"Investment Banking Report"
Singapore Investment Banking Association 24 Raffles Places, #16-02 Clifford Centre, Singapore 048621 Tel: (65) 6532 7565 • Fax: (65) 6532 3390 Email: firstname.lastname@example.org • website: siba.org.sg Singapore Investment Banking Association Annual Report 2007 ContentS 1 Notice of Annual General Meeting 2 Chairman’s Review 3 Council Members 4 Report of the Council • Council Members for 2007/2008 • Membership • Standing Committees Corporate Finance (CF) Debt Capital Market (DCM) Equity Derivatives & Structured Products (EDSP) • Report on the activities of the committees • Report on other activities Auditor’s Report Statement of Income & Expenditure Balance Sheet Statement of Changes in Fund Balance Cash Flow Statement Notes to the Financial Statements List of Members NoTicE oF ANNuAl GENErAl MEETiNG NOTICE IS HEREBY GIVEN THAT the Thirty-Third Annual General Meeting of Singapore Investment Banking Association will be held at the Raffles Hotel Singapore, Casuarina Suites A&B, 1 Beach Road, Singapore 189673 at 11:45 a.m. on 23 May 2008 (Friday) for the following purposes: 1. To confirm the Minutes of the Thirty-Second Annual General Meeting held on 21 May 2007. 2. To receive the Report of the Council : Rule 19(a). 3. To receive and adopt the audited Balance Sheet and Accounts for the year ended 31 December 2007 : Rule 19(a). 4. To appoint Auditors for 2008: Rule 19(b). 5. To consider any resolutions which may have been duly submitted to the meeting in accordance with Rule 21 of the Constitution of the Association : Rule 19(c). 6. To elect five (5) Council Members : Rules 12(ii), (iii) and 19(b). By Order Of The Council George Lee Chairman 02 May 2008 Singapore Investment Banking Association Annual Report 2007 1 chAirMAN’s rEviEw 2007 was an interesting year with tremendous activity in singapore. The property and stock market was buoyant. volume of transactions hit new highs and record prices were set in both markets amidst volatility when the us sub-prime mortgage issues surfaces. Debt capital markets were affected negatively by this event but spreads have since recovered a little although market is still uncertain if this is fully blown over. Mr. George Lee Chairman Amidst record trading volumes for 2007, the Corporate Finance front faces a challenging year with IPO offerings of PRC companies on SGX slowing down this year due to the regulations introduced last year by the Chinese Securities Regulatory Commission, to limit the number of Chinese companies that could list offshore. Nevertheless, the foreign component in Singapore is still high as about one third of those listed are foreign owned. REITs and business trusts continue to be big fund raisers in Singapore. Our Malaysian counterparts, namely Bursa, Securities Commission and MIBA, held a luncheon talk in Singapore, on Listing on Bursa to promote Malaysia as a gateway to the Middle East, amongst others. The dialogue between ICPAS and SIBA on the issuance of the comfort letter to facilitate and promote international offerings and listing in Singapore is reaching its final stages. The final version of the update on the Guidelines for Due Diligence for IPO offering in Singapore has been completed and sent to MAS for their comments. This seeks to give guidance on the broad principles which issue managers should take into consideration when conducting their due diligence. In addition, SIBA provided comments to SGX on 3 consultative papers issued in 2007. The Debt Capital Market Committee (DCMC) organized a seminar jointly with the International Capital Market Association (ICMA) with the support of MAS in November 2007 to promote best practices for the Singapore Debt Capital Market. The objective is to encourage the adoption of ICMA style recommendations in Singapore where it is practical to do so, to provide a common platform so as to encourage further expansion of the international investor base for local issuers of debt and encouraging debt issuance by foreign issuers locally. DCMC continues to provide feedback to MAS and SGX on their proposed initiatives and consultative papers, covering topics ranging from providing incentives to further develop the bond market to linkage with foreign exchanges to ensure that Singapore remains as one of the key financial hubs of Asia. The Equity Derivative and Structured Products Committee had presented their recommendations of the taskforce to MAS on initiatives to promote and innovate to keep up with global trends. Following this, MAS and SGX will be following up on some of these. To ensure that a newly licensed Training Representative has the minimum knowledge required, SIBA’s Retail Working Committee assisted in working on the draft of IBF’s Module 6 of the Capital Market Financial Advisory Services examinations. This is expected to be completed in early 2008. As in the past, an annual dialogue is held with the Malaysian Investment Banking Association (MIBA) as a platform to update the events for the year, exchange views on current market issues, promote best practices, clarify issues and co-operate with one another to develop the corporate finance and debt capital markets. The annual fixed income course, which has been run successfully all along, has reached its 5th and final year. The securitization module was of particular interest given the US sub-prime mortgage crisis this year. This course will be replaced by the Financial Industry Competency Standards (FICS) which is an industry-wide accreditation program to establish competency standard for the financial industry in Singapore. The program is expected to be launched by the 1st Quarter of 2008. SIBA continues to partner MAS, SGX and other associations to raise industry standards and promote best practices here in order to ensure that Singapore remains a progressive and competitive international financial centre for investment banking. I would like to express my appreciation to all Council Members, chairpersons and members of our standing committees, taskforces, working groups and seminar presenters and panelists for giving so much of their time and efforts to promote the interests of the investment banking industry. As Chairman of the Association, I continue to urge more member banks to volunteer their services to join us in our activities and support us in our initiatives. 2 Singapore Investment Banking Association Annual Report 2007 ThE couNcil council Members From Left: Mr Bill Foo, Mr Ronald Ong, Mr Sim Buck Khim (Treasurer), Mr George Lee (Chairman), Ms Elsie Choo (Executive Secretary), Mr Kan Shik Lum, Mr Quek Suan Kiat & Mr Tan Kee Phong Council Members (2007/2008) Represented by: OCBC Bank Mr George Lee (Chairman) Deutsche Bank AG Mr Sim Buck Khim (Deputy Chairman/Treasurer) ANZ Singapore Limited Mr Bill Foo Ms Ana Dhoraisingam Barclays Bank Plc Mr Quek Suan Kiat Mr Andrew Loh Citicorp Investment Bank (Singapore) Limited Ms Cynthia Teong (retired November 2007) Mr Tan Kee Phong Credit Suisse Mr Edwin Low Mr Ray McGregor DBS Bank Mr Kan Shik Lum Morgan Stanley Asia (Singapore) Private Mr Ronald Ong Mr Rohit Sipahimalani Singapore Investment Banking Association Annual Report 2007 3 MEMbErship report of the council On behalf of Council, the Chairman is pleased to present to members this Report on the activities of the Association during its term of office following the election at the Thirty-Second Annual General Meeting (“AGM”) held on 21 May 2007 together with the audited accounts for the year ended 31 December 2007. COUNCIL MEMBERS FOR 2007/2008 Three (3) Council members were elected to serve a new two-year term (2007/2009) at the Thirty-Second AGM. They were: 1. ANZ Singapore Limited 2. Deutsche Bank AG 3. OCBC Bank The following Council members remained to serve the second year of their two-year term (2006/2008). They were: 1. Barclays Bank Plc 2. Citicorp Investment Bank (Singapore) Limited 3. Credit Suisse 4. DBS Bank 5. Morgan Stanley Asia (Singapore) Private The new Council met immediately after the Annual General Meeting for the purpose of electing the new Chairman and Deputy Chairman/ Treasurer Banks. OCBC Bank was re-elected as Chairman Bank and Deutsche Bank was re-elected as Deputy Chairman/Treasurer Bank respectively for 2007/2008. MEMBERSHIP As at 1 January 2007, SIBA had 45 members. Since then 2 new members joined, resulting in a membership strength of 47 as at 31 December 2007. New Members in 2007 1. BSI Bank 2. Phillip Securities Pte Ltd COUNCIL MEETINGS Council meetings were held on an ad hoc basis, as and when necessary. 