Cytech 1-28

Transcription

Cytech 1-28

PROSPECTUS DATED 7 AUGUST 2000
We have applied to the Singapore Exchange Securities Trading Limited (the “SGX-ST”) for permission to deal in and for quotation
of all of our ordinary shares of HK$0.05 each (the “Shares”) comprising of existing issued and fully paid-up Shares and new Shares
(the “New Shares”) which are the subject of this Invitation. Such permission will be granted when we have been admitted to the
Official List of the SGX-ST. Quotation of and dealing in the Shares will be in Singapore Dollars.
FINANCIAL PERFORMANCE
INVESTMENT HIGHLIGHTS
For the year ended 31 December
ERP system software and standardised software for the
PRC market
Our acceptance of applications will be conditional upon permission being granted to deal in and for quotation of all of our existing
issued and fully paid-up Shares as well as the New Shares. If such permission is not granted or for any other reason, moneys paid
in respect of any application accepted will be returned to you at your own risk, without interest or any share of revenue or other
benefit arising therefrom.
We have lodged and registered a copy of this Prospectus with the Registrar of Companies and Businesses in Singapore who takes
no responsibility for its contents.
Millions
The SGX-ST assumes no responsibility for the correctness of any of the statements made, opinions expressed or reports contained
in this Prospectus. Admission to the Official List of the SGX-ST is not to be taken as an indication of the merits of the Invitation, our
Company, our subsidiaries, our issued Shares or our New Shares.
Turnover
A copy of this Prospectus, together with copies of the Application Forms, have been filed with the Registrar of Companies in
Bermuda. The Bermuda Monetary Authority has given its consent to the issue of the New Shares and the sale of the Vendor Shares
pursuant to the Invitation on the terms referred to in this Prospectus. In accepting this Prospectus for filing and in granting such
consent, the Bermuda Monetary Authority and Registrar of Companies in Bermuda accept no responsibility for the financial soundness
of the Group or any proposal or for the correctness of any of the statements made or opinions expressed herein or any of the other
documents referred to in this Prospectus.
RMB92.6
(S$19.0)
RMB43.0
(S$8.8)
2. Huatong Finance and Accounting Software
- allows users to conform with the PRC accounting
practices.
- used by educational institutions as the standard
accounting and finance software in curriculum.
RMB19.2
RMB7.6 (S$3.9)
(S$1.4)
*
*
3. Huatong Housing Sales Software
- enables real estate companies to manage the whole
retailing process.
*
**
Profit After Tax
Millions
RMB41.5
(S$8.5)
(Incorporated in Bermuda on 9 June 2000)
1. Huatong ERP System Software
- we believe that we are the only company in the PRC to
have developed an ERP system software that is based
on a web browser platform. This will allow companies
operating in different locations to be effectively linked
under one ERP system in a cost effective and convenient
manner.
4. Huatong Trade System Software
- helps businesses in the trade and manufacturing
industries.
Able to identify technological trends and market needs in
the PRC
●
RMB20.6
(S$4.2)
RMB6.4
RMB2.0 (S$1.3)
(S$0.4)
*
*
To capitalise on the development of the Internet, we
developed the Huatong ERP System Software on a web
browser platform so that companies can take advantage of
this medium to manage their businesses across borders in
an efficient and effective manner.
Strong familiarity with the PRC market
●
*
Based on our understanding of the business culture,
practices and language of the PRC, we are able to develop
products that are more suitable for use in the PRC than our
foreign competitors.
Well-suited products
**
●
We believe that our products have fully complied with the
PRC accounting and taxation regulations and practices.
Competitive pricing
Manager, Underwriter and Placement Agent
Percentage ***
Invitation in respect of 64,849,000 ordinary shares of HK$0.05 each comprising 52,000,000 New Shares and
12,849,000 Vendor Shares as follows:(1) 6,485,000 Offer Shares at S$0.68 for each Offer Share by way of public offer; and
(2) 58,364,000 Placement Shares at S$0.68 for each Placement Share by way of placement,
payable in full on application
Gross Margin
56%
J.M. Sassoon & Co (Pte) Ltd
Lum Chang Securities Pte Ltd
Ong & Company Private Limited
Phillip Securities Pte Ltd
71%
76%
We believe that our software products have the price
advantage over our foreign competitors’ as we enjoy lower
development costs in the PRC.
Established customer base
*
Co-Underwriters and Co-Placement Agents
61%
●
*
We have a base of 1,205 customers as at the end of 1999.
Approximately 90% of our customers are users of our
standardised software applications.
●
These customers will provide opportunities for us to promote
and sell our customised ERP system software and
E-Commerce services, as well as generate recurring
support and maintenance revenue for our Group.
Good track record
*
**
* converted at average exchange rates for the respective years
** converted at average exchange rate from Jan to April 2000
***rounded to the nearest whole number
●
●
Our customer base jumped more than five-fold, from 224 in
1997 to 1,205 in 1999. This is a testament of the good track
record we have achieved in providing software applications
in the PRC.
PROSPECTUS DATED 7 AUGUST 2000
We have applied to the Singapore Exchange Securities Trading Limited (the “SGX-ST”) for permission to deal in and for quotation
of all of our ordinary shares of HK$0.05 each (the “Shares”) comprising of existing issued and fully paid-up Shares and new Shares
(the “New Shares”) which are the subject of this Invitation. Such permission will be granted when we have been admitted to the
Official List of the SGX-ST. Quotation of and dealing in the Shares will be in Singapore Dollars.
FINANCIAL PERFORMANCE
INVESTMENT HIGHLIGHTS
For the year ended 31 December
ERP system software and standardised software for the
PRC market
Our acceptance of applications will be conditional upon permission being granted to deal in and for quotation of all of our existing
issued and fully paid-up Shares as well as the New Shares. If such permission is not granted or for any other reason, moneys paid
in respect of any application accepted will be returned to you at your own risk, without interest or any share of revenue or other
benefit arising therefrom.
We have lodged and registered a copy of this Prospectus with the Registrar of Companies and Businesses in Singapore who takes
no responsibility for its contents.
Millions
The SGX-ST assumes no responsibility for the correctness of any of the statements made, opinions expressed or reports contained
in this Prospectus. Admission to the Official List of the SGX-ST is not to be taken as an indication of the merits of the Invitation, our
Company, our subsidiaries, our issued Shares or our New Shares.
Turnover
A copy of this Prospectus, together with copies of the Application Forms, have been filed with the Registrar of Companies in
Bermuda. The Bermuda Monetary Authority has given its consent to the issue of the New Shares and the sale of the Vendor Shares
pursuant to the Invitation on the terms referred to in this Prospectus. In accepting this Prospectus for filing and in granting such
consent, the Bermuda Monetary Authority and Registrar of Companies in Bermuda accept no responsibility for the financial soundness
of the Group or any proposal or for the correctness of any of the statements made or opinions expressed herein or any of the other
RMB92.6
(S$19.0)
RMB43.0
(S$8.8)
2. Huatong Finance and Accounting Software
- allows users to conform with the PRC accounting
practices.
- used by educational institutions as the standard
accounting and finance software in curriculum.
RMB19.2
RMB7.6 (S$3.9)
(S$1.4)
*
*
3. Huatong Housing Sales Software
- enables real estate companies to manage the whole
retailing process.
*
**
Profit After Tax
Millions
RMB41.5
(S$8.5)
(Incorporated in Bermuda on 9 June 2000)
1. Huatong ERP System Software
- we believe that we are the only company in the PRC to
have developed an ERP system software that is based
on a web browser platform. This will allow companies
operating in different locations to be effectively linked
under one ERP system in a cost effective and convenient
manner.
4. Huatong Trade System Software
- helps businesses in the trade and manufacturing
industries.
Able to identify technological trends and market needs in
the PRC
●
RMB20.6
(S$4.2)
RMB6.4
RMB2.0 (S$1.3)
(S$0.4)
*
*
To capitalise on the development of the Internet, we
developed the Huatong ERP System Software on a web
browser platform so that companies can take advantage of
this medium to manage their businesses across borders in
an efficient and effective manner.
Strong familiarity with the PRC market
●
*
Based on our understanding of the business culture,
practices and language of the PRC, we are able to develop
products that are more suitable for use in the PRC than our
foreign competitors.
Well-suited products
**
●
We believe that our products have fully complied with the
PRC accounting and taxation regulations and practices.
Competitive pricing
Manager, Underwriter and Placement Agent
Percentage ***
Invitation in respect of 64,849,000 ordinary shares of HK$0.05 each comprising 52,000,000 New Shares and
12,849,000 Vendor Shares as follows:(1) 6,485,000 Offer Shares at S$0.68 for each Offer Share by way of public offer; and
(2) 58,364,000 Placement Shares at S$0.68 for each Placement Share by way of placement,
payable in full on application
Gross Margin
56%
J.M. Sassoon & Co (Pte) Ltd
71%
76%
We believe that our software products have the price
advantage over our foreign competitors’ as we enjoy lower
development costs in the PRC.
Established customer base
*
Co-Underwriters and Co-Placement Agents
61%
●
*
We have a base of 1,205 customers as at the end of 1999.
Approximately 90% of our customers are users of our
standardised software applications.
●
These customers will provide opportunities for us to promote
and sell our customised ERP system software and
E-Commerce services, as well as generate recurring
support and maintenance revenue for our Group.
Good track record
*
**
* converted at average exchange rates for the respective years
** converted at average exchange rate from Jan to April 2000
***rounded to the nearest whole number
●
●
Our customer base jumped more than five-fold, from 224 in
1997 to 1,205 in 1999. This is a testament of the good track
record we have achieved in providing software applications
in the PRC.
CORE BUSINESS
●
We are an IT solutions and software applications
developer based in the People’s Republic of China
(PRC) through our subsidiary, Guangzhou Yitian
Huatong Technology Corporation Ltd (Huatong).
●
Established in 1993, Huatong’s core businesses are
in:
1. Customised software development and Enterprise
Resource Planning (ERP) implementation
- develop customised business software
according to customers’ requirements
- develop and implement the web-based
Huatong ERP System Software
2. E-Commerce services
- design and construct website
- design and construct B2B systems
3. Distribution and sale of computer software
- distribute both proprietary standardised and
Microsoft software titles
4. Maintenance and upgrading services
- assist customers in maintaining networks and
providing on-site assistance
- provide training on software application for
customers’ staff
5. Distribution and sale of computer hardware/
systems integration
- accredited reseller of HP and IBM products
- provide systems integration to customers’
specifications
AWARDS AND CERTIFICATIONS
Awards and Certifications to Huatong Finance and
Accounting Software
●
One of the top three products to be awarded a 2nd
class honorary certificate by the Fangchun District
People’s Government in 1998. Believed to be the
first software to receive this award to date.
●
The only Gold Award winner in the software category
at the 8 th Annual China New Technology New
Products Convention in 1996 for comprehensive
software functions and well-designed user-interface.
●
Certified by the Guangzhou Finance Bureau to have
complied with the accounting practices under the
PRC laws and regulations.
PROSPECTS
We are confident of our future growth for the following
reasons:
●
●
●
●
The growth of the IT market in the PRC. According to
International Data Corporation (IDC), the IT market for the
PRC, Hong Kong and Macau (Greater China Region) is
projected to grow by 20.7% per year from US$1.3 billion in
1997 until it reaches US$3.5 billion in 2002.
The growth of the ERP software market in the Greater China
Region which, according to IDC, is expected to have a
compound annual growth rate of 39% from 1998 to 2003.
The growth of the Internet as a medium for conducting
business and a tool for companies to expand. This will
increase our business opportunity as our ERP system
software is based on a web browser platform.
The entry of the PRC into the World Trade Organisation
will stimulate demand for our Huatong ERP System
Software as companies would have to manage their
resources more effectively to remain competitive.
FUTURE PLANS
To tap on the growth potential of the IT and Internet market in
the PRC, we plan to:
●
increase our market coverage in the PRC by establishing
offices in Beijing, Shanghai and Hong Kong;
●
focus on the continuing development of Customised
Software and E-Commerce services;
●
develop customer relations management software
application and integrate into our Huatong ERP System
Software;
●
we are in the process of developing Bank Supervisory
Information System, a supervisory system mainly used to
monitor the banking sector in the PRC;
●
form strategic alliances or acquisitions where possible; and
●
establish the strong branding by intensifing marketing
efforts, participating in trade shows and expanding cooperation with more tertiary institutions.
CORE BUSINESS
●
We are an IT solutions and software applications
developer based in the People’s Republic of China
(PRC) through our subsidiary, Guangzhou Yitian
Huatong Technology Corporation Ltd (Huatong).
●
Established in 1993, Huatong’s core businesses are
in:
1. Customised software development and Enterprise
Resource Planning (ERP) implementation
- develop customised business software
according to customers’ requirements
- develop and implement the web-based
Huatong ERP System Software
2. E-Commerce services
- design and construct website
- design and construct B2B systems
3. Distribution and sale of computer software
- distribute both proprietary standardised and
Microsoft software titles
4. Maintenance and upgrading services
- assist customers in maintaining networks and
providing on-site assistance
- provide training on software application for
customers’ staff
5. Distribution and sale of computer hardware/
systems integration
- accredited reseller of HP and IBM products
- provide systems integration to customers’
specifications
AWARDS AND CERTIFICATIONS
Awards and Certifications to Huatong Finance and
Accounting Software
●
One of the top three products to be awarded a 2nd
class honorary certificate by the Fangchun District
People’s Government in 1998. Believed to be the
first software to receive this award to date.
●
The only Gold Award winner in the software category
at the 8 th Annual China New Technology New
Products Convention in 1996 for comprehensive
software functions and well-designed user-interface.
●
Certified by the Guangzhou Finance Bureau to have
complied with the accounting practices under the
PRC laws and regulations.
PROSPECTS
We are confident of our future growth for the following
reasons:
●
●
●
●
The growth of the IT market in the PRC. According to
International Data Corporation (IDC), the IT market for the
PRC, Hong Kong and Macau (Greater China Region) is
projected to grow by 20.7% per year from US$1.3 billion in
1997 until it reaches US$3.5 billion in 2002.
The growth of the ERP software market in the Greater China
Region which, according to IDC, is expected to have a
compound annual growth rate of 39% from 1998 to 2003.
The growth of the Internet as a medium for conducting
business and a tool for companies to expand. This will
increase our business opportunity as our ERP system
software is based on a web browser platform.
The entry of the PRC into the World Trade Organisation
will stimulate demand for our Huatong ERP System
Software as companies would have to manage their
resources more effectively to remain competitive.
FUTURE PLANS
To tap on the growth potential of the IT and Internet market in
the PRC, we plan to:
●
increase our market coverage in the PRC by establishing
offices in Beijing, Shanghai and Hong Kong;
●
focus on the continuing development of Customised
Software and E-Commerce services;
●
develop customer relations management software
application and integrate into our Huatong ERP System
Software;
●
we are in the process of developing Bank Supervisory
Information System, a supervisory system mainly used to
monitor the banking sector in the PRC;
●
form strategic alliances or acquisitions where possible; and
●
establish the strong branding by intensifing marketing
efforts, participating in trade shows and expanding cooperation with more tertiary institutions.
CONTENTS
Page
CORPORATE INFORMATION .....................................................................................................
3
DEFINITIONS ...............................................................................................................................
5
PROSPECTUS SUMMARY .........................................................................................................
9
RISK FACTORS ...........................................................................................................................
13
THE OFFER AND LISTING
A
Purchase by the Company of its own Shares ..................................................................
22
B
Listing on the SGX-ST ........................................................................................................
23
C
Invitation Statistics ...............................................................................................................
26
D
Selling Shareholders ...........................................................................................................
28
E
Dilution .................................................................................................................................
28
KEY INFORMATION
A
Selected Financial Data ......................................................................................................
29
B
Capitalisation and Indebtedness .........................................................................................
31
C
Exchange Rates ..................................................................................................................
32
D
Reasons for this Invitation and Use of Proceeds .............................................................
32
INFORMATION ON THE COMPANY
A
History and Development of our Group .............................................................................
34
B
Business Overview ..............................................................................................................
36
C
Organisational Structure ......................................................................................................
48
D
Property, Plant and Equipment ...........................................................................................
50
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
A
Operating Results ................................................................................................................
51
B
Review of Financial Position ...............................................................................................
57
C
Liquidity and Capital Resources .........................................................................................
59
D
Dividends ..............................................................................................................................
60
E
Research and Development ................................................................................................
60
F
Trend Information .................................................................................................................
61
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A
Directors and Senior Management .....................................................................................
65
B
Compensation ......................................................................................................................
69
C
Our Board of Directors ........................................................................................................
70
D
Employees ............................................................................................................................
70
1
Page
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A
Major Shareholders .............................................................................................................
71
B
Related Party Transactions .................................................................................................
72
LETTER FROM THE REPORTING ACCOUNTANTS IN RELATION TO THE
PRO FORMA CONSOLIDATED PROFIT FORECAST FOR THE FINANCIAL YEAR
ENDING 31 DECEMBER 2000 ...............................................................................................
74
LETTER FROM THE REPORTING ACCOUNTANTS IN RELATION TO THE UNAUDITED
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS FOR THE FOUR MONTHS
ENDED 30 APRIL 2000 ...........................................................................................................
75
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS FOR THE
FOUR MONTHS ENDED 30 APRIL 2000 ..............................................................................
76
ACCOUNTANTS’ REPORT ..........................................................................................................
77
ADDITIONAL INFORMATION
Share Capital ................................................................................................................................
91
DIRECTORS’ REPORT ................................................................................................................
93
GENERAL AND STATUTORY INFORMATION ...........................................................................
94
Appendix 1: PROCEDURES FOR APPLICATION AND ACCEPTANCE .................................
104
Appendix 2: SUMMARY OF BERMUDA COMPANY LAW .......................................................
118
Appendix 3: SELECTED BYE-LAWS OF OUR COMPANY .....................................................
125
2
CORPORATE INFORMATION
Board of Directors
:
Wang Xiaochuan (Chairman)
Gao Junhua (Vice Chairman)
Song Shenghong (Executive Director)
Chng Hee Kok (Independent Director)
Sitoh Yih Pin (Independent Director)
Company Secretaries
:
Cheung Kin Wah, CPA(HK), ACCA, AHKSA
Ira Stuart Outerbridge III*, FCIS
Registered Office
:
Clarendon House
2 Church Street
Hamilton HM 11
Bermuda
Registrar for the Invitation and
Singapore Share Transfer Agent
:
Lim Associates (Pte) Ltd
10 Collyer Quay
#19-08 Ocean Building
Singapore 049315
Bermuda Registrar and
Share Transfer Agent
:
The Bank of Bermuda Limited
Bank of Bermuda Building
6 Front Street
Hamilton HM 11
Bermuda
Manager, Underwriter
and Placement Agent
:
Overseas Union Bank Limited
1 Raffles Place
OUB Centre
Singapore 048616
Co-Underwriters and
Co-Placement Agents
:
J.M. Sassoon & Co. (Pte.) Ltd.
1 Raffles Place
#44-00 OUB Centre
Singapore 048616
24 Raffles Place
#12-01/06 Clifford Centre
Singapore 048621
16 Raffles Quay
#28-01 Hong Leong Building
Singapore 048581
95, South Bridge Road
#11-00, Pidemco Centre
Singapore 058717
*Mr Ira Stuart Outerbridge III will resign and be appointed assistant secretary to the Company following listing of the Shares
on the SGX-ST
3
Reporting Accountants
:
Ernst & Young
Certified Public Accountants
10 Collyer Quay #21-01
Ocean Building
Singapore 049315
Ernst & Young
15th Floor, Hutchison House
10 Harcourt Road
Central, Hong Kong
Auditors
:
Ernst & Young
15th Floor, Hutchison House
10 Harcourt Road
Central, Hong Kong
Solicitors to the Invitation
:
Wong Partnership
80 Raffles Place
#58-01 UOB Plaza 1
Singapore 048624
Legal Advisers to the Company on
Hong Kong law
:
Chiu & Partners
41st Floor Jardine House
1 Connaught Place
Central, Hong Kong
Bermuda law
:
Conyers Dill & Pearman
2901 One Exchange Square
8 Connaught Place
Central, Hong Kong
PRC law
:
Guangzhou Foreign Economic Law Office
15th Floor, Chengyue Plaza
No.448 Dongfeng Zhong Road
Guangzhou, PRC
4
DEFINITIONS
In this Prospectus and the accompanying Application Forms, the following definitions apply where
the context so admits:-
Companies
“Benep”
:
Benep Management Limited
“Company” or “Cytech”
:
Cytech Software Limited
“ESP Associates”
:
ESP Associates Limited
“HP”
:
Hewlett-Packard Co and its subsidiaries and affliliates
“Huatong”
:
Guangzhou Yitian Huatong Technology Corporation Ltd.
“IBM”
:
International Business Machines Corporation and its subsidiaries
and affliliates
“Yitian Software”
:
Guangzhou Yitian Software Company Limited
“Act” or “Singapore
Companies Act”
:
The Companies Act, Chapter 50 of Singapore
“Application Forms”
:
The official printed application forms to be used for the purpose
of the Invitation and which form part of this Prospectus
“Application List”
:
List of applications to subscribe for and/or purchase the Invitation
Shares
“ATM”
:
Automated teller machine
“Audit Committee”
:
Audit committee of the Company
“Bermuda Act” or
“Companies Act”
:
The Companies Act 1981 of Bermuda
“Bye-laws”
:
The bye-laws of the Company as amended, supplemented or
modified from time to time
“BVI”
:
the British Virgin Islands
“CDP”
:
The Central Depository (Pte) Limited
“CPF”
:
Central Provident Fund
“Directors”
:
Directors of the Company as at the date of this Prospectus,
unless otherwise stated
“Electronic Applications”
:
Applications for the Offer Shares made through an ATM or
Internet banking website of any of the Participating Banks in
accordance with the terms and conditions of this Prospectus
“EPS”
:
Earnings per Share
General
5
“FY”
:
Financial year ended or ending 31 December
“Hong Kong” or “HK”
:
The Hong Kong Special Administrative Region of the PRC
“Invitation”
:
Invitation by the Company and the Vendors to the public in
Singapore to subscribe for or purchase, as the case may, the
Invitation Shares, subject to and on the terms and conditions of
this Prospectus
“Invitation Shares”
:
64,849,000 Shares which are the subject of the Invitation,
comprising 52,000,000 New Shares and 12,849,000 Vendor
Shares
“Issue Price”
:
In the case of the Offer, the Offer Price and in the case of the
Placement, the Placement Price
“Macau”
:
The Macau Special Administrative Region of the PRC
“Market Day”
:
A day on which the Singapore Exchange Securities Trading
Limited is open for trading in securities
“N.A.”
:
Not applicable
“New Shares”
:
52,000,000 New Shares for which the Company invites
applications to subscribe, subject to and on the terms and
conditions of this Prospectus
“NTA”
:
Net tangible assets
“Offer”
:
Offer by the Company and the Vendors to the public in Singapore
of the Offer Shares for subscription or purchase, as the case
may be, at the Offer Price
“Offer Price”
:
S$0.68 for each Offer Share
“Offer Shares”
:
The 6,485,000 Invitation Shares which are the subject of the
Offer
“OUB”, “Manager”,
“Underwriter” or
“Placement Agent”
:
Overseas Union Bank Limited
“Participating Banks”
:
OUB; Development Bank of Singapore Ltd (“DBS”) (including its
POSBank Services division); Keppel TatLee Bank Limited (“KTB”);
Oversea-Chinese Banking Corporation Limited (“OCBC”) Group
(comprising OCBC and Bank of Singapore Limited); and United
Overseas Bank Limited (“UOB”) Group (comprising UOB, Far
Eastern Bank Limited and Industrial & Commercial Bank Limited)
“Placement”
:
Placement by the Company and the Vendors of the Placement
Shares at the Placement Price
“Placement Agents”
:
OUB, as lead placement agent, and J.M. Sassoon & Co. (Pte.)
Ltd., Ong & Company Private Limited, Lum Chang Securities
Pte Ltd, Phillip Securities Pte Ltd, as co-placement agents.
“Placement Price”
:
S$0.68 for each Placement Share
“Placement Shares”
:
58,364,000 Invitation Shares which are the subject of the
Placement
6
“PRC”
:
The People’s Republic of China, excluding Hong Kong and
Macau
“PRC Company Law”
:
The Company Law of the PRC adopted at the Fifth Session of
the Standing Committee of the Eight National People’s Congress
and which became effective on 1 July 1994
“Restructuring Exercise”
:
Restructuring exercise undertaken in connection with the
Invitation, as described on page 48 of this Prospectus
“SCCS”
:
Securities Clearing & Computer Services (Pte) Ltd
“Securities Account”
:
Securities account maintained by a depositor with CDP
“SGX-ST”
:
Singapore Exchange Securities Trading Limited
“Shares”
:
Ordinary shares of HK$0.05 each in the capital of the Company
“Underwriters”
:
OUB, as underwriter, and J.M. Sassoon & Co. (Pte.) Ltd., Ong
& Company Private Limited, Lum Chang Securities Pte Ltd,
Phillip Securities Pte Ltd, as co-underwriters.
“Vendors”
:
Messrs Wang Xiaochuan, Gao Junhua and Song Shenghong
“Vendor Shares”
:
The issued and fully paid-up Shares for which the Vendors invite
applications to purchase on the terms and subject to the
conditions of this Prospectus
“$” or “S$” and “cents”
:
Singapore dollars and cents, respectively
“HK$” or “HKD” and
“HK cents”
:
Hong Kong dollars and cents, respectively
“RMB”
:
PRC Renminbi
“US$” or “USD” and
“US cents”
:
United States dollars and cents, respectively
“%” or “per cent.”
:
Per centum/per centa or percentage
The terms “Depositor”, “Depository Agent” and “Depository Register” shall have the meanings ascribed
to them respectively in Section 130A of the Singapore Companies Act.
Words importing the singular shall, where applicable, include the plural and vice versa and words
importing the masculine gender shall, where applicable, include the feminine and neuter genders
and vice versa. References to persons shall include corporations.
Any reference in this Prospectus and the Application Forms to any statute or enactment is a reference
to that statute or enactment for the time being amended or re-enacted. Any word defined under the
Singapore Companies Act, Bermuda Act, PRC Company Law or any statutory modification thereof
and used in this Prospectus and the Application Forms shall have the meaning assigned to it under
the Singapore Companies Act, Bermuda Act, PRC Company Law or such statutory modification, as
the case may be.
Any reference in this Prospectus and the Application Forms to shares being allotted and/or allocated
to an applicant includes allotment and/or allocation to CDP for the account of that applicant.
Any reference to a time of day in this Prospectus shall be a reference to Singapore time unless
otherwise stated.
7
Glossary of Technical Terms
The glossary contains an explanation of certain terms used in this Prospectus in connection with our
group of companies and our business. The terms and their assigned meanings may not correspond
to standard industry or common meanings, as the case may be, or usage of these terms.
“beta version”
:
This is the test version of a software prior to its official launch
“CRM”
:
A customer relation management software application that allows
users to access and process client related information.
“Client/Server”
:
A configuration in which one computer, designated as a server, sends
information to a number of other computers known as clients.
“ERP”
:
An enterprise resource planning software system that enables a
company to manage and monitor various aspects of its business
“web browser platform”
:
A software platform on which other software may operate on and
which enables users to gain access to the Internet
8
PROSPECTUS SUMMARY
The following summary highlights certain information found in greater detail elsewhere in this
Prospectus. You should read the entire Prospectus carefully, especially the section on “Risk Factors”,
before deciding to invest in our Shares.
Our Company
Our Company was incorporated in Bermuda on 9 June 2000, and it is the holding company of
Benep and Huatong. Our core businesses are as follows:
•
Customised Software Development and ERP Implementation
We develop customised business software in accordance with the specific requirements of our
customers. We also develop and implement our Huatong ERP System Software for our customers,
so that they can manage, monitor and integrate different aspects of their internal operations
such as financial, production schedule planning, materials requirements planning, inventory
control, sales and distribution, purchase control and human resource functions so as to improve
their efficiency and reduce their operating costs.
•
E-Commerce Services
We design and construct websites for our customers. We also design B2B systems in accordance
with the requirements of our customers. The B2B system would include implementating the
e-commerce business model of the customer to be adopted, assisting in the linkage of the
Internet process to their business applications, hardware and software integration, and the
integration of their B2B system with our Huatong ERP System Software.
•
Distribution and Sale of Computer Software
We distribute both our own proprietary standardised software and Microsoft software titles that
complement or are required to operate our software. The following are our main proprietary
standardised software for the last three financial years:
•
a.
Huatong Finance and Accounting Software
b.
Huatong Trade System Software
c.
Huatong Housing Sale Software
Maintenance and Upgrading Services
We assist our customers to maintain their networks by providing a help-line our customers to
seek our assistance and any on-site assistance where necessary. We also provide technical
training to their staff to operate our software solutions.
•
Distribution and Sale of Computer Hardware/Systems Integration
We distribute and sell computer hardware and provide systems integration services in accordance
to the specifications of our customers.
Our Financial Performance
Our turnover in FY1997, FY1998 and FY1999 were RMB7.6 million, RMB19.2 million and RMB 43.0
million respectively. This represented a compound annual growth rate (“CAGR”) of 137.9%. Over the
same period, our Group recorded profit after tax of RMB2.0 million, RMB6.4 million and RMB20.6
million respectively, which represented a CAGR of 220.9%. Our gross profit margin improved from
55.5% in FY1997 to 71.0% in FY1999. Details of our past performance are set out under “Operating
Results” on pages 51 to 56 of this Prospectus.
9
For FY2000, we forecast an increase in turnover and profit after tax to RMB92.6 million and RMB41.5
million, respectively. This represents an increase of 115.3% and 101.5% over our turnover and profit
after tax respectively for the financial year ended 31 December 1999. Details are set out under
“Profit Forecast” on page 56 of this Prospectus.
Our Future Plans
For the reasons stated under “Our Prospects” on pages 61 to 62, we believe that the PRC market
possesses great potential for our future development. With respect to our businesses, we plan to:
•
increase our market coverage in the PRC by establishing additional offices in Beijing, Shanghai,
and Hong Kong;
•
focus on the continuing development of customised software, ERP implementation and
E-Commerce services. For the development of customised software, we are in the process of
developing the Bank Supervisiory Information System (
), a bank
supervisory system, for a client in the PRC;
•
enter into strategic alliances and acquisitions, where opportunities arise; and
•
establish a strong brand identity for our products and services through intensifying our marketing
efforts, participating in seminars, conventions and exhibitions and expanding our co-operation
with more tertiary institutions in the PRC.
Our Competitive Advantages
Ability to Identify Technological Trends And Market Needs in the PRC
We believe that our management is able to identify technological trends and market needs in the
PRC in our core business of customised software development and ERP implementation. We believe
we are the only PRC company that has developed an ERP software that is based on a web browser
platform and this differentiates our ERP software from those of our local competitors.
Strong Familiarity with the PRC Market
We believe that our applications are more localised, effective and user-friendly as we generally have
a better understanding of the business culture, practices, and language of the PRC compared with
our foreign competitors.
Competitive Pricing
We believe that our products are competitively priced as our foreign competitors’ software packages
are generally more expensive when compared to our Huatong ERP System Software, mainly due to
their higher development costs as the remuneration of information technology personnel is generally
lower in the PRC.
Established Customer Base
We have an established customer base of approximately 1,205 customers as at the end of 1999,
most of them purchased our Group’s standardised software application such as our Huatong Finance
and Accounting Software and Huatong Trade System Software. Over 90% of the Group’s ERP
customers are from our client base of standardised software applications. Our Directors believe that
customers of our standardised software applications will provide opportunities for us to promote and
sell our customised software applications, ERP implementation and e-commerce services and generate
both development and implementation revenue, and recurring support and maintenance revenue for
our Group in the future.
10
Good Track Record
We have established a good track record in providing software applications in PRC. With our good
track record, we believe that our products would be well accepted in other provinces and cities in the
PRC such as Beijing and Shanghai when we establish offices in these cities.
Our Contact Details
Address
:
20 Keyun Road, 2nd Floor of Hetian Plaza, Tianhe Software
Park, Guangzhou, Municipal PRC 510665
Contact Numbers
:
+86 (020) 8557 8464 (Office)/ + 86 (020) 8555 2362 (Fax)
Website
:
www.china-erp.com (information contained on our Internet site
does not constitute a part of this Prospectus)
11
The Invitation
Issue Size
:
64,849,000 Invitation Shares comprising 52,000,000 New Shares
and 12,849,000 Vendor Shares. The New Shares will, upon issue
and allotment, rank pari passu in all respects with the existing
issued Shares.
Invitation Price
:
$0.68 for each Offer Share and each Placement Share.
The Offer
:
The Offer comprises an offering of 6,485,000 Offer Shares to
members of the public in Singapore.
The Placement
:
The Placement comprises an offering of 58,364,000 Placement
Shares by way of placement.
Purpose of the Invitation
:
The purpose of the Invitation is to secure admission of our
Company to the Official List of the SGX-ST. Our Directors
consider that the listing of our Company and the quotation of
our Shares on the SGX-ST will enhance the public image of
our Group and enable us to tap the capital markets for the
expansion of our operations. The Invitation will also provide
members of the public an opportunity to participate in the equity
of our Company.
Use of Proceeds
:
The net proceeds from the issue of the New Shares (after
deducting estimated issue expenses) is approximately S$32.7
million (RMB 159 million). Please refer to “Reasons for this
Invitation and Use of Proceeds” on page 32 regarding our
planned use of the Invitation proceeds.
Listing Status
:
Our Shares will, on admission of our Company to the Official
List of the SGX-ST, be quoted on the Main Board of the SGXST. The quotation of and dealing in the Shares will be in
Singapore dollars.
12
RISK FACTORS
Potential investors should carefully evaluate each of the following risk factors and all of the other
information set forth in this Prospectus before deciding to invest in the Shares. Some of the following
risk factors relate principally to the industry in which our Group operates and the business of our
Group in general. Other considerations relate principally to general economic and political conditions
and the securities market and ownership of the Shares, including possible future sales of Shares.
If any of the following considerations and uncertainties develop into actual events, our Group’s business,
financial conditions or results of operations may be materially and adversely affected. In such case,
the trading price of the Shares could decline due to any of these considerations, and you may lose
all or part of your investment.
RISKS RELATING TO THE GROUP AND THE INDUSTRY
A substantial part of our Group’s revenues are difficult to predict because they are generated
on a project-by-project basis
Our Group derives a substantial part of its revenues from fees for services generated on a projectby-project basis. These projects vary in size and scope. Therefore, a client that accounts for a significant
portion of our Group’s revenues in a given period may not generate a similar amount of revenues, if
any, in subsequent periods. In addition, after our Group completes a project, we have no assurance
that the client will retain us for maintenance work or use our services for its future needs. A decrease
in the number or size of our Group’s projects from period to period may adversely impact our
operations and hence the price of our Shares.
Approximately 27.1% of our Group’s expenses, including those related to employee compensation
and equipment, are relatively fixed. If the number or size of our Group’s projects decreases in any
financial year, our Group’s profitability would be impacted adversely.
The IT industry is extremely dynamic and we face many challenges in competing successfully
in this industry including, among others, the need to develop software package solutions and
services which meet changing technological standards and requirements
The IT industry is extremely dynamic, characterised by rapid changes in technology and frequent
introduction of new and more advanced products. We are subject to the risks, uncertainties and
problems frequently encountered by companies in the IT industry. These risks, uncertainties and
problems include, among others, the following:•
any failure to anticipate and adapt to developing market trends
•
any failure on our part to identify, respond quickly to, develop and market our software packages
and services to keep up with the changing technological standards and requirements
•
any failure to develop commercially viable software packages and services whether by ourselves
or together with other third parties
•
any inability to maintain, upgrade and develop our systems and infrastructure and attract new
personnel in a timely and effective manner
•
any failure to develop and manage rapidly expanding operations
•
the use and acceptance of the Internet and other online services
•
any failure of our suppliers to continue to supply us with the products and services which we
require to service our customers on a timely basis
•
any disruption of our computer networks due to hacking, viruses or other reasons
The occurrence of any of the above may have a material and adverse impact on our revenues and
profits.
13
The development of the market for ERP software solutions and the level of acceptance of the
Internet as a business medium will affect our Group’s business
The market for ERP software solutions in the PRC is relatively new and is evolving rapidly. Our
Group’s future growth may be dependent upon the ability of our Huatong ERP System Software to
meet the needs of the business community and the continued development of our ERP software. As
set out under “Our Competitors” on page 46, we believe that our Huatong ERP System Software,
unlike the ERP software developed by our competitors in the PRC, exploits the Internet as a medium
of business. Therefore, the pace of development of the Internet as a medium for business would
affect the marketability of our Huatong ERP System Software and our E-Commerce business. The
level of acceptance of Internet as a medium of business is dependent upon a number of factors,
including:
•
the growth in consumer access to the Internet which, in turn, is dependent on the price of
hardware equipment such as computers, and the cost of access such as telecommunications
charges;
•
the acceptance of new interactive technologies such as the Internet;
•
companies adopting Internet-based business models; and
•
the development of technologies that facilitate two-way communication between companies and
targeted audiences, such as video-conferencing.
If significant issues concerning the commercial use of these technologies which include security,
reliability, cost, ease of use and quality of service remain unresolved, they will inhibit the growth of
Internet business solutions.
The market for Internet services in the PRC has only recently begun to develop. The adoption of the
Internet for commerce and communications, particularly by businesses that have historically relied
upon alternative means of commerce and communications, generally requires the understanding and
acceptance of a new way of conducting business and exchanging information. Many of our Group’s
potential customers in the PRC have limited experience with the Internet. Further, they may not
devote a significant portion of their expenditure to the adoption of an ERP solution which is based
on the Internet web browser, and may not find the Internet to be an effective way to meet their
business needs. If the market for Internet services fails to develop, or develops more slowly than
expected, or if our Group’s services does not achieve market acceptance, our Group’s business will
be harmed and the value of your investment in our Shares will decline.
Our reliance on Microsoft
We distribute or re-sell software developed by Microsoft, who has signed a co-operation agreement
with us. Our software products are currently designed for use on the Microsoft Windows platform.
Under the co-operation agreement, Microsoft provides us with technical assistance and training. In
particular, we develop and implement software solutions for our customers which integrate with the
software developed by Microsoft. Hence, we are substantially dependent on the continued widespread
usage of the Microsoft Windows platform and the continued support provided by Microsoft. The
development and growth of our businesses and our revenues, would be materially and adversely
affected if:•
Microsoft decides to terminate its relationships with us; or
•
there are major technical flaws in the IT applications of Microsoft; or
•
Microsoft’s IT applications become obsolete.
There is growing competition for Microsoft’s Windows 95/98/2000 operating systems from Linux,
which has developed a competing operating system for computers. Hence, if Linux becomes the
preferred operating system, we would have to expand time and resources for the development of our
software products based on the Linux operating system. In doing so, our relationship with Microsoft
may be strained.
14
If the Linux operating system becomes a more widely accepted operating system in the PRC and if
we are unable to adapt our products for use on the Linux platform as quickly as our competitors, we
will face increased competition and may lose market share whilst we are undertaking the adaptation
of our software to the Linux operating system. If this occurs, our turnover and profitability will be
adversely affected.
Our Huatong ERP System Software and E-Commerce Services are dependent on the
development and maintenance of the Internet infrastructure
The success of our Huatong ERP System Software and E-Commerce Services will depend largely
on the development and maintenance of the public Internet infrastructure that is beyond our control.
This includes the maintenance of reliable network backbone with the necessary speed, data and
security, as well as timely development of complementary products such as high speed modems, for
providing reliable Internet access and services. The Internet has experienced, and is likely to continue
to experience, significant growth in the number of users and amount of traffic. If the Internet continues
to experience increases in numbers of users, frequency of use or bandwidth requirements, the Internet
infrastructure may be unable to support the demands placed on it and the performance of the
Internet may be adversely affected by such increase.
