The Next Generation of

Transcription

1 The Next Generation of Gr wth Annual Report 2014

2 Beijing Shandong Zhejiang Guangdong India Hong Kong Macau Thailand Philippines Malaysia Singapore Indonesia Cordlife Group Limited s investments Cordlife Group Limited and its subsidiaries We are working towards a future of Deeper Scope and Wider Scale where Quality Standards is equally important to Creating Value and passion for innovation is linked to Pursuit of Excellence. At Cordlife Group Limited, we are committed to delivering on our promises, creating value and driving growth for our stakeholders. We are growing our outreach both geographically and segmentally, to expand our network of operations and provide an increased scope of complementary products and services. The Next Generation of Growth, marks our transition in becoming a consumer healthcare company catered to the mother and child segment.

3 Contents 02 Corporate Profile 04 Chairman s Message 08 CEO s Message 13 Business Overview 14 Business Unit Spotlight: Banking Strategic Business Unit 17 Business Unit Spotlight: Diagnostics Strategic Business Unit 18 Milestones 20 Financial Highlights 22 Corporate Social Responsibility 25 Board of Directors 29 Senior Management 31 Group Structure 32 Corporate Information 33 Corporate Governance Report 46 Financial Contents

4 02 CORDLIFE GROUP LIMITED Annual Report 2014 Our MISSION We are a consumer healthcare company that serves the needs of the mother and child. We deliver the highest of quality standards in service and product offerings. We maximise all stakeholders value by engaging all employees to enable the Company to achieve its fullest potential. Our VALUES As a company, and as individuals working collectively, we value integrity, honesty, openness, pursuit of excellence, creativity, constructive self-criticism, continuous self-improvement, and mutual respect. We are committed to our clients and partners, and have a passion for innovation. We embrace big challenges and pride ourselves on seeing them through. We hold ourselves accountable to our clients, shareholders, employees and regulators by honouring our commitments, providing results and striving for the highest quality. Corporate Profile Identity Listed on the Mainboard of the Singapore Exchange Securities Trading Limited ( SGX-ST ) on March 29, 2012, Cordlife Group Limited ( Cordlife, and together with its subsidiaries, the Group ) is a consumer healthcare company catering to the mother and child segment and a leading umbilical cord blood and cord lining banking service provider. Headquartered in Singapore and incorporated in May 2001, Cordlife occupies a unique space in the healthcare industry, being one of the first private cord blood banks to be established in Asia. Over the past 13 years, Cordlife s enterprising spirit and values have firmly placed it as one of the industry leaders. Today, Cordlife has the largest market share of private cord blood banks in Singapore, Indonesia and the Philippines. In Hong Kong and India, it is amongst the top three market leaders for private cord blood banks. Prior to its listing on SGX-ST, Cordlife demerged on June 30, 2011, from Life Corporation Limited ( LCL ) (previously known as Cordlife Limited), which is listed on the Australian Securities Exchange. The rationale was to enhance shareholder value by giving shareholders the opportunity to directly participate in the developed businesses owned by the Group which are cashflow positive. Following the demerger, the Group owned the developed businesses in Singapore and Hong Kong, and was granted the right of first refusal to acquire LCL s businesses in India, the Philippines and Indonesia. Cordlife subsequently completed the acquisition of the cord blood and cord lining banking businesses in India, the Philippines, Hong Kong and Indonesia from LCL in June 2013.

5 Corporate Profile 03 Today s Cordlife Growth in scale Cordlife, through its collaborative relationships and arrangements with major private hospitals and clinics such as Thomson Medical and Parkway East Hospital, has continued to increase public awareness of its cord blood banking service in Singapore. Overseas, the Group has a 10.02% direct stake in China Cord Blood Corporation ( CCBC ) a top cord blood bank operator in China holding majority shares in the Beijing, Guangdong and Zhejiang Cord Blood Banks, and an approximately 24.00% share in Shandong Cord Blood Bank. In August 2014, Cordlife announced plans to acquire CCBC convertible note for US$44 million, which will result in its interest in CCBC rising to approximately 17.79% of the enlarged share capital of CCBC, assuming full conversion of the note. In October 2013, Cordlife also acquired a 19.92% stake, which was subsequently increased to approximately 31.81% in December 2013, in StemLife Berhad ( StemLife ). StemLife is a fully licensed cord blood banking facility with the Ministry of Health Malaysia currently listed on the ACE Market of Bursa Malaysia. Growth in scope Cordlife has also expanded the product portfolio catering to the mother & child. In March 2011, it launched its umbilical cord lining banking service in Hong Kong to provide parents with an additional choice of storing their child s umbilical cord lining, which is a rich source of mesenchymal and epithelial stem cells and potentially help repair the body in different ways. In May 2013, Cordlife Technologies Pte Ltd, a wholly-owned subsidiary of Cordlife, launched umbilical cord lining banking service in Singapore 1. The cord lining banking service is currently offered in Singapore, Hong Kong, India and the Philippines. Cordlife has also recently established a new Diagnostics Business Unit, with newborn screening for metabolic disorders being one of the key diagnostics areas that the Group is focusing on. Cordlife has already launched this advanced noninvasive newborn metabolic screening test, Metascreen TM, in India in 2013, and in Hong Kong and the Philippines in 2014 respectively. Achievements As a testament to its pioneering status, Cordlife has achieved many other firsts. Cordlife was one of the first private cord blood banks in Singapore and Hong Kong to release cord blood units for transplants and other therapeutic use. In Singapore, Cordlife was the first private cord blood bank to have released cord blood units for cerebral palsy. In addition, in April 2013, Cordlife became the first private cord blood bank in Asia to have launched SEPAX 2, a Swiss-made FDA-approved, GMP compliant automated stem cell processing system that maximises automation while ensuring consistently high cell recoveries. Cordlife is honoured to be recognised for its quality services through various accolades and awards, including: Best Medical Service Award 2010 by Capital CEO Supreme Brand Awards; Top Pregnant/Baby Products Award 2011 by Pregnancy Magazine; Outstanding Financial Strength Cord Blood Bank 2012 by Quamnet Outstanding Enterprise Awards; Most Popular Brand Award 2010 The Most Popular Cord Blood Bank by TVB Weekly; U-Choice Lifestyle Brand Award 2010 by Metroinfo FM99.7; Baby & Kid Brands Awards Year 2013, My Favourite Cord Blood Bank by Hong Kong Economic Times; 2014 Most Popular Stem Cell Bank Reader s Choice by Child Magazine; MyBB Parent- Child Favorite Cord Blood and Umbilical Cord Bank Company and Baby Kingdom Top 10 Family Brand Award In 2012, Cordlife was awarded the prestigious SIAS Investors Choice Awards as runner-up in the Most Transparent Company Award 2012 New Issues Category. In August 2013, the Group was presented with Merit Award for the Singapore Corporate Awards 2013, Best Investor Relations Award. In November 2013, Cordlife was named the Most Transparent Company 2013 in the Retail & Household Goods Category and Mainboard Small Caps Category at the 14th SIAS Investors Choice Awards. In 2012, Cordlife was a runner-up for the same award in the New Issues Category, having been newly-listed on the Mainboard of the Singapore Exchange on March 29, The Investors Choice Awards honour companies and individuals who have achieved excellence in advancing corporate governance practices, including promoting greater corporate transparency. Beliefs Cordlife s ethos is to safeguard the future of its clients by providing a quality system and reliable services for parents seeking a lifetime protection for their child. Its processing and storage facilities in Singapore and Hong Kong are accredited by AABB (formerly known as American Association of Blood Banks), the world s gold standard in cord blood banking, since 2005 and 2011 respectively. Cordlife prides itself on stringent, international standards in the collection, processing, testing, cryo-preservation and storage of a child s cord blood stem cells. In July 2013, Cordlife India became the third AABB accredited facility, after Singapore and Hong Kong. 1 The storage and banking of umbilical cord lining services provided is currently not licensed by the Ministry of Health, Singapore and this service is provided on a research/ clinical trial basis 2 Awarded to Cordlife Hong Kong