4 Singapore Investment Banking Association Annual Report 2007 sTANDiNG coMMiTTEEs 2007/2008 STANDING COMMITTEE FOR CORPORATE FINANCE (CF) Member Bank Represented by: PrimePartners Mr Gerald Ong ( Chairperson) Mr Mark Liew ANZ Mr Loh H Chia BNP Paribas Mr Soh Ee Beng DBS Mr Lak Yau Huang Deloitte & Touche Mr Jeff Pirie HL Finance Mr Ong Soon Teik JP Morgan Ms Ivy Yong OCBC Ms Tsai Ai Liang Ms Ang Suat Ching Platinum Securities Ms Florence Chan PwCCF Mr Benjamin Kan Ms Ng Jiak See SAC Capital Ms Ong Hwee Li SBI E2-Capital Ms Loh Peck Kuan Stirling Coleman Ms Lucy Lim Stone Forest Mr Tay Woon Teck UBS Mr Jeffrey Wong UOB Asia Mr Chan Heng Toong Ms Joan Ling Westcomb Mr Tan Meng Shern Mr Loo Chin Keong Corporate Finance Sub-Committees Represented by: Training Primepartners Mr Gerald Ong UOB Asia Mr Chan Heng Toong SFA/other Regulations DBS Mr Lum Moe Tchun OCBC Ms Tsai Ai Liang Due Diligence Guidelines for IPOs Working Group DBS Ms Low Pek Li JP Morgan Ms Ivy Yong Stone Forest Ms Celine Ooi UBS Mr Jeffrey Wong UOB Asia Mr Chan Heng Toong By Invitation: Stamford Law Mr Ng Joo Khin Wong Partnership Mr Chua Koh Peng Mr Raymond Tong IcPAS-SIBA Working Group DBS Ms Cheah Le Sa JP Morgan Ms Ivy Yong Merrill Lynch Mr Matt Slater UBS Mr Jeffrey Wong UOB Asia Mr Low Han Keat By Invitation: Stamford Law Mr Ng Joo Khin Singapore Investment Banking Association Annual Report 2007 5 sTANDiNG coMMiTTEEs 2007/2008 STANDING COMMITTEE FOR DEBT CAPITAL MARkETS (DCM) Member Bank Represented by: Citigroup Mr Tan Kee Phong ( Chairperson) Barclays Mr Jitendra Kamdar Bank of Tokyo-Mitsubishi UFJ Mr Colin Chen BNP Mr Ranju Parambi Mr Mark Adams DBS Mr Lum Moe Tchun Mr Tan Chek Soon Deutsche Mr Sim Buck Khim Goldman Sachs Mr Martin Cher Mr Nigel How JP Morgan Ms Ivy Yong HSBC Mr Pius Chong Ms Ana Dhoraisingam OCBC Ms Tan Lay Hoon Standard Chartered Mr Kenneth Yeoh Mr Ben Bowden UOB Ms Quah Sy Yi By Invitation: MAS Ms Tay Bee Bee Ms Esther Wee DCM Sub-Committees Represented by: Investor Education DBS Mr Lum Moe Tchun Standard Chartered Mr Kenneth Yeoh UOB Ms Quah Sy Yi New Product Development Citigroup Mr Tan Kee Phong Deutsche Mr Sim Buck Khim OCBC Ms Tan Lay Hoon Standard Chartered Mr Kenneth Yeoh Asset Securitisation Bank of Tokyo-Mitsubishi UFJ Mr Colin Chen BNP Mr Ranju Parambi Citigroup Mr Sanjay Aggarwal DBS Mr Ong Siow Wei HSBC Mr Andew Duncan Best Practice Citigroup Mr Tan Kee Phong DBS Mr Lum Moe Tchun HSBC Mr Pius Chong/Ms Ana Dhoraisingam JP Morgan Ms Ivy Yong Standard Chartered Mr Kenneth Yeoh Mr Ben Bowden By Invitation: Allen & Gledhill Ms Margaret Chin Wong Partnership Mr Hui Choon Yuen 6 Singapore Investment Banking Association Annual Report 2007 sTANDiNG coMMiTTEEs 2007/2008 STANDING COMMITTEE FOR EqUITy DERIvATIvES & STRUCTURED PRODUCTS (EDSP) Member Bank Represented by: UBS Mr Rohit Jaisingh (Chairperson) OCBC Securities Mr T K Yap OCBC Mr Samuel Lin Barclays Mr Tan Yong Sheng Mr Alex Lee Credit Suisse Mr Ray McGregor Mr Desmond Koh Deutsche Mr Vinod Aachi Macquarie Securities Mr Justin Crawford Mr Harry Krkalo Merrill Lynch Mr Mark Bowden Phillip Securities Mr Lim Wah Tong Societe Generale Mr Malcolm Thomas By Invitation: IMAS Mr Giri Mudeliar MAS Ms Jean Tan SIAS Mr Christopher Cheong SGX Ms Sabrina Lee Singapore Investment Banking Association Annual Report 2007 7 sTANDiNG coMMiTTEEs 2007/2008 Equity Derivatives & structured products (EDsp) EDSP Sub-Committees Represented by: Investor Education: OCBC Securities Mr T K Yap ( Chairperson) Mr Elgin Ting Macquarie Securities Mr Justin Crawford Mr Barnaby Matthews Merrill Lynch Mr Wong Kok Fai Phillip Securities Mr Lim Wah Tong Societe Generale Mr Ooi Lid Seng By Invitation: MAS Ms Jean Tan SGX Mr Andrew Liew Ms Carin Looi Share Investor Mr Christopher Lee Ms Linda Lee SIAS Mr Christopher Cheong Education: capital Markets & Financial Advisory Services Working Group OCBC Securities Mr T K Yap ( Chairperson) Mr Elgin Ting Phillip Capital Mr Loh Hoon Sun Societe Generale Mr Malcolm Thomas By Invitation: Mr Joseph Lim, PhD, CFA IBF Ms Rachie Hui MAS Ms Jean Tan SGX Ms Sabrina Lee SIAS Mr Christopher Cheong Institutional Credit Suisse Mr Ray McGregor Mr Desmond Koh Merrill Lynch Mr Mark Bowden OCBC Mr Samuel Lin UBS Mr Rohit Jaisingh Retail Barclays Mr Tan Yong Sheng Mr Alex Lee Macquarie Securities Mr Justin Crawford OCBC Securities Mr T K Yap Societe Generale Mr Malcolm Thomas 8 Singapore Investment Banking Association Annual Report 2007 rEporT oN ThE AcTiviTiEs oF ThE coMMiTTEEs corporate Finance New Chairperson Mr Tan Jeh Wuan of DBS Bank Ltd stepped down as Chairperson of the committee. SIBA welcomed Mr Gerald Ong of PrimePartners Corporate Finance Pte Ltd as the new Chairperson in March 2007. CF Committee members from both SIBA & MIBA The annual meeting of corporate finance professionals from Singapore and Malaysia was hosted by MIBA at Shangrila, Kuala Lumpur in September 2007. The SIBA dialogue was chaired by Mr Gerald Ong of PrimePartners and Ms Pushpa Rajadurai of AmInvestment Bank chaired the MIBA dialogue. Singapore Investment Banking Association Annual Report 2007 9 rEporT oN ThE AcTiviTiEs oF ThE coMMiTTEEs corporate Finance An update of the events for the year was provided by both chairpersons with MIBA informing that their members are looking forward to tax breaks in the Malaysian budget. SIBA touched on the tremendous activity on SGX both in terms of trading and listings with the trend towards secondary fund raising rather than primary fund raising as evidenced by the secondary round of placements for REITS and business trusts which continue to be big fund raisers in Singapore. There is also increasing focus by SGX on derivative trading and SGX has been named the exchange of the year by the Energy Risk Magazine. The regulators like SGX and MAS has been increasingly consultative and the review of the New Board initiatives is part of this consultation, in response to competition from other exchanges. It was a useful update of market trends, regulations and best practices in the respective markets and a constructive exchange of views on the various issues sought by both parties. MIBA touched on the wide range of topics raised by SIBA, covering REITS and Business Trusts, Cross Border Listing, Tapping the offshore markets and Regulations. Some of the issues raised are: • How could we work better with MIBA to facilitate cross border listing? • How do we encourage secondary listing of Malaysian REITS on SGX and vice versa? • What is the process and regulatory hurdles for Malaysian companies to seek listing in Singapore? • Other than REITS, Business Trusts (transportation & infrastructure assets) have also begun to take off in Singapore. Are there similar structures in Malaysia? • Collective investment schemes from Singapore cannot be offered to investors in Malaysia. Are REITS and Business Trusts also under the same restrictions? • As companies expand beyond Malaysia, how do they then tap the offshore capital markets? • The current regulatory scene in Singapore touches on due diligence and comfort letters for public offerings of equities. Are there similar regulatory trends in Malaysia? • There are proposed changes in Singapore on a new board and introduction of a watch list. Will Malaysia be introducing a third board? • Is it market practice in Malaysia for legal counsels in a capital market transaction to issue disclosure and enforceability opinions? MIBA raised topics ranging from Business Trusts, Mergers and acquisitions, and IPOs on SGX which were clarified and elaborated on by SIBA. Some of the issues raised are: What are the eligibility criteria to act as sponsor and the expected roll out date for the new board? • Business trusts are becoming popular among the new IPO trends. What is driving the interests and is there a significant upside on valuations? • Are there new merger and acquisition themes and which are the sectors focused on? • With the halt in Chinese listings on SGX, what are the steps taken by SGX, if any, to fill this vacuum? • Malaysia would be adopting the same practice on public exposure of prospectus when the Capital Market Services Act becomes effective in September 07. What are Singapore’s experiences since Singapore has started these practices quite some time ago? CF dialogue in session 10 Singapore Investment Banking Association Annual Report 2007 rEporT oN ThE AcTiviTiEs oF ThE coMMiTTEEs corporate Finance Due Diligence Guidelines for Initial Public Offerings (IPOs) The Guidelines for Due Diligence for IPO Offering in Singapore launched in August 2004 and a working group, with the assistance and advice of Stamford Law Corporation, was formed in October 2006 to update this. The final version was finalised in October 2007 and a copy has been sent to MAS pending their comments. The Due Diligence Guidelines seek to give guidance on the