The Internet has experienced a variety of outages and other delays as a result of damage to portions
of its infrastructure, and it could face outages in the future. These outages and delays could reduce
the level of traffic and therefore the level of Internet usage. In addition, the Internet could lose its
viability due to delays in the development or adoption of new standards and protocols to handle
increased levels of activities or due to increased governmental regulations.
The cost of access to the Internet, which mainly comprises telecommunications charges, will also
affect the development of Internet traffic which may, in turn, affect the pace of development of the
Internet infrastructure. Any sustained increase in the cost of access to the Internet may adversely
affect the development of the Internet infrastructure and the prospects of the Group.
Our Group’s business will be harmed if we are unable to successfully introduce and achieve
market acceptance of new services and enhancements
The software services and Internet services industry are characterised by rapid technological changes,
changes in user preferences, the frequent development and enhancement of services and products
and new emerging industry standards. The introduction of services or products embodying new
technologies and the emergence of new industry standards and practices can render existing services
or products obsolete and unmarketable. Our Group’s future success will depend, in part, on our
ability to: (1) enhance our Group’s existing products and services; (2) develop new products and
services that address the increasingly sophisticated and varied needs of prospective customers; and
(3) respond to technological advances and emerging industry standards and practices on a timely
and cost-effective basis.
If our Group is unable to develop and introduce new, or to enhance existing, products or services, in
a timely manner in response to changing market conditions or customer requirements, or if new
products and services do not achieve market acceptance, our Group’s business will be adversely
affected. The enhancement of existing, and the development of new, products and services entails
significant technological risks. Our Group cannot assure investors that we will be successful in
effectively using new technologies, adapting our services and products to emerging industry standards,
developing, introducing and marketing service and product enhancements, or new products and
services, or that our Group will not experience difficulties that could delay or prevent the successful
development or marketing of these services and products, or that any such new service and product
enhancements will adequately meet the requirements of the marketplace and achieve market
acceptance.
15
We may have to incur additional substantial capital expenditure in product development and
set up the requisite infrastructure to pursue new businesses
To acquire the latest technologies and skills, we have to constantly invest in our infrastructure and in
R&D. To pursue new revenue sources, we have to constantly develop new software solutions and
services or enhance our existing software solutions and services. It is difficult for us to forecast
accurately the amount of capital we will need to expend to successfully develop any software or
services which we may plan to develop. Our expenditure on any software and services which we
plan to develop may exceed or exceed substantially our planned budget. There can be no assurance
that despite any substantial expenditure which we may expand, we will be able to successfully
develop new software or services or that such or services will be successfully developed according
to our budget or schedule or that there will be a market for such software or services or that the sale
thereof will be profitable.
Our Group may be liable for defects or errors in the solutions we develop
Many of the solutions developed by our Group are critical to the operations of our clients’ businesses.
Any defects or errors in these solutions could result in delayed or lost client revenues, adverse
customer reaction towards our Group, negative publicity, additional expenditures to correct the problems
and claims against our Group. Our Group does not maintain any product liability insurance. Although
we have not experienced any claims against our Group, any significant claim against our Group in
the future will have a material adverse effect on our Group’s results and prospects.
Defending against intellectual property infringement claims could be expensive and disruptive
to our Group’s business
Our Group cannot be certain that our software applications and services as well as the customised
software that we deliver or materials provided to us by clients for use in the customised software do
not or will not infringe valid patents, copyrights or other intellectual property rights held by third
parties. Our Group may be subject to legal proceedings and claims from time to time relating to the
intellectual property of others in the ordinary course of our business. Intellectual property litigation is
expensive and time consuming and successful infringement claims against our Group may result in
substantial monetary liability or may materially disrupt the conduct of our business.
Our Group must maintain our reputation and expand our name recognition to remain
competitive
Our Directors believe that establishing and maintaining a good reputation and name recognition is
critical for attracting and expanding our Group’s targeted client base. Our Directors also believe that
the importance of reputation and name recognition will increase in significance due to the growing
number of information technology providers. If our reputation is damaged or if potential clients do not
know what services our Group provides, our Group may become less competitive or lose its market
share. The promotion and enhancement of our name will depend largely on our success in providing
high quality services and software solutions, which cannot be assured. If our customers do not
perceive our Group’s software solutions to be effective or of high quality, our Group’s brand name
and reputation could be materially and adversely affected. If our customers do not perceive our
Group’s services as meeting their needs, or if we fail to market our services effectively, we will be
unsuccessful in maintaining and strengthening our brand. If our Group fails to promote and maintain
our brand, or incurs excessive expenses to do so, our business, results of operations, financial
conditions and prospects will materially suffer.
16
Although we may implement network security measures in the course of implementing ERP
solutions, developing customised software or providing E-Commerce services to our customers,
computer networks may be susceptible to viruses, break-ins or disruptions
When requested by our customers, we implement the appropriate industry-standard security measures
in the course of implementing our Huatong ERP System Software, developing customised software
for, and providing our E-Commerce services to our customers. Nonetheless, the infrastructure of the
Internet is potentially vulnerable to computer viruses, break-ins and similar disruptions. Computer
viruses, break-ins and similar disruptions could lead to many problems, including:
•
interruption, delay or cessation in service to our customers;
•
corruption of data, software and hardware;
•
theft or loss of important or confidential information stored on our clients’ systems;
•
loss or unauthorised alterations of all or a portion of the records of transactions effected or to
be effected using our ERP Implementation services based on the Internet browser and our ecommerce services;
•
costly litigation which could involve us;
•
the damage to our reputation; and
•
the loss of our ability to retain and attract customers.
Our inability to manage and focus on our intended future growth plans will affect our economic
viability
We are in the course of expanding our business, in particular our ERP implementation and the
development of our customised software business. To support the expansion, we will have to expand
our employee headcount, facilities and infrastructure rapidly. We must expand our operations and
administrative systems and recruit additional capable and talented managerial, technical, sales and
marketing personnel. We must also ensure that our employees are knowledgeable about the latest
developments in the IT industry and are equipped with adequate skills. Otherwise, our growth will be
constrained. See “Our Future Plans” on page 63 of this Prospectus.
Our future growth is largely dependent on certain key personnel
Our success depends upon the continued efforts of our senior management team and our technical,
marketing and sales personnel. Such employees may voluntarily serve notice of termination of their
employment with us at any time. In addition, we do not have any “key man” life insurance policy. See
“Compensation” on page 69 of this Prospectus.
The process of hiring employees with the combination of skills and attributes required to carry out
our strategies can be extremely competitive and time-consuming. We may not be able to retain or
integrate existing personnel or identify additional qualified personnel. The loss of services of key
personnel or our inability to attract or retain additional qualified persons would materially adversely
affect our business, financial conditions, results of operations and prospects.
We face substantial and increasing competition from our competitors
The IT industry is extremely dynamic, characterised by rapid changes in technology and frequent
introduction of newer and more advanced products by other companies. See “Our Competitors” on
page 46 of this Prospectus.
Other IT companies could provide similar products and services and compete for the same customers.
We cannot predict whether we will be able to compete successfully with current and any future
competitors. As a result, competitive pressures faced by us may materially and adversely affect our
business. Increased competition would result in an increase in our sales and marketing expenses,
thereby reducing our profit margins.
17
We may require additional funding for our future growth
Our operating expenses and capital requirements can be affected by (a) the success of our software
solutions and services; (b) level of resources to attract, maintain and expand our customer base and
maintain our infrastructure and facilities; (c) the level of R&D required to incorporate the latest
technologies and enhance our software products. Accordingly, the timing and the quantum of such
operating expenses and capital expenses cannot be accurately predicted.
We may also require additional equity financing in the event that we acquire new technologies,
assets or businesses shortly after the Invitation. An issue of Shares or other securities to raise funds
will dilute shareholders’ equity interest and may, in the case of a rights issue, require additional
investments by shareholders. Further, an issue of Shares below the then prevailing market price will
also affect the value of the Shares then held by an investor. Dilution will occur in shareholdings
terms even if the issue of shares is at a premium to the market price.
Any additional debt financing may contain restrictive covenants with respect to dividends, future fund
raising exercise and other financial and operational matters. If we are unable to secure additional
funds when required to meet our business requirements, we may not be able to fully implement our
future plans.
If our Group fails to attract and retain qualified personnel our growth could be limited and
our costs increased
Our Group’s success has been, and will be, dependent to a large degree on our ability to attract and
retain qualified senior and middle managers and highly skilled professional personnel. Our Group
cannot be certain that recently hired personnel or any personnel we hire in the future will successfully
integrate into our organisation or ultimately contribute positively to our business. The loss of the
services of professional personnel or the inability to identify, hire, train and retain other qualified
technical and managerial personnel in the future would also harm our business. Our Group expects
further growth in the number of our personnel in the future; however, competition for qualified personnel
is intense. We cannot assure prospective investors that we will be able to attract, assimilate or retain
suitable technical and managerial personnel in the future.
Our Group’s continued growth may strain our resources, which would adversely affect our
business and results of operations
A key part of our strategy is to grow, both by hiring more personnel and by acquiring companies,
and execution of this strategy may strain our Group’s resources. Our Group cannot assure prospective
investors that our managers will be able to manage our Group’s growth effectively. To manage future
growth, our Group’s management must continue to improve our operational and financial systems,
procedure and controls and expand, train, retain and manage our employee base. If our Group’s
systems, procedures and controls are inadequate to support our operations, our expansion would be
halted, and our Group could lose the opportunity to gain or maintain market share. Any inability to
manage growth effectively would have a material adverse effect on our business, results of operations
and financial condition.
Currency fluctuations could adversely impact our results of operations and the dividends on
our Shares in Hong Kong dollars or Singapore dollars.
Currently, our business is conducted in the PRC. Our revenues and purchases, except for the
remuneration of our Executive Directors and Executive Officers which are in HK$, are in RMB.
Therefore, we are exposed to foreign currency fluctuations between RMB and HK$. In the event that
the RMB depreciates against the HK$, our remuneration expenses in RMB to our Executive Directors
and Executive Officers would be higher, affecting the results of our operations.
In addition, fluctuations in the exchange rates for HK$ to RMB or Singapore dollar to RMB will affect
the cash dividends paid by us in HK$ or in Singapore dollar.
18
We are subject to payment risks in the provision of our service and products
Typically, we collect payment from our customers on a progressive payment basis. Furthermore, we
offer our customers, who purchase our Huatong ERP System Software and our customised software,
a period of one to three months to test our software products, before the final progress payment is
made.
Hence, we are vulnerable to the credit risks of our customers. If we are unable to collect our fees or
commission from our customers, our revenues and financial performance would be negatively affected.
Our intellectual property rights may be inadequately protected and there is a risk that we are
unable to enforce such rights that may adversely affect our business
A substantial portion of our revenue is derived from our own proprietary software which takes time
and resources to develop. Although our software are protected under the copyright laws of the PRC,
such laws may not be adequate or effectively enforced against third parties who violate our copyright
by copying or pirating our software products. Hence, our software may not be adequately protected
against piracy risks. We would experience a substantial loss of revenue if our software products
were to be copied and sold by third parties, in violation of our copyright. See “Our Intellectual Property”
on page 45 of this Prospectus.
We may not achieve our profit forecast as stated on page 56 of this Prospectus
On the premises set out below with details on page 56 of this Prospectus and barring unforseen
circumstances, our Directors forecast a turnover and profit after tax of RMB92.6 million and RMB41.5
million respectively for the year ending 31 December 2000.
For the four months ended 30 April 2000, we have already achieved a turnover and profit after tax
of RMB34.8 million and RMB17.9 million respectively, representing 37.6% and 43.1% of the forecasted
turnover and profit after tax. As at 30 April 2000, we have confirmed orders of approximately RMB34.0
million. Our confirmed orders as at 30 April 2000, which we expect to be fully recognised as revenue
in FY2000, and the turnover we have achieved in the first four months of FY2000 constitute
approximately 74.3% of our projected turnover for FY2000. Our overall gross profit margin for FY2000
is expected to improve from 71.0% in FY1999 to 76.0% in FY2000. Given the risks and uncertainties
that may cause our actual results and performance to be materially different from that expected,
including unforeseen circumstances that are beyond our control, such as contracts not being secured
or the cancellation or termination of contracts, undue reliance should not be placed on our forecast
and in any event, caution should be exercised. We are not representing or warranting to you that our
actual results, performance or achievements will be as discussed herein. However, we are subject to
the provisions of the Listing Manual of the SGX-ST regarding corporate disclosure.
RISKS RELATING TO LEGAL UNCERTAINTY
PRC Legal System
The PRC legal system is based on the PRC Constitution and is made up of written laws, regulations,
circulars and directives. The PRC government is still in the process of developing its legal system,
so as to meet the needs of investors and to encourage foreign investment. As the PRC economy is
undergoing development generally at a faster pace than its legal system, some degree of uncertainty
exists in connection with whether and how existing laws and regulations will apply to certain events
or circumstances. Some of the laws and regulations, and the interpretation, implementation and
enforcement thereof, are still at an experimental stage and are, therefore, subject to policy changes.
Further, precedents on the interpretation, implementation and enforcement of the PRC laws and
regulations are limited, and court decisions in PRC do not have any binding effect on lower courts.
Accordingly, the outcome of dispute resolutions may not be as consistent or predictable as in the
other more developed jurisdictions and it may be difficult to obtain swift and equitable enforcement of
the laws in the PRC, or to obtain enforcement of judgement by a court of another jurisdiction.
19
In the event of a take-over, the protection afforded under the Singapore Take-over Laws and
Regulations is limited
There are at present no provisions under any Bermuda laws or regulations requiring persons who
acquire significant shareholdings in us to make take-over offers for our Shares. As our Company is
incorporated in Bermuda, the Singapore Take-over Laws and Regulations will not apply to offers for
our Shares.
Although Bye-law 168 of the Company’s Bye-laws (set out on page 135 of this Prospectus) will, due
to its binding effect on our shareholders, require our shareholders who make take-over offers for our
Shares to comply with the Singapore Take-over Laws and Regulations, it is uncertain whether this
can be enforced in respect of persons who are not our shareholders.
In the event that a person (not being one of our shareholders), whether alone or together with
parties acting in concert with him acquires or gains control of 25% or more of our Shares or, in the
event that he already owns or controls 25% or more but less than 50% of our Shares, and acquires
an additional 3% of our Shares within any 12-month period, you may not be offered an opportunity
to sell your Shares to such acquirer at the price he paid for those Shares. In addition, even if any
take-over offer is made for our Shares, such take-over offer may not be made in accordance with the
procedure stipulated in the Singapore Take-over Laws and Regulations.
Our substantial shareholders, Mr Wang Xiaochuan and ESP Associates have each undertaken to
the SGX-ST that, as long as they continue to be the substantial shareholders of our Company, they
will endeavour to persuade potential offerors to comply with the requirements of the Singapore Takeover and Merger Laws and Regulations in the event of any take-over offer for our Shares.
POLITICAL AND ECONOMIC CONSIDERATIONS
PRC Economic Considerations
Since 1978, the PRC government has undergone various reforms of its economic systems. Such
reforms have resulted in economic growth for the PRC in the last two decades. However, many of
the reforms are unprecedented or experimental and are expected to be refined and modified from
time to time. Other political, economic and social factors may also lead to further readjustment of the
reform measures. This refinement and readjustment process may consequently have a material impact
on our operations in the PRC or a material adverse impact on our financial performance.
Our revenue is currently wholly derived from our operations in the PRC. Accordingly, our results and
financial conditions may be adversely affected by changes in the PRC’s political, economic and
social conditions and by changes in policies of the PRC government or changes in laws, regulations
or the interpretation or implementation thereof.
PRC Income Taxes
According to the Income Tax Law of the PRC, Huatong is exempted from paying income tax for the
first two profitable years of operations. Accumulated tax losses carried forward by Huatong, not
exceeding a period of five years, can be offset against its profits to arrive at the assessable profit for
income tax computation purposes. Accordingly, Huatong was exempted from paying income tax for
the first two tax profitable years from 1 January 1998 to 31 December 1999. Huatong is also entitled
to a 50% relief from the income tax for the following three years from 1 January 2000 to 31 December
2002. Accordingly, Huatong is subject to the reduced tax rate of 12% for three years from 1 January
2000 to 31 December 2002. Upon the expiry of the tax relief period, the income tax rate of 24% is
applicable to Huatong.
Any removal, loss, suspension or reduction of such tax benefits will have an adverse impact on our
Group’s net profits. See Accountant’s Report on page 86 of this Prospectus.
20
We may be subject to exchange control restrictions in the PRC
Although the government of the PRC introduced policies in 1996 which allowed greater convertibility
of the RMB, significant restrictions still remain. We cannot provide any assurance that the PRC
regulatory authorities will not impose greater restrictions on the convertibility of the RMB. As all of
our revenues are currently derived in RMB, any future restrictions on currency exchanges may limit
our ability to utilise revenue generated in PRC to fund our business activities outside PRC or to
distribute dividends to our shareholders.
RISKS RELATING TO AN INVESTMENT IN SHARES
Future sale of Shares could adversely affect the Share price
Any future sale or availability of Shares can have a downward pressure on our Share price. The sale
of a significant amount of Shares in the public market after the Invitation, or the perception that such
sales may occur, could materially adversely affect the market price of Shares. These factors also
affect our ability to sell additional equity securities. Except as otherwise described in “Moratorium”
(see page 72 of this Prospectus), there will be no restriction on the ability of the substantial
shareholders to sell their Shares either on the SGX-ST or otherwise.
Our Shares are sold at a substantial premium to the attributable net tangible assets
Our Issue Price of S$0.68 (equivalent to RMB3.31 based on the exchange rate of S$1.00=RMB4.866)
is substantially higher than our Group’s net tangible assets per share of S$0.15 (RMB0.73) (adjusted
for the net proceeds from the Invitation) as at 30 April 2000. Thus, there is an immediate and
substantial difference arising between the price per Share under the Invitation and the amount of
attributable net tangible assets per Share. See “Dilution” on page 28 of this Prospectus. In the event
of any subsequent issues of Shares at below the Issue Price, such difference will increase.
There is a high probability that our Share price will fluctuate widely and may adversely affect
your investment
We expect that the secondary trading of our Shares to be volatile and may respond to announcements
of technological or competitive developments; merger or acquisitions by us or our competitors; gain
or loss of major customers; changes affecting the IT or Internet industry; or estimates of our financial
performance by investment analysts. In addition to the above, our share price is likely to rise and fall
more sharply than other stock prices owing to the greater uncertainty surrounding our business,
particularly relating to the rapid technological changes. In addition, our share price will be under
downward pressure if certain of our Directors sell their respective Shares in the market immediately
after the Invitation.
No prior market for the Shares
Prior to this Invitation, there has been no public market for the Shares. The Issue Price may not be
indicative of the market price for the Shares after the completion of this Invitation. We have applied
to the SGX-ST for the listing and quotation of the Shares on the Main Board of the SGX-ST. However,
no assurance can be given that an active trading market for the Shares will develop or, if developed,
will be sustained.
Our Group’s Directors and substantial shareholders will retain significant control over our
Group after the Invitation, which will allow them to influence the outcome of matters submitted
to shareholders for approval
Upon the completion of the Invitation, our Group’s present executive Directors and substantial
shareholders will beneficially own in the aggregate approximately 74.8 per cent. of the issued Shares.
As a result, these persons, if they act together, will be able to exercise significant influence over all
matters requiring shareholder approval, including the election of Directors and the approval of significant
corporate transactions, and will have veto power with respect to any shareholder action or approval
requiring a majority vote. Such concentration of ownership also may have the effect of delaying,
preventing or deterring a change in control of the Group which may benefit our Group’s shareholders.
21
THE OFFER AND LISTING
A.
PURCHASE BY THE COMPANY OF ITS OWN SHARES
Under the laws of Bermuda, a company may, if authorised by its memorandum of
association or bye-laws, purchase its own shares. Our Company has such power to
purchase its own Shares under Clause 7 of our Memorandum of Association. Such power
of our Company to purchase our own shares shall, subject to the Bermuda Act and our
Memorandum of Association and where applicable, the rules and/or prior approval of the
SGX-ST and/or any competent regulatory authority (as defined in the Bermuda Act), be
exercisable by the Directors upon such terms and subject to such conditions as they
think fit, in accordance with Bye-law 3(2).
Under the laws of Bermuda, such purchases may be effected out of the capital paid-up on the
purchased shares or out of the funds of our Company otherwise available for dividends or
distribution or out of proceeds of a fresh issue of shares made for that purpose. Any premium
payable on such a purchase over the par value of the shares to be purchased must be provided
for out of the funds of our Company otherwise available for dividends or distribution or out of
our Company’s share premium account. Any amount due to a shareholder on a purchase by a
company of our own shares may (i) be paid in cash; (ii) be satisfied by the transfer of any part
of the undertaking or property of the company having the same value; or (iii) be satisfied partly
under (i) and partly under (ii). Further, any such purchase may only be made if at least two
Directors, by affidavit, declare that on the effective date of purchase and taking into account
the purchase, our Company is solvent or that all of the creditors of our Company on that date
have consented in writing to such purchase. Once our Company’s Shares are listed on the
Official List of the SGX-ST, such affidavit may, at the option of our Company, be sworn within
thirty days after the end of each calender quarter giving details of all purchases made during
each quarter and shall confirm that, after taking into account such purchases, our Company
was solvent at all material times during the quarter. The Shares so purchased will be treated as
cancelled and our Company’s issued, but not its authorised capital, will be diminished accordingly.
For further details, please see “Purchase of shares and warrants by a company and its
subsidiaries” in paragraph (c) of Appendix 2 on page 119 of this Prospectus.
Our Company presently has no intention to purchase our Shares after the listing. However, if
we decide to do so later, we would seek our shareholders’ approval in accordance with the
bye-laws of our Company, Singapore laws and the rules of the SGX-ST. Our Company will
make prompt public announcements of any such share purchase and has also given an
undertaking to the SGX-ST to comply with all requirements that the SGX-ST may impose in the
event of such share purchase.
22
B.
LISTING ON THE SGX-ST
We have applied to the SGX-ST for permission to deal in and for quotation of all our Shares
already issued as well as the New Shares which are the subject of the Invitation. Such permission
will be granted when our Company has been admitted to the Official List of the SGX-ST. Our
acceptance of applications will be conditional upon permission being granted to deal in and for
quotation of all of our existing issued Shares and the New Shares. Monies paid in respect of
any application accepted will be returned to you, without interest or any share of revenue or
other benefit arising therefrom and at your own risk, if the said permission is not granted.
The SGX-ST assumes no responsibility for the correctness of any of the statements made,
reports contained or opinions expressed in this Prospectus. Admission to the Official List of the
SGX-ST is not to be taken as an indication of the merits of the Invitation, our Company, our
subsidiaries, our issued Shares or our New Shares.
A copy of this Prospectus has been lodged with, and registered by, the Registrar of Companies
and Businesses in Singapore who takes no responsibility for its contents.
A copy of this Prospectus, together with copies of the Application Forms, has been filed with
the Registrar of Companies in Bermuda. The Bermuda Monetary Authority has given its consent
to the issue of the New Shares and the sale of the Vendor Shares pursuant to the Invitation on
the terms referred to in this Prospectus. In accepting this Prospectus for filing and in granting
such permission, the Registrar of Companies in Bermuda and the Bermuda Monetary Authority
accept no responsibility for the financial soundness of the Group or any proposal or for the
correctness of any of the statements made or opinions expressed herein or any of the other
This Prospectus has been seen and approved by our Directors and the Vendors and they
individually and collectively accept full responsibility for the accuracy of the information given in
this Prospectus and confirm that the facts contained in this Prospectus are true and accurate
and not misleading, that all expressions of opinion, intention and expectation contained herein
are honestly held and made after due and careful consideration, that to the best of their
knowledge, information and belief, this Prospectus constitutes full and true disclosure of all
material facts about this Invitation, our Group and our Shares and that there are no other
material facts the omission of which would make any statement herein misleading.
No person has been or is authorised to give any information or to make any representation not
contained in this Prospectus in connection with the Invitation and, if given or made, such
information or representation must not be relied upon as having been authorised by us or the
Manager. Neither the delivery of this Prospectus and the Application Forms nor the Invitation
shall, under any circumstances, constitute a continuing representation or create any suggestion
or implication that there has been no change in our affairs or in the statements of fact or
information contained in this Prospectus since the date of this Prospectus. Where such changes
occur, we may make an announcement of the same to the SGX-ST. All applicants should take
note of any such announcement and, upon release of such an announcement, shall be deemed
to have notice of such changes. Save as expressly stated in this Prospectus, nothing herein is,
or may be relied upon as, a promise or representation as to our future performance or policies.
This Prospectus has been prepared solely for the purpose of the Invitation and may not be
relied upon by any persons other than the applicants applying for the Invitation Shares or for
any other purpose. This Prospectus does not constitute an offer, solicitation or invitation
to subscribe for the Invitation Shares in any jurisdiction in which such offer, solicitation
or invitation is unlawful or is not authorised or to any person to whom it is unlawful to
make such offer, solicitation or invitation.
23
Copies of this Prospectus and the Application Forms may be obtained on request, subject to
availability, from:OVERSEAS UNION BANK LIMITED
1 Raffles Place
OUB Centre
Singapore 048616
and from branches of OUB, members of the Association of Banks in Singapore, members of
the SGX-ST and merchant banks in Singapore.
The Application List will open at 10.00 a.m. on 15 August 2000 and will remain open until
noon on the same day or for such further period or periods as our Directors may, in
consultation with OUB, decide, subject to any limitation under all applicable laws.
Indicative Timetable for Listing
In accordance with the SGX-ST News Release of May 28, 1993 on the trading of initial public
offering shares on a “when issued” basis, an indicative timetable is set out below for your
reference:Indicative time
Event
15 August 2000, 12.00 noon
Close of Application List
16 August 2000
Balloting of applications, if necessary (in the event of oversubscription for the Offer Shares)
17 August 2000, 9.00 a.m.
Commence trading on a “when issued” basis
28 August 2000
Last day of trading on a “when issued” basis
29 August 2000, 9.00 a.m.
Commence trading on a “ready” basis
1 September 2000
Settlement date for all trades done on a “when issued”
basis and for trades done on a “ready” basis on
29 August 2000
The above timetable is only indicative as it assumes that the date of closing of the Application
List is 15 August 2000, the date of admission of our Company to the Official List of the SGXST is 17 August 2000, the shareholding spread requirement will be complied with and the New
Shares will be issued and fully paid-up prior to 17 August 2000.
In the event of any changes in the closure of the Application List or the time period during
which the Invitation is open, we will publicly announce the same:(i)
through a MASNET announcement to be posted on the Internet at the SGX-ST website
http://www.singaporeexchange.com; and
(ii) in the local English and Chinese newspapers, namely, The Straits Times, The Business
Times and the Lianhe Zaobao.
The actual date on which our Shares will commence trading on a “when issued” basis will be
announced when it is confirmed by the SGX-ST.
24
The above timetable and procedures may be subject to such modification as the SGX-ST may,
in its absolute discretion, decide, including the decision to permit trading on a “when issued”
basis and the commencement date of such trading. All persons trading in our Shares on a
“when issued” basis do so at their own risk. In particular, persons trading in our Shares
before their Securities Accounts with CDP are credited with the relevant number of Shares
do so at the risk of selling Shares which neither they nor their nominees, as the case
may be, have been allotted with or are otherwise beneficially entitled to. Such persons
are also exposed to the risk of having to cover their net sell positions earlier if “when
issued” trading ends sooner than the indicative date shown above. Persons who have a
net sell position traded on a “when issued” basis should close their position on or before
the first day of “ready” basis trading.
Investors should consult the SGX-ST’s announcement on “ready” trading date on the Internet
(at SGX-ST website http://www.singaporeexchange.com) or the newspapers or check with their
brokers on the date on which trading on a “ready” basis will commence.
25
C.
INVITATION STATISTICS
Offer Price and Placement Price
S$0.68
NTA
NTA per Share based on the pro forma consolidated balance sheet of
our Group as at 31 December 1999 adjusted for the Restructing
Exercise disclosed on page 48 of this Prospectus:(a) before adjusting for the estimated net proceeds from the issue
of the New Shares and based on our Company’s pre-Invitation
share capital of 204,980,000 Shares
1.07 cents
(b) after adjusting for the estimated net proceeds from the issue of
the New Shares and based on our Company’s post-Invitation share
capital of 256,980,000 Shares
13.57 cents
Premium of Offer Price and Placement Price over the NTA per Share
as at 31 December 1999:(a) before adjusting for the estimated net proceeds from the issue
of the New Shares and based on our Company’s pre-Invitation
6,255%
(b) after adjusting for the estimated net proceeds from the issue of
the New Shares and based on our Company’s post-Invitation share
capital of 256,980,000 Shares
401%
Earnings
Historical net earnings per Share based on the pro forma consolidated
results of our Group for FY1999 and our Company’s pre-Invitation
2.05 cents
Estimated net earnings per share of our Group had the service
agreements for our Directors and Executive Officers been in effect for
the FY1999 based on the pre-Invitation share capital of
204,980,000 shares
1.69 cents
Forecast net earnings per Share based on the forecast pro forma
consolidated results of our Group for FY2000 and our Company’s
weighted average share capital of 226,646,667 Shares(1)
3.76 cents
Price Earnings Ratio
Historical price earnings ratio based on the Offer Price and Placement
Price and the historical net earnings per Share for FY1999
33.17 times
Estimated price earnings ratio of our Group had the service
agreements for our Directors and Executive Officers been in effect for
the FY1999 based on the pre-Invitation of share capital
40.24 times
Forecast price earnings ratio based on the Offer Price and Placement
Price and the forecast net earnings per Share for FY2000
18.08 times
Net Operating Cash Flow(2)
Historical net operating cash flow per Share for FY1999, based on
our Company’s pre-Invitation share capital of 204,980,000 Shares
26
2.14 cents
Ratio of Offer Price and Placement Price to historical net operating
cash flow per Share for FY1999
31.77 times
Forecast net operating cash flow per Share for FY 2000, based on
our Company’s weighted average share capital of 226,646,667
Shares(1)
3.91 cents
Ratio of Offer Price and Placement Price to forecast net operating
cash flow per Share for FY2000
17.39 times
Dividends
Forecast final dividend per Share for FY2000, based on the postInvitation share capital of 256,980,000 Shares
1.16 cents
Forecast final dividend yield per Share for FY2000 at the Offer Price
and Placement Price
1.8 %
Forecast dividend cover for FY2000
1.38 times
Notes:(1) Weighted average share capital is calculated assuming that our Company has the use of the net proceeds from the
issue of New Shares from 1 August 2000.
(2) Net operating cash flow is defined as net profit after tax with provision for depreciation of fixed assets added back.
27
D.
SELLING SHAREHOLDERS
The Vendors have offered to sell an aggregate 5% of our post-Invitation issued and outstanding
ordinary Shares, pursuant to the Invitation. After the Invitation, they will continue to hold an
aggregate 74.77% of our issued and outstanding Shares. The details of their offer are set out
below:
No. of Vendor Shares
offered by our
shareholders pursuant
to the Invitation
% of our postInvitation issued
and outstanding
ordinary Shares
Wang Xiaochuan
8,994,000
3.50
Gao Junhua
3,212,000
1.25
643,000
0.25
Song Shenghong
E.
DILUTION
Dilution is the amount by which the Issue Price to be paid by the applicants for our Invitation
Shares in this Invitation exceeds the net tangible book value per Share after this Invitation. Net
tangible book value per Share is determined by subtracting our total liabilities from the total
book value of our tangible assets and dividing the difference by the number of Shares deemed
to be outstanding on the date as of which the book value is determined. The unaudited net
tangible book value of our Company as of 30 April 2000 was RMB0.14 (approximately S$0.03)
per Share.
Based on the issuance by us of 52,000,000 New Shares in this Invitation at an Offer Price of
RMB3.31 (S$0.68) per ordinary share, after deducting underwriting commissions and estimated
transaction expenses to be paid by us, the net tangible book value of our Company as of 30
April 2000 would have been RMB0.73 (S$0.15) per Share. This represents an immediate increase
in net tangible book value of RMB0.59 (S$0.12) per Share to our existing shareholders and an
immediate dilution in net tangible book value of RMB2.58 (S$0.53) per Share to new investors.
The following table illustrates this per Share dilution:
Per Share
RMB$
S$
Offer Price per Share
3.31
0.68
Net tangible book value per Share as of 30 April 2000
0.14
0.03
Increase in net tangible book value per Share attributable to new
public investors
0.59
0.12
Net tangible book value per Share after the Invitation
0.73
0.15
Dilution in net tangible book value per Share to new public investors
2.58
0.53
28
KEY INFORMATION
A.
SELECTED FINANCIAL DATA
The following financial information should be read in conjunction with the Accountants’ Report
and the full text of this Prospectus.
RESULTS OF OPERATIONS OF OUR GROUP(1)
Audited
Unaudited
4 months
ended
30 April
1999
Unaudited
4 months
ended
30 April
2000
S$’000
Financial year ended
31 December
1997
1998
1999
Turnover
1,358
3,864
8,767
2,201
7,136
Profit before depreciation,
interest and tax
388
1,340
4,257
1,022
4,212
Depreciation
(14)
(54)
(149)
(41)
(67)
Net interest income/(expense)
(15)
4
86
16
17
Profit before tax
359
1,290
4,194
997
4,162
—
—
—
—
Profit attributable to shareholders
359
1,290
4,194
997
3,663
Earnings per Share (cents)(2)
0.18
0.63
2.05
0.49
1.79
5.616
4.977
4.903
4.874
4.882
Tax
Average exchange rate of RMB
to S$1.00
Audited
(499)
Unaudited
4 months
ended
30 April
1999
Unaudited
4 months
ended
30 April
2000
RMB’000
Financial year ended
31 December
1997
1998
1999
Turnover
7,626
19,230
42,977
10,729
34,833
Profit before depreciation,
interest and tax
2,181
6,667
20,871
4,979
20,562
Depreciation
(79)
(269)
(731)
(201)
(329)
Net interest income/(expense)
(86)
22
422
78
85
2,016
6,420
20,562
4,856
20,318
—
—
—
—
2,016
6,420
20,562
4,856
17,880
0.98
3.13
10.03
2.37
8.72
Profit before tax
Tax
Profit attributable to shareholders
(2)
Earnings per Share (RMB cents)
(2,438)
Notes:
(1)
The financial results of our Group for the period under review have been prepared on the basis that our Group
had been in existence throughout the period under review or since the respective dates of incorporation, if later.
(2)
For comparative purposes, the earnings per Share for the period under review have been calculated based on
the profit after tax and the pre-Invitation share capital of 204,980,000 Shares.
29
FINANCIAL POSITION OF OUR GROUP(1)
Audited
S$’000
Fixed assets
Current assets
Inventories
Trade debtors
Deposits, prepayments and
other receivables
Cash & bank balances
Current liabilities
Trade creditors
Deposits received and accurals
Deferred income
Proposed dividend
Provision for tax
Due to a director
Net current assets/(liabilities)
Net assets
NTA per Share (cents) (2)
Closing exchange rate of RMB
to S$1.00
As at 31 December
1997
1998
1999
Fixed assets
Unaudited
As at
30 April
2000
58
350
998
621
953
16
126
182
358
195
791
188
235
428
1,375
86
59
460
42
514
1,273
276
900
611
3,759
287
1,042
2,773
1,599
6,173
(50)
(229)
(7)
—
—
(29)
(180)
(352)
(66)
—
—
—
(154)
(640)
(177)
(603)
—
—
(180)
(194)
(47)
—
—
—
(157)
(671)
(295)
—
(82)
—
(315)
(598)
(1,574)
(421)
(1,205)
(28)
444
1,199
1,178
4,968
30
794
2,197
1,799
5,921
0.01
0.39
1.07
0.88
2.89
5.000
5.000
4.976
4.907
4.866
Audited
RMB’000
Unaudited
As at
30 April
1999
As at 31 December
1997
1998
1999
Unaudited
As at
30 April
1999
Unaudited
As at
30 April
2000
289
1,752
4,967
3,045
4,638
82
626
911
1,788
969
3,934
924
1,153
2,083
6,689
429
297
2,300
212
2,557
6,335
1,354
4,417
2,975
18,293
1,434
5,211
13,795
7,848
30,040
(252)
(1,141)
(35)
—
—
(145)
(902)
(1,762)
(329)
—
—
—
(765)
(3,182)
(883)
(3,000)
—
—
(883)
(954)
(230)
—
—
—
(763)
(3,270)
(1,436)
—
(397)
—
(1,573)
(2,993)
(7,830)
(2,067)
(5,866)
(139)
2,218
5,965
5,781
24,174
Net assets
150
3,970
10,932
8,826
28,812
NTA per Share (RMB cents) (2)
0.07
1.94
5.33
4.31
14.06
Current assets
Inventories
Trade debtors
Deposits, prepayments and
other receivables
Cash & bank balances
Current liabilities
Trade creditors
Deposits received and accurals
Deferred income
Proposed dividend
Provision for tax
Due to a director
Notes:
(1)
The assets and liabilities of our Group for the period under review have been prepared on the basis that our
Group had been in existence throughout the period under review or since the respective dates of incorporation,
if later.
(2)
For comparative purposes, the NTA per Share for the period under review have been computed based on the
pre-Invitation share capital of 204,980,000 Shares.
30
B.
CAPITALISATION AND INDEBTEDNESS
The following table sets out the capitalisation of our Company (i) at 30 April 2000, as adjusted
for (ii) the Restructuring Exercise and (iii) the proceeds of the Invitation. This table should be
read in conjunction with the consolidated financial statements and notes thereto appearing
elsewhere in this Prospectus. Our Group has no debts as at 30 April 2000 and as at the date
of this Prospectus.
Actual(1)
As Adjusted for
Restructuring
Exercise
As Adjusted for
the Invitation
Proceeds
3,759
3,759
36,433
—
2,258
2,830
411
—
32,102
5,510
3,663
3,663
Total shareholders’ equity
5,921
5,921
38,595
Total capitalisation
5,921
5,921
38,595
S$’000
Cash and cash equivalent
Shareholders’ equity:
Issued and fully paid up share capital
Share premium reserves
Retained profits
Note:(1)
This reflects our Group’s position as at 30 April 2000 (translated at S$100 to RMB486.6).
Subsequent to 30 April 2000, we have declared an interim dividend of RMB15 million
(approximately S$3.08 million) in respect of the profits for FY2000 to our existing shareholders
prior to the Invitation. This has reduced our total capitalisation by the above amount. Saved as
the above and the changes in retained profits due to profits earned after 30 April 2000, there
are no other changes in our total capitalisation after 30 April 2000.
Contingent Liabilities
As at the date of this Prospectus, our Group has no contingent liabilities.
31
C.
EXCHANGE RATES
The table below sets forth the high and low exchange rates for HK dollar/Singapore dollar and
RMB/Singapore dollar for each month for the past six months. The table indicates how many
HK dollars and RMB it would take to buy one Singapore dollar.
HK$/S$ Rate
High
Low
RMB/S$ Rate
High
Low
February 2000
4.5969
4.5159
4.8920
4.8240
March 2000
4.5687
4.5113
4.8580
4.8050
April 2000
4.5874
4.5273
4.8790
4.8160
May 2000
4.5587
4.4838
4.8060
4.7680
June 2000
4.5322
4.4914
4.8180
4.7730
July 2000
4.5020
4.4615
4.7910
4.7360
The following table sets forth, for financial periods indicated, how many RMB it would take to
buy one Singapore dollar, based on the average of the exchange rates on the last day of each
month during each financial period. Unless otherwise noted, the exchange rates in this table
are used for our Company’s financial accounts disclosed elsewhere in this Prospectus.
RMB/S$ Rate
Average
Closing
FY1997
5.616
5.000
FY1998
4.977
5.000
FY1999
4.903
4.976
4 months ended 30 April 1999
4.874
4.907
4 months ended 30 April 2000
4.882
4.866
As of 2 August 2000, the exchange rates for HK$/Singapore dollar and RMB/Singapore dollar
are HK$4.5068:S$1 and RMB4.7850:S$1 respectively.
