contributions to the Central Provident Fund scheme in Singapore, a defined contribution pension scheme. The Hong Kong company makes contributions to a defined contribution fund under the Mandatory Provident Fund Schemes Ordinance, of which the assets are held separately in an independently administered fund. These contributions are recognised as an expense in the period in which the related service is performed. (b) Employee leave entitlement Employee entitlements to annual leave are recognised as a liability when they accrue to employees. The estimated liability for leave is recognised for services rendered by employees up to the reporting date. 2.21 Leases The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement at inception date: whether fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset, even if that right is not explicitly specified in an arrangement. As lessee Finance leases, which transfer to the Group substantially all the risks and benefits 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 retains 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 2.22. Contingent rents are recognised as revenue in the period in which they are earned.

CORDLIFE GROUP LIMITED Annual Report 2013

55


notes to the

financial statements For the financial year ended 30 June 2013

2.

Summary of significant accounting policies (cont’d) 2.22 Revenue recognition 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 discounts, rebates and sales taxes or duty. The Group assesses its revenue arrangements to determine if it is acting as principal or agent. The Group has concluded that it is acting as a principal in all of its revenue arrangements. The following specific recognition criteria must also be met before revenue is recognised: Rendering of services Revenue from cord blood banking contracts and umbilical cord tissue banking services is recognised by reference to the stage of completion of the service. Stage of completion is measured by reference to the percentage of costs incurred to estimated total costs to complete the contracts. Revenue received in advance for services to be rendered under cord blood and umbilical cord tissue banking contracts is accounted for as deferred revenue on the statement of financial position. Interest income Interest income is recognised using the effective interest method. Rental income Rental income arising from operating leases on investment properties 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. 2.23 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 by the reporting date, 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 reporting date 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:

56

--

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 and associates, 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.

Positioned for growth


notes to the

financial statements

For the financial year ended 30 June 2013

2.

Summary of significant accounting policies (cont’d) 2.23 Taxes (cont'd) Deferred tax (cont'd) Deferred tax assets are recognised for all deductible temporary differences, 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 and associates, 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 each reporting date 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 income tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date 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 to 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 reporting date. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current income tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority. 2.24 Other taxes Revenues, expenses and assets are recognised net of the amount of Goods and Services Tax (“GST�) except: (a) where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and (b) receivables and payables that are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position. Cash flows are included in the statement of cash flows on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. 2.25 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 32, including the factors used to identify the reportable segments and the measurement basis of segment information. CORDLIFE GROUP LIMITED Annual Report 2013

57


notes to the

financial statements For the financial year ended 30 June 2013

2.

Summary of significant accounting policies (cont’d) 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 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. 2.28 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 statement of financial position 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. 2.29 Related parties A related party is defined as follows: (a) A person or a close member of that person’s family is related to the Group and the Company if that person: (i) Has control or joint control over the Company; (ii) Has significant influence over the Company; or (iii) Is a member of the key management personnel of the Group or Company or of a parent of the Company. (b) An entity is related to the Group and the Company if any of the following conditions applies : (i) The entity and the Company are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others); (ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member); (iii) Both entities are joint ventures of the same third party; (iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity;

58

Positioned for growth


notes to the

financial statements

For the financial year ended 30 June 2013

2.

Summary of significant accounting policies (cont’d) 2.29 Related parties (cont'd) (v) The entity is a post-employment benefit plan for the benefit of employees of either the Company or an entity related to the Company. If the Company is itself such a plan, the sponsoring employers are also related to the Company; (vi) The entity is controlled or jointly controlled by a person identified in (a); (vii) A person identified in (a) (i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

3.

Significant accounting judgments, estimates and assumptions The preparation of the Group’s consolidated financial statements requires management to make judgments, 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. However, 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 is of the opinion that there is no instance of application of judgement which is expected to have a significant impact on the amounts recognised in the consolidated financial statements, apart from those involving estimates described below. 3.2 Key sources of estimation uncertainty The key assumptions concerning the future and other key sources of estimation uncertainty at the end of each reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. The Group based its assumptions and estimates on parameters available when the financial statements was 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. Allowance for impairment loss on trade receivables Where receivables are outstanding beyond the normal trading terms, the likelihood of the recovery of these receivables is assessed by management. Due to the large number of debtors, this assessment is based on supportable past collection history and historical write-offs of bad debts. In addition, there are credit control departments in place within the Group to perform recovery procedures and bad debt assessment on a regular and structured basis. When the credit control departments have exhausted all avenues of recovering outstanding debts, appropriate allowances for impairment loss or write-off of trade receivables will be made. Details of the impairment loss allowance are outlined in Note 15. Revenue recognition The Group recognises revenue from cord blood banking service contracts and umbilical cord tissue banking services based on the stage of completion method. The stage of completion is measured in accordance with the accounting policy stated in Note 2.22. Significant assumptions and estimates are required in determining the total estimated costs. In making the assumptions, the Group evaluates them by relying on past experience and evidence.

CORDLIFE GROUP LIMITED Annual Report 2013

59


notes to the

financial statements For the financial year ended 30 June 2013

3.

Significant accounting judgments, estimates and assumptions (cont'd) 3.2

Key sources of estimation uncertainty (cont'd) Revaluation of investment properties The Group carries its investment properties at fair value, with changes in fair values being recognised in profit or loss. The Group engaged independent valuation specialists to determine the fair value of the investment properties as at 30 June 2013. The key assumptions used to determine the fair value of the investment properties are further explained in Note 12. Impairment of non-financial assets An impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. The fair value less costs to sell calculation is based on available data from binding sales transactions in an arm’s length transaction of similar assets or observable market prices less incremental costs for disposing the asset. The value in use calculation is based on discounted cash flow model. The cash flows are derived from the budget for the next five years and do not include restructuring activities that the Group is not yet committed to or significant future investments that will enhance the asset’s performance of the cash generating unit being tested. The recoverable amount is most sensitive to the discount rate used for the discounted cash flow model as well as the expected future cash inflows and the growth rate used for the extrapolation purposes. Further details of the key assumptions applied in the impairment assessment of goodwill, are given in Note 13 to the financial statements.

4.

Revenue

2013 $’000 Rendering of services Interest income on long-term trade receivables

5.

2012 $’000

(Restated)

31,302

28,775

3,400

1,500

34,702

30,275

Finance income

2013 $’000

60

Group

Group

2012 $’000

(Restated)

Interest income from fixed deposits

205

57

Interest income from convertible bond (Note 14)

287

100

492

157

Positioned for growth


notes to the

financial statements

For the financial year ended 30 June 2013

6.

Finance costs

2013

Group

$’000

7.

2012 $’000

Interest expense

103

15

Less: Interest expense capitalised in construction-in-progress (Note 11)

(57)

(13)

46

2

Profit before income tax Profit before income tax is stated after charging/(crediting):

2013

Group

2012

$’000

$’000

7,011

6,686

Defined contribution plan expenses

643

592

Audit fees paid to auditors of the Company

161

90

46

27

1,902

Salaries and other payroll related costs

Non-audit fees paid to auditors of the Company IPO expenses * Exchange gain

(59)

(18)

Operating lease expense

520

567

Depreciation

726

663

Impairment loss on trade receivables

320

82

Bad debts written off

124

128

Amortisation of software

39

18

Loss on disposal of property, plant and equipment

34

* Includes Nil (2012: $178,000) paid to auditors of the Company. Nil (2012: $96,000) of IPO expenses paid to auditors of the Company was taken to equity.

CORDLIFE GROUP LIMITED Annual Report 2013

61


notes to the

financial statements For the financial year ended 30 June 2013

8.