broad principles which issue managers should take into consideration when conducting their due diligence. An issue manager should continually visit and revisit what inquiries and checks are reasonable in the context of a particular transaction. The Due Diligence Guidelines are structured in three inter-related sections: • General Principles - this section sets out the broad principles on which a due diligence process should be conducted. The Due Diligence Guidelines identify general principles covering the following four areas: (1) a structured and documented process; (2) checks and verifications; (3) overall control of the due diligence process; and (4) the appointment of and reliance on advisers and experts. • Recommended Procedures - this section sets out the inquiries which issue managers would normally carry out in a typical IPO. In the course of carrying out such inquiries, issue managers must consider carefully whether other inquiries should be made to ensure accurate and full disclosure in the prospectus. • Guidance Notes - this section sets out, in the form of case studies, some guidelines on a set of appropriate measures that should be considered in certain situations. While these guidelines are non-exhaustive, they are aimed at providing further guidance to issue managers on how the General Principles are intended to work in practice. In addition to the guidance provided herein, SIBA expects to issue practice notes from time to time to address issues and concerns which are of interest to the corporate finance industry as a whole. Issue of IPO comfort letters An exposure draft of the Audit Guidance Statement (AGS) on the issuance of comfort letters for Singapore IPO offerings was circulated by the Institute of Certified Public Accountants of Singapore (ICPAS) in 2004. Reporting auditors in performing and reporting on the results of engagements, have to issue comfort letters for Sponsors, Issuer Managers and Underwriters in connection with the financial information contained in the Public Offering Documents lodged with the Monetary Authority of Singapore under the Securities Futures Act. This drew strong objections from the corporate finance industry and a taskforce was formed by ICPAS to work on the revised exposure draft. Several meetings with representatives from ICPAS and the SIBA working group has been held this year to finalize the draft. The 2 main points of contention were on: The issuance of a liability cap SIBA is of the view that it is not customary to for a liability cap vis-à-vis the sponsor managers. This is in line with current market practice and international market practice given that underwriters are “gate-keepers” in ensuring appropriate due diligence is done in connection with equity offerings. However, ICPAS reiterated that unlike audit procedures in a statutory audit, work carried out by the reporting auditors is an agreed-upon procedures engagement. Besides, there is no statutory requirement for the issuance of a comfort letter. Relying on information and documents where it is reasonable to do so ICPAS would like to be entitled to rely upon all documents and information provided by the issuer and reply on their advice and information provided by the Issuer. However, SIBA maintains its view that if the auditors are relying on all documents and information provided by the Issuer, such reliance must be reasonably exercised. Hence SIBA would like the inclusion of the phrase,” Where it is reasonable to do so”. However ICPAS indicated that the word “reasonable” would be subject to interpretation and is not acceptable. As both could not reach a compromise, SIBA suggested that this paragraph be deleted altogether as there is another paragraph in the AGS which states that auditors are not liable, other than in the event of bad faith or willful default arising from information material to their work being withheld or misrepresented by the issuer. The AGS draft is still being finalized but both parties agreed that the seriousness of the disagreement on both the above points of contention has to be brought to the attention of MAS. The final document is expected to be completed sometime in 2008. Singapore Investment Banking Association Annual Report 2007 11 rEporT oN ThE AcTiviTiEs oF ThE coMMiTTEEs corporate Finance SGX Consultative Papers SIBA provided comments to SGX on the following 3 consultative papers which they issued in 2007: 1. Trading Halt, Suspension and Cash Companies 2. Proposed Introduction for a Watch-list and Listing Rule Amendment Relating to Exit Offer in a Directed Delisting 3. Listing Manual Rules for the New Board Luncheon Talk on Foreign Listing on Bursa The luncheon talk held at the OCBC Executive Club on 2 November 2007 was held at the request of Mr Arulnathan Dass, Head of Issuer Development, from Bursa Malaysia Berhad. It was attended by members from the corporate finance industry in Singapore. Mr Gerald Ong, Chairman of CF Committee gave the opening address touching on institutional investors looking for higher yields in a global environment with 55 Chinese companies listed on Alternative Investment Market (AIM) of London and 46 Chinese companies listed on NASDAQ. Mr Arul Dass covered topics like the range of exchange-related products (equities, derivatives and offshore market like Islamic Sukuk cross listings) and informed that Malaysia is an access to Middle East Liquidity. Mr Encik Reizal Mustapha from the Securities Commission covered topics including the listing process, domestic (mainboard, secondboard or MESDAQ) and foreign listings ( mainboard or MESDAQ) and the National Development Policy (NDP) Position with regards minimum 30% bumiputra requirement. Ms Puspha Rajadurai, Chairperson of CF Committee of MIBA and Executive Director of AmInvestment Bank Berhad touched on topics including the routes of listing in Malaysia, IPO Key success factors, the principal advisor’s role in an IPO and regulatory approvals. The panel discussion was lively with questions like the 2 tier pricing on IPO for institutional tranche for foreign investors and that for the retail and bumiputras. Ms Puspha explained the market aspects of the pricing and informed that although the discount was up to 10% initially, now it is down to 2-3%. Overall, the talk was useful to provide a better understanding of Malaysia’s listing requirements on Bursa. 12 Singapore Investment Banking Association Annual Report 2007 rEporT oN ThE AcTiviTiEs oF ThE coMMiTTEEs Debt capital Markets DEBT CAPITAL MARKETS (DCM) New Chairperson Mr Pius Chong of HSBC stepped down as Chairperson of the committee. SIBA welcomed Mr Tan Kee Phong of Citigroup as the new Chairperson in July 2007. SIBA/MIBA dialogue DCM Committee members from both SIBA & MIBA The annual meeting of debt capital market professionals from Singapore and Malaysia was hosted by MIBA at Shangrila, Kuala Lumpur in September 2007. The SIBA dialogue was chaired by Mr Tan Kee Phong of Citigroup and Mr Thomas Meow of CIMB Investment Bank chaired the MIBA dialogue. Singapore Investment Banking Association Annual Report 2007 13 rEporT oN ThE AcTiviTiEs oF ThE coMMiTTEEs Debt capital Markets SIBA - MIBA Dialogue DCM dialogue in session 14 Singapore Investment Banking Association Annual Report 2007 rEporT oN ThE AcTiviTiEs oF ThE coMMiTTEEs Debt capital Markets SIBA - MIBA Dialogue Debt capital market professionals discussed the impact of the sub-prime mortgage crisis on both the Malaysian and Singapore markets and proceeded to a lively exchange on various topics raised by both parties. Some of the issues raised by SIBA are: • With the growth in Islamic finance in the market, Islamic bond issuance has seen considerable growth. There seems to be a lack of trading of such bonds. What measures have been taken to address this? Are there any plans to expand Islamic funding to other areas of banking and finance? • Current issues like readability of prospectus, adoption of ICMA practices are being discussed in Singapore. What are the current issues being discussed in Malaysia? • How does Malaysia price their long dated project finance bonds? What is the view of the method of pricing from the perspective of the market, issuers and practitioners? • How is the Malaysian market developing in the area of structured and convertible bonds? What are the types of structured bonds issued? Going forward, would the market develop further and what new products can be expected? Issues raised by MIBA include the following: • Is there a set of industry code of conduct for the primary bond markets in Singapore? Are the banks adopting or practicing the IPMA rules? • Are there rules in relation to over-allocation and green shoe