D.
REASONS FOR THIS INVITATION AND USE OF PROCEEDS
The net proceeds from the issue of our New Shares in this Invitation are estimated to be
approximately S$32.7 million (RMB159 million) (after deduction of underwriting commissions
and estimated transaction expenses). The net proceeds represent the amount that we will receive
after payment of underwriting commissions and other transaction expenses related to this
Invitation.
We intend to use the net proceeds from this Invitation as follows:
•
approximately S$3.1 million (RMB15 million) to fund our research and development activities;
•
approximately S$4.1 million (RMB20 million) to fund our sales and marketing, and branding
and advertising activities;
•
approximately S$9.3 million (RMB45 million) to fund our expansion of our Group by setting
up regional offices in Beijing, Shanghai and Hong Kong;
•
approximately S$10.3 million (RMB50 million) for potential acquisitions of PRC companies
involved in the development and implementation of ERP where the opportunities arise; and
32
•
approximately S$5.9 million (RMB29 million) for general corporate and working capital
requirements.
As at the date of this Prospectus, no acquisition deals have been finalised. Pending the
deployment of the net proceeds from the issue of the New Shares as aforesaid, the funds will
be placed in short-term deposits with banks and financial institutions or invested in money
market instruments or used for our working capital requirements as our Directors may deem fit
in their absolute discretion.
33
INFORMATION ON THE COMPANY
A.
HISTORY AND DEVELOPMENT OF OUR GROUP
Our Company was incorporated under the laws of Bermuda on 9 June 2000. Our registered
address and contact telephone number are stated under “Our Contact Details” on page 11 of
this Prospectus.
Our Group commenced business with the establishment of Huatong as a limited liability company
established under the laws of the PRC on 12 January 1993. Huatong was set up as a cooperative joint venture enterprise between Benep (a limited liability company incorporated in
the British Virgin Islands) and Yitian Software (a limited liability company established in the
PRC). The term of the co-operative joint venture was for an initial period of 10 years from the
date of establishment of Huatong. Subsequently, Benep and Yitian Software agreed to extend
the term of the joint venture for another 20 years and Huatong obtained the approval of the
PRC Ministry of Foreign Trade and Economic Co-operation for the extension of the term of the
joint venture up to 12 January 2023.
The terms of the co-operative joint venture agreement between Benep and Yitian Software
provide that Benep would contribute RMB 2,000,000 to the registered capital of Huatong as
working capital for the company to develop its software business. Subsequently, we received
approval from the PRC Ministry of Foreign Trade and Economic Co-operation to increase the
registered capital of Huatong to RMB 5,000,000.
Huatong changed its legal name to Guangzhou Yitian Huatong Technology Corporation Ltd. on
17 March 2000.
Our main business activity was initially the development of customised software for clients with
specific needs in the PRC.
In addition, we also developed various standardised software which are targeted at fulfilling the
business/accountancy/inventory control needs of government organisations, and enterprises in
the PRC engaged in various businesses such as banking, manufacturing and trade businesses.
Such standardised software are sold on a retail basis.
In 1993, we developed our first standardised software for use in the import/export business –
Import/Export Business System.
In 1994, we decided to develop a finance and accounting software which was customised with
features which enable users to conform with the PRC accounting practices. These regulations,
as elaborated under “Government Regulations” on page 46 of this Prospectus, require all
enterprises established in the PRC to adopt certain accounting practices which are peculiar to
the PRC, such as the requirement to present monthly accounting statements in a certain fixed
format to the State Income Tax Department and the local Income Tax Bureau for record purposes.
These regulations also sought to encourage the use of computers in the keeping of accounts,
as opposed to manual book keeping, and set out guidelines on the requirements which
accounting software had to follow in order to obtain the accreditation and approval of the
government. Furthermore, the PRC Finance Ministry has also actively encouraged the use of
computers in the management of accounts, by issuing a notice to the local governments to
actively promote the same in the areas under their jurisdiction.
We decided to build our finance and accounting software based on the Microsoft Windows 95
platform as it was then the most widely used operating platform in the PRC. We completed the
development of our finance and accounting package, the Huatong Finance and Accounting
Software (Win 2.0 version) (
), by the end of 1995, after which it was submitted to the
Guangzhou Finance Bureau (
) for its audit and certification.
34
The Guangzhou Finance Bureau issued a certificate in March 1996, certifying, among other
things, that our Huatong Finance and Accounting Software was in compliance with the accounting
practices adopted under the laws of the PRC.
In November 1996, Huatong took part in the 8th Annual China New Technology New Products
Convention (the “Convention”) held in Guangzhou, PRC which was organised jointly by the
Guangzhou government and the PRC National Science Council. Forty-two software products
took part in the software category of this competition. A panel of experts, made up of
professionals from the information technology industry, assessed the participating products based
on the innovative and technological features of the products. Our Huatong Finance and
Accounting Software, with its (i) full compliance with PRC’s accounting regulations, (ii)
comprehensive software functions and (iii) well designed user-interface, won the Gold Award in
the software category. Our Huatong Finance and Accounting Software was the only winner of
the Gold Award for the software category and the Gold Award was the highest form of recognition
awarded during the Convention.
We gained greater market recognition for our Huatong Finance and Accounting Software after
our success at this Convention. It was adopted by educational institutions, such as Guangdong
Finance and Accounting Institute (
), as the standard accounting and
finance software in their educational curriculum to train their students in the use of computerised
accounting and finance software for industries.
In January 1997 we developed ERP software, the Huatong ERP System Software (
) (Client/Server version), based on the Client/Server platform.
ERP
Subsequently in September 1998, we showcased a new version of our Huatong ERP System
Software, based on the Internet web browser platform at a business exhibition held in Guangzhou,
“5th Computer Network Office Automation Exhibition” which focused on the information technology
industry.
In February 1997, we launched the Huatong Housing Sale Software (
), which
assists enterprises in the real estate retail industry to manage the sale of real estate, as further
elaborated on page 41 of this Prospectus.
In June 1997, the Huatong Trade System Software (
) was developed and
released for sale. It assists enterprises to manage and plan a host of functions in daily operation
such as the requisition of materials or supplies and the sale and costing of products, as further
elaborated on page 41 of this Prospectus.
In 1998, our Huatong Finance and Accounting Software was one of the top three products to
be awarded a 2nd class honorary certificate by the Fangchun District People’s Government
(
). The certificate was awarded to products that have been introduced for
more than 2 years to the PRC market and have established a wide customer base and good
market reputation. We believe that, to date, our Huatong Finance and Accounting Software is
the only software to have received an honorary certificate from the Fangchun District People’s
Government (other awarded products were from other industries such as chemical and electronic
and were non-software related). The honorary certificate is accompanied by a monetary award
in the form of tax exemptions/concessions up to the value of RMB10,000.
In May 1999, we entered into a co-operation agreement with Microsoft. We are provided with
technical assistance and training by Microsoft with respect to their software. In addition, three
to six months prior to the launch of a new software product by Microsoft, they will provide
training to our staff on the new product with a view that we can launch updated versions of our
products that complement theirs. We are also appointed an accredited reseller of HP and IBM
and are provided with technical training with respect to their products which we retail.
Furthermore, if necessary, we could seek their technical assistance with respect to their respective
products when we encounter any difficulties in servicing our customers.
35
Principal Investments and Expenditure
Our Group has applied its capital principally in developing new software products and in the
acquisition and upgrading of its computer equipment. Our Group has also leased three properties
for use as office premises, training rooms and storage areas and purchased seven motor cars
for use in our business. The particulars of the above acquisitions are provided on page 50
under “Property, Plant and Equipment”.
We do not have any principal expenditures currently in progress.
B.
BUSINESS OVERVIEW
Since our establishment, we have extended our products offerings from customised application
software for different industries to meet our customers’ specifications to standardised software
products, which may be used by different enterprises. We have also developed, amongst others,
our own proprietary finance and accounting and enterprise resource planning software packages.
We service our customers in respect of their software customisation and training requirements.
We have also capitalised on our software development capabilities and understanding of our
customers’ customisation and systems requirements to provide network planning and integration
services to our customers. In brief, our core business is as follows:
a.
b.
E-Commerce Services
c.
d.
e.
Our Products and Services
We have two main components in this aspect of our operations – developing customised software
for our customers and ERP implementation.
Customised Software Development
Since 1993 we have been actively engaged in the development of customised business software
for our customers. Typically, we discuss with our customers on their specific requirements and
required functions for the software which we are engaged to customise for them. After
understanding their needs and specifications, we develop a customised software product to
meet their specifications. Such product will be tested for our customers before they accept the
customised software. We also install our customised software for them on their computer network
and systems. As an additional service, we provide training in the use of the software for their
staff. Furthermore, we typically provide a hotline service which the customers’ staff may call to
resolve any difficulties they may encounter in using the software.
36
The following diagram illustrates the various stages involved in the development of a customised
software, as described above:
Meeting customers to obtain
information on their business and
IT needs
Development of customised
software
Testing of customised software
System set-up
Training (optional)
The type of customised software, which we develop typically, involves enterprise resource
planning. For example, shortly after we had commenced business in 1993, we were engaged
by the Guangdong Ceramic Export Trade Company (
) to develop
a software to cater for its needs in the import/export business. The company sought to automate
and computerise certain documentation, such as the generation of invoices, packing lists, letters
of credit, insurance documents and standard contracts which it used in the course of trade.
With the aid of our software, the company was able to reduce tedious documentation while, at
the same time, increase its efficiency in its business generally.
In developing customised software for our customers, we typically retain the ownership of the
intellectual and other proprietary rights of such software developed, and license our customers
the right to use the software. If the customers desire to purchase the rights to the customised
software, we will also sell them the rights to the software (including the source code at a
premium price).
Arising from our experience in working with various enterprises, we understand their ERP
software requirements and are aware of the required functions. We also provide a comprehensive
programming solution for their needs. In programming the software, we have used various
programming languages such as Visual Basic, C++, Java, ASP and XML.
To date, we have developed various customised software packages on the request of customers
from various industries, including manufacturing, commercial, banking and real estate industries.
37
ERP Implementation
In essence, our Huatong ERP System Software, developed in January 1997, provides users
with the means to manage and monitor various aspects of their business, with the aim of
improving efficiency and reducing the operating costs of our customers’ business. Typically, the
various departments within a company have different databases and systems. Our Huatong
ERP System Software integrates the various departments and functions across a company
onto a single computer system that can serve the particular needs of the various departments.
It also creates a single database from which the various departments can easily share
information.
For example, the business process of order fulfilment, which involves taking an order from a
customer, shipping the ordered products and billing for the order, can be automated by our
Huatong ERP System Software. The sales personnel taking an order from a customer, will
have easy access through the computer terminal, to the customer’s credit rating and order
history, the inventory levels and the shipping schedule of the goods ordered. Hence, the
customer’s order can be satisfied efficiently, and he can be informed accurately as to the shipping
schedule of the ordered goods.
To cater for the varying needs of our customers, we implement different modules of our Huatong
ERP System Software for them, which includes the following:
•
Master Production Schedule (
)
•
Material Requirements Planning (
•
Production Capacity Planning (
•
Inventory Control (
•
Sales and Distribution (
•
Purchase Control (
•
Personnel Planning and Development (
•
General Ledger Accounting (
•
Accounts Receivable (
•
Accounts Payable (
•
Fixed Assets Management (
•
Cost Control (
)
)
)
)
)
)
)
)
)
)
)
More importantly, our Huatong ERP System Software was adapted to be used in the PRC and
also incorporated the essential characteristics, as referred to under “Our Competitive Advantages”
on page 47 of this Prospectus which in our view, were not adequately addressed in the other
existing foreign and PRC local ERP software.
Prior to the development of the current version of our Huatong ERP System Software, we had
developed an ERP system based on the Client/Server platform in January 1997. We had been
monitoring the development of resource management software. We felt that the then existing
foreign ERP software as at November 1997 did not adequately address all the needs and
requirements of companies in the PRC. For example, ERP software of foreign companies may
not comply fully with the PRC accounting regulations. We believe that at that time there were
no ERP software developed specifically for the PRC market. We anticipated that there would be
good market demand in the PRC for ERP software based on actual business practices and
which is easy to use.
38
Typical resource management software gathers and analyses data, after which a report is
generated to reflect the data and the analysis of the same. However, a major issue with the
existing softwares were that most of these software had a fixed format of reporting. The volume
of data involved in the running of the business of a company could be very large. We realised
that companies had their individual needs and requirements and would like to review reports
containing the relevant data and information. Furthermore, certain reports had to conform to
prescribed formats imposed by the PRC’s law. See “Government Regulations” below on page
46 of this Prospectus.
Hence we undertook the development of ERP software which could filter the relevant data for
analysis and generate a coherent report, according to the specific requirements of each company.
We were of the view that the Internet would have a significant impact on the course of business.
Besides the ability to transact business over the Internet, it could also prove to be a very useful
medium for companies to communicate efficiently and conveniently, when compared to the
local area network (“LAN”) or the wide area network (“WAN”). The Internet, unlike LAN or WAN,
allows a company to link up to its system any time and anywhere in the world, so long as there
is Internet access. Access to a LAN or a WAN typically required a user to dial in directly to the
system, either via a modem or a dedicated leased line. We developed our current ERP software
on the web browser platform in September 1998. Accordingly, our ERP software could utilise
the Internet to assist companies operating in different locations, with branches dispersed over
a wide geographic area, to effectively link up under one ERP system in a cost effective and
convenient manner.
In an age of product differentiation, we believe that our ERP software is able to meet the needs
of most typical PRC enterprises due to the high degree of adaptation, customisation and
localisation of our products for the PRC market. Our customers typically inform us of their
specific requirements, so that we are able to customise and implement our ERP software to
their specific needs. Depending on how specific or complicated their demands are, we undertake
two different types of ERP customisations with varying charges on a case by case basis.
In the majority of the cases, companies do not have specific or peculiar requirements. In such
cases, we would integrate and implement the required modules of the Huatong ERP System
Software with respect to their business. However, some companies have specific requirements
relating to the type of business they are engaged in, which our existing Huatong ERP System
does not meet. In such cases, we would undertake what we term a secondary software
development of our Huatong ERP System Software to develop separate software modules and
integrate these separate modules into our existing Huatong ERP System Software.
If requested by our customers, we would also develop on an ad-hoc basis, a business-tobusiness (“B2B”) component to complement our ERP software, so that our customers can
exploit the opportunities provided by the Internet environment. Further details of this part of our
business is elaborated under “E-Commerce Services” on page 40 of this Prospectus.
Guangzhou Yangcheng Automobile Co. Ltd. (
), a customer of our
Huatong ERP System Software, is a car manufacturer in the PRC. We implemented an ERP
system based on the Client/Server for the company in 1997. The software was used for managing
warehousing, purchasing, sales, finance costing and production. In 1998, they upgraded their
ERP system to our Huatong ERP System Software based on the Internet web browser after it
was released. We were also engaged to develop a B2B component to their ERP system, to
enable them to distribute and sell vehicles through the Internet.
39
E-Commerce Services
With the profusion of the Internet in the world and in the PRC in particular, companies have
realised that they can conduct their business through the Internet. This part of our operation
essentially aims to assist our customers to harness the Internet as a medium for their business
needs. We offer the following range of services:
•
Website Design & Construction
•
Implementation of B2B solutions
We design B2B systems in accordance with the requirements of our customers. The B2B
system would include the e-commerce business model to be adopted, assistance in the
linkage of the Internet to their business applications, hardware and software integration,
and their integration of the B2B system with our Huatong ERP System Software.
In particular, our Huatong ERP System Software was designed specifically for use with the
Internet. Our e-commerce services help our customers to ensure that they have a seamless
system which integrates the back-end support system of the Huatong ERP System Software
and the front end sales conducted through the Internet.
For example, a vendor of goods can take orders for his goods through his website from his
customers. Our ERP software would then generate the relevant invoices which would state the
price of the goods, and check the stock level of the goods in store. If necessary, an alert with
regards to the stock level can be generated. Hence, the vendors can conduct its B2B commerce
with minimal supervision.
We distribute both our own proprietary standardised software and Microsoft software titles,
which complement or are currently required by our software to operate. For example, our
standardised software operates on the Microsoft Windows 95/98/2000 platform. Accordingly,
our customers have to purchase the Microsoft Windows 95/98/2000 operating system as a prerequisite to installing and using our standardised software. The titles of Microsoft products which
we sell include:
•
Microsoft Windows 98
•
Microsoft Windows NT
•
Microsoft Windows 2000
•
Microsoft Office 97/2000
•
SQL Server 7
We have a good working relationship with Microsoft whereby they provide us technical assistance
and training with regards to their software titles. In particular, under our Microsoft Certified
Solution Provider Contract with Microsoft, before a new Microsoft product is launched in the
market, Microsoft may provide us with the beta version of its product so that we are able to
familiarise ourselves with the product before it enters into the market. Typically, we are provided
with the beta version of the new product three to six months before its launch. This gives us
the opportunity to develop our software products, which are complementary to, or which may
be based on such Microsoft products.
Due to our expertise in developing software, and our exposure to the various industries in the
course of developing customised software, we learnt about the specific requirements of the
different industries, to which we supplied software to. Our intimate knowledge of a specific
industry gained through close contact with these industries give us an advantage over general
software programmers in developing standardised software for such industries.
40
We decided to expand into the development and sale of standardised software to increase our
sales revenue and margins. Furthermore, the development costs for standardised software is
generally lower compared to that required for customised software. The sale of standardised
software also enables us to take advantage of economies of scale in development, marketing
and training of customers’ staff.
If required by our customers, we will also integrate our standardised software with their existing
computer systems.
We set out below our main standardised software titles for the last three financial years.
Huatong Finance and Accounting Software. The functions of our Huatong Finance and Accounting
Software include the management of various ledgers (such as income, expenditure, cash and
bank ledgers), the management of fixed assets (including the depreciation of the assets), and
the management of employee payroll. Our software can also generate various reports based on
the data stored in the system, for management’s analysis.
The Guangzhou City Sports Association (
) is in charge of running all
the sports facilities in the city of which there are about 100. Every sports complex has its own
accounts department, which has to report to the central accounts department of the Sports
Association. After due consideration in 1997, the Sports Association decided to implement our
Huatong Finance and Accounting Software throughout the Sports Association, including the
various accounts department of the sport complexes under its purview.
We believe that many of our customers using our Huatong Finance and Accounting Software
will eventually upgrade to our more sophisticated Huatong ERP System Software. As at 30
April 2000, more than 90% of the users of our Huatong ERP System Software (or 112 users
out of our total users of 124) are our repeat customers and were users of our Huatong Finance
and Accounting Software.
Huatong Trade System Software. In 1996, we developed a software package – Huatong Trade
System Software for the use by businesses in the trade and manufacturing industries.
This software allows companies to manage and plan a host of functions such as the requisition
of materials or supplies, the control and management of inventory, the control and management
of sales, the management of a customers database, the costing and pricing of the products
and the generation of invoices and contracts. Furthermore, the software also has the capability
to take into account foreign currencies and their various exchange rates in the above relevant
functions.
Guangzhou Hualing Appliances Enterprise Limited Company (
)
is one of our customers, which is engaged in the business of the wholesale distribution of
electrical appliances and spare parts.
Huatong Housing Sale Software. To meet the specific needs of the real estate industry in the
PRC, we developed a real estate software – Huatong Housing Sale Software for use by the
real estate industry. Our Huatong Housing Sale Software enables real estate companies to
manage the whole process of retailing real estate, such as the costing, pricing, collection of
monies, generation of receipts and contracts for various types of units, after taking into account
each unit’s specifications such as unit type and floor area.
Guangzhou Hefu Huihuang Housing Sales Centre (
), which
purchased and used our Huatong Housing Sale Software, is a medium sized company engaged
in the real estate industry and manages a big daily volume of housing related transactions,
such as the collection of instalment payments and the daily filing of valuation reports.
41
Our customers are equipped with advanced computer and systems equipment, and our
customised or standardised software. However, the full potential of such equipment and software
would only be realised if the management and technical personnel of our customers are fully
conversant with the use of the equipment and software. As the business of our customers
grow, they will require greater functionality and capacity from their computer systems and
software. We are able to help them upgrade their hardware and software to meet their needs.
To complement our software products, we also provide after sales training to the staff of our
customers. These training sessions aim to equip the staff with the underlying methodology of
ERP and the technical skills required to operate our software and their network systems smoothly.
We also enter into service agreements with our existing customers to provide their staff with
continual training, so that they are able to maintain their technical ability to use the software
and resolve any difficulties in using the software. We also help them keep up with changes in
the field of information technology by providing continous training to them. Besides providing a
form of continuing education for our customers, this also gives us an opportunity to cross sell
some of our other products to our customers.
If requested by our customers, we also help our customers maintain their networks by providing
a help-line that our customers could call to seek our assistance and any on-site assistance, if
necessary. Our maintenance services provides us with a steady stream of recurrent income as
well as sales opportunities.
We distribute computer hardware both as stand-alone products and as part of our distribution
of computer hardware/systems integration business. In the course of marketing our customised
software or standardised software, some of our customers require our assistance in setting up
a network system for their use. A network system would typically include hardware and software
components. As part of our service to our customers, we will recommend and sell to them the
hardware components (in addition to the software) required in a network system such as
computer work stations and servers. We retail a range of hardware manufactured by various
companies including those of HP and IBM. We purchase computer hardware from various
companies on a back-to-back basis only when our customers place orders for such computer
hardware and we do not hold any inventory of computer hardware. We do not have sales of
computer hardware to persons other than customers for our software products.
We have been appointed as the accredited reseller for HP and IBM for their computer hardware
products.
Our Major Suppliers
Our major suppliers relate to our purchases of computer hardware which are distributed by us.
We do not carry significant inventory as we only purchase computer hardware when there is a
confirmed sale order for the hardware. As there are many suppliers in the market selling similar
computer hardware, we are not dependent on any single supplier.
42
The suppliers which accounted for 5% or more of our purchases in each of the past three
financial years are as follows:
Percentage contribution to
the purchases of our Group
FY1997
FY1998
FY1999
%
%
%
Name of Supplier
Guangzhou Dalishi Limited Company
(
)
5.2
5.4
5.1
Guangzhou Dongcheng Computer Limited Company
(
)
—
—
7.7
Guangdong Heguang Limited Company
(
)
—
7.2
7.4
Guangzhou Ideal System Limited Company
(
)
5.3
2.8
2.5
Guangdong Jiadu Limited Company
(
)
6.9
5.7
3.5
4.8
6.5
4.4
—
—
5.5
Guangzhou Tianhe Computer System Limited
Company (
TCL Computer Technology Limited Company
(TCL
)
)
Our Principal Markets
Since our Group was established in 1993, substantially all our products and services have
been distributed in Guangdong Province of the PRC. We also have some customers in Guangxi
Province and Zhejiang Province. We believe that we are familiar with the PRC market and
possess a good working knowledge of its peculiarities. At present, more than 95% of our turnover
and profits are derived from sales in the Guangdong Province since we started our business in
the Guangdong Province. Going forward, we intend to expand our market coverage in the PRC
as set out in “Future Plans” on page 63 of this Prospectus.
We do not have any customers, accounting for 5% or more of our turnover, for any of the last
3 financial years whom we are reliant upon for our business. Our customer base has grown
from approximately 224 in 1997 to approximately 545 in 1998. As at the end of 1999, we have
approximately 1,205 customers.
Our Marketing Channels
We believe that we have a strong and dedicated marketing team which can cater to the needs
of our customers. We believe that each of our customer’s needs are unique. In purchasing our
products or engaging our services, our customer can expect us to render quality service, tailored
to his specific needs.
Our marketing strategy emphasises the establishment of a strong brand name for our Group
and we believe that we have a good reputation for our solution-oriented approach and good
after-sales service and support. To this end, we have a dedicated marketing team headed by
Mr Zhang Yu. As our products and services target at the business community, our marketing
strategy is to publicise our brand name in such relevant advertise medium of the different types
of enterprises which our products and services target.
Our marketing expenditure was approximately RMB 0.1 million, RMB 1.6 million and RMB 3.2
for FY97, FY98 and FY99 respectively.
43
Newspapers and Industry Magazines
We advertise in newspapers circulated in the PRC, such as “Guangzhou Daily” (
),
“China Computerworld” (
), “China Info World” (
), “Asia Pacific
Economic Times” (
) and “Yangcheng Wanbao” (
). We also advertise
in special interest Chinese magazines which have a predominantly business or information
technology bias in their contents, such as “South China Taxation Guide Reports” (
)
and “Guangzhou Nashui Zhinan” (
). We believe that our advertisements reach
our target business community who are interested in exploiting information technology to further
enhance their business interests.
Seminars
We seek to create awareness for our products and services amongst interested members of
the business community. We conduct joint seminars with the local Finance Bureau and Science
and Technology Bureau in areas such as Foshan, Zhongshan, Dongguang, Hangzhou and
Zhejiang Province.
These seminars highlight to the business community the benefits of adopting a computerised
accounting system. While the local governments in the PRC espouse their official policy, a live
demonstration of the benefits of the computerised accounting system is useful in helping the
seminar participants see for themselves and assess the merits of a computerised accounting
system.
As joint organisers of such seminars, we are accorded the opportunity to demonstrate to the
seminar participants the benefits and merits of our software products. After the presentations
we have the opportunity to showcase our products at our seminar booth, which includes dedicated
computer work stations demonstrating the use of our products. Our marketing team will also be
available to answer any queries, which the seminar participants may have. Our marketing team
also typically follows up with sales calls to seminar participants who have indicated that they
would like to learn more about our products and services.
Trade Conventions / Exhibitions
As part of our marketing strategy, we actively participate in relevant trade conventions and
exhibitions in the Guangdong Province, such as conventions relating to information technology.
At such trade conventions, companies are accorded an opportunity to showcase their products
by setting up a booth to demonstrate their products. Such trade conventions typically attract the
attention of businesses interested in either promoting their information technology products and
services or interested in acquiring such products and services, and attract a wide participation
amongst businesses in the information technology industry.
At some trade conventions, recognition in the form of awards are given to outstanding products
at such trade conventions. At the 8th Annual China New Technology New Products Convention,
our Huatong Finance and Accounting Software won the prestigious gold award, the highest
form of recognition given to participating companies, for our innovative software application.
In October 1998, we also participated in the “5th Computer Network Office Automation Exhibition”
held in Guangzhou to showcase our new ERP software. This business convention was attended
by well-known foreign companies such as Microsoft, HP and IBM. We believe that through this
exhibition, Microsoft, IBM and HP became aware of our Huatong ERP System Software.
Subsequently, we established a working relationship with Microsoft, IBM and HP. Accordingly,
we believe that our participation in such trade conventions and exhibitions also serves to raise
our profile within the information technology industry. It could also form the spring board for
future collaboration between ourselves and other information technology companies.
44
Internet
We provide information about our Group, our products and services through our website:
www.china-erp.com. We have also registered our website address with relevant search engines,
such as www.yahoo.com.cn so that when the words “ERP” or “
” (“Huatong”) ERP” are
keyed into the search engine, our website would be included in the search result.
In this way, people who are interested in finding out about ERP through the Internet could
easily locate our website and contact us for more information and/or hands-on demonstration
which could lead to future sales of our software and services.
Training offered to Institutions
As mentioned above, the PRC government encourages the use of computerised accounting
system. As a result of this policy, tertiary institutions offer courses to their students taking the
subject of accounting, a module on the use of the computerised accounting software. In
conjunction with such tertiary institutions, we conduct courses jointly with these institutions on
the use of our Huatong Finance and Accounting Software. These courses aim to familiarise the
students with the use of our Huatong Finance and Accounting Software.
These students may in the course of their respective careers after their graduation, choose to
adopt our software for use in their respective businesses, as they would be familiar with our
software and its benefits.
Currently, the institutions where we conduct such courses include Guangdong Auditing
Professional Institution (
), Jiawan People’s Accounting
Institute (
), and Guangzhou Huagong Institute (
).
Dealerships
We have awarded more than 15 dealerships as at 15 May 2000, to selected businesses to sell
our products and services. Our dealers are obliged to employ suitable information technology
personnel to demonstrate and implement our Huatong ERP Software System. We pay them
commissions, which are individually negotiated. Through our dealers, we are able to reach out
to a wider customer base, and overcome the geographical barrier. Accordingly, even though our
offices are all located in Guangzhou, we are able to sell our products and services through our
dealers to our customers outside Guangzhou.
The main product that our dealers sell is our Huatong ERP System Software.
Our Intellectual Property
Since the core business of our Group is the development and sale of software, the business of
our Group is substantially dependent on our ownership of our intellectual property rights. Our
intellectual property rights with regard to the software are protected under the copyright laws of
the PRC.
Under the copyright laws of the PRC, there is no compulsory requirement to register the copyright
of our software, in order to acquire copyright for our software. Once the software is developed,
copyright protection is accorded under the laws of the PRC for an initial period of 25 years.
However, before the expiry of this initial period of 25 years, we may file an application with the
PRC National Registry of Computer Software (the “Registry”) to extend our copyright protection
for another 25 years, subject to a maximum period of 50 years copyright protection for the
software. Registration with the Registry would also raise a presumption that the copyright in the
software subsists, and is validly vested in the registered author. We have obtained the registration
certificates issued by the Registry with respect to our Huatong Finance and Accounting Software
and Huatong Trade System. Our application to register the Huatong ERP System is currently
pending as at the date of issue of this Prospectus.
45
In order to protect our brandname, we have filed an application on 10 August 1998 to register
a device bearing the words “
” (Huatong) as a trade mark in the PRC. We have also filed
applications in Hong Kong on 9 June 2000, Singapore on 3 August 2000 and the PRC on 25
May 2000 to register our logo as displayed on the cover of this Prospectus as a trade mark.
Government Regulations
Our standardised software are tailored to comply with the regulations promulgated under the
PRC laws related to accounting and tax, and as such, we would be affected by any changes in
such regulations. These changes could have a positive effects on our business, as we would be
able to introduce new versions of our earlier software that would comply with any such changes.
Examples of some of the PRC accounting regulations which our software are tailored to comply
with are set out below.
We believe that any changes to the government regulations, if any, could be beneficial to our
Group, as our customers who are affected are likely to approach us to redesign or adapt their
software, so as to comply with the changes in the government regulations.
PRC Accounting Regulations. The following are accounting regulations promulgated by the PRC
government, as referred to above:
•
Accounting Laws of the People’s Republic of China (
•
Administrative Measures for Accounting Computerisation (
•
Working Rules for Accounting Computerisation (
•
Basic Functional Rules for Accounting Software (
•
Interim Administrative for Software Products (
)
)
)
)
)
These accounting regulations set down a comprehensive standard set of accounting practices
which all companies, enterprises and businesses operating in the PRC are to adopt and follow.
These regulations specify, amongst other things, the following:•
the financial year begins on 1 January and ends on 31 December of a calendar year;
•
the reporting currency must be in RMB;
•
entries in the accounting ledgers such as the monies received must be made promptly, so
as to generate monthly accounting reports in the prescribed formats that must be submitted
to the tax authorities; and
•
where the accounting functions are computerised, accounting certificates, accounting ledgers,
accounting reports and other accounting information must comply with the prescribed formats.
Our Competitors
Our main business and strength lies in the ERP implementation and the development of
customised software. Our Directors are of the opinion that it is not possible to state our
competitors extensively or conclusively for the following reasons:
a.
The ERP software market in the PRC is still relatively undeveloped. Furthermore, there is
currently no standard ERP software whether in terms of format or content, which is being
used in the PRC today. Hence, anyone with the necessary computing software skills could
attempt to develop ERP software. There could be a very large number of businesses planning
to or engaged in the development and sale of ERP software.
b.
Furthermore, the functionality of ERP software is usually guarded by the management of
an enterprise and is usually kept as a secret. Therefore, it is not possible to assess our
competitors’ products conclusively.
46
c.
Finally, there has not been any market survey done in the PRC to date on which companies
are engaged in the development or implementation of ERP software. Hence there is a lack
of conclusive public information on the major developers of ERP software.
Given the above limitations, to the best of their knowledge, our Directors set out below our
known competitors.
Local Competitors
There are a number of companies in the PRC which develop and implement ERP software.
Besides our Group, the better known companies, which compete directly against us in developing
and implementing ERP software, are as follows:
Beijing Case Software Co. Ltd. (
). They are primarily engaged in the
development and implementation of ERP software. We believe their client base is primarily in
northern PRC, which includes Beijing and Shanghai.
Beijing Ufsoft (Group) Corp. Ltd. (
). They develop accounting
and finance software, although they also develop and implement ERP software solutions. We
believe their customer base is primarily in northern PRC, which includes Beijing and Shanghai.
Shenzhen Kingdee Software Technology Ltd. (
). They develop
accounting and finance software, although they also develop and implement ERP software
solutions. As a Shenzhen Company, it has customers in the southern PRC. However, we believe
their customer base is primarily in northern PRC, which includes Beijing and Shanghai.
Foreign Competitors
Our known foreign competitors include SAP AG, Oracle Corp., System Software Associates
and QAD Inc.. They have developed ERP software, which are based on the Internet web browser
platform. Their ERP software is primarily retailed and used outside the PRC, although their
software is also sold in the PRC.
Our Competitive Advantages
Ability to Identify Technological Trends and Market Needs in the PRC
We believe our management is able to identify technological trends and market needs in the
PRC in our core business of customised software development and ERP implementation. In
particular, we completed the development of our Huatong ERP System Software based on web
browser platform in September 1998 to capitalise on the development of Internet. With the easy
accessibility of the Internet, companies can take advantage of this medium to cross the barriers
of distance in managing their businesses. Furthermore, the Internet also affords companies
with an efficient way to make and execute decisions quickly. In an ever-changing business
environment, the ability to react rapidly and effectively may be the key to staying competitive.
Especially for companies operating in different geographical locations, our Huatong ERP software
can be an invaluable tool. We believe we are the only PRC company that has developed an
Internet enabled ERP software and this differentiates our ERP software from those of our local
competitors.
Strong Familiarity with the PRC Market
We believe that our software applications are more suitable for use in the PRC as compared
with the software applications of our foreign competitors as we generally have a better
understanding of the business culture, practices, and language of the PRC . In addition, to the
best of our knowledge, our products comply fully with the PRC accounting regulations. Thus,
we believe that our applications are more localised, effective and user-friendly. The PRC
accounting regulations are set out under “Government Regulations” on page 46 of this
Prospectus.
47
Competitive Pricing
We believe that our foreign competitors’ software packages are generally more expensive when
compared to our Huatong ERP System Software, mainly due to their higher development costs
as the remuneration of information technology personnel is generally lower in the PRC.
Established Customer Base
We have an established customer base of approximately 1,205 customers as at the end of
1999. Approximately 90% of these customers are users of our standardised software applications
such as our Huatong Finance and Accounting Software and Huatong Trade System Software.
These customers will generate opportunities for us to promote and sell our customised software
applications and E-Commerce services and generate both development and implementation
revenue and recurring support and maintenance revenue for our Group in the future.
Good Track Record
We have established a good track record in providing software applications in the PRC. Our
good track record has enabled our products, such as our standardised and customised software
applications, to gain acceptability in the Guangdong Province. Our customer base has also
grown from approximately 224 customers in FY1997 to approximately 1,205 customers in FY1999
and this is a testament of our good track record. With our good track record, we believe that
our products would be similarly accepted in other provinces and cities in the PRC such as
Beijing, Shanghai, and Hong Kong when we establish offices in these cities.
C.
Organisational Structure
Restructuring Exercise
To rationalise the Group’s corporate structure, the Restructuring Exercise was implemented
following our Company’s incorporation. We set out the details below:Pursuant to the Restructuring Exercise, our Company acquired the entire issued and paid-up
capital of Benep Management Limited at the consideration based on the net tangible assets of
Benep Management Limited of HK$10,249,000 as at 31 December 1999. The consideration is
satisfied by:(a) the crediting as fully paid at par of the 2,000,000 ordinary shares of HK$0.05 each in the
share capital of the Company issued nil paid to ESP Associates;
(b) the allotment and issue of 202,980,000 ordinary shares of HK$0.05 each in the Company,
credited as fully paid, to ESP Associates, Messrs Wang Xiaochuan, Gao Junhua and Song
Shenghong as follows:
(i)
161,984,000 ordinary shares of HK$0.05 each to ESP Associates;
(ii) 28,697,200 ordinary shares of HK$0.05 each to Wang Xiaochuan;
(iii) 10,249,000 ordinary shares of HK$0.05 each to Gao Junhua; and
(iv) 2,049,800 ordinary shares of HK$0.05 each to Song Shenghong.
As a result, the total issued and paid-up capital of our Company before the Invitation are held
in the proportion of 80% by ESP Associates and the remaining 20% by Messrs Wang Xiaochuan
(14%), Gao Junhua (5%) and Song Shenghong (1%).
48
Our Group Structure
Wang
Xiaochuan
14%
Gao Junhua
Song
Shenghong
5%
1%
(BVI)
(Note 1)
80%
(Bermuda)
100%
Benep Management Limited
(The British Virgin Islands)
(Note 2)
Guangzhou Yitian Huatong
Technology Corporation Ltd.
(PRC)
(Note 3)
Note 1: ESP Associates Limited is an investment holding company incorporated in the British
Virgin Islands on 28 March 2000 with limited liability, all the issued and paid-up share
capital of which is owned as to 70% by Wang Xiaochuan, as to 25% by Gao Junhua
and as to 5% by Song Shenghong.
Note 2: Benep Management Limited is an investment holding company incorporated in the
British Virgin Islands on 10 November 1992 with limited liability. Prior to the
Restructuring Exercise, the issued and paid-up capital of Benep Management Limited
was 70% owned by Wang Xiaochuan, 25% owned by Gao Junhua and 5% owned by
Song Shenghong.
Note 3: Guangzhou Yitian Huatong Technology Corporation Ltd is a sino foreign co-operative
joint venture enterprise formed under the Sino-foreign Co-operative Joint Enterprise
Law of the PRC. The parties to this co-operative joint venture are Yitian Software
(PRC) and Benep (BVI). Under the co-operative joint venture agreement (“Agreement”),
Benep is entitled to receive all profits from Huatong after paying Yitian Software a
fixed fee of RMB 100,000 per annum, regardless of whether profits are made for the
year. The fixed fee is not subject to review and will continue to be payable as long as
Huatong remains in operation. The amount is in consideration of the assistance
which Yitian Software renders to Huatong in attending to and/or resolving local
regulatory and operational issues relating to its business. The Agreement also provides
that the management of Huatong is vested in the board of directors of Huatong which
shall comprise of three directors, two of which shall be appointed by Benep and one
by Yitian Software. In the event that the Agreement is terminated for whatsoever
reason including winding up, Benep shall be entitled to all the assets and shall bear
all the liabilities of Huatong. Either party may transfer its respective invested interest
in Huatong provided that the consent of the other party is given. Due to the limited
right of Yitian Software, Huatong is, in accordance with normal accounting practice,
treated as wholly owned subsidiary of our Company in our financial statements. Gao
Junhua, Song Shenghong and Zhang Yu, the head of our marketing team, own 70%,
20% and 10% of Yitian Software respectively.
49
D.
PROPERTY, PLANT AND EQUIPMENT
The assets of our Group have been acquired through a combination of shareholders equity and
retained profits. Our Group has not financed the acquisition of its assets through any bank
borrowings, and there are no known encumbrances on any of the assets of the Group as
described below:
Lease Properties
Our Group has leased the following 3 properties in the PRC:
a.
