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Chairman's Message  

Dear Shareholders,

We continue to strategically strengthen our businesses through our transformations in the Group. At ASTI, our focus on mobility has begun to bear fruit in our semiconductor equipment business. We saw stronger vision inspection equipment and solutions demand in the second quarter of 2014. Our manufacturing services business held steady through 2014 and our technology subsidiary EoPlex continues to make progress towards commercialization. Our Backend Equipment Solutions & Technologies (“BEST”) business reported a 38.8% growth in revenue while we saw a marginal increase in the revenue from our Distribution business. The following summarizes the key events and offers an insight into our operations in FY2014

On 30 December 2014, the Group announced that the Company had on 29 December 2014, together with other vendors entered into a conditional sale and purchase agreement with J C Investment Pte Ltd for the disposal by the Company of its entire shareholding interest of 64,316,470 ordinary shares in the share capital of APSI Pte. Ltd. for a consideration of S$8.9 million. The disposal has been approved by the shareholders of the Company at an extraordinary general meeting convened on 30 March 2015.

Our subsidiary Advanced Systems Automation Limited (“ASA”) continues to strengthen financially, commercially and technologically through 2014. ASA Group’s net assets have improved from the previously negative net assets of S$12.0m as at 31 December 2011 to positive net assets of S$16.4 million, S$17.8 million and S$20.0 million as at 31 December 2012, 2013 and 2014 respectively. Its revenue rose to S$34.8 million - the highest revenue achieved in over a decade. Correspondingly, ASA’s net losses have decreased from S$2.6m in FY2012, to S$2.3m and S$1.1m in FY2013 and FY2014 respectively.


Technologically, ASA has strengthened both the Equipment Contract Manufacturing Services (“ECMS”) and Equipment businesses. The ECMS business has improved in machining capabilities and capacity through the acquisition of Emerald Precision Engineering Sdn. Bhd. on 15 November 2013, and ASA has also added plating and surface fi nishing capabilities through the acquisition of ASA Multiplate (M) Sdn. Bhd (“ASA Multiplate”). On 27 March 2014, ASA acquired an additional 35% equity interests in ASA Multiplate through the issuance of 189,408,333 new ASA ordinary shares amounting to S$2.3 million. With this acquisition, ASA’s ownership of ASA Multiplate increased to 90%. On 18 December 2014, there was a placement of 688,888,886 new ASA ordinary shares amounting to S$3.1 million, thus improving ASA’s balance sheet. Following the above transactions, our equity interest in ASA was diluted from 54.96% to 36.66%. Despite the dilution, ASA remains to be a subsidiary of the Company as we continue to have de facto control over ASA. During the year, the ASA Group has expanded its Equipment business with the introduction of new products which will enable us to broaden our Equipment customer base in the semiconductor industry.

We continued on our journey to explore and bring other viable businesses into Dragon Group International Limited (“DGI”). At the close of FY2014, our remnant trading business with revenue of US$1.7 million is holding steady but now becoming less signifi cance in view of recent developments. On 5 January 2015, we entered into a conditional sales and purchase agreement with Green Power Ventures Limited to acquire a 30% equity interest in Heat Tech Japan Co., Ltd (“HTJ”), a company dealing in the development of heat dissipating technologies. This proposed acquisition also granted us the option to acquire an additional 36.6% interest in HTJ and a 20% interest in another company, 3DOM Inc., which is in the business of developing, manufacturing and distribution of separators for batteries. On 26 January 2015, we entered into a placement agreement with Asia Green Technology Inc. to place an aggregate of 27,777,778 new ordinary shares in the share capital of DGI to them at S$0.09 per new share. The aggregate consideration for this transaction is S$2.5 million. The placement shares were issued on 30 March 2015. On 20 March 2015, we entered into a co-operation agreement with a Chinese state owned company, Nanjing Treasure Dockyard Relics Management Co., Ltd whereby we shall be permitted to do a property development project along the Yangtze Riverbank. Upon completion of the development, we shall be given the right to use and operate the project for a period of 20 years, with an option to renew for a further 20 years thereafter. This positive development for DGI will allow a new strategic direction in the tourism and development markets. Work at the Dragon Treasure Boat shipyard is progressing. The diffi culties previously associated with the reconstruction of the Zhenghe Treasure Boat had been resolved and completion is now targeted forsecond half of year 2017. On 3 March 2015, DGI announced following the Notice of 3 Consecutive Years’ Losses released on 27 February 2015, SGX-ST has placed DGI on the watch-list with effect from 4 March 2015. DGI will have to meet requirements of Rule 1314 of the SGX-ST Listing Manual within 24 months from 4 March 2015, failing which the SGX-ST would delist the Company or suspend trading with a view to delisting the Company.



On 13 September 2012, the Group announced that it has entered into a conditional Sale and Purchase Agreement with Infl exionPoint Technologies Pte. Limited for the disposal of all issued and paid up ordinary shares in the share capital of Dragon Technology Distribution Pte. Ltd. (“Disposal Group”). The disposal of discontinued operations was completed on 3 May 2013.

In accordance with FRS 105, the results of the Disposal Group has been presented separately on the Group Income Statement as Discontinued Operations for the financial years ended 31 December 2013.

Continuing Operations

The continuing operations reported a 39.6% or S$38.4 million increase in revenue from S$96.8 million (FY2013) to S$135.2 million (FY2014). BEST business recorded a 38.8% or S$37.2 million increase in revenue fromS$95.8 million (FY2013) to S$133.0 million (FY2014). The increase in revenue was due to higher demand from the equipment business. The revenue from Distribution & Service business increased S$1.2 million from S$1.0 million (FY2013) to S$2.2 million (FY2014).