option? • Is there a minimum fee arrangement among SIBA members? • Is there any requirement to post trust deed, term sheets or offering circular on the regulator’s website? It was a meaningful dialogue with an update of events, regulations and market trends and the exchange of views on various issues including Islamic funding, long dated project finance bonds, structured bonds and best practices in the area of over-allocation and greenshoe option and book building for primary issues. The dialogue culminated in a lunch with the participation of both the Debt Capital Market and Corporate Finance professionals from SIBA and MIBA. SIBA-SMU Course Fixed Income Markets ( 12 week course) This is the 5th year in which the annual fixed income markets course held jointly by SIBA with Singapore Management University (SMU) has been running successfully. The course comprises of 3 modules and starts from 16 August 2007. It provides participants with a good coverage of fixed income aspects including structured notes and convertible bonds, especially in the light of increased volatility of interest rates, increased credit risks associated with fixed income products and derivatives which have sparked tremendous development of new pricing tools and trading strategies as well as risk models. With the US sub-prime mortgage crisis, the course was particularly useful in the areas of credit derivatives, and securitization. Participants get to learn from both the academia and practicing bankers as well as experience hands-on mock cash market and derivatives trading. SIBA members were on some of the panel discussions and were course instructors for some modules. Appreciation goes to the following SIBA members who kindly volunteered to be on the panel or were course instructors: Panel Mr Tan Kee Phong (Citigroup) and Mr Kenneth Yeoh (SCB) for Module I and Mr James Khoo (OCBC) and Mr Imran Faizal Khan (UOB) for Module III Course instructors Mr Rodney Lim (DBS) and Mr Efraim Goldberg (DBS) and Mr Christopher Chan (BNP Paribas) for Module II. With the focus on the Financial Industry Competency Standards (FICS) accredited training and assessment programs which is expected to launch in 2008, this will be the final year for the fixed income course. Singapore Investment Banking Association Annual Report 2007 15 rEporT oN ThE AcTiviTiEs oF ThE coMMiTTEEs Debt capital Markets Mr Kola Luu, Executive Director, Financial Markets Strategy, MAS Mr Tan Kee Phong, Chairman of Debt Capital Markets Committee addressing the audience addressing the audience SIBA-ICMA Seminar This seminar, to promote best practices for the Singapore Debt Capital Market, was organized by SIBA and the International Capital Market Association (ICMA) with the support of MAS. It was held on 24 October 2007 at the Auditorium of Allen & Gledhill LLP. The Singapore corporate debt market continued to grow healthily, driven by strong demand for fixed income assets. As the market develops, there is an increasing trend in SGD denominated debt issuance by foreign issuers and of local issuers tapping the international market for funds. The investor base, both locally and internationally, continues to expand for such debt issuance. Thus there is a need to align the local market practice more closely with the international practice. To achieve this, the seminar is held to encourage the adoption of ICMA style recommendations in Singapore, where it is practical to do so. This should further develop the depth and width of the debt capital market both in terms of expanding the international investor base for local issuers of debt and encouraging debt issuance by foreign issuers locally. Our chairperson of DCM Committee Mr Tan Kee Phong welcomed participants to the seminar and Mr Kola Luu, MAS gave the opening address and covered on the topic, The Singapore Experience. Presenters from ICMA, Mr Jean-Pierre Wellens, Mr Chris O’Malley and Mr Ondrej Petr covered topics on The European Experience, IPMA and ISMA handbooks and IPMA Standard Forms and Best Practice respectively. Ms Margaret Chin from Allen & Gledhill LLP touched on The Current New Issue Practice in Singapore. There was a panel discussion on “The case for introducing IPMA recommendations and IPMA standard documentation.” On the panel were Ms Tan Lay Hoon from OCBC, Mr Karl Chong from DBS, Mr Ben Bowden from SCB, Mr Charles Loh from UOB, Ms Margaret Chin from A&G LLP, Mr Hui Choon Yuen from WongPartnership and Mr Chris O’Malley and Mr Ondrej Petr, both from ICMA. The seminar was attended by professionals from the industry, including MAS, financial institutions, law firms, issuers of debt from statutory boards, government linked companies, listed companies and corporations. Allen & Gledhill LLP kindly sponsored the event. 16 Singapore Investment Banking Association Annual Report 2007 rEporT oN ThE AcTiviTiEs oF ThE coMMiTTEEs Debt capital Markets SIBA - ICMA Seminar From Left: Mr Chris O’Malley, Mr Kola Luu, Mr Jean-Pierre Wellens, Presenters and Panelists Mr Tan Kee Phong & Mr George Lee Attendees at the seminar ICMA’s presentation to the attendees Delegates from ICMA 3 delegates from ICMA giving their presentation Singapore Investment Banking Association Annual Report 2007 17 rEporT oN ThE AcTiviTiEs oF ThE coMMiTTEEs Debt capital Markets Dialogue Sessions with MAS Several meetings were held with MAS to discuss and provide feedback on their proposed policies and initiatives on the debt capital markets. • Qualifying Debt Securities (QDS) MAS requested for feedback on the Financial Sector Incentive-Bond Market and QDS scheme which ends in December 2008. They are currently reviewing these schemes to evaluate the effectiveness of the schemes for bond market development. Consolidated feedback from SIBA members was given to MAS in September 2007. Arising from the request from members to provide a common platform to facilitate enquires by the public on the QDS status of an existing paper, MAS website has been set up on 1 September 2007 to facilitate such enquiries. Investors can access MAS website to check the QDS status by sending an email and providing information required by MAS. However, MAS is unable to confirm if the reply from them will satisfy IRA requirements. • Inclusion of bonds in Minimum Liquid Assets (MLA) In June 2004, SIBA submitted a letter to MAS proposing a review and expansion of the current definition of liquid asset ratio. Following this, MAS issued a Consultative Paper on Liquidity Risk Supervision – A Revised Minimum Liquid Asset Framework. The New Product Development Sub-Committee responded to the Consultative Paper in June 2006. MAS released another consultation paper on proposed changes to Minimum Liquid Assets and Minimum Cash Balances Requirements for Banks on 26 October 2007. SIBA provided feedback to MAS on this. A full-scale revamp is targeted for implementation in early 2008 • Establishing a bridge with CDP and Clearstream SIBA members discussed with representatives of Central Depository Board (CDP) in a DCM meeting in September 2007 on establishing a bridge with Euroclear/Clearstream (EC). The objective is to ensure that where bonds originated in Singapore, it is not an issue whether they are cleared through CDP or EC. Whilst there is an existing infrastructure to facilitate cross settlement without a direct link, the system is not seamless as investors have to advise CDP of his transactions as the system does not automatically capture them. International investors tend to resist signing new documents if they already have a platform to issue debt as there are additional costs involved whilst investors tend to avoid the hassle of setting up nominee accounts. CDP is of the opinion that as it is the individual investors who are most affected, it may not be cost effective to establish this bridge. However, SIBA members are of the view that this issue will become quite transparent as the retail distribution becomes more viable. The other issue that was raised relates to the charges by CDP. It was highlighted to CDP that issuers may use EC if it can be demonstrated that it is cheaper to do so. Besides, some issuers have reverted back to scrip base to avoid paying charges to CDP for interest payments. It was noted that CDP is charging for interest payments when EC does not as CDP is still using equity as a model whilst it is serving a different client base where it concerns bond issues. The question of CDP considering volume discount, a cap on charges for long tenures and frequent issuers or charging by different tiers was raised. Upon the request of CDP, SIBA submitted a proposal to address their current charges by CDP. 18 Singapore Investment Banking Association Annual