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Building For The

FUTURE

A N N U A L

R E P O R T

2 0 1 2


Our MISSION We are the leading cord blood bank that delivers the highest quality service to our clients. We build maximum shareholder value by engaging all employees to enable the Company to achieve its fullest market and medical potential.

Our VALUES As a company, and as individuals working collectively, we value integrity, honesty, openness, pursuit of excellence, creativity, constructive self-criticism, continuous self-improvement, 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.


one chance, one choice. annual report 2012

CONTENTS 03 04 06 08 09 11 15 18 19 20 21 33

Corporate Profile Chairman’s Message CEO’s Message Looking Back Corporate Social Responsibility Financial Highlights Board of Directors Senior Management Group Structure Corporate Information Corporate Governance Report Financial Contents

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CORDLIFE GROUP LIMITED Annual Report 2012

Building for the

FUTURE

Dominant, pioneering and award-winning: The cord blood and cord tissue banking service provider that protects your child’s future in more ways.


CORDLIFE GROUP LIMITED Annual Report 2012

03

Corporate PROFILE Successfully listed 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 market player. 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 10 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 Cordlife Limited (“CBB”, previously known as Cygenics Limited), which is listed on the Australian Securities Exchange. The rationale was to enhance shareholder value. By separating the developing businesses owned by CBB and its subsidiaries, which required continued cash investments from the developed businesses owned by our Group which are cash-flow positive, shareholders would have the opportunity to directly participate in the developed businesses. Following the demerger, our Group owns the developed businesses in Singapore and Hong Kong, and was granted the right of first refusal (“ROFR”) to acquire CBB’s businesses in Indonesia, the Philippines and India. 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 life-time protection for their child. As the first private cord blood bank in Singapore and amongst the first in Asia to be accredited by AABB (formerly known as the American Association of Blood Banks), the world’s gold standard in cord blood banking, 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 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. With nearly 24,000 customers in Singapore and Hong Kong on the annual payment plan, the Group enjoys a stable pool of recurring cash flow that currently amounts to approximately S$6 million a year. Supported by this cash-generating business model, Cordlife is able to undertake growth strategies that have further entrenched

^ According to industry data found in Cordlife’s prospectus dated March 21, 2012

*Subject to approval from shareholders at the Extraordinary General Meeting **Awarded to Cordlife Hong Kong

our market position. Through its collaborative relationships or arrangements with major private hospitals & clinics such as Thomson Medical, Parkway East Hospital and Raffles Hospital, Cordlife has successfully increased public awareness of its cord blood banking services in Singapore. Overseas, the Group has a marketing collaboration agreement with China Cord Blood Corporation (“CCBC”) that has helped to promote its Hong Kong subsidiary’s services. To further capitalise on this strategic relationship, Cordlife entered into transactions* in August 2012 to acquire 10% of CCBC, the largest cord blood banking operator in China with licences to provide cord blood storage services in Beijing, and the provinces of Guangdong and Zhejiang. At the same time, the Group plans to dispose* its indirect 10% shareholding interest in the sole cord blood banking operator in Guangdong province: Guangzhou Municipality Tianhe Nuoya Bio-engineering Co., Ltd. (“Guangzhou Tianhe Nuoya”). We have achieved many “firsts,” as testament to our pioneering status. Aside from being the first private cord blood bank in Singapore to be accredited by AABB, we were also 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 the treatment of cerebral palsy. 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 2011 by Quamnet Outstanding Enterprise Awards; Most Popular Brand Award 2010 – The Most Popular Cord Blood Bank by TVB Weekly; and U-Choice Lifestyle Brand Award 2010 by Metroinfo FM99.7**. Most recently, we were awarded the prestigious SIAS Investors’ Choice Awards as runner-up in the “Most Transparent Company Award 2012” New Issues Category. With our strong, experienced and focused management team, led by industry veterans and supported by a highly efficient and talented group of 121 staff in Singapore and Hong Kong, we continue to be a trailblazer in this field. Entrusted as a steward of a child’s precious cord blood unit and of shareholders’ investments, we continue to strive for excellence, with an aim of building the future for both our clients and shareholders.


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CORDLIFE GROUP LIMITED Annual Report 2012

Chairman’s MESSAGE Dear Valued Shareholders, On behalf of the Board of Directors of Cordlife, it is my pleasure to present our maiden annual report for the financial year ended June 30, 2012. The financial year under review had been a turbulent period for the global economy. Over the period, the world witnessed the onset of the sovereign debt crisis in Europe which started in Greece, and rocked financial markets globally. In Asia, investors were worried about economic slowdown in China that many feared could result in a hard-landing for the main growth-driver of the region. Like many other corporates, this was a baptism of fire, and I am pleased to say that at Cordlife, we passed the test remarkably. Notwithstanding the challenging market conditions, we successfully listed on the Mainboard of the SGX-ST on March 29, 2012. We made a strong debut, and were the second most actively traded counter on the SGX-ST. Financially, we delivered good earnings performance on the back of a 12.1% increase in revenue to S$28.8 million for the financial year. Net profit for FY2012 stood at S$6.9 million, a decline of 18.3%. However, without one-off IPO expenses of S$1.9 million, net profit would have increased 4.1% to S$8.8 million for FY2012.

We have leveraged on our competitive strengths – namely providing quality service, market leadership, proven track record, established reputation and brand recognition that makes Cordlife the preferred choice for expectant parents, as well as our unique business model – to further entrench our market position in Asia, primarily in Singapore, Hong Kong and China.

As at June 30, 2012, the Group maintained a strong balance sheet, with a cash position of S$30.4 million. With our strong balance sheet, we are well-positioned to pursue future growth opportunities beyond our key markets of Singapore, Hong Kong, and in China.

In Singapore, our larger space at our new headquarters and facility at Yishun, A’Posh Bizhub, will be ready by first quarter of 2013. This will allow us to increase our current capacity to exploit economies of scale and reduce the uncertainty of future rental costs, which would further entrench our leadership position as the larger of only two private cord blood banking service providers in Singapore.

We are pleased to propose a final, 1-tier tax-exempt special dividend of 1.8 Singapore cents, payable on November 14, 2012. This is in addition to the special dividend of 0.2 Singapore cent that was distributed on June 13, 2012. Together, the Group has declared a total dividend of 3.8 Singapore cents, comprising an interim dividend of 1.8 Singapore cents and the special dividend of 2.0 Singapore cents, to reward both long-term and existing shareholders.

Robust Business Model, Building The Future Cordlife’s continued success is built on over 10 years of solid track record. Widely recognised as being amongst the first private cord blood banks in Asia, we now store in excess of 40,000 cord blood units in Singapore and Hong Kong – of those, nearly 24,000 customers have elected an annual payment plan, which gives us a source of recurring cash flow of approximately S$6 million. In addition, we have continued to grow our subscriber base every year. This provides a steady stream of cash flow which allows the Group to withstand downturns in the business cycle in good stead.

1

Subject to approval from shareholders at the Extraordinary General Meeting

In Hong Kong, the provision of umbilical cord tissue banking service that we launched in March 2011 has been met with good market acceptance. We will leverage on our strong position of being amongst the three market leaders for private cord blood banks in this territory to deepen our market penetration for both services. With this success, we are currently exploring the possibility of offering umbilical cord tissue banking services in Singapore. More recently, we expanded our foothold in China, with our agreements1 with New York-listed CCBC to exchange our indirect 10% shareholding interest in Guangzhou Tianhe Nuoya (which CCBC indirectly owns 90%), with 10% direct equity stake in CCBC, the largest cord blood banking operator in the world’s most populous nation. Our rationale for the move is to strengthen our alliance with CCBC, the first and largest cord blood banking operator in China and the only operator with licences in multiple provinces. We


CORDLIFE GROUP LIMITED Annual Report 2012

05

will be able to leverage on CCBC’s extensive cord blood banking network and its management’s ability to expand service coverage within the PRC, to move beyond the Guangdong province. Upon the completion of the deal/transactions, our CEO, Mr. Jeremy Yee, will be appointed as non-executive director on CCBC’s board.

In Hong Kong, similar demand drivers are in place. According to industry figures in the prospectus, the penetration rate of cord blood banking is expected to deepen from 11.5% in 2010 to 20.6% in 2015. Leading players – and Cordlife is one of the top three in terms of market share – are driving this growth by raising the visibility of our industry.

In this accretive transaction, we will be exchanging our equity stake in a private company, China Stem Cells (South) Company Limited (“CSCS”), for ordinary shares in CCBC, which can be publicly traded on the New York Stock Exchange, Inc., thereby increasing the liquidity of Cordlife’s investment and further unlocking shareholder value.

In China, home to the world’s fastest-growing population of middle-class consumers, the healthcare sector is also bucking the trend of a slowdown. More Chinese are seeking betterquality medical care, which often includes seeking a life-time protection for their children through storage of their cord blood units.

Together, we at Cordlife and CCBC share a common mission to raise awareness of the benefits of cord blood banking services in the PRC and other Asian countries, and we believe our strategic partnership will enhance the services that we provide to parents seeking a life-time protection for their children.

We intend to safeguard the future of all our stakeholders in more ways than one – for our clients, through the stringentlymonitored collection and storage of umbilical cord blood and tissue; for shareholders and investors, through sound growth strategies aimed at reaping healthy returns.

Taking Precious Steps Ahead

Even as a newly-listed company, we strongly believe in building a foundation of trust with the investing community by adhering to a high standard of corporate governance practices. We are honoured that our efforts at transparency and accountability have awarded us the prestigious SIAS Investors’ Choice Awards as runner-up in the “Most Transparent Company Award 2012” New Issues Category. We are truly encouraged, and will continue to participate in pro-active, open communications with all our stakeholders.

Looking ahead, we actively seek opportunities to broaden our service offerings and expand our geographical coverage in Asia through acquisition of similar businesses that are profitable and form a good fit with Cordlife’s culture and standards. 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 such as Thomson Medical, Parkway East Hospital and Raffles Hospital, to continue to educate the public of our cord blood banking services in Singapore. There are positive industry prospects given constant birth rates, rising affluence and increased spending on healthcare. Indeed, more educated expectant mothers are becoming aware of the benefits of cord blood banking and favourable government policies are in place to help raise penetration rates in our key markets. In Singapore, the government is reviewing policies to promote marriage and parenthood. In early August 2012, the new Ministry of Social and Family Development (MSF) was formed, with an immediate priority to help young people get married and have children earlier. A range of recommendations, including mandatory paternity leave, flexible work arrangements and improving the Baby Bonus scheme, are being considered as the government collates feedback from different interest groups2. The government’s initiatives have generated a healthy debate on the nation’s attempts to boost the birth and fertility rate.

2

A Word of Appreciation On behalf of the Board of Directors, I would like to express our deepest appreciation and gratitude towards our business partners, associates and long-term and existing shareholders for your fervent support. I would also like to thank the parents who have placed their trust in us to store their babies’ cord blood. It is Cordlife’s mission to ensure that this trust earned, is maintained. I would like to extend my sincere thanks to fellow Board members for your invaluable guidance and counsel in the last year. I would also like to credit our management and staff for making Cordlife a continued success – thank you for your steadfast commitment year after year. Against the backdrop of a continuing volatile world economy, your enduring support is vital to us in overcoming future challenges and embracing new and vast opportunities ahead.

Dr. Ho Choon Hou Chairman and Non-Executive Director

Sources: Various news publication reports, including Straits Times, August 3, 2012 “Get married and start family early”, and Prime Minister Lee Hsien Loong’s National Day Rally speech on August 26, 2012 “A Home With Hope and Heart”


06

CORDLIFE GROUP LIMITED Annual Report 2012

CEO’s MESSAGE Dear Valued Shareholders, On behalf of the Board and Management, I am pleased to present Cordlife’s FY2012 performance and operations review.

Financial Review In FY2012, the Group saw a higher number of client deliveries, which increased to 7,200 from approximately 6,600 in FY2011. The increase in client deliveries was due to increased awareness of the benefits of cord blood banking services, brought about by the successful educational activities undertaken by the Group in both Singapore and Hong Kong, currently our two key markets. In all, our revenue increased 12.1% to S$28.8 million in FY2012. Of the S$3.1 million increase in revenue, approximately S$2.4 million was derived from the increase in the provision of cord blood banking services, and S$0.7 million from the provision of cord tissue banking services, a new offering we launched in Hong Kong in March 2011. By geographical segment, our South Asia business contributed S$21.7 million, making up approximately 75.4% of the Group’s total revenue. Our North Asia business contributed S$7.1 million, making up the rest of the Group’s revenue. Similarly for FY2011, South Asia made up 74.8% and North Asia the remaining 25.2% of total sales. Both segments saw an increase, by 12.9% and 9.7% for South Asia and North Asia businesses respectively. In tandem with higher revenue, gross profit increased 9.7%, or S$1.8 million, to S$20.0 million in FY2012. Despite a marginal decline in gross profit margin of approximately 1 percentage point from FY2011, the Group still achieved a high level of approximately 70.0% in FY2012, averaging at 71.6% over the last four financial years. This was due to an increase in the cost of maternal blood testing of approximately S$120 (or 160%) per cord blood unit, brought about by a change in AABB standards that the Group adheres to for its accreditation. The AABB accreditation programme promotes the gold standard for cellular therapy and transfusion medicine. As one of the first cord blood banking groups in Asia to be accredited by AABB, we are committed to abide by its requirements to ensure clients’ interests are not compromised, even if it means an increase in costs.

and recurring listing fees. Selling and marketing expenses rose 17.6%, or S$1.0 million, largely due to an increase in commission expense, advertising and marketing activities to raise awareness of our cord blood banking services, and higher staff costs of sales and marketing personnel. Overall, net profit declined by 18.3% to S$6.9 million in FY2012 mainly due to one-off IPO expenses; as well as higher capital expenditure to drive business growth. However, without one-off IPO expenses, FY2012 net profit registered a rise of 4.1% to S$8.8 million. Aside from inflow from IPO proceeds, positive cash flow was also generated from our operating activities. We have a cash position of S$30.4 million, inclusive of S$17.5 million in fixed deposits ranging from 1 year to 3 years tenors. As at June 30, 2012, the Group maintained a strong balance sheet, with a net cash position. This provides the Group with strong headroom for future growth. Net asset value per share increased close to 13.8% at 30.58 Singapore cents as at June 30, 2012, as compared to 26.88 Singapore cents as at June 30, 2011. Building on our Financial Strength: Strong Recurring Income

As a result of the rise in turnover from rendering of services and because of the change in AABB requirements, cost of sales increased by 18.0%, or S$1.3 million.