6 4 CORDLIFE GROUP LIMITED Annual Report 2014 Chairman s Message In FY2014, the Group established the Diagnostics Strategic Business Unit to further expand our range of consumer healthcare products and services. Our first product introduced under this business unit was Metascreen, a comprehensive non-invasive metabolic screening test specially designed for newborn babies. Metascreen was first launched in India in 2013 and it has since been extended to Hong Kong and the Philippines in Going forward, we plan to roll out the service to other countries progressively. Dear Valued Shareholders, On behalf of the Board of Directors of Cordlife Group Limited, it is my pleasure to present our annual report for the financial year ended June 30, 2014 ( FY2014 ). We have come a long way since we started in Singapore in 2001, to now become the consumer healthcare company of choice for tens of thousands of parents who have entrusted their baby s stem cells to our charge. In the past year, the number of client deliveries has more than doubled to 15,880. This represents the strongest validation of the progress we have made over the years, which has been duly reflected in our financial numbers. We delivered a good set of financial results for the financial year, with net profit for the full year of FY2014 growing 125.3% year-on-year to S$30.4 million. The Group s core net profit increased by 13.0% to S$7.6 million for FY2014, excluding non-core and one-off items 1. Based on the strong performance, we are pleased to propose a final, 1-tier tax exempt dividend of 1.0 cents, payable on November 7, This is in addition to the interim dividend of 1.0 cents that was distributed on April 4, This payout is in line with our commitment to reward long term and existing shareholders.

7 Chairman s Message 5 Putting the needs of mother and child first As a consumer healthcare company, we are always actively seeking opportunities to widen our service and product offerings for families, with a focus of both the mother and child. Although our original cord blood banking business has grown rapidly, we are confident of providing greater value-add to our clients with the new suite of products and services that we are introducing. Leveraging on our leading position of the cord blood banking business in the markets we operate in, Cordlife launched cord lining banking services in India, Hong Kong and Singapore 2 in February 2010, March 2011 and May 2013 respectively. Positive take-up rates for cord lining banking service among our cord blood banking clients prompted us to introduce the service to the Philippines in August 2013 through Cordlife Medical Philippines, Inc., a wholly-owned subsidiary of the Group. This service allows expectant parents to store cord lining obtained from their baby s umbilical cord and the stem cells it contains for potential use in future therapeutic applications. Cordlife is the only company in Singapore and most ASEAN countries, including India with an exclusive license to store and harvest stem cells from cord lining. Patented in more than 16 countries, the technique is able to culture two types of stem cells from cord lining, namely Epithelial (EpSCs) and Mesenchymal stem cells (MSCs). These cells have shown immense potential in aiding the repair of injured tissues and organs and the treatment of various diseases, granting our clients access to using these cells for the treatment of a wider variety of disorders. In FY2014, the Group established the Diagnostics Strategic Business Unit to further expand our range of consumer healthcare products and services. Our first product introduced under this business unit was Metascreen, a comprehensive non-invasive metabolic screening test specially designed for newborn babies. Metascreen was first launched in India in 2013 and it has since been extended to Hong Kong and the Philippines in Going forward, we plan to roll out the service to other countries progressively. We aspire to be a trusted provider of consumer healthcare products and services catering to mothers and children at every single touch point in their lives. Extending our presence to Pan-Asia Started in Singapore in 2001, we have grown to become a Pan- Asian company, with operations across the region. On June , the Group announced that it has completed the acquisition of Australian listed Life Corporation Limited s ( LCL ) (previously known as Cordlife Limited) cord blood and cord lining banking businesses and assets in India, the Philippines and Indonesia for an aggregate consideration of A$5.5 million. Our newly-acquired operations in India, the Philippines, and Indonesia have grown rapidly in FY2014, reflecting the rising penetration rates in these developing markets. According to a report dated April 10, 2013 (the Deloitte Report ) by Deloitte & Touche Financial Advisory Services Limited ( Deloitte ), annual incremental storage units for private cord blood banks for India, the Philippines and Indonesia are expected to grow at CAGRs of 20%, 30%, 35% between 2011 and Driven by the desire of the fast-rising middle class in these countries to seek better healthcare options for their children, we expect penetration rates in these countries to continue to grow and benefit our cord blood and cord lining banking operations in these countries. Cordlife is also constantly on the lookout for strategic partners to expand our reach in Asia. These partners have to form a good fit with us and share a common vision of bettering the lives of mother and child through the highest quality products and services. Cordlife announced plans to acquire CCBC convertible note for US$44 million in August 2014, which suggests that Cordlife will be able to raise its interest in CCBC to 17.79% upon full conversion. Already among the largest cord blood banking operators in Singapore, India, Indonesia, Philippines and Hong Kong, the potential for an increased stake in CCBC will allow us to build on our leading position in Asia, particularly in the Greater China region. China is one of the fastest growing healthcare markets in Asia, and we are poised to further capitalise on its strong growth prospects with the acquisition. This acquisition also complements our previously announced proposed strategic alliance with CCBC in relation to the provision of human postnatal cord lining storage services to certain territories in