Income tax The major components of income tax expense for the years ended 30 June 2013 and 2012 are:

2013

Group

2012

$’000

$’000

987

1,064

Current income tax: Current income taxation Over provision in respect of previous years

(7)

(173)

980

891

95

(37)

Deferred income tax: Origination and reversal of temporary differences

1,075

854

A reconciliation between tax expense and the product of accounting profit multiplied by the applicable corporate tax rate for the financial years ended 30 June 2013 and 2012 is as follows:

2013 Profit before income tax Tax at the domestic rates applicable to profits in the countries where the Group operates

Group

2012

$’000

$’000

14,559

7,780

2,475

1,323

Adjustments: Deferred tax assets not recognised Expenses not deductible for tax purposes Income not subject to tax Effect of partial tax exemption Effect of tax incentive * Over provision in prior years Share of results of associates Others

22

17

207

361

(625)

(2)

(26)

(26)

(408)

(216)

(7)

(173)

(491)

(355)

(72)

(75)

1,075

854

* The Productivity and Innovation Credit (“PIC”) was introduced in the Singapore Budget 2010 and was enhanced in Budget 2012 to provide tax benefits for investments by businesses in a broad range of activities along the innovation value chain. Under the scheme, all businesses can enjoy additional allowances at 400% on up to $400,000 of their expenditure each qualifying year on qualifying activities, subject to the agreement by the Inland Revenue Authority of Singapore.

62

Positioned for growth


notes to the

financial statements

For the financial year ended 30 June 2013

9.

Earnings per share The following reflects the profit and share data used in the computation of basic and diluted earnings per share for the years ended 30 June: Group

2013 Profit for the financial year attributable to owners of the Group

Weighted average number of ordinary shares for basic and diluted earnings per share computation

2012

$’000

$’000

13,484

6,926

‘000

‘000

232,566

171,730

10. Investment in associate

2013 Shares, at cost Share of post-acquisition results of associates

Group

Company

2012

2013

2012

$’000

$’000

$’000

$’000

25,701

13,885

25,701

1,899

4,343

Foreign currency translation reserve

227

Negative goodwill on acquisition of associate

138

27,965

17,664

25,701

At 30 June

Name of company

Country of incorporation

(564)

Proportion (%) of ownership interest

Principal activities

2013

2012

%

%

China Cord Blood Corporation1

Cayman Islands

Cord blood collection, laboratory testing, hematopoietic stem cell processing and stem cell storage services

10

China Stem Cells (South) Company Limited1

British Virgin Islands

Umbilical cord blood collection, processing and cryopreservation services

10

1

Audited by KPMG Huazhen

On 12 November 2012, the Group disposed of its 10% interest in China Stem Cells (South) Company Limited (“CSCS”) for a consideration of $20,614,000. A gain on disposal of associate of $2,729,000 is included in the Group’s profit or loss for the year ended 30 June 2013.

CORDLIFE GROUP LIMITED Annual Report 2013

63


notes to the

financial statements For the financial year ended 30 June 2013

10. Investment assocoiate (cont'd) On 12 November 2012, the Group acquired a 10% interest in China Cord Blood Corporation (“CCBC”). CCBC is listed on the New York Stock Exchange (“NYSE”) and provides cord blood collection, laboratory testing, hematopoietic stem cell processing and stem cell storage services in the Beijing municipality and the provinces of Guangdong and Zhejiang. As at 30 June 2013, the fair value of investment in CCBC based on published price quotation is $26,036,000. Although the Group holds less than 20% of the voting power, CCBC and CSCS are equity accounted in view of the fact that the Group exercises significant influence by virtue of its right to appoint one director to the respective boards. As at 30 June 2013, the Group has 1 board seat of CCBC (2012: 1 board seat of CSCS). The summarised financial information of the associate, adjusted for the proportion of ownership interest held by the Group, is as follows:

2013 Share of associate’s assets and liabilities:

$’000

Group

2012 $’000

Current assets

33,954

5,558

Non-current assets

28,821

6,678

Current liabilities

(6,014)

(1,723)

(30,670)

(4,236)

26,091

6,277

Revenue

7,166

4,515

Profit for the year

1,995

2,091

Non-current liabilities Net assets Share of associate’s result:

The tax laws in the People’s Republic of China (“PRC”) imposes a withholding tax at 10%, unless reduced by a tax treaty or agreement, for dividends receivable by non-PRC-resident enterprises from PRC-resident enterprises in respect of earnings accumulated beginning on 1 January 2008. Consistent with CCBC, the Group has not provided for income taxes on such undistributed accumulated earnings of PRC subsidiaries of CCBC as at 30 June 2013, since these earnings are intended to be reinvested indefinitely in the PRC. As of 30 June 2013, such unremitted earnings that may be subject to withholding tax amounted to $1,600,000 (2012: $4,343,000) and the related unrecognised deferred tax liability was $160,000 (2012: $434,000).

64

Positioned for growth


notes to the

financial statements

For the financial year ended 30 June 2013

11. Property, plant and equipment Furniture and fittings

Laboratory equipment

Office equipment

Motor vehicle

Leasehold improvement

Leasehold building

Constructionin-progress

Total

$’000

$’000

$’000

$’000

$’000

$’000

$’000

$’000

Group Cost: At 1 July 2011

516

1,414

714

45

1,027

2,591

6,307

Additions

87

283

108

1,943

2,421

Disposals

(12)

(9)

(21)

Exchange rate adjustments

4

14

8

1

32

1

60

At 30 June 2012 and 1 July 2012

607

1,699

821

46

1,059

4,535

8,767

Additions

64

526

414

113

4,841

5,958

Disposals

(483)

(22)

(43)

Transfer to/(from) constructionin-progress

258

80

522

4,135

(4,995)

(4,196)

(4,196)

Transfer to investment properties (Note 12) Acquisition of subsidiaries (Note 28)

(548)

261

93

107

44

13

518

Acquisition of assets (1)

27

10

37

Exchange rate adjustments

(2)

(1)

(2)

3

(1)

(3)

At 30 June 2013

705

2,402

1,307

46

1,741

4,135

197

10,533

At 1 July 2011

343

908

478

19

299

2,047

Charge for the year

173

171

145

15

159

663

Accumulated depreciation:

Disposals

(12)

(9)

(21)

Exchange rate adjustments

2

7

5

1

11

26

At 30 June 2012 and 1 July 2012

518

1,074

619

35

469

2,715

Charge for the year

88

232

174

11

193

28

726

(22)

(38)

(514)

1

(1)

1

Disposals Exchange rate adjustments At 30 June 2013

(454) (1) 151

1,285

754

46

663

28

2,927

At 30 June 2012

89

625

202

11

590

4,535

6,052

At 30 June 2013

554

1,117

553

1,078

4,107

197

7,606

Net book value:

CORDLIFE GROUP LIMITED Annual Report 2013

65


notes to the

financial statements For the financial year ended 30 June 2013

11. Property, plant and equipment (cont’d) Furniture and fittings

Laboratory equipment

Office equipment

Leasehold improvement

Leasehold building

Constructionin-progress

Total

$’000

$’000

$’000

$’000

$’000

$’000

$’000

397

984

451

2,591

4,423

Additions

75

191

94

1,866

2,226

Disposals

(9)

Company Cost: At 1 July 2011

At 30 June 2012 and 1 July 2012

(9)

472

1,175

536

4,457

6,640

Additions

65

376

401

27

4,723

5,592

Disposals

(470)

(20)

(37)

Transfer to/(from) construction-in-progress

(527)

258

522

4,135

(4,915)

Transfer to investment properties (Note 12)

(4,196)

Acquisition of assets

28

9

37

325

1,559

909

549

4,135

69

7,546

At 1 July 2011

275

700

356

1,331

Charge for the year

142

102

76

320

(9)

417

802

423

(1)

At 30 June 2013

– (4,196)

Accumulated depreciation:

Disposals At 30 June 2012 and 1 July 2012 Charge for the year

(9)

1,642

60

122

115

28

33

358

(451)

(20)

(36)

(507)

26

904

502

28

33

1,493

At 30 June 2012

55

373

113

4,457

4,998

At 30 June 2013

299

655

407

521

4,102

69

6,053

Disposals At 30 June 2013 Net book value

On 28 June 2013, the Group acquired laboratory and office equipment amounting to $37,000 from P.T. Cordlife Indonesia, a subsidiary of Life Corporation Limited.