Our business model, which allows customers to opt for a onetime lump sum payment, or annual payments until the child reaches maturity (21 years old in Singapore and 18 years old in Hong Kong), provides the Group with a stable pool of recurring cash flow.

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. Administrative expenses increased by 65.6%, or S$3.6 million, mainly due to one-off IPO expenses of S$1.9 million

Cost-wise, noteworthy is the fact that with the purchase of our new facility in Yishun, we improve our operating leverage by effectively locking in our fixed costs of providing storage. Any subsequent increase in our customer base will help to lower our average costs as cost of the facility is spread over a larger base.


CORDLIFE GROUP LIMITED Annual Report 2012

Clear Growth Plans This cost-controlling measure, coupled with our organic and growth by acquisition strategies, provides us with a winning formula. We plan to grow primarily in two ways – vertically, which is the provision of secondary and complementary services; and horizontally, or geographically, via accretive acquisitions in selected markets. In the first instance, we are already seeing contributions from our umbilical cord tissue banking service launched in March 2011 in Hong Kong. We are exploring the possibility of offering the same service in Singapore to increase our revenue base. In the second instance, we have a ROFR following the demerger from CBB, which allows for the acquisitions of relevant businesses in Indonesia, the Philippines and India should CBB decide to divest these business units. Additionally, we have 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.. In China, we have entered into a Share Purchase Agreement with CCBC*, to acquire 10% of the issued share capital of CCBC for a total consideration of approximately US$20.8 million1. In conjunction, we have, through our wholly-owned subsidiary Cordlife (Hong Kong) Limited (“Cordlife Hong Kong”), entered into a Shares Repurchase Agreement with CSCS to sell our 10% stake in CSCS through a repurchase of shares by CSCS*. CSCS is an indirect subsidiary of CCBC and holds the entire equity interest in Guangzhou Tianhe Nuoya, the sole cord blood banking operator in the Guangdong province.

As a result, the Group is expected to record a disposal gain of approximately S$3.9 million based on the Group FY2012 Accounts. In addition, the transactions4 are expected to increase earnings per share from 2.98 Singapore cents to 4.91 Singapore cents, and increase net tangible assets per share from 30.57 Singapore cents to 32.18 Singapore cents.

Riding on Good Industry Prospects The potential for growth in China is limitless, given its rising affluence spurring the middle to high-income class to seek a better quality of life that encompasses better healthcare, which extends to cord blood storage to give their children more assurances. In addition, the Chinese government may be reconsidering the one-child policy5. According to industry data in our prospectus dated March 21, 2012, the nationwide penetration rate for private cord blood banks in China is expected to increase from 0.5% in 2010 to 1.4% in 2015, leaving more headroom for expanding business. In Hong Kong, the penetration rate is expected to deepen from 11.5% in 2010 to 20.6% in 2015. The annual birth numbers among Hong Kong residents have been relatively stable, ranging from 43,000 to 49,000. Our Industry Prospects: Rising penetration rates in key markets, leading to room for growth^ SINGAPORE

HONG KONG

CHINA

Private incremental cord blood storage units to grow at a CAGR of 9% between 2011 and 2015

Private incremental cord blood storage units to grow at a CAGR of 10% between 2011 and 2015

Private incremental cord blood storage units to grow at a CAGR of 22% between 2011 and 2015 Penetration rate in provinces with cord blood banking operations Penetration rate in Mainland China

The US$20.8 million consideration for the acquisition of 7.3 million shares of CCBC will be offset in part by the US$16.8 million2 consideration for the disposal of Guangzhou Tianhe Nuoya, with the remaining US$4.0 million3 funded by the net proceeds raised in our IPO in March 2012. This is in line with our intentions, as disclosed in our prospectus, to use S$16.6 million, or about 55.9%, of our net IPO proceeds to develop and expand our Group’s business and operations in Singapore and overseas. The acquisition consideration represents an approximately 10x multiple of the earnings of CCBC, attributable to the purchased CCBC shares for the financial year ended March 31, 2012, and is based on an agreed price of US$2.85 per CCBC share. The disposal consideration represents an approximately 10x multiple of the earnings of CSCS (which owns Guangzhou Tianhe Nuoya), attributable to the repurchased CSCS shares for the financial year ended March 31, 2012. The disposal consideration also represents an excess of approximately S$3.8 million over the net asset value of CSCS repurchased shares of approximately S$17.7 million based on the Group FY2012 Accounts.

38%

20.6%

5%

24% 11.5% 16%

10.7%

2% 1.4%

1% 0.5%

0.2% 2007 ^

2010

2015F

2007

2010

2015F

2007

2010

2015F

According to industry data found in Cordlife’s prospectus dated March 21, 2012

Despite uncertainties on the global economic front, we believe that with our sound fundamentals, clear growth plans in place and good industry statistics, the outlook remains positive. Barring any unforeseen circumstances, the Group expects to remain profitable for FY2013.

Mr. Yee Pinh Jeremy Executive Director and Chief Executive Officer

Subject to approval from shareholders at the Extraordinary General Meeting Approximately S$26.5 million, based on an exchange rate of US$1 = S$1.272 Approximately S$21.4 million, based on an exchange rate of US$1 = S$1.272 3 Approximately S$5.1 million, based on an exchange rate of US$1 = S$1.272 4 Assumptions are based on, inter alia, (i) the audited consolidated financial statements of the Group for the financial year ended June 30, 2012 (“Group FY2012 Accounts”) and (ii) the audited consolidated financial statements of CCBC and its subsidiaries (“CCBC Group”) for the financial year ended March 31, 2012 after taking into account the unaudited consolidated financial statements of the CCBC Group for the three-month period ended June 30, 2011 and the three-month period ended June 30, 2012 respectively to align with the aforesaid financial period of the Group. The net tangible assets per share and earnings per share of the Group are computed based on 232,687,354 shares of the Company in issue. 5 Source: TODAY, July 5, 2012, “China needs more children” *

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CORDLIFE GROUP LIMITED Annual Report 2012

Looking BACK

Savouring Precious Moments Through The Years First in Hong Kong to release a cord blood unit for treatment of neuroblastoma in January 2011

Cygenics Limited was renamed CBB in June 2007 Cordlife received licence to operate from Ministry of Health in June 2002

Holding company Cygenics Limited listed on Australian Securities Exchange in June 2004

Cordlife Hong Kong achieved ISO:9001 in August 2007

Launched provision of umbilical cord tissue banking services in Hong Kong in March 2011 Cordlife demerges from CBB on June 30, 2011; entered into ROFR agreement to acquire relevant businesses in Indonesia, the Philippines and India Singapore facility re-accredited by AABB

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

Cordlife expanded cord blood banking facility in Singapore at Camden Medical Centre in September 2004

Launched Singapore facility in April 2008 at current Science Park II location due to strong growth in demand for Cordlife’s cord blood banking services

2002

2004

2007-2008

Hong Kong facility accredited by AABB in October 2011 Launched Cordlife Care360° Safeguard programme in Singapore

2011

2001

2003

2005

2009-2010

2012

Company incorporated on May 2, 2001

Merged with Cytomatrix LLC in April 2003

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

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

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

Singapore facility became one of the first in Asia to be accredited by AABB in September 2005

First in Singapore to release a cord blood unit for treatment of cerebral palsy in September 2009 Launched Hong Kong facility at Hong Kong Science Park to cater to growth in demand 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

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. Successfully listed on Mainboard of SGX-ST on March 29, 2012 In August 2012, agreement signed (subject to approval from shareholders at the Extraordinary General Meeting) to acquire 10% of CCBC. CCBC is listed on the NYSE and China’s largest cord blood banking operator. Transactions would include disposal of 10% indirect equity stake in Guangzhou Tianhe Nuoya. Awarded SIAS Investors’ Choice Awards: Runner-up in the “Most Transparent Company Award 2012” New Issues Category  


CORDLIFE GROUP LIMITED Annual Report 2012

Corporate SOCIAL RESPONSIBILITY

Mr. Jeremy Yee, Executive Director and CEO of Cordlife Group Limited (centre) and Ms. Emily Cheung, GM of Cordlife Hong Kong (left) presenting the cheque to Prof. Andrew Burd, Medical Advisor of Hong Kong Children's Skin Foundation.

At Cordlife, we have witnessed the pain that parents experience when they learn their child has been diagnosed with a debilitating, life-threatening illness. We have seen the joy on their faces when they find out that their child has been given a new lease of life with a stem cell transplant. We understand the importance of saving something so precious and that caring for people isn’t an afterthought. Rather, it is an integral part of what we do. To this end, we believe in initiating and partaking in Corporate Social Responsibility (“CSR”) activities that would enhance the lives of our communities. Cordlife Cares Programme In Singapore, one of our long-standing programme is the Cordlife Cares Programme, which provides private cord blood banking services to less privileged families. The programme provides financial assistance, paid for by us, to families who may benefit from cord blood banking but are financially challenged to do so. Obtaining a matching cord blood from a public source can sometimes cost as much as US$25,000 and in some cases, the search may be futile. With Cordlife Cares, these families will have access to private cord blood banking. Eligible families*, whose monthly family income falls below S$2,000, will now have genetically unique stem cells readily obtainable should a transplant be required.

*Terms and conditions apply

Hong Kong Children’s Skin Foundation As part of the CSR programme of our subsidiary, Cordlife Hong Kong, a charity dinner was held in Singapore in April 2012 – soon after our listing – to raise funds for Hong Kong Children’s Skin Foundation. The funds were meant for the establishment of an advanced skin and wound care centre that seeks to alleviate the pain and suffering of children who have recessive dystrophic epidermolysis bullosa, a serious and often life-threatening disease. As a leading cord blood and tissue banking provider, we share the Foundation’s aim of pursuing stem cell therapy to promote regeneration and scarless healing for this illness. A total of S$22,888 was raised through dinner table sponsorships and a silent charity auction of a timepiece, kindly sponsored by Azimuth, a Singapore luxury watch designer and retailer whose brand is synonymous with avant-garde Swiss-made designs. The dinner was also held in celebration of Cordlife’s decade of key milestones achieved since its establishment in 2001. It was meaningful for us, as the main corporate sponsor, to be able to do our part for charity even as we celebrate our key milestones.

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CORDLIFE GROUP LIMITED Annual Report 2012

Building on

FINANCIAL STRENGTH

Unique, resilient and cash-generating: A sound business model backed by strong financials that safeguards your investments in rewarding ways.


CORDLIFE GROUP LIMITED Annual Report 2012

Financial HIGHLIGHTS

Revenue and PROFIT WITH HIGH GP MARGIN AVERAGING 71.6% (FY2009 – FY2012) FY 2009

FY 2010

FY 2011

FY 2012

Total Revenue (S$’mil)

22.6

28.2

25.7

28.8

Gross Profit (S$’mil)

16.4

20.5

18.3

20.0

Gross Profit Margin (%)

72.6

72.8

71.1

69.6

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

6.5

8.4

8.5

8.8

Earnings Per Share excluding IPO expenses* (S Cents)

4.10

5.48

5.62

5.14

* One-off IPO expenses incurred only in FY 2012

Rising revenue: Driven by the success of our educational activities to raise awareness of the benefits of cord blood banking

CAGR = 8.42%

S$’ mil 35

25

28.8

28.2

30

25.7

22.6

20 15 10 5 0 FY 2009

FY 2010

FY 2011

FY 2012

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CORDLIFE GROUP LIMITED Annual Report 2012

Financial HIGHLIGHTS

Increasing Profitability*: Sound fundamentals enable us to remain profitable despite headwinds in the global economy S$’ mil

CAGR = 10.63%

10 9 8 7 6

8.4

8.5

8.8

FY 2010

FY 2011

FY 2012

6.5

5 4 3 2 1 0 FY 2009 * Excluding one-off IPO expenses for FY2012

Rising Equity: Over the past 4 financial years, NAV/share has grown at a 19.6% CAGR S Cents/Share

CAGR = 19.6%

35

30.6

30

26.9

25 20

21.9 17.9

15 10 5 0 FY 2009

FY 2010

FY 2011

FY 2012


CORDLIFE GROUP LIMITED Annual Report 2012

STRONG Balance Sheet with Headroom for Growth: Well-poised for further market penetration and expansion at home and overseas S$’ 000

As at June 30, 2012

Cash at bank and fixed deposits*

30,445

Total Assets

90,363

Total Liabilities

19,204

Total Equity

71,159

Gearing Ratio**

0.04x

* Fixed deposits = S$17.5 million ** Book value of debt/Total book value of equity

Our Intended DISTRIbution: To recommend & distribute dividends of at least 25% of FY2011 and FY2012 profits attributable to shareholders for FY2012 and FY2013

OUR DIVIDEND PAYOUT: Exceeds the intended distribution

A TOTAL dividenD of 3.8 S cents per ordinary share for FY2012

TOTAL SPECIAL dividend of 2.0 S cents

AN INTERIM dividend of 1.8 S cents

A SPECIAL dividend of 0.2 S cent

Declared in 3Q2012 and paid out on June 13, 2012

A FINAL SPECIAL dividend of 1.8 S cents

Payable on November 14, 2012

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CORDLIFE GROUP LIMITED Annual Report 2012

Building on

CAPABILITIES

Experienced, disciplined and well-equipped: A team with a wealth of knowledge, skills and talents that ensures our brand is associated with quality and excellence.