8 6 CORDLIFE GROUP LIMITED Annual Report 2014 Chairman s Message China. Collectively, Cordlife s increased stake in and collaboration with CCBC will further strengthen the relationship between both parties. According to the Deloitte Report, China represents one of the highest growth potential markets in Asia with a burgeoning middle class. China s middle class population is estimated to grow from 290 million in 2011 to a projected 590 million by 2025, which means a progressively larger customer pool for Cordlife s products catering to the mother and child segment. In October 2013, Cordlife acquired a 19.92% stake in StemLife, a company listed on the ACE Market of Bursa Malaysia. On December 9, 2013, the Group announced that it has increased its interest from 19.92% to 31.81%. In the fourth quarter of FY2014, the Group also received our maiden contribution to other operating income of S$682,000 derived from the licensing agreement signed with StemLife in April 2014 to jointly develop cord lining related new services. Going back to our home market Singapore, FY2015 looks promising for new child births. To mark the Golden Jubilee, the 50th anniversary of Singapore s independence, the National Population and Talent Division announced 3 on June 27, 2014 that parents of Singapore s Jubilee babies born in 2015 can look forward to receiving a Jubilee Baby Gift to welcome every Singaporean baby born in the year. We are cautiously optimistic that the Golden Jubilee will be positive for childbirth rates in Singapore in Going forward, we will continue to expand our reach in Asia, so that more families can benefit from our consumer healthcare services and improve their quality of living. Safeguarding our children s future At Cordlife, we care about and share parents interest in alleviating the pain and suffering of their children stricken with illnesses. Over the years, we have earned the trust of parents to store their babies precious cord blood and cord lining with us. To-date, Cordlife and its associates have released over 250 cord blood units 4 to treat over 50 indications. We have also expanded our product portfolio in the past years to include diagnostics products such as Metascreen TM, offering parents with more healthcare options for their child. Our geographic expansion via strategic alliances and mergers & acquisitions will ensure that more people in Asia will benefit from our services. In July 2014, Cordlife Singapore announced that it will be extending support to link patients in Singapore with Duke Medicine research program for the development of several promising stem cell applications for the treatment of autism and other brain disorders. Duke Medicine received 5 a donation of U$15 million from The Marcus Foundation, an Atlanta-based philanthropic organisation, to support an innovative research program that explores the use of umbilical cord blood stem cells to treat autism, stroke, cerebral palsy and related brain disorders. The Duke Medicine research program confirms our long-held beliefs that the potential for future use of cord blood and cord lining will grow with the advancement in cell therapy. In the same month, we announced that we have joined forces with CCBC in assisting patients across the People s Republic of China ( PRC or China ), Singapore, Hong Kong, Indonesia, India, the Philippines and Malaysia to identify suitable cord blood matching units for stem cell therapy. Under the Memorandum of Understanding signed between the two companies, Cordlife, on behalf of its patients who are in need of cord blood stem cell therapy, can facilitate the process by providing relevant information to CCBC, who will then perform searches for possible matching units among its donated cord blood samples in the PRC. Helping parents secure their child s future well-being is and will remain at the core of our service proposition. Appreciation I would like to congratulate Ms. Jamie Woon and Ms. Tan Huiying who have been appointed as Directors of the Banking Strategic Business Unit and the Diagnostics Strategic Business Unit respectively in July Ms. Woon joined our Group in July 2013 as Director (General Manager), Hong Kong and Head of Group Marketing & Corporate Communications. Ms. Tan joined the Group in July 2013 as well, as Director (Philippines) to oversee the

