YCP Holdings (Global) Limited

Independent Auditor's Report

For the financial year ended 31 December 2023

Report on the Audit of the Financial Statements

Opinion

We have audited the financial statements of YCP Holdings (Global) Limited (the “Company”) and its subsidiaries (collectively, the “Group”), which comprise the statements of financial position of the Group and the Company as at 31 December 2023, the statement of changes in equity of the Group and the Company and the consolidated statement of profit or loss, consolidated statement of comprehensive income and consolidated cash flows statement of the Group for the year then ended, and notes to the financial statements, including a summary of material accounting policy information.

In our opinion, the accompanying consolidated financial statements of the Group and the statement of financial position and the statement of changes in equity of the Company are properly drawn up in accordance with the provisions of the Companies Act 1967 (the “Act”), International Financial Reporting Standards (“IFRS”) and Singapore Financial Reporting Standards (International) (“SFRS(I)”) so as to give a true and fair view of the consolidated financial position of the Group and the financial position of the Company as at 31 December 2023 and of the consolidated financial performance, consolidated changes in equity and consolidated cash flows of the Group and changes in equity of the Company for the year ended on that date.

Basis for Opinion

We conducted our audit in accordance with Singapore Standards on Auditing (“SSAs”). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Group in accordance with the Accounting and Corporate Regulatory Authority (“ACRA”) Code of Professional Conduct and Ethics for Public Accountants and Accounting Entities (“ACRA Code”) together with the ethical requirements that are relevant to our audit of the financial statements in Singapore, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ACRA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.

We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial statements.

YCP Holdings (Global) Limited

Independent Auditor's Report

For the financial year ended 31 December 2023

Key Audit Matters (Continued)

Revenue recognition – in relation to management service revenue stream

The Group recognises revenue from contracts for management service consultancy projects over time, based on the progress of each contract. The progress is assessed by reference to the stage of completion of the respective contract activity (i.e., performance obligations) of its projects at the end of each reporting period. The stage of completion is measured by reference to the cost incurred to date relative to the total estimated cost to satisfy the performance obligation. These assessments required management to apply significant judgement and make assumptions and estimates in measuring costs incurred for each performance obligation and total budgeted contract costs. The subjectivity and complexity involved in these assessments can significantly impact the results of the Group. Accordingly, we have determined this to be a key audit matter.

We performed the following procedures:

－Obtained understanding of the Group’s procedures and processes for recognising revenue from contracts with customers.

－Assessed the basis for the identification of performance obligations and determined that such contract revenue are recognised over time. Our assessment includes examining project documents and reviewing, on a sample basis, contractual terms and conditions and discussion with management on the performance obligations identified.

－Assessed contract revenues recognised and project costs incurred, on a sample basis, by comparing against the relevant contracts and supporting documents which include those that support the staff costs incurred.

－Evaluated reasonableness of management’s estimates used to determine total costs to complete for individual contracts.

－Assessed the arithmetic accuracy of the revenue recognised based on the stage of completion calculations made for individually significant projects.

－Assessed the adequacy of the disclosures of material accounting policies for revenue from contracts with customers, judgment and methods used in estimating revenue, contract assets, and contract liabilities.

Impairment assessment of goodwill

As at 31 December 2023, net carrying value of goodwill of the Group amounted to US$53.1 million. The goodwill is allocated to the respective cash-generating unit (“CGU”). Goodwill is tested for impairment annually by estimating the recoverable amounts of the CGU using the value-in-use model. Management applied the value-in-use (discounted cash flow method) to determine the recoverable amounts of the respective CGUs.

We considered the audit of management’s impairment assessment to be a key audit matter because the assessment process involves management exercising significant judgement and making assumptions of future market and economic conditions.

We evaluated the appropriateness of CGU identified by management based on our knowledge of the business acquisition giving rise to the goodwill and our understanding of the current business of the Group.

YCP Holdings (Global) Limited

Independent Auditor's Report

For the financial year ended 31 December 2023

Key Audit Matters (Continued)

Impairment assessment of goodwill (Continued)

We have performed the following procedures:

－Performed walkthrough of management’s process of setting budgets on which the cash flow forecasts are based.