(1)

66

Positioned for growth


notes to the

financial statements

For the financial year ended 30 June 2013

11. Property, plant and equipment (cont’d) Motor vehicle is pledged as security for the related finance lease liabilities (Note 27). On 26 January 2013, the Group transferred 9 office units from construction-in-progress to owners’ occupied leasehold building upon completion. The Group’s leasehold building with a carrying amount of $4,107,000 (2012: nil) are mortgaged to secure the Group’s bank loans (Note 24). The Group’s property, plant and equipment include borrowing costs arising from bank loans borrowed specifically for this purpose. During the financial year, the borrowing costs capitalised as cost of property, plant and equipment amounted to $57,000 (2012: $13,028). As at 30 June 2013, the fair value of the leasehold building was determined to be $4,400,000. The valuation was performed by Colliers International Consultancy & Valuation (Singapore) Pte Ltd, an independent valuer with a recognised and relevant professional qualification and with recent experience in the location and category of the properties being valued. The valuations are based on comparable market transactions that consider the sales of similar properties that have been transacted in the open market. 12. Investment properties Group and Company

At 1 July

2013

2012

$’000

$’000

Transfer from property, plant and equipment (Note 11)

4,196

Fair value gain recognised in profit and loss

1,134

At 30 June

5,330

On 26 January 2013, the Group transferred 9 office units from property, plant and equipment to investment properties upon completion. On that date, the Group determined that these units will no longer be held for owner occupation, but to earn rentals. No rental income was earned on the investment properties as the Group has not secured tenants for the units. Direct operating expenses (including repairs and maintenance) arising from non-rental generating properties are $24,000 (2012: nil). The Group has no restrictions on the realisability of its investment properties and no contractual obligations to purchase, construct or develop investment property or for repairs, maintenance or enhancements.

CORDLIFE GROUP LIMITED Annual Report 2013

67


notes to the

financial statements For the financial year ended 30 June 2013

12. Investment properties (cont’d) Investment properties are stated at fair value, which has been determined based on valuations performed as at 30 June 2013. The valuation was performed by Colliers International Consultancy & Valuation (Singapore) Pte Ltd, an independent valuer with a recognised and relevant professional qualification and with recent experience in the location and category of the properties being valued. The valuations are based on comparable market transactions that consider the sales of similar properties that have been transacted in the open market. Investment properties amounting to $5,330,000 (2012: nil) are mortgaged to secure bank loans (Note 24). The investment properties held by the Group and the Company as at 30 June 2013 are as follows: Description and Location

Existing Use

Tenure

Lease term

9 office units, A’Posh Bizhub 1 Yishun Industrial Street 1

Commercial

Leasehold

60 years

13. Intangible assets Customer contracts

Computer software

Total

$’000

$’000

$’000

At 1 July 2011

152

152

Additions

42

42

At 30 June 2012 and 1 July 2012

194

194

Additions

150

150

Acquisition of subsidiaries (Note 28)

1,639

1,639

At 30 June 2013

1,639

344

1,983

At 1 July 2011

141

141

Amortisation for the year

18

18

Group Cost:

Accumulated amortisation:

At 30 June 2012 and 1 July 2012

159

159

Amortisation for the year

39

39

At 30 June 2013

198

198

At 30 June 2012

35

35

At 30 June 2013

1,639

146

1,785

Net carrying amount:

68

Positioned for growth


notes to the

financial statements

For the financial year ended 30 June 2013

13. Intangible assets (cont’d) Customer contracts Customer contracts relate to the existing cord blood and umbilical cord tissue banking services contracts of the subsidiaries acquired during the year (Note 28), with useful lives ranging from 3 to 18 years. Amortisation expense The amortisation of the intangible assets has been recognised in the “Administrative expenses” line item in the consolidated statement of comprehensive income. Computer software 2013

2012

$’000

$’000

At 1 July

194

152

Additions

140

42

At 30 June

334

194

159

141

39

18

At 30 June

198

159

Net carrying amount

136

35

Company Cost:

Accumulated amortisation: At 1 July Amortisation for the year

14. Convertible bond The Group invested in a $1,500,000 convertible bond issued by CS Cell Technologies Pte Ltd, which holds an 85% interest in the India operations of Life Corporation Limited. The convertible bond had an annual coupon rate of 20% and a redemption value of $2,160,000 upon maturity on 6 March 2014. The convertible bond was redeemed on 28 June 2013, as part of the terms and conditions for the completion of the acquisition of the businesses from Life Corporation Limited (Note 28).

CORDLIFE GROUP LIMITED Annual Report 2013

69


notes to the

financial statements For the financial year ended 30 June 2013

15. Trade receivables

2013 Non-current Trade receivables Less: Impairment loss Current Trade receivables (current) Less: Impairment loss

Group

Company

2012

2013

2012

$’000

$’000

$’000

$’000

39,178

24,337

36,258

23,936

(435)

(79)

(435)

(79)

38,743

24,258

35,823

23,857

12,529

9,059

8,340

8,763

(408) 12,121

(471) 8,588

(328) 8,012

(443) 8,320

Trade receivables (current) are non-interest bearing and generally on 30 to 60 day terms. An allowance for impairment loss is recognised when there is objective evidence that the trade receivable is impaired. Non-current trade receivable represents cord blood and umbilical cord tissue banking service revenues receivable under instalment payment plans that have yet to be billed to the customer. Upon billing, the billed amount will be receivable under the same terms as current trade receivables. Non-current trade receivables are carried at amortised cost and are not yet due. An allowance for impairment loss on noncurrent trade receivables is recognised when there is objective evidence that the trade receivable is impaired. Impairment of trade receivables is individually assessed. The expected net cash flows have been discounted to their present value using market determined risk adjusted discount for the following entities in the Group:

70

Cordlife Group Limited – 10% (2012: 10%)

Cordlife (Hong Kong) Limited – 14% (2012: 14%)

Cordlife Sciences (India) Pvt Ltd – 17%

Cordlife Medical Phils Inc. – 14%

Positioned for growth


notes to the

financial statements

For the financial year ended 30 June 2013

15. Trade receivables (cont’d) Movements in the allowance for impairment loss are as follows: 2013

Group

Company

2012

2013

2012

$’000

$’000

$’000

$’000

550

468

522

440

320

97

241

97

(27)

(15)

843

550

At the beginning of the year Charge for the year: Current Write back for the year: Non-current At the end of the year

(15)

763

522

Receivables that are past due but not impaired The Group and the Company have trade receivables amounting to $3,358,000 (2012: $1,826,000) and $1,776,000 (2012: $1,558,000) respectively that are past due but not impaired. These receivables are unsecured and the analysis of their aging at the end of the reporting period is as follows:

Group

Total

Less than 31 days

31 – 60

61 – 90 days

Days

days

>90

30 June 2012

1,826

783

457

173

413

30 June 2013

3,358

1,945

318

173

922

30 June 2012

1,558

686

378

151

343

30 June 2013

1,776

569

262

150

795

Company

16. Other receivables 2013 Non-current Interest receivable on non-current fixed deposits

$’000

Group

Company

2012

2013

2012

$’000

$’000

$’000

160

160

61

61

213

214

434

214

221

Other receivables

836

573

703

518

Deposits

247

88

100

56

1,083

661

803

574

Other receivables Deposits

Current

CORDLIFE GROUP LIMITED Annual Report 2013

71


notes to the

financial statements For the financial year ended 30 June 2013

17. Fixed deposits

2013 Non-current Current Total unpledged fixed deposits Pledged fixed deposits

Group

Company

2012

2013

2012

$’000

$’000

$’000

$’000

11,500

11,500

11,500

11,500

3,500

6,000

3,500

6,000

15,000

17,500

15,000

17,500

334

As at 30 June 2013, the Group placed excess cash in non-current fixed deposits of $11,500,000 (2012: $11,500,000) which will mature in June 2015 and bear interest at 1.3% (2012: 1.3%) per annum and current fixed deposits of $3,500,000 (2012: $6,000,000) with maturity periods of three to six months and bear interest at 0.85% (2012: 1%) per annum. Pledged fixed deposits which will mature in December 2013 and bear interest at 0.7% (2012: nil) per annum are pledged to secure merchant credit card facillities. 18. Cash and cash equivalents

2013 Cash at bank and on hand

Group

Company

2012

2013

2012

$’000

$’000

$’000

$’000

7,986

12,945

3,492

10,098

Included in cash at bank is $3,201,000 (2012: $2,721,000) denominated in HKD. For the purpose of the statement of cash flows, only the cash at bank and cash on hand are classified as cash and cash equivalents. 19. Short term investments