9 Chairman s Message 7 Group s business in the Philippines. We are confident that both Ms Woon and Ms. Tan will be up to the tasks required based on their prior experiences and track records. I would also like to acknowledge the invaluable contributions of Ms. Gwendolene Yeo, formerly Senior Director of Banking Strategic Business Unit, who has resigned to pursue other career opportunities. Ms. Jin Lu, a Non-Executive Director of the Company, also stepped down from her position with effect from July 25, 2014, and Mr. Ng Tiak Soon, Independent Director, has decided to retire at this year s Annual General Meeting. The Board wishes to express its appreciation to Ms. Jin and Mr. Ng for their invaluable contributions to the Group throughout the past three years. At the same time, I would like to welcome Mrs. Eileen Tay-Tan Bee Kiew and Mr. Joseph Wong Wai Leung who joined us as Independent Directors in September Mrs. Tay has more than 40 years of experience in areas such as accounting, auditing, taxation, public listings, due diligence, mergers and acquisitions, and business advisory. Mrs. Tay was a partner at KPMG and had served as a director of several companies, both private and publicly listed, in Singapore and Australia. Mr. Wong has a wealth of experience in the financial services industry, having started his career at Big Four auditing firms PricewaterhouseCoopers and Deloitte Touche Tohmatsu, Hong Kong. Pursuant to his stint at Deloitte, Mr. Wong worked at Credit Agricole (Suisse), Hong Kong, where he advised the bank s clients on wealth management. I believe that both Mrs. Tay and Mr. Wong will able to contribute their relevant expertise to the Group. On behalf of the Board of Directors, I would like to thank my business associates and shareholders for their continued support. I also like to express my gratitude to my fellow Board members for their guidance and counsel in the last year. I like to take this opportunity to give credit to our management and staff for contributing to Cordlife s success in the year. Finally, I want to thank the parents who have stored their babies precious cord blood and cord lining with us. We have painstakingly built up our reputation and earned the trust of our clients over the years and we will continue to live up to their expectations of us as a trusted mother and child company. Dr. Ho Choon Hou Chairman and Non-Executive Director 1 These include the following: In FY2014, the Group s fair value gain on financial asset designated at fair value through profit or loss of S$18.7 million, a gain on transfer of investment in associate to financial asset designated at fair value through profit or loss of S$6.3 million, share of results in associate of S$2.4 million and fair value gain on investment properties of S$0.1 million; and in FY2013, the Group s gain on disposal of associate of S$2.7 million, share of results in associate of S$2.8 million, fair value gain on investment properties of S$1.1 million and negative goodwill on acquisition of associate of S$0.1 million. 2 The storage and banking of umbilical cord lining services provided in Singapore is currently not licensed by the Ministry of Health, Singapore. This service is provided on a research/clinical trial basis. 3 Source: Media Release by the National Population and Talent Division, 27 June 2014, 4 Kindly note that this list shows the cord blood unit release track record of Cordlife s associates for the treatment of various diseases. This should not be used as a reference for the list of treatable diseases by cord blood stem cells. In addition, banking your baby s cord blood does not guarantee that the stem cells will provide a cure or be applicable for every situation. The use would ultimately be determined by the treating physician. 5 Accessed 4 September 2014

10 8 CORDLIFE GROUP LIMITED Annual Report 2014 CEO s MESSAGe On April 30, 2014, the Group announced that it has entered into a licensing agreement with StemLife, to jointly explore and develop umbilical cord lining related new services based on cellular technology in Malaysia. This is in addition to the potential synergies of working with StemLife to cross-sell services and products in Malaysia and Thailand. Dear Valued Shareholders, On behalf of the Board and Management, I am pleased to present Cordlife s FY2014 performance and operations review. Financial review Revenue increased by 41.5% or S$14.4 million from S$34.7 million in FY2013 to S$49.1 million in the full year ended June 30, 2014 ( FY2014 ). The growth in revenue was mainly due to the 106% increase in the number of client deliveries from FY2013 to FY2014. This was contributed by the client deliveries from the Philippines, India and Indonesia, resulting from the acquisition in June The increase in revenue arising from the client deliveries from the Philippines, India and Indonesia is offset by a drop in revenue from the Group s Hong Kong subsidiary. This was due to a moratorium by the Hong Kong government on mainland Chinese mothers giving birth at private hospitals in Hong Kong commencing in Gross profit increased by 37.6% or S$9.5 million due to the increase in new client deliveries. Gross profit margin remained stable above 70% in FY2014 as compared to 73% in FY2013. Other operating income increased by approximately S$1.2 million in FY2014, which comprises a grant income of $253,000 from SPRING Singapore, S$58,000 received under the Wage Credit Scheme and Productivity and Innovation Credit Scheme, rental income of S$109,000 from Cordlife s investment properties and recognition of upfront fees

11 CEO s Message 9 of S$682,000 for providing training and technical know-how transfer services to StemLife under the licensing agreement signed in April There were no such grant income, rental income and upfront fees in FY2013. Selling and marketing expenses increased by approximately 55.8% and administrative expenses increased by approximately 46.8% respectively in FY2014, mainly due to the inclusion of expenditure on the Group s Philippines and Indian subsidiaries and Indonesian assets which were acquired in June The Group s net profit for FY2014 increased 125.3% to S$30.4 million year-on-year on the back of strong revenue growth, healthy margins, a S$1.2 million increase in other operating income, a S$18.7 million fair value gain on financial asset designated at fair value through profit or loss and a gain on transfer of investment in associate to financial asset designated at fair value through profit or loss of S$6.3 million. Excluding non-core and one-off items 1, the Group s core net profit would have been S$7.6 million for FY2014, representing an approximate 13.0% growth from S$6.7 million for FY2013. This is mainly attributable to the inclusion of results from the Group s Philippines, Indian and Indonesian operations and the Group s efforts in ramping up educational and marketing activities in these countries. In addition, the Group also incurred expenses in relation to restructuring of the Group s Indian and Philippines subsidiaries subsequent to the acquisition in June Such one-off costs were incurred in order to align these entities as part of the Group. As at June 30, 2014, the Group maintained a strong balance sheet, with cash and cash equivalents of S$45.4 million and a low gearing of 0.09 times. Net asset value per ordinary share increased by 60.4% to cents as at June 30, 2014, as compared to cents during the same period in the previous year. During the past year, we continued to execute on our economies of scale and scope strategies. Scale To derive economies of scale, Cordlife is riding on the growth story of emerging Asian nations by expanding its geographical footprint for cord blood and cord lining banking business as well as other newly-introduced products in the diagnostics segment catering to the mother and child segment. Our newly-acquired operations in India, the Philippines, and Indonesia and our 31.81% interest in Malaysia-listed StemLife have started to contribute positively to the Group s bottom line in FY2014. This year, we remain focused on our plans to expand our geographical presence, to leverage on the tremendous growth opportunities in Asia driven by rising affluence and greater health awareness. On August 25, 2014, Cordlife has entered into a convertible note sale agreement with Magnum Opus International Holdings Limited ( Magnum, and together with Cordlife, the Purchasers ) and Golden Meditech Holdings Limited (the Vendor ). Under the terms of the Agreement, the Purchasers will purchase from the Vendor in equal proportions a 7% senior unsecured convertible note (the Convertible Note ) due October 3, 2017 issued by CCBC to the Vendor on October 3, 2012 in the principal amount of US$50 million. As a result of this transaction, Cordlife is able to potentially raise its interest in China s largest cord blood banking operator to 17.79%. We are positive on this investment for three key reasons. Firstly, this strengthens Cordlife s access to the growing Chinese market with high entry barriers, where only one licensed cord blood banking operator is permitted to operate in each licensed region of the PRC; and allows Cordlife to leverage on the CCBC sales platform to cross-sell more products such as cord lining and newborn screening services. Secondly, the fact that key management of CCBC has increased their shareholdings via their investment vehicle Magnum validates our confidence in the future prospects of China s healthcare industry and CCBC itself. Thirdly, Cordlife will also enjoy a steady source of income from recurring annual coupon payments of US$1.75 million up to the point of redemption and a guaranteed Internal Rate of Return of 12% on US$25 million principal upon maturity assuming non-conversion.