Report 2007 rEporT oN ThE AcTiviTiEs oF ThE coMMiTTEEs Equity Derivatives & structured products EQUITY DERIVATIVES & STRUCTURED PRODUCTS (EDSP) SGX Website as a common platform for investors Following the presentation of the recommendations of the taskforce to the MAS last year, one of the initiatives was to provide an independent source of information to facilitate investors’ access to core information and provide them with tools to assist them in their decision making. SIBA has proposed to SGX feedback to put forward a proposed model on their website to incorporate the following: Warrant FAQ Site The proposal is for a platform administered by SGX, where investors can ask questions or register their complaints, without having to log in to different issuers’ websites. These questions are then directed by SGX to one or more of the issuers who will provide their comments. SGX can then obtain and publish the issuer’s replies as appropriate. This allows queries from the investing public to be shared and analyzed and for the weak areas of investor understanding to be targeted for future education. In addition, SGX can monitor and supervise the quality of warrant market making, as well as address the various issues raised. SGX informed that investors can currently write in to the webmaster at their website with regards their queries. However, the web will be revamped to provide a list of frequently asked questions (FAQ) from investors and the corresponding replies from warrants issuers to help investors have a better understanding of warrants. This is targeted for implementation by early 2008. Information on warrants Currently core basic information is not conveniently available to investors. This is an impediment to growth of the warrant market. To ensure such information is centralized and transparent, it was suggested that SGX website allows core basic information to be made easily to the man in the street to allow them to shop electronically for information at their own time to facilitate trading decisions: - incorporation of a calculator - ability to hunt down information at one stop eg. deltas, conversion ratios, exercise prices for all listed warrants, number of warrants issued by the issuer, market share of such issues and the volume traded per warrant. Such information and content are to be user friendly, accurate and up to date. SGX noted the feedback but is of the opinion that there may be pricing differences as the implied volatility used by each house may be different. Continuing Education SIBA also requested for continuing education to be provided on SGX website. This should include webcasts of seminars and posting of flash and interactive educational presentations. SGX will ensure that this is an on going process and regularly update relevant features under the “ Investor Education” section of their website. So far, the SGX website has featured webcasts of structured products like the Rabojet Certificates and Zero Participation Certificates on website as part of their continuing effort to educate the retail investors. IBF MODULE 6 – CMFAS EXAMINATION The retail sub-committee, chaired by Mr TK Yap of OCBC Securities, continued to work with the Institute of Banking and Finance (IBF), the study guide writer appointed by IBF and industry practitioners to provide feedback on the depth and breadth of coverage and assist in the revision of the draft of Module 6 of the Capital Markets and Financial Advisory Services (CMFAS) examinations. This revised module is intended to lay down the minimum product and analytical knowledge required for a newly licensed Trading Representative (TR) in the area of equity derivatives and structured products. IBF confirmed that these drafts will be incorporated into the new study guide and expected to be launched in 1st half of 2008. Singapore Investment Banking Association Annual Report 2007 19 RePoRt on oThEr AcTiviTiEs Financial industry competency standards (Fics) FICS is an industry-wide accreditation program, the result of a collaborative effort by the Institute of Banking & Finance (IBF), the Monetary Authority of Singapore (MAS), the Workforce Development Agency and the financial services industry. It is meant to provide a comprehensive and transparent set of competency standards for the financial services industry in Singapore. The aim is to raise the professional bar of Singapore’s financial workforce and develop a leading edge financial sector workforce to support Singapore as an international financial centre. The FICS committee (comprising representatives from the industry, IBF and tertiary institutions) was established about two years ago to work on the accreditation program. In July 2007, IBF announced the appointment of the 5 lead providers at an event held at the Amara Hotel. SIBA has been invited by one of the lead providers, Financial Training Institute @ SMU (SMU) as their industry partner in their collaterals. SMU is currently in the midst of designing and developing the FICS accredited training and assessment programs and targets to roll out the the programs for Corporate Finance, followed by Debt Capital Markets and Asset Securitisation by April 2008. Our chairman, Mr George Lee (OCBC) had been selected by IBF to join the pioneer cadre of Financial Industry Certified Professionals (FICP). The FICP title is the highest certification mark for a financial practitioner in Singapore under the FICS framework. SMU in conjunction with IBF, conducted the assessment through an assessor panel and Mr George Lee is a certified FICP for Financial Markets: Debt Origination and Syndication in October 2007. 20 Singapore Investment Banking Association Annual Report 2007 RePoRt on otHeR AcTiviTiEs Taskforce To review readability of prospectus TASkFORCE TO REvIEW READABILITy OF PROSPECTUS Taskforce Members Represented by: Macquarie Securities Mr Low Whye Choong (Chairperson) APREA (Asian Public Real Estate Association) Mr Peter Mitchell DBS Ms Cheah Le Sa Ms Valerie Lim IMAS Mr Giri Mudeliar (Investment Management Association of Singapore) Societe Generale Mr Malcolm Thomas UBS Mr Rohit Jaisingh UOB Asia Ms Quah Sy Yi Allens Arthur Robinson Mr Tim Manefield Mr Robert Clarke Colin Ng & Partners Ms Elaine Beh MAS (Co-ordinator) Mr Richard Teng Ms Abigail Ng Ms Angeline Koh Mr Gary Tan Ms Jean Tan Ms Jolene Seetoh Ms Melissa Giang SGX Ms Tan Suan Hui Mr Koh Su Haw The comprising representatives from APREA, IMAS, SIBA (with committee representatives from CF, DCM and EDSP), law firms, MAS and SGX was formed in October 2006 to propose recommendations to ensure offering documents are more readable and relevant for investors. This relates to prospectus for equity, including those issued under REITs and debentures, which include structured notes. The taskforce presented their findings and recommendations at the MAS-SGX Quarterly Meeting on 1 March 2007 and list some of the benefits of creating a shorter, more concise offering document: • making the documents more readable and informative without sacrificing investor protection • making Singapore a more cost effective and efficient jurisdiction for public offering and listing • encouraging foreign issuers to Singapore MAS responded and called for a meeting in June 2007, with 3 members of the taskforce, namely Macquarie (represented by Mr Low Whye Choong), APREA (represented by Mr Peter Mitchell) and Allens Arthur Robinson (represented by Mr Robert Clarke). The feedback from MAS on the taskforce recommendations during this meeting are: • The taskforce recommended that the legislation be changed and guidelines be introduced to focus on the concept of “materiality”. MAS is of the opinion that there is no need to further introduce an additional “materiality” test in the legislation as materiality is implied but they will consider clarifying expectations on materiality. • It was also recommended to streamline statutory requirements across different investment products. MAS will review disclosure requirements for debt securities to align these closer to the International Organisation of Securities Commissions (IOSCO) standards. • Another recommendation was for MAS to mandate a proforma form of prospectus or other initiatives to improve readability of prospectuses. During the meeting it was suggested that an abridged prospectus, which could either be a past or new offering, be introduced as a test case. Mr Low Whye Choong of Macquarie Securities, chairperson of the taskforce is currently working with MAS & SGX to look into this. Singapore Investment Banking Association Annual Report 2007 21 iNDEpENDENT AuDiTors’ rEporT To The Members of singapore investment banking Association (registration No.: ros 