2013

Group

Company

2012

2013

2012

$’000

$’000

$’000

$’000

342

Financial assets at fair value through profit or loss Non-equity investments

72

Positioned for growth


notes to the

financial statements

For the financial year ended 30 June 2013

20. Inventories

2013 Consumables

Group

Company

2012

2013

2012

$’000

$’000

$’000

$’000

435

417

156

365

Inventories recognised as an expense in cost of sales amount to $1,186,000 (2012: $965,000) 21. Amount owing by/(to) subsidiaries Amounts owing by/(to) subsidiaries (current) are non-trade related, unsecured, interest-free and are repayable on demand. Amounts owing to subsidiary (non-current) are non-trade related, unsecured, interest-free and have no fixed terms of repayment. 22. Trade and other payables (current)

2013

Group

Company

2012

2013

2012

$’000

$’000

$’000

$’000

Trade payables

1,534

789

688

730

Other payables and accrued expenses

4,693

1,570

2,374

1,298

Accrual for wages and bonus

1,046

206

982

171

232

216

195

187

7,505

2,781

4,239

2,386

Accrual for unutilised leave

Trade payables and other payables are non-interest bearing and are normally settled on 30 day terms. 23. Deferred revenue Deferred revenue represents revenue received in advance for services to be rendered under cord blood and umbilical cord tissue banking contracts. 24. Interest-bearing borrowings

2013 Current Non-current

Group

Company

2012

2013

2012

$’000

$’000

$’000

$’000

271

111

271

111

5,926

2,453

5,926

2,453

6,197

2,564

6,197

2,564

Interest-bearing borrowings comprise of a SGD bank loan drawn down under an approved $6,450,000 loan facility secured by a first mortgage over the Group’s leasehold building (Note 11) and investment properties (Note 12). Interest rate is fixed at 1.5%, 1.98% and 2.38% for the first, second and third years respectively beginning from 1 July 2011, and 2.28% + 3-month SOR thereafter. The loan is repayable in 240 monthly instalments commencing 1 July 2011.

CORDLIFE GROUP LIMITED Annual Report 2013

73


notes to the

financial statements For the financial year ended 30 June 2013

25. Share capital and treasury shares (a) Share capital

2013 No. of shares (‘000)

Group and Company

2012

$’000

No. of shares (‘000)

$’000

232,687

53,548

150,887

25,677

New shares issued

60,000

27,871*

Issue of new shares upon exercise of option **

21,800

232,687

53,548

232,687

53,548

Issued and fully paid: Ordinary shares At 1 July

At 30 June

* The proceeds from issuance of IPO shares are net of IPO expenses of $1,829,000. ** On 14 May 2011, the Group and Life Corporation Limited entered into a Bond Deed with a third party bond holder (the “Bond Holder”) pursuant to which, Life Corporation Limited secured access to working capital of approximately A$7.4 million. Pursuant to the terms of the Bond Deed, the Bond Holder was granted, inter alia, (a) one option, which was exercisable into 21,800,000 shares in the capital of Life Corporation Limited at the exercise price of A$0.40 per share and (b) an option, which was exercisable into 21,800,000 Shares of the Company, at no consideration. Pursuant to the terms of the Bond Deed, the option would be automatically exercised into 21,800,000 Shares upon the Company’s admission on the Main Board of the SGX-ST. This option had been exercised on 29 March 2012.

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

2013 No. of shares (‘000) At 1 July

Group and Company

$’000 –

2012

No. of shares (‘000)

$’000

Acquired during the financial year

(200)

(103)

At 30 June

(200)

(103)

Treasury shares relate to ordinary shares of the Company that is held by the Company. The Company acquired 200,000 (2012: nil) shares in the Company through purchase of its own shares during the financial year. The total amount paid to acquire the shares was $103,000 (2011: nil) and this was presented as a component within equity.

74

Positioned for growth


notes to the

financial statements

For the financial year ended 30 June 2013

26. Other reserves Capital reserve Capital reserve represents the value of equity-settled share options previously granted by Life Corporation Limited to the Group’s employees, prior to the distribution in specie of all of the issued share capital of Cordlife Group Limited to Life Corporation Limited's shareholders on 30 June 2011. Subsequent to the distribution, Cordlife Group Limited ceased to be a subsidiary of Life Corporation Limited. The reserve is made up of the cumulative value of services received from employees recorded on grant of equity-settled share options. Acquisition reserve Acquisition reserve represents the excess of the consideration over the carrying value when the Group acquired noncontrolling interests in Cordlife (Hong Kong) Limited. Foreign currency translation reserve Foreign currency translation reserve represents the exchange differences arising from the translation of the financial statements of foreign subsidiaries whose functional currencies are different from that of the Group’s presentation currency. Merger reserve Merger reserve represents the difference between the consideration paid/received and the equity interests acquired/ disposed, accounted for using the pooling of interest method. 27. Commitments Capital commitments The Group and the Company have capital commitments in respect of property, plant and equipment that are contracted for as at 30 June 2013 but not recognised in the financial statements aggregating to Nil (2012: $3,829,000). Operating lease commitments The Group leases office space under non-cancellable lease arrangements which have remaining lease terms ranging from 5 months to 15 years. There are no renewal options and contingent rent provisions included in the contracts. The Group is restricted from subleasing the premises. Future minimum rentals payable under non-cancellable operating leases as at 30 June are as follows:

2013 Within one year After one year but not more than five years More than five years

Group

Company

2012

2013

2012

$’000

$’000

$’000

$’000

996

615

353

195

1,937

1,007

708

478

3,411

1,622

1,061

195

CORDLIFE GROUP LIMITED Annual Report 2013

75


notes to the

financial statements For the financial year ended 30 June 2013

27. Commitments (cont’d) Finance lease commitments Commitments under finance lease are as follows: 2013

2013

2012

2012

Minimum lease payments

Present value of payments

Minimum lease payments

Present value of payments

$’000

$’000

$’000

$’000

Within one year

7

6

After one year but not more than five years

Total minimum lease payments

7

6

Less: Amounts representing finance charges

(1)

Present value of minimum lease payments

6

6

The weighted average interest rate implicit in the lease is Nil (2012: 3.75%). 28. Investment in subsidiaries Company

Unquoted equity shares, at cost

76

Positioned for growth

2013

2012

$’000

$’000

21,304

15,166


notes to the

financial statements

For the financial year ended 30 June 2013

28. Investment in subsidiaries (cont’d) Name of company

Country of incorporation

Principal activities

Held by the Company:

Percentage of equity held 2013

2012

%

%

100

Cordlife (M) Sdn Bhd1

Malaysia

Dormant

Cordlife (Hong Kong) Limited2

Hong Kong

Cord blood and umbilical cord tissue banking services

100

100

Cordlife Technologies Pte Ltd (Formerly known as CLS Services Pte Ltd)3

Singapore

Umbilical cord tissue banking services

100

100

Shanghai Cordlife Biomedical Research Co., Ltd4

People’s Republic of China

Dormant

100

100

CS Cell Technologies Pte Ltd3

Singapore

Investment holding

100

Cordlife Stem Cell Technology Limited2

Hong Kong

Umbilical cord tissue banking services

100

Cordlife Sciences (India) Pvt Ltd5

India

Cord blood and umbilical cord tissue banking services

85

Cordlife Medical Phils Inc6

Philippines

Cord blood and umbilical cord tissue banking services

99.99

Held by CS Cell Technologies Pte Ltd

1

Liquidated in financial year ended 30 June 2013

2

Audited by Ernst & Young, Hong Kong

3

Audited by Ernst & Young LLP, Singapore

4

Audited by Shanghai Xinyi Certified Public Accountants Co. Ltd

5

Audited by D.N Mukherjee & Co.