CORDLIFE GROUP LIMITED Annual Report 2012

Board of DIRECTORS

Left to right:

1

4

2 3

5

6

1. Dr. Goh Jin Hian, Independent Director 2. Mr. Yee Pinh Jeremy, Executive Director and Chief Executive Officer 3. Ms. Jin Lu, Non-Executive Director 4. Dr. Ho Choon Hou, Chairman and Non-Executive Director 5. Mr. Ho Sheng, Lead Independent Director 6. Mr. Ng Tiak Soon, Independent Director

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CORDLIFE GROUP LIMITED Annual Report 2012

Board of DIRECTORS Dr. Ho Choon Hou Chairman and Non-Executive Director Dr. Ho Choon Hou was appointed in June 2011. Dr. Ho is currently Director at Southern Capital Group Limited, a private equity firm, where he is responsible for the origination and execution of investments for the company’s portfolio of clients. Prior to joining Southern Capital Group Limited, Dr. Ho held various medical portfolios in the healthcare industry. From 2004 to 2007, he served as Project Office Head and subsequently Deputy Director at National Healthcare Group where he was involved in directing special projects and investments and held general management responsibilities. From 1996 to 2004, Dr. Ho was the Registrar, Department of General Surgery, at Tan Tock Seng Hospital, where he was responsible for conducting general surgeries. Dr. Ho holds a Bachelor of Medicine & Bachelor of Surgery from The University of Sheffield, as well as a Masters in Medicine (Surgery) from the National University of Singapore. He also obtained his Masters of Business Administration (Honours) from The University of Chicago (The Graduate School of Business). Mr. Yee Pinh Jeremy Executive Director and Chief Executive Officer Mr. Yee Pinh Jeremy was appointed Chief Executive Officer on June 30, 2011 and had been Executive Director in our Company since January 2004. As Executive Director and Chief Executive Officer of our Group, Mr. Yee is responsible for identifying and implementing company-wide business growth strategies and organisational structures, and directly oversees all aspects of our Group’s growth and operating functions. Mr. Yee was the Chief Financial Officer of CBB, prior to the demerger in June 2011. From 2004 to 2011, Mr. Yee was directly responsible for CBB’s financial function, including statutory filings, accounting audits, finance controls and treasury. Mr. Yee has more than 15 years of financial and advisory experience. 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. From 1997 to 1999, and from 2001 to 2002, Mr. Yee was Assistant Managing Consultant at KPMG LLP, where he provided audit and strategic consulting to the firm’s

portfolio of clients and headed the consultant team. In 1999, he was Risk Management Internal Auditor at United Overseas Bank Limited where he was responsible for performing audit assignment. From 1996 to 1997, Mr. Yee was Treasury Analyst at American Express Company where he was responsible for financial modelling, forecasting, risk and performance management for the company’s portfolio of clients. Mr. Yee obtained his Bachelor of Arts in Economic and Social Studies from The Victoria University of Manchester in 1994. He also holds a Bachelor of Commerce and a Master of Commerce, which he received from Murdoch University in 2009 and The University of Sydney in 1996 respectively. In addition, Mr. Yee also holds a Master of Business Administration which he obtained from the Nanyang Technological University in 2011 and a Master of Business Administration which he obtained from the University of Chicago Booth School of Business in 2012. Mr. Yee also received in 2011 the Furama Ltd Endowed Book Prize from the Nanyang Technological University. Ms. Jin Lu Non-Executive Director Ms. Jin Lu was appointed in July 2011. From 2000 to 2012, Ms. Jin was Executive Director of Golden Meditech Holdings Limited, where she was responsible for general administration and daily operations of the company. 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. Mr. Ho Sheng Lead Independent Director Mr. Ho Sheng was appointed in July 2011. Mr. Ho is currently Partner of Banamai Capital, a position he has held since 2005, where he is responsible for providing investment advisory services for the company’s portfolio of clients around Asia. 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


CORDLIFE GROUP LIMITED Annual Report 2012

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 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 Australian Institute of Finance and Banking. Dr. Goh Jin Hian Independent Director Dr. Goh Jin Hian was appointed in July 2011. Dr. Goh is currently Executive Consultant of ParkwayHealth, Singapore, a position he has held since April 2011, where he advises and assists in hospital and other projects. He is also currently Group Executive Director of IAG Healthsciences Pte Ltd, where he is responsible for overseeing the business and strategic direction of the company, which operates traditional Chinese medicine facilities and sets up clinic management systems in Singapore and China. From February 2009 to March 2011, Dr. Goh was Senior VicePresident, Growth Innovation & Strategy of Parkway Health, Singapore, where he was responsible for strategic planning and business developments with the mandate to grow the hospital’s international business. For each of the respective periods from November 2007 to February 2008 and July 2006 to November 2007, Dr. Goh held the positions of Director, Group Special Projects and Chief Executive Officer at Parkway Holdings Ltd, Gleneagles Hospital, where he was on a short-term assignment to lead and oversee the pre-bid evaluation exercise for the government’s first land tender for the new private hospital project at Novena and oversaw the hospital operations as well as nursing and service delivery functions of the hospital, respectively. From July 2002 to 2003, Dr. Goh was Chief Operating Officer at Parkway Health, Mount Elizabeth Hospital, where he reviewed

17

integration of primary care network services with the hospital division. Dr. Goh has held senior positions in various private healthcare institutions, including Parkway Shenton Pte Ltd, Shenton Medical Group and Gleneagles International GP Pte Ltd. 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 Tiak Soon Independent Director Mr. Ng Tiak Soon was appointed in November 2011. Mr. Ng is currently a self-employed consultant providing consultancy services on a part-time basis. Mr. Ng has over 30 years of experience in the audit, commercial and industrial sectors. 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 employment with Ernst & Young LLP, he held various positions which include Head of Banking, Head of an audit group, Partnerin-charge of audit quality review and Chief Financial Officer. Mr. Ng currently holds directorships in the following SGX-listed companies: 800 Super Holdings Limited, Kinergy Ltd, 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.


18

CORDLIFE GROUP LIMITED Annual Report 2012

Senior MANAGEMENT Ms. Gwendolene Yeo Teck Geok General Manager, Singapore

Ms. Thet Hnin Yi Financial Controller

Ms. Gwendolene Yeo Teck Geok is responsible for all functional and business units within our Company. 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.

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.

From July 1998 to January 2000, Ms. Yeo was 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. Ms. Cheung Wai Yee, Emily General Manager, Hong Kong Ms. Cheung Wai Yee, Emily is responsible for all functional and business units within Cordlife Hong Kong. She joined our Group in 2005 as Office Manager, Cordlife Hong Kong, where she was responsible for the day-to-day operations of the sales, administration and finance functions of Cordlife Hong Kong. She was Consultant to our Company from September 2004 to December 2004 and assisted in identifying and selecting the location for, and the setting up of the office and laboratory with respect to the operations of Cordlife Hong Kong. From 2001 to 2004, Ms. Cheung was General Manager at Super Elephant (HK) Ltd. where she oversaw all functions of the company. From 1993 to 2001, she was Office Manager of Kang Li Ltd where she was responsible for overseeing all business activities and administration functions of the company. Ms. Cheung obtained her Graduate Certificate in Business Administration and Master of Business Administration from the University of South Australia in 2008 and 2009 respectively.

Ms. Thet joined our Group in June 2011, following the demerger of our Company from CBB. She had joined CBB 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 CBB, Ms. Thet held various positions at Ernst & Young LLP from 2001 to 2007, her last position being 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.


CORDLIFE GROUP LIMITED Annual Report 2012

Group STRUCTURE

CLS Services Pte. Ltd.

Cordlife (Hong Kong) Limited

Shanghai Cordlife Biomedical Research Co., Ltd.

100%

100%

100%

China Stem Cells (South) Company Limited 10%

Guangzhou Municipality Tianhe Nuoya Bio-engineering Co., Ltd.* 100%

* Cordlife entered into transactions in August 2012 to aquire 10% of CCBC. At the same time, the Group plans to dispose its indirect 10% shareholding interest in Guangzhou Tianhe Nuoya. This is subject to the approval of shareholders at the Extraordinary General Meeting.

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CORDLIFE GROUP LIMITED Annual Report 2012

Corporate INFORMATION

BOARD OF DIRECTORS: 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) COMPANY SECRETARIES: Ms. Ang Siew Koon, ACIS Ms. Low Siew Tian, ACIS REGISTERED OFFICE: 61 Science Park Road #05-16/18 The Galen Singapore Science Park II Singapore 117525 http://www.cordlife.com/sg REGISTRATION NUMBER:

INDEPENDENT AUDITORS: Ernst & Young LLP Public Accountants and Certified Public Accountants One Raffles Quay North Tower, Level 18 Singapore 048583 Partner-in-charge: Mr. Tan Swee Ho (appointed since financial year ended 30 June 2005) Certified Public Accountant SOLICITORS TO THE COMPANY: WongPartnership LLP One George Street #20-01 Singapore 049145 BANKERS: DBS Bank Ltd. Malayan Banking Berhad - Singapore Branch

200102883E SHARE REGISTRAR AND SHARE TRANSFER OFFICE: Tricor Barbinder Share Registration Services 80 Robinson Road #02-00 Singapore 068898

INVESTOR RELATIONS: Ms. Dolores Phua / Ms. Chelsea Phua Citigate Dewe Rogerson, i.MAGE 1 Raffles Place, One Raffles Place, #26-02, Singapore 048616 Tel: +65 6534 5122

The initial public offering of Cordlife Group Limited’s shares was sponsored by PrimePartners Corporate Finance Pte. Ltd..


CORDLIFE GROUP LIMITED Annual Report 2012

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 2012 (“FY2012”).

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.

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CORDLIFE GROUP LIMITED Annual Report 2012

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

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

Audit Committee Member N.A. N.A. Member N.A. Chairman

Remuneration Committee N.A. N.A. Member N.A. Chairman Member

Nominating Committee 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 2012 are as follows:

Name of Director Dr. Ho Choon Hou (1) Yee Pinh Jeremy (2) Jin Lu (3) Ho Sheng (3) Dr. Goh Jin Hian (3) Ng Tiak Soon (4)

Board

Audit Committee

Remuneration Committee

Nominating Committee

No. of meetings attended 3/3 3/3 2/3 3/3 3/3 2/2

No. of meetings attended 2/2 N.A. N.A. 2/2 N.A. 2/2

No. of meetings attended N.A. N.A. 1/1 N.A. 1/1 1/1

No. of meetings attended N.A. 1/1 N.A. 1/1 1/1 N.A.

Notes: (1)

Appointed on 16 June 2011.

(2)

Appointed on 05 January 2004.

(3)

Appointed on 01 July 2011.

(4)

Appointed on 01 November 2011.

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 nonindependent 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.


CORDLIFE GROUP LIMITED Annual Report 2012

Corporate GOVERNANCE REPORT 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 16 to 17 of this Annual 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;

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CORDLIFE GROUP LIMITED Annual Report 2012

Corporate GOVERNANCE REPORT 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 candidate’s 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 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, Mr. Yee Pinh Jeremy and Mr. Ho Sheng 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 Mr. Yee Pinh Jeremy and Mr. Ho Sheng, the retiring Directors at the forthcoming AGM and who being eligible, had offered themselves for re-election. 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 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 2012 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.


CORDLIFE GROUP LIMITED Annual Report 2012

Corporate GOVERNANCE REPORT 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 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.

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

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CORDLIFE GROUP LIMITED Annual Report 2012

Corporate GOVERNANCE REPORT 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 accounts factors such as the time spent and the effort and the individual responsibilities of each independent or non-executive 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 FY2012 are S$90,000 and S$60,000 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. Principle 9: Disclosure on Remuneration A breakdown showing the level and mix of each individual Director’s remuneration for FY2012 is disclosed in the table below: Salary (%)

Bonus (%)

Allowances (%)

Fees (%)

Total (%)

CEO, Executive Director

89

5

6

100

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

100

100

– – –

– – –

– – –

100 100 100

100 100 100

100

100

Directors S$250,001 to S$500,000 Yee Pinh Jeremy S$250,000 and below Dr. Ho Choon Hou (1) Ho Sheng Goh Jin Hian Jin Lu (2) Ng Tiak Soon


CORDLIFE GROUP LIMITED Annual Report 2012

Corporate GOVERNANCE REPORT

Key Executives S$250,000 and below Gernalia Satianegara Lab Director – Singapore Gwendolene Yeo Teck Geok General Manager – Singapore Lee Mei Suan (Stella) Deputy General Manager – Singapore Emily Cheung Wai Yee General Manager – Hong Kong Thet Hnin Yi Financial Controller – Singapore Poon Sok Hoon Jessie Deputy Financial Controller – Singapore Jovian Ip Lab Director – Hong Kong

Salary (%)

Bonus (%)

Allowances (%)

Fees (%)

Total (%)

87 87 84

6 4 4

7 9 12

– – –

100 100 100

93 87 84

2 5 4

5 8 12

– – –

100 100 100

99

1

100

Notes: (1) (2)

A sum of S$90,000 was paid to Dr. Ho Choon Hou in FY2012 for consultancy services rendered. A sum of S$60,000 was paid to Ms. Jin Lu in FY2012 for consultancy services rendered.

