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OVERVIEW OF PROPOSED TRANSACTIONS
Hatten Land Limited is one of the leading property developers in Malaysia
specialising in integrated residential, hotel and commercial developments
and is headquartered in Malacca, Malaysia. It is the property development
arm of the Hatten Group, which is a leading brand in Malaysia with core
businesses in property development, property investment, hospitality, retail
and education.
The name “Hatten” derives from the Japanese word (發展) for “growth and
development”.
The current development portfolio comprises three (3) integrated mixed use
development projects and one retail mall in Malacca, Malaysia. They are:
Hatten City Phase 1 (incorporating Elements Mall, SilverScape Residences, Hatten Suites, and a tower block that has been taken up by DoubleTree by Hilton);
Hatten City Phase 2 (incorporating Imperio Mall and Imperio Residence);
Harbour City (incorporating a mall, a theme park and three (3) hotels); and
Vedro by the River (a retail mall).
a.
b.
c.
d.
OVERVIEW OF HATTEN LAND LIMITEDCORPORATE PROFILE
CONSIDERATION AND VALUATION INDICATIVE TIMETABLE
Note: Save for the date of the EGM, the dates set out in the above timetable are
indicative and may be subject to change. The Company will make further announce-
ments on the exact dates of such events.
Date of EGM
Suspension in Trading of Existing Shares
Completion of Proposed Acquisition &
Proposed Disposal
Commencement of Creditor Objection Period
End of Creditor Objection Period
Estimated Completion of Proposed Capital
Reduction
20 January 2017
24 January 2017
24 January 2017
20 January 2017
3 March 2017
6 March 2017
24 February 2017
3 March 2017
6 March 2017
In relation to the Proposed Acquisition & Proposed Disposal
In relation to the Proposed Capital Reduction
In relation to the Proposed Compliance Placement
Estimated Despatch of Offer Information
Statement
Completion of Proposed Compliance
Placement
Expected Lifting of the Suspension of the
Trading of the Shares
Hatten City Phase 1
Hatten City Phase 2
Harbour City
Vedro by the River
Mixed use development
Mixed use development
Mixed use development
Commercial
628
363
849
65
1,905
Project Type
Market Value of the Target Group’s
Interest in the Project (RM’ million)
Total Market Value:
Total market value of the projects as at 30 June 2016 is approximately
RM1.9 billion.
A summary of the market value of the projects are set out below:
The Revalued Net Asset Value (RNAV) of the Target Group as at
30 June 2016 is S$506.4 million.
The market value of the 100% equity in the Target Group as at
30 June 2016 is S$462.0 million.
The Proposed Acquisition's Consideration of S$386.0 million
represents a discount of 23.8% and 16.5% to the RNAV of the
Target Group and market value of 100% equity in the Target Group
as at 30 June 2016 respectively.
FINANCIAL HIGHLIGHTS
REVENUE COMPOUNDED ANNUAL GROWTH RATE: 29.7%
Revenue Gross Profit Net Profit
RM’ million
Revenue
Gross Profit
Profit before tax
Profit for the Year
Gross Profit Margin
Net Profit Margin
450
400
350
300
250
200
150
100
50
0
2014
245.2
65.1
27.8
19.5
27%
8%
2015
436.3
93.9
37.1
25.8
22%
6%
2016
412.3
154.7
96.4
68.6
38%
17 %
2014
RM’ million
2015 2016
245.2
436.3
22%38%
27%
6%17%
8%
412.3
SKY WIN MANAGEMENT CONSULTANCY PTE. LTD.
GOLD MARTSDN. BHD.
FUYUU GROUPSDN. BHD.
FUYUUVENTURESSDN. BHD.
FUYUURESOURCESSDN. BHD.
HATTENINTERNATIONALPTE. LTD.
Marketing & Development Consultancy Services
Vedro by the River
Hatten City Phase 2
Harbour CityHatten City Phase 1
Financial Adviser
to the Company in respect of the Proposed Acquisition
UOB KAY HIAN PRIVATE LIMITED(Incorporated in the Republic of Singapore)
(Company Registration No. 197000447W)
SAC CAPITAL PRIVATE LIMITED(Incorporated in the Republic of Singapore)
(Company Registration No. 200401542N)
in respect of the Proposed Whitewash Resolution,
the Proposed Disposal and the Proposed IPT Mandate
Independent Financial Adviser
IF YOU ARE IN ANY DOUBT AS TO THE ACTION YOU SHOULD TAKE, YOU SHOULD CONSULT YOUR LEGAL, FINANCIAL, TAX OR OTHER PROFESSIONAL ADVISERS IMMEDIATELY.
If you have sold or transferred all your ordinary shares (the “Shares”) in the capital of VGO Corporation Limited (“VGO” or the “Company”) held through The Central Depository (Pte) Limited (the “CDP”), you need not forward this Circular to the purchaser or transferee as arrangements will be made by CDP for a separate Circular to be sent to the purchaser or transferee. If you have sold or transferred all your Shares represented by physical share certificate(s), you should immediately forward this Circular, the enclosed Notice of Extraordinary General Meeting and the accompanying Proxy Form to the purchaser or the transferee, or to the bank, stockbroker or agent through whom the sale or the transfer was effected for onward transmission to the purchaser or the transferee.
Neither the Monetary Authority of Singapore (the “Authority”) nor the Singapore Exchange Securities Trading Limited (the “SGX-ST” or the “Exchange”) has examined or approved the contents of this Circular. Neither the Authority nor the SGX-ST assumes any responsibility for the contents of this Circular, including the correctness or accuracy of any of the statements made, reports contained or opinions expressed. The lodgement of this Circular with the SGX-ST, acting as agent on behalf of the Authority, does not imply that the Securities and Futures Act, Cap. 289, of Singapore (the “SFA”), or any other legal or regulatory requirements, or requirements under the Catalist Rules (as defined herein), have been complied with.
An application has been made to the SGX-ST for the transfer of the Company from the SGX-ST Mainboard to the Catalist, and for permission for the listing and quotation of the Shares, the Consideration Shares and the new Shares to be alloted and issued further to the Proposed Compliance Placement on the Catalist. The listing and quotation notice, if issued by the SGX-ST, is not to be taken as an indication of the merits of the Proposed Transactions, the Company, the Group, the Target Group, the Enlarged Group, the Shares, the Consideration Shares or the Compliance Placement Shares (all as defined herein). Terms appearing on the cover of this Circular bear the same meanings as defined in this Circular.
Companies listed on the Catalist may carry higher investment risk when compared with larger or more established companies listed on the SGX-ST Mainboard. In particular, companies may list on the Catalist without a track record of profitability and there is no assurance that there will be a liquid market in the Shares traded on the Catalist. You should be aware of the risks of investing in such companies and should make the decision to invest only after careful consideration and, if appropriate, consultation with your professional adviser(s).
INVESTING IN THE COMPANY’S SHARES INVOLVES RISKS WHICH ARE DESCRIBED IN SECTION 3.6 ENTITLED “RISK FACTORS” OF THE LETTER TO SHAREHOLDERS FROM THE BOARD OF DIRECTORS OF THE COMPANY. YOUR ATTENTION IS ALSO DRAWN TO SECTION 27 ENTITLED “RISK FACTORS RELATING TO THE TARGET GROUP” IN THE LETTER TO THE SHAREHOLDERS OF THE COMPANY FROM THE PROPOSED NEW DIRECTORS, WHICH YOU SHOULD READ CAREFULLY.
IF ANY OF THE RISKS SET OUT IN THE SECTIONS ABOVE DEVELOPS INTO ACTUAL EVENTS, THE ENLARGED GROUP’S BUSINESS, FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS COULD BE MATERIALLY AND ADVERSELY AFFECTED. IN SUCH CASES, THE TRADING PRICES OF THE SHARES COULD DECLINE AND YOU MAY LOSE ALL OR PART OF YOUR INVESTMENTS.
CIRCULAR TO SHAREHOLDERS IN RELATION TO:
(1) THE PROPOSED ACQUISITION OF THE ENTIRE ISSUED AND PAID-UP SHARE CAPITAL OF SKY WIN MANAGEMENT CONSULTANCY PTE LTD FOR AN AGGREGATE CONSIDERATION OF S$386.0 MILLION;
(2) THE PROPOSED ALLOTMENT AND ISSUANCE OF 1,187,692,308 CONSIDERATION SHARES TO THE VENDORS FOR THE PROPOSED ACQUISITION;
(3) THE PROPOSED COMPLIANCE PLACEMENT OF UP TO 172,400,000 COMPLIANCE PLACEMENT SHARES COMPRISING NEW SHARES AND VENDOR SHARES;
(4) THE PROPOSED TRANSFER OF THE LISTING OF THE COMPANY FROM THE MAINBOARD TO THE CATALIST;
(5) THE PROPOSED DISPOSAL OF THE COMPANY’S ENTIRE INTEREST IN THE EXISTING BUSINESS AS A MAJOR TRANSACTION AND AN INTERESTED PERSON TRANSACTION;
(6) THE PROPOSED CAPITAL REDUCTION;
(7) THE PROPOSED WHITEWASH RESOLUTION FOR THE WAIVER BY INDEPENDENT SHAREHOLDERS OF THEIR RIGHT TO RECEIVE A MANDATORY TAKE-OVER OFFER FROM THE VENDORS AND THEIR CONCERT PARTIES;
(8) THE PROPOSED CHANGE OF NAME OF THE COMPANY FROM “VGO CORPORATION LIMITED” TO “HATTEN LAND LIMITED”;
(9) THE PROPOSED APPOINTMENT OF THE PROPOSED NEW DIRECTORS TO THE COMPANY;
(10) THE PROPOSED ADOPTION OF THE NEW CONSTITUTION OF THE COMPANY;
(11) THE PROPOSED NEW SHARE ISSUE MANDATE; AND
(12) THE PROPOSED INTERESTED PERSON TRANSACTIONS MANDATE.
THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. PLEASE READ IT CAREFULLY.
CIRCULAR DATED 29 DECEMBER 2016
VGO CORPORATION LIMITED
HATTEN LAND LIMITED
(Incorporated in the Republic of Singapore)
(Company Registration No. 199301388D)
(To be renamed as Hatten Land Limited
following the completion of the Proposed
Acquisition)
VGO Corporation Limited
10 Changi South Lane, #06-01
Singapore 486162
Tel : +65 6543 5828
Fax : +65 6543 5829
Hatten Land Limited
53, Mohamed Sultan Road, #04-02
Singapore 238993
Tel : +65 6690 3136
Fax : +65 6690 3137
CONTACTINFORMATION
All images in this circular are artist impressions and computer generated.
OVERVIEW OF PROPOSED TRANSACTIONS
Hatten Land Limited is one of the leading property developers in Malaysia
specialising in integrated residential, hotel and commercial developments
and is headquartered in Malacca, Malaysia. It is the property development
arm of the Hatten Group, which is a leading brand in Malaysia with core
businesses in property development, property investment, hospitality, retail
and education.
The name “Hatten” derives from the Japanese word (發展) for “growth and
development”.
The current development portfolio comprises three (3) integrated mixed use
development projects and one retail mall in Malacca, Malaysia. They are:
Hatten City Phase 1 (incorporating Elements Mall, SilverScape Residences, Hatten Suites, and a tower block that has been taken up by DoubleTree by Hilton);
Hatten City Phase 2 (incorporating Imperio Mall and Imperio Residence);
Harbour City (incorporating a mall, a theme park and three (3) hotels); and
Vedro by the River (a retail mall).
a.
b.
c.
d.
OVERVIEW OF HATTEN LAND LIMITEDCORPORATE PROFILE
CONSIDERATION AND VALUATION INDICATIVE TIMETABLE
Note: Save for the date of the EGM, the dates set out in the above timetable are
indicative and may be subject to change. The Company will make further announce-
ments on the exact dates of such events.
Date of EGM
Suspension in Trading of Existing Shares
Completion of Proposed Acquisition &
Proposed Disposal
Commencement of Creditor Objection Period
End of Creditor Objection Period
Estimated Completion of Proposed Capital
Reduction
20 January 2017
24 January 2017
24 January 2017
20 January 2017
3 March 2017
6 March 2017
24 February 2017
3 March 2017
6 March 2017
In relation to the Proposed Acquisition & Proposed Disposal
In relation to the Proposed Capital Reduction
In relation to the Proposed Compliance Placement
Estimated Despatch of Offer Information
Statement
Completion of Proposed Compliance
Placement
Expected Lifting of the Suspension of the
Trading of the Shares
Hatten City Phase 1
Hatten City Phase 2
Harbour City
Vedro by the River
Mixed use development
Mixed use development
Mixed use development
Commercial
628
363
849
65
1,905
Project Type
Market Value of the Target Group’s
Interest in the Project (RM’ million)
Total Market Value:
Total market value of the projects as at 30 June 2016 is approximately
RM1.9 billion.
A summary of the market value of the projects are set out below:
The Revalued Net Asset Value (RNAV) of the Target Group as at
30 June 2016 is S$506.4 million.
The market value of the 100% equity in the Target Group as at
30 June 2016 is S$462.0 million.
The Proposed Acquisition's Consideration of S$386.0 million
represents a discount of 23.8% and 16.5% to the RNAV of the
Target Group and market value of 100% equity in the Target Group
as at 30 June 2016 respectively.
FINANCIAL HIGHLIGHTS
REVENUE COMPOUNDED ANNUAL GROWTH RATE: 29.7%
Revenue Gross Profit Net Profit
RM’ million
Revenue
Gross Profit
Profit before tax
Profit for the Year
Gross Profit Margin
Net Profit Margin
450
400
350
300
250
200
150
100
50
0
2014
245.2
65.1
27.8
19.5
27%
8%
2015
436.3
93.9
37.1
25.8
22%
6%
2016
412.3
154.7
96.4
68.6
38%
17 %
2014
RM’ million
2015 2016
245.2
436.3
22%38%
27%
6%17%
8%
412.3
SKY WIN MANAGEMENT CONSULTANCY PTE. LTD.
GOLD MARTSDN. BHD.
FUYUU GROUPSDN. BHD.
FUYUUVENTURESSDN. BHD.
FUYUURESOURCESSDN. BHD.
HATTENINTERNATIONALPTE. LTD.
Marketing & Development Consultancy Services
Vedro by the River
Hatten City Phase 2
Harbour CityHatten City Phase 1
Financial Adviser
to the Company in respect of the Proposed Acquisition
UOB KAY HIAN PRIVATE LIMITED(Incorporated in the Republic of Singapore)
(Company Registration No. 197000447W)
SAC CAPITAL PRIVATE LIMITED(Incorporated in the Republic of Singapore)
(Company Registration No. 200401542N)
in respect of the Proposed Whitewash Resolution,
the Proposed Disposal and the Proposed IPT Mandate
Independent Financial Adviser
IF YOU ARE IN ANY DOUBT AS TO THE ACTION YOU SHOULD TAKE, YOU SHOULD CONSULT YOUR LEGAL, FINANCIAL, TAX OR OTHER PROFESSIONAL ADVISERS IMMEDIATELY.
If you have sold or transferred all your ordinary shares (the “Shares”) in the capital of VGO Corporation Limited (“VGO” or the “Company”) held through The Central Depository (Pte) Limited (the “CDP”), you need not forward this Circular to the purchaser or transferee as arrangements will be made by CDP for a separate Circular to be sent to the purchaser or transferee. If you have sold or transferred all your Shares represented by physical share certificate(s), you should immediately forward this Circular, the enclosed Notice of Extraordinary General Meeting and the accompanying Proxy Form to the purchaser or the transferee, or to the bank, stockbroker or agent through whom the sale or the transfer was effected for onward transmission to the purchaser or the transferee.
Neither the Monetary Authority of Singapore (the “Authority”) nor the Singapore Exchange Securities Trading Limited (the “SGX-ST” or the “Exchange”) has examined or approved the contents of this Circular. Neither the Authority nor the SGX-ST assumes any responsibility for the contents of this Circular, including the correctness or accuracy of any of the statements made, reports contained or opinions expressed. The lodgement of this Circular with the SGX-ST, acting as agent on behalf of the Authority, does not imply that the Securities and Futures Act, Cap. 289, of Singapore (the “SFA”), or any other legal or regulatory requirements, or requirements under the Catalist Rules (as defined herein), have been complied with.
An application has been made to the SGX-ST for the transfer of the Company from the SGX-ST Mainboard to the Catalist, and for permission for the listing and quotation of the Shares, the Consideration Shares and the new Shares to be alloted and issued further to the Proposed Compliance Placement on the Catalist. The listing and quotation notice, if issued by the SGX-ST, is not to be taken as an indication of the merits of the Proposed Transactions, the Company, the Group, the Target Group, the Enlarged Group, the Shares, the Consideration Shares or the Compliance Placement Shares (all as defined herein). Terms appearing on the cover of this Circular bear the same meanings as defined in this Circular.
Companies listed on the Catalist may carry higher investment risk when compared with larger or more established companies listed on the SGX-ST Mainboard. In particular, companies may list on the Catalist without a track record of profitability and there is no assurance that there will be a liquid market in the Shares traded on the Catalist. You should be aware of the risks of investing in such companies and should make the decision to invest only after careful consideration and, if appropriate, consultation with your professional adviser(s).
INVESTING IN THE COMPANY’S SHARES INVOLVES RISKS WHICH ARE DESCRIBED IN SECTION 3.6 ENTITLED “RISK FACTORS” OF THE LETTER TO SHAREHOLDERS FROM THE BOARD OF DIRECTORS OF THE COMPANY. YOUR ATTENTION IS ALSO DRAWN TO SECTION 27 ENTITLED “RISK FACTORS RELATING TO THE TARGET GROUP” IN THE LETTER TO THE SHAREHOLDERS OF THE COMPANY FROM THE PROPOSED NEW DIRECTORS, WHICH YOU SHOULD READ CAREFULLY.
IF ANY OF THE RISKS SET OUT IN THE SECTIONS ABOVE DEVELOPS INTO ACTUAL EVENTS, THE ENLARGED GROUP’S BUSINESS, FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS COULD BE MATERIALLY AND ADVERSELY AFFECTED. IN SUCH CASES, THE TRADING PRICES OF THE SHARES COULD DECLINE AND YOU MAY LOSE ALL OR PART OF YOUR INVESTMENTS.
CIRCULAR TO SHAREHOLDERS IN RELATION TO:
(1) THE PROPOSED ACQUISITION OF THE ENTIRE ISSUED AND PAID-UP SHARE CAPITAL OF SKY WIN MANAGEMENT CONSULTANCY PTE LTD FOR AN AGGREGATE CONSIDERATION OF S$386.0 MILLION;
(2) THE PROPOSED ALLOTMENT AND ISSUANCE OF 1,187,692,308 CONSIDERATION SHARES TO THE VENDORS FOR THE PROPOSED ACQUISITION;
(3) THE PROPOSED COMPLIANCE PLACEMENT OF UP TO 172,400,000 COMPLIANCE PLACEMENT SHARES COMPRISING NEW SHARES AND VENDOR SHARES;
(4) THE PROPOSED TRANSFER OF THE LISTING OF THE COMPANY FROM THE MAINBOARD TO THE CATALIST;
(5) THE PROPOSED DISPOSAL OF THE COMPANY’S ENTIRE INTEREST IN THE EXISTING BUSINESS AS A MAJOR TRANSACTION AND AN INTERESTED PERSON TRANSACTION;
(6) THE PROPOSED CAPITAL REDUCTION;
(7) THE PROPOSED WHITEWASH RESOLUTION FOR THE WAIVER BY INDEPENDENT SHAREHOLDERS OF THEIR RIGHT TO RECEIVE A MANDATORY TAKE-OVER OFFER FROM THE VENDORS AND THEIR CONCERT PARTIES;
(8) THE PROPOSED CHANGE OF NAME OF THE COMPANY FROM “VGO CORPORATION LIMITED” TO “HATTEN LAND LIMITED”;
(9) THE PROPOSED APPOINTMENT OF THE PROPOSED NEW DIRECTORS TO THE COMPANY;
(10) THE PROPOSED ADOPTION OF THE NEW CONSTITUTION OF THE COMPANY;
(11) THE PROPOSED NEW SHARE ISSUE MANDATE; AND
(12) THE PROPOSED INTERESTED PERSON TRANSACTIONS MANDATE.
THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. PLEASE READ IT CAREFULLY.
CIRCULAR DATED 29 DECEMBER 2016
VGO CORPORATION LIMITED
HATTEN LAND LIMITED
(Incorporated in the Republic of Singapore)
(Company Registration No. 199301388D)
(To be renamed as Hatten Land Limited
following the completion of the Proposed
Acquisition)
VGO Corporation Limited
10 Changi South Lane, #06-01
Singapore 486162
Tel : +65 6543 5828
Fax : +65 6543 5829
Hatten Land Limited
53, Mohamed Sultan Road, #04-02
Singapore 238993
Tel : +65 6690 3136
Fax : +65 6690 3137
CONTACTINFORMATION
All images in this circular are artist impressions and computer generated.
VEDRO BY THE RIVER
UNDER DEVELOPMENT
HARBOUR CITY
International
Property Awards
Malaysian Property
Press Awards
Malaysian Property
Press Awards
iProperty.Com
Malaysia People’s
Choice Awards
Asia Pacific
Property Awards
Highly Commended
Mixed-Use Development
Winner
Best Retail Project
Outstanding Achievement
Catalyst Developer Malacca
Winner
Best Integrated Development
Highly Commended
Commercial High-Rise Development Malaysia
2016
2015
2015
2015
2015
UNDER DEVELOPMENT
AWARD WINNING PROPERTY DEVELOPMENTS UNDER HATTEN LAND LIMITED
A PANORAMICPORTFOLIO
The future development plans for Malacca present increasing opportunities for growth, especially in the residential property and hospitality sectors.
The expansion of the Malacca International Airport coupled with weekly scheduled flights to and from Guangdong, China to be operated by China Southern Airlines may increase the number of Chinese investors and tourists to Malacca. (Source: Industry Overview Report)
Plans by the Malacca government in building the Malacca Gateway in the Straits of Malacca and in particular the construction of the deep sea port will spur tourism and investment, leading to an overall increase in demand for developed properties.
FUTURE DEVELOPMENT PLANS FOR MALACCA
Malaysian economy grew by five percent (5%) in 2015 and from 2011 to 2015 (with the exception of 2013), the Malaysian GDP consistently recorded a growth of at least five percent (5%).
The Malacca GDP growth for 2015 was reported to be 5.5%. (Source: Industry Overview Report)
CONSISTENT ECONOMIC GROWTH
The outlook for the Malacca residential market is positive and with the recognition of Malacca as a UNESCO World Heritage Site in 2008, there is growing interest from foreign and local investors in the residential property market. (Source: Industry Overview Report)
The serviced apartment sector in Malacca is also becoming active. With increasing median household income levels, Malacca home buyers are looking to purchase better homes. Coupled with the upcoming KL-Singapore High Speed Rail, which has a stop in Ayer Keroh, Malacca, the serviced apartment sector is unlikely to face an oversupply situation in the short-to-medium term, resulting in an upward price trend.
GROWING INTEREST IN THE MALACCA RESIDENTIAL PROPERTY MARKET
The outlook for Malacca’s tourism sector is positive and Malacca saw a total of 15.74 million tourist arrivals in 2015. Tourist receipts grew by 39.5% in 2015, the highest annual growth since 2010.
The increasing popularity of Malacca as a tourism destination would inevitably lead to an increased demand for hotels and potentially more hospitality developments. (Source: Industry Overview Report)
INCREASED DEMAND FOR HOTELS
GROWTH PROSPECTS
SINGAPORE
JOHORBAHRU
SEREMBAN
KUALALUMPUR
PENANG
2.5HRS
2HRS
1HR
1.5HRS
5HRS
MALACCA - HIGH GROWTH CITY
5.5% GDP growth in 2015
Tourism receipts grew 39.5% in 2015
Upcoming KL-Singapore High Speed Rail, which has a
stop in Ayer Keroh, Malacca
Weekly scheduled flights to and from Guangdong, China
Construction of the Melaka Gateway in the Straits
of Malacca
MALACCAGATEWAY
BANDARMALACCA
MALACCAINTERNATIONAL
AIRPORT
Land Bank & Development Rights
AYER KEROH & SURROUNDINGS
AYER KEROH
UTeMALOR GAJAHDSITRICT
NORTH-SOUTH HIGH WAY PROPOSEDHIGH SPEED RAIL
STATION:AYER KEROH
KUALA LUMPUR - SINGAPORE HIGH SPEED RAIL (HSR)
SINGAPORE
50 Mins40 Mins
KUALALUMPUR
MALACCA
VEDRO BY THE RIVER
UNDER DEVELOPMENT
HARBOUR CITY
International
Property Awards
Malaysian Property
Press Awards
Malaysian Property
Press Awards
iProperty.Com
Malaysia People’s
Choice Awards
Asia Pacific
Property Awards
Highly Commended
Mixed-Use Development
Winner
Best Retail Project
Outstanding Achievement
Catalyst Developer Malacca
Winner
Best Integrated Development
Highly Commended
Commercial High-Rise Development Malaysia
2016
2015
2015
2015
2015
UNDER DEVELOPMENT
AWARD WINNING PROPERTY DEVELOPMENTS UNDER HATTEN LAND LIMITED
A PANORAMICPORTFOLIO
The future development plans for Malacca present increasing opportunities for growth, especially in the residential property and hospitality sectors.
The expansion of the Malacca International Airport coupled with weekly scheduled flights to and from Guangdong, China to be operated by China Southern Airlines may increase the number of Chinese investors and tourists to Malacca. (Source: Industry Overview Report)
Plans by the Malacca government in building the Malacca Gateway in the Straits of Malacca and in particular the construction of the deep sea port will spur tourism and investment, leading to an overall increase in demand for developed properties.
FUTURE DEVELOPMENT PLANS FOR MALACCA
Malaysian economy grew by five percent (5%) in 2015 and from 2011 to 2015 (with the exception of 2013), the Malaysian GDP consistently recorded a growth of at least five percent (5%).
The Malacca GDP growth for 2015 was reported to be 5.5%. (Source: Industry Overview Report)
CONSISTENT ECONOMIC GROWTH
The outlook for the Malacca residential market is positive and with the recognition of Malacca as a UNESCO World Heritage Site in 2008, there is growing interest from foreign and local investors in the residential property market. (Source: Industry Overview Report)
The serviced apartment sector in Malacca is also becoming active. With increasing median household income levels, Malacca home buyers are looking to purchase better homes. Coupled with the upcoming KL-Singapore High Speed Rail, which has a stop in Ayer Keroh, Malacca, the serviced apartment sector is unlikely to face an oversupply situation in the short-to-medium term, resulting in an upward price trend.
GROWING INTEREST IN THE MALACCA RESIDENTIAL PROPERTY MARKET
The outlook for Malacca’s tourism sector is positive and Malacca saw a total of 15.74 million tourist arrivals in 2015. Tourist receipts grew by 39.5% in 2015, the highest annual growth since 2010.
The increasing popularity of Malacca as a tourism destination would inevitably lead to an increased demand for hotels and potentially more hospitality developments. (Source: Industry Overview Report)
INCREASED DEMAND FOR HOTELS
GROWTH PROSPECTS
SINGAPORE
JOHORBAHRU
SEREMBAN
KUALALUMPUR
PENANG
2.5HRS
2HRS
1HR
1.5HRS
5HRS
MALACCA - HIGH GROWTH CITY
5.5% GDP growth in 2015
Tourism receipts grew 39.5% in 2015
Upcoming KL-Singapore High Speed Rail, which has a
stop in Ayer Keroh, Malacca
Weekly scheduled flights to and from Guangdong, China
Construction of the Melaka Gateway in the Straits
of Malacca
MALACCAGATEWAY
BANDARMALACCA
MALACCAINTERNATIONAL
AIRPORT
Land Bank & Development Rights
AYER KEROH & SURROUNDINGS
AYER KEROH
UTeMALOR GAJAHDSITRICT
NORTH-SOUTH HIGH WAY PROPOSEDHIGH SPEED RAIL
STATION:AYER KEROH
KUALA LUMPUR - SINGAPORE HIGH SPEED RAIL (HSR)
SINGAPORE
50 Mins40 Mins
KUALALUMPUR
MALACCA
WINNER OF OVER 50 PRESTIGIOUS PROPERTY AWARDS(2011-2016)
AN ACCLAIMEDVISIONARY DEVELOPER
For the full list of awards and accolades, please refer to Section 9 of Appendix A entitled
AWARDS, ACCREDITATION AND RECOGNITIONS
PHASE 2HATTEN CITY
South East Asia
Property Awards
iProperty.Com
Malaysia People’s
Choice Awards
South East Asia
Property Award
Asia Pacific
Property Awards
Development
Asia Pacific
Property Awards
Interior Design
Asia Pacific
Property Awards
Architecture
Highly Commended
Luxury Condo Development
South Malaysia
Finalist
Best Commercial Development
(Imperio Mall)
Highly Commended
Best Residential Architectural Design
South East Asia, Regional Category
(Imperio Residence)
Highly Commended
Best Commercial Development
(Imperio Mall)
Highly Commended
Best Luxury Condo Development
South Malaysia (Imperio Residence)
Winner of Best Residential Architectural
Design (Imperio Residence)
Highly Commended
Commercial High-Rise Development
Malaysia (Imperio Mall)
Highly Commended
Interior Design Apartment Malaysia
(Imperio Residence)
Highly Commended
Mixed-Use Architecture Malaysia
(Imperio)
2016
2014
2014
2014
2014
2014
2013-14
2013-14
2013-14
20162016
UNDER DEVELOPMENT
HATTEN CITYPHASE 1
Asia Pacific Property Awards Architecture
Asia Pacific Property Awards Development
iProperty.Com Malaysia People’s Choice Awards
South East Asia Property Awards
Asia Pacific Property Awards Architecture
Asia Pacific Property Awards Interior Design
South East Asia Property Awards
International Property Awards Asia Pacific
Highly CommendedResidential High-Rise Development Malaysia (SilverScape)
Highly CommendedResidential High-Rise Development Malaysia (SilverScape)
FinalistBest High Rise Development (SilverScape)
FinalistBest Integrated Development & Most Iconic Development (Hatten City Parcel 1)
Highly CommendedBest Mid-Range Condo Development South Malaysia (SilverScape)
Highly CommendedRetail Architecture Malaysia (Elements Mall)
Highly CommendedInterior Design Apartment Malaysia (SilverScape) Highly CommendedBest Condo Development Malaysia (SilverScape)
Highly CommendedBest Commercial Development South East Asia (Elements Mall)
Highly CommendedBest Commercial Architectural Design (Elements Mall)
Winner-Best Commercial Development Malaysia (Elements Mall)
Best Retail Development Malaysia (Elements Mall)
2014-15
2014-15
2014
2014
2014
2013-14
2013-14
2013
2013
2013
2013
2012-13
COMPLETED
WINNER OF OVER 50 PRESTIGIOUS PROPERTY AWARDS(2011-2016)
AN ACCLAIMEDVISIONARY DEVELOPER
For the full list of awards and accolades, please refer to Section 9 of Appendix A entitled
AWARDS, ACCREDITATION AND RECOGNITIONS
PHASE 2HATTEN CITY
South East Asia
Property Awards
iProperty.Com
Malaysia People’s
Choice Awards
South East Asia
Property Award
Asia Pacific
Property Awards
Development
Asia Pacific
Property Awards
Interior Design
Asia Pacific
Property Awards
Architecture
Highly Commended
Luxury Condo Development
South Malaysia
Finalist
Best Commercial Development
(Imperio Mall)
Highly Commended
Best Residential Architectural Design
South East Asia, Regional Category
(Imperio Residence)
Highly Commended
Best Commercial Development
(Imperio Mall)
Highly Commended
Best Luxury Condo Development
South Malaysia (Imperio Residence)
Winner of Best Residential Architectural
Design (Imperio Residence)
Highly Commended
Commercial High-Rise Development
Malaysia (Imperio Mall)
Highly Commended
Interior Design Apartment Malaysia
(Imperio Residence)
Highly Commended
Mixed-Use Architecture Malaysia
(Imperio)
2016
2014
2014
2014
2014
2014
2013-14
2013-14
2013-14
20162016
UNDER DEVELOPMENT
HATTEN CITYPHASE 1
Asia Pacific Property Awards Architecture
Asia Pacific Property Awards Development
iProperty.Com Malaysia People’s Choice Awards
South East Asia Property Awards
Asia Pacific Property Awards Architecture
Asia Pacific Property Awards Interior Design
South East Asia Property Awards
International Property Awards Asia Pacific
Highly CommendedResidential High-Rise Development Malaysia (SilverScape)
Highly CommendedResidential High-Rise Development Malaysia (SilverScape)
FinalistBest High Rise Development (SilverScape)
FinalistBest Integrated Development & Most Iconic Development (Hatten City Parcel 1)
Highly CommendedBest Mid-Range Condo Development South Malaysia (SilverScape)
Highly CommendedRetail Architecture Malaysia (Elements Mall)
Highly CommendedInterior Design Apartment Malaysia (SilverScape) Highly CommendedBest Condo Development Malaysia (SilverScape)
Highly CommendedBest Commercial Development South East Asia (Elements Mall)
Highly CommendedBest Commercial Architectural Design (Elements Mall)
Winner-Best Commercial Development Malaysia (Elements Mall)
Best Retail Development Malaysia (Elements Mall)
2014-15
2014-15
2014
2014
2014
2013-14
2013-14
2013
2013
2013
2013
2012-13
COMPLETED
INVESTMENT MERITSONE OF THE LEADING PROPERTY DEVELOPERS WITH QUALITY REPUTATION IN DEVELOPING AWARD-WINNING PREMIUM INTEGRATED PROPERTY DEVELOPMENTS IN MALAYSIA
As the property development arm of the Hatten Group, Hatten Land has over 10 years of track record
in developing award-winning integrated residential, hotel and commercial developments in Malacca.
Access to more than 20 land bank and development rights in high growth
cities held by the Hatten Group for future development.
Through the ROFR and Call Option granted to the Company, Hatten Land
is able to periodically review whether such land bank held by the Hatten
Group would be suitable for property development.
Upon Completion, and subject to shareholders’ approval (if necessary), we
intend to exercise our rights under the ROFR and Call Option to acquire the
property development companies relating to the Cyberjaya Project and the
Thea Wellness Project.
MORE THAN 20 LAND BANK AND DEVELOPMENT RIGHTS IN HIGH GROWTH CITIES AVAILABLE FOR FUTURE DEVELOPMENT
12%
5%
1%
CYBERJAYA
JOHOR BAHRU
SEREMBAN
82% MALACCA
Total AccumulatedLand Area
215.0acres
Hatten City Phase 1
Hatten City Phase 2
Vedro by the River
Habour City
1. As at 30 June 2016
2. DoubleTree by Hilton has been transferred to the Hatten Group as part of a land acquisition arrangement between the parties.
3. Harbour City Mall includes the theme park.
4. As at 30 June 2016, Harbour City Luxury Hotel has not been launched.
Elements Mall
SilverScape Residences
Hatten Suites
DoubleTree by Hilton
Imperio Mall
Imperio Residence
Vedro by the River
Harbour City Mall3
Harbour City Suites
Harbour City Resort
Harbour City Luxury Hotel
1,530
745
589
277
786
950
736
1,831
648
637
325
1,530,238
820,188
240,616
283,521
622,313
797,478
213,547
1,766,847
661,498
586,771
322,959
686,682
591,638
165,132
N.A.2
285,885
545,478
95,504
1,033,914
297,706
407,545
233,055
34
85
93
N.A.2
60
47
65
15
81
24
N.A.4
Total Units GFA
(sq ft)
Net Saleable Area
(sq ft)
Percentage
Sold (%)1
STRONG SALES TRACK RECORD & PROFIT MARGIN FOR THE 4 PROPERTY DEVELOPMENTS UNDER HATTEN LAND LIMITED
2012 2014 2016 2018 2020 2022 2024
PROJECTS PIPELINE
Hatten City Phase 1
Hatten City Phase 2
Vedro by the River
Harbour City
Thea Wellness Project
Cyberjaya Project
Completed
Under Development
Under Development
Under Development
Upcoming
Upcoming
BUSINESS STRATEGIES & FUTURE PLANS
COMPETITIVE STRENGTHS
ATTRACT, RETAIN, MOTIVATE AND DEVELOP A TALENTED & RESULT-ORIENTED CADRE OF PROFESSIONALS
We recognise the importance of
attracting, retaining, motivating and
developing a talented and result-oriented
cadre of professionals to manage the
growth and expansion of our Group.
We invest in our employees through a
long-term human resources development
plan which offers long-term talent
development and performance-linked
incentive schemes.
We believe that our human resources
policies will attract, retain, motivate and
develop our employees and provide us
with an appropriate depth of talents to
address and manage challenges arising
from the growth and expansion of our
Group.
EXPLORE OPPORTUNITIES TO EXPAND THROUGH MERGERS & ACQUISITIONS, JOINT VENTURES AND/OR STRATEGIC ALLIANCES
Expanding our business through mergers
and acquisitions, joint ventures and/or
strategic alliances with parties that create
synergistic values with our current business.
Upon Completion, and subject to
shareholders’ approval (if necessary), we
intend to exercise our rights under the
ROFR and Call Option to acquire the
property development companies relating
to the Cyberjaya Project and the Thea
Wellness Project.
EXPANSION INTO THE REGION
In addition to growing our existing
business in mixed developments, we
can also leverage on our established
business base in Malacca to explore
opportunities to expand into overseas
markets such as in various South East
Asian markets.
Furthermore, we believe that it will be
beneficial for the long-term growth of
Hatten Land to collaborate with land
owners and other developers for
prominent developments.
CONTINUED FOCUS ON DEVELOPING INTEGRATED MIXED DEVELOPMENT PROJECTS
We will continue our focus on developing
integrated mixed use development
projects with prominent lifestyle features
at accessible locations and developed
amenities. This will allow us to compete
effectively in the property market.
OUR ABILITY TO DEVELOP INNOVATIVE PROPERTIES THAT MEET THE CHANGING NEEDS AND DESIRES OF OUR CUSTOMERS
We are one of the first few developers who are able to tailor our property developments to meet the changing needs and desires of our customers in Malacca, Malaysia, by specialising in innovative integrated developments with prominent lifestyle features, accessible locations and developed amenities. By staying constantly at the forefront of innovation and focusing on producing avant-garde designs, we have established ourselves as a developer of world-class facilities and luxury amenities within the context of urban convenience and comfort.
We are confident that our business model is flexible and adaptable so as to deliver new and innovative concepts and remain competitive and viable in the market.
EXPERIENCED & DEDICATED MANAGEMENT TEAM
Our Managing Director, Dato’ Colin and Deputy Managing Director, Dato’ Edwin, field considerable experience in the property development industry. We are also supported by a dedicated management team that on average, has more than 10 years of experience in the industry.
With their experience, our management team is able to source for suitable sites with potential for development, and to assess whether such sites offer good investment returns or profitable development opportunities.
HATTEN GROUP EXPERTISE & ESTABLISHED BUSINESS RELATIONSHIPS
We tap into the strengths of the Hatten Group and its comprehensive and vertically integrated business. This allows us to incorporate various elements of the development process, ranging from design to management to hospitality services, into our planning process resulting in a consistent product that highlights the Hatten Group’s high standard of excellence.
Access to more than 20 land parcels and development rights held by the Hatten Group for future development. Through the ROFR and Call Option granted to the Company, we are able to periodically review whether such land parcels and development rights held by the Hatten Group would be suitable for property development.
ESTABLISHED TRACK RECORD & REPUTATION
Established track record for the development of well-designed properties in Malacca and ability to develop projects that meet customer’s needs.
Numerous accreditations and awards
ESTABLISHED BUSINESS RELATIONSHIPS
Developed strong professional relationships with an extensive network of professionals such as contractors, suppliers, financiers and consultants, whose professional advice and participation are pivotal to the success of a property development project.
With these established business relationships, our project teams are able to manage the development projects effectively and produce quality developments in a timely and efficient manner.
Maintain close business relationships with various property agents who provide us with first-hand information on potential development sites which are available for sale, private tenders or auction and this allows us to capitalise quickly on suitable market opportunities for future growth.
INVESTMENT MERITSONE OF THE LEADING PROPERTY DEVELOPERS WITH QUALITY REPUTATION IN DEVELOPING AWARD-WINNING PREMIUM INTEGRATED PROPERTY DEVELOPMENTS IN MALAYSIA
As the property development arm of the Hatten Group, Hatten Land has over 10 years of track record
in developing award-winning integrated residential, hotel and commercial developments in Malacca.
Access to more than 20 land bank and development rights in high growth
cities held by the Hatten Group for future development.
Through the ROFR and Call Option granted to the Company, Hatten Land
is able to periodically review whether such land bank held by the Hatten
Group would be suitable for property development.
Upon Completion, and subject to shareholders’ approval (if necessary), we
intend to exercise our rights under the ROFR and Call Option to acquire the
property development companies relating to the Cyberjaya Project and the
Thea Wellness Project.
MORE THAN 20 LAND BANK AND DEVELOPMENT RIGHTS IN HIGH GROWTH CITIES AVAILABLE FOR FUTURE DEVELOPMENT
12%
5%
1%
CYBERJAYA
JOHOR BAHRU
SEREMBAN
82% MALACCA
Total AccumulatedLand Area
215.0acres
Hatten City Phase 1
Hatten City Phase 2
Vedro by the River
Habour City
1. As at 30 June 2016
2. DoubleTree by Hilton has been transferred to the Hatten Group as part of a land acquisition arrangement between the parties.
3. Harbour City Mall includes the theme park.
4. As at 30 June 2016, Harbour City Luxury Hotel has not been launched.
Elements Mall
SilverScape Residences
Hatten Suites
DoubleTree by Hilton
Imperio Mall
Imperio Residence
Vedro by the River
Harbour City Mall3
Harbour City Suites
Harbour City Resort
Harbour City Luxury Hotel
1,530
745
589
277
786
950
736
1,831
648
637
325
1,530,238
820,188
240,616
283,521
622,313
797,478
213,547
1,766,847
661,498
586,771
322,959
686,682
591,638
165,132
N.A.2
285,885
545,478
95,504
1,033,914
297,706
407,545
233,055
34
85
93
N.A.2
60
47
65
15
81
24
N.A.4
Total Units GFA
(sq ft)
Net Saleable Area
(sq ft)
Percentage
Sold (%)1
STRONG SALES TRACK RECORD & PROFIT MARGIN FOR THE 4 PROPERTY DEVELOPMENTS UNDER HATTEN LAND LIMITED
2012 2014 2016 2018 2020 2022 2024
PROJECTS PIPELINE
Hatten City Phase 1
Hatten City Phase 2
Vedro by the River
Harbour City
Thea Wellness Project
Cyberjaya Project
Completed
Under Development
Under Development
Under Development
Upcoming
Upcoming
BUSINESS STRATEGIES & FUTURE PLANS
COMPETITIVE STRENGTHS
ATTRACT, RETAIN, MOTIVATE AND DEVELOP A TALENTED & RESULT-ORIENTED CADRE OF PROFESSIONALS
We recognise the importance of
attracting, retaining, motivating and
developing a talented and result-oriented
cadre of professionals to manage the
growth and expansion of our Group.
We invest in our employees through a
long-term human resources development
plan which offers long-term talent
development and performance-linked
incentive schemes.
We believe that our human resources
policies will attract, retain, motivate and
develop our employees and provide us
with an appropriate depth of talents to
address and manage challenges arising
from the growth and expansion of our
Group.
EXPLORE OPPORTUNITIES TO EXPAND THROUGH MERGERS & ACQUISITIONS, JOINT VENTURES AND/OR STRATEGIC ALLIANCES
Expanding our business through mergers
and acquisitions, joint ventures and/or
strategic alliances with parties that create
synergistic values with our current business.
Upon Completion, and subject to
shareholders’ approval (if necessary), we
intend to exercise our rights under the
ROFR and Call Option to acquire the
property development companies relating
to the Cyberjaya Project and the Thea
Wellness Project.
EXPANSION INTO THE REGION
In addition to growing our existing
business in mixed developments, we
can also leverage on our established
business base in Malacca to explore
opportunities to expand into overseas
markets such as in various South East
Asian markets.
Furthermore, we believe that it will be
beneficial for the long-term growth of
Hatten Land to collaborate with land
owners and other developers for
prominent developments.
CONTINUED FOCUS ON DEVELOPING INTEGRATED MIXED DEVELOPMENT PROJECTS
We will continue our focus on developing
integrated mixed use development
projects with prominent lifestyle features
at accessible locations and developed
amenities. This will allow us to compete
effectively in the property market.
OUR ABILITY TO DEVELOP INNOVATIVE PROPERTIES THAT MEET THE CHANGING NEEDS AND DESIRES OF OUR CUSTOMERS
We are one of the first few developers who are able to tailor our property developments to meet the changing needs and desires of our customers in Malacca, Malaysia, by specialising in innovative integrated developments with prominent lifestyle features, accessible locations and developed amenities. By staying constantly at the forefront of innovation and focusing on producing avant-garde designs, we have established ourselves as a developer of world-class facilities and luxury amenities within the context of urban convenience and comfort.