220/74TAp) We have audited the accompanying financial statements of Singapore Investment Banking Association, which comprise the balance sheet as at 31 December 2007, and the income statement, statement of changes in fund and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes. The financial statements for the year ended 31 December 2006 were audited by other independent auditors (other than RSM Chio Lim) whose report dated 5 April 2007 expressed an unqualified opinion on those financial statements. Council Members’ Responsibility for the Financial Statements The Council Members are responsible for the preparation and fair presentation of these financial statements in accordance with the Singapore Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Independent Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the council members, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the accompanying financial statements are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the association as at 31 December 2007 and the results, changes in fund and cash flows of the association for the year ended on that date. RSM CHIO LIM Certified Public Accountants Singapore 29 January 2008 22 Singapore Investment Banking Association Annual Report 2007 FiNANciAl sTATEMENTs Income Statement Year Ended 31 December 2007 Note 2007 2006 $ $ Revenue Members’ Subscription 211,500 202,500 Interest Income From Bank 1,149 1,454 Income From Functions, Seminars And Publication 2,522 59,894 215,171 263,848 Other Item Of Expense Audit Fees 3,220 7,350 Accountancy Fees 3,050 2,993 AGM Expenses 4,829 5,098 Bank Charges 39 – Cleaning Expense 2,810 – General Expense 253 – Depreciation 5 1,150 2,629 Insurance 2,703 – Maintenance Of Equipment 199 – Medical Expense 1,255 1,577 Miscellaneous-Donation 1,500 1,500 Newspaper 633 – Transport 3,535 3,449 Rental Of Office 40,574 54,968 Rental Of Equipment 4,051 – Repair And Maintenance 758 370 Printing & Stationery 1,161 3,608 Professional Fee 2,340 3,570 Photocopy Changes 83 – Postages 461 – Refreshment 553 – Staff CPF 13,371 14,376 Staff Salary 107,091 107,916 Staff Bonus 6,150 15,150 Seminars And Training – 32,472 Telephone 4,345 – Travelling 632 – Utilities 598 – 207,344 249,676 Surplus Before Income Tax 7,827 6,822 Income Tax Expense 4 (895) – Surplus, Net Of Income Tax 6,932 6,822 Chairman Deputy Chairman/Treasurer Mr George Lee (for OCBC Bank) Mr Sim Buck Khim (for Deutsche Bank AG) 29 January 2008 The accompanying notes form an integral part of these financial statements. Singapore Investment Banking Association Annual Report 2007 23 FiNANciAl sTATEMENTs balance sheet As At 31 December 2007 Note 2007 2006 $ $ ASSETS Non-Current Assets Plant And Equipment 5 1,278 2,043 Total Non-Current Assets 1,278 2,043 Current Assets Trade And Other Receivables 6 23,748 18,258 Cash And Cash Equivalents 7 122,936 121,813 Total Current Assets 146,684 140,071 Total Assets 147,962 142,114 FUND AND LIABILITIES Fund Capital Fund 171,000 165,000 Accumulated Fund (32,090) (39,022) Fund Total 138,910 125,978 Current Liabilities Income Tax Payable 895 - Trade Payables 8 8,157 16,136 Total Current Liabilities 9,052 16,136 Total Liabilities 9,052 16,136 Total Fund and Liabilities 147,962 142,114 Chairman Deputy Chairman/Treasurer Mr George Lee (for OCBC Bank) Mr Sim Buck Khim (for Deutsche Bank AG) 29 January 2008 The accompanying notes form an integral part of these financial statements. 24 Singapore Investment Banking Association Annual Report 2007 FiNANciAl sTATEMENTs statement of changes in Fund Year Ended 31 December 2007 Capital Accumulated Fund Fund Total $ $ $ Current year Opening Balance At 1 January 2007 165,000 (39,022) 125,978 New Memberships During The Year 6,000 - 6,000 Surplus For The Year - 6,932 6,932 Opening Balance At 31 December 2007 171,000 (32,090) 138,910 Previous year: Opening Balance At 1 January 2006 156,000 (45,844) 110,156 New Memberships During The Year 9,000 - 9,000 Surplus For The Year - 6,822 6,822 Balance As At 31 December 2006 165,000 (39,022) 125,978 The accompanying notes form an integral part of these financial statements. Singapore Investment Banking Association Annual Report 2007 25 FiNANciAl sTATEMENTs cash Flow statement Year Ended 31 December 2007 2007 2006 $ $ Cash Flows From Operating Activities Surplus Before Tax 7,827 6,822 Depreciation Of Plant And Equipment 1,150 2,629 Interest Income (1,149) (1,454) Operating Cash Flow Before Changes In Working Capital 7,828 7,997 Trade And Other Receivables (5,490) 4,653 Trade And Other Payables (7,979) 4,736 Net Cash Flows (Used In)/From Operating Activities (5,641) 17,386 Cash Flows From Investing Activities Purchase Of Plant And Equipment (385) (3,065) Interest Received 1,149 1,454 Net Cash Flows From/ (Used In) Investing Activities 764 (1,611) Cash Flows From Financing Activities Entrance Fees From New Members 6,000 9,000 Net Cash Flows From Financing Activities 6,000 9,000 Net Increase In Cash And Cash Equivalents 1,123 24,775 Cash And Cash Equivalents, Cash Flow Statements, Beginning Balance 121,813 97,038 Cash And Cash Equivalents, Cash Flow Statements, Ending Balance (Note 7) 122,936 121,813 The accompanying notes form an integral part of these financial statements. 26 Singapore Investment Banking Association Annual Report 2007 FiNANciAl sTATEMENTs Notes to the Financial statements 31 December 2007 1. General The association is registered in Singapore under the Societies Act (Cap. 311). The financial statements are presented in Singapore dollars. They are drawn up in accordance with the Singapore Financial Reporting Standards (FRS). The financial statements were approved and authorised for issue by the Council Members on 29 January 2008. The principal activity of the association is to promote the interest of the investment banking industry in Singapore. The registered office address is: 24 Raffles Place #16-02 Clifford Centre Singapore 048621. The association is domiciled in Singapore. 2. Summary of Significant Accounting Policies Accounting Convention The financial statements have been prepared in accordance with the Singapore Financial Reporting Standards (“FRS”) as issued by the Singapore Accounting Standards Council as well as all related Interpretations to FRS (“INT FRS”). The financial statements are prepared on a going concern basis under the historical cost convention except where an FRS require an alternative treatment (such as fair values) as disclosed where appropriate in these financial statements. Basis of Preparation of the Financial Statements The preparation of financial statements in conformity with generally accepted accounting principles requires the management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The estimates and assumptions are reviewed on an ongoing basis. Apart from those involving estimations, management has made judgements in the process of applying the entity’s accounting policies. The areas requiring management’s most difficult, subjective or complex judgements, or areas where assumptions and estimates are significant to the financial statements, are disclosed at the end of this footnote, where applicable. Revenue Recognition The revenue amount is the fair value of the consideration received or receivable from the gross inflow of economic benefits during the year arising from the course of the ordinary activities of the entity and it is shown net of sales related taxes, estimated returns, discounts and volume rebates. Members’ subscriptions, which are levied on members on an annual basis, are recognised on accrual basis. Interest is recognised using the effective interest method. Employee Benefits Contributions to defined contribution retirement benefit plans are recorded as an expense as they fall due. The entity’s legal or constructive obligation is limited to the amount that it agrees to contribute to an independently administered fund. This includes the government managed retirement benefit plan such as the Central Provident Fund in Singapore. For employee leave entitlement the expected cost of short-term employee benefits in the form of compensated absences is recognised in the case of accumulating compensated absences, when the employees render service that increases their entitlement to future compensated absences; and in the case of non-accumulating compensated absences, when the absences occur. A liability for bonuses is recognised where the entity is contractually obliged or where there is constructive obligation base on past practice. Singapore Investment Banking Association Annual Report 2007 27 FiNANciAl sTATEMENTs Notes to the Financial statements 31 December 2007 2. Summary of Significant Accounting Policies (Cont’d) Income Tax The income taxes are accounted using the asset and liability method that requires the recognition of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequence of events that have been recognised in the financial statements or tax returns. The measurements of current and deferred tax liabilities and assets are based on provisions of the enacted or substantially enacted tax laws; the effects of future changes in tax laws or rates are not anticipated. Income tax expense represents the sum of the tax currently payable and deferred tax. Tax and deferred tax are recognised in the income statement except that when they relate to items that initially bypass the income statement and are taken to equity, in which case they are similarly taken to equity. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same income tax authority. The carrying amount of deferred tax assets is reviewed at each balance sheet date and is reduced, if necessary, by the amount of any tax benefits that, based on available evidence, are not expected to be realised. A deferred tax amount is recognised for all temporary differences. Plant and Equipment Depreciation is provided on a straight-line basis to allocate the gross carrying amounts less their residual values over their estimated useful lives of each part of an item of these assets. The annual rates of depreciation are as follows: Plant and equipment 33.33% An asset is depreciated when it is available for use until it is derecognised even if during that period the item is idle. Fully depreciated assets still in use are retained in the financial statements. Plant and equipment are carried at cost on initial recognition and after initial recognition at cost less any accumulated depreciation and any accumulated impairment losses. The gain or loss arising from the derecognition of an item of property, plant and equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item and is recognised in the income statement. The residual value and the useful life of an asset is reviewed at least at each financial year-end and, if expectations differ from previous estimates, the changes are accounted for as a change in an accounting estimate, and the depreciation charge for the current and future periods are adjusted. Cost also includes acquisition cost, any cost directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Subsequent cost are recognised as an asset only when it is probable that future economic benefits associated with the item will flow to the entity and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement when they are incurred. Leased Assets Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased assets are classified as operating leases. For operating leases, lease payments are recognised as an expense in the income statement on a straight-line basis over the term of the relevant lease unless another systematic basis is representative of the time pattern of the user’s benefit, even if the payments are not on that basis. Lease incentives received are recognised in the income statement as an integral part of the total lease expense. Financial Assets Initial recognition and measurement: A financial asset is recognised on the balance sheet when, and only when, the entity becomes a party to the contractual provisions of the instrument. The initial recognition of financial assets is at fair value normally represented by the transaction price. The transaction price for financial asset not classified at fair value through income statement includes the transaction costs that are directly attributable to the acquisition or issue of the financial asset. Transaction costs incurred on the acquisition or issue of financial assets classified at fair value through profit are expensed immediately. The transactions are recorded at the trade date. 28 Singapore Investment Banking Association Annual Report 2007 FiNANciAl sTATEMENTs Notes to the Financial statements 31 December 2007 2. Summary of Significant Accounting Policies (Cont’d) Subsequent measurement based on the classification of the financial assets in one of the following four categories under FRS 39 is as follows: Financial assets at fair value through profit and loss: As at year end date there were no financial asset classified in this category. Held-to-maturity financial assets: As at year end date there were no financial asset classified in this category. Loans and receivables: Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Assets that are for sale immediately or in the near term are not be classified in this category. These assets are carried at amortised costs using the effective interest method (except that short-duration receivables with no stated interest rate are normally measured at original invoice amount unless the effect of imputing interest would be significant) minus any reduction (directly or through the use of an allowance account) for impairment or uncollectibility. Impairment charges are provided only when there is objective evidence that an impairment loss has been incurred as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. Losses expected as a result of future events, no matter how likely, are not recognised. For impairment, the carrying amount of the asset is reduced through use of an allowance account. The amount of the loss is recognised in the income statement. The trade and other receivables are classified in this category. Available for sale financial assets: As at year end date there were no financial asset classified in this category. Derecognition of financial assets: Irrespective of the legal form of the transactions performed, financial assets are derecognised when they pass the “substance over form” based derecognition test prescribed by FRS 39 relating to the transfer of risks and rewards of ownership and the transfer of control. Cash and cash equivalents: Cash and cash equivalents include bank and cash balances, on demand deposits and any highly liquid debt instruments purchased with an original maturity of three months or less. For the cash flow statement the item includes cash and cash equivalents less cash subject to restriction and bank overdrafts payable on demand that form an integral part of cash management. Other financial assets and financial liabilities at fair value through profit or loss are presented within the section on operating activities as part of changes in working capital in the cash flow statement. Financial Liabilities Initial recognition and measurement: A financial liability is recognised on the balance sheet when, and only when, the entity becomes a party to the contractual provisions of the instrument. The initial recognition of financial liability is at fair value normally represented by the transaction price. The transaction price for financial liability not classified at fair value through income statement includes the transaction costs that are directly attributable to the acquisition or issue of the financial liability. Transaction costs incurred on the acquisition or issue of financial liability classified at fair value through profit are expensed immediately. The transactions are recorded at the trade date. Financial liabilities including bank and other borrowings are classified as current liabilities unless there is an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date. Singapore Investment Banking Association Annual Report 2007 29 FiNANciAl sTATEMENTs Notes to the Financial statements 31 December 2007 2. Summary of Significant Accounting Policies (Cont’d) Subsequent measurement: Subsequent measurement based on the classification of the financial assets in one of the following two categories under FRS 39 is as follows: 1. Liabilities at fair value through profit and loss: As at year end date there were no financial asset classified in this category. 