The premises situated at 229 Fangchun Main Road #04-12, Guangzhou comprising an
area of 334 square metres, is leased by Huatong for a period of 71⁄2 years, pursuant to a
lease agreement dated 8 June 1993. The term commenced on 1 July 1993 and ends on
31 December 2000. Under the terms of the lease agreement, a monthly rent of RMB 4,000
is payable (exclusive of utilities charges such as electricity, water and telephone charges,
which is to be borne by us). The premises are used by our Company for storage purposes,
relating to our distribution of software and distribution of hardware/systems integration
businesses. We have no intention of renewing the lease upon its expiry on 31 December
2000 and this will have insignificant impact on our operations as the premises are used for
storage purposes only. For the time being, we will monitor our operational needs and we
may enter into new leases in the future.
b.
The premises situated at 20 Keyun Road, 2nd Floor of Hetian Plaza, Tianhe Software Park,
Guangzhou Municipal PRC 510665, comprising an area of 562.86 square metres, is leased
for a period of 3 years, pursuant to a lease agreement. The term commenced on 15
December 1999 and ends on 14 December 2002. Under the terms of the lease agreement,
a monthly rent of RMB 32,645.88 is payable together with maintenance charges (includes
utilities charges such as electricity, water and telephone charges) of RMB 21,388.68. The
management team of our Group is based at this location. The technical team of our Company
is also based here, where they carry out the development and customisation of software.
As such, most of the computer equipment of our Group is located here. There is a training
room located on the premises where our Group conducts training sessions for our customers
and their employees.
c.
The premises situated at 108 Tianhe North Road, #118 East Tower of Guangzhou Computer
City, Guangzhou comprising an area of 23.84 square metres, is leased for a period of 3
years, pursuant to a lease agreement. The term commenced on 1 September 1998 and
ends on 31 August 2001. Under the terms of the lease agreement, a monthly rent of RMB
16,102 is payable together with maintenance charges (includes utilities charges such as
electricity and water) of RMB 3,680 and telephone charges of RMB 52 per month. The rent
is relatively higher as the premise is located in a shopping centre. These premises are
used as a showroom for our software. Under the lease agreement, an annual increase of
10% in the monthly rent and maintenance charges is levied on the premises.
None of the above leases are entered with interested parties.
Computer Equipment
Being in the IT industry, our Group has acquired substantial IT equipment, including personal
computers and servers, which are the tools of our trade. Due to the rapid technological advances
and the dynamic nature of the IT industry, we have to constantly upgrade our IT equipment to
keep abreast with the IT developments and advancements.
Motor Cars
Our Group has acquired 7 motor cars for business purposes. These cars were acquired at
various times and are used by our Group to provide our customers with on site services, under
the maintenance and upgrading services of our business.
50
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
A.
OPERATING RESULTS
The following analysis of our results of operations for the past three financial years ended 31
December 1999 and the four months ended 30 April 2000 should be read in conjunction with
the full text of this Prospectus, including the Accountants’ Report as set out on pages 77 to 90
of this Prospectus.
Unaudited
Unaudited
for the
for the
4 months
4 months
Audited
ended
ended
RMB’000
30 April
30 April
FY1997 FY1998 FY1999
1999
2000
Turnover
Cost of sales
Gross profit
Operating expenses
Selling & distribution
expenses
Administrative expenses
Operating profit
Interest income
Financial expense
Profit before tax
Tax
Profit after tax
7,626
(3,393)
19,230
(7,581)
42,977
(12,446)
10,729
(3,795)
34,833
(8,343)
4,233
11,649
30,531
6,934
26,490
(328)
(1,803)
(2,131)
2,102
26
(112)
2,016
—
2,016
(2,134)
(3,117)
(5,251)
6,398
22
—
6,420
—
6,420
(4,596)
(5,795)
(10,391)
20,140
422
—
20,562
—
20,562
(985)
(1,171)
(2,156)
4,778
78
—
4,856
—
4,856
(2,862)
(3,395)
(6,257)
20,233
85
—
20,318
(2,438)
17,880
OVERVIEW
Our core business is provision of IT services and solutions to our customers. Specifically, our
scope of IT solutions and services include ERP, e-commerce, other software customisation,
design and development, implementation and consultation. We also sell standardised computer
software applications that are mainly designed and developed in-house. Professional fees from
ERP implementation and customised software development (“ERP & other customised software”),
e-commerce implementation and consultancy services (“E-Commerce services”) and sales of
standardised computer software applications accounted for approximately 62.0%, 5.0% and
12.3% of our turnover in FY1999 respectively. E-Commerce services were only introduced in
FY1999. Our other activities, which include distribution and sales of third party computer hardware
and maintenance and upgrading services, accounted for approximately 20.7% of our turnover
in FY1999.
For professional fees from ERP implementation and customised software development and ECommerce implementation and consultancy services, revenue is recognised based on stage of
physical completion of the project as specified in the contracts. For sales of standardised
computer software and hardware, revenue is earned upon completion of sales transaction
between our Group and our customers. Maintenance service fees, which are charged at a
certain percentage of the value of the applications implementation contracts, are recognised
over the period of the maintenance contract. All of our revenue is derived from PRC, with more
than 95% of which is derived from Guangdong Province. Our revenue will depend primarily on
(i) degree of awareness on the importance of IT systems and applications by companies in
PRC as a means to increase business competitive advantage and operational efficiency; and
(ii) corporate spending in PRC on IT services and applications which is in turn mainly dependent
on PRC economic conditions and corporate earnings.
51
Our cost of sales include direct labour expenses, business tax and other direct costs such as
cost of computer hardware sold, packing materials and depreciation of related fixed assets
such as computer software and hardware. In particular, cost of computer hardware sold, direct
labour expenses and business tax are the three largest components of our cost of sales and
for FY1999 they constituted approximately 46.0%, 27.3% and 14.4% of our total cost of sales
respectively. Our cost of computer hardware sold fluctuate according to the market demand and
supply at the time of our purchase. However, as we distribute and sell third party computer
hardware at a fixed mark-up, any increase in the prices of the hardware is charged directly
back to our customers. Direct labour expenses consist of primarily salaries of our IT staff which
are mainly determined by the supply and demand of IT professionals in the PRC’s labour
market. For business tax, it is currently based on 5% of our invoiced service revenue. Our
overall gross margin is relatively high and is more than 50% for the financial years in review.
This is because we provide mainly customised services and applications and our computer
software applications are mainly developed and designed in-house. Our ERP and other
customised software and E-Commerce services have relatively higher margin than our other
activities as these are customised services.
Our operating expenses comprise selling and distribution expenses and administrative expenses.
Our selling and distribution expenses include advertising and promotion expenses, sales
commission, freight and transportation and sales staff salaries, with advertising and promotion
expenses constitute the main bulk of the total selling and distribution expenses. Our advertising
and promotion expenses include expenses on seminars, trade conventions, exhibitions, training
to institutions as set out on “Our Marketing Channels” on pages 43 to 45 of this Prospectus.
Our administrative expenses comprise mainly of auditors’ and directors’ remuneration, rental,
staff welfare and training expenses, research and development and other miscellaneous
expenses.
For the financial years under review, our Group has no tax expenses. Our accumulated tax
losses carried forward has been offset against our taxable profits for FY1997 and we are entitled
to tax exemptions for FY1998 and FY1999 according to the Income Tax Law of PRC. Details of
our tax status is set out under “Tax” on page 59 of this Prospectus.
We do not experience any seasonality in the course of our business and the financial impact of
inflation over the financial years under review is insignificant.
Segmental turnover and gross profit
The breakdown of our Group’s turnover and gross profit by activities for the past three financial
years ended 31 December 1999 and the four months ended 30 April 2000 are set out below.
FY1997
FY1998
FY1999
Unaudited
for the
4 months
ended
30 April
1999
4,349
10,984
26,648
6,289
23,643
—
—
2,145
—
3,986
868
2,808
5,290
2,852
2,844
2,409
5,438
8,894
1,588
4,360
7,626
19,230
42,977
10,729
34,833
Audited
Unaudited
for the
4 months
ended
30 April
2000
Turnover (RMB’000)
ERP & other customised software
E-Commerce services
Sales of standardised software
applications
Others
Total
(1)
52
1999
Unaudited
for the
4 months
ended
30 April
1999
Unaudited
for the
4 months
ended
30 April
2000
Audited
1997
1998
3,291
8,832
22,727
4,640
20,079
—
—
1,688
—
3,129
613
1,959
3,774
1,498
1,952
329
858
2,342
796
1,330
4,233
11,649
30,531
6,934
26,490
Gross Profit (RMB’000)
ERP & other customised software
E-Commerce services
Sales of standardised software
applications
Others
(1)
Total
(1) “Others” relate to sale of computer hardware and maintenance and upgrading services
FY1997 to FY1998
Turnover
Our turnover increased 152.2% from RMB7.6 million in FY1997 to RMB19.2 million in FY1998
as all segments of our businesses experienced strong growth. Turnover from ERP & other
customised software increased 152.6% from RMB4.3 million in FY1997 to RMB11.0 million in
FY1998. Turnover from sales of standardised software applications also increased 223.5% from
RMB0.9 million in FY1997 to RMB2.8 million in FY1998. For our other activities, turnover
increased 125.7% from RMB2.4 million in FY1997 to RMB5.4 million in FY1998. The increase
in sales from ERP & other customised software and sale of standardised computer software
was primarily due to the increase in number of projects started and undertaken from 10 in
FY1997 to 18 for FY1998 and strong demand for our software applications. The strong demand
for our software applications was a result of (i) greater awareness and acknowledgement of the
benefits of computer applications by small and medium businesses in PRC and (ii) our increased
expenditure on promotion and advertising for our services and products during the year. The
improvement in our core businesses and the expansion of our client base have helped our
sales from other activities which include distribution of third party computer hardware and
provision of maintenance and upgrading services.
Cost of sales and gross profit margin
Cost of sales increased 123.4% from RMB3.4 million in FY1997 to RMB7.6 million in FY1998
due to increase in turnover. Overall gross profit margin improved by approximately 5 percentage
points from 55.5% in the FY1997 to 60.6% in FY1998 as our Group enjoyed greater economies
of scale with higher sales. Our gross profit margin was enhanced due to improvement in staff
efficiency in implementing and designing of ERP system as our staff accumulated more
experiences in this area.
Selling and distribution expenses
Selling and distribution expenses increased 550% from RMB0.3 million in FY1997 to RMB2.1
million in FY1998. The increase was mainly due to the significantly higher advertising and
promotion expenses from RMB0.1 million in FY1997 to RMB1.6 million in FY1998 as we
aggressively promoted our services and products such as our Huatong ERP System. In addition,
salaries increased from approximately RMB0.2 million in FY1997 to RMB0.4 million in FY1998
as more sales staff was employed to cope with our business expansion.
53
Administrative expenses increased 72.9% from RMB1.8 million in FY1997 to RMB3.1 million in
FY1998. The increase was generally due to our Group’s business expansion in FY1998. In
particular, the increase was primarily due to the increase in depreciation (RMB0.12 million),
auditors’ remuneration (RMB0.12 million), directors’ remuneration (RMB0.14 million), salaries of
general and administrative staff (RMB0.2 million) and staff welfare and training expenses
(RMB0.18 million).
Interest income
Interest income declined marginally by RMB4,000 due to lower bank balances in FY1998
compared to FY1997.
Financial expense
Financial expense relates to interest on loan from local financial bureau. Financial expense
decreased by RMB112,000 in FY1998 compared to FY1997 as a loan from a local financial
bureau was fully repaid by end of FY1997.
Profit before tax
In FY1998, we recorded a profit before tax of RMB6.4 million compared to RMB2.0 million in
FY1997. The increase was primary due to increase in turnover and improvement in gross profit
margins as discussed under “Turnover” and “Cost of sales and gross profit margin” above.
FY1998 to FY1999
Turnover
Turnover increased 123.5% from RMB19.2 million in FY1998 to RMB43.0 million in FY1999.
Our core businesses continued to enjoy strong growth due to the continual strong demand from
PRC companies to computerise their operations. Sales from ERP & other customised software
increased 142.6% from RMB11.0 million in FY1998 to RMB26.6 million in FY1999 and sales of
standardised software applications increased 88.4% from RMB2.8 million in FY1998 to RMB5.3
million in FY1999. In addition, the introduction of E-Commerce design, implementation and
consultancy services (‘E-Commerce services’) contributed an additional turnover of RMB2.1
million in FY1999. Turnover from our other activities also increased 63.6% from RMB5.4 million
in FY1998 to RMB8.9 million in FY1999. The increase in sales from ERP & other customised
software was due to increase in projects undertaken during the year. ERP & other customised
software projects started and undertaken during the year increased from 18 in FY1998 to 43 in
FY1999. Our continual advertising and promotion and the successfully launch of our Huatong
ERP System on web browser platform during the year have also boosted our market reputation
and increased our sales from our core businesses. Improvement in our core businesses resulted
in increase in the number of maintenance contracts and this has helped to increase our sales
from other activities in FY1999.
Cost of sales increased 64.2% from RMB7.6 million in FY1998 to RMB12.4 million in FY1999
due to increase in turnover. Gross profit margin improved 10 percentage points from 60.6% in
FY1998 to 71.0% in FY1999. The improvement in gross profit margin was mainly due to (i) the
increase in proportion of sales of ERP & other customised software and E-Commerce services
which have higher gross profit margin from 57.1% of total turnover in FY1998 to 67.0% in
FY1999, (ii) greater economies of scale as our business continued to expand, and (iii) the
general increase in staff efficiency in our maintenance and upgrading services as our staff
accumulated more experiences and expertise.
54
Selling and distribution expenses increased 115.4% from RMB2.1 million in FY1998 to RMB4.6
million in FY1999. This was mainly due to increase in advertising and promotion expenses of
101.2% from RMB1.6 million in FY1998 to RMB3.2 million in FY1999 to promote sales. In
addition, salaries increased 156.0% from RMB0.4 million in FY1998 to RMB1.1 million in FY1999
as more sales staff was employed to cope with our business expansion.
Administrative expenses increased 85.9% from RMB3.1 million in FY1998 to RMB5.8 million in
FY1999. The increase was generally due to the further expansion of our business. In particular,
the increase was mainly due to increase in depreciation (RMB0.28 million), directors’ remuneration
(RMB0.31 million), salaries of general and administrative staff (RMB0.23 million), staff welfare
and training expenses (RMB0.28 million). In addition, research and development increased
426.2% from RMB0.13 million in FY1998 to RMB0.69 million in FY1999.
Interest income
Interest income increased by RMB0.4 million from RMB22,000 in FY1998 to RMB0.42 million
due to higher bank balances in FY1999 compared to FY1998.
Profit before tax
In FY 1999, we recorded a profit before tax of RMB20.6 million compared to RMB6.4 million in
FY1998. The increase was primary due to increase in turnover and improvement in gross profit
margins as discussed under “Turnover” and “Cost of sales and gross profit margin” above.
For the four months ended 30 April 2000
Turnover
We recorded a turnover of RMB34.8 million for the four months ended 30 April 2000 compared
to RMB10.7 million for the four months ended 30 April 1999, representing an increase of 224.6%.
Our core businesses continued to enjoy strong growth as the general PRC economy improves
and more PRC companies realised the benefits of computerising their operations. Sales from
ERP and other customised software recorded a turnover of RMB23.6 million as we started and
undertook 53 projects for the four months ended 30 April 2000 compared to 14 for the same
period in FY1999. Sales of standardised software applications recorded a turnover of RMB2.8
million. E-Commerce services, introduced in FY1999, contributed an additional turnover of
RMB4.0 million. Turnover from our other activities also continue to improve and recorded sales
of RMB4.4 million as our enlarged client base broadened our maintenance services income.
Cost of sales increased 118.4%, from RMB3.8 million for the four months ended 30 April 1999
compared to RMB8.3 million for the four months ended 30 April 2000. Gross profit margin
improved 11.4 percentage points to 76.0% for the four months ended 30 April 2000 from 64.6%
for the four months ended 30 April 1999. The improvement in gross profit margin was mainly
due to (i) increase proportion of sales of ERP & other customised software and E-Commerce
services which have higher gross profit margin from 58.6% for the four months ended 30 April
1999 to 79.3% for the four months ended 30 April 2000, (ii) greater economies of scale as our
business continued to expand, and (iii) general increase in staff efficiency in our maintenance
and upgrading services as our staff accumulated more experiences and expertise.
55
Our Group recorded selling and distribution expenses of RMB2.9 million for the four months
ended 30 April 2000 compare to RMB1.0 million for the four months ended 30 April 1999,
representing an increase of 190.0%, with further expansion of our business. Approximately
74.8% of the selling and distribution expenses was due to expenditure in advertising and
promotion as our Group carried out activities to promote our software applications and services
and enhance our brand name in the PRC market.
Our Group recorded administrative expenses of RMB3.4 million for the four months ended 30
April 2000 compared to RMB1.2 million for the four months ended 30 April 1999 with further
expansion of our business. The expenses for the four months ended 30 April 2000 were mainly
due to staff welfare and training expenses (RMB0.6 million), research and development (RMB0.4
million) and other expenses increased as a result of the strong growth of turnover during the
period.
Interest income
Our Group recorded interest income of RMB85,000 for the four months ended 30 April 2000
compared to RMB78,000 for the four months ended 30 April 1999.
Profit before tax
For the four months ended 30 April 2000, we recorded a profit before tax of RMB20.3 million
compared to RMB4.9 million for the four months ended 30 April 1999. The increase was primary
due to increase in turnover and improvement in gross profit margins as discussed under
“Turnover” and “Cost of sales and gross profit margin” above.
Tax
We incurred tax charges of RMB2.4 million (12% of our profit before tax) for the four months
ended 30 April 2000 compare to nil for the same period of FY1999. This was because we are
exempted from income tax in FY1998 and FY1999 but we are subject to 12% tax in FY2000.
Please refer to “Tax” on page 59 of this Prospectus for more details.
Profit Forecast
Barring unforseen circumstances, our Directors forecasted turnover and profit after tax of
RMB92.6 million and RMB41.5 million respectively for the year ending 31 December 2000. This
represents an increase of 115.5% and 101.8% over the turnover and profit after tax for the year
ended 31 December 1999.
For the four months ended 30 April 2000, we have already achieved a turnover and profit after
tax of RMB34.8 million and RMB17.9 million respectively, representing 37.6% and 43.1% of the
forecasted turnover and profit after tax.
Demand for our services and applications for FY2000 have remained strong. ERP and other
customised software will continue to be the main source of our income for FY2000. In addition,
our Group will also benefit from the first full year contribution from our E-Commerce services in
FY2000. As at 30 April 2000, we have confirmed orders of approximately RMB34.0 million. Our
confirmed orders as at 30 April 2000, which we expect to be fully recognised as revenue in
FY2000, and the turnover we have achieved in the first four months of FY2000 constitute
approximately 74.3% of our projected turnover for FY2000. The remaining projected increase in
turnover for FY2000 is based on our discussions with our potential and existing customers on
their demand for our services and products, such as our customised software and ERP
implementation services, in FY2000 and the trend of market demand for our standardised software
products for the four months ended 30 April 2000. Our Directors believe that our forecasted
turnover for FY2000 can be achieved with the growing awareness of the benefits of IT systems
and applications by PRC companies and as we establish our reputation in the PRC market.
56
Our overall gross profit margin for FY2000 is expected to improve from 71.0% in FY1999 to
76.0% in FY2000. We expect the improvement in gross margin due to (i) the increase in
proportion of sales of ERP & other customised software and E-Commerce services, which
have higher gross profit margins as explained in “Operating Results — Overview” on page 51
and 52 of this Prospectus, from 67.0% of total turnover in FY1999 to 76.0% in FY2000; and (ii)
greater economies of scale as our business continued to expand.
Our operating expenses are expected to increase in line with the increase in turnover in FY2000.
In addition we expect to incur a tax charge of 12% of our profit before tax for FY2000. We
expect the increase in turnover and improvement in gross margin to more than offset the increase
in tax, resulting in an increase in our profit after tax by RMB20.9 million to RMB41.5 million for
the year ended 31 December 2000.
Based on the premise stated above, we believe that the forecast can be achieved. However, as
noted on page 20 of this Prospectus, we may not be able to achieve our forecast. The profit
forecast for FY ended 31 December 2000, for which the Directors are solely responsible, has
been made on the following bases and assumptions:
Bases
(a) The accounting policies normally adopted by us in preparation of our financial statements.
Assumptions
(a) there will be no material changes in the existing political, legal, fiscal or economic conditions
in the PRC or any of the countries in which the Group carries on its business;
(b) there will be no material changes in the bases or rates of tax applicable to the Group’s
business;
(c) there will be no material changes in interest rates or foreign currency exchange rates from
those currently prevailing;
(d) the activities of the Group will not be adversely affected by any new governmental legislation,
regulations and controls;
(e) there will be no material changes in raw material, spare parts, instruments and equipment
costs from those currently prevailing;
B.
REVIEW OF FINANCIAL POSITION
Pro forma Balance Sheets of our Group
RMB$’000
1997
As at 31 December
1998
1999
FIXED ASSETS
289
1,752
4,967
1,434
5,211
13,795
(1,573)
(2,993)
(7,830)
(139)
2,218
5,965
150
3,970
10,932
150
3,970
10,932
CURRENT ASSETS
CURRENT LIABILITIES
NET CURRENT ASSETS/(LIABILITIES)
NET ASSETS
Represented by:
SHARE CAPITAL AND RESERVES
57
Fixed assets
Fixed assets comprised mainly leasehold improvements, computer equipment and motor cars
in Guangzhou. The net book value of fixed assets increased from RMB0.3 million in 1997 to
RMB1.8 million in 1998 and to RMB5.0 million in 1999, respectively. This was mainly due to the
increase in leasehold improvements, computer equipment and motor cars to cope with our
continual business expansion. Besides, the net book value of leasehold improvement increased
from RMB0.2 million in 1998 to RMB1.9 million in 1999 as our Group moved to a bigger office
in Guangzhou in FY1999.
As at 31 December 1999, the Group did not have any material commitments for capital
expenditure.
Current assets
The current assets of our Group comprise mainly cash, inventories, trade debtors, deposits,
prepayment and other receivables.
Current assets increased from RMB1.4 million in 1997 to RMB5.2 million in 1998 due to increase
in trade debtors balance, deposits, prepayment and other receivable balances and inventories
balances. Because of the increase in sales revenue, trade debtors balances increased from
RMB0.6 million in 1997 to RMB1.8 million in 1998, deposits, prepayment and other receivable
balance increased from RMB0.4 million in 1997 to RMB2.3 million in 1998, respectively. The
inventories level increased from RMB0.1 million in 1997 to RMB0.9 million in 1998 as a result
of increased orders.
Current assets increased from RMB5.2 million in 1998 to RMB13.8 million in 1999 due to
increase in cash balance and trade debtors balance. As a result of the increase in operating
profit to RMB20.5 million during the year, cash balance increased from RMB0.2 million in 1998
to RMB6.3 million in 1999. Trade debtors balance increased from RMB1.8 million in 1998 to
RMB3.9 million in 1999 as a result of the increase in sales revenue. Our trade debtors collection
period is approximately 30 days for the financial years under review.
Current liabilities
The current liabilities of our Group comprise mainly trade creditors, deferred income, accrued
expenses and dividend payable.
Current liabilities increased from RMB1.6 million in 1997 to RMB3.0 million in 1998 due to
increase in trade creditors, deferred income and accrued expenses as a result of the continual
business expansion during the year.
Current liabilities increased from RMB3.0 million in 1998 to RMB7.8 million in 1999 due to
increase in dividend payable of RMB3.0 million in 1999 for the final dividend of FY1999 and the
increase in deferred income and accrued expenses as a result of the continual increase in
scale of business during the year. Our trade creditors payment period is approximately 30 days
for the financial years under review.
Shareholders’ equity
Shareholders’ equity comprised share capital and retained earnings.
Shareholders’ equity increased from RMB0.2 million in 1997 to RMB4.0 million in 1998 due to
the profits generated of RMB6.4 million during the year. A dividend of RMB2.6 million was paid
out of the profits in 1998.
Shareholders’ equity increased from RMB4.0 million in 1998 to RMB10.9 million in 1999 due to
the profits generated of RMB20.6 million during the year. A dividend of RMB13.6 million was
paid out of the profits in 1999.
58
C.
LIQUIDITY AND CAPITAL RESOURCES
Our Group’s operations have been financed primarily through a combination of shareholder’s
loans, shareholders’ equity and retained earnings. Our Group had no other bank borrowings
throughout the last three financial years ended 31 December 1999 except for the loan of RMB2.18
million in FY1997 from local financial bureau which was fully repaid prior to end of FY1997.
The shareholder’s loan has been fully repaid in FY1998 as disclosed in page 73 of this
Prospectus. As at date of this Prospectus, we have not given any guarantees and are not
subject to any contingent liabilities.
As at 30 April 2000, our principal source of liquidity comprised cash balance of RMB18.3
million.
Net cash provided by operating activities totalled RMB20.7 million in FY1999 and RMB17.0
million in the four months ended 30 April 2000. The RMB20.7 million of cash generated in
FY1999 was attributable to increase in deposits received and accruals, deferred income and
other cash generated by operating activities, offset by an increase in trade debtors. RMB17.0
million of cash generated in the four months ended 30 April 2000 was attributable to increase
in deposits received and accrued, deferred income and other cash generated by operating
activities, offset by an increase in trade debtors, inventories and deposits, prepayments and
other receivables.
Net cash used in investing activities totalled RMB3.9 million in FY1999 and nil in the four
months ended 30 April 2000. Our investing activities consisted of purchases of fixed assets of
RMB3.9 million in FY1999. Fixed assets purchased comprised mainly company motor vehicles,
leasehold improvements and computer equipment as our Group moved to a bigger office in
Guangzhou in FY1999 to cope with our continual business expansion.
Net cash used in income tax payments (at a reduced tax rate of 12%) totalled RMB2 million for
the four months ended 30 April 2000. No such payment was made in FY1999 as Huatong was
exempt from income tax under Income Tax Law of the PRC.
Net cash used in financing activities totalled RMB10.6 million in FY1999 and RMB3.0 million in
the 4 months ended 30 April 2000. The cash outflow for financing activities in FY1999 relate to
interim dividends of RMB10.6 million paid to shareholders for that year. The cash outflow for
financial activities for the 4 months ended 30 April 2000 relate to final dividends paid for FY1999.
We expect our aggregate capital expenditure to be approximately RMB12.3 million for second
half of FY2000 and approximately RMB41.3 million in FY2001. The capital expenditure will be
primarily for payment for possible strategic investments and acquisitions of approximately RMB20
million and establishment of branch offices for business expansion of approximately RMB33.6
million.
We anticipate that the proceeds from the issue of New Shares will be used to fund capital
expenditure, research and development of new E-Commerce applications, enhancement of our
ERP application, advertising and promotion of our products and services and possible strategic
investments and acquisitions. Any balance of the proceeds from the issue of New Shares will
be used for working capital purposes. We believe that the net proceeds from the issue of New
Shares, together with the cash generated from our operations, will be sufficient to fund our
capital expenditures and acquisition and our working capital needs for at least the next 12
months.
Tax
All of our operations are located in PRC and therefore we are subject to the Income Tax Law
of PRC. According to the Income Tax Law of the PRC, Huatong is exempt from income tax for
the first two profitable years of operations. Therefore, Huatong is exempt from income tax for
the first two tax profitable years in FY1998 and FY1999. We are also entitled to a 50% relief
from income tax for the following three years. Thus, we are subject to the reduced tax rate of
12% for FY2000 to FY2002. Upon expiry of the tax relief period, we expect to be subject to the
prevailing income tax rate of 24%.
59
In addition, we are subject to 5% business tax on our invoiced value of services provided under
the Tax Law of the PRC.
D.
DIVIDENDS
In the past three financial years, we have declared and paid a total of approximately RMB16.2
million cash dividends to our shareholders. In addition, we have declared an interim dividend of
RMB15 million in respect of the profit for FY2000 to our existing shareholders prior to the
Invitation and the interim dividend was paid on 30 June 2000. We will not continue with the
current dividend payout upon our listing.
We currently do not have a dividend policy. The amount of our past dividends is not indicative
of the amount that we will pay in the future. In future, the amount of dividend payable will be
dependent upon the aggregate distributable profits and our Group’s capital requirements for the
ensuring year.
Barring unforeseen circumstances, our Directors expect to recommend a gross final dividend of
approximately RMB15 million or RMB0.0584 per Share for FY2000 based on the enlarged
share capital of 256,980,000 shares of our Company.
E.
RESEARCH AND DEVELOPMENT
Since the core business of our Group is the development and sale of software, the business of
our Group is substantially dependent on its development of software. The software development
efforts of our Group are focused on the area of resource management, such as enterprise
resource planning (“ERP”).
Our research and development work is predominantly market-driven. Most of our research and
development personnel are assigned to work on projects, which our customers require us to
carry out such as the customisation of software (“Project Development”). The salaries and
expenses of our research and development are charged to these projects and are not recorded
as research and development expenses. We also maintain a small team of research and
development personnel to work on software development of products for which we anticipate
that there will be a market demand for such as our Huatong ERP System Software.
Our research and development (“R&D”) costs are charged to profit and loss account as incurred
and we set out below our R&D costs for the past three financial years:
Amount spent on R&D
FY1997
(RMB)
FY1998
(RMB)
FY1999
(RMB)
135,556
131,674
692,914
Since we began our business in 1993, we have been developing various types of resource
management software, as detailed in under the “Business Overview” of this Prospectus. Generally,
the software we have developed would consist of several different modules, which may be
integrated into a complete software package. These different modules of the software perform
different functions in the software. For example, the accounts management module of our Huatong
ERP System performs the functions of bookkeeping, generating profit and loss statements,
balance sheets, and reconciling the various bank statements with the accounts. These different
software modules form a substantial reservoir of resources from which we can tap to develop
a resource management system for a customer.
Our intellectual property rights for our software are protected under the copyright laws of the
PRC, and our contracts with our employees specifically provide that all intellectual property
rights created by them during their course of employment shall vest in our Group.
60
F.
TREND INFORMATION
Our Prospects
Our focus will remain on our core businesses in the PRC as set out above on pages 36 to 42
of this Prospectus . Our Directors are of the opinion that our Group will continue to see strong
growth in these areas in the coming years for the following reasons.
Reasons for Growth
Growth of Information Technology. According to International Data Corporation (“IDC”), the
information technology services market, and in particular the software market, in the PRC is
still in the infancy stage of development. However, IDC is of the opinion that the information
technology service market will take off in the near future for the following reasons.
First, there is a growing awareness amongst PRC companies of the benefits which information
technology could bring to a business set-up. Hence, there is an increasing willingness to invest
in the development of this area. Second, there is a general trend towards the upgrading of
information technology equipment to more complex network systems. Third, due to the growing
complexities of the network system, professionals in the area of information technology are
required to set-up and maintain the network. Hence, this creates new business opportunities for
companies specialising in the information technology business.
IDC estimates that the valuation for the information technology market for the PRC, Hong Kong
and Macau (the “Greater China Region”) for the year of 1997 was around USD 1.3 billion.
Further, it expects this market to grow by 20.7% per year, until its valuation reaches USD 3.5
billion in 2002. IDC also points out that the service sector of the information technology market
grew by 50% in 1998, and accounted for 5.9% of the information technology market.
In view of the above, we are of the view that there is a great potential for growth in servicing
the information technology needs of the companies and providing them with the software required
to run their businesses efficiently in the PRC.
Growth of the ERP Software Market. The ERP software market is a subset of the overall IT
market. According to a survey conducted by IDC, the Greater China ERP services market is
estimated to be around USD 138.2 million in 1998, and is projected to have a compound
annual growth rate of 39.0 per cent. from 1998 to 2003.
Internet. The Internet community around the world has grown at a tremendous rate. IDC estimates
that the revenues in the worldwide Internet services market grew by 71% in 1998 to reach
USD7.8 billion and projected that such growth will continue at an annual compound rate of
approximately 60%. By the year 2003, the revenue in the Internet services market could surpass
USD 78 billion. IDC estimates that the Asia Pacific region (ex- Japan) will similarly see explosive
growth in the Internet services market, from USD 457 million in 1998 to USD 4.5 billion in
2003. We believe that the Internet services market in the PRC would also experience similar
growth.
It has generally been recognised that the Internet business has undergone three phases of
development since its inception. Initially, companies sought to use the Internet to publicise its
business on the newfound medium. This phase is commonly known as “Get on the Net”. At this
stage, companies by and large did not seek to harness the Internet to conduct business.
The second phase of the development of the Internet is commonly known as “Get into the Net”.
At this stage, the focus is on the supplier or the retailer of goods and services. The Internet is
used primarily as a means to purchase goods and services from such suppliers or retailers.
The targeted group of customers are primarily consumers and not businesses. Hence, this
phase is also known as the “Business to Consumer” or “B2C”.
61
The third and current phase of development is commonly known as “Exploit the Net”. At this
stage, the focus has shifted to supplying the needs and wants of the businesses instead of the
consumer. Companies have a much better appreciation of how the Internet can help facilitate
their business and hence, the Internet does not merely become another means of supplying
their services or goods, but it becomes a powerful tool of growth for the companies. Through
the Internet, companies could create a seamless flow between supply and demand, ie. they
could purchase their supplies and sell their goods via the Internet. However, in order to
successfully exploit the Internet, companies require powerful ERP software to manage their
resources. This phase is known as “Business to Business” or “B2B”.
For example, a company retailing computers though the Internet can take orders from its
customers through the Internet. The inventory level of its computers are monitored by an ERP
software, such that when the inventory level of its computers falls below a certain level, an
automatic purchase order is generated and sent via the Internet to is supplier. We believe that
our Huatong ERP System can benefit from the third and current phase of development of the
Internet.
With the rapid development of e-commerce on the Internet, we believe that we are well poised
to aid companies, which wish to exploit the Internet business opportunities. Our customers will
find that we provide a one-stop service centre for their Internet related business needs, from
the setting up of the network systems (including hardware and software) to the building and
designing of their websites. More importantly, we possess the know-how and capability to
implement a suitable back-end system in the form of our Huatong ERP System Software or our
ability to develop customised software, which would enable them to conduct e-commerce easily.
In particular, our Huatong ERP System Software which was developed with the prospect of this
Internet era in mind, is built on a web browser platform. Therefore, our customers can monitor
and manage their resources from anywhere in the world so long as there is Internet access.
Where the business of a company in question, such as factories or sale offices, is spread out
over numerous geographical locations, it also means that it can effectively monitor and manage
those same factories or sales offices from one location, through the Internet.
Entry of China to the World Trade Organisation (“WTO”). The PRC is currently seeking entry
into the WTO. Upon its entry, there would generally be trade liberalisation conditions imposed
upon it, ie. the PRC would be required to remove certain trade barriers or restrictions within a
certain time frame. As a result, companies in the PRC could be faced with more intense
competition from the companies outside the PRC, as the protection afforded by the trade barriers
and restrictions would no longer provide them with shelter from the competition.
Our Directors believe that companies in the PRC are generally aware of the impact of the
admission of the PRC into the WTO. These companies realise that they have to prepare for the
eventuality of a more competitive environment. One critical component affecting the
competitiveness of a company is its ability to manage its resources, which forms the foundation
upon which its business is built. Its ability to effectively manage its resources could result in an
enhancement in its productivity and a reduction of its operating cost. Our Huatong ERP System
Software seeks to do precisely this as elaborated under “ERP Implementation” on page 38 of
this Prospectus.
We believe that the admission of the PRC into the WTO will stimulate demand for our Huatong
ERP System Software in this way. We believe we are well placed to exploit the demand for an
enterprise resource planning system, as we believe our Huatong ERP System Software is the
most suitable and cost effective ERP software on the market, as elaborated under “Our
Competitors” on page 46 of this Prospectus.
62
Our Future Plans
Currently, our primary source of revenue is generated mainly from our sales in Guangdong
Province. Given the potential of growth in the PRC IT market, and in particular the ERP software
market, and the economic growth of the PRC, we believe that there are opportunities for us to
further expand our business operations in the PRC. Therefore, we intend to further expand our
current business operations to the other regions of the PRC.
Our future plans for our businesses are as follows:
(a) Increase our Market Coverage in the PRC
We currently have offices in Guangzhou City. We plan to establish additional offices in the
PRC, particularly in Beijing, Shanghai, and Hong Kong to increase our market coverage in
the PRC.
In particular, we plan to expand our services to the Hong Kong market where we believe
that there could be a significant market for our services, especially our ERP Huatong
System Software and our development customised software. We believe that Hong Kong
individuals and Hong Kong-based companies invest in the PRC need to monitor the business
of their operations or their subsidiaries in the PRC. Furthermore, we believe that our products
and services are competitively priced when compared with similar products and services
sold by our competitors.
We expect to incur approximately RMB 45 million to set up these offices which will be
solely funded from our Invitation proceeds.
(b) Focus on the continuing development of Customised Software and E-commerce Services
We plan to focus on our expertise in developing customised software and e-commerce
services in the future. Specifically, we will be developing CRM application and integrate it
into our newer version of Huatong ERP System Software. We believe demand for CRM
applications will increase in the future as companies realise the importance of managing
their customers. In addition, we plan to strengthen our e-commerce services by continuing
our development efforts on B2B solution which will be integrated into our ERP System.
We are also in the process of developing a Bank Supervisory Information System
(
) (“BSIS”) for a PRC financial supervisory institution. BSIS is a supervisory
system which is mainly used to monitor the compliance of the banks with various financial
requirements of the relevant regulatory authorities. This involves gathering different
information from banks through private networks and performing financial analysis to detect
any irregularities and to ascertain if predetermined risk levels as set out by our client has
been exceeded by the banks. If our BSIS is accepted by our client, the numerous supervisory
units under its jurisdiction will also adopt our BSIS and this will provide us with a large
client base for our BSIS.
(c) Strategic Alliances and Acquisitions
We intend to enter into strategic alliances with, or acquire other IT companies in the PRC
with expertise in the ERP area, which would add value to the services we currently offer,
particularly to our ERP Implementation service. We believe that this strategy will enable
our Group to grow at a faster rate.
63
(d) Establishing our Branding
We intend to intensify our marketing efforts through our existing marketing channels such
as advertising in the relevant newspapers and industry magazines to establish brand name
in our core businesses throughout the PRC. We also intend to spread the awareness
amongst the businesses in the PRC of the importance of the ERP software, through our
participation in seminars, conventions or exhibitions. Finally, we intend to expand our cooperation with more tertiary institutions in the PRC.
We expect to incur approximately RMB 20 million, which will be solely funded from our
Invitation Proceeds.
64
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A.
DIRECTORS AND SENIOR MANAGEMENT
Our Reporting Structure
Board of Directors
Managing Director
Mr Wang Xiaochuan
General Manager
Mr. Gao Junhua
Assistant General
Manager
Mr Song Shenghong
Chief Technology
Officer
Mr Song Shenghong
Development
Team 1
Mr Wu Duosu
Development
Team 2
Mr Jiang Jingan
E-Commerce
Technical Team
Mr Yang Jun
Customer
Service Team
Mr Li Xiang
Chief Marketing
Officer
Mr Zhang Yu
Chief Financial
Controller
Mr Cheung Kin Wah
Marketing
Team 1
Mr Wen
Guanhong
Marketing
Team 2
Mr Zeng Kai
Marketing
Team 3
Mr Wang
Haibing
Research &
Development
Team
Mr Pan Haixiao
65
Accounting &
Finance
Department
Ms Zhang Qun
Human Resource
Officer
Mr Song Shenghong
Human
Resource
Department
Ms Xu
Xianzhen
The following table provides information relating to our Directors and our Executive Officers:
Name
Age
Address
Position
Directors
Wang Xiaochuan
40
11/C Block 2 Site 10
Whampoa Garden
Kowloon, Hong Kong
Chairman
Gao Junhua
38
Room 603, No.2 Avenue Mid
Hongmian Road
Huadi, Guangzhou, PRC
Vice Chairman/
General Manager
Song Shenghong
37
Room 803, No. 421
Fangchun Road
Guangzhou, PRC
Director/Assistant General
Manager/Chief Technology
Officer/Human Resource
Officer
Chng Hee Kok
51
12 Mount Elizabeth
Blk B, #18-01
Elizabeth Tower
Singapore 228511
Director
Sitoh Yih Pin
36
6 Fernwood Terrace
Singapore 458539
Director
Zhang Yu
32
Room A1-1404 Longyan Building,
No. 551 Tianhe Road
Guangzhou, 510630, PRC
Chief Marketing Officer
Cheung Kin Wah
30
Flat 7, 34/F, Block H,
Kam Ying Court, Ma On Shan,
Shatin, Hong Kong
Chief Financial Controller
Executive Officers
Our Directors
Wang Xiaochuan. He is the Chairman of our Board of Directors and has served as the chairman
of board of directors of Huatong since 1993, with responsibility for strategic issues in corporate
planning and finance. From 1987 to 1991, he served as the trade officer of Ban Pong group of
Thailand. The Ban Pong group is engaged primarily in the manufacturing of sugar. From 1991
to 1993, he served as marketing manager of the Pan Hong Co. Ltd in Hong Kong, a company
that is engaged in property development, and was tasked with investing the funds of the company
in viable business and industries in the PRC. Mr. Wang graduated from the Guangzhou Normal
University with a Bachelor degree in Education.