We are confident that our business model is flexible and adaptable so as to deliver new and innovative concepts and remain competitive and viable in the market.
EXPERIENCED & DEDICATED MANAGEMENT TEAM
Our Managing Director, Dato’ Colin and Deputy Managing Director, Dato’ Edwin, field considerable experience in the property development industry. We are also supported by a dedicated management team that on average, has more than 10 years of experience in the industry.
With their experience, our management team is able to source for suitable sites with potential for development, and to assess whether such sites offer good investment returns or profitable development opportunities.
HATTEN GROUP EXPERTISE & ESTABLISHED BUSINESS RELATIONSHIPS
We tap into the strengths of the Hatten Group and its comprehensive and vertically integrated business. This allows us to incorporate various elements of the development process, ranging from design to management to hospitality services, into our planning process resulting in a consistent product that highlights the Hatten Group’s high standard of excellence.
Access to more than 20 land parcels and development rights held by the Hatten Group for future development. Through the ROFR and Call Option granted to the Company, we are able to periodically review whether such land parcels and development rights held by the Hatten Group would be suitable for property development.
ESTABLISHED TRACK RECORD & REPUTATION
Established track record for the development of well-designed properties in Malacca and ability to develop projects that meet customer’s needs.
Numerous accreditations and awards
ESTABLISHED BUSINESS RELATIONSHIPS
Developed strong professional relationships with an extensive network of professionals such as contractors, suppliers, financiers and consultants, whose professional advice and participation are pivotal to the success of a property development project.
With these established business relationships, our project teams are able to manage the development projects effectively and produce quality developments in a timely and efficient manner.
Maintain close business relationships with various property agents who provide us with first-hand information on potential development sites which are available for sale, private tenders or auction and this allows us to capitalise quickly on suitable market opportunities for future growth.
Page
CORPORATE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
EXCHANGE RATES, EXCHANGE CONTROLS AND TAXATION . . . . . . . . . . . . . . . . . . . 19
CAUTIONARY NOTE ON FORWARD LOOKING STATEMENTS . . . . . . . . . . . . . . . . . . . 30
INDICATIVE TIMETABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
LETTER TO SHAREHOLDERS FROM THE BOARD OF DIRECTORS OF THE
COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
1. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
2. SUBMISSION TO THE SGX-ST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3. THE PROPOSED ACQUISITION AND PROPOSED ISSUANCE OF
CONSIDERATION SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4. THE PROPOSED COMPLIANCE PLACEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
5. THE PROPOSED LISTING TRANSFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6. THE PROPOSED DISPOSAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
7. THE PROPOSED CAPITAL REDUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
8. THE PROPOSED WHITEWASH RESOLUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
9. THE PROPOSED CHANGE OF NAME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
10. THE PROPOSED APPOINTMENT OF THE PROPOSED NEW DIRECTORS. . . . . . 69
11. THE PROPOSED ADOPTION OF THE NEW CONSTITUTION OF THE COMPANY . . 69
12. THE PROPOSED SHARE ISSUE MANDATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
13. THE PROPOSED IPT MANDATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
14. INTERESTED PERSON TRANSACTIONS AFTER COMPLETION . . . . . . . . . . . . . . 89
TABLE OF CONTENTS
i
15. FINANCIAL EFFECTS OF THE PROPOSED ACQUISITION, THE PROPOSED
DISPOSAL, THE PROPOSED CAPITAL REDUCTION AND THE PROPOSED
COMPLIANCE PLACEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
16. FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
17. MORATORIUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
18. MATERIAL LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
19. MATERIAL CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
20. ADVICE OF THE INDEPENDENT FINANCIAL ADVISER IN RELATION TO THE
PROPOSED WHITEWASH RESOLUTION, THE PROPOSED DISPOSAL AND
THE PROPOSED IPT MANDATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
21. INTERESTS OF DIRECTORS AND SUBSTANTIAL SHAREHOLDERS . . . . . . . . . . 98
22. ABSTENTION FROM VOTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
23. DIRECTORS’ RECOMMENDATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
24. EXTRAORDINARY GENERAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
25. ACTION TO BE TAKEN BY SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
26. CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
27. DIRECTORS’ RESPONSIBILITY STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
28. PROPOSED NEW DIRECTORS’ RESPONSIBILITY STATEMENT . . . . . . . . . . . . . . 102
29. FINANCIAL ADVISER’S RESPONSIBILITY STATEMENT . . . . . . . . . . . . . . . . . . . . 102
30. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
31. DOCUMENTS FOR INSPECTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
32. ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
APPENDIX A – LETTER TO SHAREHOLDERS FROM THE PROPOSED NEW
DIRECTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
APPENDIX B – CHANGES IN SHAREHOLDING STRUCTURE . . . . . . . . . . . . . . . B-1
TABLE OF CONTENTS
ii
APPENDIX C – INDEPENDENT AUDITOR’S REPORT ON THE COMBINED
FINANCIAL STATEMENTS OF THE TARGET GROUP FOR
FY2014, FY2015 AND FY2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . C-1
APPENDIX D – LETTER FROM SAC CAPITAL PRIVATE LIMITED TO THE
INDEPENDENT DIRECTORS AND THE AUDIT AND RISK
COMMITTEE OF VGO CORPORATION LIMITED . . . . . . . . . . . . . D-1
APPENDIX E – ASSET VALUATION REPORT. . . . . . . . . . . . . . . . . . . . . . . . . . . . E-1
APPENDIX F – BUSINESS VALUATION REPORT . . . . . . . . . . . . . . . . . . . . . . . . F-1
APPENDIX G – LIST OF INTERESTED PERSONS . . . . . . . . . . . . . . . . . . . . . . . . G-1
APPENDIX H – ASSETS UNDER RIGHT OF FIRST REFUSAL AND CALL
OPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . H-1
APPENDIX I – NEW CONSTITUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1
APPENDIX J – SUMMARY OF APPLICABLE LAWS AND REGULATIONS IN
MALAYSIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . J-1
APPENDIX K – ABRIDGED LEGAL OPINION OF THE LEGAL ADVISERS TO
THE COMPANY IN RELATION TO THE PROPOSED
ACQUISITION AS TO MALAYSIA LAW . . . . . . . . . . . . . . . . . . . . K-1
APPENDIX L – VALUATION CERTIFICATE IN RELATION TO THE DISPOSAL
VALUATION REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . L-1
NOTICE OF EXTRAORDINARY GENERAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . N-1
PROXY FORM
TABLE OF CONTENTS
iii
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BOARD OF DIRECTORS : Goh Ching Huat, Steven Group Executive Chairman
and Chief Executive Officer
Goh Ching Wah, George Executive Director
Goh Ching Lai, Joe Executive Director
Dato’ Wong King Kheng Independent Director
Anthony Clifford Brown Independent Director
Foo Jong Han Rey Independent Director
PROPOSED NEW BOARD
OF DIRECTORS
: Dato’ Tan June Teng
Colin @ Chen JunTing
Executive Chairman and
Managing Director
Dato’ Tan Ping Huang
Edwin @ Chen BingHuang
Executive Director and
Deputy Managing Director
Lee Sok Khian John Executive Director
Dato’ Wong King Kheng Lead Independent Director
Loh Weng Whye Independent Director
Foo Jong Han Rey Independent Director
COMPANY SECRETARY : Lotus Isabella Lim Mei Hua, FCIS
Lee Bee Fong, ACIS
REGISTERED OFFICE : 10 Changi South Lane
#06-01
Singapore 486162
SHARE REGISTRAR AND
SHARE TRANSFER OFFICE
: Tricor Barbinder Share Registration Services
(A division of Tricor Singapore Pte. Ltd.)
80 Robinson Road #02-00
Singapore 068898
FINANCIAL ADVISER
TO THE COMPANY IN
RESPECT OF THE
PROPOSED ACQUISITION
: UOB Kay Hian Private Limited
8 Anthony Road
#01-01
Singapore 229957
CORPORATE INFORMATION
1
AUDITORS TO THE
COMPANY
: Ernst & Young LLP
Public Accountants and Chartered Accountants
Singapore
One Raffles Quay
#18-01 North Tower
Singapore 048583
Partner-in-charge: Terry Wee Hiang Bing
(Member of Institute of Singapore Chartered Accountants)
AUDITORS TO THE TARGET
GROUP AND REPORTING
ACCOUNTANTS TO THE
ENLARGED GROUP
: Ernst & Young LLP
Public Accountants and Chartered Accountants
Singapore
One Raffles Quay
#18-01 North Tower
Singapore 048583
Partner-in-charge: Philip Ling Soon Hwa
(Member of Institute of Singapore Chartered Accountants)
LEGAL ADVISER ON
SINGAPORE LAW ON THE
PROPOSED ACQUISITION
: Morgan Lewis Stamford LLC
10 Collyer Quay
#27-00, Ocean Financial Centre
Singapore 049315
LEGAL ADVISER TO THE
COMPANY IN RESPECT OF
THE PROPOSED
ACQUISITION AS TO
MALAYSIA LAW
: Zaid Ibrahim & Co.
Level 19 Menara Milenium
Jalan Damanlela
Pusat Bandar Damansara
50490 Kuala Lumpur
Malaysia
LEGAL ADVISER TO THE
FINANCIAL ADVISER AS TO
SINGAPORE LAW
: Chancery Law Corporation
55 Market Street
#08-01
Singapore 048941
INDEPENDENT FINANCIAL
ADVISER IN RESPECT OF
THE PROPOSED
WHITEWASH RESOLUTION,
THE PROPOSED DISPOSAL
AND THE PROPOSED IPT
MANDATE
: SAC Capital Private Limited
1 Robinson Road
#21-02 AIA Tower
Singapore 048542
CORPORATE INFORMATION
2
PRINCIPAL BANKERS TO
THE GROUP
: RHB Bank Berhad
RHB Bank Building
#03-00, 90 Cecil Street
Singapore 069531
CIMB Bank Berhad
Singapore Land Tower
#01-02, 50 Raffles Place
Singapore 048623
UBS AG
One Raffles Quay
#50-01, North Tower
Singapore 048583
Malayan Banking Berhad
Maybank Tower
2 Battery Road
Singapore 049907
DBS Bank Ltd
Marina Bay Financial Centre Tower 3
12 Marina Boulevard
Singapore 018982
Overseas-Chinese Banking Corporation Limited
OCBC Centre
65 Chulia Street
Singapore 049513
PRINCIPAL BANKERS TO
THE TARGET GROUP
: United Overseas Bank (Malaysia) Bhd
No. 1, Jalan PPM 8
Plaza Pandan Malim Business Park
Jalan Balai Panjang
75250 Melaka
Malaysia
Malaysia Building Society Berhad
11th Floor, Wisma MBSB
48, Jalan Dungun, Damansara Heights
50490 Kuala Lumpur
Malaysia
CORPORATE INFORMATION
3
Malayan Banking Berhad
No. 225, 226 & 227, Jalan
Melaka Raya 1
Taman Melaka Raya
75000 Melaka
Malaysia
RHB Bank Berhad
No. 19, 21 & 23, Jalan
Merdeka
Taman Melaka Raya
75000 Melaka
Malaysia
Bank Kerjasama Rakyat
Malaysia Berhad
26th Floor, Tower 1
Bank Rakyat Twin Tower
No. 33 Jalan Travers
50470 Kuala Lumpur
Malaysia
INDEPENDENT BUSINESS
VALUER
: Jones Lang LaSalle Corporate Appraisal and Advisory
Limited
6/f Three Pacific Place
1 Queen’s Road East
Hong Kong
INDEPENDENT PROPERTY
VALUER, INDEPENDENT
MARKET RESEARCHER
AND INDEPENDENT
VALUER OF THE WOS
PROPERTY
: Nawawi Tie Leung Property Consultants Sdn. Bhd.
(formerly known as DTZ Nawawi Tie Leung Property
Consultants Sdn. Bhd.)
Suite 3401, Level 34 Menara Citibank
165 Jalan Ampang
50450 Kuala Lumpur
Malaysia
CORPORATE INFORMATION
4
Save where the context otherwise requires, the following definitions apply throughout this
Circular:
COMPANIES, ORGANISATIONS, PERSONS AND OTHER ENTITIES
“ACRA” : The Accounting and Corporate Regulatory Authority of
Singapore
“Audit and Risk
Committee” or
“Audit Committee”
: The audit and risk committee of the board of directors of the
Company from time to time
“Authority” or “MAS” : The Monetary Authority of Singapore
“BNM” : Bank Negara Malaysia
“Board” : The existing board of directors of the Company
“CDP” : The Central Depository (Pte) Limited
“CPF” : The Central Provident Fund
“Company” or “VGO” : VGO Corporation Limited
“Dato’ Colin” : Dato’ Tan June Teng Colin @ Chen JunTing, one of the
Vendors
“Dato’ Edwin” : Dato’ Tan Ping Huang Edwin @ Chen BingHuang, one of the
Vendors
“Datuk Wira Eric” : Datuk Wira Eric Tan Eng Huat
“Directors” : Directors of the Company, from time to time, “Director” shall
be construed accordingly
“Disposal Companies” : Collectively, VGO International and WOS
“Enlarged Group” : The pro forma enlarged group of companies comprising the
Company and the Target Group on Completion, and the term
“Enlarged Group Company” shall be construed accordingly
“Entities At Risk” : For the purposes of the Proposed IPT Mandate, the following
entities at risk:
(a) the Company;
(b) each of the Enlarged Group Companies; and
DEFINITIONS
5
(c) an associated company of the Company that is not listed
on the SGX-ST or an approved exchange, provided that
the Enlarged Group, or the Enlarged Group and its
interested person(s), has control over the associated
company,
and each an “Entity At Risk”
“Financial Adviser” : UOB Kay Hian Private Limited, being the financial adviser to
the Company in relation to the Proposed Acquisition
“FGSB” : Fuyuu Group Sdn. Bhd.
“FRSB” : Fuyuu Resources Sdn. Bhd.
“FVSB” : Fuyuu Ventures Sdn. Bhd.
“Group” : The Company and its subsidiaries, and the term “Group
Company” shall be construed accordingly
“GMSB” : Gold Mart Sdn. Bhd.
“Hatten Group” : The Hatten group of companies with interests in property
development, property investment, hospitality, retail and
education
“HIPL” : Hatten International Pte. Ltd.
“Independent Auditors” or
“Reporting Accountants”
: Ernst & Young LLP
“Independent Business
Valuer”
: Jones Lang LaSalle Corporate Appraisal and Advisory Limited
“Independent Directors” : Directors who are considered independent for the purpose of
the Proposed Acquisition, the Proposed Whitewash
Resolution and the Proposed Disposal:
(a) Dato’ Wong King Kheng;
(b) Anthony Clifford Brown; and
(c) Foo Jong Han Rey
“Independent Financial
Adviser” or “IFA”
: SAC Capital Private Limited, the independent financial
adviser to the Independent Directors in respect of the
Proposed Whitewash Resolution and the Proposed Disposal
and to the Audit and Risk Committee in respect of the
Proposed IPT Mandate
DEFINITIONS
6
“Independent Property
Valuer”
: Nawawi Tie Leung Property Consultants Sdn. Bhd. (formerly
known as DTZ Nawawi Tie Leung Property Consultants Sdn.
Bhd.)
“Independent
Shareholders”
: Shareholders who are considered independent for the
purpose of the Proposed Acquisition, the Proposed
Whitewash Resolution or the Proposed Disposal, as the case
may be
“Interested Persons” : The Vendors and their associates
“Lianbang” : Lianbang Ventures Sdn. Bhd.
“Malaysia Government” : Government of Malaysia
“Malaysian Subsidiaries” : Collectively, the following companies:
(a) Fuyuu Resources Sdn. Bhd.;
(b) Fuyuu Ventures Sdn. Bhd.;
(c) Fuyuu Group Sdn. Bhd.; and
(d) Gold Mart Sdn. Bhd.
“Mandated Interested
Persons”
: Has the meaning ascribed to it in Section 13.4 of the VGO
Letter
“Montane” : Montane Construction Sdn. Bhd.
“New Audit and Risk
Committee”
: The new audit and risk committee of the board of directors of
the Company upon Completion
“New Nominating
Committee”
: The new nominating committee of the board of directors of the
Company upon Completion
“New Remuneration
Committee”
: The new remuneration committee of the board of directors of
the Company upon Completion
“Nominating Committee” : The nominating committee of the board of directors of the
Company from time to time
“Purchasers” : Goh Ching Huat, Steven, Goh Ching Wah, George and Goh
Ching Lai, Joe
“Remuneration
Committee”
: The remuneration committee of the board of directors of the
Company from time to time
“SGX-ST” : Singapore Exchange Securities Trading Limited
DEFINITIONS
7
“Share Registrar” : Tricor Barbinder Share Registration Services
“SIC” : The Securities Industry Council of Singapore
“Sponsor” : UOB Kay Hian Private Limited
“Target” : Sky Win Management Consultancy Pte. Ltd.
“Target Group” : The Target and the Target Subsidiaries
“Target Obliged Parties” : Has the meaning ascribed to it in Section 8.2 of the VGO
Letter
“Target Subsidiaries” : Collectively, the following companies:
(a) Hatten International Pte. Ltd.;
(b) Fuyuu Group Sdn. Bhd.;
(c) Fuyuu Resources Sdn. Bhd.;
(d) Fuyuu Ventures Sdn. Bhd.; and
(e) Gold Mart Sdn. Bhd.
“Terratech” : Terratech Group Limited
“Vendors” or
“Tan Brothers”
: Dato’ Colin and Dato’ Edwin
“VGO International” : VGO International Pte. Ltd.
“WOS” : W.O.S. World of Sports (M) Sdn. Bhd.
GENERAL
“Accumulated Losses” : The Company’s accumulated losses as at 30 September 2016
of S$28,601,000
“Adjusted NTA” : In the context of the Proposed Disposal, the net tangible asset
value of the Disposal Companies as stated in the EGM
Balance Sheet
“Amendment Act” : Has the meaning ascribed to it in Section 11.1 of the VGO
Letter
“Approved Independent
Sources”
: Has the meaning ascribed to it in Section 13.6.1(b) of the
VGO Letter
DEFINITIONS
8
“Asset Valuation Report” : The asset valuation report prepared by the Independent
Property Valuer valuing the properties of the Target Group,
which is set out in Appendix E to this Circular
“Business Valuation
Report”
: The business valuation report prepared by the Independent
Business Valuer, which is set out in Appendix F to this Circular
“Business Day” : A day on which banks are open for business in Singapore
(other than Saturdays, Sundays and days which are gazetted
as public holidays)
“Call Option” : Has the meaning ascribed to it in Section 25.1.2(d) of the
Target Letter
“Capital City Project” : The development of an integrated property project by Capital
City Property Sdn. Bhd., which is located in Tampoi, Johor
Bahru, Johor, Malaysia
“Catalist” : The Catalist board of the SGX-ST
“Catalist Rules” : The SGX-ST’s Listing Manual Section B: Rules of Catalist, as
may be amended, modified, supplemented or revised from
time to time
“CCC” : Certificate of Completion and Compliance
“Circular” : This circular to Shareholders dated 29 December 2016
including all its appendices attached hereto
“Code” : The Singapore Code on Take-overs and Mergers, as may be
amended, modified, supplemented or revised from time to
time
“Companies Act” : The Companies Act (Cap. 50) of Singapore, as amended,
varied or supplemented from time to time
“Competing Business” : Has the meaning ascribed to it in Section 25.1.2(a) of the
Target Letter
“Completion” : Completion of the Proposed Acquisition
“Completion Date” : The date of Completion
“Compliance Placement
Shares”
: New Shares of the Company to be allotted and issued and
Vendor Shares to be sold pursuant to the Proposed
Compliance Placement
“Consideration” : The aggregate consideration of the Proposed Acquisition
being S$386.0 million
DEFINITIONS
9
“Consideration Shares” : New ordinary Shares to be allotted and issued at the Issue
Price in satisfaction of the Consideration
“Constitution” : The constitution of the Company, previously known as its
memorandum and articles of association, as amended,
modified or supplemented from time to time
“Court” : Shall have the meaning ascribed to it in Section 4(1) of the
Companies Act
“CPFIS” : Central Provident Fund Investment Scheme
“CRC” : The Conflicts Resolution Committee, as described in Section
25.3 of the Target Letter
“Cyberjaya Project” : Has the meaning ascribed to it in Section 25.1.1(c) of the
Target Letter
“Debarment” : Has the meaning ascribed to it in Section 26.1.2 of the Target
Letter
“Disposal Agreement” : The disposal agreement dated 12 December 2016
“Disposal Conditions
Precedent”
: Has the meaning ascribed to it in Section 6.2.3 of the VGO
Letter
“Disposal Consideration” : Has the meaning ascribed to it in Section 6.2.2 of the VGO
Letter
“Disposal Long-Stop
Date”
: Has the meaning ascribed to it in Section 6.2.4 of the VGO
Letter
“Disposal Restructuring” : Has the meaning ascribed to it in Section 6.2.1 of the VGO
Letter
“Disposal Shares” : The entire issued and paid-up share capital of the Disposal
Companies owned by the Company, which are to be sold to
the Purchasers on the terms and subject to the conditions of
the Disposal Agreement
“Disposal Valuation
Report”
: In the context of the Proposed Disposal, the report by Nawawi
Tie Leung Property Consultants Sdn. Bhd. dated 25 October
2016 in relation to the WOS Property, the valuation certificate
of which is set out in Appendix L to this Circular
“Due Diligence
Investigations”
: Has the meaning ascribed to it in Section 3.4.3(b) of the VGO
Letter
DEFINITIONS
10
“EGM” : The extraordinary general meeting of the Company to be held
on 20 January 2017 at 10 a.m., the notice of which is set out
in this Circular
“EGM Balance Sheet” : The combined balance sheet of the Disposal Companies as at
the last day of the month preceding the month in which the
EGM will be held, for the approval by Independent
Shareholders for the Proposed Disposal and such balance
sheet shall be prepared by the management of the Company
and reviewed by the auditors of the Company in accordance
with prevailing professional standards in Singapore and shall
be delivered by the Company, along with such evidence of
review, to the Purchasers not more than 30 days after the
EGM whereby approval of the Proposed Disposal by
Independent Shareholders is obtained
“Enlarged Share Capital” : The issued and paid-up share capital of the Company
immediately after Completion but prior to the Proposed
Compliance Placement, being 1,280,080,353 Shares
“EPS” : Earnings per share
“Existing Business” : The existing business of the Company as at the Latest
Practicable Date, which comprises of the assets and liabilities
of the existing operations of franchising, marketing and
retailing of lifestyle sporting goods, footwear, equipment,
apparel and accessories under the World of Sports trademark
of specialty sports retail shops in Singapore and Malaysia
“Existing Constitution” : Has the meaning ascribed to it in Section 11.2 of the VGO
Letter
“Existing Share Capital” : The existing issued and paid-up share capital of the Company
as at the Latest Practicable Date, being 92,388,045 Shares
“Existing Share Issue
Mandate”
: Has the meaning ascribed to it in Section 12.3 of the VGO
Letter
“Fifth Schedule” : The fifth schedule of the SFR
“FY” : In relation to the Target Group, financial year ended 30 June,
and in relation to the Group, financial year ended 31 March
“HR Companies” : Has the meaning ascribed to it in Section 24.2.9 of the Target
Letter
“IFA Letter” : Appendix D to this Circular, entitled “Letter from SAC Capital
Private Limited to the Independent Directors and the Audit and
Risk Committee of VGO Corporation Limited”
DEFINITIONS
11
“Industry Overview
Report”
: The industry overview report, which full text is set out in
Section 4.3 of the Target Letter entitled “Malacca Property
Market”
“Initial NTA” : In the context of the Proposed Disposal, the net tangible asset
value of the Disposal Companies based on the audited
consolidated statements of the Company as at 31 March 2016
“Interested Person
Transaction”
: Transactions between Entities At Risk and Interested Persons
“Investigation” : Has the meaning ascribed to it in Section 26.1.3 of the Target
Letter
“Issue Price” : S$0.325, subject to adjustments to be agreed, such as share
consolidation and in any event, the issue price shall not be
less than S$0.20
“Key Resolutions” : The key resolutions in this Circular being, Ordinary Resolution
1 on the Proposed Acquisition, Ordinary Resolution 2 on the
Proposed Issuance of Consideration Shares, Ordinary
Resolution 3 on the Proposed Disposal, Ordinary Resolution 4
on the Proposed Compliance Placement, Ordinary
Resolution 5 on the Proposed Whitewash Resolution,
Ordinary Resolution 6 on the proposed appointment of Dato’
Colin as a Proposed New Director, Ordinary Resolution 7 on
the proposed appointment of Dato’ Edwin as a Proposed New
Director, Ordinary Resolution 12 on the Proposed New Share
Issue Mandate, Ordinary Resolution 13 on the Proposed IPT
Mandate, Special Resolution 1 on the Proposed Listing
Transfer, Special Resolution 2 on the Proposed Capital
Reduction, Special Resolution 3 on the Proposed Change of
Name and Special Resolution 4 on the Proposed Adoption of
the New Constitution
“Land Bank” : Any land held by the Hatten Group and/or the Vendors that is
subject to the ROFR and the Call Option and any land
acquired by the Target Group for investment or development
purposes
“Latest Practicable Date” : 18 December 2016, being the latest practicable date prior to
the lodgement of this Circular
“Listing Manual” : The Listing Manual of the SGX-ST, as may be amended,
modified, supplemented or revised from time to time
“Mainboard” : The Mainboard of the SGX-ST
DEFINITIONS
12
“Malaysia Legal Opinion” : The legal opinion by the legal advisers to the Company in
relation to the Proposed Acquisition as to Malaysia Law, which
abridged version is set out in Appendix K to this Circular
“Mandated Transactions” : Has the meaning ascribed to it in Section 13.5 of the VGO
Letter
“MTP Requirement” : Has the meaning ascribed to it in Section 5.2.1 of the VGO
Letter
“New Constitution” : The proposed new constitution of the Company upon
Completion, which full text is set out in Appendix I to this
Circular
“NTA” : Net tangible assets
“Non-Operational
Liabilities”
: Has the meaning ascribed to it in Section 6.2.1 of the VGO
Letter
“Notice of EGM” : The notice of EGM, which is set out on pages N-1 to N-5 of
this Circular
“Period Under Review” : FY2014, FY2015 and FY2016
“Projects” : The four (4) property development projects of the Target
Group being Hatten City Phase 1, Hatten City Phase 2, Vedro
by the River and Harbour City
“Property Development
Business”
: The business of property development including but not
limited to the holding of land bank, evaluating and acquiring of
land for development, appointment of professionals in
connection with property development and sales and
marketing of such property development and shall include any
investment into any property development company and/or
joint venture
“Property Revaluation
Surplus”
: In the context of the Proposed Disposal, the difference
between the WOS Property Value and the WOS Net Carrying
Amount
“Proposed Acquisition” : The proposed acquisition by the Company of the entire issued
and paid-up share capital of the Target on the terms and
subject to the conditions of the Sale and Purchase Agreement
“Proposed Adoption of
the New Constitution”
: The proposed adoption of the New Constitution, which will
replace the Existing Constitution of the Company entirely
DEFINITIONS
13
“Proposed Appointment
of the Proposed New
Directors”
: The proposed appointment of the Proposed New Directors to
the board of directors of the Company upon Completion
“Proposed Capital
Reduction”
: The proposed capital reduction exercise to be carried out by
the Company, pursuant to Section 78A read with Section 78C
of the Companies Act, to reduce the issued and paid-up share
capital of the Company from S$27,884,753 as at the Latest
Practicable Date to S$4,000 by the cancellation of the share
capital of the Company that has been lost or is unrepresented
by available assets to the extent of S$27,880,753
“Proposed Change of
Name”
: The proposed change of name from VGO Corporation Limited
to Hatten Land Limited
“Proposed Compliance
Placement”
: The proposed issue and sale of up to 172,400,000 Shares
(inclusive of up to 123,100,000 new Shares to be issued and
up to 49,300,000 Shares to be sold by the Vendors and/or
their nominee, subsequent to Completion for purposes of,
among other things, meeting the public float requirement, the
shareholding spread and distribution requirements of the
Catalist Rules
“Proposed Disposal” : The proposed disposal of all of the Company’s Existing
Business and shareholding interests in the Disposal
Companies, following which the Company shall become a
cash company
“Proposed Dividend” : Has the meaning ascribed in Section 20.15 of the Target
Letter
“Proposed Executive
Directors”
: Dato’ Colin, Dato’ Edwin and Lee Sok Khian John
“Proposed IPT Mandate” : Has the meaning ascribed to it in Section 13 of the VGO Letter
“Proposed Issuance of
Consideration Shares”
: The proposed issuance of Consideration Shares to the
Vendors and/or their nominees
“Proposed Listing
Transfer”
: The proposed transfer of the listing of the Shares from the
Mainboard to the Catalist as set out in Section 5 of the VGO
Letter
“Proposed New Directors” : The proposed new board of directors of the Company upon
Completion being Dato’ Colin, Dato’ Edwin, Lee Sok Khian
John, Dato’ Wong Khing Kheng, Loh Weng Whye and Foo
Jong Han Rey
DEFINITIONS
14
“Proposed New Executive
Officers”
: The proposed new executive officers of the Company upon
Completion being Chong Foh Siong, Chua Thiam Siew
Johnson and Tan Kay Yan (Mark)
“Proposed New Share
Issue Mandate”
: Has the meaning ascribed to it in Section 12.1 of the VGO
Letter
“Proposed Transactions” : Has the meaning ascribed to it in Section 1.2 of the VGO
Letter
“Proposed Whitewash
Resolution”
: Has the meaning ascribed to it in Section 8.2.2 of the VGO
Letter
“Relevant Assets” : For the purposes of Section 25.1.2 of the Target Letter, (i) any
shares in the capital of any Relevant Entity, (ii) any existing or
future land held by any of the Tan Brothers and/or any
Relevant Entity, (iii) any rights to develop any land (whether
held by a Relevant Entity or otherwise), and/or (iv) any shares
in the capital of Capital City Property Sdn. Bhd.) or such
holding company holding such interest in Capital City Property
Sdn. Bhd.;
“Relevant Entity” : For the purposes of Section 25.1.2 of the Target Letter, the
Tan Brothers and any existing or future company that is part of
the Hatten Group and engaged in the Property Development
Business. Any company engaged in the Property
Development Business in which the Tan Brothers (whether
legally and/or beneficially) own more than five percent (5%) of
its shareholding interest shall be considered a Relevant Entity
“Registrar” : Registrar of Companies appointed under the Companies Act
and includes any Deputy or Assistant Registrar of Companies
“Restructuring” : The restructuring exercise to be carried out by the Target and
the vendors such that the Target holds the entire issued and
paid up share capital of the Target subsidiaries
“Restructuring
Consideration Shares”
: Has the meaning ascribed to it in Section 2.4(b) of the Target
Letter
“Retained Business” : Has the meaning ascribed to it in Section 25.1.1 of the Target
Letter
“RNAV” : Has the meaning ascribed to it in Section 1.1.4 of the VGO
Letter
“ROFR” : Has the meaning ascribed to it in Section 25.1.2(c) of the
Target Letter
DEFINITIONS
15
“Sale and Purchase
Agreement”
: The sale and purchase agreement dated 6 June 2016, as
supplemented, modified and/or amended by the
Supplemental Agreement
“Sale Shares” : The entire issued and paid-up share capital of the Target
“Service Agreements” : The service agreements of the Tan Brothers as referred to in
Section 23.5 of the Target Letter
“SFA” : The Securities and Futures Companies Act (Cap. 289) of
Singapore, as amended, varied or supplemented from time to
time
“SFR” : Securities and Futures (Offers of Investments) (Shares and
Debentures) Regulations 2005
“SGXNET” : A system network used by listed companies to send
information and announcements to the SGX-ST or any other
system networks prescribed by the SGX-ST
“Shares” : Shares of the issued and paid-up capital of the Company, and
“Share” to be construed accordingly
“Shareholders” : Registered holders of Shares, except where the registered
holder is CDP, in which case the term “Shareholders” shall in
relation to such Shares mean the depositors whose securities
accounts maintained with CDP are credited with Shares
“Substantial Shareholder” : A person (including a corporation) who has an interest in not
less than five percent (5.0%) of the issued shares of a
company
“Supplemental
Agreement”
: The supplemental agreement dated 6 September 2016
“Target Letter” : Appendix A to this Circular, entitled “Letter to Shareholders
from the Proposed New Directors”
“Trademarks” : Has the meaning ascribed to it in Section 16 of the Target
Letter
“Terratech RTO” : Has the meaning ascribed to it in Section 25.1.1(b) of the
Target Letter
“Thea Wellness Project” : Has the meaning ascribed to it in Section 25.1.1(d) of the
Target Letter
“Trademark Licence” : Has the meaning ascribed to it in Section 16 of the Target
Letter
DEFINITIONS
16
“Vendor Shares” : The Consideration Shares owned by the Vendors and/or their
nominee upon Completion
“VGO Letter” : The letter to Shareholders from the Board of Directors of the
Company
“Watch-List
Requirements”
: Has the meaning ascribed to it in Section 5.2.1 of the VGO
Letter
“Whitewash Waiver” : Has the meaning ascribed to it in Section 8.2.2 of the VGO
Letter
“WOS Net Carrying
Amount”
: The net carrying amount of the WOS Property as at 31 March
2016 as set out in the annual report of the Company for the
financial year ended 31 March 2016, of S$1,052,000
“WOS Property” : The three (3) storey semi-detached factory held under
individual title No. HSM 21000, Lot PT 56974, Mukim of
Cheras, District of Hulu Langat, State of Selangor, Malaysia,
owned by WOS
“WOS Property Value” : The market value of the WOS Property, as at 21 October 2016
as set out in the Disposal Valuation Report, of RM4,000,000
CURRENCIES AND UNITS OF MEASUREMENT
RM : Ringgit Malaysia, the lawful currency of Malaysia
S$ : Singapore dollar, the lawful currency of Singapore
Unless the context otherwise requires:
(a) the terms “depositor”, “depository register” and “depository agent” shall have the
meanings ascribed to them respectively in Section 81SF of the SFA and the terms
“subsidiary”, “related company” and “substantial shareholder” shall have the meanings
ascribed to them in Sections 5, 6 and 81 of the Companies Act respectively;
(b) the terms “acting in concert” and “whitewash resolution’ shall have the meanings ascribed
to them in the Code;
(c) the terms “associate”, “associated company” and “controlling shareholder” shall have
the meanings ascribed to them in the Section entitled “Definitions and Interpretation” of the
Listing Manual or the Catalist Rules, where relevant;
(d) the terms “entity-at-risk” and “interested person” shall be persons falling within the scope
of the definitions for the same set out in Section 1 of the Fourth Schedule of the SFR or the
Listing Manual;
DEFINITIONS
17
(e) words importing the singular shall, where applicable, include the plural and vice versa and
words importing the masculine gender shall, where applicable, include the feminine and
neuter genders. Unless the context otherwise requires, any references to persons shall
include individuals, corporate bodies (wherever incorporated), unincorporated associations
and partnerships;
(f) any reference in this Circular to any enactment is a reference to that enactment as for the
time being amended or re-enacted. Any word defined under the Companies Act, the SFA, the
SFR, the Listing Manual, the Catalist Rules or the Code or any modification thereof and not
otherwise defined in this Circular shall, where applicable, have the same meaning ascribed
to it under the Companies Act, the SFA, the SFR, the Listing Manual, the Catalist Rules or
the Code or such modification thereof, as the case may be, unless the context otherwise
requires;
(g) any reference to a time of a day in this Circular shall be a reference to Singapore time unless
otherwise stated;
(h) any reference to terms containing “1Q”, “2Q”, “3Q” and “4Q” shall be construed as references
to the relevant quarters in the stated calendar year and “1H” and “2H” shall be construed as
references to the relevant halves in the stated calendar year;
(i) any discrepancies between the figures listed and the totals thereof are due to rounding.
Accordingly, figures shown as totals in this Circular may not be an arithmetic aggregation of
the figures that precede them; and
(j) the headings in this Circular are inserted for convenience only and shall be ignored in
construing this Circular.
DEFINITIONS
18
1. EXCHANGE RATES
The following table sets out the closing exchange rates that have been used to translate the
consolidated financial statements of the Target Group for the financial periods set out in this
Circular. The average exchange rate between RM and S$ are calculated using the average
of the exchange rates on the last day of each month during each financial year or period.
These exchange rates should not be construed as a representation that the RM amounts
actually represent such amounts or could be converted into S$ at the rate indicated or any
other rate or at all.
RM/S$
Average Closing
FY2014 2.5806 2.5719
FY2015 2.6434 2.8032
FY2016 2.9732 2.9886
Source: Bank Negara Malaysia(1)
The table below sets forth the high and low exchange rates of RM and S$ for each month for
the past six (6) months prior to the Latest Practicable Date.
Month RM/S$
High Low
June 2016 3.0367 2.9886
July 2016 3.0155 2.9320
August 2016 3.0219 2.9682
September 2016 3.0407 2.9892
October 2016 3.0446 2.9923
November 2016 3.1345 3.0107
1 December 2016 to the Latest Practicable Date 3.1303 3.1033
Source: Bank Negara Malaysia(1).
At the Latest Practicable Date, the exchange rate between RM and S$ was RM3.1033 to
S$1.00 as extracted from Bank Negara Malaysia(1).
Note:
(1) The closing exchange rates for RM: S$ are extracted from published information by Bank Negara Malaysia.
Bank Negara Malaysia has not consented to the inclusion of the exchange rates quoted under this section for
the purposes of Section 249 of the SFA and is thereby not liable for these exchange rates under Sections 253
and 254 of the SFA. The Board of Directors have included the above exchange rates in the proper form and
context in this Circular and have not verified the accuracy of these exchange rates.
EXCHANGE RATES, EXCHANGE CONTROLS AND TAXATION
19
2. EXCHANGE CONTROLS
The following is a description of the exchange controls that exist in the jurisdictions which the
Group operates in.
Singapore
Currently, no foreign exchange control restrictions are enforced in Singapore. As at the
Latest Practicable Date, there are no laws or regulations in Singapore that may affect (a) the
repatriation of capital, including the availability of cash and cash equivalents for use by the
Group; and (b) the remittance of profits that may affect dividends, interests or other
payments to Shareholders.
Malaysia
Exchange control in Malaysia is governed under the Financial Services Act 2013 (“FSA”) and
the Islamic Financial Services Act 2013 (collectively known as the “Exchange Control
Regulations”). The BNM in exercising its powers under the Exchange Control Regulations,
has issued seven (7) notices, setting out transactions that are allowed by the BNM which are
otherwise prohibited under the Exchange Control Regulations (“Notices”).
There is free mobility for inflow and outflow of capital for investments in Malaysia. Foreign
investors are free to remit divestment proceeds, profits, dividends or any income arising from
investments in Malaysia. Repatriation, however, must be made in foreign currency. Foreign
investors are also free to invest in any form of RM assets either as direct or portfolio
investments.
Payments or repatriation of monies from subsidiaries in Malaysia to the Company are
considered payments from “residents” to a “non-resident” for exchange control purposes.
Pursuant to subsection 214(2) of the FSA, a person must obtain written approval from the
BNM for the following:
(a) the making of any payment by a person to another person including a payment:
(i) to or for the credit of a non-resident;
(ii) by a resident or a non-resident;
(iii) as a consideration for or in association with the receipt of a payment or the
acquisition of a property, outside Malaysia, by any person; or the creation in favour
of, or the transfer to, any person, of a right to receive a payment or to acquire a
property, outside Malaysia;
(iv) under a judgment or order of any court or an award of any arbitrator or under any
written law in favour of a non-resident, or a resident outside Malaysia; or
(v) for settlement of property in favour of a non-resident, or a resident outside
Malaysia,
other than payment in RM between residents in Malaysia and payment in foreign
currency between non-residents outside Malaysia; and
EXCHANGE RATES, EXCHANGE CONTROLS AND TAXATION
20
(b) the receiving of any payment in paragraph (a) above.
Notice 4 (Payments), one of the Notices issued by the BNM, allows:
(a) a resident to make payment in RM in Malaysia, to a non-resident, among others, for
(i) the settlement of an RM asset including any income and profit due from the RM
asset; (ii) the settlement of trade in goods or services in any manner; (iii) income earned
or expense incurred in Malaysia and (iv) for any purpose between immediate family
members; and
(b) a resident to make payment in foreign currency, to a non-resident for any purpose, other
than for:
(i) a derivative denominated in foreign currency offered by the resident unless it has
been approved by the BNM or allowed under Part B of Notice 5 issued by the BNM;
(ii) a derivative denominated in foreign currency offered by the non-resident; or
(iii) a derivative denominated in or referenced to RM unless it has been approved by
the BNM or allowed under Part B of Notice 5 issued by the BNM.
Notwithstanding subparagraph (b)(ii), payment in foreign currency is allowed for
(a) a derivative denominated in foreign currency purchased by a licensed onshore bank for
its own account (other than exchange rate derivative with reference to RM), (b) an interest
rate swap denominated in foreign currency between a resident and Labuan banks to manage
interest rate exposure arising from borrowing in foreign currency as set out in Part A of Notice
2 issued by the BNM or (c) a derivative denominated in foreign currency offered on a
specified exchange stipulated under the Capital Markets and Services Act 2007 undertaken
through a resident futures broker by a resident with firm commitment (other than exchange
rate derivatives).
If the payment between a resident and a non-resident is for purposes otherwise than allowed
above and in the Notices, a person is required to obtain express written consent of the BNM
before proceeding with such payment.
3. TAXATION
3.1 SINGAPORE TAX
The following is a summary of certain Singapore income tax, stamp duty and Goods and
Services Tax (“GST”) consequences of purchasing, owning or disposing of the Shares. This
summary is not intended to be and does not constitute legal or tax advice.
The summary is based on existing tax laws of Singapore in force as at the Latest Practicable
Date and is subject to any changes in such laws, or in interpretation of such laws, occurring
after such date, which changes could be made on a retrospective basis. These laws are also
subject to various interpretations and no assurance can be given that the courts or fiscal
authorities responsible for the administration of such laws will agree with this interpretation.
The summary is limited to a general description of certain tax consequences in Singapore
with respect to the purchase, ownership or disposition of the Shares by Singapore investors,
and does not purport to be a comprehensive or exhaustive description of all of the tax
considerations that may be relevant in a decision to purchase, own or dispose of the Shares.
This summary does not take into account the effect of any applicable tax treaty.
EXCHANGE RATES, EXCHANGE CONTROLS AND TAXATION
21
Prospective investors should consult their own tax advisers regarding Singapore income tax
and other tax consequences of purchasing, owning and disposing of the Shares. It is
emphasised that neither the Company, the Group, the Directors, the Target, the Target
Group, the Proposed New Directors nor any other persons involved in this Circular accept
the responsibility for any tax effects or liabilities resulting from the subscription for, purchase,
holding or disposal of the Shares.
Corporate Income Tax (General)
A corporate taxpayer is regarded as resident in Singapore for Singapore tax purposes if the
control and management of its business are exercised in Singapore. The meaning of control
and management is not defined in the Income Tax Act (Chapter 134) of Singapore. In
practice, the residency of a company is generally taken to be where the directors meet to
exercise control and management of the company’s business.
Singapore resident corporate taxpayers are subject to Singapore income tax on: (i) income
accruing in or derived from Singapore; and (ii) unless otherwise exempt, foreign-sourced
income received in Singapore or deemed to have been received in Singapore by the
operation of law.
Foreign-sourced dividends, branch profits and service income received in Singapore or
deemed to have been received in Singapore by Singapore resident corporate taxpayers are
tax exempt in Singapore provided certain prescribed conditions are met, including the
condition that at the time the foreign-sourced dividends, branch profits or service income is
received in Singapore, the jurisdiction from which the income is received has a headline
(or highest published) rate of tax of at least 15.0% and on which income tax, with certain
exceptions, has been imposed on the foreign-sourced dividends, branch profits or service
income.
Non-Singapore resident corporate taxpayers are subject to Singapore income tax only on
(i) income accruing in or derived from Singapore; and (ii) unless otherwise exempt,
foreign-sourced income received in Singapore or deemed to have been received in
Singapore by operation of law.
The corporate tax rate in Singapore is currently 17% after allowing for tax exemption on three
quarters of up to the first S$10,000 and up to one-half of the next S$290,000 of a company’s
chargeable income. The remaining chargeable income (after deducting the applicable tax
exemption on the first S$300,000 of chargeable income) is taxed at the prevailing corporate
tax rate, currently 17%. For year of assessment 2016 and 2017, companies are given a 50%
corporate tax rebate capped at S$20,000 for each year of assessment.
Individual Income Tax (General)
An individual is regarded as resident in Singapore in a year of assessment if, in the preceding
calendar year, the individual was physically present in Singapore or exercises an
employment in Singapore (other than as a director of a company) for 183 days or more, or
if the individual ordinarily resides (except for temporary absences) in Singapore.