6

Audited by Datiles Casedo and Associates, CPAs

CORDLIFE GROUP LIMITED Annual Report 2013

77


notes to the

financial statements For the financial year ended 30 June 2013

28. Investment in subsidiaries (cont’d) Acquisition of subsidiaries On 28 June 2013, the Group completed the acquisition of Life Corporation Limited’s cord blood and umbilical cord tissue banking businesses in India, Philippines and Hong Kong, and assets and liabilities of Life Corporation Limited’s subsidiary, P.T. Cordlife Indonesia (the “Acquisition”). The aggregate consideration for the acquisition is A$5.5 million (equivalent to $6.4 million). The Acquisition comprises of 100% of the issued and paid-up capital of CS Cell Technologies Pte. Ltd (“CSCT Singapore”) and Cordlife Stem Cell Technology Limited. CSCT Singapore is an investment holding company which holds 85% of the issued and paid-up capital of Cordlife Sciences (India) Pvt. Ltd and approximately 99.99% of the issued share capital of Cordlife Medical Phils., Inc.. The Acquisition will enable Cordlife to enlarge its geographical footprint in Asia, and is in line with the Group’s intentions, as stated in its listing prospectus, to expand its business operations overseas. The fair values of the identifiable assets and liabilities of the subsidiaries acquired were as follows: Fair value recognised on acquisition $’000 Property, plant and equipment

518

Intangible assets

1,639

Trade receivables

6,270

Other receivables and prepayments

844

Inventories

184

Cash and cash equivalents

176

Pledged fixed deposits

37

Short term investments

342

Trade and other payables

(2,844)

Deferred revenue

(2,297)

Net identifiable assets at fair value Less: Non-controlling interests measured at non-controlling interest’s proportionate share of net assets Total purchase consideration

4,869 45 4,914

Less: Cash and cash equivalents acquired Deferred cash settlement Net cash outflow on acquisition

78

Positioned for growth

(176) (3,182) 1,556


notes to the

financial statements

For the financial year ended 30 June 2013

28. Investment in subsidiaries (cont’d) Acquisition of subsidiaries (cont’d) Transaction costs Transaction costs related to the Acquisition of $225,000 have been recognised in the “Administrative expenses” line item in the Group’s profit or loss for the year ended 30 June 2013. Impact of the acquisition on comprehensive income The business combination was completed at the end of the financial year, on 28 June 2013, and the acquired subsidiaries did not contribute any revenue or profit to the Group’s total comprehensive income for the year. Customer contracts Customer contracts have been identified as an intangible asset arising from the Acquisition. The Group has engaged an independent valuer to determine the fair value of this intangible asset. 29. Related party transactions (a) There were no significant transactions between the Group and its related companies for the current financial year. Outstanding balances between the Group and its related companies are disclosed in the Statement of Financial Position. (b) Compensation of key management personnel

2013 Salaries and bonuses

Group

2012

$’000

$’000

1,565

914

Defined contribution plans

85

71

Other short-term benefits

98

84

300

280

87

150

2,135

1,499

1,319

763

816

736

2,135

1,499

Directors’ fees Consultancy fees paid to non-independent and non-executive Directors*

Comprise amounts paid to: Directors of the Company Other key management personnel

*Consultancy fees were paid to Dr Ho Choon Hou and Ms Jin Lu in accordance with their respective consultancy services agreement. Dr Ho and Ms Jin assist the Group in investment opportunities and identifying further initiatives in collaboration and cooperation in the region.

CORDLIFE GROUP LIMITED Annual Report 2013

79


notes to the

financial statements For the financial year ended 30 June 2013

30. 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, interest rate risk and liquidity risk. 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 as summarised below: 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 cash equivalents and fixed deposits), the Group minimises credit risk by dealing with high credit rating counterparties. The Group’s maximum exposure to credit risk is represented by the carrying amount of these financial assets. Trade receivables comprise amounts due from parents and therefore the individuals cannot be subject to the types of credit assessments that could be otherwise undertaken if dealing with a corporate entity. To mitigate credit risk, receivable balances are monitored on a regular basis with the result that the Group’s exposure to bad debts to date has not been significant. The nature of the cord blood banking and umbilical cord tissue business whereby the child’s umbilical cord stem cells are stored with the Group reduces the likelihood of default in payment. There are no significant concentrations of credit risk within the Group. Information regarding financial assets which are past due but not impaired is disclosed in Note 15. Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of the Group’s financial instruments will fluctuate because of changes in market interest rates. The Group’s exposure to interest rate risk arises primarily from the Group’s interestbearing borrowings whose interest rates are subject to re-pricing every quarter after July 2013. Fixed deposits of varying maturity periods are placed with reputable banks and financial institutions and generate interest income at a fixed rate during the tenure of the fixed deposits and are not subject to changes in interest rate fluctuation. As at 30 June 2013 and 2012, the Group is not subject to significant interest rate risk as the fixed deposits and interestbearing borrowings are fixed rate instruments. Liquidity risk Liquidity risk is the risk that the Group will encounter difficulty in meeting financial obligations due to shortage of funds. The Group’s liquidity risk arises primarily from mismatches of the maturities of financial assets and liabilities. The Group’s objective is to maintain adequate funding to meet the operating requirements of the business and to facilitate the Group’s ongoing growth plans. The Group’s liquidity risk management policy is to maintain sufficient liquid financial assets. At reporting date, the Group has cash and cash equivalents and unpledged fixed deposits of $22,986,000 (2012: $30,445,000). Hence, the Group’s exposure to liquidity risk is minimal.

80

Positioned for growth


notes to the

financial statements

For the financial year ended 30 June 2013

31. Financial instruments (a) Fair value (i)

Fair value of financial instruments that are carried at fair value Fair value hierarchy The Group classifies fair value measurement using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels: • Level 1– Quoted prices (unadjusted) in active markets for identical assets or liabilities • Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices), and • Level 3 – Inputs for the asset or liability that are not based on observable market data (unobservable inputs) Short term investments carried at fair value are carried at Level 2, based on the above fair value hierarchy. There are no financial instruments that are carried at fair value under Level 1 or Level 3 of the fair value hierarchy.

(ii) Fair value of financial instruments by classes that are not carried at fair value and whose carrying amounts are a reasonable approximation of fair value Management has determined that the carrying amounts of cash and cash equivalents, current fixed deposits, trade and other receivables, amounts owing by/(to) subsidiaries, trade and other payables and finance lease liabilities, based on their notional amounts, reasonably approximate their fair values because of their short term nature. The carrying amount of long term trade receivables approximates their fair values as these amounts have been discounted to their present value using market determined risk adjusted discount rates for the Group. The carrying amount of non-current fixed deposits approximates their fair values as these fixed deposits bear interest rate at the market prevailing interest for similar type of fixed deposits instrument at the end of the reporting period. The carrying amounts of interest-bearing borrowings (current and non-current) carry interest which approximates market rate. Accordingly, their notional amounts approximate their fair values. (iii) Fair value of financial instruments by classes that are not carried at fair value and whose carrying amounts are not a reasonable approximation of fair value The convertible bond is stated at cost because it has no market price and the fair value cannot be reliably measured using valuation technique. Non-current amounts owing to subsidiary are stated at cost because there are no fixed terms of repayment. The fair values of these amounts are not determinable, as the timing of the future cash flows arising from these amounts cannot be estimated reliably.

CORDLIFE GROUP LIMITED Annual Report 2013

81


notes to the

financial statements For the financial year ended 30 June 2013

31. Financial instruments (cont’d) (b) Classification of financial instruments The following table sets out the financial instruments as at the end of the reporting period:

Group

2013

2012

$’000

$’000

50,864

32,846

Financial assets

Loans and receivables: Trade receivables Other receivables

1,517

875

15,334

17,500

7,986

12,945

75,701

64,166

342

1,500

342

1,500

Trade and other payables

7,665

2,983

Amounts payable for acquisition of subsidiaries

3,182

Fixed deposits Cash and cash equivalents

Fair value through profit or loss: Short term investments Convertible bond

Financial liabilities

Liabilities at amortised cost:

Finance lease liabilities Interest-bearing borrowings

82

Positioned for growth

6

6,197

2,564

17,044

5,553


notes to the

financial statements

For the financial year ended 30 June 2013

31. Financial instruments (cont’d) (b) Classification of financial instruments (cont'd)

Company

2013

2012

$’000

$’000

Financial assets

Loans and receivables: Trade receivables

43,835

32,177

Fixed deposits

15,000

17,500

Cash and cash equivalents

3,492

10,098

Other receivables

1,024

574

Amounts owing by subsidiaries

1,476

1,032

64,827

61,381

1,500

Trade and other payables

4,239

2,386

Amounts payable for acquisition of subsidiaries

3,182

243

97

6,197

2,564

32,014

5,047

21,335

Fair value through profit or loss: Convertible bond Financial liabilities

Liabilities at amortised cost:

Amounts owing to subsidiaries Interest-bearing borrowings

Liabilities at cost: Amounts owing to subsidiaries (non-current) 32. Segment reporting For management reporting purposes, the Group is organised into two reportable segments as follows: •

North Asia consists of customers from Hong Kong, China and Macau. It also includes the Group’s share of associate’s results.