Gao Junhua. He is a Director of the Company and has served as the General Manager of
Huatong since 1993. He has been a member on the committee of the PRC Software Society
and the Guangzhou Computerised Accounting Society since July 1998 and April 1998
respectively. He has also served as the Technical Adviser of Guangzhou City since December
1999. From 1986 to 1992, he was a software engineer with Guangzhou Marine & Shipping
Design Research Institute which is in the business of designing ships, where he held the post
of supervisor. He was sent to the United States of America during his employment to receive
software development training. He received a Masters degree in engineering from the Shanghai
Jiaotong University for his research in the development of software for marine engineering in
1986.
66
Song Shenghong. He is a Director of the Company and has served as the Assistant General
Manager and Chief Technology Officer of Huatong since 1993. From 1984 to 1986, he was
employed by the North Industrial Company No.565 Factory which is in the business of
manufacturing military equipment, and served as an accountant. Subsequently, from 1986 to
1992, he served as a software engineer in the same company. In 1984 he received a Bachelor
degree in science from the Chengdu Science and Technology University.
Chng Hee Kok. He is an independent Director of the Company. He serves as the Chief Executive
Officer of NTUC Club, and is an elected Member of the Singapore Parliament. From 1995 to
1997, he has served as the Chief Executive Officer of Scotts Holdings Ltd (1995 to 1997) and
Yeo Hiap Seng Ltd (1994). He was awarded a Merit Scholarship in 1967. In 1972, he was
awarded a Mobil Silver Medal and a Gold Medal by the Institution of Engineers, Singapore. In
1991, he was awarded a Distinguished Engineering Alumni Award. He received a Bachelor of
Engineering (Mechanical) First Class Honours degree from the National University of Singapore
in 1972. He received a Master of Business Administration degree from the National University
of Singapore in 1984. He participated in the Programme for Executive Development, conducted
by IMEDE, Switzerland in 1976.
Sitoh Yih Pin. He is an independent Director of the Company. He is a Certified Public Accountant
and is currently a partner of a certified public accounting firm. He holds memberships in various
organisations including the Board of Directors of the Chinese Development Assistance Council,
the Supervisory Panel of the Feedback Unit of the Ministry of Community Development, the
Punggol East Citizens’ Consultative Committee and the Resource Panel of the Government
Parliamentary Committee for the Ministry of Manpower. In addition, he is the Honorary Secretary
and director of the Singapore Institute of Directors. He also sits on the board of directors of
several public listed companies. He holds a Bachelor of Accountancy (Honours) degree from
the National University of Singapore and is an Associate member of the Institute of Chartered
Accountants in Australia.
Our Executive Officers
Zhang Yu. He has served as the Chief Marketing Officer of Huatong since 1993. As the Chief
Marketing Officer, he is in charge of our marketing team. From 1990 to 1993, he served in the
American company, ALR Computing Company, as a marketing and sales supervisor. He received
a Bachelor degree in engineering from the Shanghai Mechanical Institute in 1988. In 1992 he
received a Masters in Business Administration from Management College of Zhongshan
University.
Cheung Kin Wah. He serves as our Chief Financial Controller and company secretary since
May 2000. Since he obtained a Honours diploma in accountancy from Lingnan College (presently
known as Lingnan University) in June 1993, he served as an auditor with Messrs Kwan, Wong,
Tan & Fong (which has since merged with Deloitte Touche Tohmatsu) until December 1994.
From 1995 to 2000, he served as an auditor with Messrs Ernst & Young (Hong Kong). As the
Chief Financial Controller, he is in charge of our Group’s accounting and finance functions. He
is a Certified Public Accountant in Hong Kong and is an associate of the Hong Kong Society of
Accountants, the Chartered Association of Certified Accountants and the Tax Institute of Hong
Kong.
Our Senior Management
Pan Haixiao. He joined our organisation in April 1997 and has since served as the head of our
Research and Development Department. He is involved mainly in the application of ERP, B2B,
design of system automation and management of technical systems. He has many years of
cumulated experience, especially in the area of Internet, software development, and technical
management. From 1989 to 1997, he worked in computer department of Beijing Wan Pacific
Limited Company. He received a Master degree in engineering in 1986 and Doctorate in 1989
from the Shanghai Jiaotong University.
67
Wu Duosu. He serves as the head of our Development Team 1. He received a Bachelor degree
in electrical engineering from the Kunming Science & Technology University in 1989. Upon
graduation, he was a lecturer at the CDA research centre before joining Guangdong Ke Long
Organisation in 1991. He was the head of the Information Technology department and was
then responsible for the management of the organisation’s computer systems. Since joining our
Group in January 2000, he has since been involved in research and development work.
Jiang Jingan. He serves as the head of our Development Team 2. He received a Bachelor
degree in electrical engineering from Xi An Jiantong University in 1994 and worked as software
developer in Dongguan High Tech Development Company. In February 1997 he joined our
Group. He is proficient in many programming languages and has participated in the development
of our software programmes.
Yang Jun. He serves as the head of our E-commerce Technical Team. He received a Bachelor
degree in computer science from Hunan University in 1996. Before joining our Company, he
served with Hubei New Century Computer Company as the I.T. chief supervisor. He joined our
Group in December 1996 and is now responsible for programming and designing of banking
systems.
Wen Guanhong. He serves as the head of our Marketing Team 1. He received a Bachelor in
accountancy from Wuhan Manufacturing University in August 1997 and joined our Group after
graduation. He markets our Huatong Accounting and Finance Software.
Zeng Kai. He serves as the head of our Marketing Team 2. He received a Bachelor degree in
Computer Science from Zhongshan University in 1993. Prior to joining our Group in November
1997, he served with Shenzhen Jin Li Song Limited Company to develop ERP application. He
markets our Huatong ERP System Software.
Wang Haibing. He serves as the head of our Marketing Team 3. He received a Bachelor degree
in Chinese Culture from Zhongshan University in 1997. He joined our Group upon graduation in
August 1996 and has since been marketing our Huatong Accounting and Finance Software
Li Xiang. He serves as the head of our Customer Service Team. He received a Bachelor degree
in Business Administration from Hunan University in 1997. He joined our Group in August 1996
and he supervises the provision of our maintenance services to our Huatong ERP System
Software customers.
Zhang Qun. She serves as the head of our Finance & Accounting Department. She received a
Bachelor degree in accountancy from Zhejiang Business University in 1991. In 1991 to 1997,
she worked as accountant in Zhe Jiang Trust Investment Company. She joined our Group since
July 1997.
Xu Xianzhen. She serves as the head of our Human Resource Department. She received a
Bachelor degree in medicine from Kunming Medical University in 1984. She had been working
as a doctor in a hospital for 6 years. Thereafter, she served in the Fangchun civil service
department for 3 years before joining our Group in October 1994.
68
B.
COMPENSATION
Directors
The remuneration of our Directors on an aggregate basis and in remuneration bands for FY1999
are as follows:(i)
Aggregate directors’ remuneration:-
Executive
Directors
FY1999
NonExecutive
Directors
Total
RMB810,000
—
RMB810,000
(ii) Number of directors in remuneration bands:-
Executive
Directors
FY1999
NonExecutive
Directors
Total
$500,000 and above
—
—
—
$250,000 to $499,999
—
—
—
$0 to $249,999
3
—
3
Service Agreements. Save as set out below, none of our Directors have entered into service
agreements with us.
Each of our Executive Directors, Wang Xiaochuan, Gao Junhua and Song Shenghong has
entered into service agreements with us, for an initial period of three years commencing from
1 July 2000. Their terms of service shall be renewed for successive periods of one year each,
unless terminated by not less than 3 months’ notice in writing by either party to the service
agreements. At present, each of our Executive Directors is entitled to a basic annual salary of
HK$ 1,200,000. Their annual salary may be revised upwards by no more than 10% at the
discretion of the Board of Directors. We may pay them discretionary management bonuses for
any financial year, which shall not exceed 5% of the audited consolidated or combined net
profit of our Group for that financial year (after tax and minority interests and payment of such
bonuses, but before extraordinary items). A Director may not vote on any resolution of the
Board regarding the amount of bonus payable to him.
Executive Officers
For the financial year ended 31 December 1999 our Executive Officers received an aggregate
amount of RMB 120,000 as compensation from our Group.
Service Agreements. Each of our Executive Officers, Zhang Yu and Cheung Kin Wah has entered
into service agreements with us, for an initial period of three years commencing from 1 July
2000. Their terms of service shall be renewed for successive periods of one year each, unless
terminated by not less than 3 months’ notice in writing by either party to the service agreements.
At present, Zhang Yu and Cheung Kin Wah are entitled to a basic annual salary of HK$240,000
and HK$504,000 respectively. Their annual salary may be revised upwards by no more than
10% at the discretion of the Board of Directors. In addition, Cheung Kin Wah is also entitled for
each financial year ending on 31 December, to a gratuity payment equivalent to one month’s
salary on or before the Chinese New Year’s eve.
69
Had the service agreements for our Directors and Executive Officers been effected on 1 Jan
1999, the total remuneration payable to our Directors and Executive Officers for FY1999 would
have been RMB4,648,000 (approximately 21.6% of our profit before tax and remunerations for
Directors and Executive Officers) instead of RMB930,000 (approximately 4.3% of our profit
before tax and remunerations for Directors and Executive Officers) and the profit after tax
would have been RMB16,844,000 instead of RMB20,562,000.
C.
OUR BOARD OF DIRECTORS
Our Bye-laws provide that our board of Directors will consist of not less than 2 Directors. We
currently have 3 Executive Directors. One third of our Directors is required to retire at every
annual general meeting of our Company. Each Director will serve for his respective term, subject
to earlier resignation or removal pursuant to an ordinary resolution passed by our shareholders
or the occurrence of certain events set forth in our Bye-laws.
Committees of the Board of Directors
Corporate Governance and Audit Committee
Our Board of Directors has established an Audit Committee that is chaired by Chng Hee Kok,
an independent director, and includes Sitoh Yih Pin, our other independent director, and Gao
Junhua, Vice Chairman of our Board of Directors. Our Audit Committee is responsible for
reviewing:
D.
•
our financial and operating results and accounting policies;
•
our financial statements and our consolidated financial statements before their submission
to the full Board of Directors and the external auditors’ report on those financial statements;
•
the co-operation given by our management to our auditors;
•
our external audit plans and the results of our external auditors’ examination and evaluation
of our internal accounting control system;
•
the re-appointment of our external auditors; and
•
transactions with parties related to us.
EMPLOYEES
We set out below the total number of our employees and the various departments in which
they serve for the FY1997, FY1998 and FY1999.
FY1997
FY1998
FY1999
4
8
11
Technical Team
17
33
49
Marketing Team
8
14
25
Accounting & Finance Department
3
3
3
32
58
88
Human Resource and
Administrative Department
Total Number
Substantially all of our employees are located in PRC. Relations between the management and
the staff are good and there has not been any disputes between our Group and our employees.
Share Ownership
Save for that disclosed on page 94 under “Information on Directors and Executive Officers”, no
Director or Executive Officer holds any Shares in the Company.
70
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A.
MAJOR SHAREHOLDERS
Before the Invitation
The shareholders of the Company and their respective direct and indirect shareholdings
immediately before the Invitation are set out below.
Direct Interests
Number of Shares
registered in
the names
of Directors
and substantial
shareholders
%
Indirect Interests*
Number of Shares
%
in which Directors
and substantial
shareholders are
deemed to have
an interest
Wang Xiaochuan
28,697,200
14.0
163,984,000
80.0
Gao Junhua
10,249,000
5.0
163,984,000
80.0
2,049,800
1.0
—
—
163,984,000
80.0
—
—
Total
204,980,000
100.0
Song Shenghong
* Our Executive Directors, Wang Xiaochuan, Gao Junhua and Song Shenghong owns 70%, 25% and 5% of ESP
Associates respectively. Wang Xiaochuan and Song Shenghong are deemed to be interested in the shareholding of
ESP Associates in our Company by virtue of their interests of 70% and 25% respectively in ESP Associates.
After the Invitation
The shareholders of the Company and their respective direct and indirect shareholdings
immediately after the Invitation are set out below:
Direct Interests
Number of Shares
registered in
the names
of Directors
and substantial
shareholders
Wang Xiaochuan
%
Indirect Interests*
Number of Shares
%
in which Directors
and substantial
shareholders are
deemed to have
an interest
19,703,200
7.7
163,984,000
63.8
Gao Junhua
7,037,000
2.7
163,984,000
63.8
Song Shenghong
1,406,800
0.6
—
—
163,984,000
63.8
—
—
64,849,000
25.2
—
—
256,980,000
100.0
Public
Total
* Our Executive Directors, Wang Xiaochuan, Gao Junhua and Song Shenghong own 70%, 25% and 5% of ESP
Associates respectively. Wang Xiaochuan and Song Shenghong are deemed to be interested in the shareholding of
ESP Associates in our Company by virtue of their interests of 70% and 25% respectively in ESP Associates.
Our Company has only issued ordinary shares of HK$0.05. The voting rights of our shareholders
are set out on page 128 of this Prospectus. In particular, our shareholders do not have different
voting rights. Same as disclosed there is no change in percentage ownership of our major
shareholders since our incorporation.
71
Moratorium
To demonstrate their commitment to the Group, Wang Xiaochuan and ESP Associates who will
own an aggregate of 7.67% and 63.81% of our Company’s share capital respectively after the
Invitation has given his/ its undertaking that he/ it will not dispose or transfer any part of his/ its
interest in the Company for a period of 6 months commencing from the date of admission of
the company to the Official List of the SGX-ST, and for a further period of 6 months thereafter,
will not reduce his/ its interest to below 50% of his/ its shareholding as at the date of this
Prospectus.
Furthermore, each of Wang Xiaochuan, Gao Junhua and Song Shenghong who own 70%, 25%
and 5% respectively of the issued share capital in ESP Associates Limited, has given their
undertaking that they will not dispose off or transfer any part of their respective interests in
ESP Associates Limited for a period of 12 months commencing from the date of admission of
our Company to the Official List of the SGX-ST.
B.
RELATED PARTY TRANSACTIONS
In general, transactions between our Group and any of its interested person (namely, the
Directors, chief executive officers or the substantial shareholders of our Company or the
associates of such directors, chief executive officers or substantial shareholders) are known as
interested person transactions. Save as disclosed below and “Restructuring Exercise” at page
48 of this Prospectus, our Group does not have any transactions with any of our interested
persons.
The Co-operative Joint Venture Agreement
Under the terms of the co-operative joint venture agreement dated 8 December 1992, between
Benep and Yitian Software (details of Benep and Yitian Software are set out on “Our Group
Structure” on page 49 of this Prospectus) pursuant to which the co-operative joint venture
company, Huatong was formed, an annual fee of RMB 100,000 is payable to Yitian Software as
set out on “Our Group Structure - Note 3” on page 49 of this Prospectus. Under the cooperative joint venture agreement (“Agreement”), Benep is entitled to receive all profits from
Huatong after paying Yitian Software a fixed fee of RMB100,000 per annum. The shareholders
of Yitian Software and the percentage of their shareholding in Yitian Software are Gao Junhua,
Song Shenghong and Zhang Yu and 70%, 20% and 10% respectively. Gao Junhua and Song
Shenghong are Executive Directors of our Group and Zhang Yu is an Executive Officer of our
Group.
Subsequently, Benep and Yitian Software entered into a supplementary agreement dated 16
March 2000, whereby the registered capital of Huatong was increased from RMB 2 million to
RMB 5 million, and the term of the joint venture was extended by another 20 years. A second
supplementary agreement dated 9 June 2000 was entered into by Benep and Yitian Software
to amend its articles of association so that the articles of association of Huatong complies with
the requirements of the Listing Manual of the SGX-ST.
The Agreement also provides that the management of Huatong is vested in the board of directors
of Huatong which shall comprise of three directors, two of which shall be appointed by Benep
and one by Yitian Software.
Save as disclosed herein, there is no arrangement or understanding with major shareholders,
suppliers or others, pursuant to which such person was selected as a director or member of
senior management.
72
The loan made by Wang Xiaochuan to Huatong
On November 1996, Wang Xiaochuan, a director of our Company advanced the sum of RMB
1,000,000 to Huatong to be used as working capital. Wang Xiaochuan charged no interest on
the advance to Huatong and the advance was unsecured. Huatong made various payments to
Wang Xiaochuan to repay the advance and it was fully repaid during the year ended 31
December 1998.
Save as disclosed under “Restructuring Exercise” on page 48 and above:(a) No Director, substantial shareholders or Executive Officer of the Group has any interest,
direct or indirect, in any transactions to which the Company was or is to be a party.
(b) No Director, substantial shareholders or Executive Officer of the Group has any interest,
direct or indirect, in any company carrying on the same business or carrying on a similar
trade as the Group.
(c) No Director, substantial shareholders or Executive Officer of the Group has any interest,
direct or indirect, in any enterprise or company that is the group’s customer or supplier of
goods or services.
73
LETTER FROM THE REPORTING ACCOUNTANTS
IN RELATION TO THE PRO FORMA CONSOLIDATED PROFIT FORECAST
FOR THE FINANCIAL YEAR ENDING 31 DECEMBER 2000
7 August 2000
The Board of Directors
Clarendon House
2 Church Street
Hamilton HM 11
Bermuda
Dear Sirs
This letter has been prepared for inclusion in the Prospectus of Cytech Software Limited (the
“Company”) dated 7 August 2000 (the “Prospectus”) in connection with the Invitation in respect of
64,849,000 ordinary shares of HK$0.05 each comprising 52,000,000 New Shares and 12,849,000
Vendor Shares in the capital of the Company.
We have examined the pro forma consolidated profit forecast of the Company and its subsidiary
companies (the “Group”) for the financial year ending 31 December 2000 set out on page 56 of the
Prospectus in accordance with the International Standard on Auditing applicable to the examination
of prospective financial information. The Directors are solely responsible for the pro forma consolidated
profit forecast including the bases and assumptions set out on page 57 of the Prospectus on which
the forecast is based.
Based on our examination of the evidence supporting the assumptions, nothing has come to our
attention to cause us to believe that these assumptions do not provide a reasonable basis for the
forecast. Furthermore, in our opinion, the forecast, so far as the accounting policies and calculations
are concerned, is properly prepared on the basis of the assumptions, is consistent with the accounting
policies normally adopted by the Group, and is presented in accordance with the International
Accounting Standards.
Yours faithfully,
Yours faithfully,
ERNST & YOUNG
ERNST & YOUNG
Singapore
Hong Kong
Tan Wee Khim
Partner
C.T. Kwok
Partner
74
LETTER FROM THE REPORTING ACCOUNTANTS
IN RELATION TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL
STATEMENTS FOR THE FOUR MONTHS ENDED 30 APRIL 2000
7 August 2000
Clarendon House
2 Church Street
Hamilton HM 11
Bermuda
Dear Sirs
This letter has been prepared for inclusion in the Prospectus of Cytech Software Limited (the
“Company”) dated 7 August 2000 (the “Prospectus”) in connection with the Invitation in respect of
64,849,000 ordinary shares of HK$0.05 each comprising 52,000,000 New Shares and 12,849,000
Vendor Shares in the capital of the Company.
We have reviewed the unaudited pro forma consolidated financial statements of the Company and
its subsidiary companies (the “Group”) for the four months ended 30 April 2000 as set out on page
76 of the Prospectus. These financial statements are the responsibility of the Company’s directors.
Our responsibility is to issue a report on these financial statements based on our review.
We conducted our review in accordance with the International Standard on Auditing applicable to
review engagements. This standard requires that we plan and perform the review to obtain moderate
assurance as to whether the financial statements are free of material misstatement. A review is
limited primarily to enquiries of Group personnel and analytical procedures applied to financial data
and thus provides less assurance than an audit. We have not performed an audit and, accordingly,
we do not express an audit opinion.
Based on our review, we are not aware of any material modifications that should be made to the
unaudited pro forma consolidated financial statements in order for such information to be in conformity
with the accounting policies normally adopted by the Group.
Yours faithfully,
Yours faithfully,
ERNST & YOUNG
ERNST & YOUNG
Singapore
Hong Kong
Tan Wee Khim
Partner
C.T. Kwok
Partner
75
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS FOR
THE FOUR MONTHS ENDED 30 APRIL 2000
The unaudited pro forma consolidated financial statements for the four months ended 30 April 2000
set out below have been prepared on the basis of accounting policy consistent with those adopted
in the Accountants’ Report, on pages 77 to 90 of this Prospectus.
Pro forma Consolidated Profit and Loss Account
RMB’000
Turnover
34,833
Cost of sales
(8,343)
Gross profit
26,490
Interest income
85
(2,862)
(3,395)
Profit before tax
20,318
Tax
(2,438)
Net profit attributable to shareholders
17,880
Pro forma Consolidated Balance Sheet
RMB’000
Fixed assets
4,638
Current assets
30,040
Current liabilities
(5,866)
Net current assets
24,174
28,812
Pro forma shareholders’ equity
28,812
76
ACCOUNTANTS’ REPORT
7 August 2000
Clarendon House
2 Church Street
Hamilton HM 11
Bermuda
Dear Sirs,
A.
INTRODUCTION
This report has been prepared for inclusion in the prospectus dated 7 August 2000 (the
“Prospectus”) in connection with the invitation (the “Invitation”) in respect of 64,849,000 ordinary
shares of HK$0.05 each (the “Invitation Shares”) in the capital of Cytech Software Limited (the
“Company”).
The Invitation Shares comprise 52,000,000 new shares and 12,849,000 Vendor shares and will
be offered to the public as follows:
(a) 6,485,000 offer shares (the “Offer Shares”) at S$0.68, payable in cash upon application, for
each Offer Share by way of public offer; and
(b) 58,364,000 placement shares (the “Placement Shares”) at S$0.68, payable in cash upon
application, for each Placement Share by way of placement.
B.
THE COMPANY
The Company was incorporated in Bermuda under the Companies Act 1981 of Bermuda on 9
June 2000 as an exempted company with limited liability in the name of Cytech Software
Limited. At the date of incorporation, the authorised share capital of the Company was
HK$100,000 divided into 2,000,000 ordinary shares of HK$0.05 each. On 27 June 2000,
2,000,000 ordinary shares of HK$0.05 each were issued nil paid to ESP Associates Limited.
The Company is an investment holding company. It was formed to take over the existing
companies of the Group (as defined below), which are engaged in the development of customised
computer software for clients with specific needs in the People’s Republic of China (the “PRC”).
Pursuant to a restructuring exercise, on 2 August 2000, the Company acquired the entire issued
share capital of Benep Management Limited (“Benep”), the then holding company of the
subsidiary company, from the shareholders of Benep, to become the Group’s holding company.
The purchase consideration was based on the consolidated net tangible asset value, of
approximately RMB10,932,000, of Benep Management Limited and its subsidiary company as
at 31 December 1999. The purchase consideration was satisfied by the allotment and issue of
202,980,000 ordinary shares of HK$0.05 each at par, credited as fully paid upon issue, and the
crediting as fully paid of 2,000,000 ordinary shares of HK$0.05 each at par which were alloted
and issued nil paid to ESP Associates Limited on 27 June 2000.
The particulars of the subsidiary companies owned by the Company upon completion of the
restructuring exercise are set out in Section C below.
77
B.
THE COMPANY (continued)
Pursuant to resolutions passed on 2 August 2000 by the sole shareholder of the Company, the
sole shareholder approved, inter alia, the following:
(a) an increase in the authorised share capital of the Company from HK$100,000 to
HK$50,000,000 by the creation of an additional 998,000,000 ordinary shares of HK$0.05
each;
(b) the issue and allotment of 202,980,000 new ordinary shares of HK$0.05 each at par pursuant
to the restructuring exercise, details of which are set out below; and
(c) the crediting as fully paid at par of the 2,000,000 ordinary shares of HK$0.05 each in the
share capital of the Company issued nil paid on 27 June 2000 to ESP Associates Limited.
Pursuant to unanimous resolutions passed on 2 August 2000 by all of the shareholders of the
Company, the shareholders approved, inter alia, the following:
(a) the adoption of a new set of bye-laws of the Company;
(b) the issue and allotment of 52,000,000 new ordinary shares of HK$0.05 each which form
part of the Invitation, on the basis that the new ordinary shares of HK$0.05, when issued
and fully paid, will rank pari passu in all respects with the existing issued shares of the
Company.
At the date of this report, the issued and paid-up share capital of the Company is HK$10,249,000
comprising 204,980,000 ordinary shares of HK$0.05 each. Upon listing, the issued and paid-up
share capital of the Company will be HK$12,849,000 comprising 256,980,000 ordinary shares
of HK$0.05 each.
C.
THE PRO FORMA GROUP
At the date of this report, the Company had the following subsidiary companies (referred to
collectively with the Company as the “Group” or the “pro forma Group”):
Name of company
Date and
country of
incorporation/
establishment
Paid-up
capital
Percentage of
equity interest
attributable
to the Group
Principal activities
10 November 1992
the British Virgin
Islands (the “BVI”)
US$200
100%
Investment holding
12 January 1993
the PRC
RMB2,000,000
100%
Development of
customised software
for clients with specific
needs in the PRC
Held by the Company
Benep Management
Limited
(“Benep”)
Held by Benep
Guangzhou Yitian
Huatong Technology
Corporation Ltd.
(“Huatong”)
(Formerly known as
Guangzhou Huatong
System Engineering
Corp. Ltd)
Neither of the above subsidiary companies is listed on any stock exchange.
On 10 November 1992, Benep was incorporated in the BVI with an authorised capital of
US$50,000 divided into 50,000 ordinary shares of US$1 each of which 100 ordinary shares of
US$1 each were issued at par. On 10 March 1993, a further 100 ordinary shares of US$1 each
were issued at a price of US$3,499 each for working capital.
78
C.
THE PRO FORMA GROUP (continued)
On 12 January 1993, Huatong was established as a sino-foreign cooperative joint venture
company under the name of Guangzhou Huatong System Engineering Corp. Ltd. with a
registered capital of RMB2,000,000. In March 2000, the registered capital of Huatong was
increased from RMB2,000,000 to RMB5,000,000. On the same date, Huatong changed its name
to Guangzhou Yitian Huatong Technology Corporation Ltd. Huatong was established pursuant
to a cooperative joint venture agreement dated 8 December 1992 entered into by Benep and
Guangzhou Yitian Software Company Limited, which is owned by Mr. Gao Junhua and Mr Song
Shenghong, two of the shareholders and directors of the Company. Pursuant to the cooperative
joint venture agreement, Benep was required to contribute 100% of the registered capital of
Huatong. Guangzhou Yitian Software Company Limited is entitled to a fixed annual fee paid by
Huatong whereas Benep is entitled to all the profits or assumes all of the losses, resulting from
the operations of Huatong. In addition, Guangzhou Yitian Software Company Limited has no
rights to receive any surplus in a return of capital upon the winding-up or termination of Huatong’s
operations.
The tenure of the cooperative joint venture agreement, and hence the term of operations of
Huatong is ten years which commenced on 12 January 1993. In March 2000, Huatong obtained
approval from the relevant PRC authorities to extend its term of operations to 12 January 2023.
According to the law of the PRC, the term of operations of Huatong may be further extended
upon the approval of the relevant PRC authorities.
D.
BASIS OF PREPARATION OF PRO FORMA FINANCIAL INFORMATION
The pro forma financial information of the Group presents the historical information as if the
Group as described above was in existence at the beginning of the period covered in this
report.
The pro forma financial information set out in this report is expressed in Renminbi (“RMB”) and
presents the Pro forma Statement of Group Results for each of the three financial years ended
31 December 1999, the Summarised Pro forma Balance Sheets of the Group as at the end of
each of the three financial years ended 31 December 1999, and the Pro forma Statement of
Net Assets as at 31 December 1999 of the Group and of the Company.
The pro forma financial information has been prepared on the assumption that the current
Group structure, as outlined above, had been in existence throughout the periods covered by
the report, or since the respective date of establishment/incorporation of the companies in the
Group, if later. The pro forma financial information is based on the audited financial statements
of Benep and Huatong and has been prepared on the basis of the accounting policies set out
in Section I of this report.
All material intra-Group transactions and balances have been eliminated in the preparation of
the pro forma financial information.
The objective of the pro forma financial information of the Group is to show what the historical
information might have been had the Group existed at an earlier date. However, the pro forma
financial information of the Group is not necessarily indicative of the results of the operations
or the related effects on the financial position that would have been attained had the above
mentioned Group actually existed earlier.
The Company is a newly incorporated company. It has not prepared any audited financial
statements. Ernst & Young Hong Kong has performed an independent review of all of the
relevant transactions of the Company since the date of its incorporation up to the date of this
report.
79
D.
BASIS OF PREPARATION OF PRO FORMA FINANCIAL INFORMATION (continued)
The financial statements of Huatong for the three financial years ended 31 December 1999
were prepared under applicable accounting regulations in the PRC. The financial statements of
Huatong for the two financial years ended 31 December 1998 and the financial year ended 31
December 1999 were audited by Guangzhou Zhong-Nan Certified Public Accountants and
Zhongqin Certified Public Accountants, firms of certified public accountants in the PRC,
respectively, for the PRC tax reporting purposes.
No audited financial statements have been prepared by Benep since its date of incorporation
because its financial statements are not required to be audited under the laws of the BVI.
For the purpose of this report, Ernst & Young Hong Kong has performed an independent audit
of the consolidated financial statements of Benep and its subsidiary company, Huatong, for
each of the three financial years ended 31 December 1999. The Ernst & Young Hong Kong
auditors’ reports on the consolidated financial statements of Benep and its subsidiary company,
Huatong, for the three financial years ended 31 December 1999 were unqualified.
E.
PRO FORMA STATEMENT OF GROUP RESULTS
The Pro forma Statements of Group Results for each of the three financial years ended 31
December 1999, prepared on the basis set out in Section D above is as follows:
Notes
Turnover
J1
Cost of sales
Gross profit
Interest income
Profit from operating activities
Financial expenses
Year ended 31 December
1997
1998
1999
RMB’000
RMB’000
RMB’000
7,626
19,230
42,977
(3,393)
(7,581)
(12,446)
4,233
11,649
30,531
26
22
422
(328)
(2,134)
(4,596)
(1,803)
(3,117)
(5,795)
2,128
6,420
20,562
—
—
(112)
Profit before tax
J2
2,016
6,420
20,562
Tax
J3
—
—
—
2,016
6,420
20,562
—
2,600
13,600
3.13 cents
10.03 cents
Net profit attributable to
shareholders of the Company
Dividends
Earnings per share — basic (RMB)#
#
0.98 cents
These pro forma earnings per share are computed based on the pre-Invitation number of shares of 204,980,000.
80
F.
STATEMENT OF ADJUSTMENTS
The pro forma financial information set out in this report has been consolidated based on the
audited financial statements of the companies in the pro forma Group as if the Group was
already in existence on 1 January 1997 based on the restructuring exercise set out in
Section B.
The Group, except for the Company, was already in existence at 1 January 1997. The Company’s
principal activity is to act as the holding company of the other companies in the pro forma
Group. No income or expense has been presumed to have been earned or incurred by the
Company since 1 January 1997. Therefore, there is no difference between the operating profit
for each of the three financial years ended 31 December 1999 shown in the audited consolidated
financial statements of Benep and its subsidiary company, Huatong, and the operating profit for
the same periods as set out in Section E “Pro forma Statement of Group Results”.
G.
SUMMARISED PRO FORMA BALANCE SHEETS OF THE GROUP
The Summarised Pro forma Balance Sheets of the Group, as at the end of each of the three
financial years ended 31 December 1999, prepared on the basis set out in Section D above,
are as follows:
1997
RMB’000
Fixed assets
Current assets
Current liabilities
As at 31 December
1998
1999
RMB’000
RMB’000
289
1,752
4,967
1,434
5,211
13,795
(1,573)
(2,993)
(7,830)
(139)
2,218
5,965
150
3,970
10,932
150
3,970
10,932
Represented by:Pro forma shareholders’ equity
The movements in the pro forma shareholders’ equity of the Group for each of the three financial
years ended 31 December 1999, prepared on the basis set out in Section D above, are as
follows:
1997
1998
1999
RMB’000
RMB’000
RMB’000
At beginning of year
(1,866)
Net profit attributable to shareholders
of the Company
2,016
Dividends
—
At end of year
150
81
150
3,970
6,420
20,562
(2,600)
(13,600)
3,970
10,932
H.
PRO FORMA STATEMENT OF NET ASSETS
The following Pro forma Statement of Net Assets sets out the net assets of the Group and of
the Company as at 31 December 1999:
Notes
Group
RMB’000
Company
RMB’000
Fixed assets
K1
4,967
—
Subsidiary companies
K2
—
10,932
K3
969
—
3,934
—
2,557
—
6,335
—
13,795
—
765
—
Current assets
Inventories
Trade debtors
Deposits, prepayments and other receivables
K4
Cash and bank balances
Current liabilities
Trade creditors
Deposits received and accruals
K5
3,182
—
Deferred income
K6
883
—
3,000
—
7,830
—
5,965
—
10,932
10,932
10,932
10,932
Proposed dividend
Net current assets
Represented by:Pro forma shareholders’ equity
82
I.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies, which have been consistently applied in preparing the pro
forma financial information set out in this report, are as follows:
1.
Basis of accounting
The financial statements of the Company and of the Group are prepared under the historical
cost convention.
All of the Group’s operations are conducted in the PRC. Accordingly, the financial statements
have been prepared in RMB, being the functional currency of the PRC subsidiary company
in the Group.
The financial statements are prepared in accordance with International Accounting Standards.
2.
Basis of consolidation
The accounting year of the Company and all its subsidiary companies in the Group ends
on 31 December and the consolidated financial statements incorporate the financial
statements of the Company and all of its subsidiary companies. The results of subsidiary
companies acquired or disposed of during the year are included in or excluded from the
respective dates of acquisition or disposal, as applicable. Intercompany transactions are
eliminated on consolidation and the consolidated financial statements reflect external
transactions only.
Assets, liabilities and results of non-PRC companies in the Group are translated into RMB
on the basis outlined in paragraph 11 below.
3.
Revenue recognition
Revenue is recognised when it is probable that the economic benefits will flow to the
Group and when the revenue can be measured reliably, on the following bases:
(a) on the rendering of services, based on the stage of completion basis as further explained
on the accounting policy for “contracts for services” in paragraph 9 below;
(b) on the sale of goods, when the significant risks and rewards of ownership have been
transferred to the buyer, provided that the Group maintains neither managerial
involvement to the degree usually associated with ownership, nor effective control over
the goods sold;
(c) maintenance service income, on a time proportion basis over the period of the contract.
The unrecognised portion is recorded as deferred income in the balance sheet; and
(d) interest income, on a time proportion basis taking into account the principal outstanding
and the effective interest rate applicable.
4.
Research and development costs
All research costs are charged to the profit and loss account as incurred.
Expenditure incurred on projects to develop new products is capitalised and deferred only
when the projects are clearly defined; the expenditure is separately identifiable and can be
measured reliably; there is reasonable certainty that the projects are technically feasible;
and the products have commercial value. Product development expenditure which does
not meet these criteria is expensed when incurred.
83
I.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
4.
Research and development costs (continued)
Deferred development costs are amortised using the straight-line basis over the commercial
lives of the underlying products not exceeding five years, commencing from the date when
the products are put into commercial production.
5.
Operating leases
Leases where substantially all the rewards and risks of ownership of assets remain with
the lessor are accounted for as operating leases. Rentals applicable to such operating
leases are charged to the profit and loss account on the straight-line basis over the lease
terms.
6.
Fixed assets and depreciation
Fixed assets are stated at cost less accumulated depreciation. The cost of an asset
comprises its purchase price and any directly attributable costs of bringing the asset to its
working condition and location for its intended use. Expenditure incurred after the fixed
assets have been put into operation, such as repairs and maintenance, is normally charged
to the profit and loss account in the period in which it is incurred. In situations where it can
be clearly demonstrated that the expenditure has resulted in an increase in the future
economic benefits expected to be obtained from the use of the fixed asset, the expenditure
is capitalised as an additional cost of that asset.
Depreciation is calculated on the straight-line basis to write off the cost of each asset over
the following estimated useful lives:
Leasehold improvements
The shorter of the lease terms and 5 years
Computer equipment
5 years
Furniture, fixtures and office equipment
5 years
Motor vehicles
5 years
The gain or loss on disposal or retirement of a fixed asset recognised in the profit and loss
account is the difference between the net sales proceeds and the carrying amount of the
relevant asset.
7.
A subsidiary company is a company in which the Company, directly or indirectly, controls
more than half of its voting power or controls the composition of its board of directors.
Interests in subsidiary companies are stated at cost unless, in the opinion of the directors,
there have been permanent diminutions in values, when they are written down to values
determined by the directors.
8.
Inventories
Inventories, representing computer hardware are stated at the lower of cost and net realisable
value after making due allowance for obsolete or slow-moving items. Cost is determined on
the first-in, first-out basis. Net realisable value is based on estimated selling prices less
any estimated costs to be incurred to completion and disposal.
84
I.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
9.
Contracts for services
Contract revenue on the rendering of services comprises the agreed contract amount. Costs
of rendering services comprise labour and other costs of personnel directly engaged in
providing the services and attributable overheads.
Revenue on the rendering of services is recognised based on the stage of completion of
the contract, provided that this and the costs incurred as well as the estimated costs to
completion can be measured reliably. The stage of completion of a contract is established
by reference to physical completion of a particular phase of the contract.
Provision is made for foreseeable losses as soon as they are anticipated by management.
10. Tax
PRC income tax is provided on income at rates applicable to enterprises in the PRC on
the income for financial reporting purposes, and is adjusted for income and expense items
which are not assessable or deductible for income tax purposes.
Deferred income tax is provided, using the liability method, on all temporary differences at
the balance sheet date between the tax bases of assets and liabilities and their carrying
amounts for financial reporting purposes. Deferred tax liabilities are recognised for all taxable
temporary differences. Deferred tax assets are recognised for all deductible temporary
differences, carry-forward of unused tax assets and unused tax losses, to the extent that it
is probable that taxable profit will be available against which the deductible temporary
differences, carry-forward of unused tax assets and unused tax losses can be utilised.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply
to the period when the asset is realised or the liability is settled, based on tax rates that
have been enacted or subsequently enacted at the balance sheet date.
11. Foreign currencies
Transactions arising in foreign currencies during the years are translated into RMB at the
applicable rates of exchange ruling at the transaction dates. Monetary assets and liabilities
denominated in foreign currencies at the balance sheet date are translated at the applicable
rates of exchange ruling at that date. Exchange differences are dealt with in the profit and
loss account.
On consolidation, the results of non-PRC companies in the Group are translated into RMB
at the applicable rate of exchange ruling at the dates of the transactions and the assets
and liabilities of non-PRC companies are translated into RMB at the applicable rates of
exchange ruling at the balance sheet date. The resulting translation differences, if any, are
included in the exchange fluctuation reserve.