EXCHANGE RATES, EXCHANGE CONTROLS AND TAXATION
22
Singapore resident individuals are subject to Singapore income tax on income accruing in or
derived from Singapore. All foreign-sourced income received in Singapore by Singapore
resident individuals (except for income received through a partnership in Singapore) is
generally exempt from Singapore income tax. Singapore resident individuals are taxed at
progressive rates ranging from 0% to 20%. The maximum rate will be increased to 22%
effective from year of assessment 2017.
Non-Singapore resident individuals are generally subject to Singapore income tax only on
income accruing in or derived from Singapore at the rate of 20% (22% effective from year of
assessment 2017).
Dividend Distributions
Singapore currently operates on a “one-tier” corporate tax system, under which the tax
collected from corporate profits is final and Singapore dividends are exempt from Singapore
income tax in the hands of the shareholder, regardless of whether the shareholder is a
corporate or individual shareholder or whether the shareholder is a Singapore tax resident.
Therefore, the dividends received from Shares are exempt from Singapore income tax on the
basis that the Company is a tax resident of Singapore.
However, foreign Shareholders are advised to consult their own tax advisers to take into
account the tax laws of their respective countries of residence and the existence of any
double taxation agreement which their country of residence may have with Singapore.
Gains on Disposal of the Shares
Singapore does not currently impose tax on capital gains. Therefore, any gains derived from
the disposal of the Shares will not be liable for Singapore income tax unless such gains are
considered income derived from a trade or business carried on in Singapore. Such gains may
also be liable for Singapore income tax if the Shares were acquired with the intent or purpose
of making a profit from their subsequent sale and not for long-term investment purposes.
If a seller has held the Shares as investment assets, any gains arising from a subsequent
sale should generally be considered capital gains not subject to Singapore income tax.
However, if the Shares have been held as trading assets, the gains arising from a
subsequent sale may be subject to Singapore income tax.
As the precise tax status of one seller will vary from another, sellers are advised to consult
their own professional advisers on the Singapore tax consequences that may apply to their
individual circumstances.
Notwithstanding the above, gains derived by a divesting company from the disposal of
ordinary shares in an investee company are not taxable if immediately prior to the date of the
share disposal, the divesting company had held at least 20% of the ordinary shares in the
investee company for a continuous period of at least 24 months (the “Tax Certainty
Scheme”).
The Tax Certainty Scheme is applicable to disposals made during the period from 1 June
2012 to 31 May 2017 (both dates inclusive) and will be reviewed at the end of five years. The
Tax Certainty Scheme does not apply to disposal of shares in an unlisted investee company
that is in the business of trading or holding Singapore immovable properties (other than
property development). Therefore, if the gains derived from the disposal of the Shares qualify
EXCHANGE RATES, EXCHANGE CONTROLS AND TAXATION
23
for the Tax Certainty Scheme, they will not be subject to Singapore income tax, even if such
gains are considered income from a trade or business carried on in Singapore or where the
Shares were acquired with the intent of making a profit from their subsequent sale.
In addition, Shareholders who adopt the tax treatment to be aligned with the Singapore
Financial Reporting Standard 39 Financial Instruments-Recognition and Measurement may
be taxed on gains (not being gains in the nature of capital) even though no sale or disposal
of the Shares is made. Shareholders who may be subject to such tax treatment should
consult their own accounting and tax advisers regarding the Singapore income tax
consequences of their acquisition, holding and disposal of the Shares.
Stamp Duty
There is no stamp duty payable on the subscription of the Shares.
Stamp duty is payable on every instrument of transfer of the Shares at the rate of 0.2%,
computed on the consideration or market value of the Shares, whichever is the higher. The
purchaser is liable for stamp duty, unless there is an agreement to the contrary. No stamp
duty is payable if no instrument of transfer is executed (such as in the case of scripless
shares, the transfer of which does not require instrument of transfer to be executed) or the
instrument of transfer is executed outside Singapore. However, stamp duty would be payable
if the instrument of transfer which is executed outside Singapore is subsequently received in
Singapore.
Stamp duty is not applicable to electronic transfers of the Shares through the scripless
trading system operated by CDP.
GST
The sale of the Shares by a GST-registered investor belonging in Singapore through a
SGX-ST member or to another person belonging in Singapore is an exempt supply not
subject to GST.
Any GST (for example, GST on brokerage) incurred by a GST-registered investor in
connection with the making of this exempt supply will generally become an additional cost to
the investor unless the investor satisfies certain conditions prescribed under the GST
legislation or certain GST concessions.
Where the Shares are sold by a GST-registered investor to a person belonging outside
Singapore (and who is outside Singapore at the time of supply), the sale is a taxable supply
subject to GST at zero rate (i.e. 0%). Consequently, any GST (for example, GST on
brokerage) incurred by him in the making of this zero-rated supply for the purpose of his
business will, subject to the provisions of the GST legislation, be recoverable as an input tax
credit in his GST returns.
Investors should seek their own tax advice on the recoverability of GST incurred on expenses
in connection with the purchase and sale of the Shares.
EXCHANGE RATES, EXCHANGE CONTROLS AND TAXATION
24
Services such as brokerage and handling services rendered by a GST-registered person to
an investor belonging in Singapore in connection with the investor’s purchase or sale of the
Shares will be subject to GST at the prevailing rate (currently seven percent (7.0%)). Similar
services rendered contractually to an investor belonging outside Singapore are subject to
GST at zero-rate, provided that the investor is not physically present in Singapore at the time
the services are performed and the services do not directly benefit a person who belongs in
Singapore.
Estate duty
Singapore estate duty has been abolished with respect to all deaths occurring on or after
15 February 2008.
3.2 MALAYSIAN TAX
The following is a summary of the principal Malaysian tax consequences relevant to the
prospective investor based on Malaysia tax laws and their implementing regulations in force
as of the date of this Circular. The summary does not address any laws other than the tax
laws of Malaysia.
Corporate Income Tax
The Income Tax Act 1967 imposes corporate income tax on businesses in Malaysia. A
resident or non-resident company is assessable to Malaysian tax on income accruing in or
derived from Malaysia. Foreign-sourced income is not subject to Malaysian tax unless
earned by a Malaysian resident company carrying on the business of banking, insurance or
sea or air transport.
The applicable income tax rate for Malaysian-incorporated and resident companies with
paid-up capital of RM2.5 million and below at the beginning of the tax basis period is 19.0%1
on chargeable income of up to RM500,000.00 and 24.0%2 on the excess. This preferential
tax rate on the first RM500,000 of chargeable income will not be available if the relevant
company is directly or indirectly related by more than 50% by way of ordinary share capital
to any other company with paid-up capital exceeding RM2.5 million. Companies with paid-up
capital exceeding RM2.5 million or which are related to other companies with paid-up capital
exceeding RM2.5 million are taxed at the rate of 24.0% on all chargeable income. The 24%
rate applies with effect from the year of assessment 2016.
Deductions on certain contributions are available under the Income Tax Act 1967. Such
deductions include contributions made to the government, state government, local
authorities, institutions or organisations approved by the Director General of Inland Revenue
Board Malaysia and sports activities approved by the Minister of Finance.
1 The Finance Bill 2016 proposes that this be reduced to 18% with effect from the year of assessment 2017.
2 It has been proposed that for the 2017 and 2018 years of assessment only, the 24% corporate tax rate be reduced
by one to four percentage points, based on an increase in chargeable income (as compared to the immediate
preceding year of assessment). This reduced rate should be available to all Malaysian companies. Details of the
above proposal have not yet been released. It is expected that there may be further qualifications and conditions
imposed. This reduced rate (where relevant) will only apply on the increased chargeable income.
EXCHANGE RATES, EXCHANGE CONTROLS AND TAXATION
25
Investment incentives under the Promotion of Investments Act 1986
The Promotion of Investments Act 1986 and Promotion of Investments (Amendment) Act
2007 provide a number of incentives for companies participating in a promoted activity.
“Promoted activity” is defined as a manufacturing, agricultural, integrated agricultural,
hotel, tourist or other industrial or commercial activity and includes an activity which is of
national and strategic importance to Malaysia. The various types of incentives given include,
amongst others:
(a) Pioneer Status (“PS”)
A pioneer status company has the advantage of partial exemption from paying income
tax for a period of five (5) years. Only 70.0% of the statutory income from the pioneer
business for each of the five (5) years will be exempt from tax. The balance of the
statutory income will be taxable at the normal corporate tax rate. A full tax exemption is
available in limited cases.
(b) Investment Tax Allowances (“ITA”)
A company receiving this incentive will be given allowances on capital expenditure
incurred on industrial buildings, plant and machinery directly used for the purpose of the
promoted activities. Generally, the allowance given is 60.0% of the qualifying capital
expenditure. The amount of the allowance which can be claimed for each year of
assessment is restricted to a maximum of 70.0% of the statutory business income. Any
excess can generally be carried forward indefinitely for future utilisation against income
from the same promoted business. The tax allowance will only be given on capital
expenditure incurred within five (5) years or ten (10) years from the date of approval of
this incentive. 100% allowances are available in limited cases.
Tax Incentives under Schedule 7A of the Income Tax Act 1967
(a) Reinvestment Allowance (“RA”)
RA is available to manufacturing companies that reinvest their capital to embark on a
project for either expansion of existing production capacity, modernisation or
automation of the production facilities, or diversification.
The rate of RA is 60.0% on the qualifying capital expenditure (i.e. factory, plant and
machinery) and is granted in addition to capital allowances. The RA can be utilised to
reduce up to 70.0% of statutory income. Any unused RA may be carried forward
indefinitely.
The incentive period for RA is 15 years from the first year of claim by a company.
Companies which have completed their 15 year RA period before the year of
assessment 2016 may claim a special RA (assuming relevant conditions are met) for
the years of assessment 2016 to 2018. Companies which complete their 15 year RA
period in the years of assessment 2016 or 2017 would also be eligible for special RA,
but only up to the year of assessment 2018. Unlike PS or ITA, this incentive does not
require prior approval from any of the authorities. RA incentive cannot be claimed in the
same basis period if a company is also enjoying PS and ITA incentives.
EXCHANGE RATES, EXCHANGE CONTROLS AND TAXATION
26
Please note that there may be other tax incentives that could be granted on a case by case
basis, subject to conditions.
Dividend Distributions
Malaysia introduced a single tier dividend system with effect from the year assessment 2008
under which tax paid by a company would be a final tax and dividends paid by the company
to its shareholders will no longer be liable to tax. The six (6) year transitional period for
companies to move onto this tax system ended on 31 December 2013. During this
transitional period, the imputation system would continue to apply on the company until its
existing tax credit account is fully utilised or until 31 December 2013, whichever is the earlier.
Companies could also have opted to forego their imputation credits any time before
31 December 2013 and move directly into the single-tier system of dividend taxation. The
single tier dividend system has commenced fully in 1 January 2014 and the tax credit account
will be deemed as nil at the end of 31 December 2013.
Capital Gains
Capital gains from the sale of investments such as the sale of shares or capital assets other
than those related to land and buildings are not subject to tax. Income tax may be payable
if the gains are treated as being revenue, as opposed to capital, in nature.
Disposal of land in Malaysia or any interest, option or other right in or over such land in
Malaysia may be subject to real property gains tax (“RPGT”). RPGT is imposed on a scale
of rates depending on the length of time such asset is held.
The current rates of RPGT are as follows:
Rates of RPGT (%)
Disposal by a
company
Disposal by an
individual who
is a Malaysian
citizen or
permanent
resident
Disposal by an
individual who
is not a
Malaysian
citizen or
permanent
resident
Disposal within 2 years 30 30 30
Disposal in the 3rd year 30 30 30
Disposal in the 4th year 20 20 30
Disposal in the 5th year 15 15 30
Disposal in the 6th year and
onwards 5 0 5
Gains from the sale of shares in a “real property company” are also subject to real property
gains tax. Under the Real Property Gains Tax Act 1976, a real property company is a
controlled company (one with not more than fifty members and controlled by no more than
five (5) persons) which acquires real property and, on the date of such acquisition, the
company’s real property holdings are 75.0% or more of its total tangible assets. The real
EXCHANGE RATES, EXCHANGE CONTROLS AND TAXATION
27
property gains tax laws can be complex. If shareholders are in any doubt as to the action you
should take due to the RPGT, you should consult your legal, financial, tax or other
professional adviser.
Stamp Duty
Stamp duty is levied on the instrument of transfer of certain assets and shares on an ad
valorem basis under the Stamp Act 1949. The stamp duty payable on transfers of unlisted
shares is currently fixed at a rate of 0.3% of the consideration or the value of the shares,
whichever is greater. The duty payable on a transfer of land is on a graduated scale. Stamp
duty payable is calculated on the purchase price, or the market value of the land, whichever
is higher.
Under section 52 of the Stamp Act 1949, no instrument chargeable with duty shall be
admitted in evidence for any purpose by any person having by law or consent of parties
authority to receive evidence, or shall be acted upon, registered, or authenticated by any
such person or by any public officer, unless such instrument is duly stamped.
A bill to amend the Stamp Act 1949 was recently released. This bill has not yet been gazetted
into law. In our comments above, we have not considered the impact of the bill.
Withholding Tax
The Income Tax Act 1967 provides that where a person is liable to make certain types of
payment to a non-resident person, he shall deduct withholding tax at the prescribed rate from
such payment and (whether such tax has been deducted or not) pay that tax to the Director
General of Inland Revenue within one month after such payment has been paid or credited
to the non-resident.
Interest, royalties and payment for services and certain other classes of income are subject
to withholding tax when paid to non-residents.
Amounts paid or credited to non-residents in consideration for services are subject to
withholding tax of either 10.0% or 13.0%, depending on the circumstances. The Finance Bill
2016 proposed that services performed outside Malaysia also be subject to withholding tax.
Where the income of the non-resident consists of interest (other than interest on an approved
loan) derived from Malaysia, withholding tax shall be at a rate of 15.0% pursuant to section
109 of the Income Tax Act 1967. Royalties are subject to a 10.0% withholding tax. There is
no withholding tax on dividends paid by Malaysian resident companies.
Please note that with effect from 1st January 2009 payment of income falling under
Section 4(f) of the Income Tax Act 1967 which is deemed to be derived from Malaysia by a
non-resident would be subject to withholding tax of 10.0% on the gross income under Section
109F of the Income Tax Act 1967. Payment of commission to a non-resident falling within
Section 4(f) of the Income Tax Act 1967 which is deemed to be derived from Malaysia may
in certain circumstances be subject to a 10.0% withholding tax under Section 109F of the
Income Tax Act 1967 even if the services are not performed by the non-resident in Malaysia.
The above tax rates may be reduced in certain cases by tax treaties.
EXCHANGE RATES, EXCHANGE CONTROLS AND TAXATION
28
Inheritance Tax
There is no inheritance tax in Malaysia since its abolishment with effect from 1 November
1991.
Goods and Services Tax
With effect from 1 April 2015, GST has been introduced at the rate of six percent (6.0%). GST
shall be applicable on all taxable supply of goods or services effected in the course or
furtherance of business in Malaysia and also covers within its purview importation of goods
or services into Malaysia.
Certain goods or services are subject to GST at 0%. For example, this applies to exports,
supply of goods to designated areas, international services (subject to conditions,) and
goods or services which are specifically prescribed as being zero-rated. Under the GST
(Exempt Supply) Order 2014, certain goods and services such as sale of residential property
and transfer of ownership of any securities or derivatives relating to securities are exempt
from GST. Further, under the GST (Relief) Order 2014, certain persons are relieved from
charging GST subject to conditions.
In terms of the GST (Exempt Supply) Order 2014, the supply of services relating to financial
services shall not be deemed to be an exempt supply (i.e. subject to GST) to the extent that
the consideration payable for the usage or provision of facilities, arranging, broking,
underwriting or advising on any of the supplies specified therein, is any fee, commission,
merchant’s discount or other similar charge. Hence, for foreign and Malaysian investors
buying Malaysian issued securities from brokers belonging in Malaysia, the fee or
commission charged by such brokers shall be subject to GST.
EXCHANGE RATES, EXCHANGE CONTROLS AND TAXATION
29
All statements contained in this Circular, statements made in press releases and oral statements
that may be made by the Company, the Group, the Target, the Target Group, their directors,
executive officers or employees acting on their behalf, that are not statements of historical fact,
constitute “forward looking statements”. Some of these statements can be identified by words that
have a bias towards, or are, forward looking such as “anticipate”, “believe”, “could”, “estimate”,
“expect”, “forecast”, “if”, “intend”, “may”, “plan”, “possible”, “probable”, “project”, “should”, “will”
and “would” or similar words. However, the Shareholders should note that these words are not the
exclusive means of identifying forward looking statements. All statements regarding the
Company’s, the Group’s, the Target’s, the Target Group’s and the Enlarged Group’s expected
financial position, business strategies, plans and prospects are forward looking statements.
These forward looking statements including but not limited to, statements as to revenue and
profitability; any expected growth; any expected industry prospects and trends; planned strategy
and future expansion plans; any other matters that are not historical facts; and any other matters
discussed in this Circular, are only predictions. These forward looking statements involve known
and unknown risks, uncertainties and other factors that may cause the Company’s, the Group’s,
the Target’s, the Target Group’s, and the Enlarged Group’s actual future results, performance or
achievements to be materially different from any future results, performance or achievements
expected, expressed or implied by such forward looking statements. These risk factors and
uncertainties are discussed in more detail in this Circular, in particular, but not limited to,
discussions in Section 3.6 of the VGO Letter entitled “Risk Factors” and Section 27 of the Target
Letter entitled “Risk Factors Relating to the Target Group”.
Given the risks and uncertainties that may cause the Company’s, the Group’s, the Target’s, the
Target Group’s and the Enlarged Group’s actual future results, performance or achievements to
be materially different from that expected, expressed or implied by the forward looking statements
in this Circular, undue reliance must not be placed on these statements.
The Company, the Group, the Target, the Target Group, the Enlarged Group, their respective
directors and executive officers and the Financial Adviser are not representing or warranting to
you that the actual future results, performance or achievements of the Company, the Group, the
Target, the Target Group and the Enlarged Group will be as those discussed in those statements.
The respective actual future results may differ materially from those anticipated in these forward
looking statements as a result of the risks faced by us. Further, the Company, the Group, the
Target, the Target Group, the Enlarged Group and the Financial Adviser disclaim any responsibility
for updating any of those forward looking statements or publicly announcing any revisions to those
forward looking statements to reflect their future developments, events or circumstances.
Upon Completion, the Enlarged Group will be subject to the listing rules of the SGX-ST regarding
corporate disclosure.
CAUTIONARY NOTE ON FORWARD LOOKING STATEMENTS
30
The following indicative timetable assumes that approval for all the resolutions proposed at the
EGM is obtained.
In relation to the Proposed Acquisition and Proposed Disposal
Last Date and Time for Lodgement of
Proxy Form
: 18 January 2017 at 10 a.m.
Date and Time of EGM/Venue of EGM : 20 January 2017 at 10 a.m.
Level 2
53 Mohamed Sultan Road
Singapore 238993
Effective Date of Suspension in Trading of
Existing Shares
: 24 January 2017
Completion of Proposed Acquisition and
Proposed Disposal
: 24 January 2017
In relation to the Proposed Capital Reduction
Commencement of Creditor Objection Period : 20 January 2017
End of Creditor Objection Period : 3 March 2017
Estimated Completion of Proposed Capital
Reduction
: 6 March 2017
In relation to the Proposed Compliance Placement
Estimated Despatch of Offer Information
Statement
: 24 February 2017
Completion of Proposed Compliance
Placement
: 3 March 2017
Expected Lifting of the Suspension of the
Trading of the Shares
: 6 March 2017
Save for the date of the EGM, the dates set out in the above timetable are indicative and may be
subject to change. The Company will make further announcements on the exact dates of such
events.
INDICATIVE TIMETABLE
31
VGO CORPORATION LIMITED(Incorporated in the Republic of Singapore)
(Company Registration No. 199301388D)
LETTER TO SHAREHOLDERS
Board of Directors:Goh Ching Huat, Steven (Group Executive Chairman andChief Executive Officer)Goh Ching Wah, George (Executive Director)Goh Ching Lai, Joe (Executive Director)Dato’ Wong King Kheng (Independent Director)Anthony Clifford Brown (Independent Director)Foo Jong Han Rey (Independent Director)
Registered Office:10 Changi South Lane#06-01 Singapore 486162
29 December 2016
To: The Shareholders of VGO Corporation Limited
Dear Sir/Madam
CIRCULAR TO SHAREHOLDERS IN RELATION TO:
(1) THE PROPOSED ACQUISITION OF THE ENTIRE ISSUED AND PAID-UP SHARECAPITAL OF SKY WIN MANAGEMENT CONSULTANCY PTE. LTD. FOR ANAGGREGATE CONSIDERATION OF S$386.0 MILLION;
(2) THE PROPOSED ALLOTMENT AND ISSUANCE OF 1,187,692,308 CONSIDERATIONSHARES TO THE VENDORS FOR THE PROPOSED ACQUISITION;
(3) THE PROPOSED COMPLIANCE PLACEMENT OF UP TO 172,400,000 COMPLIANCEPLACEMENT SHARES COMPRISING NEW SHARES AND VENDOR SHARES;
(4) THE PROPOSED TRANSFER OF THE LISTING OF THE COMPANY FROM THEMAINBOARD TO THE CATALIST;
(5) THE PROPOSED DISPOSAL OF THE COMPANY’S ENTIRE INTEREST IN THEEXISTING BUSINESS AS A MAJOR TRANSACTION AND AN INTERESTED PERSONTRANSACTION;
(6) THE PROPOSED CAPITAL REDUCTION;
(7) THE PROPOSED WHITEWASH RESOLUTION FOR THE WAIVER BY INDEPENDENTSHAREHOLDERS OF THEIR RIGHT TO RECEIVE A MANDATORY TAKE-OVER OFFERFROM THE VENDORS AND THEIR CONCERT PARTIES;
(8) THE PROPOSED CHANGE OF NAME OF THE COMPANY FROM “VGO CORPORATIONLIMITED” TO “HATTEN LAND LIMITED”;
(9) THE PROPOSED APPOINTMENT OF THE PROPOSED NEW DIRECTORS TO THECOMPANY;
(10) THE PROPOSED ADOPTION OF THE NEW CONSTITUTION OF THE COMPANY;
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
32
(11) THE PROPOSED NEW GENERAL SHARE ISSUE MANDATE; AND
(12) THE PROPOSED INTERESTED PERSON TRANSACTIONS MANDATE.
1. INTRODUCTION
1.1. Overview
1.1.1. The Proposed Acquisition and Proposed Issue of Consideration Shares
As announced on 6 June 2016 and 6 September 2016, the Company had entered into the
Sale and Purchase Agreement with the Vendors for the Proposed Acquisition of the entire
issued and paid-up share capital of the Target upon the terms and subject to the conditions
of the Sale and Purchase Agreement.
The Consideration of the Proposed Acquisition is S$386.0 million, to be satisfied in full by
the allotment and issuance of 1,187,692,308 Consideration Shares to the Vendors (and/or
their designated nominees) at the Issue Price upon Completion.
Among other things, it is a condition of the Proposed Acquisition for the Company’s listing
on the Mainboard of the SGX-ST to be transferred to the Catalist.
The Proposed Acquisition constitutes a reverse take-over as set out under Rule 1015 of
the Listing Manual as the relative figures under Rules 1006(c) and 1006(d) of the Listing
Manual exceed 100% and on Completion will result in the change in control of the
Company. The Company will be seeking the approval of Shareholders for, among other
things, the Proposed Acquisition and the issue of the Consideration Shares at the EGM.
1.1.2. The Proposed Compliance Placement
Upon the allotment and issuance of the Consideration Shares on Completion, the
Company will fall short of the public float requirement of the Catalist Rules. As such, in
order to meet the public float requirement, the Company is proposing to undertake the
Proposed Compliance Placement within three (3) months from the date of Completion.
Trading of the Shares on the SGX-ST will be suspended upon Completion. The
suspension will continue until the completion of the Proposed Compliance Placement.
1.1.3. The Proposed Whitewash Resolution
Upon the allotment and issuance of the Consideration Shares on Completion, the
Vendors, together with their concert parties, will incur an obligation to make a mandatory
general offer for the Shares under Rule 14 of the Code unless such obligation is waived
by the SIC. The Whitewash Waiver was obtained by the Vendors from SIC on 4 October
2016 and is subject to, among other things, the Proposed Whitewash Resolution being
approved by the Shareholders at the EGM. Accordingly, the Company is seeking the
approval of Shareholders for the Proposed Whitewash Resolution at the EGM.
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
33
1.1.4. The Proposed Disposal
On 12 December 2016, the Company announced that it had entered into the Disposal
Agreement with Goh Ching Huat, Steven, Goh Ching Wah, George and Goh Ching Lai,
Joe for the Proposed Disposal of the Group’s Existing Business. As the Purchasers are
directors and controlling shareholders of the Company and the relative figure under Rule
1006(a) of the Listing Manual exceed 20.0%, the Proposed Disposal constitutes an
interested person transaction under Chapter 9 of the Listing Manual and a major
transaction under Chapter 10 of the Listing Manual. Accordingly, the Company will be
seeking the approval of Shareholders for the Proposed Disposal at the EGM.
1.1.5. The Proposed Capital Reduction
As a condition to the Proposed Acquisition, the Company will be seeking to reduce its
share capital in accordance with section 78C of the Companies Act to write off part of the
Accumulated Losses of the Company amounting to approximately S$27,880,753. In
accordance with section 78C of the Companies Act, the Company will be seeking the
approval of Shareholders, by way of a special resolution, for the Proposed Capital
Reduction at the EGM.
1.1.6. The Proposed IPT Mandate
It is anticipated that the Enlarged Group would, on and after the date of Completion, in the
ordinary course of business, continue to enter into certain transactions with the Enlarged
Group’s interested persons, including but not limited to those categories of transactions
described in the Section 13 of the VGO Letter entitled “The Proposed IPT Mandate”.
Accordingly, the Company is seeking the approval of the Shareholders for the Proposed
IPT Mandate at the EGM.
1.1.7. Other Proposed Transactions
In conjunction with the actions listed above and in connection with the Proposed
Acquisition, the Company is also seeking approval from Shareholders for (a) the Proposed
Listing Transfer, (b) the Proposed Change of Name, (c) the Proposed Appointment of the
Proposed New Directors, (d) the Proposed Adoption of the New Constitution and (e) the
Proposed New Share Issue Mandate.
1.2. Purpose of Circular
The Company is seeking Shareholders’ approval for the following:
(a) the Proposed Acquisition;
(b) the Proposed Issuance of Consideration Shares;
(c) the Proposed Compliance Placement;
(d) the Proposed Listing Transfer;
(e) the Proposed Disposal;
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
34
(f) the Proposed Capital Reduction;
(g) the Proposed Whitewash Resolution;
(h) the Proposed Change of Name;
(i) the Proposed Appointment of the Proposed New Directors;
(j) the Proposed Adoption of the New Constitution;
(k) the Proposed New Share Issue Mandate; and
(l) the Proposed IPT Mandate,
(collectively, the “Proposed Transactions”).
The purpose of this Circular is to provide Shareholders with the relevant information
relating to the Proposed Transactions for which the approval of Shareholders will be
sought at the EGM. Shareholders’ approval for the Proposed Transactions shall be sought
by way of ordinary resolutions, except for the Proposed Listing Transfer, the Proposed
Capital Reduction, the Proposed Change of Name and the Proposed Adoption of the New
Constitution for which approval shall be sought by way of special resolutions.
This Circular has been prepared solely for the purposes set out herein and may not be
relied upon by any persons (other than the Shareholders to whom this Circular is
despatched to) or for any other purpose.
The SGX-ST assumes no responsibility for the accuracy of any of the statements
made, reports contained or opinions expressed in this Circular.
1.3. Conditionality of Resolutions
Shareholders are advised that the Key Resolutions are inter-conditional. This means that
if any of Ordinary Resolutions 1, 2, 3, 4, 5, 6, 7, 12 and 13 and Special Resolutions 1, 2,
3, and 4 are not approved, none of Ordinary Resolutions 1, 2, 3, 4, 5, 6, 7, 12 and 13 and
Special Resolutions 1, 2, 3, and 4 will be duly passed. Ordinary Resolutions 8, 9, 10, 11
relating to the proposed appointment of the Proposed New Directors (save for Dato’ Colin
and Dato’ Edwin) are conditional upon the passing of the Key Resolutions. The Key
Resolutions are inter-conditional as the subject matter of the Key Resolutions will facilitate
the conduct of business of the Enlarged Group upon Completion.
Additionally, the inter-conditionality of the proposed appointment of Dato’ Colin and Dato’
Edwin as Proposed New Directors with the other Key Resolutions underscore their key
involvement in the Target Group. Shareholders’ approval is required for the appointment
of each of the Proposed New Directors under separate resolutions.
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
35
2. SUBMISSION TO THE SGX-ST
On 6 December 2016, the Sponsor had submitted the pre-admission notification to the
SGX-ST. A copy of this Circular has been lodged by the Sponsor with the SGX-ST, acting
as agent on behalf of the Authority, on 29 December 2016 for posting on the SGX-ST
website.
Pursuant to Appendix 4F to the Catalist Rules, the SGX-ST is expected to issue a listing
and quotation notice for the permission for the listing and quotation of the Shares, the
Consideration Shares and the new Shares to be allotted and issued further to the
Proposed Compliance Placement upon lodgement of this Circular with the SGX-ST, acting
as agent on behalf of the Authority.
It should, be noted that the listing and quotation notice, if issued by the SGX-ST is not to
be taken as an indication of the merits of the Proposed Transactions, the Company, the
Group, the Target, the Target Group, the Enlarged Group, the Shares, the Consideration
Shares or the Compliance Placement Shares.
3. THE PROPOSED ACQUISITION AND PROPOSED ISSUANCE OF CONSIDERATION
SHARES
3.1. Overview
As announced on 6 June 2016 and 6 September 2016, the Company had entered into the
Sale and Purchase Agreement with the Vendors for the Proposed Acquisition of the entire
issued and paid-up share capital of the Target upon the terms and subject to the conditions
of the Sale and Purchase Agreement.
The Consideration of the Proposed Acquisition is S$386.0 million, to be satisfied in full by
the allotment and issuance of 1,187,692,308 Consideration Shares to the Vendors (and/or
their designated nominees) at the Issue Price upon Completion.
The Proposed Acquisition constitutes a reverse take-over as set out under Rule 1015 of
the Listing Manual as the relative figures under Rules 1006(c) and 1006(d) of the Listing
Manual exceed 100.0% and on Completion will result in the change in control of the
Company. The Company will be seeking the approval of Shareholders for, among other
things, the Proposed Acquisition and the Proposed Issuance of Consideration Shares at
the EGM.
3.2. Rationale
The Proposed Acquisition is in line with the Group’s corporate strategy to venture into a
new business area that has the potential for growth. The Board is of the view that the
Proposed Acquisition is beneficial to the Company and likely to enhance the long term
interests of Shareholders.
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
36
The Board further refers to the Company’s announcement to Shareholders dated
3 March 2016 in relation to its inclusion on the watch-list due to the failure to meet the MTP
Requirement of S$0.20 per share for shares of issuers listed on the Mainboard of the
SGX-ST as a continuing listing requirement. The Board has considered the options
available to the Company to comply with the MTP Requirement and is of the view that the
Proposed Acquisition will facilitate the Company’s ability to satisfy the MTP Requirement.
3.3. Information on the Target and the Vendors
3.3.1. Target Group
The Target is a private company limited by shares incorporated in Singapore and its entire
issued and paid-up share capital is legally and beneficially owned by the Vendors.
As a condition to the Proposed Acquisition, the Vendors and the Target have carried out
such steps in the Restructuring and the Target holds directly the entire issued and paid-up
share capital of the following companies:
(a) Hatten International Pte. Ltd.;
(b) Fuyuu Group Sdn. Bhd.;
(c) Fuyuu Resources Sdn. Bhd.;
(d) Fuyuu Ventures Sdn. Bhd.; and
(e) Gold Mart Sdn. Bhd.
The Target Group is the property development arm of the Hatten Group.
Please refer to Sections 2 and 4 of the Target Letter entitled “Background and History of
the Target Group” and “Business of the Target Group” respectively for more information on
the Target Group and its history and business.
3.3.2. Vendors
The Vendors are Dato’ Colin and Dato’ Edwin, who collectively own all the shares in the
Target. The Vendors are founders of the Hatten Group, a conglomerate with interests in
property development, property investment, hospitality, retail and education. Dato’ Colin
and Dato’ Edwin are the Managing Director and Deputy Managing Director of the Hatten
Group respectively.
The Vendors were identified through business contacts of the Company. No introducer
fees will be paid in connection with the Proposed Transactions.
Please refer to Section 23 of the Target Letter entitled “Directors and Executive Officers
of the Target Group” for more information on the Vendors.
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
37
3.4. Principal Terms of the Sale and Purchase Agreement
3.4.1. Consideration
The Consideration for the Sale Shares payable by the Company is the sum of
S$386,000,000.
The Consideration shall be satisfied in full by the allotment and issuance of 1,187,692,308
Consideration Shares by the Company to the Vendors (and/or their designated nominees)
on Completion at the issue price of S$0.325, subject to adjustments as agreed between
the parties, such as share consolidation and in any event, in compliance with Rule
1015(3)(c) of the Catalist Rules, shall not be less than S$0.20. Where the Issue Price is
adjusted, the number of Consideration Shares to be issued shall be adjusted accordingly.
For the avoidance of doubt, the Vendors may, in their absolute discretion, renounce all or
any part of the Consideration Shares in favour of any other party as the Vendors may
deem fit. The Consideration Shares will, when allotted and issued, be credited as
fully-paid ordinary shares in the capital of the Company free from any and all
encumbrances and shall rank pari passu in all respects with and carry all rights similar to
the shares of the Company in issue as at the Completion Date, except that they will not
rank for any dividend, right, allotment or other distributions, the record date of which falls
on or before the date of issue of the Consideration Shares.
The Consideration was arrived at on a willing-buyer willing-seller basis and on mutual
agreement between the parties in consultation with the Financial Adviser based on the
market value as set out in the Asset Valuation Report, the revalued net asset value
(“RNAV”) and the equity value as set out in the Business Valuation Report. Based on the
Business Valuation Report, RNAV is commonly considered as the total book value of
assets of a business entity less book value of all the liabilities after adjusting for the
revaluation surplus on real and personal property. As the development projects of the
Target Group are the major assets of the Target Group, the book values of the properties
under development are adjusted to the market values in arriving at the RNAV of the Target
Group.
Based on the Asset Valuation Report, the total market value of the Projects as at 30 June
2016 is approximately RM1.9 billion. A summary of the market value of the Projects are set
out as below:
Project Type
Market value of the
Target Group’s interest
in the Project
(RM’million)
Hatten City Phase 1 Mixed use development 628Hatten City Phase 2 Mixed use development 363Harbour City Mixed use development 849Vedro by the River Commercial 65
Total market value: 1,905
Based on the Business Valuation Report, the RNAV of the Target Group and the market
value of the 100.0% equity in the Target Group as at 30 June 2016 is S$506.4 million and
S$462.0 million respectively.
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
38
Accordingly, the Consideration of S$386.0 million represents a discount of 23.8% and
16.5% to the RNAV of the Target Group and market value of 100.0% equity in the Target
Group as at 30 June 2016 respectively.
Please see Appendices E and F to this Circular for the Business Valuation Report and the
Asset Valuation Report respectively.
The Issue Price represents a 72.9% premium to the volume-weighted average price of
S$0.188 for Shares transacted on 29 August 2016, being the last market day on which
Shares were traded immediately preceding the date of the Supplemental Agreement. The
Issue Price was determined on a willing-buyer willing-seller basis as commercially agreed
by the Company and the Vendors after taking into consideration the premium over the last
volume-weighted average price traded on the last market day on which Shares were
traded immediately preceding the date of the Supplemental Agreement not being
materially different from the range of valuation statistics implied by the Issue Price with
recently completed reverse take-overs of companies listed on the SGX-ST.
Pursuant to Rule 1003(3), the Issue Price of S$0.325 is based on reference to the
Company’s volume-weighted average price of S$0.188 for such Shares transacted on
29 August 2016, being the last market day on which Shares were traded immediately
preceding the date of the Supplemental Agreement which is higher than the Group’s net
asset value per Share of S$0.013, based on the last audited financial statement of the
Group as at 31 March 2016.
3.4.2. Restructuring
As a condition to the Sale and Purchase Agreement, the Vendors and the Target have
carried out such steps in the Restructuring such that the Target will hold directly the entire
issued and paid-up share capital of the Target Subsidiaries.
Please refer to Section 2.4 of the Target Letter entitled “Restructuring” for more
information on the Restructuring.
3.4.3. Conditions Precedent
Completion of the Proposed Acquisition shall be conditional upon, amongst others, the
following conditions being satisfied on or before the Completion Date (“Conditions
Precedent”):
(a) The completion of the Restructuring;
(b) The completion of the legal, financial and commercial due diligence to be carried out
by the Company and/or its appointed advisers in respect of the accounts, assets,
liabilities and business of the Target Group (the “Due Diligence Investigations”) and
the results of such Due Diligence Investigations being satisfactory in the reasonable
opinion of the Company provided that the Company shall not deem the outcome of
the such Due Diligence Investigations unsatisfactory without reasonable cause and
without first giving the Vendors and the Target Group a reasonable period to remedy
any default in respect thereof;
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
39
(c) The rectification, or the procurement of such rectification, to the satisfaction of the
Company by the Vendors, of all issues or irregularities uncovered by the Company
during the Due Diligence Investigations on the Target Group;
(d) The Vendors being satisfied with the results of the due diligence (whether legal,
financial, contractual, tax or otherwise) to be carried out by the Vendors and/or its
appointed advisers on the Company, including without limitation the title to and the
status and condition of any properties (whether movable or immovable), assets
(whether tangible or intangible), liabilities, businesses, operations, records, financial
position, accounts, results, legal and corporate structure, its subsidiaries and
associated companies;
(e) The SIC having granted the Vendors and its concert parties (and not having revoked
or repealed such grant) a waiver of their obligation to make a mandatory general offer
under Rule 14 of the Code for the shares in the Company not held by them and their
concert parties and from having to comply with the requirements of Rule 14 of the
Code subject to (i) any conditions that the SIC may impose, provided that such
conditions are reasonably acceptable to the Vendors; and (ii) the Independent
Shareholders approving at a general meeting of the Company the proposed ordinary
resolutions of the Company which if passed by the Independent Shareholders would
result in a waiver by the Independent Shareholders of their right to receive a
mandatory general offer from the Vendors and parties acting in concert with them in
connection with the issue of the Consideration Shares under the Proposed
Acquisition;
(f) The completion of the Proposed Disposal;
(g) The Company receiving the following approvals from its Shareholders at an
extraordinary general meeting to be convened, for:
(i) the Proposed Acquisition;
(ii) the Proposed Listing Transfer;
(iii) the Proposed Disposal;
(iv) the Proposed Capital Reduction;
(v) the Proposed Whitewash Resolution;
(vi) the Proposed Change of Name of the Company;
(vii) the Proposed New Share Issue Mandate;
(viii) the Proposed Appointment of the Proposed New Directors; and
(ix) such other corporate action(s) in connection with the Proposed Acquisition and
the Proposed Disposal, as may be necessary;
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
40
(h) The appointment of such directors nominated by the Vendors to form the Company’s
Board on the Completion Date provided always that the directors so nominated by
the Vendors are qualified to hold such directorships under applicable laws and
acceptable by the Financial Adviser;
(i) Approval in-principle being received from the SGX-ST for the dealing in and
quotation for the Consideration Shares, such approval not being revoked, rescinded
or cancelled prior to Completion and, where such approval in-principle is obtained
subject to any conditions, such conditions being reasonably acceptable to the
Vendors and the Company as confirmed by such parties;
(j) The delivery of a disclosure letter (in such form to be agreed by parties in writing) by
the Vendors to the Company and the Company being satisfied with the contents
thereof as on the Completion Date (which shall include, by reference, any disclosures
pertaining to the Target Group and the business of the Target Group as will be found
in this Circular);
(k) The execution of the legally binding agreement for the Proposed Disposal;
(l) The Company being free from all liabilities, contingent or otherwise, save for:
(i) costs and expenses incurred in the ordinary course of the Company’s business;
(ii) the usual administrative and operational costs and expenses for the
maintenance of the Company as a company listed on the Mainboard of the
SGX-ST prior to completion of the Proposed Listing Transfer;
(iii) the usual administrative and operational costs and expenses for the
maintenance of the Company as a company listed on the Catalist board of the
SGX-ST upon completion of the Proposed Listing Transfer; and
(iv) the costs and expenses in connection with the proposed transactions
contemplated in the Sale and Purchase Agreement and/or in connection with
the acquisition of the Sale Shares and other transaction costs;
(m) The Target Group meeting and complying with all the requirements for listing on the
Catalist;
(n) The receipt of a notification by the SGX-ST confirming that it has no further
comments to the Company’s draft Shareholders’ circular prepared in relation to the
Company’s acquisition of the Sale Shares and the compliance by the Company of all
the conditions which may be imposed by the SGX-ST in connection thereto; and
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
41
(o) Approval in-principle being received from the SGX-ST for the Proposed Acquisition,
the Proposed Listing Transfer and the Proposed Disposal and such other corporate
action(s) in connection with the Proposed Acquisition, the Proposed Listing Transfer
and the Proposed Disposal, as may be necessary, and where such approval is
obtained subject to any conditions, such conditions being reasonably acceptable to
the Vendors and the Company as confirmed by such parties.
As at the Latest Practicable Date, save for the conditions precedents set out in Section
3.4.3(a), (f), (g) and (h) above, the Conditions Precedent have been satisfied or waived by
the relevant parties. As announced by the Company on 12 December 2016, the Company
and the Vendors have agreed to waive the Condition Precedent in relation to completion
of the Proposed Capital Reduction. This is to facilitate the Completion of the Proposed
Acquisition. As the Proposed Capital Reduction is subject to certain requirements (as set
out in Section 7 of the VGO Letter entitled “Proposed Capital Reduction”, such as the six
(6)-week creditor objection period), the expected completion of the Proposed Capital
Reduction is around March 2017. As such, the waiver of the completion of the Proposed
Capital Reduction as a Condition Precedent to the Proposed Acquisition will allow for
Completion to take place around January 2017. For the avoidance of doubt, the approval
of Shareholders on the Proposed Capital Reduction remains as a Condition Precedent as
set out in Section 3.4.3(g)(iv) above. Upon Completion, the Company shall complete the
Proposed Capital Reduction as soon as practicable.
3.4.4. Long Stop Date
If any of the Conditions Precedent is not fulfilled or waived by mutual consent of the parties
by the date falling 12 months from the date of the Sale and Purchase Agreement or such
later date as the Company and the Vendors shall determine in their discretion, the Sale
and Purchase Agreement shall cease and determine and (save as provided in the Sale
and Purchase Agreement, or for any antecedent breach of the Sale and Purchase
Agreement) none of the parties shall have any claim against any other party for costs,
damages, compensation or anything whatsoever.
3.4.5. Structure of the Enlarged Group
Sky Win Management Consultancy Pte. Ltd.
VGO Corporation Limited
(to be renamed as Hatten Land Limited)
Hatten International
Pte. Ltd.
Fuyuu Resources
Sdn. Bhd.
Fuyuu Ventures
Sdn. Bhd.
Fuyuu Group
Sdn. Bhd.
Gold Mart
Sdn. Bhd.
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
42
3.5. Reverse Take-Over Transaction
As announced by the Company on 6 September 2016, the Proposed Acquisition is
governed by the rules in Chapter 10 of the Listing Manual. Based on the audited
consolidated financial statements of the Group for FY2016 and the management accounts
of the Target Group for FY2016, the relative figures in respect of the Proposed Acquisition
computed on the bases set out in Rule 1006 of the Listing Manual are as follows:
Rule 1006 Bases Percentage (%)
(a) Net asset value of the assets to be disposed of,
compared with the Group’s net asset value(1)
Not applicable(1)
(b) Net profits(2) of approximately S$33,176,000(3)
attributable to the Sale Shares, compared with the
Group’s net loss of approximately S$9,273,000 for
FY2016
Not meaningful
(c) The Purchase Consideration of S$386,000,000,
compared with the Company’s market capitalisation of
approximately S$17,368,952 as at 29 August 2016,
being the last market day on which the Company’s
shares (“Shares”) were traded on the Mainboard of the
SGX-ST immediately preceding the date of the
Supplemental Agreement(4)
2,222.4%
(d) The number of Consideration Shares for the Proposed
Acquisition(5), compared with the number of equity
securities previously in issue
1,285.5%
(e) The aggregate volume or amount of proved and probable
reserves to be disposed of, compared with the aggregate
of the Group’s proved and probable reserves
Not applicable(6)
Notes:
(1) This is not applicable to an acquisition of assets.
(2) Under Rule 1002(3) of the Listing Manual, “net profits” means profit or loss before income tax, minority
interests and extraordinary items. The respective net profits of the Target and the Group are based on their
respective audited net profits for their respective financial year ending in 2016.