12 10 CORDLIFE GROUP LIMITED Annual Report 2014 Ceo s Message Prior to this, Cordlife has already deepened its reach into China via strategic alliances. On March 3, 2014, the Group announced that it has extended its strategic alliance and co-operation with Cordlabs Asia Pte. Ltd ( Cordlabs Asia ) and NYSE-listed CCBC, in relation to the provision of human postnatal umbilical cord lining storage services to certain territories in the PRC. On November 11, 2013, the Group announced that it has signed a non-binding term sheet with CCBC, to jointly explore and develop new services based on cellular technologies. This collaboration will enable the Group to capitalise on economies of scale by expanding its geographical reach via CCBC s local networks. Apart from China, Malaysia is also a key consumer healthcare market for Cordlife. On December 9, 2013, the Group announced that it has acquired a further 11.89% interest in StemLife, an associated company of Cordlife listed on the ACE Market of the Bursa Malaysia, for a cash payment of approximately RM17.66 million. Following the additional acquisition, Cordlife will hold approximately 31.81% of the issued and paid-up share capital in StemLife. The consideration for the additional acquisition was satisfied by the Group fully in cash funded through a combination of borrowings and IPO proceeds. Prior to this, the Group announced on October 4, 2013 that it had completed the acquisition of an initial 19.92% interest in StemLife. The increased stake in StemLife will enlarge the Group s geographical footprint in Asia and allow us to tap into the growth story of emerging Asian nations. Scope To benefit from economies of scope, the Group is also transitioning into a consumer healthcare company catering to the mother and child segment. In addition to providing cord blood and cord lining banking services, the Group is looking to provide other complementary products and services that cater to the mother and child segment. On April 30, 2014, the Group announced that it has entered into a licensing agreement with StemLife, to jointly explore and develop umbilical cord lining related new services based on cellular technology in Malaysia. This is in addition to the potential synergies of working with StemLife to cross-sell services and products in Malaysia and Thailand. In October 2013, the Group s Indian subsidiary, Cordlife Services (India) Pvt. Ltd., introduced an advanced non-invasive metabolic screening service known as Metascreen. Metascreen is a comprehensive set of metabolic screening test specially designed for both newborn babies and adults. In 2014, we also launched Metascreen in Hong Kong and the Philippines and we are pleased that the initial market acceptance for Metascreen in these countries has been positive. Expanding scale and scope Looking ahead to FY2015, we expect to continue extracting growth from new geographies, new licensing revenues and new products. New geographies Since the inclusion of the Group s Philippines, Indian and Indonesian operations acquired in June 2013, we have devoted our efforts towards ramping up educational and marketing activities in these countries. This has enabled us to further promote customers awareness of the Group s existing and new products and services, so that the Group can continue to establish and establish its leadership position in these countries. According to the Deloitte Report, Cordlife is the largest cord blood banking operator in the Philippines, Indonesia and the third biggest player in India. In FY2014, Cordlife s revenue rose 41.5% as increased client deliveries from India, Indonesia and the Philippines offset lower Hong Kong contributions due to ban on mainland Chinese women s deliveries. We plan to further strengthen our presence in these markets by expanding our operations to a greater number of cities. New licensing revenues Cordlife currently holds a 10.02% interest in NYSE-listed CCBC and a 31.81% interest in our associate company StemLife. Cordlife has recently entered into licensing agreements with StemLife and CCBC, which are expected to contribute to earnings in FY2015 and beyond.

13 CEO s Message 11 Cordlife will deepen its reach into China via an alliance with CCBC to provide cord lining banking services that will give it a steady stream of royalty income. In March 2014, we formed a strategic alliance with CCBC and Cordlabs Asia, a Singapore-based stem cell research and development company, to launch cord lining banking services in China. The cord lining service will be progressively introduced in the regions where CCBC has cord blood banking licences. Cord lining banking services have been launched in Beijing by CCBC in June 2014, with plans to extend these services to Zhejiang, Guangdong and Shandong provinces soon. Following our April 30, 2014 announcement with respect to the licensing agreement, StemLife will obtain a sub-licence from Cordlife to engage in the provision of the services in relation to the collection, preparation and storage services for cord lining to StemLife s clients in Malaysia. Cordlife recognised other operating income of S$682,000 earned from the licensing agreement signed with StemLife in the fourth quarter of FY2014. New products Metascreen, as a newborn metabolic screening test, was first launched by Cordlife in India in October Since April 2014, Metascreen became available also in Hong Kong and the Philippines for parents looking for more comprehensive screening of metabolic disorders for their children. Metascreen is the first in a suite of products and services catering to the mother and child segment that Cordlife plans to roll out under its Diagnostics unit. Closing thoughts We are confident of increasing our share of the businesses in the fast growing markets across Asia. Overall, we remain focused on our key strategy to grow via economies of scale and scope through collaborative networks and strategic alliances. 2013, Cordlife was awarded Most Transparent Company award in the Retail and Household Goods Category and Mainboard Small Caps Category at SIAS 14th Investors Choice Awards. This represents the second consecutive year that we have been honoured at the Investors Choice Awards. In October 2012, Cordlife was awarded the prestigious SIAS Investors Choice Awards as runner-up in the Most Transparent Company Award 2012 New Issues Category. We are pleased that our efforts to make Cordlife s operations clear and easily understandable for our stakeholders and investors have been recognised. Going forward, we will continue participating in pro-active, open communications with the investing community to maintain the trust that we have built. The Group is positioned for sustainable long term growth, by virtue of our economies of scale and scope strategy. We remain focused on our plans to expand our geographical footprint (economies of scale), as well as increase the scope of products and services that we will be providing (economies of scope). Going forward, the Group is cautiously optimistic that its strong market position and brand equity, coupled with favourable industry factors, will benefit the Group in the next 12 months. Barring any unforeseen circumstances, the Group expects to remain profitable for FY2015. Mr. Yee Pinh Jeremy Executive Director and Chief Executive Officer While we continue to grow our businesses, the Group still has its sight firmly focused on advancing corporate governance practices, including promoting greater corporate transparency. In November 1 These include the following: In FY2014, the Group s fair value gain on financial asset designated at fair value through profit or loss of S$18.7 million, a gain on transfer of investment in associate to financial asset designated at fair value through profit or loss of S$6.3 million, share of loss in associate of S$2.4 million and fair value gain on investment properties of S$0.1 million; and in FY2013, the Group s gain on disposal of associate of S$2.7 million, share of results in associate of S$2.8 million, fair value gain on investment properties of S$1.1 million and negative goodwill on acquisition of associate of S$0.1 million.