－Tested robustness of management’s budgeting process by comparing the actual financial performance against previously forecasted results.

－Assessed the reasonableness of key assumptions used in cash flow projections by comparing them against future business plans.

－Involved our internal specialist in the review of discount and terminal growth rates.

－Performed sensitivity analysis, focusing on reasonably possible changes in the key assumptions or discount rates, and analysed the impact to the recoverable amount.

－Reviewed the adequacy of the disclosures made on the goodwill in Note 14 to the financial statements.

Accounting for business combination

During the financial year, the Group has completed the following acquisitions:

(a) 100% equity interest in Consus Group for a total purchase consideration of US$11.2 million via cash, US$3.7 million via share issuance and two tranches of contingent consideration depending on the earnout conditions. The purchase price allocation (“PPA”) exercise for Consus is provisional;

(b) 100% equity interest in E-vets, LLC (“Evet”) for a total purchase consideration of JPY321.1 million (equivalent to approximately US$2.4 million). The PPA exercise for Evet has been finalised; and;

(c) 100% equity interest in Aleph Ltd., (“Aleph”) for a total purchase consideration of JPY330 million (equivalent to US$2.5 million). The PPA exercise for Aleph has been finalised.

The above acquisitions were accounted for using the acquisition method and the Group performed purchase price allocation (“PPA”) exercises for each new acquisition during the year as disclosed in Note 33 of the financial statements.

Significant judgement and estimates were made in the PPA exercises on the identification of intangible assets, valuation of the acquired assets and liabilities and measurement of the fair value of the new shares issued. Given the quantitative materiality of these acquisitions, the significant management judgement required in the PPA exercises, we considered the accounting for the above acquisitions to be a key audit matter.

We have performed the following procedures:

－Read the relevant agreements to obtain an understanding of the transaction and the key terms.

－Corroborated the identification of the acquired assets based on discussion with management and our understanding of the target companies.

－Engaged our internal valuation specialists to assist us in reviewing the nature and basis of the external party valuation report and adjustments to the purchase consideration and the acquired assets.

－Assessed the competency, capabilities and objectivity of the external valuers by considering their professional background, reputation and experience in similar industry.

YCP Holdings (Global) Limited

Independent Auditor's Report

For the financial year ended 31 December 2023

Key Audit Matters (Continued)

Accounting for business combination (Continued)

We have performed the following procedures (Continued):

－Reviewed the appropriateness of the valuation methodology used by management in the fair valuation of acquired assets and liabilities, including determining whether the assumptions used in valuing the acquired intangible assets were consistent with what a market participant would use.

－Assessed the adequacy and appropriateness of the disclosures in Note 33 of the financial statements.

Other Information

Management is responsible for the other information. The other information comprises the information included in the annual report, but does not include the financial statements and our auditor’s report thereon.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of Management and Directors for the Financial Statements

Management is responsible for the preparation of financial statements that give a true and fair view in accordance with the provisions of the Act, SFRS(I) and IFRS, and for devising and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair financial statements and to maintain accountability of assets.

In preparing the financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

The directors’ responsibilities include overseeing the Group’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

YCP Holdings (Global) Limited

Independent Auditor's Report

For the financial year ended 31 December 2023

Auditor’s Responsibilities for the Audit of the Financial Statements (Continued)

As part of an audit in accordance with SSAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

・Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

・Obtain an understanding of internal control relevant to the audit 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 Group’s internal control.

・Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

・Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.

・Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

・Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

YCP Holdings (Global) Limited

Independent Auditor's Report

For the financial year ended 31 December 2023

Report on Other Legal and Regulatory Requirements

In our opinion, the accounting and other records required by the Act to be kept by the Company and by those subsidiary corporations incorporated in Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act.

The engagement partner on the audit resulting in this independent auditor’s report is Tan Boon Leong.

Ernst & Young LLP

Public Accountants and

Chartered Accountants

Singapore