(3) Based on the profit before tax of the Target Group for FY2016 of approximately RM96,441,000 and the
average exchange rate as at 31 March 2016 of RM1: S$0.344 as set out in the annual report of the
Company for the Company’s financial year ended 31 March 2016.
(4) The market capitalisation of the Company is calculated on the basis of 92,388,045 Shares in issue
(excluding treasury shares), and the volume-weighted average price of S$0.188 for such Shares
transacted on 29 August 2016, being the last market day on which Shares were traded immediately
preceding the date of the Supplemental Agreement.
(5) Based on the issue of 1,187,692,308 Consideration Shares at the Issue Price.
(6) This is not applicable as the Proposed Acquisition is not an acquisition of mineral, oil or gas assets.
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
43
As the relative figures computed on the bases set out in Rules 1006(c) and 1006(d) of the
Listing Manual exceed 100% and given that the Completion will result in a change in
control of the Company, the Proposed Acquisition is classified as a “Reverse Take-over”
and shall be conditional upon, among other things, the approval of Shareholders at the
EGM to be convened pursuant to Rule 1015 of the Listing Manual.
3.6. Risk Factors
Shareholders should carefully consider and evaluate each of the material risk factors
relating to the ownership of the Shares as described below, together with all of the other
information set forth in this Circular (and the warning regarding forward looking statements
in this Circular under “Cautionary Note on Forward Looking Statements”). Shareholders
should also note that the material risk factors relating to the Target Group as described in
Section 27 of the Target Letter entitled “Risk Factors Relating to the Target Group” will
constitute the material risk factors relating to the Enlarged Group following Completion.
Concentration of control
The Vendors will obtain majority control over the Company after Completion, which will
enable the Vendors to influence the outcome of matters submitted to Shareholders for
approval. As a result, the Vendors will be able to exercise significant influence over all
matters requiring Shareholders’ approval, including the election of directors and the
approval of significant corporate transactions except where they are required by the
Listing Manual, or such other applicable laws, to abstain from voting. The Vendors will also
effectively have veto power with respect to any Shareholder action or approval requiring
a special resolution. Such concentration of ownership will place the Vendors in a position
to significantly affect corporate actions in a manner that could conflict with the interests of
public Shareholders and may also have the effect of delaying, preventing or deterring a
change in control of the Company, which may otherwise have benefited the public
Shareholders.
Sale of Shares by the Vendors
Following the expiry of the moratorium period, all Shares owned by the Vendors and/or
their nominees will be eligible for sale in the open market, subject to applicable securities
laws and regulations. The market price of the Shares could decline as a result of the sales
of such Shares in the market. These sales, or the possibility that these sales may occur,
might also make it more difficult for the Company to issue new securities in the future at
a time and price that it deems appropriate.
Additional funds raised through issuance of new shares or loans for the Enlarged
Group’s future growth will dilute Shareholders’ equity interest or may limit their
ability to pay dividends
The Enlarged Group expects to incur significant capital expenditure in the future and
therefore may require additional financing which may not be available to the Company.
The raising of additional capital may also dilute your ownership in the Company.
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
44
The Enlarged Group may need to raise additional funds in the future to finance its
expansion or for new developments in relation to its existing operations or new
acquisitions. If additional funds are raised through the issuance of new equity or
equity-linked securities other than on a pro rata basis to the then-existing Shareholders,
the percentage ownership of Shareholders may be reduced and Shareholders may thus
experience dilution.
The Enlarged Group cannot however, ensure that its profitability will increase significantly
or that it will not incur losses after its capital expenditure. The Enlarged Group has
identified plans as described in Section 21.3 of the Target Letter entitled “Business
Strategies and Future Plans”. In addition, the Enlarged Group may chance upon other
opportunities to grow its business. Under such circumstances, it may need to obtain
additional debt or equity financing to fund its future capital expenditures. Additional equity
financing may result in dilution to the Shareholders. Additional debt financing may be
required, which if obtained, may limit the Enlarged Group’s ability to pay dividends or
require it to seek consents from the relevant financial institutions or lenders, if necessary,
for the payment of dividends, increase its vulnerability to general adverse economic and
industrial conditions, limit its ability to pursue its growth plan and/or require it to dedicate
a substantial portion of its cash flow from operations to payments of its debt, thereby
reducing the availability of its cash flow to fund capital expenditures, working capital and
other general corporate purposes and limit its flexibility in planning for, or reacting to,
changes in its business and industries.
The Enlarged Group cannot ensure that it will be able to secure additional funding on
terms that are acceptable to it when required to meet its business requirements and if that
is so, it may not be able to fully implement its plans or respond to competitive pressures
or unanticipated requirements, in which case, its business results would suffer.
The Enlarged Group may not be able to pay dividends in the future
The Enlarged Group’s ability to declare dividends to Shareholders in the future will be
contingent on its future financial performance and distributable reserves of the Company.
This is in turn dependent on its ability to implement its future plans, and on regulatory,
competitive and technical factors and other factors such as general economic conditions,
demand for and selling prices of the Enlarged Group’s products and services and other
factors exclusive to the property development industry. Any of these factors could have a
material adverse effect on the Enlarged Group’s business, financial position and results of
operations, and hence there is no assurance that the Enlarged Group will be able to pay
dividends to Shareholders after the completion of the Proposed Transactions.
Further, in the event that the Enlarged Group is required to enter into any loan
arrangements with any financial institutions, covenants in the loan agreements may also
limit when and how much dividends the Enlarged Group can declare and pay out.
Protection afforded to the Shareholders under Singapore laws is limited as
substantially all of the Target Group’s assets and operations are located in Malaysia
Upon Completion, substantially all of the Enlarged Group’s assets and operations will be
located in Malaysia and will therefore be subject to the relevant laws of Malaysia. As a
result, it may be difficult for investors to effect service of process, or to enforce a judgment
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
45
obtained in Singapore against the Target Group or any such persons. In particular,
judgments of a Singapore court may not be enforceable in Malaysia or such other relevant
foreign jurisdiction. It may also be difficult for investors to take legal action in a foreign
jurisdiction and the costs of bringing such an action may be prohibitive.
Existing Shareholders will face immediate and substantial dilution and may
experience future dilution to shareholdings
Completion will result in immediate dilution to the shareholdings of the existing
Shareholders as a result of the allotment and issuance of the Consideration Shares to the
Vendor and/or its designated nominees.
The Company will also undertake the Proposed Compliance Placement to satisfy the
public float requirement of the Catalist Rules, which will lead to further dilution of the
existing Shareholders’ shareholding in the Company.
The Company may also issue new shares or convertible securities, share options or share
awards under any employee share schemes that may be implemented after Completion.
This may lead to further dilution to the shareholdings of the existing Shareholders.
The Share price may be volatile, which could result in substantial losses for
investors in the Shares after Completion
The market price of the new Shares may fluctuate significantly and rapidly as a result of,
among other things, the following factors, some of which are beyond the control of the
Company and the Enlarged Group:
(a) the success or failure of the Enlarged Group’s management team in implementing
business and growth strategies;
(b) announcements by the Company of significant contracts, acquisitions, strategic
alliances or capital commitments;
(c) changes in the Enlarged Group’s operating results;
(d) involvement in litigation;
(e) any negative publicity on the Enlarged Group;
(f) unforeseen contingent liabilities of the Enlarged Group;
(g) addition or departure of key personnel;
(h) fluctuations in share prices of companies with similar business to the Company that
are listed in Singapore;
(i) differences between the actual financial operating results of the Enlarged Group and
those expected by investors;
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
46
(j) foreign exchange fluctuations and translations; and
(k) general economic and stock market conditions.
The price of the Shares may, in some instances, fluctuate based upon factors that have
little or nothing to do with the Company, and these fluctuations may materially affect the
price of its Shares.
The Target Group’s operating results fluctuate from period to period, and such
fluctuations make it difficult to predict its future performance, which may vary
significantly from period to period
As the Target Group derives its revenue principally from the sale of properties developed
by it, its operating results may vary significantly from period to period. The Target Group’s
contracted sales amount derived from the sale of properties in any given period depends
on (i) the number of property development projects and the amount of gross floor area
available for sale as completed properties, and (ii) the underlying demand for such gross
floor area available for sale. According to the Target Group’s accounting policies, its
recognised revenue mainly depends on the project progress and its contracted sales
amount mainly depends on the number and amount of projects which have obtained
permits. Periods in which it delivers properties with a higher aggregate gross floor area
typically generate higher levels of revenue. However, the Target Group may not have a
smooth distribution of recognised revenue and contracted sales amount over different
periods of the year due to a combination of factors, which include the overall delivery
schedules of its projects, the market demand for its properties, the timing of the sale of
properties that it has developed and any fluctuation in costs such as land costs and
construction costs.
Consequently, the Target Group’s operating results for any given period may not be
indicative of the actual demand for its properties or the sales achieved during such period.
The Target Group’s revenue and profit during any given period generally reflect property
purchase decisions made by purchasers at some time in the past. As a result, the Target
Group’s operating results are not necessarily indicative of results that may be expected for
any future period and may lead to fluctuations in the price of the Shares.
Negative publicity involving any of the Proposed New Directors, Proposed New
Executive Officers or substantial Shareholders
Any negative publicity or announcement relating to any of the Proposed New Directors,
Proposed New Executive Officers or substantial Shareholders following the Completion
may adversely affect the market perception of the Enlarged Group or performance of the
Share price, whether or not it is justifiable. As at the Latest Practicable Date, there has
been no negative publicity or announcement relating to any of the Proposed New
Directors, Proposed New Executive Officers or substantial Shareholders.
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
47
Goodwill may arise and the impairment of goodwill may materially affect the
financials of the Enlarged Group
If goodwill arises from the Proposed Acquisition, the impairment of goodwill in subsequent
financial periods may materially affect the income statement and financial position of the
Enlarged Group. Upon Completion, the Proposed Acquisition may result in goodwill being
recognised in the financial statements of the Enlarged Group for FY2017. The goodwill
represents an excess of the consideration transferred arising from the Proposed
Acquisition over the fair values of the net identifiable assets and liabilities. The actual
goodwill will be determined and will be accounted for in accordance with the accounting
policies of the Enlarged Group. The accounting policies also require the goodwill to be
tested for impairment on an annual basis or more frequently if there is indication of
impairment. This assessment may lead to an impairment charge to be recorded in the
income statements of the Enlarged Group in FY2017 or subsequent financial periods. Any
impairment charge against the goodwill could have a material negative impact on the
profits of the Enlarged Group to be reported in respect of FY2017 or subsequent financial
periods.
The Enlarged Group may be susceptible to fluctuation in foreign exchange rates
that could result in the Enlarged Group incurring foreign exchange losses
After Completion, it is expected that the revenue of the Enlarged Group will be mainly in
RM while purchases and operating expenses will be in the local currencies of the countries
of operation. To the extent that its revenue, purchases and operating expenses are not
naturally matched in the same currency and to the extent that there are timing differences
between invoicing and collection/payment, the Enlarged Group may be exposed to
adverse fluctuation in foreign exchange rates.
The reporting currency of the Company is in S$. In contrast, the functional currency of the
Target Group is in RM. The financial statements of any entity whose functional currency
is not RM will be translated into RM for consolidation. Any material fluctuation in foreign
exchange rates will result in translation gains or losses on consolidation and such
translation gains or losses will be recorded as translation reserves or deficits as part of
shareholders’ equity.
The United Kingdom’s withdrawal from the European Union (“Brexit”) could impair
financial markets and global economic growth which may lead to volatility and
fluctuations in Share prices
The economic and political uncertainties following the United Kingdom (“UK”)’s decision to
leave the European Union (“EU”) in June 2016 have had an immediate impact on global
currencies and stock markets. Although the stock markets have since recovered, there
may be repeated bouts of volatility in financial markets as Brexit is debated and negotiated
between the UK and the EU. Following this change in political landscape, there will also
be inevitable, but currently unknown, changes in underlying laws, regulations, agreements
and/or controls governing the UK and the EU. Such uncertainties will likely reduce
investments and economic growth in the UK and to some extent in Europe, which may
result in a subdued global economic outlook for the next few years and loss of market
confidence.
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
48
Although Brexit is not expected to have any significant adverse effects on the Enlarged
Group, the Enlarged Group is not insulated from volatility in the financial markets and
there is no assurance that the Enlarged Group will not be affected by global economic
uncertainties or other unanticipated consequences of Brexit. The occurrence of such
events may cause the market price of the Shares to fluctuate significantly and/or rapidly
which could result in substantial losses for investors in the Shares and adversely affect the
Enlarged Group’s business, results of operations and financial condition.
Foreign Shareholders may not be permitted to participate in future rights issues or
other security offerings by the Company
As the distribution of any offering information statement or document may be prohibited or
restricted (either absolutely or subject to various relevant securities requirements,
whether legal or administrative, being complied with) in jurisdictions outside of Singapore
under the relevant securities laws of those jurisdictions, for practical reasons and in order
to avoid any violation of the securities legislation applicable in countries other than in
Singapore where Shareholders may have their registered addresses (“Foreign
Shareholders”), any offering information statement or document issued by the Company
will not be despatched to Foreign Shareholders. Accordingly, Foreign Shareholders will
not be entitled to participate in any rights issues or security offerings which require the
Company to issue such accompanying offering information statement or document.
4. THE PROPOSED COMPLIANCE PLACEMENT
4.1. Proposed Compliance Placement
Under Rule 724 of the Catalist Rules, the SGX-ST may suspend trading of the Shares in
the Company if less than the required 10.0% of the Shares is held in the hands of the
public. The SGX-ST may allow the Company a period of three (3) months, or such longer
period as the SGX-ST may agree, to raise the percentage of Shares in public hands to at
least 10.0%.
In addition, the Company is required to comply with Rule 1015(3)(a) read with Rule
406(1)(a) of the Catalist Rules, where at least 15.0% of the issued share capital of the
Company must be held in the hands of at least 200 public Shareholders.
Upon Completion but prior to the Proposed Compliance Placement, approximately 7.2%
of the Shares shall be considered as public shareholdings and the number of public
shareholders is expected to be more than 200 for the purpose of calculating the free float
requirement stipulated under the Catalist Rules.
As such, upon Completion, the public float falls below the required threshold in the Catalist
Rules. In order to meet the public float requirement, the Company is proposing to
undertake the Proposed Compliance Placement within three (3) months from the date of
Completion. Trading of the Shares on the SGX-ST will be suspended upon Completion.
The suspension will continue until the listing of the Compliance Placement Shares.
The Proposed Compliance Placement will comprise the issue and sale of up to
172,400,000 Shares and will include the proposed issue of up to 123,100,000 new Shares
and the proposed sale of up to 49,300,000 Shares by the Vendors and/or their nominee.
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
49
Pursuant to Rule 1015(3)(c) of the Catalist Rules, the issue price of the Compliance
Placement Shares shall not be less than S$0.20. In addition, Rule 811(1) of the Catalist
Rules requires that issue of shares must not be priced at more than a 10.0% discount to
the weighted average price for trades done on the SGX-ST for the full market day on which
the placement or subscription agreement is signed. Rule 811(3) provides that Rule 811(1)
is not applicable if specific Shareholders’ approval is obtained for the issuance of shares
at a greater discount.
In order for the Company to comply with the rules set out above and in view of the
uncertain market conditions, the Company is seeking Shareholders’ approval for the
Company to issue the new Compliance Placement Shares at such discount to be
determined by the Directors based on market conditions and demand during the
book-building process, in their absolute discretion (in which case the discount may be
more than 10.0%), provided that such issue price shall not be less than S$0.20. The above
approval from Shareholders for the Proposed New Directors to determine the issue price
for the Compliance Placement Shares at their absolute discretion (in which case the
discount to the share price of the Company may be more than 10.0%) is necessary to
ensure smooth execution of the Proposed Compliance Placement and to avoid prolonged
suspension of the trading of the Shares. The issue price (and the relevant discount) for the
Compliance Placement Shares will be determined through a book-building process by the
placement agent to be appointed, taking into consideration, among other things, the
then-prevailing market conditions and the response from investors pursuant to investors’
road shows to be conducted.
In the event of unforeseen circumstances and the Compliance Placement Shares cannot
be placed out at not less than S$0.20 per Compliance Placement Share and/or the new
Compliance Placement Shares are to be placed at such discount higher than 10.0%, the
Company will seek Shareholders’ approval at a separate extraordinary general meeting to
be convened, to approve a consolidation ratio to meet the requirement under Rule
1015(3)(c) of the Catalist Rules and/or to approve the discount to the issue price of the
Compliance Placement Shares. In such a situation, the Company will provide
Shareholders an updated circular containing the necessary disclosures.
The Company will not issue securities to transfer a controlling interest in the Company
without prior approval of Shareholders at a general meeting.
4.2. Use of Proceeds from the Proposed Compliance Placement
The Company expects to raise aggregate net proceeds of up to approximately S$35.0
million, after deducting estimated expenses, from issuance and allotment of up to
123,100,000 new Shares at the Issue Price of S$0.325 to raise gross proceeds of up to
approximately S$40.0 million as part of the Proposed Compliance Placement. The
Proposed New Directors intend to apply such net proceeds to fund general corporate
activities and for working capital requirements.
For illustrative purposes only, the Company intends to utilise the net proceeds from the
Proposed Compliance Placement in the following manner:
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
50
Use of proceeds S$(’000)
Estimated amount
allocated for each
dollar of the gross
proceeds from the
Proposed Compliance
Placement (cents)
To fund general corporate activities
including, but not limited to,
acquisitions, joint ventures and/or
strategic alliances 20,000 50.0
General working capital 15,000 37.5
Net Proceeds 35,000 87.5
Listing and processing fees
Professional fees and expenses(1) 2,500 6.3
Placement commission 1,400 3.5
Miscellaneous expenses 1,100 2.7
Gross Proceeds 40,000 100.0
Note:
(1) This includes fees paid to professionals including financial advisers and sponsor, legal advisers, tax
advisers, auditors, valuers and public relations consultants for the Proposed Transactions.
Pending the deployment of the net proceeds as aforesaid, the funds will be placed in
short-term deposits with financial institutions, used to invest in short-term money market
instruments and/or used for working capital requirements as the Proposed New Directors
may deem appropriate.
The Company will make periodic announcements as and when the proceeds from the
Proposed Compliance Placement are materially disbursed and whether such a use is in
accordance with the stated use and in accordance with the percentage allocated in this
Circular. Where there is any material deviation from the stated use of proceeds, the
Company will announce the reasons for such deviation. The Company will also provide a
status report on the use of the net proceeds in its annual report. Any material deviation in
the use of the net proceeds will be subject to the Catalist Rules and appropriate
announcements will be made by the Company on SGXNET.
4.3. Further Information
The Company will make the necessary follow-up announcements as and when required
and/or as and when material developments arise in respect of the Proposed Compliance
Placement.
If applicable, a circular and/or an offer information statement will be despatched to
Shareholders in due course.
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
51
5. THE PROPOSED LISTING TRANSFER
5.1. Background
Upon Completion, it is proposed that the Company will transfer the listing of its Shares
from the Mainboard to the Catalist. The Proposed Listing Transfer is a condition precedent
to the Proposed Acquisition. UOB Kay Hian Private Limited will be appointed as the
continuing sponsor of the Company following Completion.
5.2. Rationale for the Proposed Listing Transfer
5.2.1. Changes to Watch-List Requirements and Implementation of the Minimum Trading Price
Requirement
The Company refers to its announcement to Shareholders dated 3 March 2016 in relation
to its inclusion on the watch-list due to the failure to meet the minimum trading price
requirement of S$0.20 as a continuing listing requirement for issuers listed on the
Mainboard (the “MTP Requirement”). The MTP Requirement was introduced by the
SGX-ST on 2 March 2015 and came into effect on 2 March 2016 after a one (1) year
transition period. It was further announced by the SGX-ST on 2 December 2016 that a
market capitalisation test will be added to the MTP Requirement. The MTP Requirement
only applies to Mainboard issuers and not Catalist issuers. Mainboard issuers who do not
comply with the MTP Requirement will enter the watch-list. Mainboard issuers who may be
unable to meet the MTP Requirement can consolidate their shares to increase their share
prices or consider transferring their listing to the Catalist. The Catalist is a sponsor-
supervised regime and has no MTP Requirement.
The watch-list criteria was adjusted to rationalise the current watch-list criteria with the
MTP Requirement.
Previously, an issuer would be placed on the watch-list of the SGX-ST if it records:
(a) pre-tax losses for the three (3) most recently completed consecutive financial years
(based on the latest announced full year consolidated accounts, excluding
exceptional or non-recurrent income and extraordinary items); and
(b) an average daily market capitalisation of less than S$40 million over the last 120
market days on which trading was not suspended or halted. For the purpose of this
rule, trading is deemed to be suspended or halted if trading is ceased for a full market
day.
With effect from 2 December 2016, an issuer will be placed on the watch list of the
SGX-ST, under either of the following:
(a) if it records pre-tax losses for the three (3) most recently completed consecutive
financial years (based on audited full year consolidated accounts); and an average
daily market capitalisation of less than S$40 million over the last six (6) months; or
(b) if it records a volume-weighted average price of less than S$0.20 and an average
daily market capitalisation of less than S$40 million over the last six (6) months,
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
52
(the “Watch-List Requirements”).
The Company’s average daily market capitalisation over the last six (6) months preceding
the Latest Practicable Date has been approximately S$18.5 million, below the threshold of
S$40 million. The Company’s market capitalisation based on its last transacted price per
Share on 13 December 2016 was S$16.6 million.
The highest and lowest share prices of the Company over the 12 month period preceding
the Latest Practicable Date are S$0.22 and S$0.054 respectively. The last transacted
price per Share on 13 December 2016 (being the last full market day on which Shares
were traded prior to the Latest Practicable Date) was S$0.18. This is below the threshold
of S$0.20 per share.
As such, based on the foregoing, if Shareholders’ approval is not obtained and the
Company remains listed on the Mainboard, the Company expects that it would have to
carry out substantive corporate actions (including, without limitation, share consolidation,
restructuring and business acquisitions) to raise its share price to meet the Watch-List
Requirements and the MTP Requirement.
5.2.2. Catalist as a More Conducive Platform
In addition to the absence of the MTP Requirement for listing on the Catalist, the Proposed
New Directors believe that the Catalist provides a more conducive platform for the
Enlarged Group for the purposes of fundraising and potential acquisitions and disposals
in the future.
5.3. Requirements for the Proposed Listing Transfer
A transfer of listing from the Mainboard to the Catalist is governed by Rule 410 of the
Catalist Rules. As set out below, subject to Shareholders’ approval for the Proposed
Listing Transfer, the Company will meet all the requirements for a transfer to the Catalist.
5.3.1. Rule 410(1) – Compliance with Rules 406(1), (2)(b), (3), (4) and 407(2) and (3)
Upon Completion and completion of the Proposed Compliance Placement, approximately
18.9% of the Shares will held in the hands of the public and the number of public
shareholders is expected to be more than 200. As such, the Company will fulfil the
requirements stipulated under the Catalist Rules in relation to Shareholding Spread and
Distribution by having at least 15.0% of the Company’s shares in the hands of the public
and more than 200 public shareholders.
The overall distribution of shareholdings is expected to provide an orderly secondary
market in the securities when trading commences, and is unlikely to lead to a corner
situation in the Shares. We will ensure that the subscription and allocation value of the
Shares for each investor is at least S$200 and will be based on an integral multiple of a
board lot.
The Company will comply with Rule 406(3) of the Catalist Rules in that:
(a) the Proposed New Directors and Proposed New Executive Officers of the Group have
the appropriate experience and expertise to manage the Enlarged Group’s business;
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
53
(b) nothing materially adverse has come to the attention of the Sponsor to suggest that
the Proposed New Directors, Proposed New Executive Officers and controlling
shareholders of the Enlarged Group do not have the character and integrity expected
of a listed issuer; and
(c) the Enlarged Group has at least two (2) non-executive directors who are independent
and free of any material business or financial connection with the Enlarged Group.
As Rule 406(4) of the Catalist Rules is not applicable in relation to reverse take-overs, the
Sponsor has provided the confirmation required in Appendix 10A of the Catalist Rules that
the Enlarged Group is suitable for listing and complies with the Catalist Rules.
Pursuant to Rule 407(2) of the Catalist Rules, in the reasonable opinion of the Proposed
New Directors, barring unforeseen circumstances and after taking into consideration the
Group’s internal resources, operating cash flow and present bank facilities, the working
capital available to the Enlarged Group is sufficient for its present requirements and for at
least 12 months after the Proposed Listing Transfer takes effect.
Pursuant to Rule 407(3) of the Catalist Rules, in the reasonable opinion of the Sponsor,
barring unforeseen circumstances and after taking into consideration the Group’s internal
resources, operating cash flow and present bank facilities, the working capital available to
the Enlarged Group is sufficient for its present requirements and for at least 12 months
after the Proposed Listing Transfer takes effect.
Accordingly, Rule 410(1) of the Catalist Rules will be complied with upon Completion and
completion of the Proposed Compliance Placement.
5.3.2. Rule 410(2) – The Company is sponsored and the Sponsor provides SGX-ST with a
completed Appendix 4D (Transfer Confirmation by Sponsor)
The Proposed New Directors proposes to appoint the Sponsor as the Company’s
continuing sponsor, subject to the Proposed Listing Transfer taking effect. The Sponsor
has provided SGX-ST with the completed Appendix 4D (Transfer Confirmation by
Sponsor) of the Catalist Rules.
Accordingly, Rule 410(2) of the Catalist Rules will be complied with upon Completion.
5.3.3. Rule 410(3) – The Company provides SGX-ST with a completed Appendix 4E (Applicant’s
Listing Agreement)
The Company has in its application to the SGX-ST for the Proposed Listing Transfer
provided SGX-ST with the completed Appendix 4E (Applicant’s Listing Agreement) of the
Catalist Rules.
Accordingly, Rule 410(3) of the Catalist Rules has been complied with.
5.3.4. Rule 410(4) – The Company’s Shareholders have approved the Proposed Listing Transfer
by special resolution
The Proposed Listing Transfer is subject to the approval of the Shareholders by way of
special resolution at the EGM, the notice of which is set out on page N-1 of this Circular.
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
54
Accordingly, subject to the approval of the Shareholders for the Proposed Listing Transfer
at the EGM, Rule 410(4) of the Catalist Rules will be complied with.
5.3.5. Rule 410(5) – The Company is in compliance with all applicable Mainboard Listing Rules
The Company confirms that it is in compliance with all applicable Mainboard listing rules.
Accordingly, Rule 410(5) of the Catalist Rules has been complied with.
5.4. Shareholders’ Approval
The Proposed Listing Transfer is subject to the approval of the Shareholders by way of a
special resolution to be tabled at the EGM.
5.5. Use of CPF Savings under the CPF Investment Scheme to Purchase Shares
Shareholders should note that CPF savings cannot be used to purchase shares that are
listed on the Catalist, except for companies that were migrated from SESDAQ to the
Catalist on 17 December 2007. If Shareholders approve the Proposed Listing Transfer at
the EGM and the Company transfers its listing to the Catalist, CPF account savings can
no longer be used to purchase Shares under the CPFIS. Shareholders who have
purchased Shares using their account savings under CPFIS can choose to hold or sell
their Shares or participate in corporate actions, subject to prevailing CPFIS rules and
limits for such Shares.
6. THE PROPOSED DISPOSAL
On 12 December 2016, the Company announced that it had entered into the Disposal
Agreement with the Purchasers for the Proposed Disposal.
The Purchasers are controlling shareholders and Directors of the Company. The Proposed
Disposal is an interested person transaction under Chapter 9 of the Listing Manual, which
requires approval of the Independent Shareholders under Rule 906 of the Listing Manual.
The Proposed Disposal also constitutes a major transaction under Rule 1014 of the Listing
Manual.
6.1. Rationale
As announced by the Company on 6 June 2016 and 6 September 2016, the Company
entered into the Sale and Purchase Agreement with the Vendors in relation to the
Proposed Acquisition. As a condition of the Sale and Purchase Agreement, the Company
is to undertake a disposal of all assets and liabilities of its Existing Business prior to
completion of the Proposed Acquisition. Accordingly, the Company is undertaking the
Proposed Disposal to fulfil the condition precedent to the Proposed Acquisition. As a result
of the Proposed Disposal and prior to Completion, the Company will cease to have any
operating business and become a cash company.
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
55
6.2. Salient Terms of the Proposed Disposal
6.2.1. Restructuring and Sale and Purchase of the Disposal Shares
As the Existing Business in Singapore is currently held by the Company directly, the
Company will be undertaking such restructuring (the “Disposal Restructuring”) to
transfer the Existing Business in Singapore to its wholly owned subsidiary, VGO
International. Upon completion of such restructuring, the Existing Business (in both
Singapore and Malaysia) will be held through VGO International and the Company’s
Malaysian subsidiary, WOS. VGO International and WOS are collectively known as the
“Disposal Companies”.
Upon completion of the Disposal Restructuring, the Company shall not own any assets or
have any liabilities, save for the net proceeds arising from the Proposed Disposal and
non-operational liabilities such as professional and audit and tax fees and corporate
expenses incurred or to be incurred by the Company (the “Non-Operational Liabilities”).
For the avoidance of doubt, assets owned by and liabilities of the Disposal Companies
after the Disposal Restructuring and the liabilities arising from the Disposal Restructuring
shall not constitute assets and liabilities of the Company. The Non-Operational Liabilities
shall not, collectively, exceed S$550,000.
On the terms and conditions of the Disposal Agreement, the Company shall sell, and the
Purchasers shall buy, the entire issued and paid-up share capital of the Disposal
Companies (the “Disposal Shares”) free from all encumbrances or third party interests
and together with all rights, benefits and entitlements attaching thereto as at the date of
completion of the Proposed Disposal and thereafter.
6.2.2. Consideration
The aggregate consideration payable by the Purchasers to the Company for the sale and
purchase of the Disposal Shares (the “Disposal Consideration”) shall be calculated as
follows:
Disposal Consideration = (Initial NTA + Property Revaluation Surplus) + S$550,000
provided always that the Disposal Consideration shall not fall below S$550,000.
On the date on which the approval of Independent Shareholders of the Company is
obtained for the Proposed Disposal, based on the EGM Balance Sheet, in order to
accurately reflect the latest financial position of the Disposal Companies, parties agree
that:
(a) if the Adjusted NTA exceeds the Initial NTA, the Disposal Consideration shall be
increased by an amount equal to such excess of the Adjusted NTA over the Initial
NTA; and
(b) if the Adjusted NTA is less than the Initial NTA, the Disposal Consideration shall be
reduced by an amount equal to such deficit of the Adjusted NTA below the Initial NTA.
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
56
For the avoidance of doubt, the Disposal Consideration shall not fall below S$550,000.
Prior to any adjustments as stated above, the Disposal Consideration shall be
S$2,300,000. For the purposes of calculating the Disposal Consideration, the WOS
Property Value is converted to Singapore dollars at a rate of RM3.003: S$1 based on such
exchange rate as at 21 October 2016 listed on Bloomberg(1).
The Disposal Consideration shall be fully satisfied in cash to be paid on the date of
completion of the Proposed Disposal, which will be on the same day as the date of
Completion of the Proposed Acquisition.
Note:
(1) The exchange rate of RM3.003: S$1 is extracted from published information by Bloomberg. Bloomberg has
not consented to the inclusion of the exchange rate quoted under this Section for the purposes of section
249 of the SFA and is thereby not liable for this exchange rate under sections 253 and 254 of the SFA. The
Board of Directors have included the above exchange rate in the proper form and context in this Circular
and have not verified the accuracy of these exchange rates.
6.2.3. Disposal Conditions Precedent
Completion of the Proposed Disposal is conditional upon the satisfaction (or waiver) of the
following:
(a) the completion of the Disposal Restructuring;
(b) the approval of Shareholders having been obtained at an EGM to be convened for the
Proposed Acquisition;
(c) the approval of Independent Shareholders having been obtained at an EGM to be
convened for the Proposed Disposal;
(d) the Disposal Restructuring, the Proposed Acquisition and the Proposed Disposal not
being prohibited by any statute, order, rule, regulation, directive or request
promulgated or issued after the date of the Disposal Agreement by any legislative,
executive or regulatory body or authority of Singapore or elsewhere, which is
applicable to any party;
(e) all other necessary corporate and regulatory approvals, consents, licences or
waivers (whether governmental, corporate or otherwise) for the transactions
described or contemplated herein having been obtained by the Purchasers and/or
the Company and not having been revoked or amended, and if such approval is
subject to any conditions, such conditions being acceptable to the party to whom
such approval applies, and if any condition is required to be satisfied by completion
of the Proposed Disposal, such condition being so satisfied; and
(f) all other consents and approvals required under any and all applicable laws for the
sale and purchase of the Disposal Shares and to give effect to the transactions
contemplated in the Disposal Agreement (including, without limitation, such waivers
as may be necessary of terms which would otherwise constitute a default under any
instrument, contract, document or agreement to which the Company or the Disposal
Companies is a party or by which the Company or the Disposal Companies are a
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
57
party to or by which the Company or the Disposal Companies or its or their respective
assets are bound) being obtained and where any consent or approval is subject to
conditions, such conditions being satisfactory to the Purchasers,
(collectively, the “Disposal Conditions Precedent”).
The Parties agree that the Disposal Conditions Precedent may be waived, in whole or in
part and conditionally or unconditionally, by mutual agreement between the Parties.
The Parties shall use their best endeavours to ensure that the Disposal Conditions
Precedent set out above shall be fulfilled on or before the Long-Stop Date (as defined
below), and where necessary, provide all reasonable assistance to the other Party in
procuring that the Disposal Conditions Precedent are fulfilled.
Shareholders should note that if the Proposed Disposal is not completed, and as
completion of the Proposed Disposal is a condition precedent of the Proposed Acquisition,
the Proposed Acquisition will not be completed.
6.2.4. Disposal Long-Stop Date
If any of the Disposal Conditions Precedent is not fulfilled or waived by the relevant Party
by the long-stop date of the Sale and Purchase Agreement (or such other date and time
as the Parties may agree in writing) (the “Disposal Long-Stop Date”), the Disposal
Agreement shall automatically terminate and (save as provided in the Disposal
Agreement, or for any antecedent breach of the Disposal Agreement) none of the Parties
shall have any claim against any other Party for costs, damages, compensation or
anything whatsoever.
6.2.5. Financial Information on the Proposed Disposal
S$’000
Net asset value of the Disposal Shares 1,470
Excess of the net proceeds of the Proposed Disposal over the
book value of the Disposal Shares 470(1)
Net gain attributable to the Disposal Shares 830(2)
Notes:
(1) The net proceeds of S$1,940,000 was derived from taking the Disposal Consideration of S$2,300,000
minus estimated disposal expenses of approximately S$360,000.
(2) Based on the consolidated net asset value of the Disposal Shares as at 31 March 2016 of S$1,469,741
as compared to the Disposal Consideration of S$2,300,000.
6.3. Information on the Disposal Companies and the Purchasers
Based on the latest audited consolidated financial statements of the Group for the financial
year ended 31 March 2016, the book value and NTA value of the Disposal Companies was
S$1,469,741.
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
58
WOS
WOS is a private company incorporated in Malaysia on 3 January 1996. As at the Latest
Practicable Date, WOS has an issued and paid-up share capital of RM1,000,000
consisting of 1,000,000 ordinary shares. The entire issued and paid-up share capital of
WOS is legally and beneficially owned by the Company. The principal business of WOS is
the marketing and retailing of sporting goods, equipment, footwear, apparel and
accessories in Malaysia. Based on the latest audited consolidated financial statements of
the Group for the financial year ended 31 March 2016, the book value and net tangible
asset value of WOS was S$1,707,395. As WOS also owns the WOS Property, a valuation
has been conducted by Nawawi Tie Leung Property Consultants Sdn. Bhd. on the WOS
Property as at 21 October 2016 and valued the market value of the WOS Property at
RM4,000,000.
VGO International
VGO International is a private company incorporated in Singapore on 20 October 2016. As
a condition to the Proposed Disposal, the Company has undertaken to carry out the
Disposal Restructuring that will result in VGO International taking over all the assets and
liabilities of the Existing Business in Singapore. As at the Latest Practicable Date, VGO
International has an issued and paid-up share capital of S$2,000,000 consisting of
2,000,000 ordinary shares. The entire issued and paid-up share capital of VGO
International is legally and beneficially owned by the Company.
Purchasers
The Purchasers, Goh Ching Huat, Steven, Goh Ching Wah, George and Goh Ching Lai,
Joe, are brothers.
Goh Ching Huat, Steven is the Group Executive Chairman and Chief Executive Officer of
the Company. He is responsible for the overall strategy and direction of the Group’s
business. As at the Latest Practicable Date, Goh Ching Huat, Steven holds 20,906,757
Shares, representing 22.6% of the Existing Share Capital.
Goh Ching Wah, George is an Executive Director of the Company. He is responsible for
the overall Group’s corporate finance, strategic planning and business development. As at
the Latest Practicable Date, Goh Ching Wah, George holds 20,136,170 Shares,
representing 21.8% of the Existing Share Capital.
Goh Ching Lai, Joe is an Executive Director of the Company. He is responsible for the
overall Group’s marketing activity strategy, branding development and investors relations.
As at the Latest Practicable Date, Goh Ching Lai, Joe holds 16,872,441 Shares,
representing 18.3% of the Existing Share Capital.
The Purchasers are controlling shareholders of the Company and accordingly would, for
the purposes of Chapter 9 of the Listing Manual and the Proposed Disposal, be regarded
as “interested persons” of the Company.
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
59
Upon completion of the Proposed Acquisition, the Purchasers will step down from the
Board and their shareholdings in the Company will be diluted as follows:
Shareholders
Percentage shareholding
before the Proposed
Acquisition (%)
Estimated Percentage
shareholding after the
Proposed Acquisition and
prior to the Proposed
Compliance Placement (%)
Goh Ching Huat, Steven 22.6 1.6
Goh Ching Wah, George 21.8 1.6
Goh Ching Lai, Joe 18.3 1.3
6.4. Consent from the Securities Industry Council
As the Proposed Acquisition is conditional upon the Proposed Disposal, the Proposed
Disposal may constitute a special deal under Rule 10 of the Code. As announced by the
Company on 12 December 2016, the SIC has granted their consent to the Proposed
Disposal, provided that the IFA publicly states that in his opinion, the terms of the
Proposed Disposal are fair and reasonable.
SAC Capital Private Limited has been appointed as the IFA to the Independent Directors
in respect of the Proposed Whitewash Resolution and the Proposed Disposal, and to the
Audit and Risk Committee in respect of the Proposed IPT Mandate.
A relevant excerpt from the IFA Letter in relation to the Proposed Disposal is as follows:
“the Proposed Disposal (which terms are fair and reasonable) is on normal
commercial terms and is not prejudicial to the interests of the Company and the
Independent Shareholders. Accordingly, we advise the Independent Directors to
recommend the Independent Shareholders to vote in favour of the Proposed
Disposal.”
The IFA Letter, setting out the IFA’s advice in full, is reproduced in Appendix D to this
Circular entitled “Letter From SAC Capital Private Limited to the Independent Directors
and the Audit And Risk Committee of VGO Corporation Limited”.
6.5. Use of Proceeds
Subject to any adjustment of the Disposal Consideration in accordance with the Disposal
Agreement, the net proceeds arising from the Proposed Disposal is approximately
S$1,940,000 (after deducting estimated expenses of approximately S$360,000 from the
Proposed Disposal). The Company intends to utilise such proceeds for working capital
requirements. This additional working capital will be valuable in view of the Company’s aim
to acquire new businesses and undertake new investment opportunities in the future.
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
60
6.6. Directors’ Service Contracts
There are no persons who are proposed to be appointed as a Director of the Company in
connection with the Proposed Disposal. Accordingly, no service contract is proposed to be
entered into between the Company and any such person.
6.7. Chapter 9 of the Listing Manual
As stated in Section 6.3 of this Circular, the Purchasers are regarded as interested
persons of the Company for the purposes of Chapter 9 of the Listing Manual and the
Proposed Disposal. Therefore, the Proposed Disposal, being between the Company, an
“entity at risk”, and the Purchasers, constitutes an interested person transaction under
Chapter 9 of the Listing Manual.
The Disposal Consideration represents approximately 192.5% of the latest audited
consolidated NTA of the Group of S$1,195,000 as at 31 March 2016. As the value of the
Proposed Disposal is more than five percent (5.0%) of the Group’s latest audited NTA, for
the purposes of Chapter 9 of the Listing Manual, approval of the Independent
Shareholders is required for the Proposed Disposal.
Save for the Proposed Disposal and discounts on purchases between the Company and
Ossia World of Golf (M) Sdn. Bhd., a subsidiary of Ossia International Limited for the
amount of S$137,000, there are no other interested person transactions entered into by
the Company for the current financial year of the Company ending 31 March 2017 up to
the Latest Practicable Date. The Purchasers are also the controlling shareholders and
directors of Ossia International Limited.
Accordingly, pursuant to Rules 917(4)(a)(ii) and 921(4)(a) of the Listing Manual, SAC
Capital Private Limited has been appointed as the IFA to the Independent Directors in
respect of the Proposed Whitewash Resolution and the Proposed Disposal, and to the
Audit and Risk Committee in respect of the Proposed IPT Mandate.
The IFA Letter, setting out the IFA’s advice in full, is reproduced in Appendix D to this
Circular entitled “Letter From SAC Capital Private Limited to the Independent Directors
and the Audit and Risk Committee of VGO Corporation Limited”.
The Purchasers will abstain from voting on the resolution approving the Proposed
Disposal, and from accepting any appointments as proxies unless specific instructions as
to voting are given at the EGM.
6.8. Chapter 10 of the Listing Manual
Chapter 10 of the Listing Manual governs the continuing listing obligations of a listed
company in respect of acquisitions and realisations of assets, including securities and
business undertakings. If any of the relative figures as computed on the bases set out in
Rule 1006 of the Listing Manual exceeds 20.0%, such transaction is classified as a major
transaction.
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
61
Based on the latest announced consolidated financial results of the Group for the financial
period ended 30 September 2016, the relative figures for the Proposed Disposal computed
on the bases set out in Rule 1006 of the Listing Manual are as follows:
Rule 1006 Bases Percentage (%)
(a) Net asset value of the Disposal Shares to be disposed
of, compared with the Group’s net asset value of
S$408,015
185.4
(b) Net loss of approximately S$27,135 attributable to the
assets disposed of, compared with the Group’s net
loss of approximately S$244,282
11.1
(c) Aggregate value of the consideration received,
compared with the Company’s market capitalisation of
S$16,629,848(1)
9.5
(d) Number of equity securities issued by the Company as
consideration for an acquisition, compared with the
number of equity securities previously in issue
Not applicable(2)
(e) Aggregate volume or amount of proved and probable
reserves to be disposed of, compared with the
aggregate of the Group’s proved and probable
reserves
Not applicable(3)
Notes:
(1) The market capitalisation of the Company is calculated on the basis of 92,388,045 Shares in issue
(excluding treasury shares) as at the date of the Disposal Agreement, and the volume-weighted average
price of S$0.18 for such Shares transacted on 7 December 2016, being the last market day on which
Shares were traded immediately preceding the date of the Disposal Agreement.
(2) This is not applicable as the Proposed Disposal pertains to a disposal of assets.
(3) This is not applicable as the Proposed Disposal is not a disposal of mineral, oil or gas assets.
As the relative figures computed on the basis set out in Rule 1006(a) of the Listing Manual
exceed 20.0%, the Proposed Disposal constitutes a major transaction under Rule 1014 of
the Listing Manual and is accordingly conditional upon, among other things, approval of
Shareholders being obtained at the EGM.
7. THE PROPOSED CAPITAL REDUCTION
7.1. Introduction
The Company is proposing to undertake the Proposed Capital Reduction to write off part
of the Accumulated Losses of the Company amounting to S$27,880,753 as at
30 September 2016.
It is a requirement under the Companies Act that a company proposing to undertake a
capital reduction exercise should, among other things, obtain the approval of their
shareholders at a general meeting of shareholders by way of a special resolution, to be
tabled at such general meeting.
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
62
7.2. Details of the Proposed Capital Reduction
The Directors propose to carry out the Proposed Capital Reduction pursuant to section
78A read with section 78C of the Companies Act.
The Proposed Capital Reduction will be effected in the following manner:
(a) by reducing the share capital of the Company from S$27,884,753 to S$4,000 by the
cancellation of the share capital of the Company that has been lost or is
unrepresented by available assets to the extent of S$27,880,753; and
(b) thereafter by applying an amount equal to S$27,880,753 being the credit arising from
the cancellation of the share capital of the Company, towards the writing-off of part
of the Accumulated Losses.
7.3. Resultant Effect on the Share Capital of the Company
As at the Latest Practicable Date, the Company has a paid-up share capital of
S$27,884,753. Upon completion of the Proposed Capital Reduction, the Company will
have a paid-up share capital of S$4,000.
The Proposed Capital Reduction will reduce the Company’s Accumulated Losses as at
30 September 2016 by the cancellation of the share capital of the Company to the extent
of S$27,880,753.