None of the Directors or Executive Officers are related by blood or marriage to one another nor are they related to any of the substantial shareholders of the Company. Ms. Jin Lu, a non-executive non-independent Director of the Company, was the executive director of Golden Meditech Holdings Limited, a company listed on the Hong Kong Stock Exchange. Golden Meditech Holdings Limited is deemed to be interested in the Shares held by China Stem Cells (East) Company Limited, a substantial shareholder of the Company. According to an announcement released by Golden Meditech Holdings Limited on The Stock Exchange of Hong Kong Limited on 25 September 2012, Ms. Jin Lu retired by rotation as a director of Golden Meditech Holdings Limited at its annual general meeting held on 25 September 2012.

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)

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CORDLIFE GROUP LIMITED Annual Report 2012

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;


CORDLIFE GROUP LIMITED Annual Report 2012

Corporate GOVERNANCE REPORT 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.

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 two meetings in FY2012. 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 internal and external auditors, without any executive of the Group being present. 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 FY2012 and the evaluation of the Group’s system of internal controls. The AC has also reviewed the Group’s full-year results announcement, the financial statements of the Company and the consolidated financial statements of the Group for FY2012 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 FY2012, 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 FY2012 is S$117,000 out of which S$90,000 was for audit services and S$27,000 was for non-audit services. In addition, a total amount of S$274,000 was paid by the Company to EY for the services provided by EY in relation to the Company’s listing on the SGX-ST. 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 2012.

29


30

CORDLIFE GROUP LIMITED Annual Report 2012

Corporate GOVERNANCE REPORT 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.

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.


CORDLIFE GROUP LIMITED Annual Report 2012

Corporate GOVERNANCE REPORT 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] The Group has established procedures to ensure that all transactions with interested persons are reported in a timely manner to the AC and that all such transactions are carried out on normal commercial terms and are not prejudicial to the interests of the Company and its shareholders. The Board and the AC will review all interested person transactions to be entered into to ensure that the relevant rules under Chapter 9 of the Listing Manual are complied with. The aggregate value of interested person transactions for FY2012, disclosed in accordance with Rule 907 of the Listing Manual, was as follows:

Name of Interested Person(s)

Description of Interested Person Transactions

Aggregate value of all interested person transactions during the financial period under review (excluding transactions less than S$100,000 and transactions conducted under shareholders’ mandate pursuant to Rule 920)

Aggregate value of all interested person transactions conducted under shareholders’ mandate pursuant to Rule 920 (excluding transactions less than S$100,000)

For the period 1 July 2011 to 31 March 2012 Cordlife Stem Cell Technology (“Cordlife Stem Cell”) – a subsidiary of CBB

Commission payable by Cordlife Stem Cell to the Group for services performed

S$ 703,000

Receipts collected by the Group on behalf of Cordlife Stem Cell

S$ 929,000

CBB Group

Commission payable by the Group to CBB group for customer referral

S$ 603,000

S$ 1,756,000

S$ 3,000

Receipts collected by CBB Group on behalf of the Group China Cord Blood

Commission payable by the Group to China Cord Blood for customer referral

31


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CORDLIFE GROUP LIMITED Annual Report 2012

Corporate GOVERNANCE REPORT Please refer to the prospectus of Cordlife Group Limited registered by the Monetary Authority of Singapore on 21 March 2012 (the “Prospectus”) for further elaboration of the above transactions. Briefly, by way of background, as part of a restructuring exercise undertaken prior to the placement and the public offer, as detailed in the Prospectus, CBB was issued and allotted an “A” preference share, pursuant to which it had the option to acquire all the issued shares in the Company if the listing of the Company on the Main Board of the SGX-ST did not occur by 31 March 2012. The Company was listed on the Main Board of the SGX-ST on 29 March 2012. Accordingly, with effect from 30 March 2012, the option given to CBB pursuant to the “A” Preference Share to acquire all the issued Shares of the Company had lapsed. As disclosed in the Prospectus, CBB has ceased being our “controlling shareholder” and transactions between the CBB Group and our Group will no longer constitute interested person transactions. As disclosed in the Prospectus of the Company, China Cord Blood is no longer the “controlling shareholder” of the Company immediately after the listing on 29 March 2012. The above transactions are ongoing. However, since these transactions have ceased to be considered as interested person transactions, pursuant to Chapter 9 of the Listing Manual, with effect from 30 March 2012, there is no requirement to disclose the above transactions after 30 March 2012.

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. AUDITING FIRMS [Listing Manual, Rule 1207(6)(c)] The Group has complied with Rule 712 and Rule 716 in relation to auditing firms. USE OF IPO PROCEEDS [Listing Manual, Rule 1207(20)] The Group had successfully raised net proceeds of $25,969,000 from its initial public offering of 60,000,000 new ordinary shares at S$0.495 each on 29 March 2012. To date, the net proceeds have not been utilised. The Company will make periodic announcements on the use of the balance net proceeds, as and when the funds are materially disbursed.


Financial Contents 34 37 38 40 41 42 43 44 80 82

Directors’ Report Statement by Directors Independent Auditors’ Report Consolidated Statement of Comprehensive Income Statements of Financial Position Statements of Changes in Equity Consolidated Statement of Cash Flows Notes to the Financial Statements Statistics of Shareholdings Notice of Annual General Meeting Proxy Form


34

CORDLIFE GROUP LIMITED Annual Report 2012

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 2012.

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

(appointed (appointed (appointed (appointed

on on on on

1 1 1 1

July 2011) July 2011) July 2011) November 2011)

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

At beginning of the year

At end of the year

1,326,034 529,061 650,000

1,526,034 589,061 1,650,000

There was no change in any of the above-mentioned interests in the Company between the end of the financial year and 21 July 2012. Except as disclosed in this report, no Director who held office at the end of the financial year had interests in shares, share options, warrants or debentures of the Company, or of related corporations, either at the beginning of the financial year, or date of appointment if later, or at the end of the financial year.

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


CORDLIFE GROUP LIMITED Annual Report 2012

Directors’ REPORT 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, Cap. 50, including the following: –

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

Reviews the quarterly and annual financial statements and the auditors’ 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 auditors, 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 auditors

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

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

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

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

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

35


36

CORDLIFE GROUP LIMITED Annual Report 2012

Directors’ REPORT Auditors Ernst & Young LLP have expressed their willingness to accept reappointment as auditors.

On behalf of the board of Directors:

Dr Ho Choon Hou Director

Mr Yee Pinh Jeremy Director Singapore 28 September 2012


CORDLIFE GROUP LIMITED Annual Report 2012

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 2012 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 28 September 2012

37


38

CORDLIFE GROUP LIMITED Annual Report 2012

Independent AUDITORS’ REPORT For the financial year ended 30 June 2012 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 (collectively, the “Group”) set out on pages 40 to 79, which comprise the statements of financial position as at 30 June 2012, 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 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 2012 and of 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.


CORDLIFE GROUP LIMITED Annual Report 2012

Independent AUDITORS’ REPORT For the financial year ended 30 June 2012 To the Members of Cordlife Group Limited

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

Ernst & Young LLP Public Accountants and Certified Public Accountants Singapore 28 September 2012

39


40

CORDLIFE GROUP LIMITED Annual Report 2012

Consolidated Statement of COMPREHENSIVE INCOME For the financial year ended 30 June 2012

Revenue from the rendering of services Cost of sales Gross profit Other operating income Selling and marketing expenses Administrative expenses Share of results of associate Finance income Finance costs Profit before income tax Income tax Profit for the financial year, net of tax

Note

2012 $’000

2011 $’000

4

28,775 (8,743) 20,032

25,673 (7,410) 18,263

75 (6,909) (9,164) 2,091 1,657 (2) 7,780 (854) 6,926

360 (5,876) (5,535) 1,675 1,090 (43) 9,934 (1,458) 8,476

462 7,388

(933) 7,543

– 6,926 6,926

– 8,476 8,476

– 7,388 7,388

– 7,543 7,543

4.03 4.03

5.62 5.62

5 6 7 8

Other comprehensive income: Foreign currency translation Total comprehensive income for the financial year, net of tax Profit after income tax attributable to: Non-controlling interests Owners of the Company

Total comprehensive income attributable to: Non-controlling interests Owners of the Company

Earnings per share for profits attributable to owners of the Company: Basic EPS (cents per share) Diluted EPS (cents per share)

23 23

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


CORDLIFE GROUP LIMITED Annual Report 2012

Statements of FINANCIAL POSITION As at 30 June 2012

Group

Non-current assets Investment in associate Investment in subsidiaries Property, plant and equipment Intangible assets Convertible bond Trade receivables Deposits Fixed deposits Current assets Cash and cash equivalents Fixed deposits Trade receivables Other receivables Prepayments Inventories Amount owing by subsidiaries

Note

2012 $’000

2011 $’000

Company 2012 2011 $’000 $’000

9 25 10 11 12 13

17,664 – 6,052 35 1,500 24,258 214 11,500 61,223

15,111 – 4,260 11 – 22,874 208 – 42,464

– 15,166 4,998 35 1,500 23,857 – 11,500 57,056

– 15,166 3,092 11 – 22,520 – – 40,789

12,945 6,000 8,588 661 529 417 – 29,140 90,363

3,995 1,310 6,788 288 318 228 – 12,927 55,391

10,098 6,000 8,320 574 373 365 1,032 26,762 83,818

2,229 1,310 6,319 157 160 157 790 11,122 51,911

2,781 4,281 – 1,092 6 111 8,271 20,869

2,261 3,675 – 2,044 15 47 8,042 4,885

2,386 3,526 97 1,076 – 111 7,196 19,566

1,454 2,933 113 2,044 – 47 6,591 4,531

202 8,181 – 97 2,453 10,933 19,204 71,159

– 5,886 6 132 771 6,795 14,837 40,554

– 4,622 – 60 2,453 7,135 14,331 69,487

– 3,073 – 66 771 3,910 10,501 41,410

53,548 19,205 (1,594) 71,159 90,363

25,677 16,933 (2,056) 40,554 55,391

53,548 15,517 422 69,487 83,818

25,677 15,311 422 41,410 51,911

15

14 15 13 16

17

Total assets Current liabilities Trade and other payables Deferred revenue Amount owing to subsidiaries Tax payable Finance lease liabilities Interest-bearing borrowings

18 19 17 24 20

Net current assets Non-current liabilities Other payables Deferred revenue Finance lease liabilities Deferred tax liabilities Interest-bearing borrowings

19 24 20

Total liabilities Net assets Capital and reserves Share capital Accumulated profit Reserves Total equity Total equity and liabilities

21 22

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

41


42

CORDLIFE GROUP LIMITED Annual Report 2012

Statements of CHANGES IN EQUITY For the financial year ended 30 June 2012

Share capital $’000 Group Balance at 1 July 2010 Profit for the year Other comprehensive income Total comprehensive income for the year, net of tax Balance at 30 June 2011 and 1 July 2011 Profit for the year Other comprehensive income Total comprehensive income for the year, net of tax Contributions by and distributions to owners Issuance of shares pursuant to the IPO IPO expenses taken to equity (Note 7) Dividends (Note 30) Total contributions by and distributions to owners Balance at 30 June 2012

Accumulated profit $’000

Capital reserve $’000

Merger reserve $’000

Foreign currency Acquisition translation reserve reserve $’000 $’000

Total $’000

25,677 – –

8,457 8,476 –

568 – –

534 – –

(2,184) – –

(41) – (933)

33,011 8,476 (933)

8,476

(933)

7,543

25,677 – –

16,933 6,926 –

568 – –

534 – –

(2,184) – –

(974) – 462

40,554 6,926 462

6,926

462

7,388

29,700

29,700

(1,829) –

– (4,654)

– –

– –

– –

– –

(1,829) (4,654)

27,871 53,548

(4,654) 19,205

– 568

– 534

– (2,184)

– (512)

23,217 71,159

Share capital $’000 Company Balance at 1 July 2010 Profit for the year Total comprehensive income for the year, net of tax Balance at 30 June 2011 and 1 July 2011 Profit for the year Total comprehensive income for the year, net of tax Contributions by and distributions to owners Issuance of shares pursuant to the IPO IPO expenses taken to equity Dividends (Note 30) Total contributions by and distributions to owners Balance at 30 June 2012

Accumulated Capital profit reserve $’000 $’000

Total $’000

25,677 – – 25,677 – –

8,386 6,925 6,925 15,311 4,860 4,860

422 – – 422 – –

34,485 6,925 6,925 41,410 4,860 4,860

29,700 (1,829) – 27,871 53,548

– – (4,654) (4,654) 15,517

– – – – 422

29,700 (1,829) (4,654) 23,217 69,487

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


CORDLIFE GROUP LIMITED Annual Report 2012

Consolidated Statement of CASH FLOWS For the financial year ended 30 June 2012

Note

Cash flows from operating activities : Profit before income tax Adjustments for : Depreciation Amortisation Loss on disposal of property, plant and equipment Interest income Interest expense Impairment loss on trade receivables Write-back of amount owing by related companies Share of results of associate IPO expenses Operating cash flows before changes in working capital

10 11 7 5 6 7 7 9 7

Changes in working capital : Increase in trade receivables (Increase)/decrease in other receivables, deposits and prepayments (Increase)/decrease in inventories Increase/(decrease) in trade payables Increase in other payables Increase in deferred revenue Cash generated from operations Interest received Interest paid Income tax paid Net cash flows generated from operating activities Cash flows from investing activities : Purchase of property, plant and equipment Purchase of intangible assets Investment in convertible bond Transfer to fixed deposits, net Net cash flows used in investing activities Cash flows from financing activities : Repayments of finance lease liabilities Interest-bearing borrowings Repayment of interest-bearing borrowings Repayments from holding and related companies Repayments to holding and related companies Proceeds from issue of shares Share issue cost Dividends Net cash flows generated from/(used in) financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of the financial year Effects of exchange rate changes on the balance of cash and cash equivalents Cash and cash equivalents at end of the financial year

10 11 12

14

2012 $’000

2011 $’000

7,780

9,934

663 18 – (157) 2 210 – (2,091) 1,902 8,327

570 18 15 (92) 43 126 (203) (1,675) – 8,736

(3,394) (583) (189) 295 369 2,901 7,726 57 (2) (1,748) 6,033

(1,145) 148 20 (21) 8 1,634 9,380 92 (43) (1,394) 8,035

(2,363) (42) (1,500) (16,190) (20,095)

(3,056) – – (1,310) (4,366)

(17) 1,837 (91) – – 29,700 (3,731) (4,654) 23,044 8,982 3,995

(20) 818 – 4,544 (12,621) – – – (7,279) (3,610) 7,338

(32) 12,945

267 3,995

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

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CORDLIFE GROUP LIMITED Annual Report 2012

Notes to the FINANCIAL STATEMENTS For the financial year ended 30 June 2012

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 at 61 Science Park Road, The Galen #05-16/17/18, Singapore Science Park II, Singapore 117525. 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 25 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 and Interpretations of FRS (INT FRS) that are effective for annual periods beginning on or after 1 July 2011. The adoption of these standards and interpretations did not have any effect on the financial performance or position of the Group and the Company.

