Monday, June 13, 2016

Direct Interest & Deemed Interests

Hi all,

Today I ll be writing about disclosure of Interests/ Change in Interest of Substantial Shareholder(s) or Director/Chief Executive Officer.

You will see this very often when you scroll through the Company Announcement under the Company Information Tab. When I just started investing, I remembered scrolling down to check the earnings report and end up seeing many of these.

Well the purpose of this is that Under the Securities and Futures Act as well as Companies Act, Part VII, MAS requires CEO/Directors of the company, substantial shareholders, trustee manager of listed REIT or BT to actually disclose when there's a change in their shareholdings.


In the form,

There's a column for direct interest and deemed interest.

Definition of deemed interest under Companies Act   
I'll label them into 4 points.

1. Control of board / controlling interest - where a body corporate has, or is deemed to have, an interest in a share and the body corporate is, or its directors are, accustomed or under an obligation whether formal or informal to act in accordance with the directions, instructions or wishes of a person; or a person has a controlling interest in the body corporate, that per son shall be deemed to have an interest in that share;

2. Control / exercise of ≥ 20% or more through itself, its associates or together with associates – where a body corporate has, or is deemed to have, an interest in a share and a person is, the associates of a person are, or a person and his associates are, entitled to exercise or control the exercise of not less than 20% of the votes attached to the voting shares in the body corporate, then that person shall be deemed to have an interest in that share;

3. Interest arising from right to acquire shares/units , shares/units purchase agreement, options to acquire shares/units etc.

4. Where one is entitled (other than by being a proxy or representative to vote at a meeting) to exercise or control the exercise of a right attached to the share/units

Difference between direct and deemed interest

Let's illustrate this difference with an example.

Direct Interest
In 800Super's example, Lee Koh Yong owns 2.8% of the shares in his own name, that's direct interest.

Deemed Interest
Deemed interest is one which are not held in the name of the director but the law regards as being attributable to him. According to Companies Act, Mr. Lee Koh Yong, Executive Chairman of 800Super has control of board (pt 1) and as he owns 28% (≥20%) of the company which in turn own shares of 800Super (pt 2) so he has deemed interest in 800Super shares in which Yong Seong Investments has an interest.

A director/CEO can also deemed to have interest in the shares if his spouse or child (below 21 years of age) owns the shares.

For point 3 and 4, you will see it in companies which commonly issue options/warrants to management which gives them the right to exercise the options at a certain price. Once CEO/Directors are awarded options/warrants, they have to declare as they have deemed interest in the shares of the company.

Effective ownership interest vs deemed interest

There's actually a difference in the two terms used above. In the case of 800Super, Mr. Lee's effective ownership interest is actually 2.8% + 28%* 66%= 21.28%. Deemed interest=66%. Technically speaking, Mr. Lee should have 21.28% of voting rights, because he only owns 28% (not 100%) of Yong Seong Investments Pte. Ltd.

Let's work on 2 more examples:

 Global Logistic Properties

In the case of GLP, PNC Financial Services Group, being a substantial shareholder of GLP ( ≥5% effective ownership in of GLP) needs to notify company of its shareholding movement.

Since it owns ≥20% of Blackrock Inc which in turn own shares of GLP, PNC Financial Services Group has deemed interest in shares of GLP.

Hotel Properties

There was a change in the Managing Director Ong Beng Seng's deemed interest as his wife added more shares in her own name and through her holding company.

This transaction also shows that MD deemed to have interest  in his spouse in shares own by her spouse in her own name or shares which she has deemed interest in.

So here's how it's derived:

Before Transaction

After Transaction

If you have any questions, feel free to ask me. I am also learning at the same time :)

Last Friday, I received a call from OCBC securities that I was not allotted any private placement shares for Fraser Logistics & Industrial Trust IPO. (I've updated in FB last week). So from the email from OCBC it states that the public offer starts on 10 to 16th June. Most likely I ll be applying some. Keeping my fingers crossed.