There will be no change in the total number of issued Shares in the Company held by the
Shareholders immediately after the Proposed Capital Reduction, nor will the Proposed
Capital Reduction involve the payment to any Shareholders of any paid-up share capital
of the Company.
7.4. Rationale for the Proposed Capital Reduction
As described in Section 3.4.3 of this letter, completion of the Proposed Acquisition is
conditional upon the approval of the resolution relating to the Proposed Capital Reduction
at the EGM. The purpose of the Proposed Capital Reduction is to write off part of the
Accumulated Losses, with a view to restructuring the finances of the Company. This
serves to rationalise the balance sheet of the Company to reflect more accurately the
value of its underlying assets, and thus the financial position of the Company. In addition,
the Proposed Capital Reduction will facilitate future equity-related fund raising exercises
to recapitalise and strengthen the balance sheet of the Company. The Company would be
in a better position to retain profits and enhance its ability to pay future dividends, if
appropriate, if the Accumulated Losses are written off. The Directors will take into
consideration the present and future funding needs of the Company and Group before
declaring any dividends.
Pursuant to section 78C(2) of the Companies Act, the Company is not required to meet the
solvency requirements under section 78C(1)(b) of the Companies Act as the Proposed
Capital Reduction does not involve a reduction, payment or distribution of cash or other
assets by the Company, or a release of any liability owed to the Company.
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
63
7.5. Effective Date of the Proposed Capital Reduction
If no application is received from any creditor of the Company for the cancellation of the
resolution approving the Proposed Capital Reduction within six (6) weeks commencing
from the date of the resolution approving the Proposed Capital Reduction, the Company
will after the end of the aforesaid six (6) weeks and before the end of the eight (8) weeks,
beginning with the date of the resolution approving the Proposed Capital Reduction, lodge
the relevant documents required under sections 78E(2)(i) and (ii) of the Companies Act
with the Registrar, upon which the Proposed Capital Reduction will take effect.
The Company will thereafter announce and notify Shareholders of the effective date of the
Proposed Capital Reduction through a SGXNET announcement to be posted on the
SGX-ST website at http://www.sgx.com.
7.6. Conditions for the Proposed Capital Reduction
The Proposed Capital Reduction is subject to, among other things, the following:
(a) approval by the Shareholders of the special resolution for the Proposed Capital
Reduction at the EGM;
(b) compliance with the relevant publicity requirements as prescribed in the Companies
Act;
(c) no application having been made for the cancellation of the Shareholders’ resolution
approving the Proposed Capital Reduction by any creditor of the Company within the
timeframe prescribed in the Companies Act, or if such application was made, the
withdrawal or dismissal thereof by the judicial authorities; and
(d) the Company after the end of six (6) weeks (but before the end of eight (8) weeks)
beginning with the date on which the Proposed Capital Reduction was approved by
the Shareholders, lodging with the Registrar –
(i) a statement made by the Directors confirming that the requirements under
section 78C(1)(c) and section 78C(3) (if applicable)(1) have been complied with,
and that no application for cancellation of the resolution has been made; and
(ii) a notice containing the Proposed Capital Reduction information.
The Company will make an immediate announcement on SGXNET to update
Shareholders if any of the conditions for the Proposed Capital Reduction as set out in this
section is not met.
Note:
(1) Section 78C(3) of the Companies Act is not applicable in relation to the Proposed Capital Reduction as the
Company need not meet solvency requirements pursuant to section 78C(2) of the Companies Act. Please
refer to section 7.4 of this VGO Letter for more details.
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
64
7.7. Creditor Objections
In the event that during the six (6) weeks commencing with the date on which the
Proposed Capital Reduction was approved by the Shareholders (the “Creditor Objection
Period”), one or more applications for the cancellation of the Shareholders’ resolution
approving the Proposed Capital Reduction has been made under section 78D(2) of the
Companies Act, for the Proposed Capital Reduction to take effect, the following conditions
must be satisfied:
(a) the Company must give to the Registrar notice of the application(s) for the
cancellation of the Capital Reduction Resolution as soon as possible after such
application(s) have been served on the Company by the creditor(s);
(b) the proceedings in relation to each application for the cancellation of the
Shareholders’ resolution approving the Proposed Capital Reduction must be brought
to an end by either the dismissal of the application under section 78F of the
Companies Act or without determination (for example, because the application has
been withdrawn); and
(c) the Company must, within 15 days beginning with the date on which the last such
proceedings were brought to an end in accordance with paragraph (b) above, lodge
with the Registrar:
(i) a statement made by the Directors confirming that the requirements under
section 78C(1)(c), section 78C(3) (if applicable)(1) and section 78D(4) of the
Companies Act have been complied with, and that the proceedings in relation to
each such application have been brought to an end by the dismissal of the
application or without determination;
(ii) a notice containing the Proposed Capital Reduction information; and
(iii) in relation to each such application which has been dismissed by the Court, a
copy of the order of the Court dismissing the application.
Note:
(1) Section 78C(3) of the Companies Act is not applicable in relation to the Proposed Capital Reduction as the
Company need not meet solvency requirements pursuant to section 78C(2) of the Companies Act. Please
refer to section 7.4 of this VGO Letter for more details.
8. THE PROPOSED WHITEWASH RESOLUTION
8.1. Rule 14 of the Code
Under Rule 14 of the Code and section 139 of the SFA, where (a) any person acquires,
whether by a series of transactions over a period of time or not, shares which (taken
together with shares held or acquired by persons acting in concert with him) carry 30.0%
or more of the voting rights of a company; or (b) any person who, together with persons
acting in concert with him, holds not less than 30.0% but not more than 50.0% of the voting
rights and such person, or any person acting in concert with him, acquires in any period
of six (6) months additional shares carrying more than 1.0% of the voting rights, such
person must extend offers immediately to the holders of any class of share capital of the
company which carries votes and in which such person, or persons acting in concert with
him, hold shares.
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
65
8.2. Obliged Parties
In view of the requirements under Rule 14 of the Code, the Vendors would be required,
together with its concert parties (collectively, the “Target Obliged Parties”) to make a
general offer following the allotment and issuance of the Consideration Shares upon
Completion.
8.2.1. Target Obliged Parties
The information relating to the Target Group and its concert parties provided below was
provided to the Company by the Vendors and the Target Group. The Board of Directors
has not conducted an independent review or verification of the accuracy of the statements
and information below.
As at the Latest Practicable Date, the Target Obliged Parties do not hold any interest in
any Shares. Upon Completion and prior to the Proposed Compliance Placement, the
Target Obliged Parties will hold 1,187,692,308 Shares, representing approximately 92.8%
of the Enlarged Share Capital on Completion.
Please refer to Appendix B to this Circular entitled “Changes in Shareholding Structure” for
shareholding effects of, among other things, the Proposed Acquisition on the shareholding
of the existing Shareholders and the Target Obliged Parties.
Shareholders should note that the Proposed Acquisition is conditional upon the
approval for the Proposed Whitewash Resolution, and hence the Proposed
Acquisition will not be completed in the event that the Proposed Whitewash
Resolution is not approved.
8.2.2. Conditional Waiver by the SIC
As announced by the Company, the SIC had on 4 October 2016 granted the Vendors a
waiver of the requirement to make a general offer under Rule 14 of the Code as a result
of the allotment and issuance of the Consideration Shares to the Vendors under the
Proposed Acquisition (the “Whitewash Waiver”), subject to the following conditions:
(a) a majority of holders of voting rights of the Company approve at a general meeting,
before the issue of the Consideration Shares to the Vendors, a resolution by way of
poll to waive their rights to receive a general offer from the Vendors and parties acting
in concert with them (the “Proposed Whitewash Resolution”);
(b) the Proposed Whitewash Resolution is separate from other resolutions;
(c) the Vendors, parties acting in concert with them and parties not independent of them
abstain from voting on the Proposed Whitewash Resolution;
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
66
(d) the Vendors and their concert parties did not acquire or are not to acquire any shares
or instruments convertible into and options in respect of shares of the Company
(other than subscriptions for, rights to subscribe for, instruments convertible into or
options in respect of new shares which have been disclosed in the circular):
(i) during the period between 6 June 2016 (being the date on which the Proposed
Acquisition was first announced) and the date shareholders’ approval is
obtained for the Proposed Whitewash Resolution; and
(ii) in the 6 months prior to 6 June 2016, but subsequent to negotiations,
discussions or the reaching of understandings or agreements with the directors
of the Company in relation to such issue;
(e) the Company appoints an independent financial adviser to advise its independent
shareholders on the Proposed Whitewash Resolution;
(f) the Company sets out clearly in its circular to shareholders:
(i) details of the Proposed Acquisition and the issue of the Consideration Shares
to the Vendors;
(ii) the dilution effect to existing holders of voting rights as a result of the issue of
the Consideration Shares to the Vendors;
(iii) the number and percentage of voting rights in the Company as well as the
number of instruments convertible into, rights to subscribe for and options in
respect of shares in the Company held by the Target Obliged Parties as at the
latest practicable date (if any);
(iv) the number and percentage of voting rights to be issued to the Vendors under
the Proposed Acquisition;
(v) specific and prominent reference to the fact that the Proposed Acquisition would
result in the Target Obliged Parties holding shares carrying over 49% of the
voting rights of the Company and the Vendors and their concert parties will be
free to acquire further shares without incurring any obligation under Rule 14 of
the Code to make a general offer;
(vi) that independent Shareholders, by voting for the Proposed Whitewash
Resolution, are waiving their rights to a general offer from the Vendors at the
highest price paid by the Target Obliged Parties for shares in the Company in
the past six (6) months preceding the commencement of the offer;
(g) the circular by the Company to its shareholders states that the waiver granted by the
SIC to the Vendors from the requirement to make a general offer under Rule 14 is
subject to the conditions stated at paragraphs (a) to (f) above;
(h) the Company obtains the SIC’s approval in advance for those parts of the Circular
that refer to the Proposed Whitewash Resolution; and
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
67
(i) to rely on the Proposed Whitewash Resolution, the issue of the Consideration Shares
to the Vendors under the Proposed Acquisition must be completed within three (3)
months of the approval of the Proposed Whitewash Resolution.
8.3. Implications of the Proposed Whitewash Resolution
Independent Shareholders should note that:
(a) their approval of the Proposed Whitewash Resolution is a condition precedent
to Completion pursuant to the terms of the Sale and Purchase Agreement, and
if Independent Shareholders do not vote in favour of the Proposed Whitewash
Resolution, the Proposed Acquisition will not take place;
(b) the issue of the Consideration Shares will result in the Target Obliged Parties
holding Shares carrying over 49.0% of the voting rights of the Company, and
the Target Obliged Parties will be free to acquire further Shares without
incurring any obligation under Rule 14 of the Code to make a general offer; and
(c) by voting in favour of the Proposed Whitewash Resolution, they will be waiving
their rights to receive a general offer for all of their Shares from the Vendors at
the highest price paid by the Target Obliged Parties for the Shares in the past
six (6) months preceding the commencement of the offer.
SAC Capital Private Limited has been appointed as the Independent Financial Adviser to
the Independent Directors in respect of the Proposed Whitewash Resolution and the
Proposed Disposal, and to the Audit and Risk Committee in respect of the Proposed IPT
Mandate.
The IFA Letter setting out the IFA’s advice in full is reproduced in Appendix D to this
Circular entitled “Letter From SAC Capital Private Limited to the Independent Directors
and the Audit and Risk Committee of VGO Corporation Limited”.
9. THE PROPOSED CHANGE OF NAME
In connection with the Proposed Acquisition and Proposed Disposal, the Company is
proposing to change the name of the Company from “VGO Corporation Limited” to
“Hatten Land Limited” to better reflect the status of the Enlarged Group and the new
business and activities of the Enlarged Group. The change of name of the Company will
only take effect upon Completion.
In line with the Proposed Change of Name of the Company, the Company also intends to
adopt the corporate logo as shown below:
The Proposed Change of Name of the Company is subject to the approval of the
Shareholders by way of a special resolution to be tabled at the EGM.
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68
Upon obtaining Shareholders’ approval in respect of the Proposed Change of Name and
the Proposed Adoption of the New Constitution, the name of the Company shall be Hatten
Land Limited.
Shareholders should take note that notwithstanding the change of the Company’s name,
the Company will not recall any existing share certificates bearing the current name of the
Company, which continue to be prima facie evidence of legal title. No further action is
required on the part of the Shareholders.
10. THE PROPOSED APPOINTMENT OF THE PROPOSED NEW DIRECTORS
Upon Completion, all the existing members of the current Board will resign and the
Company proposes to appoint the Proposed New Directors who are as follows:
(a) Dato’ Colin;
(b) Dato’ Edwin;
(c) Lee Sok Khian John;
(d) Dato’ Wong King Kheng;
(e) Loh Weng Whye; and
(f) Foo Jong Han Rey.
As shown above, Dato’ Wong King Kheng and Foo Jong Han Rey, who are currently
independent directors of the Company, will be seeking re-appointment as independent
directors.
For further information on each of the Proposed New Directors and details on the New
Audit and Risk Committee, the New Nominating Committee, and the New Remuneration
Committee of the Enlarged Group, please refer to Section 23 of the Target Letter entitled
“Directors and Executive Officers of the Target Group”.
11. THE PROPOSED ADOPTION OF THE NEW CONSTITUTION OF THE COMPANY
11.1. Rationale
The Companies (Amendment) Act 2014 (the “Amendment Act”), which was passed in
Parliament on 8 October 2014 and took effect in phases on 1 July 2015 and 3 January
2016 respectively, introduced wide-ranging changes to the Companies Act. The changes
aim to reduce regulatory burden on companies, provide for greater business flexibility and
improve the corporate governance landscape in Singapore. The key changes include the
introduction of the multiple proxies regime to enfranchise indirect investors and CPF
investors, provisions to facilitate the electronic transmission of notices and documents,
and the merging of the memorandum and articles of association of a company into one
document called the “constitution”.
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11.2. New Constitution
The Company is proposing to adopt the New Constitution, which will replace the existing
constitution (previously known as the memorandum and articles of association of the
Company, which were in force immediately before 3 January 2016) (the “Existing
Constitution”) entirely, and incorporate amendments to take into account the changes to
the Companies Act introduced pursuant to the Amendment Act. At the same time, the
existing objects clause will be replaced with a general provision giving the Company full
capacity to carry on or undertake any business or activity, do any act or enter into any
transaction. The New Constitution also contains updated provisions which are consistent
with the prevailing listing rules of the SGX-ST in compliance with Rule 730 of the Catalist
Rules, as well as to take into account the provisions of the Personal Data Protection Act
relating to the collection, use and disclosure of personal data, and to streamline and
rationalise certain other provisions.
11.3. Summary of Key Regulations in the New Constitution
The following is a summary of the key regulations of the New Constitution which are
significantly different from the equivalent provisions in the Existing Constitution. The New
Constitution is set out in its entirety in Appendix I to this Circular.
11.3.1. Amendments in view of the Amendment Act
The following amendments to the Existing Constitution are in line with the Companies Act
as amended pursuant to the Amendment Act:
(a) Article 1 (Article 2 of the Existing Constitution)
Article 1 is the interpretation section of the New Constitution and includes the
following additional/revised provisions:
(i) new definitions of “registered address” and “address” to make it clear that these
expressions mean, in relation to any Shareholder, his physical address for the
service or delivery of notices or documents personally or by post, except where
otherwise expressly specified;
(ii) new regulation stating that the expressions “current address”, “electronic
communication”, “relevant intermediary”, “special resolution” and “treasury
shares” shall have the meanings ascribed to them respectively in the
Companies Act, in light of the introduction of the new provisions facilitating
electronic communication and the multiple proxies regime pursuant to the
Amendment Act;
(iii) new regulation stating that the terms “Depositor”, “Depository”, “Depository
Agent” and “Depository Register” shall have the meanings ascribed to them in
the Securities and Futures Act as the provisions in relation to the Central
Depository System in the Companies Act have migrated to the Securities and
Futures Act; and
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(iv) new definition of “writing” and new definition of “written” to clarify that the terms
“writing” and “written” include any representation or reproduction of words,
symbols or other information which may be displayed in a visible form, whether
in a physical document or in an electronic communication or form.
(b) Article 8 (Article 4 of Existing Constitution)
Article 8, which relates to the issue of different classes of shares, has a new provision
which empowers the Company to issue shares for which no consideration is payable
to the Company. This follows the amended section 68 of the Companies Act pursuant
to the Amendment Act.
(c) Article 17 (Article 13(A) of Existing Constitution)
The requirement to disclose the amount paid on the shares in the share certificate
relating to those shares has been removed in Article 17. A share certificate need only
state, among other things, the number and class of the shares, whether the shares
are fully or partly paid-up, and the amount (if any) unpaid on the shares. This follows
the amendments to section 123(2) of the Companies Act pursuant to the Amendment
Act.
(d) Article 55 (Article 11 of Existing Constitution)
Article 55, which relates to the Company’s power to alter its share capital, has new
provisions which:
(i) empower the Company, by ordinary resolution, to convert its share capital or
any class of shares from one currency to another currency. This is in line with
the new section 73 of the Companies Act, which sets out the procedure for such
re-denominations; and
(ii) empower the Company, by special resolution and subject to the Companies Act
and applicable laws, to convert one class of shares into another class of shares.
This is in line with the new section 74A of the Companies Act, which sets out the
procedure for such conversions.
(e) Article 65 (Article 51 of Existing Constitution)
Article 65, which relates to the routine business that is transacted at an AGM, has
been revised to substitute the references to “accounts” with “financial statements”,
and references to the “reports of the Directors” with “Directors’ statement”, for
consistency with the updated terminology in the Companies Act.
(f) Article 71 (Article 59 of Existing Constitution)
Article 71, which relates to the method of voting at a general meeting where
mandatory polling is not required, has been revised to reduce the threshold for
eligibility to demand a poll from 10% to 5% of the total voting rights of the members
having the right to vote at the meeting. This is in line with section 178 of the
Companies Act, as amended pursuant to the Amendment Act.
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71
(g) Articles 77 and 85 (Articles 69, 70 and 71 of Existing Constitution)
Articles 77 and 85, which relate to the voting rights of Shareholders, has new
provisions which cater to the multiple proxies regime introduced by the Amendment
Act. The multiple proxies regime allows “relevant intermediaries”, such as banks,
capital markets services licence holders which provide custodial services for
securities and the CPF Board, to appoint more than two proxies to attend, speak and
vote at general meetings. In particular:
(i) a member who is a relevant intermediary (as defined in the Companies Act) may
appoint more than two proxies to attend, speak and vote at the same general
meeting, but each proxy must be appointed to exercise the rights attached to a
different share or shares held by such member, and where such member’s form
of proxy appoints more than two proxies, the number and class of shares in
relation to which each proxy has been appointed must be specified in the form
of proxy. This is in line with new section 181(1C) of the Companies Act;
(ii) in the case of a member who is a relevant intermediary (as defined in the
Companies Act) and who is represented at a general meeting by two or more
proxies, each proxy shall be entitled to vote on a show of hands. This is in line
with new section 181(1D) of the Companies Act;
(iii) the Company will be entitled and bound to reject an instrument of proxy lodged
by a Depositor if he is not shown to have any shares entered against his name
in the Depository Register as at 72 (previously 48) hours before the time of the
relevant general meeting. Consequential changes have also been made to
make it clear that the number of votes which a Depositor or his proxy can cast
on a poll is the number of shares entered against his name in the Depository
Register as at 72 hours before the time of the relevant general meeting. This is
in line with new section 81SJ(4) of the Securities and Futures Act;
(iv) the Company shall be entitled and bound, in determining rights to vote and other
matters in respect of a completed instrument of proxy, to have regard to the
instructions (if any) given by and the notes (if any) set out in the instrument of
proxy; and
(v) the cut-off time for the deposit of proxies has been extended from 48 to 72 hours
before the time appointed for holding the general meeting. This is in line with
section 178(1)(c) of the Companies Act, as amended pursuant to the
Amendment Act.
(h) Article 94 (Article 81 of Existing Constitution)
Article 94, which relates to the power of Directors to hold an office of profit and to
contract with the Company, has been expanded to extend the obligation of a Director
to disclose interests in transactions or proposed transactions with the Company, or
any office or property held which might create duties or interests in conflict with those
as Director, to also apply to a Managing Director (or person(s) holding an equivalent
position). This is in line with section 156 of the Companies Act, as amended pursuant
to the Amendment Act.
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72
(i) Article 101 (Article 109 of Existing Constitution)
Article 101, which relates to the general powers of the Directors to manage the
Company’s business, clarifies that the business and affairs of the Company is to be
managed by, or under the direction of or, additionally, under the supervision of, the
Directors. This is in line with section 157A of the Companies Act, as amended
pursuant to the Amendment Act.
(j) Articles 126, 132 and 133 (Articles 121, 136 and 137 of Existing Constitution)
The references to the Company’s “profit and loss account” or “accounts” have been
updated in Articles 126, 132 and 133 to substitute them with references to the
“financial statements”, as appropriate, for consistency with the updated terminology
in the Companies Act.
(k) Articles 153 and 157 (Article 140 of Existing Constitution)
Article 153, which relates to the service of notices to Shareholders, has new
provisions to facilitate the electronic transmission of notices and documents following
the introduction of simplified procedures for the sending of notices and documents
electronically pursuant to the new section 387C of the Companies Act.
Section 387C of the Companies Act further provides that a notice or document may
be given, sent or served using electronic communications with the express, implied
or deemed consent of member in accordance with the constitution of the company.
Under the new section 387C, regulations may be made to exclude any notice or
document or any class of notices or documents from the application of section 387C,
provide for safeguards for the use of electronic communications under section 387C,
and provide that a member who is deemed to have consented to receive notices or
documents by way of electronic communications may make a fresh election to
receive such notice or document as a physical copy and the manner in which the
fresh election may be made. The Companies Act has provided the following
definitions which we replicate below for ease of reference:
(i) A member is taken to have given implied consent if the constitution (a) provides
for the use of electronic communications; (b) specifies the manner in which
electronic communications is to be used; and (c) provides that the member shall
agree to receive such notice or document by way of such electronic
communications and shall not have a right to elect to receive a physical copy of
such notice or document.
(ii) A member is deemed to have consented if the constitution (a) provides for the
use of electronic communication; (b) specifies the manner in which electronic
communications is to be used; and (c) specifies that the member will be given
an opportunity to elect, within a specified period of time (the specified time)
whether to receive such notice or document by way of electronic
communications or as a physical copy.
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73
Accordingly, a member may also express his or its consent to receive notices and
documents by way of electronic communication by submitting such intention in
writing to the company, subject to the constitution of the company.
In particular, Article 153 provides that:
(i) notices and documents may be sent to members using electronic
communications either to a member’s current address (which may be an email
address) or by making it available on a website prescribed by the Company from
time to time; and
(ii) for these purposes, a member is deemed to have agreed to receive such notice
or document by way of electronic communications and will not have a right to
elect to receive a physical copy of such notice or document. Notwithstanding the
above, the Directors may, at their discretion, at any time give a member an
opportunity to elect within a specified period of time whether to receive such
notice or document by way of electronic communications or as a physical copy,
and a member is deemed to have consented to receive such notice or document
by way of electronic communications if he was given such an opportunity but
failed to make an election within the specified time, and he shall not in such an
event have a right to receive a physical copy of such notice or document.
It should be noted, however, that the introduction and use of the electronic
transmission of notices and documents by the Company as provided for in
Article 153 is subject to the listing rules of the SGX-ST and any requirement
which might be prescribed under the listing rules. In addition, please note that
there is no certainty that the listing rules will be amended to allow for the
introduction and use of electronic transmission of notices and documents.
Article 157 additionally provides for when service is effected in the case of notices or
documents given, sent or served by electronic communications. In particular, where
a notice or document is made available on a website, it is deemed given, sent or
served on the date on which the notice or document is first made available on the
website, unless otherwise provided under the Companies Act and/or other applicable
regulations or procedures.
Subject to Shareholders’ approval being obtained at the EGM of the Company, the
new Articles 153 and 157 will adopt the Companies Act’s definition of deemed
consent as set out above. The Company wishes to highlight to the Shareholders that
if any Shareholder does not agree to the proposed adoption of deemed consent in
relation to the electronic transmission of notices and documents in accordance with
the Constitution, Shareholders may vote against the resolution in relation to the
proposed adoption of the New Constitution of the Company.
11.3.2. Amendments in view of the Catalist Rules
Rule 730 of the Catalist Rules provides that if an issuer amends its Constitution or other
constituent documents, they must be made consistent with the Catalist Rules prevailing at
the time of amendment.
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74
The following amendments to the Existing Constitution are in line with the Catalist Rules
prevailing as at the Latest Practicable Date.
(a) Article 10 (Article 9 of Existing Constitution)
Article 10, which relates to the variation of rights attached to shares, additionally
clarifies that preference capital other than redeemable preference capital may be
repaid either with the sanction of a Special Resolution or the consent in writing of the
preference shareholders concerned. This additional clarification is in line with
paragraph (5) of Appendix 4C to the Catalist Rules.
(b) Articles 23 and 24 (Article 35 of Existing Constitution)
Articles 23 and 24, which relates to the Directors’ power to decline to register a
transfer of shares, has been amended to be in line with Rule 733 of the Catalist
Rules, which provides that if an issuer refuses to register a transfer of a security, it
must give to the lodging party written notice of the refusal containing the precise
reasons justifying the refusal within 10 market days after the date on which the
transfer was lodged with the issuer. Consequential changes have been made to
Article 24.
(c) Articles 71, 72 and 75 (Articles 59, 60 and 62 of Existing Constitution)
Article 71, which relates to the method of voting at general meetings, has new
provisions to make it clear that, if required by the listing rules of any stock exchange
upon which shares in the Company may be listed, all resolutions at general meetings
shall be voted by poll (unless such requirement is waived by the stock exchange).
Consequential changes have been made to Articles 72 and 75. These changes are
in line with Rule 730A of the Catalist Rules.
Article 72 has also been amended to provide that at least one scrutineer will be
appointed for each general meeting. This amendment is in line with Rule 730A(3) of
the Catalist Rules.
11.3.3. Objects Clause
To be in line with section 23 of the Companies Act, the Company proposes to include a
general regulation in the New Constitution to the effect that, subject to the provisions of the
Companies Act and any other written law and the New Constitution, any branch or kind of
business is expressly or by implication authorised to be undertaken by the Company and
may be undertaken by the Directors at such time or times as they shall think fit, and further
may be suffered by them to be in abeyance, whether such branch or kind of business may
have been actually commenced or not, so long as the Directors may deem it expedient not
to commence or proceed with such branch or kind of business.
11.3.4. Amendments in view of the Personal Data Protection Act
In general, under the Personal Data Protection Act, an organisation can only collect, use
or disclose the personal data of an individual with the individual’s consent, and for a
reasonable purpose which the organisation has made known to the individual. The new
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75
Article 162 specifies, among other things, the purposes for which the Company and/or its
agents and service providers would collect, use and disclose personal data of
Shareholders and their appointed proxies or representatives.
11.3.5. General
The following amendments to the Existing Constitution are to update, streamline and
rationalise the New Constitution.
(a) Article 61 (Article 47 of Existing Constitution)
Article 61, which sets out, among other things, the time-frame for holding annual
general meetings, has been revised to make it clear that an annual general meeting
shall be held once every year within a period of not more than 15 months after the
last preceding annual general meeting, but that this is save as otherwise permitted
under the Companies Act. This will provide the Company with the flexibility, if the
need to do so should arise, to apply for an extension of the 15-month period between
annual general meetings in accordance with the provisions of the Companies Act,
notwithstanding that the period may extend beyond the calendar year.
(b) Article 65 (Article 51 of Existing Constitution)
Article 65, which relates to the routine business that is transacted at an annual
general meeting, has been revised to expand the routine business items to include
(i) in addition to the re-appointment of the Auditor, the appointment of the Auditor; and
(ii) fixing the remuneration of the Directors.
(c) Article 76
Article 76 is a new provision that has been included in the New Constitution to clarify
that no business or question shall, under any pretext whatsoever, be brought forward
or discussed in any general meeting after the chairman has declared the general
meeting to be over and left the chair.
(d) Articles 83 and 85 (Articles 70 and 71 of Existing Constitution)
Article 83, which relates to the appointment of proxies, has new provisions to
facilitate the appointment of a proxy through electronic means online. In particular, it
provides that a Shareholder can elect to signify his approval for the appointment of
a proxy via electronic communication, through such method and in such manner as
may be approved by the Directors, in lieu of the present requirement of signing, or
where applicable, the affixation of the corporate Shareholder’s common seal.
For the purpose of accommodating the deposit by Shareholders, and receipt by the
Company, of electronic proxy instructions by Shareholders who elect to use the
electronic appointment process, Article 85, which relates to the deposit of proxies,
has new provisions which authorise the Directors to prescribe and determine the
manner of receipt by the Company of the instrument appointing a proxy through
digital means.
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76
(e) Article 123 (Article 94 of Existing Constitution)
Article 123 has been updated to substitute the references to insane persons and
persons of unsound mind with references to persons who are mentally disordered
and incapable of managing himself or his affairs, following the enactment of the
Mental Health (Care and Treatment) Act, Cap. 178A, which repealed and replaced
the Mental Disorders and Treatment Act.
(f) Article 97 (Article 89 of Existing Constitution)
Article 97 relates to the retirement of a Managing Director. This Article has been
amended to subject the Managing Director (or person holding an equivalent position)
who is a Director to retirement by rotation at annual general meetings of the
Company to be in line with good corporate governance.
(g) Article 152 (Article 134 of Existing Constitution)
Article 152, which relates to the Directors’ power to issue free shares and/or
capitalise reserves for share-based incentive plans, has been expanded to empower
the Directors to do the same for the benefit of non-executive Directors as part of their
Directors’ remuneration. This will enable the Company, if it so desires, to remunerate
its non-executive Directors by way of Directors’ fees in the form of shares, or in a
combination of cash and shares.
12. THE PROPOSED SHARE ISSUE MANDATE
12.1. Rationale
After the Proposed Listing Transfer, the Company will no longer be subject to the Listing
Manual and will be subject to the Catalist Rules instead. The Company is seeking the
approval of Shareholders at the EGM for the grant of a new general share issue mandate
for the allotment and issuance of new Shares and convertible securities pursuant to
section 161 of the Companies Act and Rule 806 of the Catalist Rules (the “Proposed New
Share Issue Mandate”).
12.2. Main Differences between the Catalist Rules and the Listing Manual in relation to
General Share Issue Mandates
Some of the main differences between the Listing Manual and the Catalist Rules relating
to the general share issue mandate are summarised in the table below:
Listing Manual Catalist Rules
The limit of the general share issue
mandate set out in Rule 806(2) of the
Listing Manual is 50.0% of the total
number of issued shares (excluding
treasury shares) at the time of the passing
of the resolution approving the mandate.
The limit of the general share issue
mandate set out in Rule 806(2)(a) of the
Catalist Rules is 100.0% of the total
number of issued shares (excluding
treasury shares) at the time of the passing
of the resolution approving the mandate.
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Listing Manual Catalist Rules
Pursuant to Rule 806(2) of the Listing
Manual, issuers can only issue up to
20.0% of the total number of issued
shares (excluding treasury shares) at the
time of the passing of the resolution
approving the mandate on a non-pro rata
basis.
Pursuant to Rule 806(2)(a) of the Catalist
Rules, issuers can only issue up to 50.0%
of the total number of issued shares
(excluding treasury shares) at the time of
the passing of the resolution approving
the mandate on a non-pro rata basis.
None. Pursuant to Rule 806(2)(b) of the Catalist
Rules, issuers can issue up to 100.0% of
the total number of issued shares
(excluding treasury shares) at the time of
the passing of the resolution approving
the mandate on a non-pro rata basis if
Shareholders approve this by way of a
special resolution.
12.3. Proposed New Share Issue Mandate
At the annual general meeting of the Company for the financial year ended 31 March 2016
held on 29 July 2016, Shareholders had approved a general share issue mandate
empowering the Board to issue at any time such number of new Shares and instruments
(including but not limited to the creation and issue of (as well as adjustments to) options,
warrants, debentures or other instruments convertible into Shares) to such persons and
upon such terms and for such purposes as the Board may in its absolute discretion deem
fit, subject to certain limits as prescribed in the Listing Manual (the “Existing Share Issue
Mandate”). Unless revoked or varied by the Company in general meeting, the Existing
Share Issue Mandate will expire on the date of the next annual general meeting of the
Company.
After the Proposed Listing Transfer, the Company will no longer be subject to the Listing
Manual and will be subject to the Catalist Rules instead. The Company is therefore
seeking Shareholders’ approval at the EGM to adopt the Proposed New Share Issue
Mandate to empower the Proposed New Directors to issue an aggregate number of new
Shares and convertible securities of the Company on a pro rata basis, of up to 100.0% of
the total number of Shares (excluding treasury shares) as at the date of Completion and
on a non-pro rata basis, up to 50.0% of the total number of Shares (excluding treasury
shares) as at the date of Completion. For the avoidance of doubt, upon the adoption of the
Proposed New Share Issue Mandate, the Existing Share Issue Mandate shall expire.
The Proposed New Share Issue Mandate falls within the limits set out in Rule 806(2)(a) of
the Catalist Rules.
The Proposed New Share Issue Mandate is also conditional upon the Shareholders voting
in favour of, among others, the Proposed Listing Transfer.
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12.4. Validity of the Proposed New Share Issue Mandate
The Proposed New Share Issue Mandate, if approved by Shareholders at the EGM, will
supersede and replace the Existing Share Issue Mandate and shall take force and effect
from the Completion Date, and the Existing Share Issue Mandate shall correspondingly be
deemed revoked with effect from the Completion Date.
The Proposed New Share Issue Mandate shall continue in force until the earliest of the
following:
(a) the conclusion of the next annual general meeting; or
(b) the expiration of the period within which the next annual general meeting is required
to be held pursuant to the Constitution or any applicable laws of Singapore; or
(c) it is carried out to the full extent mandated; or
(d) it is revoked or varied by ordinary resolution of the Shareholders in a general
meeting.
Subject to its continued relevance to the Company, the Proposed New Share Issue
Mandate will be put to Shareholders for renewal at subsequent general meetings of the
Company.
13. THE PROPOSED IPT MANDATE
The Company wishes to seek Shareholders’ approval for a general mandate for interested
person transactions (the “Proposed IPT Mandate”) pursuant to Part VIII of Chapter 9 of
the Catalist Rules. The Proposed IPT Mandate assumes that Completion has taken place,
and the listing of the Shares has been transferred to the Catalist. Subject to Shareholders’
approval, the Proposed IPT Mandate shall be effective upon Completion and shall
continue in force until the date on which the next annual general meeting of the Company
is held or is required by law to be held, whichever is the earlier.
13.1. Chapter 9 of the Catalist Rules
Pursuant to Rule 920(1)(b)(viii) of the Catalist Rules, interested persons shall abstain and
undertake that their associates will abstain from voting on resolutions approving interested
person transactions involving themselves and the Enlarged Group. Furthermore, such
interested persons shall not act as proxies in relation to such resolutions unless voting
instructions have been given by Shareholders who are unrelated to such interested
persons or their associates.
Pursuant to Rule 905(1) of the Catalist Rules, a listed company will be required to make
an immediate announcement of any interested person transaction of a value equal to, or
exceeding, three percent (3.0%) of the Enlarged Group’s latest audited NTA, or if the
aggregate value of all transactions entered into with the same interested person during the
same financial year amounts to three percent (3.0%) or more of the Enlarged Group’s
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latest audited NTA, the listed company must make an immediate announcement of the
latest transaction and all future transactions entered into with that same interested person
during that financial year.
Pursuant to Rule 906(1) of the Catalist Rules, a listed company will be required to obtain
shareholders’ approval for any interested person transaction of a value equal to, or
exceeding, five percent (5.0%) of the Enlarged Group’s latest audited NTA or equals to, or
exceeds five percent (5.0%) of the Enlarged Group’s latest audited NTA when aggregated
with other transactions entered into with the same interested person during the same
financial year.
Rules 905(1) and 906(1) of the Catalist Rules do not apply to any transaction which has
a value below S$100,000 with an interested person and therefore transactions below
S$100,000 need not be covered under the Proposed IPT Mandate.
Chapter 9 of the Catalist Rules allows a listed company to obtain a mandate from its
shareholders for recurrent interested person transactions which are of a revenue or
trading nature or for those necessary for its day-to-day operations. These transactions
may not include the purchase or sale of assets, undertakings or businesses which are not
part of its day-to-day operations.
13.2. Rationale for the Proposed IPT Mandate
It is anticipated that the Enlarged Group would, on and after the date of Completion, in the
ordinary course of business, continue to enter into certain transactions with certain entities
within the Hatten Group. Given that the Vendors will be controlling shareholders of the
Enlarged Group upon Completion and their ownership of the entities within the Hatten
Group, these transactions will be considered interested person transactions under the
Catalist Rules.
In view of the time-sensitive nature of commercial transactions, and the need for smooth
and efficient conduct of business which may include entering into transactions which are
recurring in nature or in the ordinary course of business with certain interested persons,
it would be advantageous for the Enlarged Group to obtain a Shareholders’ mandate to
enter into certain interested person transactions in its normal course of business, provided
that all such transactions are carried out on an arm’s length basis, on normal commercial
terms consistent with the Enlarged Group’s usual business practices and on terms which
are generally not more favourable than those extended to unrelated third parties and will
not be prejudicial to the interests of the Enlarged Group and its minority Shareholders.
13.3. Benefits of the Proposed IPT Mandate
As parts of the Hatten Group’s businesses are complementary to the business of the
Enlarged Group and vice versa, there are opportunities for the Enlarged Group and the
Hatten Group to leverage on each other’s business, experience and resources to add
value to both businesses. For example, by having access to management and support
services from the Interested Persons, the Enlarged Group will derive operational and
financial leverage through savings in terms of reduced overheads and greater economies
of scale (such as bulk discounts).
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
80
As the Proposed IPT Mandate is subject to annual renewal, this would eradicate the need
for the Enlarged Group to announce and convene separate general meetings from time to
time to seek Shareholders’ prior approval as and when potential interested person
transactions with the Interested Persons arises. The Enlarged Group would be able to
save substantial administrative time and costs in arranging for such separate general
meetings, without compromising the corporate objectives and adversely affecting the
business opportunities available to the Enlarged Group. Not only would this greatly
improve administrative efficacy, it would also enable the Enlarged Group to dedicate its
time to other matters.
The Proposed IPT Mandate is intended to facilitate the Interested Person Transactions in
the ordinary course of business of the Enlarged Group which the Proposed New Directors
envisage are likely to be transacted with some frequency from time to time with the
Interested Persons, provided that they are carried out on an arm’s length basis, on normal
commercial terms consistent with the Enlarged Group’s usual business practices and on
terms which are generally not more favourable than those extended to unrelated third
parties and will not be prejudicial to the interests of the Enlarged Group and its minority
Shareholders.
13.4. Classes of Mandated Interested Persons under the Proposed IPT Mandate
The Proposed IPT Mandate will apply to the Mandated Transactions (as described in
Section 13.5) below) to be carried out between the Enlarged Group and the entities within
the Hatten Group, namely:
(a) Hatten Properties Sdn. Bhd.;
(b) Hatten Retail Management Sdn. Bhd.;
(c) Hatten Hotel International Sdn. Bhd.; and
(d) Hatten Place Sdn. Bhd.
Additionally, the Proposed IPT Mandate will apply to transactions between the Enlarged
Group and Montane. Montane is beneficially owned by Tan Ler Choo, the aunt of the
Vendors. On this basis, transactions between the Enlarged Group and Montane do not fall
within the ambit of “interested person transactions” under Chapter 9 of the Catalist Rules.
We have, for prudence and corporate governance, included transactions with Montane as
part of the Proposed IPT Mandate.
The interested persons stated above shall collectively be referred to as the “Mandated
Interested Persons”.
Please refer to Section 24 of the Target Letter entitled “Interested Person Transactions” for
details of the Interested Persons.
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
81
13.5. Mandated Transactions Under the Proposed IPT Mandate
The categories of Mandated Transactions which will be covered by the Proposed IPT
Mandate include transactions by Enlarged Group relating to the provision to, and obtaining
from, the interested persons of the following products and services in the normal course
of business of the Enlarged Group:
(a) the engagement of property agency management services in respect of
(i) management of property agents; (ii) management of agent commission; and
(iii) administrative support to property agents from Hatten Properties Sdn. Bhd.;
(b) the engagement of mall/complex/property management services in respect of
(i) estate management; (ii) building maintenance services; and (iii) building security
services from Hatten Retail Management Sdn. Bhd.;
(c) the engagement of construction services from Montane;
(d) the leasing of the relevant hospitality properties under a master lease arrangement,
in accordance with such processes as set out in Section 4.2.4 of the Target Letter
entitled “Sales and Marketing”, to Hatten Hotel International Sdn. Bhd. and/or Hatten
Place Sdn. Bhd.;
(e) the engagement of agency services in respect of the leasing of any unsold retail units
of the Enlarged Group, or sold units leased-back by the Enlarged Group from its
customers, in accordance with such processes as set out in Section 4.2.4 of the
Target Letter entitled “Sales and Marketing”, from Hatten Retail Management Sdn.
Bhd.;
(f) the provision of property development management services to future property
development projects which are not wholly owned by the Enlarged Group, whether
through joint ventures or otherwise;
(g) the provision of administrative and logistical support (where required) in relation to
the provision of, and/or obtaining of products and/or services in sub-paragraph (a) to
(f) above; and
(h) the provision and/or obtaining of management and support services in the area of
professional, administrative and support services, including but not limited to,
corporate events, information technology, and management information systems,
intellectual property rights, and any other professional, administrative and support
services that may arise from time to time. For the avoidance of doubt, services set
out in this sub-section are not incidental to the products and/or services as set out in
sub-sections (a) to (f) above,
(collectively, the “Mandated Transactions”).
By having access to such services, the Enlarged Group will benefit through savings in
terms of reduced overheads and greater economies of scale (such as bulk discounts).
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
82
Please refer to Section 24 of the Target Letter entitled “Interested Person Transactions” for
details of the Interested Persons.
13.6. Review Procedures for Mandated Transactions with Mandated Interested Persons
The Enlarged Group will establish the following procedures to ensure that the Mandated
Transactions are carried out on an arm’s length basis, on normal commercial terms
consistent with the Enlarged Group’s usual business practices and on terms which are
generally not more favourable than those extended to unrelated third parties and will not
be prejudicial to the interests of the Enlarged Group and its minority Shareholders.
13.6.1. Review Procedures in relation to Mandated Transactions other than Management and
Support Services
The Audit and Risk Committee of the Enlarged Group will review and approve the
Mandated Transactions where applicable, and to ensure that all future Mandated
Transactions are carried out on an arm’s length basis and on normal commercial terms
consistent with the Enlarged Group’s usual business practices and on terms which are
generally not more favourable than those extended to unrelated third parties and will not
be prejudicial to the interests of the Enlarged Group and its minority Shareholders.
The following review procedures will be implemented in relation to all Interested Person
Transactions (including those that do not fall within the ambit of the Proposed IPT Mandate
but other than transactions listed in Section 13.5(h) above):
(a) all Interested Person Transactions shall be conducted in accordance with the
Enlarged Group’s usual business practices and policies consistent or comparable
with the usual margin or historical margin or costs (where applicable), rates
(including commission) or prices extended to or received by the Enlarged Group for
the same or substantially similar type of transactions between the Enlarged Group
and unrelated third parties, and the terms are not more favourable to the Interested
Persons compared to those extended to or received from unrelated third parties after
taking into account the speed of and cost for timely response and mobilisation, credit
terms, quality, requirements, specification, scope, size, complexity and resources
required for implementation of the projects for which Interested Persons are
providing goods and services, preferential or relatively advantageous access to
assets and buyers, asset type, restrictions and array of services including its
specialist nature, local knowledge, track record and standing in the relevant markets,
risk for such transactions and the attendant cost in managing such risks;
(b) when purchasing any products or obtaining any services (including the leasing of
premises) from an Interested Person, in order to ensure that the interest of the
Enlarged Group or the minority Shareholders are not disadvantaged, comparison will
be made with at least two quotations from unrelated/independent third party(ies) as
a basis for comparison, from independent verifiable and reliable sources as approved
by the Audit and Risk Committee from time to time (“Approved Independent
Sources”) with advice from relevant employee of the Enlarged Group with
management responsibilities comprising personnel from the finance department and
other relevant departments. The list of Approved Independent Sources will be
maintained by the Group Financial Controller and reviewed by the Audit and Risk
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
83
Committee periodically. The purchase price or fee for the products or services, after
taking into account factors mentioned in paragraph (a) above, shall not be higher
than the most favourable price or fee of the two other quotations (wherever possible
or available) from the Approved Independent Sources;
(c) When selling any products or supplying any services (including the leasing of
premises) to an Interested Person, the price or fee or profit margins and terms of two
other successful transactions of a similar nature (or comparable nature) with
non-Interested Persons will be used as comparison to ensure that the interests of the
Enlarged Group or the minority Shareholders are not disadvantaged. The price or fee
or margin for the supply of products or services shall not be lower than the lowest
price or fee of the two other successful transactions with non-Interested Persons,
taking into account all pertinent factors, including but not limited to speed of and cost
for timely response and mobilisation, quality, credit records of the customers, term of
sale or supply, strategic purpose of the transaction, specifications, scope, size,
complexity and resources required for implementation of the projects for Interested
Persons, preferential or relatively advantageous access to assets and buyers, asset
type, restrictions, array of services including its specialist nature, local knowledge,
track record and standing in the relevant markets, risk for such transactions and the
attendant cost in managing such risks and other qualitative consideration; and
(d) In circumstances where it is impractical or impossible to obtain comparable prices of
contemporaneous transactions of similar goods or services due to the nature of the
goods or services to be purchased or provided, any two (2) Directors of the Enlarged
Group with no interest, direct or indirect, in the proposed Interested Person
Transaction will, subject to the approval thresholds as set out in Section 13.6.3
below, take such necessary steps which would include but not limited to (i) relying on
corroborative inputs from reasonably experienced market practitioners in order to
determine that the terms provided by the Interested Persons are fair and reasonable,
and (ii) evaluate and weigh the benefits of and rationale for transacting with the
Interested Persons, taking into account factors such as but not limited to, the nature
of the services, track record, delivery schedules, requirements and specifications of
the Enlarged Group or the customer, duration of contract, quality, reliability, previous
working experience taking into account mobilisation cost and timely response,
specifications, scope, size, complexity and resources required for the
implementation of the projects for which the Interested Persons are providing goods
or services, preferential or relatively advantageous access to assets and buyers,
asset type, restrictions and structure of investments, array of services including its
specialist nature, local knowledge, track record and standing in the relevant markets,
risk for such transactions and the attendant cost in managing such risks, project
restrictions and structure or the results of and returns from the underlying projects.