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 FRS 1 FRS FRS FRS FRS FRS FRS FRS

12 19 27 28 110 111 112

Amendments to FRS 1 Presentation of Items of Other Comprehensive Income Amendments to FRS 12 Recovery of Underlying Assets Employee Benefits Separate Financial Statements Investments in Associates and Joint Ventures Consolidated Financial Statements Joint Arrangements Disclosure of Interest in Other Entities

Effective for annual periods beginning on or after 1 July 2012 1 1 1 1 1 1 1

January January January January January January January

2012 2013 2014 2014 2014 2014 2014


CORDLIFE GROUP LIMITED Annual Report 2012

Notes to the FINANCIAL STATEMENTS For the financial year ended 30 June 2012

2.

Summary of significant accounting policies (cont’d)

2.3

Standards issued but not yet effective (cont’d)

Description FRS 113 FRS 107 FRS 101 FRS 32 INT FRS 120

Fair Value Measurements Disclosures – Offsetting Financial Assets and Financial Liabilities Government Loans Offsetting Financial Assets and Financial Liabilities Improvements to FRSs 2012 Stripping Costs in the Production Phase of a Surface Mine

Effective for annual periods beginning on or after 1 January 2013 1 January 2013 1 1 1 1

January January January January

2013 2014 2013 2013

The Directors expect that the adoption of the other 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 During the financial year ended 30 June 2011, the Company entered into restructuring agreements which include the acquisition of 100% interest in Cordlife (Hong Kong) Limited (including 10% interest in China Stem Cells (South) Company Limited); CLS Services Pte Ltd from Cordlife Limited; and the disposal of 100% interest in Cordlife International Pte Ltd and Cordlife Pty Ltd to Cordlife Limited. The above restructuring involving entities under common control are accounted for by applying the pooling of interest method which 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.

Although the above restructuring agreement was entered into in the financial year ended 30 June 2011, the financial statements present the financial position, results of operations and cash flows as if the restructuring had occurred as of the beginning of the earliest period presented.

45


46

CORDLIFE GROUP LIMITED Annual Report 2012

Notes to the FINANCIAL STATEMENTS For the financial year ended 30 June 2012

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 controls 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: -

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.


CORDLIFE GROUP LIMITED Annual Report 2012

Notes to the FINANCIAL STATEMENTS For the financial year ended 30 June 2012

2.

Summary of significant accounting policies (cont’d)

2.4

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

Basis of consolidation (cont’d) Basis of consolidation prior to 1 July 2010 (cont’d) -

(c)

Upon loss of control, the Group accounted for the investment retained at its proportionate share of net asset value at the date control was lost. The carrying value of such investments as at 1 July 2010 have not been restated.

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 change to other comprehensive income. If the contingent consideration is classified as equity, it is not be 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 before 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.

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48

CORDLIFE GROUP LIMITED Annual Report 2012

Notes to the FINANCIAL STATEMENTS For the financial year ended 30 June 2012

2.

Summary of significant accounting policies (cont’d)

2.4

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

Business combinations before 1 July 2010 (cont’d) 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.

2.5

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. Nonmonetary 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 the consolidated statement of comprehensive income 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 the consolidated statement of comprehensive income 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 the consolidated statement of comprehensive income.


CORDLIFE GROUP LIMITED Annual Report 2012

Notes to the FINANCIAL STATEMENTS For the financial year ended 30 June 2012

2.

Summary of significant accounting policies (cont’d)

2.6

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 2.17. 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 the consolidated statement of comprehensive income as incurred. 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 Lab equipment Office equipment Motor vehicle Leasehold improvement

– – – – –

3 5 3 3 5

to 5 years years years years to 6 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 the consolidated statement of comprehensive income in the year the asset is derecognised. 2.7

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 the consolidated statement of comprehensive income in the expense category consistent with the function of the intangible asset.

49


50

CORDLIFE GROUP LIMITED Annual Report 2012

Notes to the FINANCIAL STATEMENTS For the financial year ended 30 June 2012

2.

Summary of significant accounting policies (cont’d)

2.7

Intangible assets (cont’d) Computer software is stated at cost less accumulated amortisation and any accumulated impairment losses. These costs are amortised using the straight-line method over their estimated useful lives of 3 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 the consolidated statement of comprehensive income when the asset is derecognised.

2.8

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 independent of those from other assets or groups of assets. Where the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Impairment losses are recognised in the consolidated statement of comprehensive income. 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 pretax 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, quoted share prices for publicly traded securities or other available fair value indicators. Impairment losses are recognised in the consolidated statement of comprehensive income 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 the consolidated statement of comprehensive income.

2.9

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.


CORDLIFE GROUP LIMITED Annual Report 2012

Notes to the FINANCIAL STATEMENTS For the financial year ended 30 June 2012

2.

Summary of significant accounting policies (cont’d)

2.10 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 investments 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 postacquisition 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 consolidated statement of comprehensive income 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 shown on the face of the consolidated statement of comprehensive income after tax. 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. 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 the consolidated statement of comprehensive income. 2.11 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.

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CORDLIFE GROUP LIMITED Annual Report 2012

Notes to the FINANCIAL STATEMENTS For the financial year ended 30 June 2012

2.

Summary of significant accounting policies (cont’d)

2.11 Financial assets (cont’d) 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 the consolidated statement of comprehensive income when the loans and receivables are derecognised or impaired, as well as through the amortisation process.

(iii)

Available-for-sale financial assets Available-for-sale financial assets are financial assets that are not classified as loans and receivables. After initial recognition, available-for-sale financial assets are measured at fair value. Any gains or losses from changes in fair value of the financial asset are recognised directly in other comprehensive income, except that impairment losses, foreign exchange gains and losses on monetary instruments and interest calculated using the effective interest method are recognised in the consolidated statement of comprehensive income. The cumulative gain or loss previously recognised in other comprehensive income is reclassified to the consolidated statement of comprehensive income as a reclassification adjustment when the financial asset is derecognised. Investments whose fair value cannot be reliably measured are measured at cost less impairment loss.


CORDLIFE GROUP LIMITED Annual Report 2012

Notes to the FINANCIAL STATEMENTS For the financial year ended 30 June 2012

2.

Summary of significant accounting policies (cont’d)

2.11 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 the consolidated statement of comprehensive income. 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. 2.12 Impairment of financial assets The Group assesses at each reporting date whether there is any objective evidence that a financial asset or group of financial assets is impaired. (i)

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 the consolidated statement of comprehensive income. 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 the consolidated statement of comprehensive income.

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CORDLIFE GROUP LIMITED Annual Report 2012

Notes to the FINANCIAL STATEMENTS For the financial year ended 30 June 2012

2.

Summary of significant accounting policies (cont’d)

2.12 Impairment of financial assets (cont’d) (ii)

Available-for-sale financial assets Objective evidence of impairment include (i) significant financial difficulty of the issuer or obligor, (ii) information about significant changes with an adverse effect that have taken place in the technological, market, economic or legal environment in which the issuer operates, and indicates that the cost of the investment in equity instrument may not be recovered; and (iii) a significant or prolonged decline in the fair value of the investment below its costs. Significant is to be evaluated against the original cost of the investment and ‘prolonged’ against the period in which the fair value has been below its original cost. If an available-for-sale financial asset is impaired, an amount comprising the difference between its cost (net of any principal payment and amortisation) and its current fair value, less any impairment loss previously recognised in the consolidated statement of comprehensive income, is transferred from other comprehensive income to the consolidated statement of comprehensive income. Reversals of impairment losses in respect of equity instruments are not recognised in the consolidated statement of comprehensive income; increase in their fair value after impairment are recognised directly in other comprehensive income. Reversals of impairment losses in respect of debt instruments are recognised in the consolidated statement of comprehensive income if the increase in fair value of the debt instrument can be objectively related to an event occurring after the impairment loss was recognised in the consolidated statement of comprehensive income.

2.13 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. For the purposes of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts that form an integral part of the Group’s cash management. 2.14 Inventories Inventories are stated at the lower of cost and net realisable values, 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. 2.15 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.


CORDLIFE GROUP LIMITED Annual Report 2012

Notes to the FINANCIAL STATEMENTS For the financial year ended 30 June 2012

2.

Summary of significant accounting policies (cont’d)

2.16 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 the consolidated statement of comprehensive income 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 the consolidated statement of comprehensive income. 2.17 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. 2.18 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.

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CORDLIFE GROUP LIMITED Annual Report 2012

Notes to the FINANCIAL STATEMENTS For the financial year ended 30 June 2012

2.

Summary of significant accounting policies (cont’d)

2.19 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 the consolidated statement of comprehensive income. 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 the consolidated statement of comprehensive income 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 straightline basis. 2.20 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 banking 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.


CORDLIFE GROUP LIMITED Annual Report 2012

Notes to the FINANCIAL STATEMENTS For the financial year ended 30 June 2012

2.

Summary of significant accounting policies (cont’d)

2.21 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 the consolidated statement of comprehensive income except to the extent that the tax relates to items recognised 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: -

where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

-

in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised except: -

where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

-

in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred income 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 income tax asset 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.

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CORDLIFE GROUP LIMITED Annual Report 2012

Notes to the FINANCIAL STATEMENTS For the financial year ended 30 June 2012

2.

Summary of significant accounting policies (cont’d)

2.22 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. 2.23 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 29, including the factors used to identify the reportable segments and the measurement basis of segment information. 2.24 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. 2.25 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.


CORDLIFE GROUP LIMITED Annual Report 2012

Notes to the FINANCIAL STATEMENTS For the financial year ended 30 June 2012

2.

Summary of significant accounting policies (cont’d)

2.25 Contingencies (cont’d) 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. 2.26 Related parties A related party is defined as follows: (a)

(b)

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.

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;

(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).

59


60

CORDLIFE GROUP LIMITED Annual Report 2012

Notes to the FINANCIAL STATEMENTS For the financial year ended 30 June 2012

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 reporting date. Management continually evaluates its judgments and estimates and bases its judgments and estimates on historical experience and on other various factors it believes to be reasonable under the circumstances, the result of which form the basis of the carrying values of assets and liabilities that are not readily apparent from other sources. Management has identified the following accounting policies for which significant judgments, estimates and assumptions are made. Actual results may differ from these estimates under different assumptions and conditions and may materially affect financial results or the financial position reported in future periods. Further details of the nature of these assumptions and conditions may be found in the relevant notes to the financial statements. 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 13. Revenue recognition The Group recognises revenue from cord blood banking service contracts and sub-contracted 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 2.20. 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.

4.

Revenue Group

Rendering of services

2012 $’000

2011 $’000

28,775

25,673


CORDLIFE GROUP LIMITED Annual Report 2012

Notes to the FINANCIAL STATEMENTS For the financial year ended 30 June 2012

5.

Finance income Group

Interest income from term deposits Interest income on long-term trade receivables Interest income from convertible bond

6.

2012 $’000

2011 $’000

57 1,500 100 1,657

92 998 – 1,090

Finance costs Group Note

Interest expense Less: Interest expense capitalised in construction-in-progress

7.

10

2012 $’000

2011 $’000

15 (13) 2

55 (12) 43

Profit before income tax Group

Profit before income tax is stated after charging/(crediting): Salaries and other payroll related costs Defined contribution plan expenses Audit fees paid to auditors of the Company Non-audit fees paid to auditors of the Company IPO expenses* Exchange gain Operating lease expense Depreciation Allowance for impairment loss on trade receivables Bad debts written off Amortisation of software Loss on disposal of property, plant and equipment Write-back of amount owing by related companies *

2012 $’000

2011 $’000

6,686 592 90 27 1,902 (18) 567 663 82 128 18 – –

5,532 421 82 32 – (28) 554 570 126 238 18 15 (203)

Includes $178,000 paid to auditors of the Company. $96,000 of IPO expenses paid to auditors of the Company was taken to equity.

61


62

CORDLIFE GROUP LIMITED Annual Report 2012

Notes to the FINANCIAL STATEMENTS For the financial year ended 30 June 2012

8.