14 12 CORDLIFE GROUP LIMITED Annual Report 2014 Growing towards Greater Prospects To benefit from economies of scope, the Group is also transitioning into a consumer healthcare company catering to the mother and child segment. In addition to providing cord blood and cord lining banking services, the Group is looking to provide other complementary products and services that cater to the mother and child segment.

15 Business Overview 13 Business overview Incorporated in May 2001, Cordlife Group is one of the pioneers in Asia s private cord blood banking industry. In the past 13 years, we have grown from a start-up company in Singapore to a consumer healthcare group with operations across Asia. We are currently the market leaders in umbilical cord blood banking across key Asian markets; and we have expanded our product portfolio catering to the mother and child to include umbilical cord lining service and diagnostics service such as newborn screening for metabolic disorders. Going forward, we will continue to be committed to our mission as a consumer healthcare company serving the needs of the mother and child. Cordlife s Commitment to Quality Since Cordlife s inception in 2001, the Group has taken a steadfast approach to ensure that all operational protocols meet the highest quality standards. Every year, Cordlife s facilities around the world have successfully passed many stringent audits by some of the world s gold standards including AABB, International Organisation for Standardisation (ISO) and other country regulators such as the Ministry of Health of Singapore, DEPKES Indonesia, Department of Health of Philippines and Drugs Controller General of India. Particularly, AABB has led the world in the development of blood banking standards since In 1991, the organisation established a set of standards dedicated for cord blood banking, which are updated regularly based on additional knowledge obtained from the field. Today, AABB is globally recognised as the world s gold standards in transfusion medicine and cellular therapies. These standards ensure that cord blood banks accredited by AABB, provide their clients with only the facts and the best possible method for collection, processing as well as storage of the transplant-ready cord blood units until needed in the future. Banking Cord Blood Market leader in Singapore, Indonesia and the Philippines and among the top three 1 private cord blood banks in Hong Kong and India Financial interests in cord blood banking service providers operating in China, Malaysia and Thailand Cordlife and its subsidiaries have successfully released 15 cord blood units to clients residing in all five markets for medical treatments Cord Lining The only company in Singapore and most ASEAN countries (including India) with an exclusive licence to offer cord lining banking, a patented source of stem cells as well as patented technique to extract and culture two cell lines Cord lining banking service currently available in India, Hong Kong, Singapore 2 and the Philippines The first family cord lining bank in Singapore Diagnostics Newborn Metabolic Screening Metascreen TM, a comprehensive metabolic screening test of up to 110 inborn errors of metabolism using urine samples of newborns Metascreen TM is already launched in India, Hong Kong and Philippines, with plans to launch in other entities within the Group Other diagnostics products catering to the mother and child in the pipeline Other than being regulated by the respective local governments, Cordlife s facilities in Singapore, Hong Kong and India are accredited by AABB. In addition, the facilities in Hong Kong, India, Indonesia and the Philippines are ISO certified. These achievements are testimony of the Group s commitment to quality and innovation to give families assurance that their baby s cord blood was collected, processed and stored according to stringent quality standards. All these are essential to ensure the delivery of safe stem cells for future medical treatment. 1 Source : Deloitte & Touche Financial Advisory Services Limited report, April 10, The storage and banking of umbilical cord lining services provided is currently not licensed by the Ministry of Health, Singapore and this service is provided on a research/ clinical trial basis