South Asia and Southeast Asia consists of customers from Singapore, Philippines, Indonesia and India.

The following items and associated assets and liabilities are not allocated to operating segments as they are not considered part of the core operations of any segment: •

Interest income excluding interest income on long-term trade receivables.

Income taxes that are managed on a group basis.

Subsidiaries not in the principal activities of the provision of cord blood and umbilical cord tissue banking services.

No operating segments have been aggregated to form the above reportable operating segments.

CORDLIFE GROUP LIMITED Annual Report 2013

83


notes to the

financial statements For the financial year ended 30 June 2013

32. Segment reporting (cont’d) Segment revenue

Year ended 30 June 2013 Revenue from external customers

North Asia

South Asia and Southeast Asia

Others

Total

$’000

$’000

$’000

$’000

6,079

28,623

34,702

Total consolidated revenue

34,702

Year ended 30 June 2012 (Restated) Revenue from external customers

7,109

23,166

30,275 30,275

Total consolidated revenue Segment results 2013

2012

$’000

$’000

- North Asia

5,044

2,052

- South Asia and Southeast Asia

8,973

5,589

14,017

7,641

Interest income

492

157

Other unallocated*

(88)

(18)

138

– 7,780

Group Segment profit:

Unallocated income/expenses:

Others Negative goodwill on acquisition of associate Profit before income tax expense

14,559

Income tax expense

(1,075)

Total net profit for the year

13,484

(854) 6,926

* Other unallocated refers to results of subsidiaries not in the principal activities of the provision of cord blood and umbilical cord tissue banking services.

84

Positioned for growth


notes to the

financial statements

For the financial year ended 30 June 2013

32. Segment reporting (cont’d) Segment assets and liabilities

30 June 2013

Assets

Liabilities

$’000

$’000

Segment assets and liabilities: - North Asia**

54,194

6,185

- South Asia and Southeast Asia

86,551

56,015

1,138

Tax recoverable/payable

Deferred tax liabilities

(21,116)

Eliminations+ Others* Consolidated

30 June 2012

192 (21,150)

820

506

120,449

42,886

Assets

Liabilities

$’000

$’000

Segment assets and liabilities: - North Asia**

22,807

5,981

- South Asia and Southeast Asia

68,640

13,184

Tax recoverable/payable

1,092

Deferred tax liabilities

97

Eliminations

(1,185)

+

Others* Consolidated

(1,190)

101

40

90,363

19,204

+ Inter-segment balances are eliminated on consolidation. * Others refer to the assets and liabilities of subsidiaries not in the principal activities of the provision of cord blood and umbilical cord tissue banking services. ** Included in the assets of North Asia is investment in associate of $27,965,000 (2012: $17,664,000).

CORDLIFE GROUP LIMITED Annual Report 2013

85


notes to the

financial statements For the financial year ended 30 June 2013

33. Dividends Group and Company

Declared and paid during the financial year:

2013

2012

$’000

$’000

2,325

4,188

466

4,188

6,513

4,654

4,188

2,327

Dividends on ordinary shares: Interim exempt (one-tier) dividend for 2013: 1.0 cents (2012: 1.8 cents) per share Special exempt (one-tier) dividend for 2012: 0.2 cents per share Special final exempt (one-tier) dividend for 2012: 1.8 cents per share

Proposed but not recognised as a liability as at 30 June: Dividends on ordinary shares, subject to shareholders’ approval at the AGM: Special final exempt (one-tier) dividend for 2012: 1.8 cents per share Final exempt (one-tier) dividend for 2013: 1.0 cents per share 34. Capital management Capital comprise of equity attributable to owners of the Company. The primary objective of the Group’s capital management is to ensure that it maintains an appropriate capital structure in order to support its business and maximise shareholder value. The Group manages its capital structure and makes adjustment to it, in the light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Group is not subject to any externally imposed capital requirements. No changes were made in the objectives, policies or processes during the years ended 30 June 2013 and 2012. The Group is currently in net cash position. The Group will continue to be guided by prudent financial policies of which gearing is an important aspect. 35. Events occurring after the reporting period On 3 September 2013, the Company entered into a conditional sale and purchase agreement with certain vendors to acquire a 19.92% interest in StemLife Berhad ("StemLife"), a company listed on Bursa Malaysia for an aggregate consideration of RM29.58 million. The acquisition will enable the Company to invest in and expand its geographical footprint in Asia to Malaysia and Thailand through StemLife and its associated company, Thai StemLife Co Ltd.

86

Positioned for growth


notes to the

financial statements

For the financial year ended 30 June 2013

36. Comparatives Certain comparative figures have been reclassified to conform with the current year’s presentation.

Statement of comprehensive income: Revenue Finance income

2012

Before reclassification

Amounts reclassified

After reclassification

$’000

$’000

$’000

28,775

1,500

1,657

(1,500)

30,275 157

37. Authorisation of financial statements for issue The financial statements for the financial year ended 30 June 2013 were authorised for issue in accordance with a resolution of the Directors on 27 September 2013.

CORDLIFE GROUP LIMITED Annual Report 2013

87


statistics of

shareholdings As at 12 September 2013

Class of equity securities

:

Ordinary Shares

Number of equity securites :

232,687,354 ordinary shares

Voting rights

One vote per share

:

Number of treasury shares :

200,000 ordinary shares

STATISTICS OF SHAREHOLDERS Size of Holdings 1 - 999

Shareholders

%(1)

No. of Shares

%(1)

34

1.58

12,665

0.01

1,306

60.72

7,513,023

3.23

10,001 - 1,000,000

786

36.54

54,805,251

23.55

1,000,001 and above

25

1.16

170,356,415

73.21

2,151

100.00

232,687,354

100.00

1,000 - 10,000

Total

SUBSTANTIAL SHAREHOLDERS AS AT 12 SEPTEMBER 2013 (As recorded in the Register of Substantial Shareholders) Direct

Deemed

Substantial Shareholders

Number of Shares

% of total issued Shares(1)

China Stem Cells (East) Company Limited

24,366,666

10.48

China Stem Cells Holdings Limited China Cord Blood Services Corporation China Cord Blood Corporation Golden Meditech Stem Cells Company Limited Golden Meditech Holdings Limited Coop International Pte. Ltd. Bonvests Holdings Limited Wells Spring Pte. Ltd. Providence Investments Pte Ltd Chye Hin Pte Ltd Tai Tak Estates Sdn Bhd SG Investments Pte Ltd Ho Han Leong Calvin FIL Limited FMR LLC

Number of Shares

% of total issued Shares(1)

24,366,666

(2)

10.48

24,366,666

(3)

10.48

24,366,666

(4)

10.48

24,366,666(5)

10.48

24,366,666

(6)

10.48

24,450,000

10.52

24,450,000(7)

10.52

25,200,000

10.84

– –

25,200,000

(8)

10.84

25,200,000

(9)

10.84

25,200,000(10)

10.84

25,200,000

(11)

10.84

25,200,000

(12)

10.84

20,925,000(13)

9.00

1,000

(13)

0.00

Notes: (1)

As a percentage of the issued share capital of the Company (excluding the 200,000 Shares held as treasury shares), comprising 232,487,354 Shares.

(2)

China Stem Cells Holdings Limited is the sole shareholder of China Stem Cells (East) Company Limited and is therefore deemed to be interested in the

(3)

China Cord Blood Services Corporation is the sole shareholder of China Stem Cells Holdings Limited and is therefore deemed to be interested in the Shares

88

Shares held by China Stem Cells (East) Company Limited by virtue of Section 4 of the Securities and Futures Act (“SFA”). held by China Stem Cells (East) Company Limited by virtue of Section 4 of the SFA.