Income tax The components of income tax expense in the consolidated statement of comprehensive income are: Group

Current income tax: Current year provision Over provision in respect of prior years Deferred income tax: Origination and reversal of temporary differences

2012 $’000

2011 $’000

1,064 (173) 891

1,381 (30) 1,351

(37) 854

107 1,458

The reconciliation between the tax expense and the product of accounting profit multiplied by the applicable tax rate for the financial years ended 30 June 2012 and 2011 are as follows: Group

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

2012 $’000

2011 $’000

7,780

9,934

1,323

1,689

17 361 (2) (26) (216) (173) (355) (75) 854

4 107 (14) (26) (42) (30) (285) 55 1,458

* 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.


CORDLIFE GROUP LIMITED Annual Report 2012

Notes to the FINANCIAL STATEMENTS For the financial year ended 30 June 2012

9.

Investment in associate Group

Unquoted shares, at cost Share of post-acquisition results of associates Foreign currency translation reserve At 30 June

2012 $’000

2011 $’000

13,885 4,343 (564) 17,664

13,885 2,252 (1,026) 15,111

The Group has a 10% interest in China Stem Cells (South) Company Limited (“CSC South”) and one out of three Board seats at reporting date. CSC South directly owns 100% equity interest in Guangzhou Tianhe Nuoya Biology Engineering Co., Ltd. (“Nuoya”) which provides umbilical cord blood collection, processing and cryopreservation services. CSC South is audited by KPMG Huazhen. The following table illustrates the summarised financial information, adjusted for the proportion of ownership interest held by the Group: Group 2012 $’000

2011 $’000

Share of associate’s statement of financial position: Current assets Non-current assets

5,558 6,678

3,531 4,449

Current liabilities Non-current liabilities Net assets

(1,723) (4,236) 6,277

(2,355) (1,658) 3,967

Share of associate’s results: Revenue

4,515

3,830

Profit after income tax

2,091

1,675

The tax laws in the People’s Republic of China (“PRC”), the country of incorporation of Nuoya, imposes a withholding tax at 10%, unless reduced by a tax treaty or agreement, for dividends receivable by nonPRC-resident enterprises from PRC-resident enterprises in respect of earnings accumulated beginning on 1 January 2008. The Group has not provided for income taxes on such undistributed accumulated earnings of Nuoya since these earnings are intended to be reinvested indefinitely in the PRC pursuant to the announcement by China Cord Blood Corporation, which is listed on the New York Stock Exchange and the ultimate holding company of China Stem Cells (South) Company Limited. As of 30 June 2012, such unremitted earnings that may be subject to the withholding tax amounted to $4,343,000 (2011: $2,252,000) and the related unrecognised deferred tax liability was $434,000 (2011: $225,000).

63


233 116 – (6) 343 173 – 2 518

173 89

Accumulated depreciation: At 1 July 2010 Charge for the year Disposals Exchange rate adjustments At 30 June 2011 Charge for the year Disposals Exchange rate adjustments At 30 June 2012

Net book value: At 30 June 2011

At 30 June 2012

625

506

773 157 – (22) 908 171 (12) 7 1,074

1,237 234 (7) (50) 1,414 283 (12) 14 1,699

Laboratory equipment $’000

202

236

383 118 (12) (11) 478 145 (9) 5 619

561 196 (20) (23) 714 108 (9) 8 821

Office equipment $’000

* Included in additions for the year is provision for restoration cost on plant and equipment of $58,000 (2011: nil).

503 28 – (15) 516 87 – 4 607

Furniture and fittings $’000

Group Cost: At 1 July 2010 Additions Disposals Exchange rate adjustments At 30 June 2011 and 1 July 2011 Additions* Disposals Exchange rate adjustments At 30 June 2012

10. Property, plant and equipment

11

26

4 16 – (1) 19 15 – 1 35

51 – – (6) 45 – – 1 46

Motor Vehicle $’000

590

728

159 163 – (23) 299 159 – 11 469

1,152 7 – (132) 1,027 – – 32 1,059

4,535

2,591

– – – – – – – – –

– 2,591 – – 2,591 1,943 – 1 4,535

Leasehold Constructionimprovement in-progress $’000 $’000

6,052

4,260

1,552 570 (12) (63) 2,047 663 (21) 26 2,715

3,504 3,056 (27) (226) 6,307 2,421 (21) 60 8,767

Total $’000

64 CORDLIFE GROUP LIMITED Annual Report 2012

Notes to the FINANCIAL STATEMENTS

For the financial year ended 30 June 2012


CORDLIFE GROUP LIMITED Annual Report 2012

Notes to the FINANCIAL STATEMENTS For the financial year ended 30 June 2012

10. Property, plant and equipment (cont’d) Furniture and fittings $’000

Laboratory equipment $’000

Office Constructionequipment in-progress $’000 $’000

Company Cost: At 1 July 2010 Additions Disposals At 30 June 2011 and 1 July 2011 Additions* Disposals At 30 June 2012

378 19 – 397 75 – 472

823 168 (7) 984 191 – 1,175

407 64 (20) 451 94 (9) 536

– 2,591 – 2,591 1,866 – 4,457

1,608 2,842 (27) 4,423 2,226 (9) 6,640

Accumulated depreciation: At 1 July 2010 Charge for the year Disposals At 30 June 2011 and 1 July 2011 Charge for the year Disposals At 30 June 2012

192 83 – 275 142 – 417

607 93 – 700 102 – 802

305 62 (11) 356 76 (9) 423

– – – – – – –

1,104 238 (11) 1,331 320 (9) 1,642

Net book value At 30 June 2011

122

284

95

2,591

3,092

At 30 June 2012

55

373

113

4,457

4,998

Total $’000

* Included in additions for the year is provision for restoration cost on plant and equipment of $58,000 (2011: nil).

Motor vehicle is pledged as security for the related finance lease liabilities (Note 24). Construction-in-progress is mortgaged to secure the Group’s bank loan (Note 20). The construction-inprogress include borrowing costs arising from bank loans borrowed specifically for this purpose. During the financial year, the borrowing costs capitalised as cost of construction-in-progress amounted to $13,028 (2010: $11,852).

65


66

CORDLIFE GROUP LIMITED Annual Report 2012

Notes to the FINANCIAL STATEMENTS For the financial year ended 30 June 2012

11. Intangible assets Computer software 2012 2011 $’000 $’000 Group and Company Cost: At 1 July Additions At 30 June

152 42 194

152 – 152

Accumulated amortisation: At 1 July Amortisation for the year At 30 June

141 18 159

123 18 141

35

11

Net carrying amount Amortisation expense

The amortisation of the computer software is included in the “Administrative expenses” line item in the consolidated statement of comprehensive income.

12. Convertible bond The Company invested in a $1,500,000 convertible bond issued by CS Cell Technologies Pte Ltd (the “issuer”). The issuer is an investment holding company incorporated in Singapore, with 85% interest in Cordlife Limited’s Indian operations. The convertible bond has a redemption value of $2,160,000, with a tenure of 2 years maturing on 6 March 2014 and a coupon rate of 20%. The Company has the option to convert the bond into ordinary shares of the issuer at any time on or after the date falling 6 months from 7 March 2012 (the “issue date”). Upon conversion at the option of the Company, the aggregate of the principal amount of the convertible bond and the interest accreted thereon from the issue date to the conversion date will be divided by the contracted conversion price to derive the number of shares which the Company is entitled to receive. At conversion date, the Company will acquire an equity stake in CS Cell Technologies Pte Ltd not exceeding 30%.


CORDLIFE GROUP LIMITED Annual Report 2012

Notes to the FINANCIAL STATEMENTS For the financial year ended 30 June 2012

13. Trade receivables Group

Trade receivables (current) Less: Impairment loss

2012 $’000

2011 $’000

Company 2012 2011 $’000 $’000

9,059 (471) 8,588

7,162 (374) 6,788

8,763 (443) 8,320

6,665 (346) 6,319

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 a trade receivable is impaired. Trade receivables (non-current) Less: Impairment loss

24,337 (79) 24,258

22,968 (94) 22,874

23,936 (79) 23,857

22,614 (94) 22,520

Non-current trade receivables represents cord blood banking service revenues receivable under annual , five year and ten year 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 non-current trade receivables is recognised when there is objective evidence that a 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:  

Cordlife Group Limited – 10% (2011: 10%) Cordlife (Hong Kong) Limited – 14% (2011: 14%)

Movements in the allowance for impairment loss are as follows: Group

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

Company 2012 2011 $’000 $’000

2012 $’000

2011 $’000

468

342

440

314

97

172

97

126

(15) 550

(46) 468

(15) 522

– 440

67


68

CORDLIFE GROUP LIMITED Annual Report 2012

Notes to the FINANCIAL STATEMENTS For the financial year ended 30 June 2012

13. Trade receivables (cont’d) Receivables that are past due but not impaired The Group has trade receivables amounting to $1,826,000 (2011: $1,599,000) 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:

Total

Less than 31 days

31 – 60 days

61 – 90 days

>90 Days

Group 30 June 2011

1,599

632

318

156

493

30 June 2012

1,826

783

457

173

413

Company 30 June 2011

1,130

434

204

143

349

30 June 2012

1,558

686

378

151

343

14. Cash and cash equivalents Group

Cash at bank and on hand

2012 $’000

2011 $’000

Company 2012 2011 $’000 $’000

12,945

3,995

10,098

2,229

Included in cash at bank is $2,721,200 (2011: $1,629,000) denominated in HKD and $120,300 (2011: $129,200) denominated in RMB. For the purpose of the statement of cash flows, only the cash at bank and cash on hand is classified as cash and cash equivalents. The Group had a $1,000,000 overdraft facility in 2011. The facility was fully secured (Note 15) and bore interest of 5.25% per annum.

15. Fixed deposits Group

Non-current Current

2012 $’000

2011 $’000

Company 2012 2011 $’000 $’000

11,500 6,000 17,500

– 1,310 1,310

11,500 6,000 17,500

– 1,310 1,310


CORDLIFE GROUP LIMITED Annual Report 2012

Notes to the FINANCIAL STATEMENTS For the financial year ended 30 June 2012

15. Fixed deposits (cont’d) As at 30 June 2011, fixed deposits amounting to $1,310,000 placed with a bank were held as security for a bank overdraft facility with a maturity period of more than 3 months as at reporting date. These fixed deposits were denominated in AUD. The bank overdraft facility was terminated during the financial year ended 30 June 2012 and the corresponding fixed deposits were lifted. As at 30 June 2012, the Group placed fixed deposits of $11,500,000 which will mature in June 2015 and bears an interest rate of 1.3% per annum and $6,000,000 which will mature in June 2013 and bears an interest rate of 1% per annum.

16. Other receivables Group

Other receivables Deposits Tax recoverable

2012 $’000

2011 $’000

573 88 – 661

87 108 93 288

Company 2012 2011 $’000 $’000 518 56 – 574

81 76 – 157

17. Amount owing by/(to) subsidiaries Amounts owing by/(to) subsidiaries are non-trade related, unsecured, interest-free and repayable on demand.

18. Trade and other payables Group

Trade payables Other payables Accrued expenses Amounts due to staff

2012 $’000

2011 $’000

Company 2012 2011 $’000 $’000

789 – 1,570 422 2,781

494 31 1,251 485 2,261

730 – 1,298 358 2,386

468 6 723 257 1,454

Trade payables and other non-trade payables are non-interest bearing and are normally settled on 30 day terms.

19. Deferred revenue Deferred revenue represents revenue received in advance for services to be rendered under cord blood and umbilical cord tissue banking contracts.

69


70

CORDLIFE GROUP LIMITED Annual Report 2012

Notes to the FINANCIAL STATEMENTS For the financial year ended 30 June 2012

20. Interest-bearing borrowings Group 2012 $’000 Current Non-current

111 2,453 2,564

2011 $’000 47 771 818

Company 2012 2011 $’000 $’000 111 2,453 2,564

47 771 818

This is a SGD bank loan drawn down under an approved $6,450,000 loan facility secured by a first mortgage over the Group’s properties, which are under construction for own business use. Interest rate is stipulated at a fixed rate of 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.

21. Share capital 2012 No. of shares (‘000) $’000 Issued and fully paid: Ordinary shares At 1 July New shares issued Issue of new shares upon exercise of option *** At 30 June

2011 No. of shares (‘000) $’000

150,887 60,000

25,677 27,871*

40,306 110,581**

25,677 –

21,800 232,687

– 53,548

– 150,887

– 25,677

*

The proceeds from issuance of IPO shares are net of IPO expenses of $1,829,000.

**

On 22 June 2011, the Company issued 110,581,479 ordinary shares at nil consideration to Cordlife Limited.

***

On 14 May 2011, Cordlife Limited and our Group entered into a Bond Deed with a third party bond holder (the “Bond Holder”) pursuant to which, Cordlife 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 is exercisable into 21,800,000 shares in the capital of Cordlife Limited at the exercise price of A$0.40 per share and (b) an option, which is exercisable into 21,800,000 Shares of the Company, at no consideration. Pursuant to the terms of the Bond Deed, the option will 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. On 22 June 2011, the Company issued 1 preference share (“Class A Share”) at $1 to Cordlife Limited. The holder of the preference share is not entitled to receive dividends, and has no voting rights. The preference share ranks in priority over the ordinary shares for the return of assets or capital for $1.00 in the event of any liquidation, dissolution or winding-up of the Company, but shall not thereafter participate in the surplus profits or assets of the Company. With effect from 30 March 2012, the option by Cordlife Limited pursuant to the “A” Preference Share to acquire all the issued Shares of the Company has lapsed and the “A” Preference Share had been redeemed by the Company.