16 14 CORDLIFE GROUP LIMITED Annual Report 2014 Business Unit Spotlight: Banking Strategic Business Unit Leading the way in 5 key markets Cordlife operates the largest private cord blood banks in Singapore, the Philippines and Indonesia; and is amongst the top three market leaders in Hong Kong and India. The Group also has a 10.02% direct stake in CCBC the largest cord blood bank operator in China, which holds provincial licences to operate in four main cities: Beijing, Guangdong, Zhejiang and Shandong. In October 2013, Cordlife also acquired a 19.92% stake, which was subsequently increased to approximately 31.81% in December 2013, in StemLife. StemLife, currently listed on the ACE Market of Bursa Malaysia, is a fully licensed cord blood banking facility with the Ministry of Health Malaysia. The miracle of cord blood stem cells Cord blood, which is also called placental blood, is blood that remains in the umbilical cord and placenta following the birth of a baby. This blood is a rich source of haematopoietic stem cells ( HSCs ), which are primarily responsible for replenishing blood and regenerating the immune system. HSCs have been successfully used in transplants to replace and regenerate damaged or diseased bone marrow; treat blood cancers; correct genetic defects (sibling/allogeneic transplantation). They also possess the potential for cellular therapy and regenerative medicine. Cellular therapy is about using stem cells as an alternative natural source to treat diseases, rather than using traditional drugs. Regenerative medicine is about repairing or replacing, damaged or diseased, tissue and organs. Both these methods of using stem cells are being actively researched in many clinical trials. An Essential Healthcare Service for Every Family Since 1988, doctors have used cord blood stem cells to treat more than 30,000 patients 1 suffering from certain cancers such as leukaemia and lymphoma as well as many other blood disorders, inborn errors of metabolism and immunodeficiencies. With statistics 2 showing that every 1 in 217 people may need stem cells for treatment in their lifetime, private cord blood banking could very well be the essential healthcare service every child needs. Although HSCs can also be found in bone marrow and peripheral blood, about 70% 3 of all patients who need a transplant are unable to find a suitable match within their family. By storing their child s cord blood, parents are assured of a guaranteed match for autologous transplants and treatment (where the donor and recipient is the same individual). Banking cord blood stem cells is also beneficial for the family as these cells are more tolerant to tissue mismatches, which increases the probability of locating a match in the family. Furthermore, clinical reports have shown that transplant patients recover better and survival rates are doubled 4 when they receive stem cells from a related donor. The full potential of cord blood stem cell therapy goes beyond its current proven applications and we are just beginning to discover its true value. In 2014, Duke Medicine initiated a new clinical trial to explore the use of cord blood stem cells for the treatment of autism, stroke, cerebral palsy and related brain disorders. The qualifying criteria for this trial include the requirement for patients to have their own cord blood stored. This validates the relevance of private cord blood banking and its significant role in modern medicine today. Deploying the Latest Technology for Best Results Cordlife has constantly strived to be the industry s technology leader since its early days. The Group was not only amongst the first in Asia to adopt SEPAX, the world s only U.S. FDA-cleared fully automated cord blood processing system, but was also the first in Asia to lead the upgrade of the technology to SEPAX 2. The switch from manual processing to a fully automated platform was imperative to ensure that Cordlife consistently achieves optimal stem cell recovery rates during processing to help enhance the success rate of a transplant. Cordlife s Release Track Record To date, Cordlife and its subsidiaries have successfully released 15 cord blood units to families for medical treatment. This proven track record for release is the ultimate validation of the Group s collection, processing and storage methods.

17 Business Unit Spotlight: Banking Strategic Business Unit 15 Expanding Scope Beyond Cord Blood Banking Along with cord blood banking, Cordlife launched cord lining banking that gives expectant parents the option to store their baby s cord lining at birth to avail their family access to a wider range of future medical treatments. The introduction of the cord lining banking service was in line with Cordlife s growth plans to offer complementary services to its clients through strategic partnerships and collaborations. First introduced in India in 2010 and subsequently launched in Hong Kong a year later, Cordlife completed the final leg of the service implementation to the rest of its facilities in Singapore, Indonesia and the Philippines by In early 2014, Cordlife entered into licensing agreements with CCBC and StemLife to offer the cord lining banking service to their prospective clients in China and Malaysia respectively. Harnessing the Power of Cord Lining Stem Cells Umbilical cord is the connecting cord from the developing embryo or fetus to the placenta which allows blood to carry oxygen and nutrition to the baby in the womb. Traditionally, the umbilical cord is routinely discarded with the placenta as medical waste after the birth of a newborn. When researchers became aware of the fact that umbilical cord contains useful and potentially life-saving stem cells that could be used in regenerative medicine and cellular therapy, many parents around the world have elected to store this precious resource for future use. Other than containing cord blood, the umbilical cord itself is composed of Wharton s jelly, umbilical arteries and an umbilical vein. These components are protected by a sheet-like membrane known as cord lining. While Wharton s jelly contains one type of stem cells - Mesenchymal stem cells ( MSCs ), cord lining today is found to contain two important types of stem cells including MSCs and Epithelial stem cells ( EpSCs ). EpSCs form the soft tissues that connect, support or surround other structures and organs of the body including cornea and skin, as well as lining of the stomach and liver. Based on current research, EpSCs are considered to be a possible key resource for epidermal and skin regeneration as they have been used to treat surface ulcers, burns and tissue trauma such as those from accidents. They are also being studied in regenerative medicine for corneal replacement. On the other hand, MSCs are building blocks of the structural tissues of the human body such as bone, cartilage, muscle, fibrous tissues and fat. According to clinicaltrials.gov, a research database managed by FDA of the United States, there are over 400 ongoing clinical trials 5 worldwide investigating the potential applications of MSCs, including tissue repair for heart failure, cartilage injury, spinal cord injury and stroke. Other potential applications also include the co-infusion of MSCs to support HSCs transplantation to reduce immune system complications and shorten time to engraftment. Just like cord blood, the true value of stem cells from cord lining has yet to be fully exploited. Once these advances are translated to successful therapies, families who have stored their child s cord blood and cord lining can be part of this medical revolution and more medical options will be available to them. 1 Ballen KK, Gluckman E, Broxmeyer HE. Umbilical cord blood transplantation: The first 25 years and beyond. 2013; Blood: 122(4) 2 Nietfeld JJ, Pasquini MC, Logan BR, Verter F, Horowitz MM. Lifetime probabilities of hematopoietic stem cell transplantation in the U.S Biology of Blood and Marrow Transplantation. 2008;14: Be The Match website. Assessed 21 Jul Gluckman et al., N Engl J Med. 1989;321: Accessed in September