Thanks for reading my blog! Hope you enjoyed reading and benefited from it. Whenever I update my blog series/ blogposts or making adjustments to my portfolio, I'll  post them on my Facebook. To be the first few to be notified and to stay in touch, be sure to follow me on Facebook my liking my page by clicking here or at the top right hand corner (in desktop view)! :) Do also share my posts if you believe my writing could benefit more people.

Friday, May 27, 2016

Current Portfolio

Hi all,

It's been awhile since I update my blog. I did some adjustments in my portfolio and wish to exclude the stocks which I decided not to include in my retirement fund & dividend calculation purposes (see list below). Hence, to make things more organized, I have actually created another CDP joint account (since 1 person can only have one CDP acc)- let's call this Acc2, to store the excluded shares and recently also added more shares to that portfolio. I will slowly be transferring the excluded over to Acc2. Moving forward, I will not be adding anymore shares into Acc2 and won't be updating it anymore.

The way I ll be transferring is to use my cash allocated for retirement fund to buy shares through standard chartered and transfer it to Acc2.
I wont actually be transferring shares to Acc2 from my individual cdp acc; I'll buy shares using Stan Chart and transfer it to Acc2 e.g for DBS, I bought 300 shares using stan chart. Once I have accumulated 400 shares, I'll transfer to Joint Acc CDP.

So moving forward, I ll slowly be buying those shares shown below through stan chart and transfer it to Acc2.

Stocks excluded for retirement fund (excluded shares)
1. 1000 shares of ST Eng (transferred 1000 shares)
2. 400 shares of DBS (not yet transferred)
3. 1000 shares of Keppel Corp (not yet transferred)
4. 1000 shares of SGX (not yet transferred)
5. 5000 shares of 800Super (not yet transferred)

Current Acc2 shares:

Since SGX implemented the 100 shares/lot, I have been using more of Standard Chartered trading platform by buying hundred to few hundred shares at one time till I hit the desired no of shares and head over to stan chart to fill in the form to transfer to CDP and I plan to do so in future.

 Standard Chartered Portfolio: (part of retirement fund)

Retirement Portfolio

I have divested SembCorp last year at a price of $3.70 which I regretted not selling when it hits about $4.84 where B and ASSI sold. I bought at $4.18 which makes it a loss of $500 (inc brokerage fees ex. div). Personally, I believe oil prices will eventually recover one day but it' ll be quite sometime am. So the current oil&gas share which I own is only Keppel Corp.

Other than buying shares through Stan Chart, I have also been buying Nikko STI ETF shares through POSB InvestSaver which allows me to do dollar costs averaging. I am funding it through the angpow money I've collected since young :) I bought at 2014 so the returns hasn't been fantastic since STI is still at 2.7k levels; but long term should be good.

That's for today. I ll also post my entry price for my individual acc soon, write up about SLA and some stocks under my watchlist.

(Btw, I am currently just showing my portfolio. Will write more on the transactions soon i.e why did I buy/sell those shares )

Individual Acc Portfolio (retirement fund)

Wednesday, May 25, 2016

Fractional Entitlements for CDP vs StanChart Trading Platform

Hi all,

It's really been awhile (close to a year) since I last blogged. Things have been quite busy since I officially graduated from Uni and now focusing on my full time job.

Well, the market (STI) has been on a downtrend after April' 15 and there had been quite a few bull traps and it's currently hovering around 2,700+.

As a dividend investor, I am more concerned on ability of companies to pay dividends than the stock fluctuations. Since a few of my stocks are entitled to script dividend scheme, I have been thinking through should I collect cash or dividends. As I bought some shares under Standard Chartered Securities trading platform, it came to my attention that fractional entitlement to the new shares are actually all rounded down for Standard Chartered.

In the case of OCBC Shares, for CDP holders

Issue share price= $8.11

Fractional entitlement to a hundredth of a share will be rounded up to the nearest whole share.