12. Related parties
Parties are considered to be related if one party has the ability, directly or indirectly, to
control the other party, or exercise significant influence over the other party in making
financial and operating decisions. Parties are also considered to be related if they are
subject to common control or common significant influence. Related parties may be
individuals or corporate entities.
85
J.
NOTES TO PRO FORMA STATEMENT OF GROUP RESULTS
1.
Turnover
Turnover represents the invoiced value of services rendered and the net invoiced value of
goods sold, after allowance for returns and trade discounts, and after elimination of all
significant intra-Group transactions.
Turnover comprises revenue from the following activities:
1997
1998
1999
RMB’000
RMB’000
RMB’000
2.
Sales of software products
and provision of services
5,413
14,482
36,395
Sales of hardware products
2,213
4,748
6,582
7,626
19,230
42,977
Profit before tax
Profit before tax is arrived at after charging:
1997
1998
1999
RMB’000
RMB’000
RMB’000
Depreciation of fixed assets
79
269
731
Operating lease rentals in respect of
land and buildings
297
386
585
Research and development costs
136
132
693
Directors’ remuneration
360
496
810
1,249
2,832
5,052
Auditors’ remuneration
180
300
300
Interest on unsecured other loans
112
—
—
Staff costs
(excluding directors’ remuneration)
3.
Tax
No income tax has been provided because the Group did not generate any assessable
profits during the three financial years ended 31 December 1999.
The Group’s major operations are in the PRC and are subject to the tax charges applicable
in the PRC.
According to the Income Tax Law of the PRC, Huatong is exempted from income tax for
the first two profitable years of operations. Accumulated tax losses carried forward by
Huatong, not exceeding a period of five years, can be applied to offset against subsequent
financial years’ profits to arrive at the assessable profits for income tax computation purposes.
Huatong was exempted from income tax from 1 January 1998 to 31 December 1999 being
its first two profitable financial years. Huatong is also entitled to a 50% relief from income
tax for the following three financial years from 1 January 2000 to 31 December 2002,
resulting in a reduced tax rate of 12% for these three financial years from 1 January 2000
to 31 December 2002. Upon expiry of the tax relief period, the full income tax rate of 24%
is applicable to Huatong.
No deferred taxation has been provided because the Group did not have any significant
timing differences at the balance sheet dates.
86
J.
NOTES TO PRO FORMA STATEMENT OF GROUP RESULTS (continued)
4.
Related party transactions
(a) The Group paid annual fees of RMB100,000 for each of the three financial years ended
31 December 1999 to Guangzhou Yitian Software Company Limited which is owned by
Mr. Gao Junhua and Mr. Song Shenghong, two of the shareholders and directors of the
Company. The details of the arrangement are set out in Section C.
(b) During the two financial years ended 31 December 1997 and 1998, a director of the
Company, Mr. Wang Xiaochuan, made advances to the Group. The balance due to the
director amounted to approximately RMB145,000 as at 31 December 1997 and was
fully repaid during the financial year ended 31 December 1998. The amount due to the
director was unsecured, interest-free and had no fixed terms of repayment.
(c) At the date of this report, the directors consider ESP Associates Limited, a company
incorporated in the British Virgin Islands, to be the Company’s ultimate holding company.
K.
NOTES TO PRO FORMA STATEMENT OF NET ASSETS
1.
Fixed assets
Group
Leasehold
improvements
RMB’000
Computer
equipment
RMB’000
Furniture,
fixtures
and office
equipment
RMB’000
Motor
vehicles
RMB’000
Total
RMB’000
Cost:
At 1 January 1999
319
567
67
1,322
2,275
Additions
1,802
629
152
1,364
3,947
At 31 December 1999
2,121
1,196
219
2,686
6,222
At 1 January 1999
136
179
27
182
524
Provided during the year
107
113
110
401
731
At 31 December 1999
243
292
137
583
1,255
1,878
904
82
2,103
4,967
Accumulated depreciation:
Net book value:
At 31 December 1999
2.
Company
RMB’000
Unquoted shares, at cost
10,932
The details of the subsidiary companies as at the date of this report are set out in Section
C.
3.
Inventories
Inventories represent computer hardware held for resale. No inventories were stated at net
realisable value as at 31 December 1999.
87
K.
NOTES TO PRO FORMA STATEMENT OF NET ASSETS (continued)
4.
Deposits, prepayments and other receivables
Group
RMB’000
Deposits
74
Prepayments
1,782
Other receivables
701
2,557
5.
Deposits received and accruals
Group
RMB’000
Customers’ deposits received
1,716
Accrued operating expenses
1,466
3,182
6.
Deferred income
Deferred income represents maintenance service fees received in advance.
7.
Share capital
Company
HK$’000
RMB’000
Authorised:
1,000,000,000 ordinary shares of HK$0.05 each
50,000
53,330
Issued and fully paid:
204,980,000 ordinary shares of HK$0.05 each
10,249
10,932
The above represents the pre-Invitation authorised, issued and paid-up share capital of the
Company after the restructuring exercise set out in Section B.
8.
Operating lease commitments
The Group leases certain properties under lease agreements. At 31 December 1999, total
commitments for lease payments for all leases were as follows:
Group
RMB’000
Within one year
656
In the second to fifth years, inclusive
959
1,615
The Company did not have any significant operating lease commitments as at 31 December
1999.
88
K.
NOTES TO PRO FORMA STATEMENT OF NET ASSETS (continued)
9.
Capital commitments
The Group and the Company did not have any significant capital commitments as at 31
December 1999.
10. Fair values of financial instruments
At 31 December 1999, the Group’s financial instruments mainly consisted of cash and
bank balances, trade debtors, other debtors and trade creditors. The carrying amounts of
these financial instruments approximate their fair values because of the immediate or short
term maturity of these financial instruments.
L.
SUBSEQUENT EVENTS
Subsequent to 31 December 1999, the following events occurred:
(a) In March 2000, the registered capital of Huatong was increased from RMB2,000,000 to
RMB5,000,000. On the same date, Huatong changed its name from Guangzhou Huatong
System Engineering Corp. Ltd to Guangzhou Yitian Huatong Technology Corporation Ltd.
(b) On 30 June 2000, Benep paid an interim dividend of RMB15,000,000 in respect of its profit
for the year ending 31 December 2000 to its existing shareholders.
(c) The companies now comprising the Group undertook a restructuring exercise in connection
with the Invitation, the details of which are set out in Section B.
M.
NET TANGIBLE ASSETS BACKING
The net tangible assets backing of the Group for each ordinary share of HK$0.05 each is
based on the Statement of Net Assets of the Group as at 31 December 1999 after taking into
account the restructuring exercise and the proceeds and the estimated expenses arising from
the issue of the new shares which form part of the Invitation:
Group
RMB’000
Net tangible assets
Net tangible assets as at 31 December 1999
Add:
10,932
Estimated proceeds from the issue of 52,000,000 new shares
of HK$0.05 each
at S$0.68 per share which form part of the Invitation
(translated at S$100 to RMB486.7)
172,097
Less: Estimated expenses arising from the issue of new shares
(13,105)
Net tangible assets after issue of new shares
169,924
89
M.
NET TANGIBLE ASSETS BACKING (continued)
Number of
ordinary shares
Issued share capital
Issued and allotted nil paid share capital on 27 June 2000
2,000,000
Issue of shares pursuant to the restructuring exercise set out in
Section B
202,980,000
Pre-Invitation
204,980,000
Issue of 52,000,000 new shares of HK$0.05 each which form
part of the Invitation
52,000,000
Post-Invitation
256,980,000
RMB
Net tangible assets backing for each ordinary share of HK$0.05 each
— after restructuring exercise but before issue of new shares
5.3 cent
— after restructuring exercise and issue of new shares
N.
66.1 cent
DIVIDENDS
(a) No dividend has been declared or paid by the Company since the date of its incorporation.
The dividends declared by a subsidiary company, Benep, to its then shareholders during
the three financial years ended 31 December 1999 amounted to nil, RMB2,600,000 and
RMB13,600,000, respectively.
(b) On 30 June 2000, Benep further paid an interim dividend of RMB15,000,000 in respect of
its profit for the financial year ending 31 December 2000 to its existing shareholders.
O.
AUDITED FINANCIAL STATEMENTS
No audited financial statements of the Company and the Group have been prepared for any
period subsequent to 31 December 1999.
Yours faithfully,
Yours faithfully,
ERNST & YOUNG
ERNST & YOUNG
Singapore
Hong Kong
Tan Wee Khim
Partner
C.T. Kwok
Partner
90
ADDITIONAL INFORMATION
SHARE CAPITAL
Our Company was incorporated in Bermuda on 9 June 2000 under the Bermuda Act as an
exempted company with limited liability. At the date of incorporation, the authorised share capital
of our Company was HK$100,000 divided into 2,000,000 ordinary shares of HK$0.05 each. We
have only one class of shares, namely the ordinary shares of par value HK$0.05. Our Company’s
constitution is its Memorandum of Association and its Bye-laws. Our Company has not established
a place of business in Singapore as at the date of the Prospectus.
On 27 June 2000, 2,000,000 ordinary shares of HK$0.05 each in the share capital of the
Company were allotted and issued nil paid to ESP Associates Limited.
Pursuant to resolutions passed by ESP Associates Limited on 2 August 2000, acting as the
sole shareholder of the Company, the Company approved the following:
(a) an increase in the authorised share capital of the Company from HK$100,000 to
HK$50,000,000 by the creation of an additional 998,000,000 ordinary shares of HK$0.05
each; and
(b) the Restructuring Exercise (including the crediting of the nil paid ordinary shares of HK$0.05
each which were allotted and issued to ESP Associates Limited, as fully paid-up), details
of which are set out on page 48 of this Prospectus, under “Restructuring Exercise”.
Pursuant to resolutions passed on 2 August 2000 by all shareholders of our Company, the
shareholders approved the following:(a) the adoption of a new set of Bye-laws of the Company;
(b) the allotment and issue of 52,000,000 New Shares which, together with the 12,849,000
Vendor Shares, are the subject of the Invitation;
(c) the service agreements between the Executive Directors and the Executive Officers and
ourselves and the remuneration payable to the independent Directors.
Pursuant to the resolutions in writing referred to above, the shareholders also authorised the
Directors to issue further Shares (in addition to the 52,000,000 New Shares) (whether by way
of rights, bonus or otherwise) from time to time provided that the aggregate number of such
shares to be issued does not exceed 50 per cent. of the issued share capital of the Company
for the time being and provided that the aggregate number of Shares to be issued other than
on a pro-rata basis to shareholders of the Company does not exceed 20 per cent. of the
issued share capital of the Company for the time being.
91
Details of the issued and paid-up share capital of our Company since 9 June 2000, being the
date of incorporation of our Company, and its issued and paid-up capital immediately after the
Invitation are as follows:
Par
Value
(HK$)
Issue Price/
Consideration
(HK$)
Resultant
issued
Share
capital
(HK$)
Number
of shares
Date of Issue
Purpose of Issue
27 June 2000
Issued nil-paid ordinary
shares of HK$0.05
0.05
—
2,000,000
—
2 August 2000
Issued fully paid-up ordinary
shares of HK$0.05 each upon
the completion of the
Restructuring Exercise
0.05
10,149,000
202,980,000
10,149,000
2 August 2000
Credited as fully paid at par the
2,000,000 ordinary shares at
par of HK$0.05 that were issued
as nil-paid on 27 June 2000
0.05
100,000
—
100,000
Pre-Invitation issued share
capital
0.05
—
204,980,000
10,249,000
New Shares to be issued for
public subscription
0.05
—
52,000,000
2,600,000
Post-Invitation issued share
capital
0.05
—
256,980,000
12,849,000
The authorised share capital and the shareholders’ funds of our Company as at the date of this
Prospectus before and after adjustments to reflect the issue of New Shares are set forth below.
These statements should be read in conjunction with the Accountants’ Report set out on pages
77 to 90 of this Prospectus.
As at
9 June 2000
(date of incorporation)
HK$
After the
Restructuring
Exercise
HK$
After the
Invitation
HK$
100,000
50,000,000
50,000,000
Issued and fully paid shares
—
10,249,000
12,849,000
Share premium
—
—
145,990,000
Shareholders’ funds
—
10,249,000
158,839,000
Authorised Share Capital
Ordinary shares of HK$0.05 each
Shareholders’ Funds
92
DIRECTORS’ REPORT
7 August 2000
The Shareholders
Clarendon House
2 Church Street
Hamilton HM 11
Bermuda
Dear Sirs
This report has been prepared for inclusion in the prospectus dated 7 August 2000 (the “Prospectus”)
in connection with the invitation in respect of 64,849,000 ordinary shares of HK$0.05 each (the
“Shares”) in the capital of Cytech Software Limited (the “Company”) comprising 52,000,000 New
Shares and 12,849,000 Vendor Shares.
On behalf of the Directors of the Company, I report that, having made due inquiry in relation to the
period between 31 December 1999, the date to which the last audited consolidated accounts of the
Company and its subsidiaries were made up, and the date hereof:(a)
the business of the Company and each of its subsidiaries has, in the opinion of the Directors,
been satisfactorily maintained;
(b)
in the opinion of the Directors, no circumstances have arisen since the last Annual General
Meeting of the Company which adversely affect the trading or the value of the assets of the
Company or any of its subsidiaries;
(c)
the current assets of the Company and its subsidiaries appear in the books at values which are
believed to be realisable in the ordinary course of business;
(d)
no contingent liabilities have arisen by reason of any guarantees given by the Company or its
subsidiaries; and
(e)
save as disclosed on page 91 to page 92 of the Prospectus, there has been no change in the
published reserves or any unusual factors affecting the profits of the Company and its subsidiaries
since 31 December 1999, the date to which the last audited accounts of the Company and its
subsidiaries were made up.
Yours faithfully
for and on behalf of
the Board of Directors
Wang Xiaochuan
93
GENERAL AND STATUTORY INFORMATION
Information on Directors and Executive Officers
1.
The name, age, address, principal occupation and business and working experience of each of
our Directors and Executive Officers are set out on pages 66 to 67 of this Prospectus.
2.
The present and past directorships (held in the five years preceding the date of this Prospectus)
of each of our Directors in other companies are set out below:Wang Xiaochuan
Present
Benep Management Limited (BVI)
ESP Associates Limited (BVI)
Guangzhou Yitian Huatong Technology Corporation Ltd. (PRC)
Past
K.C. Island Enterprise Co. (Hong Kong)
Gao Junhua
Present
Guangzhou Yitian Software Company Limited (PRC)
Past
nil
Song Shenghong
Present
Guangzhou Yitian Software Company Limited (PRC)
Past
nil
Chng Hee Kok
Present
Dahl Consultants Pte Ltd
Dahl System Marketing Pte Ltd
Pacific Century Regional Developments Ltd
Compact Metal Industries Ltd
Singapore Power Ltd
Lung Kee Metal Holdings Ltd (incorporated in Bermuda)
SLF Management Services Pte Ltd
SLF Properties Pte Ltd
Samudera Shipping Line Ltd
Brilliant Manufacturing Ltd
NTUC Club Investments Pte Ltd
NCI Management Services Pte Ltd
NTUC Link Pte Ltd
NCI Leisure Pte Ltd (formerly known as N and Safe)
NTUC Jurong Lifestyle Centre Pte Ltd
Lifestyle & Leisure Investments Pte Ltd
L&M Group Investments Ltd
Ho Lee Group Pte Ltd
LeisureQuest Pte Ltd
E-Commerce Gateway Pte Ltd
Calendarone.com Pte Ltd
Onemedhub.com Pte Ltd
Explorerkid.com Pte Ltd
94
Past
Ambrose Realty Pte Ltd
Astacorp Sdn Bhd
Berkeley Cleaning Pte Ltd
BS Group plc
Cambrone Pte Ltd
Cell Communication Pte Ltd
Chancery Saigon Hotel Ltd
Craydon Pte Ltd
Essential Services Pte Ltd
Forlidas Investments Pte Ltd
Funpolis Asia Pte Ltd
Gerald Fields & Co Pte Ltd
Javana Pte Ltd
Khong Guan Realty Pte Ltd
Kokusai Ninjukai Pte Ltd
Manhattan House Car-Parks Service (Pte) Ltd
Mawar Investments Pte Ltd
Modern Packaging Industries Pte Ltd
Nobel Design Holdings Ltd
Paling Perkasa Sdn Bhd
PDCI Sdn Bhd
Pioneer Die-Casting Industries Pte Ltd
Powergas Limited
Powersenoko Limited
Powerseraya Limited
Powergrid Limited
Premium Systems Technology Pte Ltd
Progressive Building Services Pte Ltd
Seapower Realty Pte Ltd
Sembsita Pte Ltd
Sim Lim Building Services Pte Ltd
Sim Lim Engineering Pte Ltd
Singapore Environment Council
Sita Holdings (S) Pte Ltd
Sitaclean Technologies (S) Pte Ltd
Sita Pest Control & Fumigation Services Pte Ltd
Summa Impex Pte Ltd
Summa Square Pte Ltd
Summavina Investments Pte Ltd
Sun Yuan Holdings Pte Ltd
The Ascott Limited
Tower Computer Systems Pte Ltd
Tropicon Contractors Pte Ltd
United Paper Industries Pte Ltd
United Pulp & Paper Company Ltd
UPP Investment (Asia) Pte Ltd
Venecia Singapore Pte Ltd
Sitoh Yih Pin
Present
Chinese Development Assistance Council
Singapore Institute of Directors
Meiban Plastic Ltd
Labroy Marine Limited
Lian Beng Group Ltd
KS Tech Ltd
Nera Telecommunications Ltd
Asia Quest Associates Pte Ltd
Takenaka Partners Globalink Pte Ltd
95
AQA Associates Pte Ltd
Tan & Sitoh Management Consultants Pte Ltd
TSA Recruitment Consultants Pte Ltd
TSA Capital Pte Ltd
Onemedhub.com Pte Ltd
Fin2Biz.com Pte Ltd
U T Direct.com Pte Ltd
Past
Kaki Bukit Industrial Park Pte Ltd
OM Global Ventures Pte Ltd
Mountamount (Singapore) Pte Ltd
ABC Consultants (Singapore) Pte Ltd
Greenvest Pte Ltd
3.
Save as set out below, none of our Executive Officers have held any directorships, whether
present or past, in the five years preceding the date of this Prospectus, in other companies.
Zhang Yu
Present
Guangzhou Yitian Software Company Limited
Past
Nil
Cheung Kin Wah
Present
nil
Past
nil
4.
None of our Directors has any family relationship with other Directors or with any of our Executive
Officers or substantial shareholders of our Company.
5.
None of our Executive Officers has any family relationship with other Executive Officers or with
any of our Directors or substantial shareholders of our Company.
6.
None of our Directors or Executive Officers,
(a) was in the last 10 years involved in a petition under any bankruptcy laws in any jurisdiction
filed against him.
(b) was in the last 10 years a partner in any partnership involved in a petition under any
bankruptcy laws in any jurisdiction filed against him in the last 10 years, while he was a
partner of that partnership.
(c) was in the last 10 years a director or executive officer of any corporation involved in a
petition under any bankruptcy laws in any jurisdiction filed against it while he was such a
director or executive officer.
(d) has any unsatisfied judgements outstanding against him.
(e) has been convicted of any offence, in Singapore or elsewhere, involving fraud or dishonesty
punishable with imprisonment for 3 months or more, or charged for violation of any securities
laws. Further, no Director or Executive Officer is subject to any such pending criminal
proceeding.
(f)
has been convicted of any offence, in Singapore or elsewhere, involving a breach of any
securities or financial market laws, rules or regulations.
96
(g) has received any judgement against him in any civil proceeding in Singapore or elsewhere
in the last 10 years involving fraud, misrepresentation or dishonesty. No Director or Executive
Officer is subject to any such pending civil proceeding.
(h) has been convicted in Singapore or elsewhere of any offence in connection with the formation
or management of any corporation.
(i)
has ever been disqualified from acting as a director of any company, or from taking part in
any way directly or indirectly in the management of any company.
(j)
has ever been subject to any order, judgement or ruling of any court of competent jurisdiction,
tribunal or governmental body permanently or temporarily enjoining him from engaging in
any type of business practice or activity.
7.
The aggregate remuneration paid to our Directors for services rendered in all capacities to our
Company and our subsidiaries for the last financial year ended 1999 was RMB810,000. For the
current financial year ending 2000, the aggregate remuneration payable to Directors by our
Group is estimated to be HK$2,400,000 .
8.
Save as disclosed under “Compensation” on page 69 of this Prospectus, there are no existing
or proposed service contracts between our Executive Directors or Executive Officers and our
Company or any of our subsidiaries.
9.
There is no shareholding qualification for Directors.
10.
No option to subscribe for shares in, or debentures of, our Company or any of our subsidiaries
has been granted to, or was exercised by, any of our Directors or Executive Officers within the
last financial year.
11.
Save as disclosed under “Related Party Transactions” on page 72 and “Restructuring Exercise”
on page 48 of this Prospectus, none of our Directors is interested, directly or indirectly, in the
promotion of, or in any property or assets which have, within the two years preceding the date
of this Prospectus, been acquired or disposed of by or leased to, our Company or any of our
subsidiaries, or are proposed to be acquired or disposed of by or leased to our Company or
any of our subsidiaries.
12.
Save as disclosed under “Related Party Transactions” on page 72 of this Prospectus, none of
our Directors or Executive Officers or substantial shareholders of our Company has any
substantial interest, direct or indirect, in any company carrying on a similar trade as our Company
or our subsidiaries.
97
13.
The interests of our Directors and substantial shareholders in our Shares as at the date of this
Prospectus are as follows:Direct Interests
Number of Shares
registered in
the names
of Directors
and substantial
shareholders
%
Indirect Interests*
Number of Shares
%
in which Directors
and substantial
shareholders are
deemed to have
an interest
Wang Xiaochuan
28,697,200
14
163,984,000
80
Gao Junhua
10,249,000
5
163,984,000
80
2,049,800
1
—
—
163,984,000
80
—
—
Total
204,980,000
100
Song Shenghong
Substantial shareholders
*
Our Executive Directors, Wang Xiaochuan, Gao Junhua and Song Shenghong owns 70%, 25% and 5% of ESP
Associates respectively. Wang Xiaochuan and Song Shenghong are deemed to be interested in the shareholding
of ESP Associates in our Company by virtue of their interests of 70% and 25% respectively in ESP Associates.
14.
No sum or benefit has been paid or is agreed to be paid to any Director or expert, or to any
firm in which such Director or expert is a partner or any corporation in which such Director or
expert holds shares or debentures, in cash or shares or otherwise, by any person to induce
him to become, or to qualify him as, a Director, or otherwise for services rendered by him or by
such firm or corporation in connection with the promotion or formation of our Company.
15.
Save as disclosed under “Related Party Transactions” on page 72 of this Prospectus, none of
our Directors has any interest in any existing contract or arrangement which is significant in
relation to the business of our Company and our subsidiaries, taken as a whole.
Share Capital
16.
As at the date of this Prospectus, there is only one class of shares in the capital of our
Company. There are no founder, management or deferred shares. The rights and privileges
attached to our Shares are stated in the Bye-laws of our Company, a selected extract of which
is set out on page 125 to 135 of this Prospectus.
17.
Save as set out under “Share Capital” on page 91 of this Prospectus, there were no changes
in the issued and paid-up share capital of our Company and our subsidiaries within the two
years preceding the date of this Prospectus.
18.
Save as disclosed in paragraph 17 above, no shares in, or debentures of, our Company or any
of our subsidiaries have been issued, or are proposed to be issued, as fully or partly paid for
cash or for a consideration other than cash, within the two years preceding the date of this
Prospectus.
19.
No person has been, or is entitled to be, granted an option to subscribe for shares in, or
debentures of, our Company or any of our subsidiaries.
98
Bye-Laws
20.
The provisions in the Bye-laws of the Company relating to the remuneration, voting rights on
proposals, arrangements or contracts in which the Directors are interested, borrowing powers
of the Directors, the restrictions on the transferability of shareholdings and the voting rights of
members of the Company are set out under “Appendix 3 : SELECTED BYE-LAWS OF OUR
COMPANY” of this Prospectus.
Bank Borrowings and Working Capital
21.
Our Group had no borrowings or indebtedness in the nature of borrowings including bank
overdrafts and liabilities under acceptances (other than normal trading bills) or acceptance credits,
mortgages, charges, hire purchase commitments, guarantees or other contingent liabilities as
at 31 December 1999.
22.
In the opinion of our Directors, no minimum amount must be raised by the issue of the New
Shares in order to provide the sums required to be provided in respect of each of the following:(a) the purchase price of any assets purchased or to be purchased which is to be defrayed in
whole or in part out of the proceeds of the issue of the New Shares;
(b) estimated expenses (including underwriting commission and brokerage) for the Invitation
payable by our Company;
(c) the repayment of any money borrowed by our Company in respect of any of the foregoing
matters; and
(d) working capital.
Although no minimum amount must be raised by the Invitation in order to provide for the items
set out above, the estimated amount to be provided for the items set out in paragraph (b)
above is approximately $2.64 million. Such amount is proposed to be provided out of the proceeds
of the Invitation.
23.
Our Directors are of the opinion that, our Group has adequate working capital for our requirements.
Material Contracts
24.
The following contracts, not being contracts entered into in the ordinary course of business,
have been entered into by our Company and our subsidiaries within the two years preceding
the date of this Prospectus and are or may be material:(a) An agreement dated 4 August 2000 made between our Company and CDP pursuant to
which CDP agreed to act as the central depository for our Company’s securities for trades
in the securities of our Company through the SGX-ST
(b) The Management and Underwriting Agreement dated 4 August 2000 made between our
Company, the Vendors, OUB and the Co-Underwriters referred to in paragraph 26 on
page 100.
(c) The Placement Agreement dated 4 August 2000 made between our Company, the Vendors,
OUB and the Co-Placement Agents referred to in paragraph 27 on page 100.
(d) Receiving banker’s letter dated 4 August 2000 between OUB and our Company referred to
in paragraph 40 on page 102.
(e) Share Purchase Agreement dated 2 August 2000 made between Wang Xiaochuan, Gao
Junhua and Song Shenghong (the “Vendors”), ESP Associates Limited and our Company,
pursuant to which our Company acquired all the issued and paid-up ordinary shares of
US$1.00 each in Benep Management Limited.
99
(f)
Deed of Indemnity dated 2 August 2000 made between the Vendors, ESP Associates Limited
and our Company, pursuant to which the Vendors and ESP Associates Limited agreed to
indemnify our Company jointly and severally against the payment of estate duties and
taxation liabilities with respect to the Share Purchase Agreement referred to in paragraph
24(e) above.
(g) An agreement dated 16 March 2000 between Benep and Yitian Software providing, inter
alia, that the name of Huatong be changed to Guangzhou Yitian Huatong Technology
Corporation Ltd.; the registered capital of Huatong be increased from RMB 2 million to
RMB 5 million; and the term of the co-operative joint venture in relation to Huatong be
extended by another 20 years.
(h) An agreement dated 9 June 2000 between Benep and Yitian Software which took effect on
15 June 2000, providing, inter alia, that the agreement dated 16 March 2000 between the
same parties (as set out above under paragraph 24(g)) be terminated on 15 June 2000;
the registered capital of Huatong be increased from RMB 2 million to RMB 5 million; the
term of the co-operative joint venture in relation to Huatong be extended by another 20
years; and the articles of association of Huatong be amended to comply with the
requirements of the Listing Manual of the SGX-ST.
Litigation
25.
Neither our Company nor any of our subsidiaries is engaged in any litigation as plaintiff or
defendant in respect of any claims or amounts which are material in the context of the Invitation
and our Directors have no knowledge of any proceedings pending or threatened against our
Company or any of our subsidiaries or any facts likely to give rise to any litigation, claims or
proceedings which might materially affect the financial position or the business of our Company
or any of our subsidiaries.
Management, Underwriting and Placement Arrangements
26.
Pursuant to the Management and Underwriting Agreement dated 4 August 2000 (the
“Management and Underwriting Agreement”) made between our Company, the Vendors, OUB
and the Co-Underwriters, our Company and the Vendors appointed OUB to manage the Invitation
and the Underwriters to underwrite the 6,485,000 Offer Shares. OUB will receive a management
fee, payable by our Company and the Vendors in the proportion in which the number of Invitation
Shares offered by each of them pursuant to the Invitation bears to the total number of Invitation
Shares, for its services rendered in connection with the Invitation. The Underwriters will receive
an underwriting commission of 1.75 per cent. of the Offer Price for the Offer Shares, payable by
our Company and the Vendors in the proportion in which the number of Invitation Shares
offered by each of them pursuant to the Invitation bears to the total number of Invitation Shares,
for subscribing for and/or purchasing or procuring subscribers and/or purchasers for any Offer
Shares not subscribed for or purchased by the public pursuant to the Invitation and will pay or
procure payment to our Company and the Vendors for such Offer Shares.
27.
Pursuant to the Placement Agreement dated 4 August 2000 (the “Placement Agreement”) made
between our Company, the Vendors and the Placement Agents, the Placement Agents agreed
to subscribe for and/or purchase or procure subscribers and/or purchasers for the 58,364,000
Placement Shares for a placement commission of 1.75 per cent. of the Placement Price for the
Placement Shares, to be paid by our Company and the Vendors in the proportion in which the
number of Invitation Shares offered by each pursuant to the Invitation bears to the total number
of Invitation Shares.
100
28.
Brokerage will be paid by our Company and the Vendors, in the proportion in which the number
of Invitation Shares offered by each of them pursuant to the Invitation bears to the total number
of Invitation Shares, at the rate of 1.0 per cent. of the Offer Price for each Offer Share and 1.0
per cent. of the Placement Price for each Placement Share. In respect of the Offer Shares, the
brokerage will be paid to OUB, members of the SGX-ST, merchant banks and members of the
Association of Banks in Singapore in respect of successful applications made on Application
Forms bearing their respective stamps, or to Participating Banks in respect of successful
applications made through Electronic Applications at their respective ATMs and Internet banking
websites. In respect of the Placement Shares, the brokerage will be paid to OUB.
29.
The Management and Underwriting Agreement may be terminated by OUB at any time on or
before the close of the Application List on the occurrence of certain events including, inter alia,
any significant change in the political, financial or economic or stock market conditions in
Singapore as would, in the reasonable opinion of OUB exercised in good faith and after
consultation with us, result or be likely to result in a material adverse fluctuation or adverse
conditions in the stock market in Singapore or be likely to prejudice the success of the Invitation.
30.
The Placement Agreement is conditional upon the Management and Underwriting Agreement
not having been terminated or rescinded pursuant to the provisions of the Management and
Underwriting Agreement.
31.
In the event that the Management and Underwriting Agreement is terminated, we reserve the
right, at our absolute discretion, to cancel the Invitation.
Miscellaneous
32.
The nature of the business of our Company is stated on pages 36 to 42 of this Prospectus. As
at the date of this Prospectus, the corporations which by virtue of Section 6 of the Singapore
Companies Act are deemed to be related to our Company are set out below:ESP Associates Limited (BVI)
33.
The time of opening of the Application List is set out under “Listing on the SGX-ST” on page 23
of this Prospectus.
34.
The amount payable on application is S$0.68 for each Offer Share and each Placement Share.
35.
Save as disclosed on page 91 under the heading “SHARE CAPITAL”, there has been no
previous issue of Shares by our Company or offer for sale of our Shares to the public within
the two years preceding the date of this Prospectus.
36.
The expenses in connection with the Invitation, including underwriting commission, placement
commission, brokerage, management fee and other expenses in relation to the Invitation, is
approximately S$3.3 million. The Share Registrar’s charges and the listing fee and other incidental
fees payable to the SGX-ST for the listing application are payable by our Company. All other
expenses are payable by our Company and the Vendors in the proportion in which the number
of Invitation Shares offered by each pursuant to the Invitation bears to the total number of
Invitation Shares.
37.
No property has been purchased or acquired or is proposed to be purchased by us or any of
our subsidiaries which is to be paid for wholly or partly out of the proceeds of the Invitation or
the purchase or acquisition of which has not been completed at the date of the issue of this
Prospectus, other than property the contract for the purchase or acquisition thereof was entered
into in our ordinary course of business, the contract not being made in contemplation of the
Invitation nor the Invitation in consequence of the contract.
101
38.
Save as disclosed at paragraphs 26, 27 and 28 on pages 100 to 101 no commission, discount
or brokerage has been paid or other special terms granted within the two years preceding the
date of this Prospectus or is payable to any Director, promoter, expert, proposed director or any
other person for subscribing or agreeing to subscribe or procuring or agreeing to procure
subscriptions for any shares in, or debentures of, our Company or any of our subsidiaries.
39.
No expert is interested, directly or indirectly, in the promotion of, or in any property or assets
which have, within the two years preceding the date of this Prospectus, been acquired or
disposed of by or leased to our Company or any of our subsidiaries or are proposed to be
acquired or disposed of by or leased to our Company or any of our subsidiaries.
40.
Application monies received by our Company and the Vendors in respect of successful
applications (including successful applications which are subsequently rejected) will be placed
in a separate non-interest bearing account with OUB (the “Receiving Bank”). In the ordinary
course of business, the Receiving Bank will deploy these monies in the interbank money market.
Pursuant to a letter dated 4 August 2000 (the “Receiving Bank Agreement”), our Company, the
Vendors and the Receiving Bank have agreed that our Company and the Vendors will receive
a 50.0 per cent. share of any net revenue in excess of $100,000 earned by the Receiving Bank
from the deployment of such monies in the interbank money market. Any refund of all or part
of the application monies to unsuccessful or partially successful applicants will be made without
any interest or any share of revenue or any other benefit arising therefrom.
41.
Save as disclosed in this Prospectus, our Directors are not aware of any relevant material
information including trading factors or risks which are unlikely to be known or anticipated by
the general public and which could materially affect the profits of our Company and our
subsidiaries.
42.
Save as disclosed in this Prospectus, the financial condition and operations of our Group are
not likely to be affected by any of the following:(a) known trends or demands, commitments, events or uncertainties that will result in or are
reasonably likely to result in our Group’s liquidity increasing or decreasing in any material
way;
(b) material commitments for capital expenditure;
(c) unusual or infrequent events or transactions or any significant economic changes that
materially affected the amount of reported income from operations; and
(d) known trends or uncertainties that have had or that we reasonably expect will have a
material favourable or unfavourable impact on revenues or operating income.
43.
No Shares shall be allocated or allotted on the basis of this Prospectus later than six months
after the date of this Prospectus.
44.
We currently have no intention of changing our auditors after the listing of our Company on the
SGX-ST.
Consents
45.
The Auditors and Reporting Accountants have given and have not withdrawn their written consent
to the issue of this Prospectus with the inclusion herein of the Accountants’ Report, their letter
on the pro forma consolidated profit forecast for the financial year ending 31 December 2000
and their letter on the unaudited pro forma consolidated financial statements for four months
ended 30 April 2000 in the form and context in which they are respectively included and
references to their name in the form and context in which it appears in this Prospectus and to
act in such capacity in relation to this Prospectus.
102
46.
The Manager, Underwriter and Placement Agent, the Co-Underwriters, the Co-Placement Agents,
the Solicitors to the Invitation, the Legal Advisers to the Company on Hong Kong law, the Legal
Advisers to the Company on Bermuda law, the Legal Advisers to the Company on PRC law,
the Bermuda Share Registrar and Share Transfer Agent, the Registrar for the Invitation and
Singapore Share Transfer Agent have each given and have not withdrawn their written consents
to the issue of this Prospectus with the inclusion herein of their names and references thereto
in the form and context in which they respectively appear in this Prospectus and to act in such
respective capacities in relation to this Prospectus.
Responsibility Statement by our Directors and the Vendors
47.
This Prospectus has been seen and approved by our Directors and the Vendors and they
individually and collectively accept full responsibility for the accuracy of the information given
herein and confirm, having made all reasonable enquiries, that to the best of their knowledge
and belief, the facts stated and the opinions expressed herein are fair and accurate in all
material respects as of the date hereof and there are no material facts the omission of which
would make any statements in this Prospectus misleading and that this Prospectus constitutes
full and true disclosure of all material facts about the Invitation and our Group. Our Directors
also confirm that the pro forma consolidated profit forecast of our Group for the financial year
ending 31 December 2000 has been stated after due and careful enquiry.
Statement by the Manager
48.
The Manager confirms that, having made due and careful enquiry and to the best of its
knowledge and belief, this Prospectus constitutes full and true disclosure of all material facts
about the Invitation and our Group and it is not aware of any other facts the omission of which
would make any statements herein misleading. It is also satisfied that the pro forma consolidated
profit forecast of the Group for the financial year ending 31 December 2000 has been stated by
the Directors after due and careful enquiry.
Documents available for Inspection
49.
The following documents or copies thereof may be inspected at 298 Tiong Bahru Road,
#18-01/06 Central Plaza, Singapore 168730 during normal business hours for a period of six
months from the date of this Prospectus:(a) the Memorandum and Bye-laws of our Company;
(b) the letter from the Reporting Accountants in relation to the unaudited pro forma consolidated
financial statements for the four months ended 30 April 2000 set out on page 75 of this
Prospectus;
(c) the letter from the Reporting Accountants in relation to the pro forma consolidated profit
forecast for the financial year ending 31 December 2000 set out on page 74 of this
Prospectus;
(d) the Accountants’ Report set out on pages 77 to 90 of this Prospectus;
(e) the Directors’ Report set out on page 93 of this Prospectus;
(f)
the material contracts referred to in paragraph 24 on page 99 of this Prospectus;
(g) the letters of consent referred to in paragraphs 45 and 46 on page 102 and page 103 of
this Prospectus; and
(h) the audited financial statements of our subsidiaries for each of the three financial years
ended 31 December 1997, 31 December 1998 and 31 December 1999.
103
APPENDIX 1
PROCEDURES FOR APPLICATION AND ACCEPTANCE
You are invited to apply and subscribe for and/or purchase the Invitation Shares at the Issue Price
for each Offer Share and each Placement Share subject to the following terms and conditions:1.
YOUR APPLICATION MUST BE MADE IN LOTS OF 1,000 INVITATION SHARES AND
INTEGRAL MULTIPLES THEREOF. YOUR APPLICATION FOR ANY OTHER NUMBER OF
SHARES WILL BE REJECTED.
2.
Your application for Offer Shares may be made by way of Offer Shares Application Forms or by
way of Electronic Applications through ATMs belonging to the Participating Banks (“ATM Electronic
Applications”) or through Internet Banking (“IB”) web-sites of the relevant Participating Banks
(“Internet Electronic Applications”, which together with ATM Electronic Applications, shall be
referred to as “Electronic Applications”). Your application for the Placement Shares may only be
made by way of Placement Shares Application Forms. YOU MAY NOT USE CPF FUNDS TO
APPLY FOR THE SHARES.
3.
You are allowed to submit only one application in your own name for the Offer Shares or
the Placement Shares. If you submit an application for Offer Shares by way of an
Application Form, you MAY NOT submit another application for Offer Shares by way of
an Electronic Application and vice versa. A person submitting an application for Offer
Shares by way of an ATM Electronic Application may not submit another application for
Offer Shares by way of an Internet Application and vice versa. Such separate applications
shall be deemed to be multiple applications and shall be rejected.
If you, other than an approved nominee company, have submitted an application for
Offer Shares in your own name, you should not submit any other application for Offer
Shares, whether by way of an Application Form or by way of an Electronic Application,
for any other person. Such separate applications shall be deemed to be multiple
applications and shall be rejected.
If you have made an application for Placement Shares, you should not make any
application for Offer Shares either by way of an Application Form or by way of an
Electronic Application and vice versa. Such separate applications shall be deemed to be
multiple applications and shall be rejected.
Conversely, if you have made an application for Offer Shares either by way of an Electronic
Application or by way of an Application Form, you may not make any application for
Placement Shares. Such separate applications shall be deemed to be a multiple
applications and shall be rejected.