CORDLIFE GROUP LIMITED Annual Report 2012

Notes to the FINANCIAL STATEMENTS For the financial year ended 30 June 2012

22. Reserves Capital reserve Capital reserve represents the value of equity-settled share options previously granted by Cordlife Limited to the Group’s employees, prior to the distribution in specie of all of the issued share capital of Cordlife Group Limited to Cordlife Limited’s shareholders on 30 June 2011. Subsequent to the distribution, Cordlife Group Limited ceased to be a subsidiary of Cordlife 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 non-controlling 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 as a result of the restructuring described in Note 2.4.

23. Earnings per share The following reflects the income used in the basic and diluted earnings per share computations: Group 2012 $’000 (a)

(b)

Earnings used in calculating earnings per share Net profit attributable to owners of the Company

Weighted average number of shares Weighted average number of ordinary shares for basic earnings per share Effect of dilution: Outstanding options Weighted average number of ordinary shares adjusted for the effect of dilution

2011 $’000

6,926

8,476

’000

’000

171,730

150,887

60

171,730

150,947

There are no instruments (e.g. share options) excluded from the calculation of diluted earnings per share in the current year that could potentially dilute basic earnings per share in the future. Total anti-dilutive options which could be dilutive in the future was nil as at 30 June 2012 (2011: nil).

71


72

CORDLIFE GROUP LIMITED Annual Report 2012

Notes to the FINANCIAL STATEMENTS For the financial year ended 30 June 2012

23. Earnings per share (cont’d) Except as described in the paragraph below, there have been no transactions involving ordinary shares or potential ordinary shares that would significantly change the number of ordinary shares or potential ordinary shares outstanding between the reporting date and the date of completion of these financial statements. As at 30 June 2011, there is one outstanding option which is exercisable into 21,800,000 shares of the Company at no additional consideration. This option had been exercised on 29 March 2012.

24. 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 2012 but not recognised in the financial statements aggregating to $3,829,000 (2011: $5,644,000). Operating lease commitments The Group leases office space under non-cancellable lease arrangements which have remaining lease terms ranging from 3 months to 3 years. Future minimum rentals payable under non-cancellable operating leases as at 30 June are as follows: Group

Company 2012 2011 $’000 $’000

2012 $’000

2011 $’000

615 1,007 1,622

727 1,372 2,099

195 – 195

264 31 295

2012 Minimum lease payments $’000

2012 Present value of payments $’000

2011 Minimum lease payments $’000

2011 Present value of payments $’000

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

Finance lease commitments Commitments under finance lease are as follows:

Within one year After one year but not more than five years Total minimum lease payments Less: Amounts representing finance charges Present value of minimum lease payments

7 – 7 (1) 6

6 – 6 – 6

The weighted average interest rate implicit in the lease is 3.75% (2011: 3.75%).

17 7 24 (3) 21

15 6 21 – 21


CORDLIFE GROUP LIMITED Annual Report 2012

Notes to the FINANCIAL STATEMENTS For the financial year ended 30 June 2012

25. Investment in subsidiaries Company 2012 2011 $’000 $’000 Unquoted equity shares, at cost

15,166

15,166

Name of company

Country of incorporation

Cordlife (M) Sdn Bhd 1

Malaysia

Dormant (Malaysia)

100

100

Cordlife (Hong Kong) Limited 2

Hong Kong

Cord blood and umbilical cord tissue banking services (Hong Kong)

100

100

Singapore

Dormant (Singapore)

100

100

People’s Republic of China

Dormant (People’s Republic of China)

100

100

CLS Services Pte Ltd

3

Shanghai Cordlife Biomedical Research Co., Ltd 4

1 2 3 4

Principal activities

Percentage of equity held 2012 2011 % %

Under liquidation Audited by Ernst & Young, Hong Kong Audited by Ernst & Young LLP, Singapore Not required to be audited in the country of incorporation

26. Related party transactions (a)

Significant transactions between the Group and its related companies are as follows: Group 2012 $’000 Sale of goods to related companies Commission income from related company Commission expense to related companies Recharge of staff costs from related companies Recharge of rental to related companies

– – – – –

2011 $’000 169 213 538 887 72

Related companies refer to Cordlife Limited and its subsidiaries prior to the distribution in specie of all of the issued share capital of Cordlife Group Limited to Cordlife Limited’s shareholders on 30 June 2011. Subsequent to the distribution, Cordlife Group Limited ceased to be a subsidiary of Cordlife Limited. Included in “recharge of staff costs from related companies” is compensation paid to key management personnel of the Company.

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74

CORDLIFE GROUP LIMITED Annual Report 2012

Notes to the FINANCIAL STATEMENTS For the financial year ended 30 June 2012

26. Related party transactions (cont’d) (b)

Compensation of key management personnel Group

Salaries and bonuses Defined contribution plans Other short-term benefits Directors’ fees Consultancy fees paid to Directors*

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

2012 $’000

2011 $’000

914 71 84 280 150 1,499

178 12 26 3 – 219

763 736 1,499

3 216 219**

*

Relates to consultancy fees paid to two non-executive Directors.

**

For the financial year ended 30 June 2011, remuneration for one Director and one key management personnel was paid by Cordlife Limited and one of its subsidiaries respectively, as these employees had entered into employment contracts with the respective companies. The compensation was included in “recharge of staff costs from related companies” in the FY2011. The employment contracts were novated to the Company in the current year upon demerger of the Company from Cordlife Limited.

27. 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 minimise 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 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.


CORDLIFE GROUP LIMITED Annual Report 2012

Notes to the FINANCIAL STATEMENTS For the financial year ended 30 June 2012

27. Financial risk management (cont’d) 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 interest-bearing borrowings whose interest rates are subject to re-pricing every quarter after July 2014. 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. The convertible bond generates interest income at a fixed rate during the tenure of the convertible bond and is not subject to changes in interest rate fluctuation. As at 30 June 2012 and 2011, the Group is not subject to significant interest rate risk as the fixed deposits, convertible bond and interest-bearing 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 fixed deposits of $30,445,278 (2011: $5,304,745) and unused credit facilities available for its immediate use of nil (2011: $1,000,000). Hence, the Group’s exposure to liquidity risk is minimal.

28. Financial instruments (a)

Fair value Management has determined that the carrying amounts of cash and cash equivalents, current fixed deposits, trade and other receivables, amount 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. The convertible bond is stated at cost because it has no market price and the fair value cannot be reliably measured using valuation technique.

75


76

CORDLIFE GROUP LIMITED Annual Report 2012

Notes to the FINANCIAL STATEMENTS For the financial year ended 30 June 2012

28. 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 Financial assets Loans and receivables: Trade receivables Deposits Fixed deposits Cash and cash equivalents Other receivables

Fair value through profit or loss: Convertible bond Financial liabilities Liabilities at amortised cost: Trade and other payables Finance lease liabilities Interest-bearing borrowings

Company Financial assets Loans and receivables: Trade receivables Fixed deposits Cash and cash equivalents Other receivables Amounts due from subsidiaries

Fair value through profit or loss: Convertible bond Financial liabilities Liabilities at amortised cost: Trade and other payables Amounts due to subsidiaries Interest-bearing borrowings

2012 $’000

2011 $’000

32,846 214 17,500 12,945 661 64,166

29,662 208 1,310 3,995 288 35,463

1,500

2,983 6 2,564 5,553

2,261 21 818 3,100

32,177 17,500 10,098 574 1,032 61,381

28,839 1,310 2,229 157 790 33,325

1,500

2,386 97 2,564 5,047

1,454 113 818 2,385


CORDLIFE GROUP LIMITED Annual Report 2012

Notes to the FINANCIAL STATEMENTS For the financial year ended 30 June 2012

29. 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 consists of customers from Singapore, Philippines and Indonesia.

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 activity of the provision of cord blood banking services.

No operating segments have been aggregated to form the above reportable operating segments. Segment revenue North Asia $’000

South Asia $’000

Others $’000

Total $’000

Year ended 30 June 2011 Revenue from external customers Total consolidated revenue

6,459

19,214

25,673 25,673

Year ended 30 June 2012 Revenue from external customers Total consolidated revenue

7,083

21,692

28,775 28,775

Segment results 2012 $’000 Group Segment profit: - North Asia - South Asia Unallocated income/expenses: Interest income Other unallocated * Profit before income tax expense Income tax expense Total net profit for the year *

2011 $’000

2,052 5,589 7,641

1,586 8,250 9,836

157 (18) 7,780 (854) 6,926

92 6 9,934 (1,458) 8,476

Other unallocated refers to results of subsidiaries not in the principal activity of the provision of cord blood banking services.

77


78

CORDLIFE GROUP LIMITED Annual Report 2012

Notes to the FINANCIAL STATEMENTS For the financial year ended 30 June 2012

29. Segment reporting (cont’d) Segment assets and liabilities Assets $’000

Liabilities $’000

30 June 2011 Segment assets and liabilities: - North Asia - South Asia

19,341 36,745

5,144 8,390

Tax recoverable/payable Deferred tax liabilities Eliminations + Others * Consolidated

93 – (902) 114 55,391

2,044 132 (908) 35 14,837

30 June 2012 Segment assets and liabilities: - North Asia - South Asia

22,807 68,640

5,981 13,184

Tax recoverable/payable Deferred tax liabilities Eliminations + Others * Consolidated

– – (1,185) 101 90,363

1,092 97 (1,190) 40 19,204

+ *

Inter-segment balances are eliminated on consolidation. Others refer to the assets and liabilities of subsidiaries not in the principal activity of the provision of cord blood banking services.

30. Dividends Group and Company 2012 2011 $’000 $’000 Declared and paid during the financial year: Dividends on ordinary shares: Interim exempt (one-tier) dividend for 2012: 1.8 cents (2011: nil) per share Special exempt (one-tier) dividend for 2012: 0.2 cents (2011: nil) 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 (2011: nil) per share

4,188 466 4,654

– – –

4,188


CORDLIFE GROUP LIMITED Annual Report 2012

Notes to the FINANCIAL STATEMENTS For the financial year ended 30 June 2012

31. 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 2012 and 2011. 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.

32. Events occurring after the reporting period The Company has on 15 August 2012 entered into a share purchase agreement (the “Share Purchase Agreement”) with China Cord Blood Corporation (“CCBC”) in relation to the proposed acquisition by the Company of 7,314,015 ordinary shares of US$0.0001 par value per share in the issued share capital of CCBC held by CCBC in treasury, representing approximately 10% of the issued share capital of CCBC (including treasury shares) as at the date of the Share Purchase Agreement (the “Acquisition”). The consideration for the Acquisition is US$20,844,943 (approximately S$26,514,767). In connection with the Acquisition, Cordlife (Hong Kong) Limited (“Cordlife HK”), a wholly-owned subsidiary of the Company, has on 15 August 2012 entered into a shares repurchase agreement (the “Shares Repurchase Agreement”) with China Stem Cells (South) Company Limited (“CSCS”), a company in which CCBC has an indirect shareholding interest of 90%, in relation to the proposed repurchase by CSCS of Cordlife HK’s 100 ordinary shares of US$1.00 par value per share in the issued share capital of CSCS, representing 10% of the issued share capital of CSCS as at the date of the Shares Repurchase Agreement (the “Disposal”). The consideration for the Disposal is US$16,841,359 (approximately S$21,422,208). The consideration for the Acquisition will be satisfied partly by way of a set-off against the consideration for the Disposal and the remaining portion of US$4,003,584 (approximately S$5,092,559) by cash. Based on the terms of the Share Purchase Agreement and the Shares Repurchase Agreement, the completion of the Acquisition shall take place simultaneously with the completion of the Disposal. The completion of Acquisition and Disposal are subject to the fulfilment or waiver of the terms and conditions set out in the Share Purchase Agreement and Share Repurchase Agreement as well as the shareholders’ approval at the Extraordinary General Meeting to be convened in due course. As at 28 September 2012, both the Acquisition and the Disposal have not been completed. The non-current asset which is subject to the Shares Repurchase Agreement is the Group’s investment in associate with a carrying value of $17,664,000 as at 30 June 2012 (2011: $15,111,000). The carrying amount of the investment in associate forms part of the assets in the segment “North Asia” as disclosed in Note 29. For the financial year ended 30 June 2012, the share of associate’s profit of $2,091,000 (2011: $1,675,000) forms part of the segment profit of “North Asia” as disclosed in Note 29.

33. Authorisation of financial statements for issue The financial statements for the financial year ended 30 June 2012 were authorised for issue in accordance with a resolution of the Directors on 28 September 2012.

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CORDLIFE GROUP LIMITED Annual Report 2012

80

Statistics of SHAREHOLDINGS As at 13 September 2012

Class of equity securities

:

Ordinary Shares

Number of equity securites

:

232,687,354 ordinary shares

Voting rights

:

One vote per share

The Company does not hold any treasury shares.