13.6.2. Review Procedures in respect of Management and Support Services
For management and support services, the costs of certain administrative and support
services provided to and/or by Mandated Interested Persons will be shared between the
Enlarged Group and the Mandated Interested Persons. Such services and fees shall be
based on a cost-reimbursement basis charged to and/or by the Mandated Interested
Persons based on the time cost charges of the employees involved.
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
84
13.6.3. Approval and Review Threshold
The following approval procedures will be implemented to supplement existing internal
control procedures for Interested Person Transactions (including the Mandated
Transactions) to ensure that such transactions are taken on an arm’s length basis and on
normal commercial terms consistent with the Enlarged Group’s usual business practices
and on terms which are generally not more favourable than those extended to unrelated
third parties and will not be prejudicial to the interests of the Enlarged Group and its
minority Shareholders. For the avoidance of doubt, where the approving party as
stipulated herein is interested in the transaction to be approved, he/she will inform the
Audit and Risk Committee and such disclosures should be documented. In the event any
equivalent person with the relevant experience and responsibility, as stated below for the
various thresholds cannot be determined, the approving authority shall be decided by the
Audit and Risk Committee.
Individual and aggregate transactions review and approval thresholds shall be as follows:
(a) Where the individual or aggregate value of the Interested Person Transactions is
equal to or more than S$100,000 but less than three percent (3.0%) of the Enlarged
Group‘s latest audited NTA, the Interested Person Transactions shall require the
prior approval of either the Group Financial Controller (or equivalent person) or
Director, who is not interested in the transaction. New Interested Person
Transactions that have been approved by the Audit and Risk Committee need not be
aggregated for the purpose of such approval.
(b) Where the individual or aggregate value of the Interested Person Transactions is
equal to or more than three percent (3.0%) but less than five percent (5.0%) of the
Enlarged Group’s latest audited NTA, the Interested Person Transactions shall
require the prior approval of both the Group Financial Controller (or equivalent
person) and Director, who is not interested in the transaction or is a member of the
Audit and Risk Committee. New Interested Person Transactions that have been
approved by the Audit and Risk Committee need not to be aggregated for the purpose
of such approval.
(c) Where the individual or aggregated Interested Person Transactions is equal to or
more than five percent (5.0%) of the Enlarged Group’s latest audited NTA, the
Interested Person Transactions will be subject to the prior approval of the Audit and
Risk Committee. If a member of the Audit and Risk Committee is interested in any
Interested Person Transaction, he shall abstain from participating in the review of
that particular transaction. New Interested Person Transactions that have been
approved by the Audit and Risk Committee need not to be aggregated for the purpose
of such approval. For avoidance of doubt, the Audit and Risk Committee shall be
responsible for such approval.
(d) All approvals must strictly follow the review procedures as stipulated in this Section
and must be documented. The documentation, including the reasons for approval
where necessary, must be accompanied with supporting documents to serve as audit
trails, which will be subject to internal and/or external audit.
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
85
In addition, the Group Financial Controller (or equivalent person), who is a key executive
of the Enlarged Group, will review (and document such review) all Interested Person
Transactions (including Interested Person Transactions that are each less than S$100,000
in value) and its register on a quarterly basis or such other period as approved by the Audit
and Risk Committee.
The threshold limits set out above are adopted by the Enlarged Group taking into account
among other things, the nature, volume, recurrent frequency and size of the transactions
as well as the Enlarged Group’s day-to-day operations, administration and businesses.
The threshold limits are arrived at after considering the operational efficiency for the
day-to-day business operations of the Enlarged Group and the internal control for
Interested Person Transactions. The threshold limits act as an additional safeguard to
supplement the review procedures which will be implemented by the Enlarged Group for
Interested Person Transactions.
13.6.4. Other Review Procedures
The Enlarged Group will also implement the following procedures for the identification of
Interested Persons and the recording of all Interested Person Transactions (including the
Mandated Transactions):
(a) The finance department of the Enlarged Group will prepare and maintain a register
of transactions carried out with the Mandated Interested Persons pursuant to the
Proposed IPT Mandate (recording and documenting the identity of the Mandated
Interested Persons, basis, including the quotations and supporting evidence or
records or details obtained to support such basis on which they were entered into as
well as the approving authority). For avoidance of doubt, the quotations and
supporting evidence or records or supporting details obtained may be kept or
maintained by other relevant departments. The Mandated Transactions register shall
be monitored and reviewed on a quarterly basis, by the Group Financial Controller (or
equivalent person) of the Enlarged Group who is not a Mandated Interested Person.
This is to ensure that they are carried out on an arm’s length basis and on normal
commercial terms and in accordance with the guidelines and review procedures in
the IPT Mandate. All relevant non-quantitative factors will also be taken into account.
Such review includes the examination of the transaction(s) and its supporting
documents or such other data deemed necessary by the Audit and Risk Committee.
In addition, any exceptions or departures from the procedures shall be reported and
highlighted to the Audit and Risk Committee immediately.
(b) The Group Financial Controller (or equivalent person)/Company Secretary will obtain
signed letters of confirmation from key management personnel, controlling
shareholders and the Directors on a periodic basis (annual basis or such other period
as may be determined by the Audit and Risk Committee) with respect to their interest
in any transactions with the Enlarged Group.
(c) The Group Financial Controller (or equivalent person)/Company Secretary will
maintain a list of the Directors and controlling shareholders of the Enlarged Group
(which is to be updated immediately if there are any changes) to enable identification
of Interested Persons. The master list of Interested Persons shall be reviewed by the
Audit and Risk Committee at least on an annual basis.
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
86
(d) The Enlarged Group’s annual or periodic (such period as may be decided by the Audit
and Risk Committee) internal audit plan shall incorporate a review of all Interested
Person Transactions (where applicable), including the established procedures for
monitoring of the Mandated Transactions entered into during the current financial
year pursuant to the Proposed IPT Mandate and consistent with the Code of
Corporate Governance 2012. The approval thresholds as stipulated herein may be
delegated with the approval of the Audit and Risk Committee which will be duly
documented together with the bases for such approval.
(e) The Audit and Risk Committee shall periodically review all Interested Person
Transactions, at least on a quarterly basis (or such other frequency as the Audit and
Risk Committee may decide), except where Interested Person Transactions are
required under the review procedures to be approved by the Audit and Risk
Committee prior to the entry thereof, to ensure that they are carried out on normal
commercial terms and in accordance with the guidelines and review procedures in
the Proposed IPT Mandate. All relevant non-quantitative factors will also be taken
into account. Such review includes the examination of the transaction(s) and its
supporting documents or such other data deemed necessary by the Audit and Risk
Committee. The Audit and Risk Committee shall, when it deemed fit, have the right
to require the appointment of independent sources, advisers, and/or valuers to
provide additional information or review of controls and its implementation pertaining
to the transactions under review.
(f) In the event that a member of the Audit and Risk Committee is interested in any
Interested Person Transaction, he shall abstain from participating in the review
and/or approval of that particular transaction.
(g) The Audit and Risk Committee will conduct periodic review (of not less than
half-yearly or such other period as may be determined by the Audit and Risk
Committee) of the review procedures for the Interested Person Transactions. If,
during these periodic review, the Audit and Risk Committee is of the view that these
review procedures are no longer sufficient or appropriate to ensure that the
Interested Person Transactions are transacted on normal commercial terms and will
not be prejudicial to the interest of the Enlarged Group and its minority shareholders,
the Enlarged Group will seek a fresh mandate from the Shareholders based on new
review procedures for Interested Person Transactions. All New Interested Person
Transactions will be reviewed and approved by the Audit and Risk Committee prior
to entry while a fresh mandate is being sought from the Shareholders.
(h) The Audit and Risk Committee will review the letters of confirmation from key
management personnel, controlling shareholders and the Directors of the Enlarged
Group on periodic basis (annual basis or such other period as may be determined by
the Audit and Risk Committee) and the minutes of such review and its outcome shall
be taken.
(i) For purpose of the above review and approval process, any Director who is not
considered independent for purposes of the Proposed IPT Mandate and/or any new
Interested Person Transaction will abstain from voting in relation to any respective
resolution, and/or abstain from participating in the Audit and Risk Committee’s
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
87
decision during its review of the established review procedures for new Interested
Person Transactions or during its review or approval of any new Interested Person
Transactions.
13.6.5. Review of Other Interested Person Transactions not covered by the Proposed IPT
Mandate and Review by Audit and Risk Committee
All other existing and future Interested Person Transactions not subject to the Proposed
IPT Mandate will be reviewed by the Audit and Risk Committee from time to time in
accordance with the requirements of Chapter 9 of the Catalist Rules, to ensure that they
are carried out on an arm’s length basis, on normal commercial terms consistent with the
Enlarged Group’s usual business practices and on terms which are generally not more
favourable than those extended to unrelated third parties and will not be prejudicial to the
interests of the Enlarged Group and its minority Shareholders.
The Audit and Risk Committee will also review the internal audit reports to ascertain
whether the guidelines and procedures established to monitor interested person
transactions have been complied with. Further, if during these periodic reviews by the
Audit and Risk Committee, the Audit and Risk Committee is of the view that the guidelines
and procedures as stated in Section 13.6 above are not sufficient to ensure that these
interested person transactions will be on an arm’s length basis, on normal commercial
terms and will not be prejudicial to the Company and its minority Shareholders, the
Enlarged Group will (pursuant to Rule 920(1)(b)(iv) and (vii) of the Catalist Rules) obtain
from Shareholders a fresh mandate based on new guidelines and procedures for
transactions with Interested Persons pursuant to which additional information may be
required to be presented to Shareholders and an independent financial adviser may be
appointed for an opinion.
In the event that a member of the Board or a member of the Audit and Risk Committee has
a conflict of interest in relation to any interested person transaction, he will abstain from
reviewing and/or approving (as the case may be) that particular transaction. In such
instances, an alternative approving authority will be responsible for reviewing and/or
approving (as the case may be) the transaction. The Board will also ensure that all
disclosure requirements on interested person transactions, including those required by
prevailing legislation, the Catalist Rules and accounting standards, are complied with. The
Enlarged Group will also endeavour to comply with the recommendations set out in the
Code of Corporate Governance 2012.
13.7. Disclosure
The Company will announce the aggregate value of transactions conducted with the
Mandated Interested Persons pursuant to the Proposed IPT Mandate for each financial
period on which the Company is required to report on pursuant to Rule 705 of the Catalist
Rules and within the time required for the announcement of such report in accordance with
Rule 920(1)(a)(ii) of the Catalist Rules.
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
88
Disclosure will also be made in the annual report of the Company of the aggregate value
of new Mandated Transactions pursuant to the Proposed IPT Mandate during the relevant
financial period and in the annual reports for the subsequent financial years during which
the Proposed IPT Mandate is in force, in the following format as stipulated under Rule 907
of the Catalist Rules:
Name of interested
person
Aggregate value of all
interested person transactions
during the financial year under
review (excluding transactions
less than S$100,000 and
transactions conducted under
shareholders’ mandate pursuant
to Rule 920)
Aggregate value of all
interested person transactions
conducted under shareholders’
mandate pursuant to Rule 920
(excluding transactions less
than S$100,000)
13.8. Statement from the Audit and Risk Committee and Proposed New Audit and Risk
Committee
As the transactions under the Proposed IPT Mandate are transactions that would be
entered into by the Enlarged Group on and after the date of Completion, both the present
Audit and Risk Committee and the proposed New Audit and Risk Committee have
reviewed the review procedures for the Interested Person Transactions with Interested
Persons and the other review procedures as proposed by the Company for determining
the terms of the Interested Person Transactions, and having also considered, among other
things, the rationale for and benefits of the Proposed IPT Mandate, the classes of
Mandated Interested Persons, both the present Audit and Risk Committee and the
proposed New Audit and Risk Committee are satisfied that the review procedures for the
Interested Person Transactions, as well as the quarterly reviews to be made by the Audit
and Risk Committee in relation thereto, if applied strictly, are sufficient to ensure that the
Mandated Transactions will be carried out on an arm’s length basis, on normal commercial
terms consistent with the Enlarged Group’s usual business practices and on terms which
are generally not more favourable than those extended to unrelated third parties and will
not be prejudicial to the interests of the Enlarged Group and its minority Shareholders.
Both the present Audit and Risk Committee and the proposed New Audit and Risk
Committee have not taken a different view from the Independent Financial Adviser’s
opinion as set out in Section 20 of this letter and in the IFA Letter.
14. INTERESTED PERSON TRANSACTIONS AFTER COMPLETION
Following Completion, all present and ongoing interested person transactions of the
Target Group will be considered interested person transactions of the Enlarged Group.
Please refer to Section 24 of the Target Letter entitled “Interested Person Transactions” for
more information on the present and ongoing interested person transactions of the Target
Group.
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
89
15. FINANCIAL EFFECTS OF THE PROPOSED ACQUISITION, THE PROPOSED
DISPOSAL, THE PROPOSED CAPITAL REDUCTION AND THE PROPOSED
COMPLIANCE PLACEMENT
15.1. Bases and Assumptions
The pro forma financial effects of the Proposed Acquisition, the Proposed Disposal, the
Proposed Capital Reduction and the Proposed Compliance Placement on the Group as
set out in this Section 15 are based on:
(a) the audited consolidated financial statements of the Group for the financial year
ended 31 March 2016; and
(b) the audited combined financial statements of the Target Group for the financial year
ended 30 June 2016.
For illustration purposes, the pro forma financial effects of the Proposed Acquisition,
Proposed Disposal, Proposed Capital Reduction and the Proposed Compliance
Placement have been prepared based on the audited consolidated financial statements of
the Group for the financial year ended 31 March 2016 and the audited combined financial
statements of the Target Group for the financial year ended 30 June 2016, without any
adjustment to align the financial year-end of the Company with that of the Target Group.
The financial year-end of the Company is 31 March while the financial year-end of the
Target Group is 30 June. It is intended that after Completion, the financial year end of the
Company will be changed to 30 June.
The audited combined financial statements of the Target Group for the financial year
ended 30 June 2016 has been prepared in accordance with the Singapore Financial
Reporting Standards.
For the purposes of illustrating the financial effects of the Proposed Acquisition, Proposed
Disposal, Proposed Capital Reduction and Proposed Compliance Placement, the financial
effects have been prepared based on, among other things, the following bases and
assumptions:
(a) the financial effects on the earnings and the EPS of the Group for the year ended
31 March 2016 are computed assuming that the Proposed Acquisition, Proposed
Disposal, Proposed Capital Reduction and Proposed Compliance Placement are
completed on 1 April 2015;
(b) the financial effects of the NTA and net gearing of the Group as at 31 March 2016 are
computed assuming that the Proposed Acquisition, Proposed Disposal, Proposed
Capital Reduction and Proposed Compliance Placement are completed on 31 March
2016;
(c) the financial effects do not take into account any transactions completed by the
Group subsequent to 31 March 2016;
(d) the financial effects take into account the Proposed Capital Reduction to write-off
part of the Accumulated Losses of the Company amounting to S$27,880,753;
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
90
(e) the difference between the deemed consideration for the Proposed Acquisition and
the fair value of the net assets of the Group, if any, have not been considered and will
be determined on the date of Completion when the Vendors have effectively obtained
control of the Company. The actual difference could be materially different from the
aforementioned assumption;
(f) all proceeds from the Proposed Disposal will be used for working capital and the
settlement of the outstanding liabilities, resulting in the NTA of the Company to be
zero;
(g) costs and expenses in connection with the Proposed Acquisition, Proposed Disposal,
Proposed Capital Reduction and Proposed Compliance Placement are disregarded
for the purposes of calculating the financial effects; and
(h) has not been adjusted for the impact of any other transactions or events other than
the Proposed Acquisition, Proposed Disposal, Proposed Capital Reduction and
Proposed Compliance Placement.
15.2. Pro Forma Financial Effects
Shareholders should note that the pro forma financial effects of the Proposed Acquisition,
Proposed Disposal, Proposed Capital Reduction and Proposed Compliance Placement
are for illustrative purposes only. The illustrative financial effects should not be construed
to mean that the actual results, performance or achievements of the Group will be as
expected, expressed or implied in such financial effects.
15.3. Share Capital
The effect of the Proposed Acquisition, Proposed Disposal, Proposed Capital Reduction
and Proposed Compliance Placement on the existing share capital of the Company as at
the Latest Practicable Date is as follows:
Share Capital
(S$’000) Number of shares
Issued and paid-up share capital
as at 31 March 2016 27,885 92,388,045
Add: Proposed Issue of Consideration Shares 386,000(1) 1,187,692,308
Add: Proposed Disposal – –
Add: Proposed Capital Reduction (27,881) –
Add: Proposed Compliance Placement Shares 40,008(2) 123,100,000
Issued and paid-up capital after the
Proposed Acquisition, Proposed Disposal,
Proposed Capital Reduction and Proposed
Compliance Placement
426,012 1,403,180,353
Notes:
(1) Based on the Total Consideration of S$386.0 million.
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
91
(2) Based on the issuance and allotment of 123.1 million Shares at an issue price of S$0.325 through the
Proposed Compliance Placement.
15.4. NTA
(S$’000)
Before the Proposed
Acquisition, Proposed
Disposal, Proposed
Capital Reduction and
Proposed Compliance
Placement
After the Proposed
Acquisition, Proposed
Disposal, Proposed
Capital Reduction and
Proposed Compliance
Placement
NTA 1,195 60,436(1)(2)
Number of Shares 92,388,045 1,403,180,353
NTA per share (cents) 1.29 4.31
Notes:
(1) Based on the closing exchange rate as at 31 March 2016 of RM1: S$0.337 as set out in the annual report
of the Company for the financial year ended 31 March 2016.
(2) Based on the NTA of the Target Group as at 30 June 2016 of RM60.6 million and the indicative gross
proceeds from the Compliance Placement of S$40.0 million.
15.5. Earnings
(S$’000)
Before the Proposed
Acquisition, Proposed
Disposal, Proposed
Capital Reduction and
Proposed Compliance
Placement
After the Proposed
Acquisition, Proposed
Disposal, Proposed
Capital Reduction and
Proposed Compliance
Placement
Loss after income tax (9,430) –
Effect from Proposed
Acquisition – 23,594(1)(2)
Enlarged (loss)/earnings after
income tax (9,430) 23,594
Number of Shares 92,388,045 1,403,180,353
(LPS)/EPS (cents) (10.21) 1.68
Notes:
(1) Based on the exchange rate for the financial year ended 31 March 2016 of RM1: S$0.337 as set out in the
annual report of the Company for the financial year ended 31 March 2016.
(2) Based on the profit after tax of the Target Group for FY2016 of approximately RM68,588,000.
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
92
15.6. Gearing
(S$’000)
Before the Proposed
Acquisition, Proposed
Disposal, Proposed
Capital Reduction and
Proposed Compliance
Placement
After the Proposed
Acquisition, Proposed
Disposal, Proposed
Capital Reduction and
Proposed Compliance
Placement
Net debt for the financial year
ended in 2016 8,050 16,791(1)
Shareholders’ Equity(2) 1,195 60,436
Net Gearing Ratio(3) (times) 6.7 0.3
Notes:
(1) Based on the indicative gross proceeds from the Compliance Placement of S$40.0 million and the net debt
of the Target Group as at 30 June 2016 of RM168.5 million and based on the closing exchange rate as at
31 March 2016 of RM1: S$0.337 as set out in the annual report of the Company for the financial year
ended 31 March 2016. Net debt is calculated as borrowings plus finance leases less cash and cash
equivalents.
(2) Based on the respective NTA of the Group and the Target Group.
(3) Net Gearing Ratio is calculated based on net debt divided by shareholders’ equity.
16. FINANCIAL INFORMATION
16.1. Disclosure requirements
Under Rules 1015(1)(a)(ii) and 1015(4)(a) of the Catalist Rules, the Company is required
to disclose the following:
(a) last two (2) years of historical financial information of the assets to be acquired and
one (1) year of pro forma financial information (of the enlarged group);
(b) information required by Rules 407, 416, 1010, 1011, 1012, 1013 and Part XII of
Chapter 4 of the Catalist Rules, where applicable.
Rule 407 of the Catalist Rules requires compliance with Parts II and XI of the Fifth
Schedule. Under the Fifth Schedule, pro forma financial statements are required for the
most recently completed financial year and the period covered by interim financial
statements, if any, where the Company has, during such period:
(a) acquired or disposed of any assets or any entity, business or business trust (other
than a common control entity, common control business or common control business
trust); or
(b) entered into any agreement to acquire or dispose of any asset or any entity, business
or business trust (whether or not that entity, business or business trust is a common
control entity, common control business or common control business trust),
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
93
and the net book value or absolute amount of profit or loss before tax of such asset, entity,
business or business trust exceeds the prescribed thresholds under the Fifth Schedule.
16.2. Application for Waiver
As announced by the Company on 17 August 2016, the Company had applied to the
SGX-ST for a waiver from Rules 1015(1)(a)(ii) and 1015(4)(a) of the Catalist Rules in
respect of disclosure of pro forma financial information of the Enlarged Group for the
following reasons:
16.2.1. Business and assets of Enlarged Group wholly that of the Target Group
Upon Completion, the business of the Company will comprise wholly of the business of the
Target Group. The approval of the resolutions in relation to the Proposed Acquisition and
Proposed Capital Reduction shall be conditional upon approval being obtained from
Shareholders in relation to the Proposed Disposal.
As such, the operations and financial position of the existing Group are not relevant to and
will not form part of the operations and financial position of the Enlarged Group. Post
Completion, the Enlarged Group’s business and assets will comprise only the business
and assets of the Target Group.
The Company believes that it would be reasonable for the Shareholders to only consider
the business of the Target Group moving forward instead of business and financial position
of the existing Group. The audited financial information of the Target Group for the latest
three financial years and unaudited financial information for any interim financial period (if
applicable), will be prepared in accordance with the Singapore Financial Reporting
Standards for inclusion in the circular to be despatched to Shareholders in accordance
with the requirements of the Catalist Rules.
16.2.2. Cost of preparation and reporting pro forma financial information outweighs benefit to
Shareholders
In light of the Proposed Disposal and the Proposed Capital Reduction and that the audited
financial information of the Target Group would adequately reflect the financial position of
the Company upon Completion, the Company is of the view that the cost of preparation
and reporting the pro forma financial information on the Enlarged Group outweighs the
benefits to its Shareholders. Furthermore, combining the financial information of the
existing Group with the financial information of the Target Group to arrive at the pro forma
financial information of the Enlarged Group will be purely theoretical and illustrative in
nature, and will not be reflective of the Enlarged Group’s financial position and results
upon Completion.
Accordingly, the Company is of the view that the exclusion of the pro forma financial
information of the Enlarged Group would not be prejudicial to the Shareholders.
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
94
16.2.3. Financial performance and position of existing Group
Shareholders would already be familiar with the historical financial performance and
position of the existing Group and could refer to the Group’s annual reports and periodic
financial results announcements. The annual report of the Group for the financial year
ended 31 March 2016 has been released on 14 July 2016. The net asset value of the
Group and the Company as at 31 March 2016 was approximately S$1.2 million and
S$0.3 million respectively.
16.3. Grant of Waiver
On 16 August 2016, SGX-ST granted the waiver sought and indicated that the SGX-ST
has no objection to granting the Company a waiver from Rules 1015(1)(a)(ii) and
1015(4)(a) of the Catalist Rules in respect of disclosure of pro forma financial information
of the Enlarged Group, subject to:
(a) the Company announcing the waiver granted, stating the reasons for seeking the
waiver as required under Rule 106 of the Catalist Rules, and that the Company
and/or its Board are not aware of any other material information in respect of the
Company and the Proposed Acquisition which was not formerly disclosed to the
investors;
(b) the disclosure of the waiver granted and bases for seeking the waiver in the circular
to shareholders; and
(c) submission of a written confirmation from the Company that the waiver does not
contravene any laws and regulations governing the Company and the constitution of
the Company.
As at the date of this Circular, the Directors are not aware of any other material information
in respect of the Company and the Proposed Acquisition which has not been formerly
disclosed, or disclosed in this Circular to Shareholders and potential investors.
17. MORATORIUM
As the Company envisages the listing of its Shares to be transferred to the Catalist upon
Completion, the Proposed Acquisition is subject to the moratorium requirements specified
in the Catalist Rules. In particular, Rule 1015(3)(b) of the Catalist Rules provides that the
moratorium requirements specified in Rules 420, 421 and 422 are applicable to the
following persons:
(a) persons who are existing controlling shareholders or who will become controlling
shareholders of the issuer as a result of the asset acquisition; and
(b) associates of any person in (a).
Such persons are required to provide an undertaking to maintain his effective interest in
the securities under moratorium during the moratorium period of six (6) months.
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
95
Upon Completion, the Vendors are entitled to receive Consideration Shares in accordance
with the terms of the Sale and Purchase Agreement and intend to renounce the
Consideration Shares in favour of Hatten Holdings Pte. Ltd., which is a Singapore
incorporated company jointly owned by the Vendors. The trading of the Shares on the
SGX-ST will be suspended on Completion. The suspension will continue until the
completion of the Proposed Compliance Placement.
Accordingly, in compliance with the moratorium requirements specified in Rules 420, 421
and 422 of the Catalist Rules, the following persons have provided undertakings in favour
of the Company and the Sponsor as set out below:
(a) Hatten Holdings Pte. Ltd., which will own 1,187,692,308 Consideration Shares after
Completion but prior to the Proposed Compliance Placement, has irrevocably and
unconditionally undertaken not to directly or indirectly, offer, sell, contract to sell,
realise, transfer, assign, pledge, grant any option or right to purchase, grant any
security over, encumber or otherwise dispose of:
(i) all or any part of the Consideration Shares (adjusted for any bonus issues or
sub-division of Consideration Shares) for a period of six (6) months from the
date of the listing of the Compliance Placement Shares on the Catalist; and
(ii) no more than 50.0% of the Consideration Shares (adjusted for any bonus issues
or sub-division of Consideration Shares) for a period of six (6) months
thereafter;
(b) each of the Vendors, being shareholders of Hatten Holdings Pte. Ltd., have
irrevocably and unconditionally undertaken, on a several basis, not to:
(i) directly or indirectly, offer, sell, contract to sell, realise, transfer, assign, pledge,
grant any option or right to purchase, grant any security over, encumber or
otherwise dispose of, all or any part of the Consideration Shares (both as
adjusted for any bonus issues or sub-division of Consideration Shares) for a
period of six (6) months from the date of the listing of the Compliance Placement
Shares on the Catalist and no more than 50.0% of such Consideration Shares
for a period of six (6) months thereafter; and
(ii) directly or indirectly offer, sell, contract to sell, realise, transfer, assign, pledge,
grant any option or right to purchase, grant any security over, encumber or
otherwise dispose or realise any part of his interest in the shares in Hatten
Holdings Pte. Ltd. held by him for a period of one (1) year from the date of the
listing of the Compliance Placement Shares on the Catalist.
The moratorium undertakings do not prevent Hatten Holdings Pte. Ltd. and/or the Vendors
from selling the Consideration Shares as part of the Proposed Compliance Placement and
the moratorium undertakings shall apply to such number of Consideration Shares held by
Hatten Holdings Pte. Ltd. and/or the Vendors after the completion of the Proposed
Compliance Placement.
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
96
18. MATERIAL LITIGATION
The Group is not engaged in any legal or arbitration proceedings including those which are
pending or known to be contemplated, which may have or have had in the 12 months
immediately preceding the date of this Circular, a material effect on the Group’s financial
position or profitability. The Directors have no knowledge of any proceedings pending or
threatened against the Group or any facts likely to give rise to any litigation, claims or
proceedings which might materially affect the financial position or the business of the
Group.
19. MATERIAL CONTRACTS
Save for the Sale and Purchase Agreement and the Disposal Agreement, the Group has
not entered into any contracts not in the ordinary course of business in the two (2) years
preceding the Latest Practicable Date.
20. ADVICE OF THE INDEPENDENT FINANCIAL ADVISER IN RELATION TO THE
PROPOSED WHITEWASH RESOLUTION, THE PROPOSED DISPOSAL AND THE
PROPOSED IPT MANDATE
SAC Capital Private Limited has been appointed as the Independent Financial Adviser to
the Independent Directors in respect of the Proposed Whitewash Resolution and the
Proposed Disposal and to the Audit and Risk Committee in respect of the Proposed IPT
Mandate. A copy of the IFA Letter in relation to the above is reproduced in Appendix D to
this Circular. Shareholders are advised to read the IFA Letter in its entirety.
Taking into consideration the factors set out in the IFA Letter and information available to
the Independent Financial Adviser as at the Latest Practicable Date, the Independent
Financial Adviser is of the opinion that:
(a) the Proposed Whitewash Resolution, from a financial point of view, when considered
in the context of the Proposed Acquisition (which terms are fair and reasonable), is
not prejudicial to the interests of the Company and the Independent Shareholders.
Accordingly, the Independent Financial Adviser advises the Independent Directors to
recommend the Independent Shareholders to vote in favour of the Proposed
Whitewash Resolution; and
(b) the Proposed Disposal (which terms are fair and reasonable) is on normal
commercial terms and is not prejudicial to the interests of the Company and the
Independent Shareholders. Accordingly, the Independent Financial Adviser advises
the Independent Directors to recommend the Independent Shareholders to vote in
favour of the Proposed Disposal.
Having considered, among other things set out in the IFA Letter, the rationale and benefits
of the Proposed IPT Mandate, the review procedures of the Company for the Mandated
Transactions and the role of the Audit and Risk Committee in enforcing the Proposed IPT
Mandate, and subject to the qualifications and assumptions set out in the IFA Letter, the
Independent Financial Adviser is of the opinion that the review procedures for determining
transaction prices of the Mandated Transactions as set out in Section 13.6 of the VGO
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
97
Letter, if adhered to, are sufficient to ensure that the Mandated Transactions will be
conducted on normal commercial terms and will not be prejudicial to the interests of the
Company and its minority Shareholders.
21. INTERESTS OF DIRECTORS AND SUBSTANTIAL SHAREHOLDERS
None of the Directors or substantial shareholders of the Company or their associates has
any interest, direct or indirect, in the Proposed Transactions, save for:
(a) their respective shareholdings in the Company; and
(b) the Purchasers, who are interested in the Proposed Disposal.
22. ABSTENTION FROM VOTING
As the Proposed Acquisition is conditional upon the Proposed Disposal, and the Key
Resolutions are inter-conditional upon each other, the Purchasers, being existing
controlling shareholders of the Company are therefore interested in the Proposed
Acquisition. Accordingly, the Purchasers have abstained from making any
recommendations to Shareholders on all resolutions in this Circular relating to the
Proposed Transactions. The Purchasers will also abstain and procure that their associates
will abstain from voting at the EGM on the resolutions relating to the Proposed
Transactions. The Purchasers will decline to accept appointment as proxies for voting at
the EGM in respect of the resolutions relating to the Proposed Transactions unless
specific instructions as to voting have been given.
In accordance with the conditions of the Whitewash Waiver, notwithstanding the lack of
any voting rights in the Company, the Vendors and their concert parties will abstain from
voting at the EGM on the ordinary resolution relating to the Proposed Whitewash
Resolution.
The Vendors and their concert parties will also decline to accept appointment as proxies
for voting at the EGM in respect of the resolution relating to the Proposed Whitewash
Resolution unless the Independent Shareholders appointing them as proxies give specific
instructions in their proxy forms as to the manner in which their votes are to be cast in
respect of such resolution.
23. DIRECTORS’ RECOMMENDATION
Goh Ching Huat, Steven, Goh Ching Wah, George and Goh Ching Lai, Joe have abstained
from making any recommendation to Shareholders on the resolutions relating to the
Proposed Transactions.
As Dato’ Wong King Kheng and Foo Jong Han Rey are interested in the resolutions
relating to their proposed appointments, they have abstained from making any
recommendation to Shareholders on the resolutions relating to their respective
appointments.
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
98
Having considered and reviewed, among other things, the terms of the Sale and Purchase
Agreement, the rationale and benefits of the Proposed Acquisition, the risk factors and all
other relevant facts set out in this Circular, the Independent Directors are of the opinion
that the Proposed Acquisition is in the best interests of the Company. Accordingly, the
Independent Directors recommend that Shareholders vote in favour of the resolutions
relating to the Proposed Acquisition and the Proposed Issuance of Consideration Shares.
The Audit and Risk Committee have considered and concurs with the opinion of the IFA
in relation to the Proposed Whitewash Resolution, the Proposed Disposal and the
Proposed IPT Mandate.
Having considered, among other things, the advice of the IFA, the Independent Directors
believe that the Proposed Whitewash Resolution, the Proposed Disposal and the
Proposed IPT Mandate are in the best interests of the Company. Accordingly, they
recommend that Independent Shareholders vote in favour of the ordinary resolutions
relating to the Proposed Whitewash Resolution, the Proposed Disposal and the Proposed
IPT Mandate as stated in the Notice of EGM.
Having considered and reviewed, among other things, the rationale and benefits for the
Proposed Compliance Placement, the Proposed Listing Transfer, the Proposed Capital
Reduction, the Proposed Change of Name, the Proposed Adoption of the New
Constitution, the Proposed New Share Issue Mandate and the Proposed Appointment of
the Proposed New Directors, the Independent Directors are of the opinion that the above
transactions are in the best interests of the Company. Accordingly, they recommend that
Shareholders vote in favour of all the resolutions relating to the above as set out in the
Notice of EGM.
24. EXTRAORDINARY GENERAL MEETING
The EGM, notice of which is set out in pages N-1 to N-5 of this Circular, will be held at
Level 2, 53 Mohamed Sultan Road, Singapore 238993 on 20 January 2017 at 10 a.m., for
the purpose of considering, and if thought fit, passing with or without any modifications,
the resolutions set out in the Notice of EGM.
25. ACTION TO BE TAKEN BY SHAREHOLDERS
25.1. Appointment of Proxies
Shareholders who are unable to attend the EGM and who wish to appoint a proxy to attend
and vote at the EGM on their behalf should complete and sign the Proxy Form attached
to this Circular in accordance with the instructions printed thereon. The completed and
signed Proxy Form should then be returned as soon as possible and in any event so as
to arrive at the Company’s Share Registrar in Singapore not less than 48 hours before the
time fixed for the EGM. Shareholders who have completed and returned the Proxy Form
may still attend and vote in person at the EGM, if they so wish, in place of their proxy. A
proxy need not be a Shareholder.
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
99
25.2. When a Depositor is Regarded as a Shareholder
A depositor shall not be regarded as a member of the Company entitled to attend the EGM
and to speak and vote thereat unless he is shown to have Shares entered against his
name in the depository register, as certified by the CDP, at least 72 hours before the EGM.
26. CONSENTS
(a) UOB Kay Hian Private Limited, the Financial Adviser to the Company in respect of the
Proposed Acquisition, has given and has not withdrawn its written consent to the
issue of this Circular with the inclusion of its name and all references thereto in the
form and context in which they appear in this Circular and to act in such capacity in
relation to this Circular.
(b) SAC Capital Private Limited, the Independent Financial Adviser to the Independent
Directors in respect of the Proposed Whitewash Resolution and the Proposed
Disposal, and to the Audit and Risk Committee in respect of the Proposed IPT
Mandate has given and has not withdrawn its written consent to the issue of this
Circular with the inclusion herein of its name, the IFA Letter and all references thereto
in the form and context in which they appear in this Circular and to act in such
capacity in relation to this Circular.
(c) Jones Lang LaSalle Corporate Appraisal and Advisory Limited, the Independent
Business Valuer commissioned by the Company to conduct a valuation of the Target
Group has given and has not withdrawn its written consent to the issue of this
Circular with the inclusion herein of its name, the Independent Business Valuation
Report, and all references thereto in the form and context in which they appear in this
Circular and to act in such capacity in relation to this Circular.
(d) Nawawi Tie Leung Property Consultants Sdn. Bhd., the Independent Property Valuer
issuing the Property Valuation Report, and the Independent Market Researcher
issuing the Industry Overview Report, and the independent valuers of the WOS
Property and issuing the Disposal Valuation Report, has given and has not withdrawn
its written consent to the issue of this Circular with the inclusion of its name, the
Property Valuation Report, the Industry Overview Report and the valuation
certification as set out in Appendix L to this Circular and all references thereto in the
form and context in which they appear in this Circular and to act in such capacity in
relation to this Circular.
(e) Ernst & Young LLP, the auditors to the Company and the Target Group and the
Reporting Accountants to the Enlarged Group, has given and has not withdrawn its
written consent to the issue of this Circular with the inclusion of its name, the
“Independent Auditors Report on the Combined Financial Statements of the Target
Group for FY2014, FY2015 and FY2016” as set out in Appendix C and all references
thereto in the form and context in which they appear in this Circular and to act in such
capacity in relation to this Circular.
(f) Morgan Lewis Stamford LLC, the legal adviser on Singapore law in relation to the
Proposed Acquisition, has given and has not withdrawn its written consent to the
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
100
issue of this Circular with the inclusion of its name and references thereto in the form
and context in which they appear in this Circular and to act in such capacity in relation
to this Circular.
(g) Zaid Ibrahim & Co., the legal adviser to the Company in respect of the Proposed
Acquisition as to Malaysia Law, has given and has not withdrawn its written consent
to the issue of this Circular with the inclusion of its name, the “Summary of Applicable
Laws and Regulations in Malaysia” as set out in Appendix J to this Circular, the
“Abridged Legal Opinion of the Legal Advisers to the Company in respect of the
Proposed Acquisition as to Malaysia Law” as set out in Appendix K, and all
references thereto in the form and context in which they appear in this Circular and
to act in such capacity in relation to this Circular.
(h) Chancery Law Corporation, the legal adviser to the Financial Adviser as to Singapore
law, has given and has not withdrawn its written consent to the issue of this Circular
with the inclusion of its name and references thereto in the form and context in which
they appear in this Circular and to act in such capacity in relation to this Circular.
(i) Shearn Delamore & Co., having provided a Malaysia tax law opinion in relation to the
third paragraph of Section 26.2 of the Target Letter entitled “Taxation” only, has given
and has not withdrawn its written consent to the reproduction of such excerpt of its
tax law opinion as set out in the third paragraph of Section 26.2 of the Target Letter.
Each of UOB Kay Hian Private Limited, Morgan Lewis Stamford LLC, Zaid Ibrahim & Co.,
Chancery Law Corporation and Shearn Delamore & Co., does not make or purport to make
any statement in this Circular or any statement upon which a statement in this Circular is
based and each of them makes no representation regarding any statement in this Circular
and, to the maximum extent permitted by law, expressly disclaim and take no responsibility
for any liability to any persons which is based on, or arises out of any statement,
information or opinion included or omitted from this Circular.
27. DIRECTORS’ RESPONSIBILITY STATEMENT
The Directors collectively and individually accept full responsibility for the accuracy of the
information given in this Circular and confirm after making all reasonable enquiries that,
to the best of their knowledge and belief, this Circular constitutes full and true disclosure
of all material facts about the Proposed Transactions, and the Company and its
subsidiaries (save in respect of information pertaining to the Vendors, the Target Group or
the Hatten Group) and the Directors are not aware of any facts the omission of which
would make any statement in this Circular misleading. Where information in this Circular
(save in respect of information pertaining to the Vendors, the Target Group or the Hatten
Group) has been extracted from published or otherwise publicly available sources or
obtained from a named source, the sole responsibility of the Directors has been to ensure
that such information has been accurately and correctly extracted from those sources
and/or reproduced in this Circular in its proper form and context.
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
101
28. PROPOSED NEW DIRECTORS’ RESPONSIBILITY STATEMENT
The Proposed New Directors collectively and individually accept full responsibility for the
accuracy of the information given in the Target Letter and any information in this Circular
pertaining to the Vendors, the Target Group and the Hatten Group in connection with the
Proposed Acquisition and confirm after making all reasonable enquiries that, to the best
of their knowledge and belief, this Circular constitutes full and true disclosure of all
material facts about the Vendors, the Target Group and the Hatten Group in connection
with the Proposed Acquisition and the Proposed New Directors are not aware of any facts
the omission of which would make any statement in this Circular misleading.
Where information in the Target Letter and any information in this Circular pertaining to the
Vendors, the Target Group and the Hatten Group in connection with the Proposed
Acquisition has been extracted from published or otherwise publicly available sources or
obtained from a named source, the sole responsibility of the directors of the Target has
been to ensure that such information have been accurately and correctly extracted from
those sources and/or reproduced in the Target Letter and this Circular in its proper form
and context. In this regard, the Financial Adviser advised the Proposed Board of Directors
of the Enlarged Group to engage Ernst & Young LLP to perform agreed-upon procedures
to ensure that such information have been accurately and correctly extracted from those
sources and/or reproduced in the Target Letter and this Circular in its proper form and
context.
29. FINANCIAL ADVISER’S RESPONSIBILITY STATEMENT
To the best of the Financial Adviser’s knowledge and belief, this Circular and the Target
Letter constitutes full and true disclosure of all material facts about the Proposed
Acquisition, the Company and its subsidiaries, the Target Group, the Enlarged Group, and
the Financial Adviser is not aware of any facts the omission of which would make any
statement in this Circular and the Target Letter misleading.
Where information relating to the Company, the Target Group, the Enlarged Group and the
Proposed Acquisition has been extracted from published or otherwise publicly available
sources, obtained from a named source, or obtained from the Directors and/or employees
and/or agents acting on behalf of the Company, the Vendors or the Proposed New
Directors and/or employees and/or agents acting on behalf of the Target Group, the sole
responsibility of the Financial Adviser has been to ensure that such information has been
accurately and correctly extracted from those sources and/or reproduced in the Target
Letter and this Circular in its proper form and context, having considered the agreed-upon
procedures performed.
30. MISCELLANEOUS
There has been no public take-over by third parties in respect of the Shares or shares of
the Target Group, or by the Company or the Target Group in respect of other companies’
shares or units of a business trust which has occurred from the beginning of the most
recently completed financial year to the Latest Practicable Date.
No significant trading suspension of the Company had occurred on the SGX-ST during the
three (3) years immediately preceding the Latest Practicable Date.
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
102
Save as disclosed in this Circular, the Directors are not aware of any event which has
occurred since the end of the most recently concluded financial year to the Latest
Practicable Date, which may have a material effect on the financial position and results of
the Company.
31. DOCUMENTS FOR INSPECTION
Copies of the following documents may be inspected at the registered office of the
Company during normal business hours for a period of six (6) months from the date of this
Circular:
(a) the Sale and Purchase Agreement;
(b) the Supplemental Agreement;
(c) the Disposal Agreement;
(d) the Disposal Valuation Report;
(e) the combined audited financial statements of the Target Group;
(f) the IFA Letter;
(g) the Property Valuation Report;
(h) the Industry Overview Report;
(i) the Business Valuation Report;
(j) the Service Agreements;
(k) the Non-Competition Agreement;
(l) the Malaysia Legal Opinion;
(m) the letters of consent referred to in Section 26 of VGO Letter;
(n) the moratorium undertakings referred to in Section 17 of the VGO Letter; and
(o) the Existing Constitution of the Company.
32. ADDITIONAL INFORMATION
Your attention is drawn to the additional information set out in the Target Letter and the
Appendices to this Circular.
