CPF Balances Update – One year of a Journey

One year on in my Full Retirement Sum journey for my CPF SA, I decided to look back and see how far I have came about. I could still remember the day I decided to take the plunge and transferred 30 grand from my CPF OA to SA. It was a one-way trip. The subsequent monthly transfers and top-ups were less stressful as I had a goal to commit to – the Full Retirement Sum (FRS) of $181,000 at least for FY2020.

From 41.9% when I first started in Jul 19, I am currently 60.0% to my goal in Aug 20. Staying on course (hopefully) to reach my goal in 2 years time.

MonthSA BalanceDelta
Jul 19$43,185.04NA
Jul 19$75,849.09Transferred
OA to SA
Aug 19$77,589.13$1,740.04
Sep 19$79,778.09$2,188.96
Oct 19$82,222.09 $2,444.00
Nov 19$84,562.09$2,340.00
Dec 19$89,763.09$5,201.00
Jan 20$96,990.09$7,227.00
Feb 20$98,214.04$1,223.95
Mar 20$103,063.50$4,849.46
Apr 20$104,527.67$1,464.17
May 20$105,792.58$1,264.91
Jun 20$107,057.49$1,264.91
Jul 20$108,000.40$942.91
Aug 20$108,600.41$600.01

Differences between Scrip Dividend Scheme (SDS) and Dividend Reinvestment Plan (DRIP)

Most recently, I elaborated on understanding the Scrip Dividend Scheme better and shared my choices for the Dividend Reinvestment Plan — OCBC Bank (O39) and CapitaLand Retail China Trust (AU8U). I had erred on the later, it should be corrected as Scrip Dividend Scheme (SDS), and not Dividend Reinvestment Plan (DRIP).

SDS and DRIP look the same, sound the same; but they are not synonymous.

What is common between Scrip Dividend Scheme and Dividend Reinvestment Plan?

Both allows existing shareholders an opportunity to increase their shareholding over time by adding shares in lieu of cash dividend.

What are the differences between Scrip Dividend Scheme and Dividend Reinvestment Plan?

Scrip Dividend Scheme reinvests the dividend at a fixed share price, called the Issue Price, which is announced in advance of the dividend pay-date. Dividend Reinvestment Plan reinvests the dividend at the prevailing share price on dividend pay-date.

Scrip Dividend Scheme usually creates new shares (and sometimes from treasury shares or shares in the company’s reserve). Dividend Reinvestment Plan buy shares from the open market. Therefore, SDS usually cause shares dilution for existing shareholders who do not opt for scrip while DRIP does not lead to share dilution.

Scrip Dividend Scheme allows the issuing companies to retain cash as working capital or for future growth etc. as shareholders opt for scrip instead cash for dividend payout. Dividend Reinvestment Plan offers no similar advantages to the company; it just pools the cash dividends payable to shareholders who opt for shares and purchases the shares from the open market on their behalf.

Shares under the Scrip Dividend Scheme are issued by the company. There is therefore no additional cost; stamp duty, brokerage commission, exchange fees or other transaction cost. Shares under the Dividend Reinvestment Plan is considered a trade; the shares are however purchased at a very competitive commission rate. Stamp duty is applicable.

Shares under the Scrip Dividend Scheme are allocated on the dividend payment date in lieu of cash dividend. As it is a trade under Dividend Reinvestment Plan, normal settlement rules apply (e.g. T+2 on SGX), therefore a delay in the shares appearing on the register.

Side note

Some brokerages offer some sort of DRIP or reinvestment scheme. POEMS Share Builders Plan (a Regular Savings Plan account) reinvest the cash dividends into your preferred counter by default, instead of withdrawing the cash dividends from the account.

Importance of understanding Level of Ownership – Subsidiary, Associate and Joint Venture

Following up from my previous thoughts on why we, as investors, should care about Shareholding statistics of your vested company (which is upstream), it is important also to know the level of ownership your vested company has in other companies (which is downstream).

The main objective to investment in other companies is to derive positive dollar revenue. If the downstream (ownership of) companies are not doing well, this would otherwise affect the overall revenue generated by the parent company — which would be highlighted in the annual report.

In the process of doing so, you probably have to understand the difference between Subsidiaries, Associates/Affiliates and Joint Ventures.


Subsidiary is an entity controlled by another entity. Control is attained by owning a majority stake; shareholding percentage or voting rights > 50%. A wholly-owned subsidiary is one which is 100% owned by the parent entity. If the business fails, in the case of a wholly owned subsidiary, the parent entity absorbs all losses.

By control, the parent company governs the operational and financial aspects or decisions of its investee (subsidiary) through the:

  • “controlling interest” or power over the investee;
  • exposure or rights to variable returns from the investor’s involvement with the investee;
  • ability to exert its power over the investee to affect the amount of the investor’s returns

DBS Group (D05) Subsidiaries

Companies such as DBS Group made their foreign direct investments (FDI) foray in host countries by means of opening bank subsidiaries. This is done partially to prevent any negative stigma or opinion associated with foreign ownership.

UOB Group (U11) Subsidiaries

Companies such as UOB Group is able to extend the range of their products and services (beyond what would be expected usually from its brand) into property investment and travel services by creating new subsidaries.

Associates / Affiliates

Associate is an entity over which the investor has significant influence. Associate is used synonymously with Affiliate. Significant influence is owning a minority stake; shareholding percentage or voting rights > 20% but less than 50%.