2. Other financial liabilities: All liabilities, which have not been classified in the previous category fall into this residual category. These liabilities are carried at amortised cost using the effective interest method. Trade and other payables and borrowing are classified in this category. Items classified within trade and other payables are not usually re-measured, as the obligation is usually known with a high degree of certainty and settlement is short-term. Fair Value of Financial Instruments The carrying values of current financial assets and financial liabilities including cash, accounts receivable, short-term borrowings, accounts payable approximate their fair values due to the short-term maturity of these instruments. The fair values of non-current financial instruments are not disclosed unless there are significant items at the end of the year and in the event the fair values are disclosed in the relevant notes. Disclosures of fair value are not made when the carrying amount is a reasonable approximation of fair value. The maximum exposure to credit risk is the fair value of the financial instruments at the balance sheet date. The fair value of a financial instrument is derived from an active market. The appropriate quoted market price for an asset held or liability to be issued is usually the current bid price without any deduction for transaction costs that may be incurred on sale or other disposal) and, for an asset to be acquired or liability held, the asking price. Critical Judgements, Assumptions and Estimation Uncertainties There were no critical judgements made in the process of applying the accounting policies that have the most significant effect on the amounts recognised in the financial statements. There were no key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. 30 Singapore Investment Banking Association Annual Report 2007 FiNANciAl sTATEMENTs Notes to the Financial statements 31 December 2007 3. Employee Benefits Expense 2007 2006 $ $ Employee benefits expense 113,241 123,066 Contributions to defined contribution plan 13,371 14,376 Other benefits 4,790 5,026 Total employee benefits expense 131,402 142,468 4. Income Tax The association’s tax status is governed by section 11(2) of the Income Tax Act. 2007 2006 $ $ Current tax expense 895 - The income tax expense varied from the amount of tax expense determined by applying the Singapore income tax rate of 18% (2006: 20%) to surplus before income tax as a result of the following differences: 2007 2006 $ $ Tax rate reconciliation: Surplus before tax 7,827 6,822 Income tax expense at the above rate 1,409 1,364 Non-allowable items 270 1,515 Non income statement item subject to tax 1,080 1,800 Prior years’ tax loss carryforwards utilized - (4,679) Prior years’ donation carryforwards utilized (937) - Tax exemptions (1,315) - Other minor item less than 3% each 388 - Total income tax expense 895 964 Effective tax rate 11.43% 14.13% Singapore Investment Banking Association Annual Report 2007 31 FiNANciAl sTATEMENTs Notes to the Financial statements 31 December 2007 5. Plant and Equipment Plant & Equipment $ Cost: At beginning of year 1 January 2007 92,471 Additions 385 Assets written off (80,416) At end of year 31 December 2007 12,440 Accumulated depreciation: At beginning of year 1 January 2007 90,428 Depreciation for the year 1,150 Assets written off (80,416) At end of year 31 December 2007 11,162 Net book value: At end of year 31 December 2007 1,278 Cost: At beginning of year 1 January 2006 89,406 Additions 3,065 At end of year 31 December 2006 92,471 Accumulated depreciation: At beginning of year 1 January 2006 87,799 Depreciation for the year 2,629 At end of year 31 December 2006 90,428 Net book value: At end of year 31 December 2006 2,043 6. Trade and Other Receivables 2007 2006 $ $ Trade receivables: Members - 4,500 Other receivables and prepayments: Deposits 9,509 9,579 Prepayments 13,468 3,745 Other receivables 771 434 Total trade and other receivables 23,748 18,258 The average credit period generally granted to members is about 30 days (2006: 30 days). Current receivables with a short duration are not discounted and the carrying amounts are assumed to be a reasonable approximation of fair values. 32 Singapore Investment Banking Association Annual Report 2007 FiNANciAl sTATEMENTs Notes to the Financial statements 31 December 2007 7. Cash and Cash Equivalents 2007 2006 $ $ Cash on hand - 500 Cash at bank 60,972 60,389 Fixed deposit cash bank 61,964 60,924 122,936 121,813 The effective interest rate of interest earning balances is 1.7% (2006:1.7%) per annum. The carrying amounts are assumed to be a reasonable approximation of fair values. 8. Trade Payables 2007 2006 $ $ Trade payables and accrued liabilities: Accrued liabilities 8,157 16,136 The average credit period taken to settle non-related trade payables is about 30 days (2006: 30 days). The carrying amounts are assumed to be a reasonable approximation of fair values. 9. Operating Lease Payment Commitments At the balance sheet date, the total of future minimum lease payments under non-cancellable operating leases are as follows: 2007 2006 $ $ Not later than one year 125,148 41,370 Later than one year and not later than five years 62,574 56,937 187,722 98,307 Rental expense for the year 44,625 42,724 Operating lease payments are for rentals payable for office premises and office equipment. The lease from the landlord is for 3 years from 1 July 2006. The lease rental terms are negotiated for an average term of 3 year. Singapore Investment Banking Association Annual Report 2007 33 FiNANciAl sTATEMENTs Notes to the Financial statements 31 December 2007 10. Changes and Adoption of Financial Reporting Standard For the year ended 31 December 2007 the following new or revised Singapore Financial Reporting Standards were adopted for the first time. The new or revised standards did not require any material modification of the measurement method or the presentation in the financial statements. FRS No. Title FRS 1 Presentation of Financial Statements - Amendments relating to capital disclosures (*) FRS 40 Investment Property (*) INT FRS 105 Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds (*) INT FRS 107 Applying the Restatement Approach under FRS 29 Financial Reporting in Hyperinflationary Economies (*) INT FRS 108 Scope of FRS 102 (*) INT FRS 109 Reassessment of Embedded Derivatives (*) INT FRS 110 Interim Financial Reporting and Impairment (*) INT FRS 111 FRS102 - Group and Treasury Share Transactions (*) (*) Not relevant to the entity. 11. Future Changes in Accounting Standards The following new or revised Singapore Financial Reporting Standards that have been issued will be effective in future. The transfer to the new or revised standards from the effective dates is not expected to have a material impact on the financial statements. FRS No. Title Effective date for periods beginning on or after FRS 23 Borrowing Costs (*) 1.1.2009 FRS 107 Financial Instruments: Disclosures 1.1.2008 FRS 107 Financial Instruments: Disclosures - Implementation Guidance 1.1.2008 FRS 108 Operating Segments (*) 1.1.2009 INT FRS 111 FRS102 - Group and Treasury Share Transactions (*) 1.3.2007 INT FRS 112 Service Concessions Arrangements (*) 1.1.2008 (*) Not relevant to the entity. 12. Comparative Figures The financial statements for the year ended 31 December 2006 were audited by other independent auditors (other than RSM Chio Lim) whose report dated 5 April 2007 expressed an unqualified opinion on those financial statements. 34 Singapore Investment Banking Association Annual Report 2007 lisT oF MEMEbErs list of members as at 31 December 2007 1. ABN AMRO BANK N.V. 2. ANZ SINGAPORE LIMITED 3. AFC MERCHANT BANK 4. BARCLAYS BANK PLC 5. BNP PARIBAS PEREGRINE (SINGAPORE) LTD 6. BANK OF NOVA SCOTIA ASIA LTD, THE 7. BSI BANK LIMITED 8. CIBC (ASIA) LIMITED 9. CITICORP INVESTMENT BANK (S) LTD 10. CREDIT SUISSE 11. CHINA CONSTRUCTION BANK 12. DAIWA SECURITIES SMBC SINGAPORE LTD 13. DBS BANK LTD 14. DEXIA BIL ASIA SINGAPORE LIMITED 15. DRESDNER BANK AG 16. DEUTSCHE BANK AG 17. DELOITTE & TOUCHE CORPORATE FINANCE PTE LTD 18. FORTIS PRIVATE BANKING SINGAPORE LTD 19. GOLDMAN SACHS (SINGAPORE) PTE 20. HONGKONG & SHANGHAI BANKING CORPORATION LTD, THE 21. HSBC PRIVATE BANK (SUISSE) SA 22. HONG LEONG FINANCE LIMITED 23. ING BANK N.V. 24. J.P. MORGAN SECURITIES (S.E.A.) LIMITED 25. MERRILL LYNCH INTERNATIONAL BANK LTD 26. MORGAN STANLEY ASIA (SINGAPORE) PRIVATE 27. MACQUARIE CAPITAL (SINGAPORE) PTE LIMITED 28. MITSUBISHI UFJ SECURITIES (SINGAPORE) LTD 29. NIBC BANK LTD 30. N M ROTHSCHILD & SONS (SINGAPORE) LTD 31. NIKKO MERCHANT BANK (S) LTD, THE 32. NOMURA SINGAPORE LTD 33. OCBC BANK LTD 34. PHILLIP SECURITIES PTE LTD 35. PRIMEPARTNERS CORPORATE FINANCE PTE LTD 36. PRICEWATERHOUSECOOPERS CORPORATE FINANCE PTE LTD 37. PLATINUM SECURITIES CO. LTD 38. STANDARD CHARTERED BANK 39. STIRLING COLEMAN CAPITAL LTD 40. STONE FOREST M&A PTE LTD 41. SAC CAPITAL PRIVATE LIMITED 42. SOCIETE GENERALE 43. SBI E2-CAPITAL ASIA SECURITIES PTE LTD 44. UBS AG 45. UOB ASIA LIMITED 46. WESTCOMB FINANCIAL GROUP LIMITED 47. WESTLB ASIA PACIFIC LIMITED Singapore Investment Banking Association Annual Report 2007 35 singapore investment banking Association AUDITORS RSM CHIO LIM Certified Public Accountants BANKERS DBS Bank Ltd Raffles Place Branch 22 Malacca Street # 01-00 DBS Securities Building Singapore 048980 REGISTERED OFFICE 24 Raffles Place # 16-02 Clifford Centre Singapore 048621 36 Singapore Investment Banking Association Annual Report 2007