Joint applications shall be rejected. Multiple applications for Invitation Shares shall be
rejected. If you submit or procure submissions of multiple share applications (whether
for Offer Shares, Placement Shares or a combination), you may be deemed to have
committed an offence under the Penal Code, Chapter 224 of Singapore and the Securities
Industry Act, Chapter 289 of Singapore, and your applications may be referred to the
relevant authorities for investigation. Multiple applications or those appearing to be or
suspected of being multiple applications will be liable to be rejected at the discretion of
our Company and the Vendors.
4.
We will not accept applications from any person under the age of 21 years, undischarged
bankrupts, sole-proprietorships, partnerships, chops or non-corporate bodies, joint Securities
Account holders of CDP and from applicants whose addresses (furnished in their Application
Forms or, in the case of Electronic Applications, contained in the records of the relevant
Participating Banks) bear post office box numbers.
104
5.
We will not recognise the existence of a trust. Any application by a trustee or trustees must be
made in his/her/their own name(s) and without qualification or, where the application is made
by way of an Application Form, in the name(s) of an approved nominee company or approved
nominee companies after complying with paragraph 6 below.
6.
WE WILL NOT ACCEPT APPLICATIONS FROM NOMINEES EXCEPT THOSE MADE BY
APPROVED NOMINEE COMPANIES ONLY. Approved nominee companies are defined as banks,
merchant banks, finance companies, insurance companies, licensed securities dealers in
Singapore and nominee companies controlled by them. Applications made by nominees other
than approved nominee companies shall be rejected.
7.
IF YOU ARE NOT A NOMINEE COMPANY, YOU MUST MAINTAIN A SECURITIES ACCOUNT
WITH CDP IN YOUR OWN NAME AT THE TIME OF YOUR APPLICATION. If you do not have
an existing Securities Account with CDP in your own name at the time of your application, your
application will be rejected (in the case of an application by way of an Application Form), or
you will not be able to complete your Electronic Application (in the case of an Electronic
Application). If you have an existing Securities Account with CDP but fail to provide your
Securities Account number or provide an incorrect Securities Account number in Section B of
the Application Form or in your Electronic Application, as the case may be, your application is
liable to be rejected. Subject to paragraph 8 below, your application shall be rejected if your
particulars such as name, NRIC/passport number, nationality and permanent residence status
provided in your Application Form or in the records of the relevant Participating Bank at the
time of your Electronic Application, as the case may be, differ from those particulars in your
Securities Account as maintained with CDP. If you possess more than one individual direct
Securities Account with CDP, your application shall be rejected.
8.
If your address as stated in the Application Form or, in the case of an Electronic
Application, in the records of the relevant Participating Bank, as the case may be, is
different from the address registered with CDP, you must inform CDP of your updated
address promptly, failing which the notification letter on successful allotment and/or
allocation will be sent to your address last registered with CDP.
9.
Our Company and the Vendors reserve the right to reject any application which does not
conform strictly to the instructions set out in the Application Form and in this Prospectus
or which does not comply with the instructions for Electronic Applications or with the
terms and conditions of this Prospectus or, in the case of an application by way of an
Application Form, which is illegible, incomplete, incorrectly completed or which is
accompanied by an improperly drawn remittance. Our Company and the further reserve
the right to treat as valid any applications not completed or submitted or effected in all
respects in accordance with the instructions set out in the Application Forms or the
instructions for Electronic Applications or the terms and conditions of this Prospectus
and also to present for payment or other processes all remittances at any time after
receipt and to have full access to all information relating to, or deriving from, such
remittances or the processing thereof.
10.
Our Company and the Vendors reserve the right to reject or to accept, in whole or in part, or
to scale down or to ballot any application, without assigning any reason therefor, and no enquiry
and/or correspondence on the decision of our Company and the Vendors will be entertained.
This right applies to applications made by way of Application Forms and by way of Electronic
Applications. In deciding the basis of acceptance, due consideration will be given to the
desirability of allotting and/or allocating the Invitation Shares to a reasonable number of Applicants
with a view to establishing an adequate market for the Shares.
105
11.
Share certificates will be registered in the name of CDP and will be forwarded only to CDP. It
is expected that CDP will send to you, at your own risk, within 15 Market Days after the close
of the Application List, a statement of account stating that your Securities Account has been
credited with the number of Invitation Shares allotted and/or allocated to you. This will be the
only acknowledgement of application monies received and is not an acknowledgement by our
Company and the Vendors. You irrevocably authorise CDP to complete and sign on your behalf
as transferee or renouncee any instrument of transfer and/or other documents required for the
issue or transfer of the Invitation Shares allotted and/or allocated to you. This authorisation
applies to applications made by way of Application Forms and by way of Electronic Applications.
12.
In the event of an under-subscription for Offer Shares as at the close of the Application List,
that number of Offer Shares under-subscribed shall be made available to satisfy applications
for Placement Shares to the extent that there is an over-subscription for Placement Shares as
at the close of the Application List.
In the event of an under-subscription for Placement Shares as at the close of the Application
List, that number of Placement Shares under-subscribed shall be made available to satisfy
applications for Offer Shares to the extent that there is an over-subscription for Offer Shares as
at the close of the Application List.
In the event of an over-subscription for Offer Shares as at the close of the Application List and
Placement Shares are fully subscribed or over-subscribed as at the close of the Application
List, the successful applications for Offer Shares will be determined by ballot or otherwise as
determined by our Company and approved by the SGX-ST.
13.
You irrevocably authorise CDP to disclose the outcome of your application, including the number
of Invitation Shares allotted and/or allocated to you pursuant to your application, to authorised
operators.
14.
Any reference to “you” or the “Applicant” in this section shall include an individual, a corporation,
an approved nominee and trustee applying for the Offer Shares by way of an Application Form
or by way of an Electronic Application and a person applying for the Placement Shares through
the Placement Agents.
15.
By completing and delivering an Application Form or by making and completing an Electronic
Application by (in the case of an ATM Electronic Application) pressing the “Enter” or “OK” or
“Confirm” or ”Yes” key on the ATM (as the case may be) or by (in the case of an Internet
Electronic Application) clicking “Submit” or “Continue” or “Yes” or “Confirm” on the IB web-site
screen (as the case may be) in accordance with the provisions of this Prospectus, you:(a) irrevocably offer to subscribe for the number of Invitation Shares specified in your application
(or such smaller number for which the application is accepted) at the Issue Price and
agree that you will accept such Invitation Shares as may be allotted and/or allocated to
you subject to the conditions set out in this Prospectus and the Memorandum and Articles
of Association of our Company; and
(b) warrant the truth and accuracy of the information provided in your application.
16.
Our acceptance of applications will be conditional upon, inter alia, our Company and the Vendors
being satisfied that:(a) permission has been granted by the SGX-ST to deal in and for quotation for all our existing
Shares and the Invitation Shares on a “when issue” basis on the Official List of SGX-ST;
and
(b) the Management and Underwriting Agreement and the Placement Agreement referred to
on page 100 of this Prospectus have become unconditional and have not been terminated.
17.
We will not hold any application in reserve.
106
18.
We will not allot and/or allocate shares on the basis of this Prospectus later than six months
after the date of this Prospectus.
19.
Additional terms and conditions for applications by way of Application Forms are set out on
pages 107 to 109 of this Prospectus.
20.
Additional terms and conditions for applications by way of Electronic Applications are set out
on pages 110 to 117 of this Prospectus.
ADDITIONAL TERMS AND CONDITIONS FOR APPLICATIONS USING APPLICATION FORMS
You shall make an application by way of Application Forms made on and subject to the terms and
conditions of this Prospectus including but not limited to the terms and conditions appearing below
as well as those set out under the section on “PROCEDURES FOR APPLICATION AND
ACCEPTANCE” on pages 104 to 117 of this Prospectus, as well as the Memorandum and Articles of
Association of our Company.
1.
Your application must be made using the WHITE Application Forms for Offer Shares, the BLUE
Application Forms for Placement Shares accompanying and forming part of this Prospectus.
We draw your attention to the detailed instructions contained in the respective Application Forms
and this Prospectus for the completion of the Application Forms which must be carefully followed.
Our Company and the Vendors reserve the right to reject applications which do not
conform strictly to the instructions set out in the Application Forms and this Prospectus
or to the terms and conditions of this Prospectus or which are illegible, incomplete,
incorrectly completed or which are accompanied by improperly drawn remittances.
2.
Your Application Forms must be completed in English. Please type or write clearly in ink using
BLOCK LETTERS.
3.
All spaces in the Application Forms except those under the heading “FOR OFFICIAL USE
ONLY” must be completed and the words “NOT APPLICABLE” or “N.A.” should be written in
any space that is not applicable.
4.
Individuals, corporations, approved nominee companies and trustees must give their names in
full. You must make your application, in the case of individuals, in your full names appearing in
your identity cards (if applicants have such identification documents) or in your passports and,
in the case of corporations, in your full names as registered with a competent authority. An
Applicant, other than an individual, completing the Application Form under the hand of an
official must state the name and capacity in which that official signs. If you are a corporation
completing the Application Form, you are required to affix your Common Seal (if any) in
accordance with your Memorandum and Articles of Association or equivalent constitutive
documents of the corporation. If you are a corporate applicant and your application is successful,
a copy of your Memorandum and Articles of Association or equivalent constitutive documents
must be lodged with our Company’s Share Registrar. Our Company reserves the right to require
you to produce documentary proof of identification for verification purposes.
5.
(a) You must complete Sections A and B and sign page 1 of the Application Forms.
(b) You are required to delete either paragraph 7(a) or 7(b) on page 1 of the Application
Forms. Where paragraph 7(a) is deleted, you must also complete Section C of the Application
Forms with particulars of the beneficial owner(s).
(c) If you fail to make the required declaration in paragraph 7(a) or 7(b), as the case may be,
on page 1 of the Application Forms, your application is liable to be rejected.
107
6.
You, whether you are an individual or corporate applicant, whether incorporated or unincorporated
and wherever incorporated or constituted, will be required to declare whether you are a citizen
or permanent resident of Singapore or a corporation in which citizens or permanent residents
of Singapore or any body corporate constituted under any statute of Singapore have an interest
in the aggregate of more than 50 per cent. of the issued share capital of or interests in such
corporations. If you are an approved nominee company, you are required to declare whether
the beneficial owner of the Invitation Shares is a citizen or permanent resident of Singapore or
a corporation, whether incorporated or unincorporated and wherever incorporated or constituted,
in which citizens or permanent residents of Singapore or any body corporate whether incorporated
or unincorporated and wherever incorporated or constituted under any statute of Singapore
have an interest in the aggregate of more than 50 per cent. of the issued share capital of or
interests in such corporation.
7.
Your application must be accompanied by a remittance in Singapore currency for the full amount
payable, in respect of the number of Invitation Shares applied for, in the form of a BANKER’S
DRAFT or CASHIER’S ORDER drawn on a bank in Singapore, made out in favour of “CYTECH
SHARE ISSUE ACCOUNT” crossed “A/C PAYEE ONLY”, with your name and address written
clearly on the reverse side. Applications accompanied by ANY OTHER FORM OF PAYMENT
WILL NOT BE ACCEPTED. We will reject remittances bearing “NOT TRANSFERABLE” or “NON
TRANSFERABLE” crossings. No acknowledgement of receipt will be issued by our Company,
the Vendors or the Manager for applications and application monies received.
8.
Unsuccessful applications and those not successfully balloted or accepted and expected to be
returned (without interest or any share of revenue or other benefit arising therefrom) to you by
ordinary post within three Market Days after the close of the Application List at your own risk.
Where your application is rejected or accepted in part only, the full amount or the balance of
the application monies, as the case may be, will be refunded (without interest or any share of
revenue or other benefit arising therefrom) to you by ordinary post at your own risk within 14
days after the close of the Application List.
9.
Capitalised terms used in the Application Forms and defined in this Prospectus shall bear the
meanings assigned to them in this Prospectus.
10.
By completing and delivering the Application Form, you agree that:(a) in consideration of our Company and the Vendors having distributed the Application Form
to you and agreeing to close the Application List at 12.00 noon on 15 August 2000 or such
other time or date as our Directors and the Vendors may, in consultation with the Manager,
decide and by completing and delivering the Application Form, you agree that:(i)
your application is irrevocable; and
(ii) your remittance will be honoured on first presentation and that any monies returnable
may be held pending clearance of your payment without interest or any share of revenue
or other benefit arising therefrom;
(b) all applications, acceptances and contracts resulting therefrom under the Invitation shall be
governed by and construed in accordance with the laws of Singapore and that you
irrevocably submit to the non-exclusive jurisdiction of the Singapore courts;
(c) in respect of the Invitation Shares for which your application has been received and not
rejected, acceptance of your application shall be constituted by written notification and not
otherwise, notwithstanding any remittance being presented for payment by or on behalf of
our Company and the Vendors; and
(d) you will not be entitled to exercise any remedy of rescission for misrepresentation at any
time after acceptance of your application.
108
Applications for Offer Shares
1.
Your application for Offer Shares MUST be made using the WHITE Offer Shares Application
Forms and WHITE official envelopes “A” and “B”. ONLY ONE APPLICATION should be enclosed
in each envelope.
2.
You must:(a) enclose the WHITE Offer Shares Application Form, duly completed and signed, together
with your remittance in the WHITE envelope “A” provided;
(b) in the appropriate spaces on WHITE envelope “A”:(i)
write your name and address;
(ii) state the number of Offer Shares applied for; and
(iii) affix adequate Singapore postage;
(c) SEAL WHITE ENVELOPE “A”;
(d) write, in the special box provided on the larger WHITE envelope “B” addressed to
OVERSEAS UNION BANK LIMITED, 1 RAFFLES PLACE, OUB CENTRE, SINGAPORE
048616, the number of Offer Shares for which the application is made; and
(e) insert WHITE envelope “A” into WHITE envelope “B”, seal WHITE envelope “B” and
thereafter DESPATCH BY ORDINARY POST OR DELIVER BY HAND at your own risk
to OVERSEAS UNION BANK LIMITED, 1 RAFFLES PLACE, OUB CENTRE, SINGAPORE
048616, to arrive by 12.00 noon on 15 August 2000 or such other time as our Company
may, in consultation with OUB, decide. Local Urgent Mail or Registered Post must
NOT be used. No acknowledgement of receipt will be issued for any application or remittance
received.
3.
Applications that are illegible, incomplete or incorrectly completed or accompanied by improperly
drawn remittances are liable to be rejected.
4.
ONLY ONE APPLICATION should be enclosed in each envelope. No acknowledgement of
receipt will be issued for any application or remittance received.
Applications for Placement Shares
1.
Your application for Placement Shares must be made using the BLUE Placement Shares
Application Forms. ONLY ONE APPLICATION should be enclosed in each envelope.
2.
The completed BLUE Placement Shares Application Form and your remittance with your name
and address written clearly on the reverse side, must be enclosed and sealed in an envelope
to be provided by you. The sealed envelope must be DESPATCHED BY ORDINARY POST
OR DELIVERED BY HAND at your own risk to OVERSEAS UNION BANK LIMITED, 1
RAFFLES PLACE, OUB CENTRE, SINGAPORE 048616, to arrive by 12.00 noon on 15 August
2000 or such other time as our Company may, in consultation with OUB, decide. Local
Urgent Mail or Registered Post must NOT be used. No acknowledgement of receipt will be
issued for any application or remittance received.
3.
ONLY ONE APPLICATION should be enclosed in each envelope. No acknowledgement of
receipt will be issued for any application or remittance received.
109
ADDITIONAL TERMS AND CONDITIONS FOR ELECTRONIC APPLICATIONS
The procedures for Electronic Applications are set out on the ATM screens (in the case of ATM
Electronic Applications) and the IB web-site screens (in the case of Internet Electronic Applications)
of the relevant Participating Banks. Currently, DBS Bank, OUB and UOB are the only Participating
Banks through which Internet Electronic Applications can be made. For illustration purposes, the
procedures for Electronic Applications through ATMs of OUB and the IB web-site of OUB are set out
respectively in the “Steps for Electronic Applications through ATMs of OUB” and the “Steps for
Internet Electronic Applications through the IB web-site of OUB” (the “Steps”) appearing on pages
114 to 117 of this Prospectus. The Steps set out the actions that you must take at an ATM or the IB
web-site of OUB to complete an Electronic Application. Please read carefully the terms of this
Prospectus, the Steps and the terms and conditions for Electronic Applications set out below before
making an Electronic Application. Any reference to “you” in the additional terms and conditions for
Electronic Applications and the Steps shall refer to you making an application for Offer Shares
through an ATM or the IB web-site of a relevant Participating Bank.
You must have an existing bank account with and be an ATM cardholder of one of the Participating
Banks before you can make an Electronic Application at the ATMs of that Participating Bank. An
ATM card issued by one Participating Bank cannot be used to apply for Offer Shares at an ATM
belonging to other Participating Banks. For an Internet Electronic Application, you must have an
existing bank account with and an IB User Identification (“User ID”) and a Personal Identification
Number/Password (“PIN”) given by a relevant Participating Bank. The Steps set out the actions that
you must take at ATMs or the IB web-site of OUB to complete an Electronic Application. The actions
that you must take at ATMs or the IB web-sites of other Participating Banks are set out on the ATM
screens or the IB web-site screens of the relevant Participating Banks. Upon the completion of your
ATM Electronic Application transaction, you will receive an ATM transaction slip (“Transaction Record”),
confirming the details of your Electronic Application. Upon completion of your Internet Electronic
Application, there will be an on-screen confirmation (“Confirmation Screen”) of the application which
can be printed out for your record. The Transaction Record or your printed record of the Confirmation
Screen is for your retention and should not be submitted with any Application Form.
You must ensure that you enter your own Securities Account number when using the ATM
card issued to you in your own name. If you fail to use your own ATM card or if you do not
key in your own Securities Account number, your application will be rejected. If you operate
a joint bank account with any of the Participating Banks, you must ensure that you enter
your own Securities Account number when using the ATM card issued to you in your own
name. Using your own Securities Account number with an ATM card which is not issued to
you in your own name will render your ATM Electronic Application liable to be rejected.
You must ensure, when making an Internet Electronic Application, that your mailing address is in
Singapore and the application is being made in Singapore and you will be asked to declare accordingly.
Otherwise your application is liable to be rejected.
You shall make an Electronic Application on the terms and subject to the conditions of this Prospectus
including but not limited to the terms and conditions appearing below and those set out under the
section on “PROCEDURES FOR APPLICATION AND ACCEPTANCE” on pages 104 to 117 of this
Prospectus as well as the Memorandum of Association and Bye-Laws of our Company.
1.
In connection with your Electronic Application for Offer Shares, you are required to confirm
statements to the following effect in the course of activating the ATM for your Electronic
Application:(a) that you have received a copy of this Prospectus (in the case of ATM Electronic
Applications only) and have read, understood and agreed to all the terms and
conditions of application for Offer Shares and this Prospectus prior to effecting the
Electronic Application and agree to be bound by the same;
110
(b) that you consent to the disclosure of your name, NRIC/passport number, address,
nationality, permanent resident status, CPF Investment Account number, CDP
Securities Account number, and application details (the “Relevant Particulars”) by
the relevant Participating Bank to the Share Registrar, CDP, SCCS, our Company, the
Vendors, and the Manager (the “Relevant Parties”); and
(c) that this is your only application for Offer Shares and it is made in your own name
and at your own risk.
Your application will not be successfully completed and cannot be recorded as a completed
transaction in the ATM unless you press the “Enter” or “Confirm” or “Yes” or “OK” key in the
ATM or click “Confirm” or “OK” on the IB web-site screen. By doing so, you shall be treated as
signifying your confirmation of each of the above three statements. In respect of statement 1(b)
above, such confirmation, by pressing the “Enter” or “Confirm” or “Yes” key, shall signify and
shall be treated as your written permission, given in accordance with the relevant laws of
Singapore including Section 47(4) of the Banking Act (Chapter 19) of Singapore to the disclosure
by that Participating Bank of the Relevant Particulars to the Relevant Parties.
2.
BY MAKING AN ELECTRONIC APPLICATION, YOU CONFIRM THAT YOU ARE NOT
APPLYING FOR OFFER SHARES AS NOMINEE OF ANY OTHER PERSON AND THAT ANY
ELECTRONIC APPLICATION THAT YOU MAKE IS THE ONLY APPLICATION MADE BY
YOU AS BENEFICIAL OWNER.
YOU SHOULD MAKE ONLY ONE ELECTRONIC APPLICATION FOR OFFER SHARES AND
SHOULD NOT MAKE ANY OTHER APPLICATION FOR INVITATION SHARES, WHETHER
AT THE ATMS OR THE IB WEB-SITES (IF ANY) OF ANY PARTICIPATING BANK OR ON
THE APPLICATION FORMS. IF YOU HAVE MADE AN APPLICATION FOR OFFER SHARES
OR PLACEMENT SHARES ON AN APPLICATION FORM, YOU SHALL NOT MAKE AN
ELECTRONIC APPLICATION FOR OFFER SHARES AND VICE VERSA.
3.
You must have sufficient funds in your bank account with your Participating Bank at the time
you make your Electronic Application, failing which your Electronic Application will not be
completed. Any Electronic Application, which does not conform, strictly to the instructions
set out in this Prospectus or on the screens of the ATM or the IB web-site through which
your Electronic Application is being made shall be rejected.
You may make an Electronic Application at the ATM of any Participating Bank for Offer Shares
using cash only by authorising such Participating Bank to deduct the full amount payable from
your account with such Participating Bank.
4.
You irrevocably agree and undertake to subscribe for and to accept the number of Offer Shares
applied for as stated on the Transaction Record or the Confirmation Screen or any lesser
number of Offer Shares that may be allotted and/or allocated to you in respect of your Electronic
Application. In the event that our Company and Vendors decides to allot and/or allocate any
lesser number of such Offer Shares or not to allot and/or allocate any Offer Shares to you, you
agree to accept such decision as final. If your Electronic Application is successful, your
confirmation (by your action of pressing the “Enter” or “Confirm” or “Yes” key on the ATM or
clicking “Confirm” or “OK” on the IB web-site screen) of the number of Offer Shares applied for
shall signify and shall be treated as your acceptance of the number of Offer Shares that may
be allotted and/or allocated to you and your agreement to be bound by the Memorandum and
Articles of Association of our Company.
5.
We will not keep any applications in reserve. Where your Electronic Application is
unsuccessful, the full amount of the application monies will be refunded (without interest or any
share of revenue or other benefit arising therefrom) to you by being automatically credited to
your account with your Participating Bank within three Market Days after the close of the
Application List. Trading on a “WHEN ISSUED” basis, if applicable, is expected to
commence after such refund has been made.
111
Where your Electronic Application is rejected or accepted in part only, the full amount or the
balance of the application monies, as the case may be, will be refunded (without interest or
any share of revenue or other benefit arising therefrom) to you by being automatically credited
to your account with your Participating Bank within 14 days after the close of the Application
List.
Responsibility for timely refund of application monies from Electronic Applications lies
solely with the respective Participating Banks. Therefore, you are strongly advised to
consult your Participating Bank as to the status of your Electronic Application and/or
the refund of any monies to you from unsuccessful or partially successful Electronic
Application, to determine the exact number of Offer Shares allotted and/or allocated to
you before trading the Offer Shares on SGX-ST. Neither the SGX-ST, the CDP, the SCCS,
the Participating Banks, our Company, the Vendors or the Manager assume any
responsibility for any loss that may be incurred as a result of you having to cover any
net sell positions or from buy-in procedures activated by the SGX-ST.
6.
If your ATM Electronic Application is made through the ATMs of Keppel TatLee Bank Limited or
UOB Group, and is unsuccessful, it is expected that a computer generated notice will be sent
to you by the relevant Participating Bank (at your address stated in the records of the relevant
Participating Bank as at the date of your ATM Electronic Application) by ordinary post at your
own risk within three Market Days after the close of the Application List.
If your ATM Electronic Application is made through the ATMs of DBS (including its POSBank
Services division), the OCBC Group or OUB, and is unsuccessful, no notification will be sent
by such Participating Bank.
If your Internet Electronic Application made through the IB web-site of OUB, DBS Bank or UOB
Group is unsuccessful, no notification will be sent by such Participating Bank.
If you make ATM Electronic Applications through the ATMs of the following banks, you may
check the results of your Electronic Applications as follows:Bank
Telephone
Available at ATM
Operating Hours
Service
expected from
OUB
1800 224 2000
OUB Personal Banking
Phone Banking
24 hours a day
Evening of the
balloting day
www.oub2000.com.sg
Internet Banking
24 hours a day
Evening of the
balloting day
OUB Mobile Buzz
OUB Mobile Buzz
24 hours a day
Evening of the
balloting day
DBS Bank
1800 222 2222
327 4767
Internet Banking
Internet Kiosk
www.dbs.com.sg
24 hours a day
7 p.m. on the
balloting day
Keppel TatLee
Bank Limited
222 8228
ATM
ATM – 24 hours a day
ATM – Evening of
the balloting day
Phone Banking:8:00 a.m. on the
day after the
balloting day
Phone Banking:Mon-Fri 0800-2200
Sat
0800-1500
OCBC
1800 363 3333
ATM
ATM – 24 hours
a day
Phone Banking
– 24 hours a day
Evening of the
balloting day
UOB
1800 533 5533
1800 222 2121
ATM (Other
Transactions –
“IPO Enquiry”)
ATM - 24 hours a day
Phone Banking
– 24 hours a day
6 p.m. on the
balloting day
www.uobcyberbank.com.sg
112
•
If you make your Internet Electronic Application through the IB web-site of OUB, DBS Bank or UOB, you may
check the result through the same channels listed in the table above in relation to ATM Electronic Application
made at ATMs of OUB, DBS Bank or UOB.
•
If you make your Electronic Applications through the ATMs or IB web-site of OUB, and have activated your OUB
Mobile Buzz service, you will be notified of the results of your Electronic Application via your mobile phone.
•
If you make your Electronic Applications through the ATMs or IB web-site of UOB, you may check the results of
your application through UOB CyberBank, UOB Group’s ATMs or UOB Phone Banking services.
7.
Electronic Applications shall close at 12.00 noon on 15 August 2000 or such other time as
our Company may, in consultation with OUB, decide. An Internet Electronic Application is deemed
to be received only upon its completion, that is, when there is an on-screen confirmation of the
application.
8.
You are deemed to have irrevocably requested and authorised our Company and the Vendors
to:(a) register the Offer Shares allotted and/or allocated to you in the name of CDP for deposit
into your Securities Account;
(b) send the relevant Share certificate(s) to CDP;
(c) return or refund (without interest or any share of revenue earned or other benefit arising
therefrom) the application monies, should your Electronic Application be rejected, by
automatically crediting your bank account with your Participating Bank with the relevant
amount within three Market Days after the close of the Application List; and
(d) return or refund (without interest or any share of revenue or other benefit arising therefrom)
the balance of the application monies, should your Electronic Application be accepted in
part only, by automatically crediting your bank account with your Participating Bank with
the relevant amount within 14 days after the close of the Application List.
9.
You irrevocably agree and acknowledge that your Electronic Application is subject to risks of
electrical, electronic, technical and computer-related faults and breakdowns, fires, acts of God
and other events beyond the control of the Participating Banks and if, in any such event, our
Company, the Vendors, the Manager and/or the relevant Participating Bank does not receive
your Electronic Application, or data relating to your Electronic Application is lost, corrupted or
not otherwise accessible, whether wholly or partially for whatever reason, you shall be deemed
not to have made an Electronic Application and you shall have no claim whatsoever against
our Company, the Vendors, the Manager and/or the relevant Participating Bank for Offer Shares
applied for or for any compensation, loss or damage.
10.
We do not recognise the existence of a trust. Any Electronic Application by a trustee must be
made in your own name and without qualification. Our Company and the Vendors will reject any
application by any person acting as nominee.
11.
All your particulars in the records of your Participating Bank at the time you make your Electronic
Application shall be deemed to be true and correct and your Participating Bank and the Relevant
Parties shall be entitled to rely on the accuracy thereof. If there has been any change in your
particulars after the time of the making of your Electronic Application, you shall promptly notify
your Participating Bank.
12.
You should ensure that your personal particulars as recorded by both CDP and the
relevant Participating Bank are correct and identical, otherwise, your Electronic Application
is liable to be rejected. You should promptly inform CDP of any change in address, failing
which the notification letter on successful allotment and/or allocation will be sent to your address
last registered with CDP.
113
13.
By making and completing an Electronic Application, you are deemed to have agreed that:(a) in consideration of our Company and the Vendors making available the Electronic Application
facility, through the Participating Banks acting as agents of our Company and the Vendors,
at the ATMs and the IB web-sites (if any):(i)
your Electronic Application is irrevocable; and
(ii) your Electronic Application, the acceptance by our Company and the Vendors and the
contract resulting therefrom under the Invitation shall be governed by and construed in
accordance with the laws of Singapore and you irrevocably submit to the non-exclusive
jurisdiction of the Singapore courts;
(b) none of our Company, the Vendors, the Manager or the Participating Banks shall be liable
for any delays, failures or inaccuracies in the recording, storage or in the transmission or
delivery of data relating to your Electronic Application to our Company, the Vendors or
CDP due to breakdowns or failure of transmission, delivery or communication facilities or
any risks referred to in paragraph 9 above or to any cause beyond our respective controls;
(c) in respect of Offer Shares for which your Electronic Application has been successfully
completed and not rejected, acceptance of your Electronic Application shall be constituted
by written notification by or on behalf of our Company and the Vendors and not otherwise,
notwithstanding any payment received by or on behalf of our Company and the Vendors;
and
(d) you will not be entitled to exercise any remedy of rescission for misrepresentation at any
time after acceptance of your application.
Steps for Electronic Applications through ATMs and the IB web-site of OUB
The instructions for Electronic Applications will appear on the ATM screens and the IB web-site
screens. For illustration purposes, the steps for making an Electronic Application through an ATM
belonging to OUB or through the IB web-site of OUB are shown below. Instructions for Electronic
Applications on the ATM screens and the IB web-site screens (if any) of the Participating Banks,
other than OUB, may differ from those represented below.
Owing to space constraints on OUB’s ATM screen, the following terms will appear in abbreviated
form:“&”
:
and
“A/C”
:
Account
“CDP”
:
“CDP A/C”
:
CDP Account
“CPF”
:
The Central Provident Fund Board
“CPF Inv A/C”
:
CPF Investment Account
“Mgrs”
:
Manager and Co-Manager
“NETS”
:
Network for Electronic Funds Transfer
“No.”
:
Number
“NRIC/PP No.”
:
National Registration Identity Card/Passport Number
114
“PR”
:
Permanent Resident
“S$”
:
Singapore Dollars
“SCCS”
:
“SGX-ST”
:
Steps for an ATM Electronic Application for Offer Shares
Step 1
:
Insert your personal ATM Autocash Card
2
:
Select Language Choice
3
:
Enter your Personal Identification Number
4
:
Select “Cash Card/Other Services”
5.
:
Select “Securities / Unit Trust”
6
:
Select “Electronic Share Application”
7
:
Select “CYTECH”
8
:
Select the type of bank account to debit your application monies
9
:
Press the “YES” key to confirm that you have read the following messages:— A copy of prospectus/document is available at various Participating Banks.
— Where applicable, a copy of this prospectus has been lodged with and registered
by the Registrar of Companies & Businesses in Singapore who takes no
responsibility for its contents.
10 :
Press the “YES” key again to confirm that:(1) I have read, understood & agreed to all the terms & conditions of the
application & prospectus/document.
(2) I consent to disclosure of my name, NRIC/PP No., nationality, PR status, CPF
Inv A/C, CDP A/C and application details to the Registrar, CDP, SGX-ST, SCCS,
CPF, NETS, Issuer, Vendors & the Issue Mgrs.
11 :
Select “Fixed Price”
12 :
Press the “YES” key to confirm that:— This is my only application and is made in my name & at my own risk.
13 :
Select your nationality and permanent resident status
14 :
Press the “YES” key to confirm your NRIC/Passport No.
15 :
Press the “YES” key to confirm your CDP Securities A/C No. or enter your own CDP
Securities A/C No. (12 digits)
16 :
Enter No. of Shares applied for
115
17 :
Check the details of your application on screen and press the “YES” key to confirm
application
18 :
Remove the Transaction Record; this is for your reference only
Owing to space constraints on OUB’s IB web-site screens, the following terms will appear in
abbreviated form:“CDP”
:
“CPF”
:
The Central Provident Fund
“NRIC”
:
National Registration Identity Card
“PR”
:
Permanent Resident
“SGD” or “$”
:
Singapore Dollars
“SCCS”
:
“SGX-ST”
:
Steps for an Internet Electronic Application through the IB web-site of OUB
Step 1
:
Connect to OUB web-site
2
:
Login to OUB Personal Internet Banking
3
:
Enter your IB User ID and PIN
4
:
Select “Investment”
5
:
Select “Electronic Securities Application”
6
:
Select “IPO”
7
:
Click “Yes” to declare that you are in Singapore and have a mailing address in Singapore
8
:
Select “CYTECH”
9
:
Click “Yes” to confirm that:-
10 :
1.
I have read, understood and agreed to all terms and conditions of the
application and prospectus/document.
2.
I consent to the disclosure of my name, NRIC/Passport Number, address,
nationality, PR status, CPF Investment account number, CDP securities
account number and application details to the registrars, CDP, SGX-ST, SCCS,
CPF, issuer, vendors and the Manager; and
3.
This application is made in my own name and at my own risk. For FIXED
price securities application, this is my only application. For TENDER price
securities application, this is my only application at the selected tender price.
For Fixed price securities applications, Click “Continue”.
For applications for securities with Fixed price and Tender price tranches, click “Fixed
price” to make a fixed price application and click “Tender price” to make a tender price
application.
116
11 :
Fill in details for securities application and click “Continue”
12 :
For Fixed price securities applications, enter the quantity of securities applied for and
click “Continue”
For Tender price securities applications, enter tender price and quantity of securities
applied for and click “Continue”
13 :
Check details for your application, your NRIC/Passport Number, and quantity of
securities on the screen and click “Confirm” to confirm your application.
14 :
Print Confirmation Screen (optional) for your reference and retention only
117
APPENDIX 2
SUMMARY OF BERMUDA COMPANY LAW
The Company is incorporated in Bermuda and, therefore, operates subject to Bermuda law. Set out
below is a summary of certain provisions of Bermuda company law, although this does not purport
to contain all applicable qualifications and exceptions or to be a complete review of all matters of
Bermuda company law and taxation, which may differ from equivalent provisions in jurisdictions with
which interested parties may be more familiar:
(a)
Share capital
The Companies Act provides that where a company issues shares at a premium, whether for
cash or otherwise, a sum equal to the aggregate amount or value of the premiums on those
shares shall be transferred to an account, to be called the “share premium account”, to which
the provisions of the Companies Act relating to a reduction of share capital of a company shall
apply as if the share premium account were paid up share capital of the company except that
the share premium account may be applied by the company:
(i)
in paying up unissued shares of the company to be issued to members of the company as
fully paid bonus shares;
(ii) in writing off:
(aa) the preliminary expenses of the company; or
(bb) the expenses of, or the commission paid or discount allowed on, any issue of shares
or debentures of the company; or
(iii) in providing for the premiums payable on redemption of any shares or of any debentures
of the company.
However, only premiums arising on the same class of shares can be used to pay up bonus
shares or in providing for the premiums payable on redemption of shares referred to in (i) and
(iii) above respectively.
In the case of an exchange of shares the excess value of the shares acquired over the nominal
value of the shares being issued may be credited to a contributed surplus account of the
issuing company.
The Companies Act permits a company to issue preference shares and subject to the conditions
stipulated therein to convert those preference shares into redeemable preference shares.
The Companies Act includes certain protections for holders of special classes of shares, requiring
their consent to be obtained before their rights may be varied. Where provision is made by the
memorandum of association or bye-laws for authorising the variation of rights attached to any
class of shares in the company, the consent of the specified proportions of the holders of the
issued shares of that class or the sanction of a resolution passed at a separate meeting of the
holders of those shares is required, and where no provision for varying such rights is made in
the memorandum of association or bye-laws and nothing therein precludes a variation of such
rights, the written consent of the holders of three-fourths of the issued shares of that class or
the sanction of a resolution passed as aforesaid is required.
118
(b)
Financial assistance to purchase shares of a company or its holding company
A company is prohibited from providing financial assistance for the purpose of an acquisition of
its own or its holding company’s shares unless there are reasonable grounds for believing that
the company is, and would after the giving of such financial assistance be, able to pay its
liabilities as they become due; and the realisable value of the company’s assets, after the
giving of such financial assistance, would not thereby be less than the aggregate of its liabilities,
issued share capital and share premium accounts. However, in certain circumstances, the
prohibition from giving financial assistance may be excluded such as where the assistance is
only an incidental part of a larger purpose or the assistance is of an insignificant amount such
as the payment of minor costs. In addition, the Companies Act expressly permits the grant of
financial assistance where (i) the financial assistance does not reduce the company’s net assets
or, to the extent the net assets are reduced, such financial assistance is provided for out of
funds of the company which would otherwise be available for dividend or distribution; (ii) an
affidavit of solvency is sworn by the directors of the company; and (iii) the financial assistance
is approved by resolution of shareholders of the company.
(c)
Purchase of shares and warrants by a company and its subsidiaries
A company may, if authorised by its memorandum of association or bye-laws, purchase its own
shares. Such purchases may only be effected out of the capital paid up on the purchased
shares or out of the funds of the company otherwise available for dividend or distribution or out
of the proceeds of a fresh issue of shares made for the purpose. Any premium payable on a
purchase over the par value of the shares to be purchased must be provided for out of funds
of the company otherwise available for dividend or distribution or out of the company’s share
premium account. Any amount due to a shareholder on a purchase by a company of its own
shares may (i) be paid in cash; (ii) be satisfied by the transfer of any part of the undertaking or
property of the company having the same value; or (iii) be satisfied partly under (i) and partly
under (ii). Any purchase by a company of its own shares may be authorised by its board of
directors or otherwise by or in accordance with the provisions of its bye-laws. Such purchase
may only be made if at least two directors, by affidavit, declare that on the effective date of the
purchase and taking into account the purchase, the company is solvent or that all of the creditors
of the company on that date have consented in writing to the purchase. In the case where a
company is listed on an appointed stock exchange (as defined in the Companies Act), the
affidavit may, at the option of the company, be sworn within thirty days after the end of each
calendar quarter giving details of the purchases made during each quarter. The shares so
purchased will be treated as cancelled and the company’s issued, but not its authorised, capital
will be diminished accordingly.
A company is not prohibited from purchasing and may purchase its own warrants subject to
and in accordance with the terms and conditions of the relevant warrant instrument or certificate.
There is no requirement under Bermuda law that a company’s memorandum of association or
its bye-laws contain a specific provision enabling such purchases and the directors of a company
may rely upon the general power contained in its memorandum of association to buy and sell
and deal in personal property of all kinds.
Under Bermuda law, a subsidiary may hold shares in its holding company and in certain
circumstances, may acquire such shares. The holding company is, however, prohibited from
giving financial assistance for the purpose of the acquisition, subject to certain circumstances
provided by the Companies Act. A company, whether a subsidiary or a holding company, may
only purchase its own shares for cancellation if it is authorised to do so in its memorandum of
association or bye-laws pursuant to section 42A of the Companies Act.
119
(d)
Dividends and distributions
A company may not declare or pay a dividend, or make a distribution out of contributed surplus,
if there are reasonable grounds for believing that (i) the company is, or would after the payment
be, unable to pay its liabilities as they become due; or (ii) the realisable value of the company’s
assets would thereby be less than the aggregate of its liabilities and its issued share capital
and share premium accounts. Contributed surplus is defined for purposes of section 54 of the
Companies Act to include the proceeds arising from donated shares, credits resulting from the
redemption or conversion of shares at less than the amount set up as nominal capital and
donations of cash and other assets to the company.