By significant influence, the parent company has the power to participate and weigh in the operational and financial aspects or decisions of the investee (associate) but not the control.  

DBS Group (D05) Associates

DBS Group extends beyond the primarily generation of revenue in the financial services to real estate services and fund management services etc. NETs, collectively owned by DBS Bank, OCBC Bank and United Overseas Bank, is a Singaporean electronic payment service provider founded to establish Singapore’s debit network and adoption of electronic payments.

UOB Group (U11) Associates

UOB Group, unlike DBS Group, has only a minority stake in its stockbroking arm. UOB-Kay Hian therefore has a higher degree of autonomy to DBS Vickers Securities in making corporate decisions.

Joint Ventures

Joint venture is an arrangement whereby two or more parties involved pool resources and have joint rights to the net assets of the arrangement. A joint venture could have equal partnership or with one partner having a larger share. In a joint venture, the risk is spread out between more than one parties. Losses are divided if the business fails; making it less risky as more resources such as capital and personnel are provided.

We can see how this works out for FEHT and MIT below.

Far East Hospitality Trust (Q5T) joint venture with Far East Organization Centre

Mapletree Industrial Trust (ME8U) joint venture with Mapletree Investments

Why does it matter as an investor?

“I am only interested in whether the company makes money, and not how it makes money.”

“Dividend yield and capital gains are my only focus.”

I shared my experience earlier when I did my portfolio refocus towards retail and hospitality sector.

Cathay Pacific’s principal shareholder (45% ownership) is Swire Pacific. I had existing investment in Cathay Pacific at one point. By investing in Swire Pacific (Parent), I had indirectly raised my exposure to Cathay Pacific (Associate) as well. Thus, when Cathay Pacific became financially impaired by COVID-19, Swire Pacific stock prices tanked as well.

One of the things you should be doing is to diversify and limit your exposure to any particular company or counter. You might unnecessarily take on more risk than you are prepared for.

Shareholding statistics — why should you as an investor care?

As shareholders, we would have seen this section on “Shareholding statistics” or “Unitholding statistics” in the final pages of any company’s annual report. Generally it shows the number of shareholders, the breakdown of their size of shareholdings and sometimes additional information on location breakdown of shareholders, percentage of publicly / privately-held shares, number of treasury shares etc.

What I am more interested in is the subsection on Substantial Shareholders; or major shareholders who have controlling interest over the way the company is run or making of major decisions. This is further broken down into Direct and Deemed interests for clarity.

Large shareholders usually form a very important element of the companies’ corporate governance system. When it comes to major corporate decisions, large shareholders also display their importance and influence in approving or blocking them. As a minority shareholder, you would be interested to follow up on positive/negative news concerning substantial shareholders which may otherwise or subsequently affect the owned-company in question.

Variations in the types of large owners

Is the company or business largely Government-backed or owned? Institution or employee ownership? Is it a family-run business whose is owned by blood-related persons? Is power or control largely by a single individual?

From DBS FY19/20 Annual Report, it is simple enough to see that Temasek Holdings, an investment company owned by the Government of Singapore, has a direct interest of 11.10% and deemed interest of 29.91% (when including it’s subsidiary Maju Holdings direct interest of 17.92%).

From Thomson Medical FY18/19 Annual Report, Lim Eng Hock (or Peter Lim) is a Singaporean business magnate that owns the majority (81.50%) shares in Thomson Medical as an individual. Would your vote matter, as an ordinary shareholder, if a resolution is raised for a decision?

From UOB FY19/20 Annual Report, we can see that the Wee family has a sizable direct and deemed interest; UOB remains the only Singapore bank still run by a family after OCBC Bank and others chose outsiders as their CEO or merged.

Direct interest Versus Deemed interest

So what is the difference between Direct and Deemed interests?

Direct interest is pretty clear-cut. If you buy shares in a company, you have a direct interest in the company. Similarly, if a Company B owns shares in another Company A, it has a direct interest. If Company A owns shares in Company Y, then Company B has an indirect or deemed interest in Company Y as well.

Deemed interest — A more complicated example of deemed interest by Temasek Holdings on Mapletree Commercial Trust

We can see that Temasek Holdings is missing from the Top 20 shareholders list — the company does not have any shares (or direct interest) in Mapletree Commercial Trust. However, it has a deemed interest (34.12%) through its subsidiaries (Fullerton Management and Mapletree Investment) and through its substantial (deemed) interest in DBS Group Holdings.

We had seen the latter example from our earlier reference: DBS FY19/20 Annual Report for Temasek Holdings deemed interest (>20%) on DBS Bank.

Deemed interest by Temasek Holdings — as of 6 July 2020

In text format, we can see how Temasek Holdings derived its deemed interest in Mapletree Commercial Trust.

Pictorially, this is how the deemed interest percentages are derived through its subsidiaries and through its substantial (deemed) interest in DBS Group Holdings. Annex 1 and Annex 2 shows a clearer breakdown.

In short, deemed interest provide a better overview of the control and influence that a shareholder has over the company. While it may not be a major shareholder (or even own shares), it may still exert a clout by having substantial interests in other companies or subsidiaries who have ownership in that particular company.

Regular Savings Plan Update – August 2020

Monthly Allocation for 19 August 2020 as follows , with a $100 investment amount

CounterQuantityPriceInvestment Amount
OCBC Bank (O39)10$8.875$88.75

Average Price of existing Portfolio counters

CounterTotal SharesAvg Price
OCBC Bank (O39)449$10.2657
SIA (C6L)645$8.6553