For instance if one owns 1041 OCBC shares, he is entitled to (1041*0.18)/8.11= 23.10 and this will be rounded to 24 shares.

However for 541 OCBC shares, he is entitled to (541*0.18)/8.11= 12.007, which will be rounded down to 12 shares (only rounded up to the hundredth of a share).

Whereas for Standard Chartered, it's always rounded down to the nearest whole no. regardless of the stock. Quoted from the letter:

In the event that this corporate action (whether voluntary or otherwise) results in you holding a fractional interest in relation to any Security, the total amount of your allocation of such Security will be rounded down to the nearest whole number.

When I saw the Corporate announcement letter by Stan Chart, I thought they could have made a mistake by standardizing all the script scheme. I called to check with the staff and they confirmed with me that it's all rounded down.

After much thought, I began to understand why. The most probable reason is that since Standard Chartered hold their shares under Raffles Nominees Pte Ltd, they are actually treated like one corporate shareholder instead of many individual shareholders.

Come to think of it, if they owns 10k of OCBC shares, Raffles Nominees Pte Ltd actually receives (10,000*0.18)/8.11=  221.94, rounded up to 222 shares. Assuming it consists of 10 individual shareholders, each will own 1k shares. Then Stan Chart sends out Corporate announcement that shares will be rounded down. So each will receive (1,000*0.18)/8.11= 22.19  shares, rounded down to 22 shares. So 22*10= 220 shares, so my guess is that they'll most probably profit the 2 shares. I have nothing against this since the brokerage fee is 0.20% with no minimum trading fee and it's quite easy to use. It's quite a good platform to do dollar costs averaging.

For this time round, I've got the option to participate in dividend script scheme for:

4.First REIT
5. Raffles Medical

With exception of UOL (which I am still considering), I subscribed to their script dividends for shares under CDP and exercised cash option for Stan Chart.

Cash or Script?- if issue price is very close or slightly to current share price

Many people whom I know will compare the current price to script price and decide if it's worth taking shares. And they'll take cash if issue price is ever higher or very near to the stock price, because the thinking is that it' ll be cheaper to buy from stock market.

That will probably make alot of sense if brokerage fee+ total shares acquired from market is cheaper than subscribing to issue price. But in many cases, it's actually not unless we really own quite a substantial amount of shares. For instance, UOL shares closed at $5.60 today (24-May) and their new issue share price is $5.66. I am entitled to 27 new shares by holding 1020 shares. Although it's cheaper in stock market, the only way I can buy is through the unit share market - low liquidity and high brokerage fees.

The approach is quite short term thinking imo, since current share price is not reflective of the underlying's firm intrinsic value. As a long term investor, a better way to decide is to consider the value of the shares to the script rather than just comparing to stock price. Anyway the stock price changes everyday and if it went up much in a years time, probably we'll regret not subscribing to the script.

And lastly on Silverlake Axis...
I have received some queries and emails asking for my thoughts on Silverlake Axis and what action did I take. The price has move quite abit and market seemed to be convinced by the shortseller's report. For me,  similar to B, I read through the report (but only early this year) and I ve decided to bite the bullet and divested all my shares at $0.550 with some dividends. The 42 pages is definitely not an easy read especially on the related party transactions where the company names can be quite confusing. So in my next post, I will try to write-up a post of SLA in a more simple version to make it easy for investors to understand.

In the past, I have been able to write 2-3 posts a month but judging from my current job demand, I will most likely be able to do a monthly post from now.

Thanks for reading my blog! Hope you enjoyed reading and benefited from it. Whenever I update my blog series/ blogposts or making adjustments to my portfolio, I'll  post them on my Facebook. To be the first few to be notified and to stay in touch, be sure to follow me on Facebook my liking my page by clicking here or at the top right hand corner (in desktop view)! :) Do also share my posts if you believe my writing could benefit more people.