(e)
Protection of minorities
Class actions and derivative actions are generally not available to shareholders under the laws
of Bermuda. The Bermuda courts, however, would ordinarily be expected to permit a shareholder
to commence an action in the name of a company to remedy a wrong done to the company
where the act complained of is alleged to be beyond the corporate power of the company or is
illegal or would result in the violation of the company’s memorandum of association and bye-laws.
Furthermore, consideration would be given by the court to acts that are alleged to constitute a
fraud against the minority shareholders or, for instance, where an act requires the approval of
a greater percentage of the company’s shareholders than actually approved it.
Any member of a company who complains that the affairs of the company are being conducted
or have been conducted in a manner oppressive or prejudicial to the interests of some part of
the members, including himself, may petition the court which may, if it is of the opinion that to
wind up the company would unfairly prejudice that part of the members but that otherwise the
facts would justify the making of a winding up order on just and equitable grounds, make such
order as it thinks fit, whether for regulating the conduct of the company’s affairs in future or for
the purchase of shares of any members of the company by other members of the company or
by the company itself and in the case of a purchase by the company itself, for the reduction
accordingly of the company’s capital, or otherwise. Bermuda law also provides that the company
may be wound up by the Bermuda court, if the court is of the opinion that it is just and
equitable to do so. Both these provisions are available to minority shareholders seeking relief
from the oppressive conduct of the majority, and the court has wide discretion to make such
orders as it thinks fit.
Except as mentioned above, claims against a company by its shareholders must be based on
the general laws of contract or tort applicable in Bermuda.
A statutory right of action is conferred on subscribers of shares in a company against persons,
including directors and officers, responsible for the issue of a prospectus in respect of damage
suffered by reason of an untrue statement therein, but this confers no right of action against
the company itself. In addition, such company, as opposed to its shareholders, may take action
against its officers including directors, for breach of their statutory and fiduciary duty to act
honestly and in good faith with a view to the best interests of the company.
(f)
Management
The Companies Act contains no specific restrictions on the power of directors to dispose of
assets of a company, although it specifically requires that every officer of a company, which
includes a director, managing director and secretary, in exercising his powers and discharging
his duties must do so honestly and in good faith with a view to the best interests of the
company and exercise the care, diligence and skill that a reasonably prudent person would
exercise in comparable circumstances. Furthermore, the Companies Act requires that every
officer should comply with the Companies Act, regulations passed pursuant to the Companies
Act and the bye-laws of the company.
120
(g)
Accounting and auditing requirements
The Companies Act requires a company to cause proper records of accounts to be kept with
respect to (i) all sums of money received and expended by the company and the matters in
respect of which the receipt and expenditure takes place; (ii) all sales and purchases of goods
by the company and (iii) the assets and liabilities of the company.
Furthermore, it requires that a company keeps its records of account at the registered office of
the company or at such other place as the directors think fit and that such records shall at all
times be open to inspection by the directors or the resident representative of the company. If
the records of account are kept at some place outside Bermuda, there shall be kept at the
office of the company in Bermuda such records as will enable the directors or the resident
representative of the company to ascertain with reasonable accuracy the financial position of
the company at the end of each three month period, except that where the company is listed
on an appointed stock exchange, there shall be kept such records as will enable the directors
or the resident representative of the company to ascertain with reasonable accuracy the financial
position of the company at the end of each six month period.
The Companies Act requires that the directors of the company must, at least once a year, lay
before the company in general meeting financial statements for the relevant accounting period.
Further, the company’s auditor must audit the financial statements so as to enable him to
report to the members. Based on the results of his audit, which must be made in accordance
with generally accepted auditing standards, the auditor must then make a report to the members.
The generally accepted auditing standards may be those of a country or jurisdiction other than
Bermuda or such other generally accepted auditing standards as may be appointed by the
Minister of Finance of Bermuda under the Companies Act; and where the generally accepted
auditing standards used are other than those of Bermuda, the report of the auditor shall identify
the generally accepted auditing standards used. All members of the company are entitled to
receive a copy of every financial statement prepared in accordance with these requirements, at
least seven days before the general meeting of the company at which the financial statements
are to be tabled.
(h)
Auditors
At each annual general meeting, a company must appoint an auditor to hold office until the
close of the next annual general meeting; however, this requirement may be waived if all of the
shareholders and all of the directors, either in writing or at the general meeting, agree that
there shall be no auditor.
A person, other than an incumbent auditor, shall not be capable of being appointed auditor at
an annual general meeting unless notice in writing of an intention to nominate that person to
the office of auditor has been given not less than 21 days before the annual general meeting.
The company must send a copy of such notice to the incumbent auditor and give notice thereof
to the members not less than 7 days before the annual general meeting. An incumbent auditor
may, however, by notice in writing to the secretary of the company waive the requirements of
the foregoing.
Where an auditor is appointed to replace another auditor, the new auditor must seek from the
replaced auditor a written statement as to the circumstances of the latter’s replacement. If the
replaced auditor does not respond within 15 days, the new auditor may act in any event. An
appointment as auditor of a person who has not requested a written statement from the replaced
auditor is voidable by a resolution of the shareholders at a general meeting. An auditor who
has resigned, been removed or whose term of office has expired or is about to expire, or who
has vacated office is entitled to attend the general meeting of the company at which he is to be
removed or his successor is to be appointed; to receive all notices of, and other communications
relating to, that meeting which a member is entitled to receive; and to be heard at that meeting
on any part of the business of the meeting that relates to his duties as auditor or former
auditor.
121
(i)
Exchange control
An exempted company is usually designated as “non-resident” for Bermuda exchange control
purposes by the Bermuda Monetary Authority. Where a company is so designated, it is free to
deal in currencies of countries outside the Bermuda exchange control area which are freely
convertible into currencies of any other country. The permission of the Bermuda Monetary
Authority is required for the issue of shares and warrants by the company and the subsequent
transfer of such shares and warrants. In granting such permission, the Bermuda Monetary
Authority accepts no responsibility for the financial soundness of any proposals or for the
correctness of any statements made or opinions expressed in any document with regard to
such issue. Before the company can issue or transfer any further shares and warrants in
excess of the amounts already approved, it must obtain the prior consent of the Bermuda
Monetary Authority.
Permission of the Bermuda Monetary Authority will normally be granted for the issue and transfer
of shares and warrants to and between persons regarded as resident outside Bermuda for
exchange control purposes without specific consent for so long as the shares and warrants are
listed on an appointed stock exchange (as defined in the Companies Act). Issues to and transfers
involving persons regarded as “resident” for exchange control purposes in Bermuda will be
subject to specific exchange control authorisation.
(j)
Taxation
Under present Bermuda law, no Bermuda withholding tax on dividends or other distributions,
nor any Bermuda tax computed on profits or income or on any capital asset, gain or appreciation
will be payable by an exempted company or its operations, nor is there any Bermuda tax in the
nature of estate duty or inheritance tax applicable to shares, debentures or other obligations of
the company held by non-residents of Bermuda. Furthermore, a company may apply to the
Minister of Finance of Bermuda for an assurance, under the Exempted Undertakings Tax
Protection Act 1966 of Bermuda, that no such taxes shall be so applicable until 28th March
2016, although this assurance will not prevent the imposition of any Bermuda tax payable in
relation to any land in Bermuda leased or let to the company or to persons ordinarily resident
in Bermuda.
(k)
Stamp duty
An exempted company is exempt from all stamp duties except on transactions involving “Bermuda
property”. This term relates, essentially, to real and personal property physically situated in
Bermuda, including shares in local companies (as opposed to exempted companies). Transfers
of shares and warrants in all exempted companies are exempt from Bermuda stamp duty.
(l)
Loans to directors
Bermuda law prohibits the making of loans by a company to any of its directors or to their
families or companies in which they hold more than a 20 per cent. interest, without the consent
of any member or members holding in aggregate not less than nine-tenths of the total voting
rights of all members having the right to vote at any meeting of the members of the company.
These prohibitions do not apply to anything done to provide a director with funds to meet the
expenditure incurred or to be incurred by him for the purposes of the company, provided that
the company gives its prior approval at a general meeting or, if not, the loan is made on
condition that it will be repaid within six months of the next following annual general meeting if
the loan is not approved at or before such meeting. If the approval of the company is not given
for a loan, the directors who authorised it will be jointly and severally liable for any loss arising
therefrom.
122
(m) Inspection of corporate records
Members of the general public have the right to inspect the public documents of a company
available at the office of the Registrar of Companies in Bermuda which will include the company’s
certificate of incorporation, its memorandum of association (including its objects and powers)
and any alteration to the company’s memorandum of association. The members of the company
have the additional right to inspect the bye-laws of a company, minutes of general meetings
and the company’s audited financial statements, which must be presented to the annual general
meeting. Minutes of general meetings of a company are also open for inspection by directors
of the company without charge for not less than two hours during business hours each day.
The register of members of a company is open for inspection by members without charge and
to members of the general public for a fee. The company is required to maintain its share
register in Bermuda but may, subject to the provisions of the Companies Act, establish a branch
register outside Bermuda. Any branch register of members established by the company is
subject to the same rights of inspection as the principal register of members of the company in
Bermuda. Any person may require a copy of the register of members or any part thereof which
must be provided within fourteen days of a request. Bermuda law does not, however, provide
a general right for members to inspect or obtain copies of any other corporate records.
A company is required to maintain a register of directors and officers at its registered office and
such register must be made available for inspection for not less than two hours in each day by
members of the public without charge.
(n)
Winding up
A company may be wound up by the Bermuda court on application presented by the company
itself, its creditors or its contributors. The Bermuda court also has authority to order winding up
in a number of specified circumstances including where it is, in the opinion of the Bermuda
court, just and equitable that such company be wound up.
A company may be wound up voluntarily when the members so resolve in general meeting, or,
in the case of a limited duration company, when the period fixed for the duration of the company
by its memorandum expires, or the event occurs on the occurrence of which the memorandum
provides that the company is to be dissolved. In the case of a voluntary winding up, such
company is obliged to cease to carry on its business from the time of passing the resolution for
voluntary winding up or upon the expiry of the period or the occurrence of the event referred to
above. Upon the appointment of a liquidator, the responsibility for the company’s affairs rests
entirely in his hands and no future executive action may be carried out without his approval.
Where, on a voluntary winding up, a majority of directors make a statutory declaration of solvency,
the winding up will be a members’ voluntary winding up. In any case where such declaration
has not been made, the winding up will be a creditors’ voluntary winding up.
In the case of a members’ voluntary winding up of a company, the company in general meeting
must appoint one or more liquidators within the period prescribed by the Companies Act for the
purpose of winding up the affairs of the company and distributing its assets. If the liquidator at
any time forms the opinion that such company will not be able to pay its debts in full, he is
obliged to summon a meeting of creditors.
As soon as the affairs of the company are fully wound up, the liquidator must make up an
account of the winding up, showing how the winding up has been conducted and the property
of the company has been disposed of, and thereupon call a general meeting of the company
for the purposes of laying before it the account and giving an explanation thereof. This final
general meeting requires at least one month’s notice published in an appointed newspaper in
Bermuda.
123
In the case of a creditors’ voluntary winding up of a company, the company must call a meeting
of creditors of the company to be summoned on the day following the day on which the meeting
of the members at which the resolution for winding up is to be proposed is held. Notice of such
meeting of creditors must be sent at the same time as notice is sent to members. In addition,
such company must cause a notice to appear in an appointed newspaper on at least two
occasions.
The creditors and the members at their respective meetings may nominate a person to be
liquidator for the purposes of winding up the affairs of the company provided that if the creditors
nominate a different person, the person nominated by the creditors shall be the liquidator. The
creditors at the creditors’ meeting may also appoint a committee of inspection consisting of not
more than five persons.
If a creditors’ winding up continues for more than one year, the liquidator is required to summon
a general meeting of the company and a meeting of the creditors at the end of each year to lay
before such meetings an account of his acts and dealings and of the conduct of the winding up
during the preceding year. As soon as the affairs of the company are fully wound up, the
liquidator must make an account of the winding up, showing how the winding up has been
conducted and the property of the company has been disposed of, and thereupon shall call a
general meeting of the company and a meeting of the creditors for the purposes of laying the
account before such meetings and giving an explanation thereof.
124
APPENDIX 3
SELECTED BYE-LAWS OF OUR COMPANY
The provisions in the Bye-laws relating to the Directors’ remuneration, voting rights on proposals and
contracts in which the directors are interested, borrowing powers of the Directors, voting rights of the
Members, consents necessary for the variation of class rights and restrictions on transferability of
shares are as follows:
DIRECTORS’ REMUNERATION
Directors’ Fees and Expenses
Bye-law 95
The ordinary remuneration of the Directors shall from time to time be determined by the Company in
general meeting, shall not be increased except pursuant to an ordinary resolution passed at a general
meeting where notice of the proposed increase shall have been given in the notice convening the
general meeting, and shall (unless otherwise directed by the resolution by which it is voted) be
divided amongst the Board in such proportions and in such manner as the Board may agree or,
failing agreement, equally, except that any Director who shall hold office for part only of the period
in respect of which such remuneration is payable shall be entitled only to rank in such division for a
proportion of remuneration related to the period during which he has held office. Such remuneration
shall be deemed to accrue from day to day.
Bye-law 96
Each Director shall be entitled to be repaid or prepaid all travelling, hotel and incidental expenses
reasonably incurred or expected to be incurred by him in attending meetings of the Board or
committees of the Board or general meetings or separate meetings of any class of shares or of
debentures of the Company or otherwise in connection with the discharge of his duties as a Director.
Bye-law 97
(1)
Any Director who, upon request by the Board, goes or resides abroad for any purpose of the
Company or who performs services which in the opinion of the Board go beyond the ordinary
duties of a Director may be paid such extra remuneration (whether by way of salary, commission,
participation in profits or otherwise) as the Board may determine and such extra remuneration
shall be in addition to or in substitution for any ordinary remuneration provided for by or pursuant
to any other Bye-law.
(2)
The remuneration (including any remuneration under Bye-law 97(1) above) in the case of a
Director other than an executive Director shall be payable by a fixed sum and shall not at any
time be by commission on or percentage of the profits or turnover, and no director whether an
executive Director or otherwise shall be remunerated by a commission on or percentage of
turnover.
Bye-law 98
The Board shall obtain the approval of the Company in general meeting before paying pensions or
other retirement, superannuation, death or disability benefits to (or to any person in respect of) any
Director for the time being holding any executive office or for the purpose of providing any such
pensions or other benefits, paying any sum in contribution to any scheme or fund or to pay premiums.
The Board shall obtain the approval of the Company in general meeting before making any payment
to any Director or past Director of the Company by way of compensation for loss of office, or as
consideration for or in connection with his retirement from office (not being payment to which the
Director is contractually entitled).
125
Bye-law 99
A Director may:
(a)
hold any other office or place of profit with the Company (except that of Auditor) in conjunction
with his office of Director for such period and, subject to the relevant provisions of the Act and
if applicable any rules or regulations of the Designated Stock Exchange , upon such terms as
the Board may determine. Any remuneration (whether by way of salary, commission, participation
in profits or otherwise) paid to any Director in respect of any such other office or place of profit
shall be in addition to any remuneration provided for by or pursuant to any other Bye-law; and/
or
(b)
act by himself or his firm in a professional capacity for the Company (otherwise than as Auditor)
and he or his firm may be remunerated for professional services as if he were not a Director;
and/or
(c)
continue to be or become a director, managing director, joint managing director, deputy managing
director, executive director, manager or other officer or member of any other company promoted
by the Company or in which the Company may be interested as a vendors, shareholder or
otherwise and (unless otherwise agreed) no such Director shall be accountable for any
remuneration, profits or other benefits received by him as a director, managing director, joint
managing director, deputy managing director, executive director, manager or other officer or
member of or from his interests in any such other company. Subject as otherwise provided by
these Bye-laws the Directors may exercise or cause to be exercised the voting powers conferred
by the shares in any other company held or owned by the Company, or exercisable by them as
directors of such other company in such manner in all respects as they think fit (including the
exercise thereof in favour of any resolution appointing themselves or any of them directors,
managing directors, joint managing directors, deputy managing directors, executive directors,
managers or other officers of such company) or voting or providing for the payment of
remuneration to the director, managing director, joint managing director, deputy managing director,
executive director, manager or other officers of such other company and any Director may vote
in favour of the exercise of such voting rights in manner aforesaid notwithstanding that he may
be, or about to be, appointed a director, managing director, joint managing director, deputy
managing director, executive director, manager or other officer of such a company, and that as
such he is or may become interested in the exercise of such voting rights in manner aforesaid.
Executive Directors
Bye-law 90
Notwithstanding Bye-laws 95, 96, 97 and 98, an executive director appointed to an office under
Bye-law 89 hereof shall receive such remuneration (whether by way of salary, commission, participation
in profits or otherwise or by all or any of those modes) and such other benefits (including pension
and/or gratuity and/or other benefits on retirement) and allowances as the Board may from time to
time determine, and either in addition to or in lieu of his remuneration as a Director, but he shall not
in any circumstances be remunerated by a commission on or a percentage of turnover.
126
Alternate Directors
Bye-law 92
An alternate Director shall only be a Director for the purposes of the Act and shall only be subject
to the provisions of the Act insofar as they relate to the duties and obligations of a Director when
performing the functions of the Director for whom he is appointed in the alternative and shall alone
be responsible to the Company for his acts and defaults and shall not be deemed to be the agent
of or for the Director appointing him. An alternate Director shall be entitled to contract and be
interested in and benefit from contracts or arrangements or transactions and to be repaid expenses
and to be indemnified by the Company to the same extent mutatis mutandis as if he were a Director
but he shall not be entitled to receive from the Company any fee in his capacity as an alternate
Director except only such part, if any, of the remuneration otherwise payable to his appoint or as
such appoint or may by Notice to the Company from time to time direct.
Voting Rights on Proposals, Arrangements and Contracts in which the Directors are interested
Bye-law 102
(1)
A Director shall not vote (nor be counted in the quorum) on any resolution of the Board in
respect of any contract or arrangement or any other proposal in which he is to his knowledge
materially interested, but this prohibition shall not apply to any of the following matters namely:
(a) any contract or arrangement for the giving to such Director any security or indemnity in
respect of money lent by him or obligations incurred or undertaken by him at the request
of or for the benefit of the Company or any of its subsidiaries;
(b) any contract or arrangement for the giving of any security or indemnity to a third party in
respect of a debt or obligation of the Company or any of its subsidiaries for which the
Director has himself assumed responsibility in whole or in part whether alone or jointly
under a guarantee or indemnity or by the giving of security;
(c) any contract or arrangement concerning an offer of shares or debentures or other securities
of or by the Company or any other company which the Company may promote or be
interested in for subscription or purchase, where the Director is or is to be interested as a
participant in the underwriting or sub-underwriting of the offer;
(d) any contract or arrangement in which he is interested in the same manner as other holders
of shares or debentures or other securities of the Company or any of its subsidiaries by
virtue only of his interest in shares or debentures or other securities of the Company;
(e) any contract or arrangement concerning any other company in which he is interested only,
whether directly or indirectly, as an officer or executive or a shareholder other than a
company in which the Director together with any of his associates (as defined by the rules,
where applicable, of the Designated Stock Exchange) is beneficially interested in (other
than through his interest (if any) in the Company) five (5) per cent or more of the issued
shares or of the voting rights of any class of shares of such company (or any third company
through which his interest is derived); or
(f)
any proposal concerning the adoption, modification or operation of a share option scheme,
a pension fund or retirement, death or disability benefits scheme or other arrangement
which relates both to directors and employees of the Company or of any of its subsidiaries
and does not provide in respect of any Director as such any privilege or advantage not
accorded to the employees to which such scheme or fund relates.
127
(2)
A company shall be deemed to be a company in which a Director owns five (5) per cent. or
more if and so long as (but only if and so long as) he and his associates (as defined by the
rules, where applicable, of the Designated Stock Exchange), (either directly or indirectly) are
the holders of or beneficially interested in (other than through his interest (if any) in the Company)
five (5) per cent. or more of any class of the equity share capital of such company or of the
voting rights available to members of such company (or of any third company through which
his interest is derived). For the purpose of this paragraph there shall be disregarded any shares
held by a Director as bare or custodian trustee and in which he has no beneficial interest, any
shares comprised in a trust in which the Director’s interest is in reversion or remainder if and
so long as some other person is entitled to receive the income thereof, and any shares comprised
in an authorised unit trust scheme in which the Director is interested only as a unit holder.
(3)
Where a company in which a Director together with his associates (as defined by the rules,
where applicable, of the Designated Stock Exchange) holds five (5) per cent. or more is materially
interested in a transaction, then that Director shall also be deemed materially interested in
such transaction.
(4)
If any question shall arise at any meeting of the Board as to the materiality of the interest of a
Director (other than the chairman of the meeting) or as to the entitlement of any Director (other
than such chairman) to vote and such question is not resolved by his voluntarily agreeing to
abstain from voting, such question shall be referred to the chairman of the meeting and his
ruling in relation to such other Director shall be final and conclusive except in a case where the
nature or extent of the interest of the Director concerned as known to such Director has not
been fairly disclosed to the Board. If any question as aforesaid shall arise in respect of the
chairman of the meeting such question shall be decided by a resolution of the Board (for which
purpose such chairman shall not vote thereon) and such resolution shall be final and conclusive
except in a case where the nature or extent of the interest of such chairman as known to such
chairman has not been fairly disclosed to the Board.
Borrowing Powers
Bye-law 109
The Board may exercise all the powers of the Company to raise or borrow money and to mortgage
or charge all or any part of the undertaking, property and assets (present and future) and uncalled
capital of the Company and, subject to the Act, to issue debentures, bonds and other securities,
whether outright or as collateral security for any debt, liability or obligation of the Company or of any
third party.
Voting rights of Members
Bye-law 65
Subject to any special rights or restrictions as to voting for the time being attached to any shares by
or in accordance with these Bye-laws, at any general meeting on a show of hands every Member
present in person (or being a corporation, is present by a representative duly authorised under
Section 78 of the Act), or by proxy shall have one vote, the chairman of the meeting to determine
which proxy shall be entitled to vote where a Member (other than the Depository) is represented by
two proxies and on a poll every Member present in person or by proxy or, in the case of a Member
being a corporation, by its duly authorised representative shall have one vote for every fully paid
share of which he is the holder or which he represents and in respect of which all calls due to the
Company have been paid, but so that no amount paid up or credited as paid up on a share in
advance of calls or instalments is treated for the foregoing purposes as paid up on the share. A
resolution put to the vote of a meeting shall be decided on a show of hands unless (before or on the
declaration of the result of the show of hands or on the withdrawal of any other demand for a poll)
a poll is demanded:
(a)
by the chairman of such meeting; or
128
(b)
by at least three Members present in person (or in the case of a Member being a corporation
by its duly authorised representative) or by proxy for the time being entitled to vote at the
meeting; or
(c)
by a Member or Members present in person (or in the case of a Member being a corporation
by its duly authorised representative) or by proxy, or where such a Member has appointed two
proxies any one of such proxies, or any proxy appointed by the Depository, or any number or
combination of such Members or proxies, holding or representing as the case may be not less
than one-tenth of the total voting rights of all Members having the right to vote at the meeting;
or
(d)
by a Member or Members present in person (or in the case of a Member being a corporation
by its duly authorised representative) or by proxy, or where such a Member has appointed two
proxies any one of such proxies, or any proxy appointed by the Depository, or any number or
combination of such Members or proxies, holding or representing as the case may be shares
in the Company conferring a right to vote at the meeting being shares on which an aggregate
sum has been paid up equal to not less than one-tenth of the total sum paid up on all shares
conferring that right.
A demand by a person as proxy for a Member or in the case of a Member being a corporation by
its duly authorised representative shall be deemed to be the same as a demand by a Member.
Bye-law 66
Unless a poll is duly demanded and the demand is not withdrawn, a declaration by the chairman
that a resolution has been carried, or carried unanimously, or by a particular majority, or not carried
by a particular majority, or lost, and an entry to that effect made in the minute book of the Company,
shall be conclusive evidence of the fact without proof of the number or proportion of the votes
recorded for or against the resolution.
Bye-law 67
If a poll is duly demanded the result of the poll shall be deemed to be the resolution of the meeting
at which the poll was demanded.
Bye-law 68
A poll demanded on the election of a chairman, or on a question of adjournment, shall be taken
forthwith. A poll demanded on any other question shall be taken in such manner (including the use
of ballot or voting papers or tickets) and either forthwith or at such time (being not later than thirty
(30) days after the date of the demand) and place as the chairman directs. It shall not be necessary
(unless the chairman otherwise directs) for notice to be given of a poll not taken immediately.
Bye-law 69
The demand for a poll shall not prevent the continuance of a meeting or the transaction of any
business other than the question on which the poll has been demanded, and, with the consent of
the chairman, it may be withdrawn at any time before the close of the meeting or the taking of the
poll, whichever is the earlier.
Bye-law 70
On a poll votes may be given either personally or by proxy.
Bye-law 71
A person entitled to more than one vote on a poll need not use all his votes or cast all the votes he
uses in the same way.
129
Bye-law 72
In the case of an equality of votes, whether on a show of hands or on a poll, the chairman of such
meeting shall be entitled to a second or casting vote in addition to any other vote he may have.
Bye-law 73
Where there are joint holders of any share any one of such joint holder may vote, either in person
or by proxy, in respect of such share as if he were solely entitled thereto, but if more than one of
such joint holders be present at any meeting the vote of the senior who tenders a vote, whether in
person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders, and for
this purpose seniority shall be determined by the order in which the names stand in the Register in
respect of the joint holding. Several executors or administrators of a deceased Member in whose
name any share stands shall for the purposes of this Bye-law be deemed joint holders thereof.
Bye-law 74
(1)
A Member who is a patient for any purpose relating to mental health or in respect of whom an
order has been made by any court having jurisdiction for the protection or management of the
affairs of persons incapable of managing their own affairs may vote, whether on a show of
hands or on a poll, by his receiver, committee, curator bonis or other person in the nature of a
receiver, committee or curator bonis appointed by such court, and such receiver, committee,
curator bonis or other person may vote on a poll by proxy, and may otherwise act and be
treated as if he were the registered holder of such shares for the purposes of general meetings,
provided that such evidence as the Board may require of the authority of the person claiming
to vote shall have been deposited at the Office, head office or Registration Office, as appropriate,
not less than forty-eight (48) hours before the time appointed for holding the meeting, or
adjourned meeting or poll, as the case may be.
(2)
Any person entitled under Bye-law 53 to be registered as the holder of any shares may vote at
any general meeting in respect thereof in the same manner as if he were the registered holder
of such shares, provided that forty-eight (48) hours at least before the time of the holding of
the meeting or adjourned meeting, as the case may be, at which he proposes to vote, he shall
satisfy the Board of his entitlement to such shares, or the Board shall have previously admitted
his right to vote at such meeting in respect thereof.
Bye-Law 75
No Member shall, unless the Board otherwise determines, be entitled to attend and vote and to be
reckoned in a quorum at any general meeting unless he is duly registered and all calls or other
sums presently payable by him in respect of shares in the Company have been paid.
Bye-law 76
If:
(a)
any objection shall be raised to the qualification of any voter; or
(b)
any votes have been counted which ought not to have been counted or which might have been
rejected; or
(c)
any votes are not counted which ought to have been counted;
the objection or error shall not vitiate the decision of the meeting or adjourned meeting on any
resolution unless the same is raised or pointed out at the meeting or, as the case may be, the
adjourned meeting at which the vote objected to is given or tendered or at which the error occurs.
Any objection or error shall be referred to the chairman of the meeting and shall only vitiate the
decision of the meeting on any resolution if the chairman decides that the same may have affected
the decision of the meeting. The decision of the chairman on such matters shall be final and conclusive.
130
Bye-law 77
(1)
Any Member entitled to attend and vote at a meeting of the Company who is the holder of two
or more shares shall be entitled to appoint not more than two proxies to attend and vote
instead of him at the same general meeting provided that if the Member is the Depository:
(a) the Depository may appoint more than two proxies to attend and vote at the same general
meeting and each proxy shall be entitled to exercise the same powers on behalf of the
Depository as the Depository could exercise, including, notwithstanding Bye-law 65, the
right to vote individually on a show of hands;
(b) the Company shall be entitled and bound:(i)
to reject any instrument of proxy lodged if the proxy first named in that instrument,
being the Depositor, is not shown in the records of the Depository as at a time not
earlier than forty-eight (48) hours prior to the time of the relevant general meeting
supplied by the Depository to the Company, to have any shares credited to a Securities
Account; and
(ii) to accept as the maximum number of votes which in aggregate all the proxies appointed
by the Depository in respect of a particular Depositor are able to cast on a poll a
number which is the number of shares credited to the Securities Account of that
Depositor, as shown in the records of the Depository as at a time not earlier than
forty-eight (48) hours prior to the time of the relevant general meeting supplied by the
Depository to the Company, whether that number is greater or smaller than the number
specified in any instrument of proxy executed by or on behalf of the Depository; and
(iii) the Company shall accept as valid in all respects the form of proxy approved by the
Depository (the “CDP Proxy Form”) for use at the date relevant to the general meeting
in question notwithstanding that the same permits the Depositor concerned to nominate
a person or persons other than himself as the proxy or proxies appointed by the
Depository. The Company shall be entitled and bound, in determining rights to vote
and other matters in respect of a completed CDP Proxy Form submitted to it, to have
regard to the instructions given by and the notes (if any) set out in the CDP Proxy
Form.
(2)
In any case where a form of proxy appoints more than one proxy (including the case where
such appointment results from a nomination by a Depositor), the proportion of the shareholding
concerned to be represented by each proxy shall be specified in the form of proxy.
(3)
A proxy need not be a Member. In addition, subject to sub-paragraph (1) of this Bye-law, a
proxy or proxies representing either a Member who is an individual or a Member which is a
corporation shall be entitled to exercise the same powers on behalf of the Member which he or
they represent as such Member could exercise.
Bye-law 78
The instrument appointing a proxy shall be in writing under the hand of the appoint or of his attorney
duly authorised in writing or, if the appoint or is a corporation, either under its seal or under the hand
of an officer, attorney or other person authorised to sign the same or, in the case of the Depository,
signed by its duly authorised officer by some method or system of mechanical signature as the
Depository may deem appropriate. In the case of an instrument of proxy purporting to be signed on
behalf of a corporation by an officer thereof it shall be assumed, unless the contrary appears, that
such officer was duly authorised to sign such instrument of proxy on behalf of the corporation without
further evidence of the fact.
131
Bye-law 79
The instrument appointing a proxy and (if required by the Board) the power of attorney or other
authority (if any) under which it is signed on behalf of the appointer (which shall, for this purpose,
include a Depositor), or a certified copy of such power or authority, shall be delivered to such place
or one of such places (if any) as may be specified for that purpose in or by way of note to or in any
document accompanying the notice convening the meeting (or, if no place is so specified at the
Registration Office or the Office, as may be appropriate) not less than forty-eight (48) hours before
the time appointed for holding the meeting or adjourned meeting at which the person named in the
instrument proposes to vote or, in the case of a poll taken subsequently to the date of a meeting or
adjourned meeting, not less than twenty-four (24) hours before the time appointed for the taking of
the poll and in default the instrument of proxy shall not be treated as valid. No instrument appointing
a proxy shall be valid after the expiration of twelve (12) months from the date named in it as the
date of its execution, except at an adjourned meeting or on a poll demanded at a meeting or an
adjourned meeting in cases where the meeting was originally held within twelve (12) months from
such date. Delivery of an instrument appointing a proxy shall not preclude a Member from attending
and voting in person at the meeting convened and in such event, the instrument appointing a proxy
shall be deemed to be revoked.
Bye-law 80
Instruments of proxy shall be in any usual or common form (including any form approved from time
to time by the Depository) or in such other form as the Board may approve (provided that this shall
not preclude the use of the two-way form) and the Board may, if it thinks fit, send out with the notice
of any meeting forms of instrument of proxy for use at the meeting. The instrument of proxy shall be
deemed to confer authority to demand or join in demanding a poll and to vote on any amendment of
a resolution put to the meeting for which it is given as the proxy thinks fit. The instrument of proxy
shall, unless the contrary is stated therein, be valid as well for any adjournment of the meeting as
for the meeting to which it relates.
Bye-law 81
A vote given in accordance with the terms of an instrument of proxy shall be valid notwithstanding
the previous death or insanity of the principal, or revocation of the instrument of proxy or of the
authority under which it was executed, provided that no intimation in writing of such death, insanity
or revocation shall have been received by the Company at the Office or the Registration Office (or
such other place as may be specified for the delivery of instruments of proxy in the notice convening
the meeting or other document sent therewith) two (2) hours at least before the commencement of
the meeting or adjourned meeting, or the taking of the poll, at which the instrument of proxy is used.
Bye-law 82
Anything which under these Bye-laws a Member may do by proxy he may likewise do by his duly
appointed attorney and the provisions of these Bye-laws relating to proxies and instruments appointing
proxies shall apply mutatis mutandis in relation to any such attorney and the instrument under which
such attorney is appointed.
Bye-law 83
(1)
Any corporation which is a Member may by resolution of its directors or other governing body
authorise such person as it thinks fit to act as its representative at any meeting of the Company
or at any meeting of any class of Members. The person so authorised shall be entitled to
exercise the same powers on behalf of such corporation as the corporation could exercise if it
were an individual Member and such corporation shall for the purposes of these Bye-laws be
deemed to be present in person at any such meeting if a person so authorised is present
thereat.
132
(2)
If permitted by the Act, where a Member is the Depository (or its nominee, in each case, being
a corporation), it may authorise such persons as it thinks fit to act as its representatives at any
meeting of the Company or at any meeting of any class of Members provided that the
authorisation shall specify the number and class of shares in respect of which each such
representative is so authorised. Each person so authorised under the provisions of this Bye-law
shall be entitled to exercise the same rights and powers as if such person was the registered
holder of the shares of the Company held by the Depository (or its nominee).
(3)
Any reference in these Bye-laws to a duly authorised representative of a Member being a
corporation shall mean a representative authorised under the provisions of this Bye-law.
Variation of Rights
Bye-law 10
Whenever the share capital of the Company is divided into different classes of shares, subject to the
provisions of the Statutes, preference capital other than redeemable preference capital may be repaid
and the special rights attached to any class may be varied or abrogated either with the consent in
writing of the holders of three-quarters in nominal value of the issued shares of the class or with the
sanction of a special resolution passed at a separate general meeting of the holders of the shares
of the class (but not otherwise) and may be so repaid, varied or abrogated either whilst the Company
is a going concern or during or in contemplation of a winding-up. To every such separate general
meeting and all adjournments thereof all the provisions of these Bye-laws relating to general meetings
of the Company and to the proceedings thereat shall mutatis mutandis apply, except that the necessary
quorum (other than at an adjourned meeting) shall be two persons at least holding or representing
by proxy at least one-third in nominal value of the issued shares of the class and at any adjourned
meeting of such holder, two holders present in person or by proxy (whatever the number of shares
held by them) shall be a quorum and that any holder of shares of the class present in person or by
proxy may demand a poll and that every such holder shall on a poll have one vote for every share
of the class held by him, provided always that where the necessary majority for such a special
resolution is not obtained at such general meeting, consent in writing if obtained from the holders of
three-quarters in nominal value of the issued shares of the class concerned within two months of
such general meeting shall be as valid and effectual as a special resolution carried at such general
meeting. The foregoing provisions of this Bye-law shall apply to the variation or abrogation of the
special rights attached to some only of the shares of any class as if each group of shares of the
class differently treated formed a separate class the special rights whereof are to be varied.
Restrictions on Transferability of Shares
Bye-law 46
Subject to these Bye-laws, any Member may transfer all or any of his shares by an instrument of
transfer in the form for the time being approved by the Designated Stock Exchange or where the
Company is no longer listed on the Designated Stock Exchange, in any other form acceptable to the
Board.
Bye-law 47
The instrument of transfer shall be executed by or on behalf of the transferor and the transferee
provided that an instrument of transfer in respect of which the transferee is the Depository shall be
effective although not signed or witnessed by or on behalf of the Depository and provided further
that the Board may dispense with the execution of the instrument of transfer by the transferee in any
case which it thinks fit in its discretion to do so. The Board may also resolve, either generally or in
any particular case, upon request by either the transferor or transferee, to accept mechanically
executed transfers. The transferor shall be deemed to remain the holder of the share until the name
of the transferee is entered in the Register in respect thereof. Nothing in these Bye-laws shall
preclude the Board from recognising a renunciation of the allotment or provisional allotment of any
share by the allottee in favour of some other person.
133
Bye-law 48
(1)
The Board may, in its absolute discretion, refuse to register a transfer of any share (not being
a fully paid up share) to a person of whom it does not approve, or any share issued under any
share incentive scheme for employees upon which a restriction on transfer imposed thereby
still subsists, and it may also, without prejudice to the foregoing generality, refuse to register a
transfer of any share to more than four (4) joint holders or a transfer of any share (not being
a fully paid up share) on which the Company has a lien.
(2)
No transfer shall be made to an infant or to a person of unsound mind or under other legal
disability.
(3)
The Board in so far as permitted by any applicable law may, upon request by a shareholder
and in its absolute discretion, at any time and from time to time transfer any share upon the
Register to any branch register or any share on any branch register to the Register or any
other branch register. In the event of any such transfer, the shareholder requesting such transfer
shall bear the cost of effecting the transfer unless the Board otherwise determines.
(4)
Unless the Board otherwise agrees (which agreement may be on such terms and subject to
such conditions as the Board in its absolute discretion may from time to time determine, and
which agreement the Board shall, without giving any reason therefor, be entitled in its absolute
discretion to give or withhold), no shares upon the Register shall be transferred to any branch
register nor shall shares on any branch register be transferred to the Register or any other
branch register and all transfers and other documents of title shall be lodged for registration,
and registered, in the case of any shares on a branch register, at the relevant Registration
Office, and, in the case of any shares on the Register, at the Office or such other place in
Bermuda at which the Register is kept in accordance with the Act.
(5)
Save as provided in the Bye-laws, there shall be no restriction on the transfer of fully paid up
shares (except where required by law, or the listing rules of the Designated Stock Exchange).
Bye-law 49
Without limiting the generality of the last preceding Bye-law, the Board may decline to recognise any
instrument of transfer unless:(a)
a fee of such maximum sum as the Designated Stock Exchange may determine to be payable
or such lesser sum as the Board may from time to time require is paid to the Company in
respect thereof;
(b)
the instrument of transfer is in respect of only one class of share;
(c)
the instrument of transfer is lodged at the Office or such other place in Bermuda at which the
Register is kept in accordance with the Act or the Registration Office (as the case may be)
accompanied by the relevant share certificate(s) and such other evidence as the Board may
reasonably require to show the right of the transferor to make the transfer (and, if the instrument
of transfer is executed by some other person on his behalf, the authority of that person so to
do); and
(d)
if applicable, the instrument of transfer is duly and properly stamped.
Bye-law 50
If the Board refuses to register a transfer of any share, it shall, within one (1) month after the date
on which the transfer was lodged with the Company, send to each of the transferor and transferee
notice of the refusal, stating the facts which are considered to justify the refusal.
134
Bye-law 51
The registration of transfers of shares or of any class of shares may, after notice has been given by
advertisement in an appointed newspaper and, where applicable, any other newspapers in accordance
with the requirements of any Designated Stock Exchange to that effect, be suspended at such times
and for such periods (not exceeding in the whole thirty (30) days in any year) as the Board may
determine.
Bye-Law 168
For so long as the shares of the Company are listed on the Designated Stock Exchange, the provisions
of Sections 213, 214 and 215 of the Singapore Companies Act, the Tenth Schedule of the Singapore
Companies Act and the Singapore Take-over Code on Take-overs and Mergers shall apply, mutatis
mutandis, to all take-over offers for the Company.
135

Cytech 1-28

Transcription

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2 March 2016 Dear Shareholder Notice of the Annual

SOCIAL MEDIA MIX