Positioned for growth


statistics of

Shareholdings As at 12 September 2013

(4)

China Cord Blood Corporation is the sole shareholder of China Cord Blood Services Corporation and is therefore deemed to be interested in the Shares

(5)

Golden Meditech Stem Cells Company Limited holds approximately 41.80% equity interests in China Cord Blood Corporation and is therefore deemed to

(6)

Golden Meditech Holdings Limited is the sole shareholder of Golden Meditech Stem Cells Company Limited and is therefore deemed to be interested in the

(7)

Bonvests Holdings Limited is the sole shareholder of Coop International Pte. Ltd. and is therefore deemed to be interested in the Shares held by Coop

(8)

Providence Investments Pte Ltd is the sole shareholder of Wells Spring Pte. Ltd. and is therefore deemed to be interested in the Shares held by Wells Spring

(9)

Chye Hin Pte Ltd is the sole shareholder of Providence Investments Pte Ltd and is therefore deemed to be interested in the Shares held by Wells Spring

(10)

Tai Tak Estates Sdn Bhd is the sole shareholder of Chye Hin Pte Ltd and is therefore deemed to be interested in the Shares held by Wells Spring Pte. Ltd.

(11)

SG Investments Pte Ltd is the sole shareholder of Tai Tak Estates Sdn Bhd and is therefore deemed to be interested in the Shares held by Wells Spring

(12)

Ho Han Leong Calvin is deemed to be interested in the Shares held by Wells Spring Pte. Ltd. as he is a shareholder of SG Investments Pte Ltd and Tai Tak

(13)

Based on the Form 3 (Notification Form for Substantial Shareholder(s)/Unitholder(s) in respect of Interests in Securities) received by the Company on

held by China Stem Cells (East) Company Limited by virtue of Section 4 of the SFA.

be interested in the Shares held by China Stem Cells (East) Company Limited by virtue of Section 4 of the SFA. Shares held by China Stem Cells (East) Company Limited by virtue of Section 4 of the SFA. International Pte. Ltd. by virtue of Section 4 of the SFA. Pte. Ltd. by virtue of Section 4 of the SFA. Pte. Ltd. by virtue of Section 4 of the SFA. by virtue of Section 4 of the SFA.

Pte. Ltd. by virtue of Section 4 of the SFA. Estates Sdn Bhd.

23 July 2013, FIL Limited is a privately-owned company incorporated under the laws of Bermuda. FMR LLC is a privately owned limited liability company organized under the laws of the state of Delaware, in the United States of America. FIL Limited and FMR LLC have certain directors in common and provide services to each other on an arms’ length basis. Edward C Johnson 3rd is a shareholder and controls a portion of the voting interests of FMR LLC.

TWENTY LARGEST SHAREHOLDERS No.

No. of Shares

%

1

Name

RAFFLES NOMINEES (PTE) LTD

27,709,500

11.91

2

HSBC (SINGAPORE) NOMINEES PTE LTD

27,565,331

11.85

3

WELLS SPRING PTE LTD

25,200,000

10.83

4

COOP INTERNATIONAL PTE LTD

24,450,000

10.51

5

CITIBANK NOMINEES SINGAPORE PTE LTD

10,968,555

4.71

6

MAYBANK KIM ENG SECURITIES PTE LTD

7,713,000

3.31

7

CIMB SECURITIES (SINGAPORE) PTE LTD

5,235,914

2.25

8

PHILLIP SECURITIES PTE LTD

4,592,763

1.97

9

CHATSWORTH CAPITAL MANAGEMENT LTD

4,500,000

1.93

10

COBB FINANCIAL CORPORATION

4,200,000

1.80

11

CHONG SIEW HONG

3,384,000

1.45

12

HO HAN SIONG CHRISTOPHER

2,669,000

1.15

13

CHEN YAN FENG

2,630,000

1.13

14

TANTALUM CELLULAR PRODUCTS LLC

2,566,972

1.10

15

OCBC SECURITIES PRIVATE LTD

2,284,000

0.98

16

UOB KAY HIAN PTE LTD

1,996,000

0.86

17

YEE PINH JEREMY

1,711,034

0.74

18

DBS NOMINEES PTE LTD

1,693,721

0.73

19

UNITED OVERSEAS BANK NOMINEES PTE LTD

1,623,050

0.70

20

LEE MOH MING

1,302,723

0.56

163,995,563

70.47

Total

As at 12 September 2013, 57.88% of the issued share capital of the Company were held in the hands of the public (based on the information available to the Company). Accordingly, the Company has complied with Rule 723 of the Listing Manual of Singapore Exchange Securities Trading Limited. CORDLIFE GROUP LIMITED Annual Report 2013

89


notice of

annual general meeting NOTICE IS HEREBY GIVEN that the Annual General Meeting of Cordlife Group Limited (the “Company”) will be held at the Auditorium 302, Level 3, NTU@one-north Executive Centre, 11 Slim Barracks Rise (off North Buona Vista Road), Singapore 138664 on Friday, 18 October 2013 at 10.00am for the following purposes: Ordinary Business 1.

To receive and adopt the Directors’ Report and Audited Financial Statements of the Company for the financial year ended 30 June 2013 together with the Auditor’s Report thereon. (Resolution 1)

2.

To re-elect the following Directors retiring pursuant to Article 94 of the Company’s Articles of Association: (a) Dr Ho Choon Hou (b) Ms Jin Lu

(Resolution 2) (Resolution 3)

3.

To approve the payment of a final tax exempt (1-tier) dividend of 0.01 cents per ordinary share for the financial year ended 30 June 2013. (Resolution 4)

4.

To approve the payment of Directors’ fee of $420,000.00 for the financial year ending 30 June 2014, payable quarterly in arrears (2013: $300,000.00) (Resolution 5)

5.

To approve the payment of additional Director’s fee of $120,000 to Dr Ho Choon Hou for the financial year ending 30 June 2014, payable quarterly in arrears. [See Explanatory Note (i)] (Resolution 6)

6.

To approve the payment of additional Director’s fee of $75,000 to Ms Jin Lu for the financial year ending 30 June 2014, payable quarterly in arrears. [See Explanatory Note (i)] (Resolution 7)

7.

To re-appoint Messrs Ernst & Young LLP as the Company’s Auditors and to authorise the Directors to fix their remuneration. (Resolution 8)

8.

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

9.

To consider and, if thought fit, to pass the following resolution as an Ordinary Resolution, with or without any modifications: Ordinary Resolution: Authority to allot and issue shares “That, pursuant to Section 161 of the Companies Act, Cap. 50 and Rule 806(2) of the Listing Manual of the Singapore Exchange Securities Trading Limited (“SGX-ST”), authority be and is hereby given to the Directors of the Company to:(a) (i) issue shares in the capital of the Company (“shares”) whether by way of rights, bonus or otherwise; and/or

(ii) make or grant offers, agreements or options (collectively, “Instruments”) that might or would require shares to be issued, including but not limited to the creation and issue of (as well as adjustments to) warrants, debentures or other instruments convertible into shares,

at any time and upon such terms and conditions and for such purposes and to such persons as the Directors may in their absolute discretion deem fit; and (b) (notwithstanding the authority conferred by this Resolution may have ceased to be in force) issue shares in pursuance of any Instrument made or granted by the Directors while this Resolution was in force, provided that: (1) the aggregate number of shares to be issued pursuant to this Resolution (including shares to be issued in pursuance of Instruments made or granted pursuant to this Resolution) does not exceed fifty per cent. (50%) of the Company’s total number of issued shares excluding treasury shares (as calculated in accordance with sub-paragraph (2) below), of which the aggregate number of shares to be issued other than on a pro-rata basis