Gross Profi t Margin
Gross profi t margin (“GPM”) in FY2014 was 34.4%, which was 2.5% higher than the 31.9% reported in FY2013. This was due to a higher proportion of the Group’s revenue being contributed from the equipment business which had a relatively higher margin compared to the revenue from other businesses.

Other income
Other income increased in FY2014 due to the increase in rental income during the year.

Operating Expenses
Marketing & distribution, research & development and general administrative expenses incurred in FY2014
were comparable to the expenses reported in FY2013

In line with the higher borrowings from the financial institutions, fi nancing costs increased S$0.2 million from S$0.8 million (FY2013) to S$1.0 million (FY2014).

Appreciation of US dollar in 2014 resulted in a gain of S$1.1 million in FY2014, compared to the gain of S$0.3 million reported in FY2013. The exceptional items in FY2014 comprise the followings:

(a) A net gain of S$68,000 from the disposal of an investment security (the gain of S$400,000 arising from the disposal of an investment security more than offset the impairment loss of S$332,000 relating to this same investment security)

(b) The realisation of foreign exchange translation loss arising from the deregistration of overseas subsidiaries.

Depreciation of property, plant and equipment in FY2014 increased due additional purchase of property plant and equipment during the year.

Net Profi t/Loss
The continuing operations reported an operating profit of S$2.6 million and a net profi t attributable to shareholders of S$2.9 million in FY2014, compared to the operating loss of S$13.3 million and a net loss of S$14.8 million in FY2013

Discontinued Operations
With the completion of the disposal on 3 May 2013, the Group has recognised the results generated from discontinued operations for the period from January to April 2013.

As at 31 December 2014, total assets stood at S$185.1 million comprising S$52.9 million from noncurrent
assets and S$132.2 million from current assets. Total liabilities stood at S$67.9 million comprising current liabilities of $64.4 million and non-current liabilities of S$3.5 million. Shareholders’ equity including
non-controlling interests stood at S$117.2 million.

The following are highlights of the Group’s balance sheet as at 31 December 2014.

Intangible assets
The decrease in intangible assets was mainly due to amortisation of customer relationships and intellectual properties, as well as impairment loss on country club memberships.

Property, plant and equipment
The decrease in property, plant and equipment was mainly due to depreciation and also the reclassifi cation of a land and building to “non-current assets held for sale” as the Group is in the process of disposing these assets.

Investment securities
The Group reclassifi ed an unquoted investment security to “non-current assets held for sale” as the Group is in the process of disposing this asset.

Other receivables (non-current)
Other receivables (non-current) balance in 31 December 2013 represented 10% of the proceeds from the disposal of the discontinued operations to be collected after 12 months from the balance sheet date.

Other receivables and prepayments
The other receivables and prepayments comprised receivables from external parties which increased in 2014.

Trade receivables
Trade receivables’ balance increased S$7.5 million mainly due to the higher sales reported in second half
of the year.

Non-current assets held for sale
The Group had an unquoted investment security that was classifi ed under non-current assets held for sale. This asset is currently in the process of being disposed. At balance sheet date, this investment security was stated at its fair value. Non-current assets held for sale also included the leasehold land and building which a subsidiary of the Group is in the process disposing.

Loans and borrowings
Loans and borrowings increased S$12.6 million from S$16.2 million to S$28.8 million due to additional trade financing obtained to fund the increased business activities.

Payables and accruals
Payables and accruals increased S$7.2 million from S$27.3 million to S$34.5 million mainly due to the increased trade payables of the BEST business arising from the increased business activities.


The Group generated S$2.4 million from its operations. An amount of S$1.6 million was used for the payment of interest and tax. S$2.3 million being proceeds from the sales of discontinued operations was received. Another proceed of S$3.1 million was received from the share placement exercise of a subsidiary. A net amount of S$4.4 million was used for the purchase of property, plant and equipment. The Group drew down net borrowings of S$11.7 million from financial institutions to support the increased business activities.


With ASA’s extended capabilities and the expanded regional coverage, ASA is increasingly able to offer a more comprehensive value proposition to a broader customer base across a wider region. ASA has expanded its Equipment business through the introduction of new products. These new products will enable the ASA to serve more customers in the semiconductor industry. The expansion of the ECMS business and Equipment businesses will help ASA firm its foothold in the region in 2015 and beyond.

DGI’s announcements of the various opportunities are both strategic and lucrative, and may allow DGI to propel into a whole new enterprise for our shareholders. While we pursue our commercial interests, we must at the same time address the regulatory watch-list issue. The unfolding drama and the ultimate outcome remain uncertain.

The stronger transformed business entities in the enlarged Group are strategically poised to pursue their destinies unencumbered. With ASTI’s equipment business focused on mobility, manufacturing services business continuing to improve, and our technology subsidiary EoPlex progressing towards commercialization, 2015 may prove to be a strategic infl ection point for the enlarged Group.

It is important to note that our business is prone to economic uncertainties and the cyclical nature of the electronics and semiconductor industries. Unforeseeable factors include but are not limited to foreign exchange volatility, intellectual property litigations, product and technology obsolescence, and inventory adjustments. In view of these factors, we will remain prudent and cautious in the management of our businesses.

In closing, I would like to thank all our customers, shareholders, business associates, and bankers for your trust and confi dence in us, and I look forward to your support in the new fi nancial year. To all our employees, I appreciate your perseverance and dedication, and I have confi dence in your commitment to make our Group financially, commercially and technologically strong to ride the opportunities in front of us.

Yours sincerely,

Executive Chairman and
Chief Executive Officer


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Blk 25 Kallang Avenue #06-01 Kallang Basin Industrial Estate Singapore 339416T (65) 6392 6922F (65) 6329 5522Company Registration No.: 199901514C
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