18 16 CORDLIFE GROUP LIMITED Annual Report 2014 Business Unit Spotlight: Banking Strategic Business Unit Leukaemia boy saved by baby sister Ryan was suffering from leukaemia at a tender age of three. Despite a nation-wide search for bone marrow stem cells, a suitable donor could not be found. Fortunately, Rachel, baby sister of Ryan, was born during the critical period, which enabled the family to store and use her cord blood for Ryan s transplant. Cerebral palsy baby helped by cord blood An accident at birth deprived two and a half year old Georgia of oxygen to her brain, resulted in cerebral palsy. The damage to the toddler's brain caused her to move involuntarily, suffer from muscle spasms and have up to 50 seizures a day. With the aid of a renowned neurosurgeon, Georgia s cord blood was infused back into her body. After the infusion, her caretakers reported that Georgia had noticeable improvements in her temperament, concentration level and use of vocalisation. Neuroblastoma boy treatment by his own cord blood Justin (alias) was diagnosed with a common childhood cancer, neuroblastoma, at a tender age of one and half years old. Over the course of one year, the child had to endure numerous rounds of high-dose chemotherapy to treat his condition. Chemotherapy destroyed cancer cells, but at the same time also killed normal cells. Fortunately, Justin s parents had his cord blood stored at birth with Cordlife. The cord blood stem cells were infused back to his body after a course of chemotherapy at Queen Mary Hospital and he was discharged from hospital after 3 months. The cord blood unit used was cryopreserved in Cordlife s facility in Hong Kong for 29 months. Sibling s Cord Blood for Thalassemia Major Cordlife India was the first cord blood bank to successfully release a cord blood unit to support the first ever mixed stem cell transplant in India. Moinam was diagnosed with Thalassemia Major when he was barely one year old. If left untreated, most of the children inflicted with this disorder do not live beyond the age of 10. Fortuitously, his newborn sister was free from the disorder and her cord blood stem cells were a perfect match for Moinam. A combination of bone marrow and cord blood cells was used enhance transplant success rate. * Photos in the narrative may not be the actual people referred to

19 Business Unit Spotlight: Diagnostics Strategic Business Unit 17 Business unit spotlight: Diagnostics Strategic Business Unit Diagnostics Strategic Business Unit Cordlife is a consumer healthcare company that serves the needs of the mother and child. Besides being a leading cord blood and cord lining banking service provider, Cordlife has also recently established a new Diagnostics Business Unit. This initiative is part of Cordlife s vertical growth plan to offer complementary products and services that cater to the mother and child segment, which will benefit the Group through expanded economies of scope. Newborn screening for metabolic disorders is one of the key diagnostics areas that Cordlife is currently focusing on. Metabolic disorders Metabolism is a set of chemical reaction processes that converts energy from food to maintain vital life activities like immunity, body growth, brain development, etc. Newborn babies with metabolic disorders lack enzymes to maintain normal metabolic functions, resulting in a build-up of toxic substances or deficiency of critical substances. If left untreated, metabolic disorders can cause serious developmental issues and lifelong complications such as intellectual disability, physical disability and in some instances, death. Although metabolic disorders are rare, early diagnosis and intervention of condition can drastically help to improve the therapeutic effects of treatment, making a huge difference between lifelong impairment and healthy development for the affected baby. As parents can pass along an abnormal copy of the gene for a certain disorder without knowing that they are carriers, going through the screening can help to confirm the child s metabolic health status. Metascreen Metascreen, a comprehensive metabolic screening test currently designed for newborn babies, is the first of Cordlife s new product and service offerings in diagnostics, as the Group transforms into a consumer healthcare company catering to the mother and child segment. The service is made available through Cordlife s existing collaborative network of hospitals and physicians. Compared to other similar screening services that require blood for testing, Metascreen is a non-invasive and painless form of screening. The test can screen for up to 110 inborn errors of metabolism from urine samples of newborns. Metabolic disorders are usually not apparent at the time of birth. If left undiagnosed and untreated, the baby can develop irreversible damages such as neurological impairment and physical deformities. Most countries in the European Union and some parts of Asia and United States have already made newborn screening compulsory. Metascreen is offered to parents, with the aim to help them secure their child s future well-being and represent a natural extension of the parents desire for better healthcare options for their children. When the babies receive early diagnosis and treatments, they do not proceed to develop serious and lifelong complications, which will create a long-term financial burden for the affected families. The initial one-time cost of expanded newborn screening is considered very low as compared to the financial burden of morbidity caused by metabolic disorders. With the early critical information on the health status of the child provided by Metascreen, parents will be much better prepared for any eventuality and most importantly, safeguarding their family s health. Metascreen was first launched by Cordlife in India in October Since April 2014, Metascreen became available also in Hong Kong and the Philippines for parents looking for more comprehensive screening of metabolic disorders for their children. Cordlife has plans to introduce Metascreen to other entities in the Group.

20 18 CORDLIFE GROUP LIMITED Annual Report 2014 Milestones 2012 Listed on the Mainboard of SGX-ST on March 29, Awarded SIAS Investors Choice Awards: Runner-up in the Most Transparent Company Award 2012 New Issues Category in October In December 2012, Cordlife acquired 10% of CCBC. CCBC is listed on the NYSE and is China s largest cord blood banking operator The Group moved to its fully-owned 23,000 sq ft office and laboratory facility in A Posh Bizhub in Yishun, Singapore for storage of up to 650,000 cord blood and cord lining units. Launched Cordlife Care360 Shield programme in Singapore. Cordlife Care360 Safeguard Programme is a holistic protection specially crafted to ensure that clients enjoy that added peace of mind, with services, including but not limited to, Sepax 2 automated stem cell processing technology, coverage of possible pregnancy and childbirth complications, a Quality Guarantee of US$25,000 and insurance coverage. First in Asia to introduce SEPAX 2 automated processing technology in Singapore. In May 2013, Cordlife launched umbilical cord lining banking services in Singapore under its wholly-owned subsidiary Cordlife Technologies Pte Ltd. The umbilical cord lining is a rich source of mesenchymal and epithelial stem cells which could repair the body in different ways. The storage and banking of umbilical cord lining service is currently not licensed by the Ministry of Health, Singapore and is provided on a research/ clinical trial basis. In June 2013, Cordlife completed the acquisition of the cord blood and cord lining banking businesses and assets in India, the Philippines, Hong Kong and Indonesia from Life Corporation Limited ( LCL ). In July 2013, Cordlife s India facility was accredited by AABB. In August 2013, the umbilical cord lining banking service was introduced in the Philippines. In the same month, the Group received the Merit Award under the Best Investor Relations Award category in the Singapore Corporate Awards In October 2013, Cordlife acquired a 19.92% stake in StemLife, a company listed on the ACE Market of Bursa Malaysia. In the same month, Cordlife completed a private placement and raised gross proceeds of approximately S$33.5 million to fund the Group s growth initiatives while concurrently strengthening its shareholder base.