Investors

The purchase consideration

The purchase consideration of A$9.75 million was arrived at following negotiations between CSE and the Vendors on a willing-buyer and willing-seller basis, and having taken into account the following factors:-

i. The unaudited A$1.20 million (approximately S$1.48 million) profit after tax for the financial year ended 30 June 2004 of Uniserve as tabled below under Financial effects of the acquisition;
ii. The fit between Uniserve's and CSE's operations;
iii. The track record and customer base of Uniserve;
iv. The unaudited net tangible asset of Uniserve as at 30 June 2004 of A$4.42 million (approximately S$5.44 million); and
v. The future prospects of Uniserve.

Using the consideration of A$9.75 million (approximately S$12.0 million), the price to unaudited earnings for the financial year ended 30 June 2004 is 8.1 times. Similarly, the price to unaudited net tangible asset at the end of the financial year is 2.2 times.

CSE proposes to finance the acquisition from internally generated funds and bank borrowings.

None of the substantial shareholders of CSE or Directors has any interest, direct or indirect, in the acquisition.

Discloseable Transaction

For the purposes of Rule 1006 of the listing manual ("Listing Manual") of the Singapore Exchange Securities Trading Limited:

(i) The acquisition is regarded as a discloseable transaction based on the following tests:

(a) Net Profit Test

The unaudited net profits attributable to Uniserve (amounting to A$1.20 million (equivalent to S$1.48 million) for the financial year ended 30 June 2004) is approximately 8.6% compared to the CSE Group's net profits (amounting to S$17.3 million for the financial year ended 30 December 2003) (using a conversion rate of A$1.00: S$1.23 ).

(b) Market Capitalisation Test

The consideration is approximately 6.7% compared to the market capitalisation of CSE of approximately S$178.0 million (based on 317,801,407 shares in issue on 30 June 2004 and the closing price of S$0.56 per CSE share on 14 July 2004, and using a conversion rate of A$1 : S$1.23).

Profit and Loss	Ended 30 June
A$'000	2002 Audited	2003 Audited	2004 Unaudited
Turnover	20,320	19,578	18,634
Profit before tax	1,773	1,871	1,646
Profit after tax	1,277	1,307	1,193

	Ended 30 June
A$'000	2002 Audited	2003 Audited	2004 Unaudited
Share Capital	750	750	750
Accumulated profits	1,519	2,476	3,669
	2,269	3,226	4,419
Fixed assets, NBV	1,180	1,232	1,138
Deferred taxation	139	149	286
Inventory	1,652	1,711	2,100
Trade debtors	3,831	3,617	3,576
Other debtors	1	130	390
Cash in hand and bank	1,660	1,348	1,962
Total current assets	7,144	6,806	8,028
Trade creditors	4,262	3,254	3,867
Other creditors	1,390	1,260	819
Total current liabilities	5,652	4,514	4,686
Non current liabilities	541	446	347
	2,269	3,226	4,418

The proposed acquisition is in line with the long-term business plan of CSE to expand through acquisition of companies with specialized skills and technologies complementary to CSE.

CSE is of the view that the acquisition is in the interest of CSE for the following reasons:

i. Effective and Committed Management

The management team of Uniserve built the business over the last 26 years. Mr. Peter Whelan, one of the Vendors, has agreed to remain as the non-executive chairman of Uniserve. He will also be appointed as a member of CSE's Advisory Committee.

ii. Ability to offer a more comprehensive range of services

With the acquisition of Uniserve, CSE will now have the capability to provide high quality electrical engineering solutions in addition to CSE's existing industrial automation, information technology and telecommunication capabilities.

iii. Markets

Both CSE and Uniserve can leverage on each other's existing relationships with customers. Uniserve will be able to tap into CSE's global network of offices and through its offices in Australia and New Zealand further expand CSE's industrial automation, information technology and telecommunication business.

Financial effects of the acquisition

For illustrative purposes, the pro forma financial effects of the acquisitions set out below are prepared using CSE's audited consolidated financial statements ended 31 December 2003 and based on, inter alia, the following key assumptions:-

a. the completion of the acquisition on 1 January 2003;
b. CSE amortizes the goodwill of S$6.55 million over 10 years;
c. CSE borrows the S$12.0 million at 3% interest per annum.; and
d. Uniserve's unaudited profit after tax of S$1.48 million is earned uniformly over the financial year.

i. Pro forma financials for Uniserve for a year taking into account goodwill amortisation and interest expenses.

	S$'000
Profit after tax	1,480
Goodwill amortization	655
Interest expenses	252
Addition to CSE's profit after tax	573

	Before Acquisition	After Acquisition
Net tangible assets (S$'000)	33,864	27,314
No. of shares outstanding	317,801,407	317,801,407
Net tangible assets per share (cents)	10.66	8.59

	Before Acquisition	After Acquisition
Profit after tax (S$'000)	17,341	17,914
No. of shares outstanding	317,801,407	317,801,407
Earnings per share (cents)	5.46	5.64

	Before Acquisition	After Acquisition
Bank Borrowings (S$'000)	40,095	52,095
Cash in hand and bank (S$'000)	17,117	19,530
Shareholders Fund (S$'000)	54,192	54,192
Net gearing	0.42	0.60