STATISTICS OF SHAREHOLDERS Size of Holdings

Shareholders

1 - 999 1,000 - 10,000 10,001 - 1,000,000 1,000,001 and above Total

31 1,171 1,153 29 2,384

%

No. of Shares

%

1.30 49.12 48.36 1.22 100.00

12,380 7,801,189 69,359,941 155,513,844 232,687,354

0.01 3.35 29.81 66.83 100.00

Deemed Interest

%

SUBSTANTIAL SHAREHOLDERS AS AT 13 SEPTEMBER 2012 (As recorded in the Register of Substantial Shareholders) Direct Interest

%

24,366,666

10.47

24,366,666

10.47

24,366,666

10.47

24,366,666

10.47

24,366,666

10.47

Golden Meditech Holdings Limited(5) City Challenge Global Limited

– 21,800,000

– 9.37

24,366,666 –

10.47 –

Lau Wai Chi Stellan(6) Coop International Pte Ltd Wells Spring Pte Ltd

– 20,450,000 16,800,000

– 8.79 7.22

21,800,000 – –

9.37 – –

– 2,069,250

– 0.89

16,800,000 16,800,000

7.22 7.22

China Stem Cells (East) Co Ltd (1)

China Stem Cells Holdings Limited China Cord Blood Services Corporation(2) (3)

China Cord Blood Corporation Golden Meditech Stem Cells Company Limited(4)

Tai Tak Estates Sendirian Berhad(7) Ho Han Siong Christopher(8) Note: 1

China Stem Cells Holdings Limited (“CSCH”) is the sole shareholder of China Stem Cells (East) Co Ltd (“CSCE”) and is therefore deemed to be interested in the shares held by CSCE by virtue of Section 7 of the Companies Act.

2

China Cord Blood Services Corporation (“CCBSC”) is the sole shareholder of CSCH and is therefore deemed to be interested in the shares held by CSCE by virtue of Section 7 of the Companies Act.

3

China Cord Blood Corporation (“CCBC”) is the sole shareholder of CCBSC and is therefore deemed to be interested in the shares held by CSCE by virtue of Section 7 of the Companies Act.

4

Golden Meditech Stem Cells Company Limited (“GMSC”) holds approximately 41.8% equity interests in CCBC and is therefore deemed to be interested in the shares held by CSCE by virtue of Section 7 of the Companies Act.

5

Golden Meditech Holdings Limited is the sole shareholder of GMSC and is therefore deemed to be interested in the shares held by CSCE by virtue of Section 7 of the Companies Act.


CORDLIFE GROUP LIMITED Annual Report 2012

Statistics of SHAREHOLDINGS As at 13 September 2012

6

Lau Wai Chi Stellan is the sole shareholder of City Challenge Global Limited and is therefore deemed to be interested in the shares held by City Challenge Global Limited by virtue of Section 7 of the Companies Act.

7

Tai Tak Estates Sendirian Berhad is the sole shareholder of Wells Spring Pte Ltd and is therefore deemed to be interested in the shares held by Wells Spring Pte Ltd by virtue of Section 7 of the Companies Act.

8

Based on the substantial shareholder notifications received by the Company on 3 April 2012 and 4 April 2012, Christopher Ho Han Siong is deemed interested in the Shares held by Wells Spring Pte. Ltd. as a director.

TWENTY LARGEST SHAREHOLDERS No.

Name

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

China Stem Cells (East) Co Ltd City Challenge Global Limited Coop International Pte Ltd Wells Spring Pte Ltd CIMB Securities (Singapore) Pte Ltd DBS Nominees Pte Ltd Faitheagle Investments Limited Raffles Nominees (Pte) Ltd Citibank Nominees Singapore Pte Ltd HSBC (Singapore) Nominees Pte Ltd Chong Siew Hong Maybank Kim Eng Securities Pte Ltd Phillip Securities Pte Ltd Mount Vertical Investments Limited DB Nominees (Singapore) Pte Ltd Tantalum Cellular Products LLC Ko Woon Hong DBSN Services Pte Ltd Ho Han Siong Christopher Mr Evan Philip Clucas & Ms Leanne Jane Weston (Kuranga Nursery Super A/C) Total

No. of Shares

%

24,366,666 21,800,000 20,450,000 16,800,000 7,474,914 6,372,029 5,446,210 5,240,202 5,056,252 3,991,071 3,384,000 3,179,333 3,005,763 3,000,000 2,655,306 2,566,972 2,346,000 2,200,000 2,069,250 1,773,227

10.47 9.37 8.79 7.22 3.21 2.74 2.34 2.25 2.17 1.72 1.45 1.37 1.29 1.29 1.14 1.10 1.01 0.95 0.89 0.76

143,177,195

61.53

As at 13 September 2012, 61.6% 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.

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82

CORDLIFE GROUP LIMITED Annual Report 2012

Notice of ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN that the Annual General Meeting of Cordlife Group Limited (the “Company”) will be held at Ngee Ann Kongsi Auditorium @ School of Accountancy, Singapore Management University, 60 Stamford Road, Level 2, Singapore 178900 on Friday, 19 October 2012 at 10.00 a.m. 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 2012 together with the Auditors’ Report thereon. (Resolution 1)

2.

To re-elect the following Directors retiring pursuant to Article 94 of the Company’s Articles of Association: (a) (b)

Mr Yee Pinh Jeremy Mr Ho Sheng

(Resolution 2) (Resolution 3)

(Mr Ho Sheng will, upon his re-election as a Director of the Company, remain as Chairman of the Nominating Committee and Member of the Audit Committee. He is considered independent for the purpose of Rule 704(8) of the Listing Manual of the Singapore Exchange Securities Trading Limited) 3.

To approve the payment of a special final tax exempt (1-tier) dividend of 1.8 cents per ordinary share for the financial year ended 30 June 2012. (Resolution 4)

4.

To approve the payment of Directors’ fee of S$300,000.00 for the financial year ending 30 June 2013, payable quarterly in arrears (2012 : S$280,000.00) (Resolution 5)

5.

To re-appoint Messrs Ernst & Young LLP as the Company’s Auditors and to authorise the Directors to fix their remuneration. (Resolution 6)

6.

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

Special Business 7.

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,


CORDLIFE GROUP LIMITED Annual Report 2012

Notice of ANNUAL GENERAL MEETING provided that:

8.

(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 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)

new 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 SGX-ST) 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 (i)] (Resolution 7)

To consider and, if thought fit, to pass the following resolution as an Ordinary Resolution, with or without any modifications: Ordinary Resolution: To grant approval for the adoption of the Share Purchase Mandate “That: (a)

for the purposes of the Companies Act (Chapter 50 of Singapore) (the “Companies Act”), the exercise by the directors of the Company (the “Directors”) of all the powers of the Company to purchase or otherwise acquire issued and fully paid ordinary shares (“Shares”) in the share capital of the Company not exceeding in the aggregate the Maximum Limit (as hereinafter defined), at such price(s) as may be determined by the Directors from time to time up to the Maximum Price (as hereinafter defined), whether by way of: (i)

market purchases or acquisitions of Shares (each a “Market Purchase”) on the Singapore Exchange Securities Trading Limited (the “SGX-ST”); and/or

(ii)

off-market purchases or acquisitions of Shares (each an “Off-Market Purchase”) in accordance with any equal access scheme(s) as may be determined or formulated by the Directors as they consider fit, which scheme(s) shall satisfy all the conditions prescribed by the Companies Act,

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84

CORDLIFE GROUP LIMITED Annual Report 2012

Notice of ANNUAL GENERAL MEETING and otherwise in accordance with all other laws and regulations, including but not limited to, the provisions of the Companies Act and the listing rules of the SGX-ST as may for the time being be applicable, be and is hereby authorised and approved generally and unconditionally (the “Share Purchase Mandate”); (b)

(c)

the authority conferred on the Directors of the Company pursuant to the Share Purchase Mandate may be exercised by the Directors at any time and from time to time during the period commencing from the date of the passing of this Resolution and expiring on the earliest of: (i)

the date on which the next annual general meeting (“AGM”) of the Company is held or required by law to be held;

(ii)

the date on which the Share purchases or acquisitions by the Company pursuant to the Share Purchase Mandate are carried out to the full extent mandated; or

(iii)

the date on which the authority conferred by the Share Purchase Mandate is revoked or varied by the Company in a general meeting;

in this Resolution: “Average Closing Market Price” means the average of the closing market prices of the Shares over the last five (5) Market Days, on which transactions in the Shares were recorded, preceding the day of the Market Purchase or, as the case may be, the day of the making of the offer pursuant to the Off-Market Purchase, and deemed to be adjusted for any corporate action that occurs after the relevant five (5)-day period; “day of the making of the offer” means the day on which the Company announces its intention to make an offer for the purchase of Shares from shareholders of the Company, stating the purchase price (which shall not be more than the Maximum Price) for each Share and the relevant terms of the equal access scheme for effecting the Off-Market Purchase; “Market Day” means a day on which the SGX-ST is open for securities trading; “Maximum Limit” means that number of Shares representing 5% of the total number of issued Shares (excluding any Shares which are held as treasury shares) ascertained as at the date of the last AGM or at the date of the general meeting at which the Share Purchase Mandate is approved, whichever is the higher, unless the Company has effected a reduction in the share capital of the Company in accordance with the applicable provisions of the Companies Act, at any time during the Relevant Period, in which event the total number of issued Shares of the Company shall be taken to be the total number of issued Shares of the Company as altered; “Maximum Price” in relation to a Share to be purchased or acquired, means the purchase price (excluding brokerage, commission, stamp duties, applicable goods and services tax and other related expenses) which shall not exceed: (i)

in the case of a Market Purchase, 105% of the Average Closing Market Price of the Shares; and

(ii)

in the case of an Off-Market Purchase pursuant to an equal access scheme, 105% of the Average Closing Market Price of the Shares; and

“Relevant Period” means the period commencing from the date on which the last AGM was held and expiring on the date the next AGM is held or is required by law to be held, whichever is the earlier, after the date the resolution relating to the Share Purchase Mandate is passed; and


CORDLIFE GROUP LIMITED Annual Report 2012

Notice of ANNUAL GENERAL MEETING (d)

the Directors of the Company and/or any of them be and are hereby authorised to complete and do all such acts and things (including executing such documents as may be required) as they and/or he may consider expedient or necessary to give effect to the transactions contemplated and/or authorised by this Resolution.” [See Explanatory Note (ii)] (Resolution 8)

By Order of the Board

Ang Siew Koon Low Siew Tian Company Secretaries

Singapore, 04 October 2012

Explanatory Notes: (i)

Ordinary Resolution 7 proposed in item 7 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 pro-rata 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.

(ii)

Ordinary Resolution 8, 8 if passed, will empower the Directors to exercise all powers of the Company to purchase or otherwise acquire (whether by way of Market Purchases or Off-Market Purchases) issued and fully paid ordinary Shares in the capital of the Company on terms of the Share Purchase Mandate set out in the letter to shareholders of the Company dated 4 October 2012. The authority conferred by Resolution 8 will continue in force until the earliest of: (a)

the date on which the next AGM of the Company is held or required by law to be held;

(b)

the date on which the Share purchases or acquisitions by the Company pursuant to the Share Purchase Mandate are carried out to the full extent mandated; or

(c)

the date on which the authority conferred by the Share Purchase Mandate is revoked or varied by the Company in a general meeting.

The Company intends to use internal sources of funds to finance purchases or acquisitions of Shares pursuant to the Share Purchase Mandate. The Directors do not propose to carry out purchases pursuant to the Share Purchase Mandate to such an extent that would, or in circumstances that might, result in a material adverse effect on the financial position (including working capital and gearing) of the Company and/or affect the listing status of the Company on the SGX-ST. The amount of financing required for the Company to purchase or acquire its Shares and the impact on the Company’s financial position cannot be ascertained as at the date of this Notice as these will depend on, inter alia, whether the Shares are purchased out of capital or profits of the Company, the price paid for such Shares, the aggregate number of Shares purchased or acquired and whether the Shares purchased are held in treasury or cancelled. An illustration of the financial impact of the Share purchases by the Company pursuant to the Share Purchase Mandate on the audited financial statements of the Company and its subsidiaries for the financial year ended 30 June 2012 is set out in the letter dated 4 October 2012 to the shareholders of the Company. Shareholders should note that the financial effects set out therein are purely for illustrative purposes only.

85


CORDLIFE GROUP LIMITED Annual Report 2012

86

Notice of ANNUAL GENERAL MEETING Books Closure Date and Payment Date for Final Dividend Subject to the approval of the shareholders at this Annual General Meeting, the Register of Members and the Transfer Books of the Company will be closed on 30 October 2012 (“Book Closure Date”) for the purpose of determining members’ entitlement to the special final dividend (“Dividend”). 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 29 October 2012 (“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 special final dividend, if approved by the shareholders at the Annual General Meeting, will be paid on 14 November 2012.

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.

The initial public offering of Cordlife Group Limited’s shares was sponsored by PrimePartners Corporate Finance Pte. Ltd..


Proxy Form IMPORTANT PLEASE READ THE NOTES TO THE PROXY FORM.

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

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 %

NRIC/Passport Number

Proportion of Shareholdings No. of Shares %

and/or (delete as appropriate) Name

Address

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, 19 October 2012 at 10.00a.m. Ngee Ann Kongsi Auditorium @ School of Accountancy, Singapore Management University, 60 Stamford Road, Level 2, Singapore 178900 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. No.

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 2012 together with the Auditors’ Report thereon. 2. Re-election of Mr Yee Pinh Jeremy as a director. 3. Re-election of Mr Ho Sheng as a director. 4. Special final tax exempt (1-tier) dividend of 1.8 cents per ordinary share for the financial year ended 30 June 2012. 5. Directors’ fee amounting to S$300,000.00 for the financial year ending 30 June 2013, payable quarterly in arrears. 6. Re-appointment of Messrs Ernst & Young LLP as Auditors. Special Business 7. Authority to directors to allot and issue shares 8. Proposed adoption of the Share Purchase Mandate * 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

Total number of Shares held

Signature(s) of Shareholder(s)/Common Seal 1st Fold (this flap for sealing)


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.


Corporate Office: 61 Science Park Road, #05-16/18 The Galen, Singapore Science Park II, Singapore 117525 Tel: (65) 6238 0808 Fax: (65) 6238 1108 Website: www.cordlife.com/sg Company Registration Number: 200102883E


Cordlife Annual Report