90

Positioned for growth


notice of

annual general meeting to existing shareholders of the Company (including shares to be issued in pursuance of Instruments made or granted pursuant to this Resolution) does not exceed twenty per cent. (20%) of the Company’s total number of issued shares excluding treasury shares (as calculated in accordance with sub-paragraph (2) below). Unless prior shareholder approval is required under the Listing Manual of the SGX-ST, an issue of treasury shares will not require further shareholder approval, and will not be included in the aforementioned limits. (2) (subject to such manner of calculation as may be prescribed by the SGX-ST) for the purpose of determining the aggregate number of shares that may be issued under sub-paragraph (1) above, the total number of issued shares excluding treasury shares is based on the Company’s total number of issued shares excluding treasury shares at the time this Resolution is passed, after adjusting for: (i) n ew shares arising from the conversion or exercise of any convertible securities or share options or vesting of share awards which are outstanding or subsisting at the time this Resolution is passed; and (ii) any subsequent bonus issue, consolidation or subdivision of shares; (3) in exercising the authority conferred by this Resolution, the Company shall comply with the provisions of the Listing Manual of the SGX-ST for the time being in force (unless such compliance has been waived by the SGXST) and the Articles of Association for the time being of the Company; and (4) (unless revoked or varied by the Company in general meeting) the authority conferred by this Resolution shall continue in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is the earlier.” [See Explanatory Note (ii)] (Resolution 9) By Order of the Board Ang Siew Koon Low Siew Tian Company Secretaries Singapore, 03 October 2013 Explanatory Notes: (i)

Ordinary Resolutions 6 and 7 The additional Directors’ fee proposed for the Non-Independent Non-Executive Directors namely Dr Ho Choon Hou and Ms Jin Lu is based on their additional active roles in the Group.

(ii) Ordinary Resolution 9 proposed in item 9 above, if passed, will authorise and empower the Directors of the Company from the date of this Annual General Meeting until the next Annual General Meeting to issue shares and/or convertible securities in the Company up to an amount not exceeding in aggregate 50% of the total number of issued shares excluding treasury shares of which the total number of shares and convertible securities issued other than on a prorata basis to existing shareholders shall not exceed 20% of the total number of issued shares excluding treasury shares of the Company at the time the resolution is passed, for such purposes as they consider would be in the interests of the Company. This authority will, unless revoked or varied at a general meeting, expire at the next Annual General Meeting of the Company. Books Closure Date and Payment Date for Final Dividend Subject to the approval of the shareholders at the forthcoming Annual General Meeting, the Register of Members and the Transfer Books of the Company will be closed on 29 October 2013 (“Book Closure Date”) for the purpose of determining members’ entitlement to the final dividend (“Dividend”).

CORDLIFE GROUP LIMITED Annual Report 2013

91


notice of

annual general meeting Duly completed registrable transfers received by the Company’s Share Registrar Tricor Barbinder Share Registration Services at 80 Robinson Road, #02-00 Singapore 068898 up to 5.00pm on 28 October 2013 (“Entitlement Date”) will be registered to determine members’ entitlements to the Dividend. Subject as aforesaid, persons whose securities accounts with The Central Depository (Pte) Limited are credited with ordinary shares in the capital of the Company as at 5.00pm on the Entitlement Date will be entitled to the Dividend. The final dividend, if approved by the shareholders at the Annual General Meeting, will be paid on 15 November 2013. NOTES: 1.

A member entitled to attend and vote at the Annual General Meeting is entitled to appoint one or two proxies to attend and vote instead of him. A proxy need not be a member of the Company.

2.

Where a member appoints more than one proxy, the appointment shall be invalid unless he/she specifies the proportion of his/her shareholding to be represented by each proxy.

3.

The instrument appointing a proxy or proxies must be under the hand of the appointor or by his/her attorney duly authorised in writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed either under its common seal or under the hand of its attorney or a duly authorised officer.

4.

The instrument appointing a proxy must be deposited at the Company’s Share Registrar, Tricor Barbinder Share Registration Services (a division of Tricor Singapore Pte Ltd) at 80 Robinson Road, #02-00 Singapore 068898 not less than forty-eight hours (48) before the time for holding the Annual General Meeting.

92

Positioned for growth


Proxy Form

IMPORTANT

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

(Registration Number: 200102883E) (Incorporated in the Republic of Singapore on 2 May 2001)

3. CPF investors who wish to attend the Annual General Meeting as an observer must submit their requests through their CPF Approved Nominees within the time frame specified. If they also wish to vote, they must submit their voting instructions to the CPF Approved Nominees within the time frame specified to enable them to vote on their behalf.

ANNUAL GENERAL MEETING I/We _______________________________________________________________ (Name(s) and NRIC/Passport Number(s)) of _________________________________________________________________ (Address) being a shareholder/shareholders of Cordlife Group Limited (the “Company”), hereby appoint: Name

Address

NRIC/Passport Number

Proportion of Shareholdings No. of Shares %

Address

NRIC/Passport Number

Proportion of Shareholdings No. of Shares %

and/or (delete as appropriate) Name

as my/our proxy/proxies to attend and to vote for me/us on my/our behalf and if necessary, to demand a poll, at the Annual General Meeting (“AGM”) of the Company to be held on Friday, 18 October 2013 at 10.00am at the Auditorium 302, Level 3, NTU@onenorth Executive Centre, 11 Slim Barracks Rise (off North Buona Vista Road), Singapore 138664 and at any adjournment thereof. I/We direct my/our proxy/proxies to vote for or against the resolutions to be proposed at the AGM as indicated hereunder. If no specific direction as to voting is given, the proxy/proxies will vote or abstain from voting at his/ their discretion, as he/they will on any other matter arising at the AGM. Ordinary Resolutions

To be used on a show of hands For*

Against*

To be used in the event of a poll No. of Votes No. of Votes For** Against**

No. Ordinary Resolutions Relating to: Ordinary Business 1. Directors’ Report and Audited Financial Statements for the financial year ended 30 June 2013 together with the Auditors’ Report thereon. 2. Re-election of Dr Ho Choon Hou as a director. 3. Re-election of Ms Jin Lu as a director. 4. Final tax exempt (1-tier) dividend of 0.01 cents per ordinary share for the financial year ended 30 June 2013. 5. Directors’ fee amounting to $420,000.00 for the financial year ending 30 June 2014, payable quarterly in arrears. 6. Payment of additional Directors’ Fee of $120,000 to Dr Ho Choon Hou for the financial year ending 30 June 2014, payable quarterly in arrears. 7. Payment of additional Directors’ Fee of $75,000 to Ms Jin Lu for the financial year ending 30 June 2014, payable quarterly in arrears. 8. Re-appointment of Messrs Ernst & Young LLP as Auditors. Special Business 9. Authority to directors to allot and issue shares * Please indicate your vote “For” or “Against” with a tick (√) within the box provided.

** If you wish to exercise all your votes “For” or “Against”, please tick (√) within the box provided. Alternatively, please indicate the number of votes as appropriate.

Dated this __________ day of _______________________ _________________________________________________________ Signature(s) of Shareholder(s)/Common Seal 1st Fold (this flap for sealing)

Total number of Shares held


NOTES: 1.

A member entitled to attend and vote at the Annual General Meeting is entitled to appoint one or two proxies to attend and vote instead of him. A proxy need not be a member of the Company.

2.

Where a member appoints more than one proxy, the appointment shall be invalid unless he/she specifies the proportion of his/her shareholding to be represented by each proxy.

3.

The instrument appointing a proxy or proxies must be under the hand of the appointor or by his/her attorney duly authorised in writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed either under its common seal or under the hand of its attorney or a duly authorised officer.

4.

The instrument appointing a proxy must be deposited at the Company’s Share Registrar, Tricor Barbinder Share Registration Services (a division of Tricor Singapore Pte Ltd) at 80 Robinson Road, #02-00 Singapore 068898 not less than forty-eight hours (48) before the time for holding the Annual General Meeting.

GENERAL: The Company shall be entitled to reject a proxy form which is incomplete, improperly completed, illegible or where the true intentions of the appointor are not ascertainable from the instructions of the appointor specified on the proxy form.


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Corporate Office: 1 Yishun Industrial Street 1 A’Posh Bizhub, #06-01 / 09 Singapore 768160 Tel: (65) 6238 0808 Fax: (65) 6238 1108 Website: www.cordlife.com Company Registration Number: 200102883E


Cordlife Group Annual Report 2013