Yours faithfully
For and on behalf of
The Board of Directors of
VGO CORPORATION LIMITED
LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY
103
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SKY WIN MANAGEMENT CONSULTANCY PTE. LTD.(Incorporated in the Republic of Singapore)
(Company Registration No. 201307192Z)
Proposed New Directors:
Dato’ Tan June Teng Colin @ Chen JunTing
(Proposed Executive Chairman and Managing Director)
Dato’ Tan Ping Huang Edwin @ Chen BingHuang
(Proposed Executive Director and Deputy Managing Director)
Lee Sok Khian John (Proposed Executive Director)
Dato’ Wong King Kheng (Proposed Lead Independent Director)
Loh Weng Whye (Proposed Independent Director)
Foo Jong Han Rey (Proposed Independent Director)
Registered Office:
53 Mohamed Sultan Road
#04-02
Singapore 238993
29 December 2016
To: The Shareholders of VGO Corporation Limited
Dear Sir/Madam
THE PROPOSED ACQUISITION OF THE ENTIRE ISSUED AND PAID-UP SHARE CAPITAL OF
SKY WIN MANAGEMENT CONSULTANCY PTE. LTD. FOR AN AGGREGATE CONSIDERATION
OF S$386.0 MILLION BY WAY OF THE ALLOTMENT AND ISSUANCE OF 1,187,692,308
CONSIDERATION SHARES IN THE CAPITAL OF VGO CORPORATION LIMITED
1. INTRODUCTION
This letter (the “Target Letter”) has been prepared by the Proposed New Directors, on
behalf of the Target Group, for inclusion in this Circular.
Unless the context otherwise requires, all the terms as defined in this Circular shall bear
the same meaning when used in this letter. For the purposes of this Target Letter, any
references to “we”, “us”, and “our” is a reference to the Target Group or any member of the
Target Group, as the context requires and any references to the “Tan Brothers” is a
reference to the Vendors, namely Dato’ Colin and Dato’ Edwin.
2. BACKGROUND AND HISTORY OF THE TARGET GROUP
2.1. Background
We are one of the leading property developers in Malaysia specialising in integrated
residential, hotel and commercial developments and are headquartered in Malacca,
Malaysia.
The Target was incorporated as a private company in Singapore on 19 March 2013.
Pursuant to the terms of the Sale and Purchase Agreement, the Tan Brothers and the
Target will be carrying out the Restructuring of the Target Group. Details of the
Restructuring are set out in Section 2.4 of this letter entitled “Restructuring”.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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The Target Group represents the property development arm of the Hatten Group. The
Hatten Group is a conglomerate owned by the Tan Brothers with core businesses in
property development, property investment, hospitality, retail and education. Please see
Section 2.3 of this letter entitled “Structure of the Hatten Group” for more details on the
Hatten Group.
Our current development portfolio comprises three (3) integrated mixed use development
projects in Malacca, Malaysia. They are (a) Hatten City Phase 1 (incorporating Elements
Mall, SilverScape Residences, Hatten Suites, and a tower block that has been taken up
by DoubleTree by Hilton); (b) Hatten City Phase 2 (incorporating Imperio Mall and Imperio
Residence); and (c) Harbour City (incorporating a mall, a theme park and three (3) hotels).
We have also designed and are developing a retail mall in Malacca, Malaysia called Vedro
by the River. Further details on the developments are set out in Section 4 of this letter
entitled “Business of the Target Group”.
2.2. History
The Target Group is the property development arm of the Hatten Group. Property
development was the first business of the Hatten Group. The Hatten Group commenced
its first property development when the Tan Brothers took over the entire beneficial
interest of Lianbang in 2005. In order to take over Lianbang and an abandoned mall
project, the Tan Brothers agreed with unrelated third party vendors for an aggregate
purchase consideration in return for the transfer of an agreed number of retail units upon
completion of the abandoned mall project which is known today as Dataran Pahlawan
Melaka Megamall. Prior to taking over Lianbang, both Dato’ Edwin and Dato’ Colin joined
Lianbang as its business development managers in 2004 and 2006 respectively. Their
father, Datuk Wira Eric, was a consultant to Lianbang. Datuk Wira Eric continued as a
consultant to Lianbang after the Tan Brothers took over Lianbang’s business. The Tan
Brothers had the benefit of the views and advice of their father and adviser on strategic
issues. Datuk Wira Eric has many years of experience and a wide network in property
development and construction and currently still serves as the group adviser and mentor
of the Hatten Group.
In developing Dataran Pahlawan Melaka Megamall, the Tan Brothers recognised that the
abandoned 7.7 hectares site was located in the heart of Malacca’s historic city. Therefore,
despite doubts from other established industry players, they saw potential to revive and
inject life into an otherwise abandoned project. The Tan Brothers overcame various
challenges, ranging from the reconfiguration of design and layout to increase the saleable
area of the mall, to the sourcing of international brands and high quality tenants. The
international brands brought in by the Tan Brothers included many that were not previously
in the Malacca market, which contributed to the popularity and success of Dataran
Pahlawan Melaka Megamall.
The construction of Dataran Pahlawan Melaka Megamall was undertaken by the then
existing turnkey main contractor and the Tan Brothers were assisted by external
professionals such as architects and quantity surveyors. The first phase of the Dataran
Pahlawan Melaka Megamall project and its land were pledged to secure the turnkey
construction financing facility. The first phase of Dataran Pahlawan Melaka Megamall was
completed in 2006. The partial payment of construction costs and partial repayment of
bank financing was through the proceeds obtained from the sale of some retail units of the
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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Dataran Pahlawan Melaka Megamall as the value of the retail units had appreciated over
the period. To date, the Hatten Group still owns a substantial portion of the retail units of
the Dataran Pahlawan Melaka Megamall.
The completion of the first phase of Dataran Pahlawan Melaka Megamall paved the way
for further developments in Malacca. Incorporating Hatten Group Sdn. Bhd. in 2008, the
Tan Brothers consolidated their experience gained in the property development process
and sought to expand its property investment portfolio through land acquisitions for future
development as well as venturing into hospitality and retail businesses. Please see
Section 2.3 of this letter entitled “Structure of the Hatten Group” for more details on the
current structure of the Hatten Group.
The Tan Brothers subsequently re-invested the profits from the first phase of Dataran
Pahlawan Melaka Megamall and secured a US$50 million senior note programme in 2007
arranged by a foreign bank secured by the land lease on the land which Dataran Pahlawan
Melaka Megamall was built upon and all assets on that land to settle the remaining
construction costs and turnkey construction financing facility of the first phase of Dataran
Pahlawan Melaka Megamall and part finance the development of the second phase of
Dataran Pahlawan Melaka Megamall. The second phase of Dataran Pahlawan Melaka
Megamall added five (5) storeys to the mall and was completed in 2008. To date, Dataran
Pahlawan Melaka Megamall remains the largest shopping mall in Malacca.
(Dataran Pahlawan Melaka Megamall)
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Between 2009 and 2015, Hatten Group completed two (2) integrated property
development projects as follows:
(i) Hatten Square Suites & Shoppes
Growing from the success of the development of Dataran Pahlawan Melaka
Megamall, the Hatten Group embarked on the design and development of Hatten
Square Suites & Shoppes. Hatten Square Suites & Shoppes was its first
integrated property development project with retail and hospitality properties and
was launched in 2008 and completed in 2012. The retail properties of Hatten
Square Suites & Shoppes further enhanced the retail space of the Hatten Group.
The hospitality properties of Hatten Square Suites & Shoppes, subsequently
known as Hatten Hotel, is the first hotel of the Hatten Group and to date is the
largest hotel in Malacca with over 700 rooms.
The Hatten Hotel has been awarded various accolades, including winning “Best
Luxury Suite Hotel 2014” and “Best Luxury Family Hotel 2015” from the World
Luxury Hotel Awards.
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(Hatten Square Suites and Shoppes)
(ii) Terminal Pahlawan
Seeking to further enhance the surrounding areas of Dataran Pahlawan Melaka
Megamall and Hatten Hotel as a tourism hub, the Hatten Group sought to solve
the problem of frequent traffic congestion caused by the lack of tourist bus
parking bays and that of a large drain next to the mall. This led to the designing
and development of Terminal Pahlawan. Terminal Pahlawan was specifically
designed to incorporate bus parking and was built on top of the unsightly drain.
Terminal Pahlawan was the Hatten Group’s second integrated property
development project with its sales launched in 2012 and its construction
completed in 2015. Terminal Pahlawan also comprises Estadia Hotel which
combines simplicity with peranakan home-styled luxury with over 196 deluxe
suites.
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(Terminal Pahlawan)
(Estadia Hotel)
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A summary of the key property development milestones of the Hatten Group is as
follows:
Year Milestones
2004 – 2005 • Acquisition of Lianbang that owned an abandoned
project (currently known as Dataran Pahlawan Melaka
Megamall after the project was revived by the Tan
Brothers)
2006 – 2008 • Completed construction of the first phase of Dataran
Pahlawan Melaka Megamall
• The Tan Brothers incorporated Hatten Group Sdn. Bhd.
• Launched sales of Hatten Square Suites & Shoppes
(retail units)
• Completed construction of the second phase of Dataran
Pahlawan Melaka Megamall by adding five (5) storeys to
the mall
2009 – 2011 • Completed construction of the first shop-to-shop
pedestrian link bridge between Dataran Pahlawan
Melaka Megamall and Hatten Square Suites & Shoppes
• Launched sales of Hatten Square Suites & Shoppes
(hospitality units)
• Completed construction of Hatten Square Suites &
Shoppes (retail units)
• Launched sales of SilverScape Residences and
Elements Mall for Hatten City Phase 1
• Signed management agreement to house DoubleTree by
Hilton in Hatten City Phase 1
2012 – 2013 • Completed construction of Hatten Square Suites &
Shoppes (hospitality units)
• Launched sales of Terminal Pahlawan
• Launched sales of Imperio Mall for Hatten City Phase 2
• Launched sales of Hatten Suites for Hatten City Phase 1
• Launched sales of Imperio Residence for Hatten City
Phase 2
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Year Milestones
• Launched sales of Vedro by the River
• Completed further expansion of Dataran Pahlawan
Melaka Megamall, the largest shopping mall in Malacca
2014 – 2015 • Completed construction of Terminal Pahlawan
• Launched sales of Harbour City
• Completed construction of Estadia Hotel
2016 • Completed construction of Hatten City Phase 1
2.3. Structure of the Hatten Group
The Hatten Group of companies is a conglomerate owned by the Tan Brothers and has
core businesses in property development, property investment, hospitality, retail and
education.
The current structure of the Hatten Group is as follows:
Hatten Group
Property
Development
Property
InvestmentHospitality Retail Education
The name “Hatten” is derived from the same Japanese word (發展) that means “growth
and development”. This signifies the Hatten Group’s vision and mission of growing and
developing into a market leader across multiple industries and to continue delivering value
to its stakeholders.
The Hatten Group is a leading brand in the Malaysian market, as evidenced by the awards
won by the Hatten Group and the Target Group, including the Best Property Development
Brand Malaysia by Global Brands Magazine in 2014 and the Outstanding Brands (Property
Developer) from Outstanding Brands in 2016. The Hatten Group has five (5) core
businesses, namely (i) property development, (ii) property investment, (iii) hospitality,
(iv) retail, and (v) education. The Target Group represents only the property development
business of the Hatten Group.
The following sets out some of the Hatten Group’s portfolio in its core businesses other
than property development as at the Latest Practicable Date.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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2.3.1. Property Investment
The Hatten Group’s property investment arm is primarily responsible for
managing, leasing, advertising and promoting the Hatten Group’s investment
properties. The strategic location of such investment properties under the Hatten
Group’s portfolio allows the Hatten Group to attract internationally renowned
fashion brands, lifestyle outlets and eateries as tenants. Some of these tenants
include Uniqlo, H&M, Watsons, Toys “R” Us, Burger King and McDonalds.
As at the Latest Practicable Date, the Hatten Group’s investment portfolio is as
follows:
(a) Dataran Pahlawan Melaka Megamall, the largest retail destination in
Malacca which encompasses a gross area of 2 million square feet and a net
lettable area of 800,000 square feet. It has 750 retail units and 300 parking
bays. The Dataran Pahlawan Melaka Megamall has won awards such as the
“Highly Commended Retail Development Malaysia” and “Highly
Commended Retail Architecture Malaysia” at the Asia Pacific Property
Awards 2013/2014.
(b) Hatten Square Suites & Shoppes is one of the first mixed-used
developments in Malacca. The mall serves as a platform for the guests of
the Hatten Hotel and has a net lettable area of 180,000 square feet and
houses 200 retail units while its multi-storey car park houses 1,500 parking
bays.
(c) Terminal Pahlawan Mall comprises four (4) retail levels poised atop a luxury
coach bay. The development also houses Estadia Hotel, a Peranakan-
themed boutique hotel.
(d) Certain units of Elements Mall, part of the integrated property development,
Hatten City Phase 1, together with SilverScape Residences, Hatten Suites
and DoubleTree by Hilton, is located fronting the Malacca Straits.
Additionally, the Hatten Group periodically purchases land for investment
purposes.
The Tan Brothers and/or the Hatten Group have certain passive investments in
properties and/or property development companies in which they do not hold a
majority and/or controlling interests. Please refer to Appendix H of this Circular
entitled “Assets Under Right of First Refusal and Call Option” for a full list of such
properties and/or property development companies and to Section 25 of this
letter entitled “Potential Conflicts of Interests” for information on the mitigating
steps of such potential conflicts of interests.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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2.3.2. Hospitality
As at the Latest Practicable Date, the hospitality division of the Hatten Group
currently owns, operates and/or manages the following hotels:
(a) Hatten Hotel – An award-winning premier hotel with over 700 rooms and is
the largest hotel in the city and also home to the city’s first rooftop sky
lounge, Alto.
(b) Estadia Hotel – A contemporary Peranakan-themed hotel with more than
196 rooms that offer an authentic experience of Malacca’s local
baba-nyonya heritage.
Hatten City Phase 1 also looks to add two (2) other properties to the Hatten
Group’s current hospitality portfolio. DoubleTree by Hilton, a 277-room hotel that
is part of Hatten City Phase 1, is to be managed by Hilton Worldwide and is
scheduled to be opened in 2017. Also part of Hatten City Phase 1, Hatten Suites,
a 589-unit hotel, is intended to be managed by the Hatten Group’s own hospitality
division under a master lease agreement. Save for any unsold units, none of the
hospitality developments will be owned by the Target Group. The business of the
Target Group is to focus on selling all developed units to maximise economic
benefit as a property developer. Please see Section 4 of this letter entitled
“Business of the Target Group” for further details relating to the Target Group’s
business.
2.3.3. Retail
The retail division was set up to capitalise and complement the properties owned
by the property investment division. With its marketing and business network and
its own Hatten Brand Management programme, the retail division conceptualises,
forms and operates Hatten Group’s own brand of products primarily in the food &
beverage, lifestyle and fashion retail sectors. Current ventures include:
(a) Teddie Bear Cafe is a unique themed café that serves a healthy menu
amidst a warm teddy bear filled ambience. Located at Level 3 of Terminal
Pahlawan Mall, the café’s signature products are its cubed drinks and local
snacks.
(b) Being the franchisee of Urban Food Hall, located in Dataran Pahlawan
Melaka Megamall, the concept of ‘cross ordering’ is introduced, where
cuisines of distinct restaurants are savoured in a shared seating area.
Diners have the choice of renowned restaurants such as Johnny Rockets,
Franco, The Library, Q Café and The South East. The Hatten Group is also
a sub-franchisee of Johnny Rockets.
(c) Pastry Emporium is an exciting artisan bakery house known for its range of
delicious handmade breads, gourmet cakes and pastries. Their signature
creations are freshly hand-made daily.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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(d) Nyonya Galleria fuses both classic and modern Peranakan styling into a
chic fashion store. Stocking delicate embroidered kebaya tops in modern
vibrant hues with ready-made batik sarongs, the store also sells kerongsang
brooches, iconic beaded slippers, handkerchiefs, gilded hair pins,
hand-fans, bejewelled evening clutches and bangles.
(e) Cosha Retail, located in Terminal Pahlawan Mall, is a fashion and lifestyle
departmental store.
2.3.4. Education
In line with its vision of “Building Tomorrow Together”, the Hatten Group strives to
channel its expertise and resources into developing and enriching the local
community. Besides its ongoing corporate social responsibility efforts, the Hatten
Group has embarked on a long-term initiative – Education.
Its first project was to secure the exclusive franchise rights for the renowned
EtonHouse International Pre-School. The Hatten Group has equipped the 25,000
square feet pre-school facility in Malacca with an art atelier, music and drama
studio, science and language corner, library and outdoor play areas. At
EtonHouse International Pre-School, Melaka, students develop a strong
tri-lingual foundation, as well as confidence and competence through an inquire,
think and learn teaching approach.
2.4. Restructuring
As a condition of the Sale and Purchase Agreement, the Tan Brothers and the Target will
carry out the Restructuring to streamline the corporate structure of the Target Group. The
following steps were or will be taken:
(a) transfer of shares in FVSB and GMSB not held by the Tan Brothers (the “Minority
Shares”) to the Tan Brothers by the relevant Target Subsidiaries’ shareholders as
follows:
Shareholding before
transfer of Minority Shares
Shareholding after
transfer of Minority Shares(1)
FVSB Dato’ Colin – 43.3%
Dato’ Edwin – 43.3%
Tong Yee Xing(2) – 6.7%
Chong Foh Siong(3) – 6.7%
Dato’ Colin – 50.0%
Dato’ Edwin – 50.0%
GMSB Dato’ Colin – 24.0%
Dato’ Edwin – 24.0%
Tong Yee Xing(2) – 52.0%
Dato’ Colin – 50.0%
Dato’ Edwin – 50.0%
Notes:
(1) For illustrative purposes only. The Minority Shares have been transfered directly to the Target.
(2) Tong Yee Xing is the spouse of Dato’ Colin.
(3) Chong Foh Siong is a Proposed New Key Executive Officer of the Enlarged Group.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
A-11
Details of the transfer of Minority Shares are as follows:
FVSB
Party Consideration
Number of
Shares
transferred
Tong Yee Xing RM868,659 1,750,000
Chong Foh Siong RM868,659 1,750,000
GMSB
Party Consideration
Number of
Shares
transferred
Tong Yee Xing RM1 520,000
The consideration for the Minority Shares are based on the net book value of the
audited financial statements of the relevant Target Subsidiaries as at
30 June 2015. In relation to GMSB, as the net book value is negative, the
consideration is fixed at RM1.
(b) execution of conditional share sale agreements by the Target with the Tan
Brothers for the sale and purchase of the entire issued and paid-up share capital
of the Target Subsidiaries. The aggregate consideration for such purchase of
S$30,825,316 shall be satisfied by the allotment and issuance of 30,825,316
consideration shares in the Target (the “Restructuring Consideration Shares”)
to the Tan Brothers, or their nominee, on Completion of the Proposed Acquisition;
and
(c) upon Completion of the Proposed Acquisition, the Tan Brothers shall renounce
the Restructuring Consideration Shares to VGO and transfer their existing
shareholding in the Target to VGO.
As at the date of this Circular, pursuant to the Restructuring, the Minority Shares have
been transferred to the Target. Additionally, the shares in each of the Target Subsidiaries
have been transferred to the Target.
Based on the reports and opinions provided by Zaid Ibrahim & Co., the legal advisers to
the Company in respect of the Proposed Acquisition as to Malaysia law, and Morgan Lewis
Stamford LLC, the legal adviser on Singapore law on the Proposed Acquisition, the
Proposed New Directors are of the view that the steps in relation to the Restructuring
above have not been carried out in breach of applicable rules and regulations.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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3. GROUP STRUCTURE OF TARGET GROUP
As at the date of this Circular, the Target owns 100.0% of the shareholding in each of the
Target Subsidiaries and our corporate structure will be as follows:
Sky Win Management Consultancy Pte. Ltd.
Hatten International
Pte. Ltd.
Fuyuu Resources
Sdn. Bhd.
Fuyuu Ventures
Sdn. Bhd.
Fuyuu Group
Sdn. Bhd.
Gold Mart
Sdn. Bhd.
Details of the Target Group are as follows:
Name of
entity
Date and
Country of
incorporation
Principal
place of
business
Principal
activities
Issued and
paid-up
capital
Effective
interest held
by the Target
(%)
Sky Win
Management
Consultancy
Pte. Ltd.
19 March 2013,
Singapore
Singapore Management
consultancy
and investment
holding
S$4 –
Hatten
International
Pte. Ltd.
22 October
1999,
Singapore
Singapore Marketing and
development
consultancy
S$500,000 100
Fuyuu
Resources
Sdn. Bhd.
3 December
2009,
Malaysia
Malaysia Property
development
RM5,000,000 100
Fuyuu
Ventures Sdn.
Bhd.
7 June
2012,
Malaysia
Malaysia Property
development
RM26,000,000 100
Fuyuu Group
Sdn. Bhd.
18 February
2008,
Malaysia
Malaysia Property
development
RM5,000,000 100
Gold Mart Sdn.
Bhd.
29 February
2008,
Malaysia
Malaysia Property
development
RM1,000,000 100
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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4. BUSINESS OF THE TARGET GROUP
4.1. Principal Activities
We are a property developer specialising in integrated residential, hospitality and
commercial developments and are one of the leading property developers in Malaysia. We
further tap into the strengths of the Hatten Group to provide consistently high quality
services to stakeholders across all segments of the value chain.
Details of the current property development portfolio of the Target Group are as follows:
4.1.1. Hatten City Phase 1 – Elements Mall, SilverScape Residences, Hatten Suites and
DoubleTree by Hilton
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(Hatten City Phase 1 – Elements Mall and SilverScape Residences)
Hatten City Phase 1 is developed by Fuyuu Resources Sdn. Bhd. Hatten City
Phase 1 measures approximately six (6) acres and is located along Jalan Syed
Abdul Aziz, Bandar Hilir, Malacca, Malaysia, fronting the Malacca Straits. The
mixed development integrates four (4) distinct projects namely Elements Mall,
SilverScape Residences, Hatten Suites and a tower block which will be managed
by Hilton Worldwide as part of its DoubleTree by Hilton brand. As at the Latest
Practicable Date, the construction of Hatten City Phase 1 has been completed. It
should be noted that while DoubleTree by Hilton was developed by us, it will be
transferred to the Hatten Group as part of a land acquisition arrangement
between the parties. Please refer to Section 4.2 of this Target Letter entitled
“Business Process” for more details on such land acquisition arrangements.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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As at 30 June 2016, details of each of these projects are as follows:
Total
Units
GFA
(square
feet)
Net
Saleable
Area(1)
(square
feet)
Percentage
Sold
(%)
Percentage
Completion
(%)
Completion
Date
Elements Mall 1,530 1,530,238 686,682 34(2) 100 November
2015
SilverScape
Residences
745 820,188 591,638 85(3) 100 March
2016
Hatten Suites 589 240,616 165,132 93 100 November
2015
DoubleTree by
Hilton
277 283,521 N.A. N.A.(4) 100 March
2016
Notes:
(1) Further to land acquisition arrangements entered into by the Target Group, certain units in
Hatten City Phase 1 will be transferred to Prolific Acres Sdn. Bhd. or its nominee upon
completion. These areas include car park units and the area designated as the Sky Deck on
levels 43 and 44 of SilverScape Residences and have not been included in the net saleable
area. Please refer to Section 25.2.1 of this letter entitled “Details on potential conflict of
interests” for further details.
(2) 12 units (representing 20,562 square feet and 3.0% of the net saleable area of Elements Mall)
and four (4) units (representing 6,496 square feet and 0.9% of the net saleable area of
Elements Mall) in Elements Mall are sold to interested persons, Fuyuu Development Sdn. Bhd.
and Temasek Blooms Sdn. Bhd. respectively. If these 12 units sold to Fuyuu Development Sdn.
Bhd. and four (4) units sold to Temasek Blooms Sdn. Bhd. were excluded, the percentage of
Elements Mall sold is 30.1%. Please see Section 24.2.11 of this letter entitled “Property Sales”
for further details.
(3) One (1) unit in SilverScape Residences (representing 515 square feet and 0.1% of the net
saleable area of SilverScape Residences) was sold to an interested person, Regal Fiesta Sdn.
Bhd., a company held by Dato’ Colin in his personal capacity. If this unit sold was excluded, the
percentage of SilverScape Residences sold is 84.9%. Please see Section 24.2.11 of this letter
entitled “Property Sales” for further details.
(4) DoubleTree by Hilton will be transferred to the Hatten Group as part of a land acquisition
arrangement between the parties.
Save for the units sold to interested persons as set out in Section 24.2.11 of this
letter entitled “Property Sales”, no other units were sold to interested persons.
Based on the Asset Valuation Report, the market value of Hatten City Phase 1 as
at 30 June 2016 is RM628.0 million.
Based on the relevant property development experience of the Proposed
Executive Directors, the Proposed Executive Directors are of the view that the
reason for the relatively lower sales of Elements Mall can be attributed to the
industry norm of purchasers of retail units only making purchases when there is
visible human traffic in the relevant mall. The Target Group is currently engaging
the Hatten Group and third parties to provide leasing agency services to source
for established brand names as tenants for the unsold units in Elements Mall. The
Proposed New Directors do not foresee any issues in the sale of the remaining
units.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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Since the completion of construction of Elements Mall and the receipt of the CCC
in November 2015, our customers have taken vacant possession of the relevant
retail units. The Target Group continues its efforts to sell the retail units of
Elements Mall and source for established brand names as tenants for Elements
Mall to pave way for the mall’s opening in Q2 of 2017. As at 31 October 2016, the
committed tenant occupancy rate of Elements Mall is approximately 49.0% of its
net saleable area.
Since the completion of construction of Hatten Suites and the receipt of the CCC
in November 2015, our customers have taken vacant possession of the relevant
hospitality units and the Target Group is in the process of fitting and renovating
such hospitality units to pave way for the hotel’s opening in Q2 of 2017. The
Target Group is expected to enter into a master lease agreement with the Hatten
Group or such other third parties for the leasing of the relevant hospitality units
when the hotel business of the Hatten Suites commenced in Q2 of 2017. Please
see Section 4.2.4 of this letter entitled “Sales and Marketing” for more information
on such arrangements.
Since the completion of construction of SilverScape Residences and the receipt
of the CCC in March 2016, our customers have taken vacant possession of the
relevant residential units and certain customers have moved into their units.
Additional details of Fuyuu Resources Sdn. Bhd. and Hatten City Phase 1 are as
follows:
Sales Launch : April 2011
Main Contractor : Montane Construction Sdn. Bhd.
Construction Start Date : April 2011
Financing Bank : Bank Kerjasama Rakyat Malaysia Berhad
As at the Latest Practicable Date, notable awards received by Hatten City
Phase 1 are as follows:
(a) Best Retail Development Malaysia (Elements Mall)
International Property Awards Asia Pacific 2012 – 2013
(b) New City Of The Year (Hatten City)
World Sense Of Place Awards 2013
(c) Best Innovation – Bronze (Hatten City Phase 1)
Overseas Property Professional (OPP) Awards For Excellence 2014
(d) Best Residential High-Rise Architecture Malaysia (SilverScape Residences)
Asia Pacific Property Awards Architecture 2014 – 2015
(e) Product & Service Excellence Award (Fuyuu Resources Sdn. Bhd.)
Sin Chew Business Excellence Awards 2015
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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4.1.2. Hatten City Phase 2 – Imperio Mall and Imperio Residence
(Hatten City Phase 2 – Imperio Mall and Imperio Residence, artist’s impression)
Hatten City Phase 2 is being developed by Fuyuu Ventures Sdn. Bhd. Hatten City
Phase 2 measures approximately four (4) acres and is located along Jalan Syed
Abdul Aziz, Bandar Hilir, Malacca, Malaysia, fronting the Malacca Straits. The
mixed development consists of Imperio Mall and Imperio Residence. The current
construction progress of Hatten City Phase 2 is on track and is scheduled for
completion in 2H2017. Imperio Mall and Imperio Residence will be connected to
the rest of Hatten City via an air-conditioned link bridge.
Imperio Mall and Imperio Residence utilise an iconic “cascading steps” design
which functions as an outdoor jogging route with views of the coast and the
surrounding city. Imperio Residence will also feature 10 cabana villa units, each
of which will measure approximately 3,930 square feet across three (3) storeys
along with two (2) private carparks, its own lift and pool.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
A-18
As at 30 June 2016, details of each of these projects are as follows:
Total
Units
GFA
(square
feet)
Net
Saleable
Area(1)
(square
feet)
Percentage
Sold
(%)
Percentage
Completion
(%)
Estimated
Completion
Date
Imperio Mall 786 622,313 285,885 60 66 2H2017
Imperio
Residence
950 797,478 545,478 47 66 2H2017
Note:
(1) Further to land acquisition arrangements entered into by the Target Group, certain units in
Hatten City Phase 2 will be transferred to Fuyuu Capital Sdn. Bhd. upon the Target Group
obtaining strata title of the same. Such units have not been included in the total number of units
stated above. Please refer to Section 25.2.1 of this letter entitled “Details on potential conflict
of interests” for further details.
No units in Hatten City Phase 2 have been sold to interested persons.
Based on the Asset Valuation Report, the market value of Hatten City Phase 2 as
at 30 June 2016 is RM363.0 million.
Additional details of Fuyuu Ventures Sdn. Bhd. and Hatten City Phase 2 are as
follows:
Sales Launch : February 2013
Main Contractor : Montane Construction Sdn. Bhd. (Construction
Management)
Longxin Construction Sdn. Bhd.(1) (Construction
Services)
Construction Start Date : May 2013
Financing Bank : Malaysia Building Society Berhad
Note:
(1) Longxin Construction Sdn. Bhd. is an unrelated third party supplier and none of the Proposed
New Directors and Proposed New Key Executive Officers have any interests, direct or indirect,
in Longxin Construction Sdn. Bhd.
As at the Latest Practicable Date, notable awards received by Hatten City
Phase 2 are as follows:
(a) Winner of Best Residential Architectural Design (Imperio Residence)
South East Asia Property Awards 2014
(b) Highly Commended
Commercial High-Rise Development Malaysia (Imperio Mall)
Asia Pacific Property Awards Development 2013 – 2014
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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(c) Highly Commended
Interior Design Apartment Malaysia (Imperio Residence)
Asia Pacific Property Awards Design 2013 – 2014
(d) Highly Commended
Mixed-Use Architecture Malaysia (Imperio Mall & Residence)
Asia Pacific Property Awards Architecture 2013 – 2014
(e) Highly Commended
Best Commercial Development (Imperio Mall)
South East Asia Property Awards 2014
(f) Highly Commended
Best Luxury Condo Development – South Malaysia (Imperio Residence)
South East Asia Property Awards 2014
(g) Highly Commended
Best Residential Architectural Design – South East Asia, Regional Category
(Imperio Residence)
South East Asia Property Awards 2014
(h) Finalist
Best Commercial Development (Imperio Mall)
iProperty.com Malaysia People’s Choice Awards 2014
4.1.3. Vedro by the River
(Vedro by the River, artist’s impression)
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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Vedro by the River is being developed by Fuyuu Group Sdn. Bhd. Vedro by the
River measures approximately two (2) acres and is located along the Malacca
River on Kee Ann Road. The current construction progress of Vedro by the River
is on track and it is scheduled for completion in 1H2017.
As at 30 June 2016, details of Vedro by the River are as follows:
Total
Units
GFA
(square
feet)
Net
Saleable
Area
(square
feet)
Percentage
Sold
(%)
Percentage
Completion
(%)
Estimated
Completion
Date
Vedro by the
River
736 213,547 95,504 65 65 1H2017
Vedro by the River aims to feature an eclectic mix of tenants ranging from fashion
houses to retailers of novelty gadgets and chic accessories.
No units in Vedro by the River have been sold to interested persons.
Based on the Asset Valuation Report, the market value of Vedro by the River as
at 30 June 2016 is RM65.0 million.
Additional details of Fuyuu Group Sdn. Bhd. and Vedro by the River are as
follows:
Sales Launch : October 2013
Main Contractor : Montane Construction Sdn. Bhd.
Construction Start Date : November 2014
Financing Bank : United Overseas Bank (Malaysia) Bhd
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
A-21
4.1.4. Harbour City
(Harbour City, artist’s impression)
Harbour City is being developed by Gold Mart Sdn. Bhd. Harbour City measures
approximately six (6) acres and is located on Pulau Melaka fronting the Malacca
Straits. The mixed development will consist of Harbour City Mall, an integrated
water theme park and three (3) hotel blocks. The current construction progress of
Harbour City is on track and it is estimated to be completed in 1H2020.
In incorporating elements of retail, hotels and the theme park, Harbour City aims
to change Malacca’s tourism and entertainment landscape.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
A-22
As at 30 June 2016, details of each of these projects are as follows:
Total
Units
GFA
(square
feet)
Net
Saleable
Area
(square
feet)
Percentage
Sold
(%)
Percentage
Completion
(%)
Estimated
Completion
Date
Harbour City
Mall(1)
1,831 1,766,847 1,033,914 15 9 2H2019
Harbour City
Suites
648 661,498 297,706 81 9 2H2019
Harbour City
Resort
637 586,771 407,545 24 9 1H2020
Harbour City
Luxury Hotel
325 322,959 233,055 N.A.(2) 9 1H2020
Notes:
(1) Harbour City Mall includes the theme park.
(2) As at 30 June 2016, Harbour City Luxury Hotel has not been launched.
As the site on which Harbour City is being built was prime for development, the
site was acquired by Gold Mart Sdn. Bhd. for immediate development as part of
our land acquisition strategy. For more details on our land acquisition strategy,
please refer to Section 4.2 of this letter entitled “Business Process”.
No units in Harbour City have been sold to interested persons.
Based on the Asset Valuation Report, the market value of Harbour City as at
30 June 2016 is RM849.0 million.
Based on the relevant property development experience of the Proposed
Executive Directors, the Proposed Executive Directors are of the view that the
reason for the low take-up rate for Harbour City Resort was due to sales of the
development only being recently launched in April 2016. In relation to Harbour
City Mall, the reason for the relatively lower sales is twofold. Firstly, the launch of
sales of Harbour City Mall is carried out in phases and only approximately 40.0%
of the Harbour City Mall has been launched. Secondly, such lower sales of
Harbour City Mall can be attributed to the industry norm of purchasers of retail
units only making purchases when there is visible human traffic in the relevant
mall. As and when it is required, the Target Group may engage the Hatten Group
and/or third parties to provide leasing agency services in order to secure
established brand names as tenants in Harbour City Mall.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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Additional details of Gold Mart Sdn. Bhd. and Harbour City are as follows:
Sales Launch : January 2015
Main Contractor : CCC Construction Sdn. Bhd., a wholly-owned
subsidiary of China Construction Third Bureau
First Engineering Co., Ltd.
Construction Start Date : September 2015
Financing Bank : United Overseas Bank (Malaysia) Bhd
As at the Latest Practicable Date, notable awards received by Harbour City is as
follows:
(a) Winner – Best Integrated Development
iProperty.com Malaysia People’s Choice Awards 2015
(b) Winner – Best Retail Project
Malaysian Property Press Awards 2015
(c) Outstanding Achievement – Catalyst Developer Malacca
Malaysian Property Press Awards 2015
(d) Highly Commended
Commercial High-Rise Development Malaysia
Asia Pacific Property Awards 2015
(e) Highly Commended
Mixed Use Development
International Property Awards 2016
4.2. Business Process
The core business of the Target Group as a property developer is to sell all developed
units in order to maximise economic benefit. The Target Group does not intend to own any
units in its own developments. We have developed a comprehensive set of business
procedures through years of experience in property development. The development of
each project, however, takes into account unique considerations pertaining to each
specific project and its development is specifically designed to cater to its stakeholders.
The property development process can be summarised into the following diagram:
Site
Evaluation
and
Assessment
Site
Acquisition
Appointment
of
professional
consultants
Sales and Marketing
Completion
Post
Completion
Construction
Commencement
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
A-24
Our key business processes in detail are as follows:
4.2.1. Site Evaluation and Assessment
Potential development sites are identified from a variety of sources especially
from private land owners or through our network of agents.
In assessing the viability of a development site, various factors will be taken into
consideration, including but not limited to the features of the site, vibrancy and
amenities of the area, purchase price of the site, accessibility of the location,
feasibility of a potential property development, market conditions, zoning and
restrictions of the site. These assessments are conducted internally or externally
by professional consultants engaged by us.
4.2.2. Site Acquisition
Upon satisfactory results of a site assessment, we will then proceed to procure
such suitable sites for development through various methods that may be suitable
for the Target Group at the relevant time. Currently, the two (2) main ways in
which land is procured for development are as follows:
(a) Acquisition of land for cash consideration – Cash may be paid to purchase
the land from the relevant landowner to maximise flexibility in the property
development process.
(b) Joint venture with landowner – A joint venture with the landowner may be
entered into resulting in an arrangement whereby the landowner shall be
entitled to cash and/or a certain number of strata-titled units in the
developed property on completion. Such joint ventures may allow us to rely
less on financing in order to acquire the necessary sites for development.
To ensure profitability, sites are acquired or procured for development based on
a pre-determined price range.
Furthermore, tapping into the large number of sites owned by the Hatten Group,
over which we have a ROFR and Call Option, we are assured of a significant
number of potential development sites. For more details relating to assets under
the ROFR and the Call Option, please refer to Section 25 of this letter entitled
“Potential Conflicts of Interests” and Appendix H to this Circular entitled “Assets
Under Right of First Refusal and Call Option”.
4.2.3. Appointment of Professional Consultants
We will then proceed to engage a team of professional consultants, including
architects, interior designers, registered surveyors, mechanical and electrical
engineers, and civil and structural engineers to formulate the design of the site
make-up, architecture, interior design, and specifications of the development
such as the number of units to be built, floor area of the units and materials to be
used. Approvals, licences and building plan clearances necessary for the sale
and construction of the project will also be obtained at this stage.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
A-25
4.2.4. Sales and Marketing
Based on the design and building plan approved for the proposed development,
showrooms will be built by professional contractors to prepare for the project
launch. Building on the insights obtained from our internal market research
processes, we will then formulate the marketing strategy for the project,
executing the necessary marketing and sales activities, including media
advertising, and the design, production and distribution of promotional materials.
Internal as well as external sales and marketing agents will be engaged to handle
sales of the development through exhibitions at our showrooms during project
launch and other channels.
With regard to our hospitality and retail developments, we engage the following
additional marketing strategies:
Hospitality Developments
In relation to current hospitality properties developed by the Target Group
(excluding any units transferred to the landowner pursuant to land acquisition
arrangements entered into by the Target Group), these hospitality developments
are sold to our customers with a sale and leaseback arrangement to provide
rental yield (which currently stands at six percent (6.0%) of the purchase price or
the prevailing market price, annually) for a committed rental period (which
currently is six (6) to nine (9) years). This is part of our marketing strategy to
promote our hospitality properties. The rental yield was determined based on the
range of benchmark rates of comparable developments in Malaysia. Moving
forward, depending on market conditions and our marketing strategy, hospitality
developments developed by the Target Group may or may not be sold with such
sale and leaseback arrangements. Based on the knowledge of the Proposed
Executive Directors, such sale and leaseback agreements are common and such
practices are observed in the hospitality property industry in Malaysia.
The rental yield is provided to our customers through a tenancy agreement, which
is entered into between our customers as purchasers and us as developer at the
same time as the sale and purchase agreement. This rental yield is accounted for
by the Target Group upfront, according to the percentage of completion of the
relevant project and is reflected in the Target Group’s financials as “deferred
revenue” under other liabilities and charged out where there is payment of rent to
our customers for the period of such tenancy agreement.
In relation to Harbour City Suites and Harbour City Resort, purchasers of certain
units in such developments have signed tenancy agreements with the Hatten
Group with the benefit of such tenancy agreements assigned to GMSB. To ensure
consistency with the overall marketing strategy of the Target Group, we are in the
process of rectifying such tenancy agreements to provide for such units to be
signed directly with GMSB. As at the Latest Practicable Date, none of the tenancy
agreements in relation to Harbour City Suites and Harbour City Resort have
commenced.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
A-26
In order to satisfy our obligations on providing such rental yield, we intend to
enter into a master lease agreement, which shall be beneficial to the Target
Group, with the Hatten Group or such other third parties for the leasing of the
relevant hospitality units. Such master lease agreements provide rental cash flow
for the Target Group and facilitate the satisfaction of the Target Group’s
obligations in providing rental yield to its customers. As part of the agreement, the
Hatten Group or such other third party leases all relevant hospitality units from
the Target Group at a fixed rental rate that takes into consideration the rental yield
due to the Target Group’s customers. Based on the knowledge of the Proposed
Executive Directors, such fixed rental rate arrangements are common and such
practices are observed in the hospitality property industry in Malaysia. For
illustrative purposes, the Target Group leases the relevant hospitality units to the
Hatten Group or such other third party for such sum to be recognised in the Target
Group’s financials as “rental income”, which would go towards payment of the
Target Group’s customers’ annual rental yield.
In the event that such agreement is entered into with the Hatten Group, such
master leasing agreements will fall within the Proposed IPT Mandate and will be
subject to the review procedures set out in Section 13.6 of the VGO Letter entitled
“Review Procedures for Mandated Transactions with Mandated Interested
Persons”. In the event of default by the master lessee in their performance of their
respective obligations under the master lease arrangements, the business, the
financial performance and results of operations of the Target Group may be
adversely affected. Please refer to Section 27 of this letter entitled “Risk Factors
Relating to the Target Group” for further details.
As at the Latest Practicable Date, the Target Group has not entered into such
master lease agreements as set out above with the Hatten Group or such other
third parties.
Retail Developments
In relation to current retail properties developed by the Target Group (excluding
any units transferred to the landowner pursuant to land acquisition arrangements
entered into by the Target Group), these retail developments are sold to our
customers with sale and leaseback arrangements to provide a rental yield (which
currently stands at six percent (6.0%) to eight percent (8.0%) of the purchase
price, annually) for the initial committed rental period of two (2) to three (3) years
and renewable for a further two (2) to three (3) year period at our discretion. This
is part of our marketing strategy to promote our retail properties and control the
tenant-mix of our retail malls. Rental yields were determined based on the range
of benchmark rates of comparable developments in Malaysia. Whether or not
such tenancy agreements with our customers will be renewed will depend on
whether the Target Group will be able to find suitable third party tenants to lease
such retail units. Moving forward, depending on market conditions and our
marketing strategy, retail developments developed by the Target Group may or
may not be sold with such sale and leaseback arrangements.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
A-27
The rental yield is provided to our customers through a tenancy agreement, which
is entered into between our customers and us as developer at the same time as
the sale and purchase agreement. This rental yield was accounted for by the
Target Group upfront, according to the percentage of completion of the relevant
project and is reflected in the Target Group’s financials as “deferred revenue”
under other liabilities and charged out where there is payment of rent to our
customers for the period of such tenancy agreement. In addition, we will enter
into an agreement with the Hatten Group or such other third parties for retail mall
management services for our retail units. The retail mall management fees for the
sold retail units will be passed on to our customers.
In relation to Harbour City Mall, purchasers of certain units have signed tenancy
agreements with the Hatten Group with the benefit of such tenancy agreements
assigned to GMSB. To ensure consistency with the overall marketing strategy of
the Target Group, we are in the process of rectifying such tenancy agreements to
provide for such units to be signed directly with GMSB. As at the Latest
Practicable Date, none of the tenancy agreements in relation to Harbour City Mall
have commenced.
In order to satisfy our obligations on providing such rental yield, we intend to
engage agency services from the Hatten Group or such other third parties in
respect of leasing of the sold retail units to third party tenants. This allows us to
control the tenant mix of the relevant retail malls and source high quality tenants
and international brands. For illustrative purposes, the Target Group leases the
sold retail units to the third party tenants for an aggregate sum of RM15.0 million
per year (to be recognised in the Target Group’s financials as “rental income”). In
consideration of the Hatten Group or such other third parties providing leasing
services for the Target Group’s sold retail units, the Target Group pays the Hatten
Group or such other third parties an aggregate sum of RM2.0 million as leasing
agency fee depending on the number of successful leasing transactions (to be
recognised in the Target Group’s financials as “cost of sales”). The remaining
RM13.0 million would go towards payment of the Target Group’s customers’
rental yield.
In the event of default by the third party tenants in their performance of their
respective obligations under the lease arrangements, the business, the financial
performance and results of operations of the Target Group may be adversely
affected. Please refer to Section 27 of this letter entitled “Risk Factors Relating
to the Target Group” for further details.
In order to enhance the popularity, occupancy rate and human traffic of the retail
malls, the Target Group will engage leasing agency services from the Hatten
Group or such other third parties in respect of leasing of the unsold retail units to
third party tenants while continuing with its sales and marketing effort to sell its
retail units.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
A-28
In the event that such agreements are entered into with the Hatten Group, such
retail mall management and leasing agency agreements will fall within the
Proposed IPT Mandate and will be subject to the review procedures set out in
Section 13.6 of this letter entitled “Review Procedures for Mandated Transactions
with Mandated Interested Persons”.
As at the Latest Practicable Date, the Target Group has not entered into any such
retail mall management agreements as set out above with the Hatten Group or
such other third parties.
4.2.5. Construction and Development of Projects
Prior to the commencement of construction, a main contractor will be selected
through an open tender process and appointed based on factors including its
licensed qualifications, financial status, reliability, pricing, track record, labour
strength, ability to commit to the project timeline, and quality of workmanship and
finishing. Once a main contractor is appointed, the construction work will
commence.
Our development management team will manage and supervise the progress of
each construction stage of the project closely, with the assistance of the architect
and other professional consultants, to ensure that the building standards are met
and that the project will be completed within the set budget and scheduled
timeline. We have internal processes, such as the submission of weekly progress
reports, periodic meetings and site visits, designed to track the development of
our projects.
4.2.6. Completion
Once construction works are completed, an application will be submitted to the
relevant authorities for the CCC to be issued in respect of the development. Upon
the issue of the CCC, the purchasers will begin to take possession of the
individual units.
4.2.7. Post Completion Services
Post completion, there is a defects liability period which usually lasts between
12 to 24 months from the date of the CCC. Any retention sum held by our
solicitors, in accordance with the sale and purchase agreements, will be released
to us once the defects, if any, are rectified.
If there are any unsold units, we will continue our sales and marketing efforts to
sell such remaining units.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
A-29
4.3. Malacca Property Market
As at the Latest Practicable Date, the Target Group only has property development
projects in Malacca, Malaysia. A study of the Malacca property market has been
conducted by the Independent Market Researcher, Nawawi Tie Leung Property
Consultants Sdn. Bhd. and the Industry Overview Report is reproduced below.
“1 ECONOMY
The Malaysian economy grew by 5% in 2015, lower than the 6% registered in 2014.
Throughout 2011 – 2015, the GDP has consistently recorded a growth of at least 5%, with
the exception in 2013, due to a decline in activities in all but the agricultural sector.
Private domestic demand expanded by 6.1% in 2015 (2014: 7.9%), as private
consumption and investments grew slower. The lower growth in private consumption also
suggested that households have adjusted their spending patterns following the
introduction of the Goods and Services Tax (GST) in April 2015. Net exports slipped by
3.7%, after increasing at a double-digit rate of 12.8% in 2014. Demand from the public
sector saw higher growth of 2. 1% in 2015, compared to 0.4% in the previous year. Public
consumption remains the key driver of public sector demand, following the reduction in
spending on fixed assets by the Government.
Figure 1.1:
Malaysia GDP Growth and
Unemployment Rate
Figure 1.2:
Malaysia GDP by Sectors
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
5.3% 5.5%
4.7%
6.0%
5.0%
3.1% 3.0% 3.1% 2.9% 3.1%
2011 2012 2013 2014 2015
GDP Growth Unemployment Rate
Agriculture
9%Mining and
Quarrying
9%
Manufacturing
23%
Construction
4%
Services
54%
Import
Duties
1%
Source: Department of Statistics Malaysia,
Bank Negara Malaysia
Source: Department of Statistics Malaysia,
Bank Negara Malaysia
On the supply side, the construction sector led the growth for the fourth consecutive year
with an annual expansion of 8.2%, followed by the Services and Manufacturing sectors
which grew by 5.1% and 4.9% respectively. In terms of the sector composition, the
Services sector has always been the key driver with a contributory share of 54% in 2015,
higher than the 51% recorded in 2010. This is followed by the Manufacturing sector which
accounted for 23% of the GDP during the last five years.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
A-30
In tandem with the overall economy at the national level, Melaka GDP growth for 2015 is
estimated at 4.5%, compared to the 7.6% registered in 2014. The Services sector, which
is mainly driven by wholesale, retail trade, accommodation and restaurants, and utilities,
transport, storage and communication subsectors, saw its contributory share increased
from 44% of the state’s GDP in 2010 to 46% in 2015. In contrast, the Manufacturing sector
accounted for 40% of the state’s GDP in 2015, compared to 42% in 2010.
Figure 1.3:
Melaka GDP Growth and
Unemployment Rate
Figure 1.4:
Melaka GDP by Sectors
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
5.4%
7.0%7.6%
4.5%
0.7%0.5%
2.5%
0.7% 0.9% 1.0%
2011 2012 2013 2014 2015e
GDP Growth Unemployment Rate
Agriculture
11%
Mining and
Quarrying
0%
Manufacturing
40%
Construction
3%
Services
46%
Import
Duties
0%
Source: Department of Statistics Malaysia,
Bank Negara Malaysia
Source: Department of Statistics Malaysia,
Bank Negara Malaysia
The Malaysia’s employment market remained stable, with a moderate increase in
unemployment rate from 2.9% in 2014 to 3.1% in 2015. This can be attributed by the
increase in both labour force and unemployment, which outweighed employment growth.
The state of Melaka, which houses a population of 0.88 million, continued to record a
lower-than-national unemployment rate of 1.0%.
Headline inflation, as measured by the Consumer Price Index (CPI), rose 2.1%
year-on-year (y-o-y) in 2015, lower than the y-o-y growth of 3.2% recorded in 2014. This
was largely due to the 4.5% deflation in transport category. With the weak energy and
commodity prices, Bank Negara Malaysia (BNM) has lowered its inflation forecast for 2016
from 2.5% – 3.5% to 2.0% – 3.0%.
Figure 1.5: Malaysia and Melaka Economic Indicators
Economic Indicators 2010 2011 2012 2013 2014 2015
Malaysia
GDP at constant 2010 prices
(RM bil) 821 865 912 955 1,013 1,063
GDP Growth (%) 7.4% 5.3% 5.5% 4.7% 6.0% 5.0%
GDP per Capita at Current Prices
(RM) 28,733 31,372 32,913 33,721 36,165 37,324
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
A-31
Economic Indicators 2010 2011 2012 2013 2014 2015
Population (’000) 28,589 29,062 29,510 30,214 30,598 30,996
Employment (’000) 11,900 12,284 12,723 13,210 13,532 14,068
Unemployment Rate (%) 3.3% 3.1% 3.0% 3.1% 2.9% 3.1%
Median Monthly Household
Income (RM) – – 3,626 – 4,585 –
Approved Investments (RM bil)
Foreign Investment 44.4 68.0 34.9 59.5 64.6 36.1
Domestic Investment 61.1 86.6 132.9 159.9 171.3 150.6
Tourist Arrivals (mil Foreigners) 24.6 24.7 25.0 25.7 27.4 25.7
Melaka
GDP at constant 2010 prices
(RM bil)* 24 25 27 28 30 31
GDP Growth (%) 6.6% 5.4% 7.0% 2.5% 7.6% 4.5%
GDP per Capita at Current Prices
(RM) 29,366 32,421 34,965 35,727 38,766 –
Population (’000) 824 833 843 857 869 882
Employment (’000) 335 341 355 372 391 398
Unemployment Rate (%) 1.0% 0.7% 0.5% 0.7% 0.9% 1.0%
Median Monthly Household
Income (RM) – – 3,923 – 5,029 –
Tourist Arrivals (million)
Foreigners 2.2 3.1 3.5 3.9 4.2 4.5
Domestic 8.2 9.1 10.2 10.4 10.8 11.3
*Note: data for 2015 are estimates.
Source: Department of Statistics Malaysia, Bank Negara Malaysia, International Monetary Fund, Melaka Tourism
Promotion Division
Amid the global economic uncertainties and decline in oil prices, Malaysia’s GDP growth
for 2016 is projected at 4.0% – 4.5%, as opposed to the earlier forecast of 4.0% – 5.0%.
In July 2016, Bank Negara Malaysia (BNM) lowered its Overnight Policy rate (OPR) from
3.25% to 3.00%, given the moderate inflation coupled with the heightened global
economic risks posed by the European Union membership referendum in the United
Kingdom. The reduction in OPR is expected to boost private consumption and investment.
Nevertheless, the Malaysian Government is targeting an average GDP growth of
5.0% – 6.0% per annum for the year 2016 – 2020 under its 11th Malaysian Plan. For the
state of Melaka, average annual GDP growth is targeted at 5.5%, with services industry
identified as the sector that will lead the state’s economic growth in the medium term.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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2 RESIDENTIAL
The Melaka residential market recorded a Compound Annual Growth Rate (CAGR) of
1.7% in supply during 2010 – 2015, with completions averaged at over 2,000 units per
annum. As of Q1 2016, Melaka has a total stock of 168,021 units. It primarily consists of
landed developments including terrace, semi-detached, cluster, and town houses which
collectively account for 68% of the total supply. NAPIC data shows limited supply of
condominium/apartment and serviced apartment, with a share of merely 6% of the existing
stock, equivalent to 10,405 units. Malaysian house buyers, especially for own occupation,
generally prefer landed homes. Especially in a state like Melaka, where demand mainly
comes from local owner occupier, the supply of condominium/apartment and serviced
apartment tends to be low as landed homes are still preferred.
Figure 2.1:
Supply of Residential Units in Melaka
Figure 2.2:
Existing Supply by Types, Q1 2016
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
2010 2011 2012 2013 2014 2015 2016
Q1
Un
its
Melaka Tengah Jasin Alor Gajah
Condo/
Apartment
6%
Low Cost
Housing
26%Terrace
51%
Detached
9%
Semi-D
7%
Town
House
1%
Cluster
0%
Serviced
Apartment
0%
Source: NAPIC Source: NAPIC
The recent rise in the supply of condominium/apartment and serviced apartment in Melaka
is bolstered by the positive trends in the tourism industry, where investors are targeted as
potential buyers.
Data from National Property Information Centre (NAPIC) indicates that there are 1,176
overhang units as of 2016 Q1, equivalent to less than 1% of the current stock. Out of these
1,176 units, only six units are serviced apartments while the remaining are landed
residential, predominantly terrace units.
As of 2016 Q1, 33,407 units are under construction and will be completed in the next three
years. While the landed segment continues to dominate the incoming supply with a share
of 62%, it is worthy to note that the high rise segment accounts for 19%, equivalent to
6,400 units, of which 4,420 units are serviced apartments. In addition, 14,777 units are
being planned in Melaka, of which 3,135 units are high rise residential. Notable upcoming
developments include Impression City, Melaka Gateway, Cheng Ho City and Eco Marine
Theme Park.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
A-33
Key market players include Faithview Group and Yong Tai Berhad, while Hatten Group is
the leading developer of serviced apartments in Melaka city centre. Following the
recognition of Melaka City as UNESCO World Heritage Site in 2008, there is growing
interest from both foreign and local investors in the property market, evidenced by the
sales performance of recent launches which have reportedly attracted foreign buyers from
Singapore, China and Indonesia. It should be noted that local buyers continue to dominate
the market.
Figure 2.3: Incoming Supply of Serviced Apartments
Project Developer Area UnitsLaunching
Year
ExpectedYear of
Completion
SellingPrice
(RM psf)Take-Up
(%)
1 SilverScapeResidences
HattenGroup
Melaka City 745 2011 2016 654(average)
85%
2 ImperioResidence
HattenGroup
Melaka City 950 2013 2017 849(average)
47%
3 The WaveResidences
FaithviewGroup
KotaLaksamana
450 2014 2017 700 – 800 80%
4 The Atlantis TeladanSetia
KotaLaksamana
1,360 2014 2017 420 – 540 60%
5 The Greens– Block B
Jaya Mapan KotaLaksamana
255 2014 2018 600 – 700 80%
6 The Greens– Block C
Jaya Mapan KotaLaksamana
306 Q4 2016 2018 800 – 900 N/A
7 The Apple Yong Tai Melaka City 361 2014 2018 600 – 700 60%
TOTAL INCOMING SUPPLY 4,427
Source: NTL Research & Consulting
The serviced apartment sector in Melaka is relatively inactive prior to the launch of The
Shore Serviced Residences (completed in 2014) and SilverScape Residences in 2011.
There were very limited units and these units are not at par with new developments in
terms of design, concept, masterplan, amenities and facilities. While many of the new
serviced apartments were launched at over RM600 per sq ft, the older serviced
apartments were transacted at not more than RM370 per sq ft during 2014 – 2015.
Figure 2.4: Selected Transactions of Serviced Apartments
No ProjectFloor Area
(sq ft)Year of
TransactionPrice
(RM psf)
1 Plaza Melaka Raya 646 2014 263
2 Plaza Melaka Raya 907 2015 243
3 Garden City 603 2015 340
4 Garden City 603 2015 362
5 The Shore 461 2015 824
6 The Shore 435 2015 874
7 The Shore 435 2016 851
Source: NTL Research & Consulting
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
A-34
Figure 2.5: Planned Supply of Serviced Apartments
Project Developer Area
1 Melaka Gateway KAJ Development Pulau Melaka
2 Proposed Serviced Residences Faithview Group Pulau Melaka
3 Impression City Yong Tai Berhad Kota Laksamana
4 Cheng Ho City Cheng Ho City Sdn Bhd Klebang
5 Eco Marine Theme Park Xin Eco Marine Group Klebang
Source: NTL Research & Consulting
The year 2015 saw the transactions of 8,914 residential units, 3% fewer than the 9,187
units recorded in 2014. This was due to the economic uncertainties and stringent lending
policies. Despite the decline in transaction volume, total transacted value saw a moderate
increase of 1.7%, from RM1.937 billion in 2014 to RM1.971 billion in 2015. This reflects
the escalating house prices, evidenced by the House Price Index which grew by 8.4%
y-o-y in Q4 2015. Nevertheless, Melaka housing market is the most affordable in Malaysia.
According to Khazanah Research Institute, the ideal median multiple in an affordable
market is 3.0. A median multiple of over 3.0 indicates an unaffordable housing market,
which is the case for all states but Melaka. The median multiple for Melaka is 2.98, given
its median house price of RM180,000 and annual median income of RM60,348 in 2014.
This shows that developers, until recently, are targeting mainly local owner occupiers
offering products that are within the affordability of the buyers.
Figure 2.6: Residential Transactions in Melaka
0.0
0.5
1.0
1.5
2.0
2.5
0
2,000
4,000
6,000
8,000
10,000
2010 2011 2012 2013 2014 2015 2016 Q1
RM
bill
ion
Un
its
Terrace Semi-D
Detached Town Houses
Cluster Low Cost Housing
High Rise Other
Total Value Transacted (RM bil) – RHS
Source: NAPIC
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
A-35
Figure 2.7: House Price Index
0
50
100
150
200
250
Ind
ex (
2010 :
100)
Malaysia Melaka
2000
Q1
2001
Q1
2002
Q1
2003
Q1
2004
Q1
2005
Q1
2006
Q1
2007
Q1
2008
Q1
2009
Q1
2010
Q1
2011
Q1
2012
Q1
2013
Q1
2014
Q1
2015
Q1
Source: NAPIC
In the long term, prices are expected to increase gradually in line with the rise in land cost,
building construction cost and other development-related costs. Melaka’s House Price
Index has been on the uptrend moderately at a CAGR of 4.5% during 2001 – 2015.
Overall, the volume of transactions registered a CAGR of 14% during 2010 – 2015, with
much of the growth can be attributed to the double-digit increase in transaction volume
during 2011 and 2012. The market share (in terms of transaction volume) of landed units
has been increasing, from 67% in 2010 to 79% in 2015, while the market share of low cost
housing units dropped from 22% in 2010 to 12% in 2015. This reflects improving
affordability among home buyers in Melaka to purchase better homes, evidenced by the
data published by Department of Statistics showing increasing median household income
level, which grew by a CAGR of 11%, from RM 3,005 in 2009 to RM 5,029 in 2014.
Moving forward, the outlook for Melaka residential market remains positive. While much
focus have always been given to its neighbouring areas such as Iskandar Malaysia and
Klang Valley, Melaka has started to appear on investors’ radar, especially those who are
keen on gaining exposure to the tourism sector as Melaka offers a unique proposition with
its UNESCO World Heritage status. The upcoming KL-Singapore High Speed Rail (HSR),
slated for operation in 2026, will enhance the connectivity between two capital cities and
the five transit locations, which include Ayer Keroh. This in turn, may potentially generate
spillover demand for the Melaka property market. As such, the serviced apartment sector
is unlikely to face an oversupply situation in the short-to-medium term, resulting in an
upward price trend.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
A-36
3 HOTEL
The performance of Melaka’s tourism sector continued to reach new high, with total
arrivals of 15.74 million tourists in 2015, a steady increase of 4.7% from 2014. Tourist
receipts increased 39.5%, the highest annual growth since 2010, from RM12.0 million in
2014 to RM16.7 million in 2015.
Figure 3.1:
Tourist Arrivals and Receipts
Figure 3.2:
Foreign Tourist Arrivals
0
2
4
6
8
10
12
14
16
18
20
0
2
4
6
8
10
12
14
16
18
20
2010 2011 2012 2013 2014 2015
RM
bill
ion
To
urist
Arr
iva
ls (
mill
ion
)
Domestic Tourists – LHS
Foreign Tourists – LHS
Tourist Receipts (RM bil) – RHS
To
urist
Arr
iva
ls (
mill
ion
)
Rest of Malaysia Melaka
0
5
10
15
20
25
30
35
40
9%
13
%
14
%
15
%
15
%
17
%
24.6024.71 25.03
25.7227.44
25.72
2010 2011 2012 2013 2014 2015
Source: Melaka Tourism Promotion Division Source: Melaka Tourism Promotion Division, Tourism
Malaysia
Of the state’s 15.74 million arrivals, international tourists accounted for 28.4%
(4.4 million), higher than the 27.8% (4.2 million) recorded in 2014 amidst the decreasing
overall international tourist arrivals in Malaysia. This shows that Melaka is increasingly
popular among foreign tourists, as it attracted 17% of the foreign tourists in Malaysia in
2015, compared to 15% in 2014.
Melaka is a prominent destination for Chinese nationals in Malaysia, capturing 879,050
out of the 1.67 million Chinese tourists who visited Malaysia in 2015. The state will
continue to attract significant number of tourists from China with various Chinese-themed
leisure developments such as Cheng Ho City and Impression Melaka. From September
2016, Melaka International Airport has a new direct route connecting the state to
Guangdong, China, via chartered flights operated by China Southern Airlines. With these
and upcoming major attractions and promotions, the government is confident to attract
eight million Chinese tourists to the country in five years time. These will have positive
impacts on the retail and hotel sectors.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
A-37
Figure 3.3:
Top Five Tourist Arrivals in Melaka by
Country of Residence, 2015
Figure 3.4:
Melaka Hotel Performance
1.47
0.88
0.59
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
2010 2011 2012 2013 2014 2015
To
urists
(m
illio
n p
eo
ple
)
Singapore China Indonesia
Taiwan Japan
126
128
130
132
134
136
138
140
142
144
58%
60%
62%
64%
66%
68%
70%
72%
2010 2011 2012 2013 2014 2015
RM
per
nig
ht
Occu
pa
ncy %
Occupancy Rate (%) – LHS
Average Room Rate – RHS
Source: Melaka Tourism Promotion Division Source: Melaka Tourism Promotion Division
Melaka’s resilient tourism industry is further shown with the state’s tourist average length
of stay which climbed from 2.01 nights in 2014 to 2.18 nights in 2015, despite the national
average saw a significant decline to 5.5 nights from 2014’s 6.6 nights, and 2013’s 8.5
nights. With the flourishing tourism industry, the hotel scene will be more competitive.
Average hotel occupancy has moderated to 66% in 2015 from 70% in 2012, while average
room rate stood at RM141 per night. Melaka currently houses 144 hotels, 5 of which are
5-star and 12 are 4-star, according to NAPIC. The 144 hotels offers a total of 11,853
rooms.
Figure 3.5: Average Room Rate (RM per night) by Star Rating
Year 2013 2014 2015
3-star 140 150 160
4-star 230 240 250
5-star 300 310 320
Source: NTL Research & Consulting, Melaka Tourism Promotion Division
Hatten Hotel by Hatten Group is one of the most prominent hotels in Melaka. The hotel’s
excellent quality and hospitality, coupled with its reasonable rates are some of its
attributes which resulted the 4-star hotel to achieve a significantly high occupancy of
around 70% on normal weekends. However, the hotel’s location is its biggest advantage
as it is located at the heart of Melaka’s commercial vibrancy, thus having the convenience
of reachability including public transportation and also the convenience of having two
malls i.e. Hatten Square and Dataran Pahlawan connected to it directly and via link bridge.
Apart from Hatten Hotel, the Hatten Group also offers Estadia Hotel, which features
Melaka’s iconic Baba Nyonya Heritage. The Hatten Group, through Hatten Suites will also
soon offer world-class hospitality.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
A-38
In terms of future supply in Melaka, NAPIC data shows that 14 hotels are expected to be
completed during the next three years, offering a total of 3,422 rooms – the second highest
incoming hotel room in the country (Kuala Lumpur is expecting 5,125 rooms). In addition,
NAPIC further reported that two hotels with a total of 513 rooms have been planned.
Figure 3.6: Selected Incoming Hotels in Melaka
No Hotel Area
Expected
Year of
Opening
Star
Rating No. of Rooms
1 Ibis Hotel Melaka City 2016 3 247
2
DoubleTree
by Hilton Melaka City 2017 4 277
3
Courtyard
by Marriot Melaka City 2018 4 284
4
Park Hotel,
The Green
Kota
Laksamana 2019 4 245
5
Harbour City
Resort Pulau Melaka 2021 4 637
6
Harbour City
Luxury Hotel Pulau Melaka 2021 5 325
TOTAL 2,015
Source: NTL Research & Consulting
Hotel rooms for sale, such as those in Harbour City and Hatten City Phase 1, are generally
sold between RM700 per sq ft to RM1,600 per sq ft, with rental yield around six per cent
(6.0%) for a lease term of generally six (6) to nine (9) years.
Figure 3.7: Selected Transactions of Hotel Rooms
No Hotel
Floor Area
(sq ft)
Year of
Transaction
Price
(RM psf)
1 Imperial Heritage 224 2015 1,027
2 Hatten Suites 361 2015 803
3 Hatten Suites 407 2016 978
4 Hatten Suites 380 2016 989
5 Hatten Suites 361 2016 1,066
Source: NTL Research & Consulting
Hotels in Melaka generally have the indicative yield of seven per cent (7.0%) to eight per
cent (8.0%).
Looking ahead, Melaka’s tourism industry will continue to prosper as the upcoming
KL-Singapore High Speed Rail (HSR) system is targeted to be fully operational by 2026,
with Ayer Keroh identified to house one of the seven stations. The current average room
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
A-39
rate of RM141 per night and occupancy rate of 66% may face pressure due to the volume
of incoming supply of hotel rooms. Nevertheless, it should be noted that Tourism Malaysia
is targeting 36 million tourist arrivals by 2020, and that the Melaka Tourism Promotion
Division aims to attract half of the tourists visiting Malaysia, equivalent to 18 million
tourists, to visit Melaka. With the prospect of expected increasing number of tourists in the
future, the outlook of Melaka’s hotel sector remains positive in the medium term.
4. RETAIL
Malaysia’s retail sector saw its retail sales increased 1.4% in 2015, the lowest annual
growth since 2009. Overall market sentiments were significantly affected by the gloomy
economic outlook, weakening Ringgit, uncertainties in the job market and the
implementation of Goods and Services Tax (GST) in April 2015, as evidenced by the
Consumer Sentiments Index (CSI) which plummeted to its record-low of 63.8 in 2015 Q4.
It is worthy to note that the CSI has been hovering below its threshold confidence level of
100 for seven consecutive quarters.
Figure 4.1:
Consumer Sentiments Index
Figure 4.2:
Malaysia Annual Retail Sales
72.9
0
20
40
60
80
100
120
140
201
0 Q
1
201
0 Q
3
201
1 Q
1
201
1 Q
3
201
2 Q
1
201
2 Q
3
201
3 Q
1
201
3 Q
3
201
4 Q
1
201
4 Q
3
201
5 Q
1
201
5 Q
3
201
6 Q
1
Ind
ex
7177
83.287.7
91.794.8 96.2
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
0
20
40
60
80
100
120
2009 2010 2011 2012 2013 2014 2015G
row
th (
%)
RM
bill
ion
Retail Sales (RM bil) – LHS
Annual Growth (%) – RHS
Source: Malaysian Institute of Economic Research Source: Retail Group Malaysia
Despite the improved consumer confidence in the first quarter of 2016, data from Retail
Group Malaysia (RGM) indicates a disappointing Q1 which saw retail sales shrank by
4.4% y-o-y, compared to the 4.6% growth recorded in Q1 2015. As a result, RGM has
revised downward its overall 2016 retail sales growth forecast from 4.0% to 3.5%.
Up until the last few years, the retail scene in Melaka was generally stagnant. During 2010
– 2013, retail space in the state hovered around 3.7 to 3.9 million sq ft. Since 2014,
several new malls were opened including The Shore Shopping Gallery in Melaka city
centre, and Freeport A’Famosa Outlet in Alor Gajah. Today, Melaka has 19 shopping
centres and eight hypermarkets throughout the state, with a total retail space of 4.7 million
sq ft. The state capital, Melaka city, being the center of development, houses 14 shopping
centres and two hypermarkets, representing 2.9 million sq ft of the overall stock in Melaka.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
A-40
Figure 4.3: Supply and Occupancy of Retail Space in Melaka
77
78
79
80
81
82
83
84
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
2010 2011 2012 2013 2014 2015 2016 Q1
Occu
pa
ncy R
ate
(%
)
Mill
ion
sq
ft
Stock (mil sq ft) – LHS Occupancy Rate (%) – RHS
Source: NAPIC
The increase in retail space, coupled with the sluggish sales, has contributed to the
decline in average occupancy rate, from 83% in 2014 to 80% in 2015. Nevertheless, major
malls in Melaka, such as Dataran Pahlawan and Aeon Mall, generally have higher
occupancy rate of 90% to 100% throughout. However, traffic volume differs significantly in
different malls due mainly to location and accessibility conveniences, as well as in
consideration of weekdays and weekends.
Dataran Pahlawan, also rightfully known as Dataran Pahlawan Melaka Megamall, is
Melaka’s largest shopping mall. Together with Hatten Square and Mahkota Parade,
Dataran Pahlawan’s biggest appeal is its location being in the central area of Melaka city’s
commercial activities and is directly connected to the two said malls via pedestrian
bridges. In addition, due to the various well known tenants at Dataran Pahlawan, the mall
is considered as Melaka’s most visited mall.
The major upcoming malls are mostly stratified malls developed by Hatten Group. While
depending on location and market positioning of the mall, selling price of retail lots in
Melaka generally ranges from RM1,500 per sq ft to RM3,500 per sq ft.
Figure 4.4: Selected Transactions of Retail Lot
No Mall Floor Level
Floor area
(sq ft)
Year of
Transaction
Price
(RM psf)
1 Dataran Pahlawan Lower Ground 237 2015 3,187
2 Dataran Pahlawan Ground 1,604 2015 2,899
3 Dataran Pahlawan 1st Floor 108 2014 1,486
4 Mahkota Parade Ground 732 2015 3,370
5 Mahkota Parade Ground 724 2015 2,624
6 Mahkota Parade 1st Floor 516 2015 1,547
Source: NTL Research & Consulting, NAPIC
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
A-41
Numerous mall developments are in the pipeline for Melaka. It is worth to note that many
of these incoming malls are located in the vicinity of city centre.
Figure 4.5: Selected Incoming Retail Centres
No Project
Exp.
Year of
Opening
NLA
(sq ft)
AEON
The Shore
Vedro
Dataran
Pahlawan
Ha!en SquareMahkota Parade
ImperioElements
Mall
Harbour City
Mall
1 km
Upcoming
Exis!ng Mall
1 Freeport
A’Famosa
Outlet Phase 2
2016 62,000
2 Elements Mall 2017 686,682
3 Vedro by the
River
2017 95,504
4 Imperio Mall 2018 285,885
5 Harbour City
Mall
2020 1,033,914
6 Freeport
A’Famosa
Outlet Phase 3
N/A 73,000
TOTAL 2,236,985
Source: NTL Research & Consulting
Rental rate across malls in Melaka are generally stagnant with a few exceptions of
increase, most notably lots at Mahkota Parade. With the anticipation of the incoming
2.2 million sq ft of retail space in the next few years, the stagnation in rental growth is likely
to persist. Nevertheless, the retail market in Melaka is indicated to have a yield of 7%.
Figure 4.6: Retail Lot Monthly Rental Trend
0
5
10
15
20
25
30
2011 2012 2013 2014 2015
RM
psf
Ground Floor
Dataran Pahlawan
Mahkota Parade
Hatten Square
Plaza Hang Tuah
0
5
10
15
20
25
30
2011 2012 2013 2014 2015
RM
psf
Upper Floor
Dataran Pahlawan 1st Floor
Mahkota Parade 1st Floor
Hatten Square 2nd Floor
Plaza Hang Tuah 1st Floor
Source: NAPIC, NTL Research & Consulting
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
A-42
Heightened competition is inevitable for malls in Melaka city centre in the near future.
Coupled with the slow retail market, malls may face greater challenge in attracting high
traffic of shoppers due to overlapping catchment. Therefore, it is important for new malls
to have “differentiating points” to attract shoppers in terms of market positioning, brands
and facilities & services to be provided. For instance, upcoming malls such as Elements
Mall and Harbour City, both developed by Hatten Group offer retail environment with
thematic concept, the first of its kind in Melaka. The aforementioned anticipated influx of
tourists from China is imperative to be realised in order to minimise the risk of imbalance
in retail supply and demand. Regardless, due to the competition and high incoming supply,
average mall occupancy is expected to moderate in the near future.
Disclaimer
This report should not be relied upon as a basis for entering into transactions without
seeking specific, qualified, professional advice. Whilst facts have been rigorously
checked, Nawawi Tie Leung can take no responsibility for any damage or loss suffered as
a result of any inadvertent inaccuracy within this report. Information contained herein
should not, in whole or part, be published, reproduced or referred to without prior approval.
Any such reproduction should be credited to Nawawi Tie Leung. Information contained
herein should not, in whole or part, be published, reproduced or referred to without prior
approval. Any such reproduction should be credited to Nawawi Tie Leung.”
We have not sought the consent of the entities listed in the Industry Overview Report nor
has such entities listed provided its consent for the inclusion of the information set out in
the Industry Overview Report. The entities listed above are therefore not liable for such
information under Sections 253 and 254 of the SFA. We have included the above
information in its proper form and context in this letter and have not separately verified the
accuracy of the contents of the information.
4.4. Seasonality
The Target Group did not experience significant seasonal trends during the Period Under
Review as the business of the Target Group is project based and not dependent on
seasonal patterns. The Proposed New Directors are of the view that currently there are no
apparent factors that may cause seasonality in the Property Development Business.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
A-43
5. SHARE CAPITAL AND PRINCIPAL SHAREHOLDERS
The issued and paid-up share capital of the Target after the Restructuring will be
S$30,825,320 comprising 30,825,320 ordinary shares. Please refer to Section 2.4 of this
letter entitled “Restructuring” for more information on the Restructuring.
Prior to the Restructuring (which shall be completed on the same day as Completion of the
Proposed Acquisition) and as at the Latest Practicable Date, the direct and indirect
shareholdings in the Target of the directors and substantial shareholders of the Target are
as follows:
Direct Interest Deemed Interest
Number of Shares % Number of Shares %
Directors
Dato’ Colin 2 50 – –
Dato’ Edwin 2 50 – –
Save as disclosed below, there are no significant changes in ownership of the equity
interest of the Target and that of the Target Subsidiaries or any changes in the share
capital of the Target and that of the Target Subsidiaries in the last three (3) years
preceding the date of this Circular.
5.1. Target
Date Description Consideration
Number ofShares
issued ortransferred
Before transaction After transaction
Numberof Shares
ShareCapital
Numberof Shares
ShareCapital
30 June2016
Allotment andissuance of
shares in theTarget to Dato’
Edwin
S$2 2 2 S$2 4 S$4
5.2. FRSB
Date Description Consideration
Number ofShares
issued ortransferred
Before transaction After transaction
Numberof Shares
ShareCapital
Numberof Shares
ShareCapital
(RM) (’000) (’000) (RM’000) (’000) (RM’000)
8 August2014
Transfer ofshares fromAbd Jalil binRahmat(1) toDato’ Colin
1,275,000 1,275
5,000 5,000 5,000 5,000
8 August2014
Transfer ofshares fromAbd Jalil binRahmat to
Dato’ Edwin
1,275,000 1,275
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
A-44
Date Description Consideration
Number ofShares
issued ortransferred
Before transaction After transaction
Numberof Shares
ShareCapital
Numberof Shares
ShareCapital
(RM) (’000) (’000) (RM’000) (’000) (RM’000)
30 November2016
Transfer ofshares from
Dato’ Colin tothe Target
40,671,325.50(2) 2,500
5,000 5,000 5,000 5,000
30 November2016
Transfer ofshares from
Dato’ Edwin tothe Target
40,671,325.50(2) 2,500
Notes:
(1) Abd Jalil bin Rahmat is not a related party of the Tan Brothers, Proposed New Directors and/or controlling
shareholders of the Enlarged Group.
(2) The consideration for the entire issued and paid-up share capital of the Malaysia Subsidiaries was based
on the aggregate net asset value of the Malaysian Subsidiaries as at their respective financial year end
in 2015. Where such Malaysian Subsidiary has a net liability value, the relevant shares are transferred at
a nominal value of RM1. The aggregate consideration paid to the Tan Brothers for the entire issued and
paid-up share capital of the Malaysian Subsidiaries is RM88,667,200.
5.3. FGSB
Date Description Consideration
Number ofShares
issued ortransferred
Before transaction After transaction
Numberof Shares
ShareCapital
Numberof Shares
ShareCapital
(RM) (’000) (’000) (RM’000) (’000) (RM’000)
6 January2015
Allotment andissuance of
shares to Dato’Colin
1,500,000 1,500
2,000 2,000 5,000 5,000
6 January2015
Allotment andissuance of
shares to Dato’Edwin
1,500,000 1,500
30 November2016
Transfer ofshares from
Dato’ Colin tothe Target
0.50(1) 2,500
5,000 5,000 5,000 5,000
30 November2016
Transfer ofshares from
Dato’ Edwin tothe Target
0.50(1) 2,500
Note:
(1) The consideration for the entire issued and paid-up share capital of the Malaysia Subsidiaries was based
on the aggregate net asset value of the Malaysian Subsidiaries as at their respective financial year end
in 2015. Where such Malaysian Subsidiary has a net liability value, the relevant shares are transferred at
a nominal value of RM1. The aggregate consideration paid to the Tan Brothers for the entire issued and
paid-up share capital of the Malaysian Subsidiaries is RM88,667,200.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
A-45
5.4. FVSB
Date Description Consideration
Number of
Shares
issued or
transferred
Before transaction After transaction
Number
of Shares
Share
Capital
Number
of Shares
Share
Capital
(RM) (’000) (’000) (RM’000) (’000) (RM’000)
20 June
2014
Transfer of
shares from
Dato’ Edwin to
Tong Yee Xing
1,750,000 1,750
5,000 5,000 5,000 5,000
20 June
2014
Transfer of
shares from
Dato’ Colin to
Chong Foh
Siong
1,750,000 1,750
15 January
2015
Allotment and
issuance of
shares to Dato’
Colin
10,500,000 10,500
5,000 5,000 26,000 26,000
15 January
2015
Allotment and
issuance of
shares to Dato’
Edwin
10,500,000 10,500
30 November
2016
Transfer of
shares from
Tong Yee Xing
to the Target
868,659 1,750
26,000 26,000 26,000 26,000
30 November
2016
Transfer of
shares from
Chong Foh
Siong to the
Target
868,659 1,750
30 November
2016
Transfer of
shares from
Dato’ Colin to
the Target
5,584,236.50(1) 11,250
26,000 26,000 26,000 26,000
30 November
2016
Transfer of
shares from
Dato’ Edwin to
the Target
5,584,236.50(1) 11,250
Note:
(1) The consideration for the entire issued and paid-up share capital of the Malaysia Subsidiaries was based
on the aggregate net asset value of the Malaysian Subsidiaries as at their respective financial year end
in 2015. Where such Malaysian Subsidiary has a net liability value, the relevant shares are transferred at
a nominal value of RM1. The aggregate consideration paid to the Tan Brothers for the entire issued and
paid-up share capital of the Malaysian Subsidiaries is RM88,667,200.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
A-46
5.5. GMSB
Date Description Consideration
Number ofShares
issued ortransferred
Before transaction After transaction
Numberof Shares
ShareCapital
Numberof Shares
ShareCapital
(RM) (RM) (’000) (RM’000)
29 January2015
Allotment andissuance of
shares to Dato’Edwin
239,990 239,990
20 20 1,000 1,00029 January2015
Allotment andissuance of
shares to Dato’Colin
239,990 239,990
29 January2015
Allotment andissuance of
shares to TongYee Xing
520,000 520,000
30 November2016
Transfer ofshares from
Tong Yee Xingto the Target
1 520,000 1,000,000 1,000,000 1,000 1,000
30 November2016
Transfer ofshares from
Dato’ Colin tothe Target
0.50(1) 240,000 1,000,000 1,000,000 1,000 1,000
30 November2016
Transfer ofshares from
Dato’ Edwin tothe Target
0.50(1) 240,000 1,000,000 1,000,000 1,000 1,000
Note:
(1) The consideration for the entire issued and paid-up share capital of the Malaysia Subsidiaries was based
on the aggregate net asset value of the Malaysian Subsidiaries as at their respective financial year end
in 2015. Where such Malaysian Subsidiary has a net liability value, the relevant shares are transferred at
a nominal value of RM1. The aggregate consideration paid to the Tan Brothers for the entire issued and
paid-up share capital of the Malaysian Subsidiaries is RM88,667,200.
5.6. HIPL
Date Description Consideration
Number ofShares
issued ortransferred
Before transaction After transaction
Numberof Shares
ShareCapital
Numberof Shares
ShareCapital
(S$) (’000) (’000) (S$’000) (’000) (S$’000)
20 December2016
Transfer ofshares from
Dato’ Colin tothe Target
707,826 250 500 500 500 500
20 December2016
Transfer ofshares from
Dato’ Edwin tothe Target
707,826 250 500 500 500 500
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
A-47
Save as disclosed in this letter:
(a) no shares in the Target or any Target Subsidiary have been issued for a consideration
other than cash during the three (3) years preceding the Latest Practicable Date.
(b) as at the Latest Practicable Date, no person has, or has the right to be given, an
option to subscribe for or purchase any securities of the Target or any Target
Subsidiary;
As at the Latest Practicable Date, the Target Group is not directly or indirectly owned or
controlled, whether severally or jointly, by any government.
As at the Latest Practicable Date, there is no known arrangement where the operation of
which may, at a subsequent date, result in a change of control of the Target Group.
There has not been any public take-over offer by a third party in respect of any of the
shares of the Target or of any of the Target Subsidiaries or by the Vendors and/or the
Target Group in respect of the shares of another corporation or the units of a business
trust, which has occurred between the beginning of the most recently completed financial
year and the Latest Practicable Date.
6. MAJOR CUSTOMERS AND SUPPLIERS
6.1. Major Customers
The customer of the Target Group who accounts for five percent (5.0%) or more of the
Target Group’s total revenue in any of FY2014, FY2015 and FY2016 is set out in the table
below.
Name of Customer Percentage of total revenue (%)
FY2014 FY2015 FY2016
Fuyuu Development Sdn. Bhd. – 10.5% 0.7%
Fuyuu Development Sdn. Bhd. is part of the Hatten Group. 12 units of Elements Mall
(representing 20,562 square feet and 3.0% of net saleable area) were sold to Fuyuu
Development Sdn. Bhd. at a 30.0% discount. Please see Section 24.2 of this letter entitled
“Past Interested Person Transactions” for further details. Although the units to be
transferred to the relevant landowners pursuant to land acquisition arrangements were
recognised as revenue under the Singapore Financial Reporting Standards 115 (Revenue
from contracts with customers) (FRS 115), such landowners are not considered major
customers of the Target Group. Please see Section 4.2.2 of this letter entitled “Site
Acquisition” for further details on such land acquisition arrangements.
The above revenue was recorded on a net basis, taking into account the discount given,
in accordance with the Target Group’s accounting policies. Please see Section 2.6 of
Appendix C to this Circular entitled “Revenue Recognition” for further details.
As at the Latest Practicable Date, the Target Group has no other major customers, as
customers of the Target Group are mainly retail customers for the units in the Target
Group’s property developments. Save as disclosed above, none of the customers
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
A-48
accounted for five percent (5.0%) or more of the Target Group’s total revenue for the
Period Under Review. For the Period Under Review, the business or profitability of the
Target Group is not materially dependent on any single customer.
Save as disclosed in this letter, none of the Proposed New Directors, Proposed New
Executive Officers, or their respective associates has any interest, direct or indirect, in any
of the customers.
6.2. Major Suppliers
The supplier of the Target Group who accounts for five percent (5.0%) or more of the
Target Group’s total purchases in any of FY2014, FY2015 and FY2016 is set out in the
table below.
Name of Supplier Type of purchases Percentage of total purchases (%)
FY2014 FY2015 FY2016
Montane
Construction
Sdn. Bhd.
Construction
Services
85.9% 74.4% 82.4%
Our major supplier, Montane, is a construction company appointed for different
development projects. In selecting Montane as its main contractor for certain of the Target
Group developments, the Target Group had obtained estimates from other contractors and
Montane was selected and appointed based on factors such as its licensed qualifications,
financial status, reliability, pricing, track record, ability to commit to project timelines, and
quality of workmanship and finishing. We do not consider ourselves materially dependent
on Montane as we believe that there are other qualified contractors that the Target Group
is able to work with should Montane provide unacceptable or uncompetitive terms. Moving
forward, the Target Group intends to award contracts to the main contractors for its
development projects through an open tender process. Please refer to Section 4.2 of this
letter entitled “Business Process” for more information on the selection of the main
contractor for our property development projects.
The entire issued and paid-up share capital of Montane is beneficially owned by the aunt
of the Vendors. Please refer to Section 24.4 of this letter entitled “Other Interested Person
Transactions” for further details relating to Montane.
As at the Latest Practicable Date, our business or profitability is not materially dependent
on any single supplier.
Save as disclosed above, none of the Proposed New Directors, Proposed New Executive
Officers, or their respective associates has any interest, direct or indirect, in the above
supplier.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
A-49
7. CREDIT AND INVENTORY MANAGEMENT
7.1. Credit Policy
7.1.1. Residential Properties
The credit policy granted to our customers of residential properties (building or
land for subdivision into parcels) is standardised pursuant to a standard form sale
and purchase agreement, as prescribed under Schedule H of the Housing
Development (Control and Licensing) Act 1966 and Subregulation 11(1) of the
Housing Development (Control and Licensing) Regulations 1989, whereby the
progress payment schedule is as follows:
Stage Instalment Payment
Payment
(% of
purchase price)
1 Immediately upon the signing of the sale and purchase
agreement
10
2 Within 21 working days after receipt by customer of
written notice of the completion of:
(a) the work below ground level of the building
including foundation of the building;
10
(b) the structural framework; 15
(c) the walls with door and window frames placed in
position;
10
(d) the roofing, electrical wiring, plumbing (without
fittings), gas piping (if any) and internal telephone
trunking and cabling;
10
(e) the internal and external finishes including the
wall finishes;
10
(f) the sewerage works; 5
(g) the drains; 5
(h) the roads 5
3 On the date the customer takes vacant possession with
water and electricity supply ready for connection
12.5
4 On the date the customer takes vacant possession as in
stage 3 and to be held by our solicitors as stakeholder
for payment to the Target Group within 21 working days
after receipt by the customer of the written confirmation
of submission to and acceptance by the appropriate
authority of the application for subdivision of the land on
which the property was built
2.5
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
A-50
Stage Instalment Payment
Payment
(% of
purchase price)
5 On the date the customer takes vacant possession as in
stage 3 and to be held by our solicitors as stakeholder
for payment to the Target Group as follows:
(a) 2.5% at the expiry of eight (8) months after the
date the customer takes vacant possession; and
(b) 2.5% at the expiry of 24 months after the date the
customer takes vacant possession.
5
For purchasers who are unable to settle payments at the respective stages,
interest is chargeable on the unpaid amount in accordance with the sale and
purchase agreement.
7.1.2. Commercial Properties
Sale and purchase agreements for commercial properties are not required to
conform to any prescribed law or standard format and are concluded on a
willing-buyer willing-seller basis. Therefore, the schedule of payment and in turn
the credit policy for such agreements will vary between different contracts. Based
on the current sale and purchase agreements entered into between the Target
Group and its customers in relation to commercial properties, customers have
14 days to make payment from the invoice date based on progress payment
milestones stipulated in the sale and purchase agreements.
7.2. Credit Management
The average trade receivables turnover days for the Period Under Review are as follows:
FY2014 FY2015 FY2016
Average trade receivables turnover days(1) 30 32 59
The trade receivables turnover days was increased to 59 days in FY2016 due to the
retention of stakeholders’ monies by the solicitors for Hatten City Phase 1. Such
stakeholders’ monies will only be released to the Target Group 12 to 24 months
(depending on the type of property developed) after customers take vacant possession.
During FY2016, Hatten City Phase 1 obtained the CCC in November 2015 (Elements Mall
and Hatten Suites) and March 2016 (SilverScape Residences).
Note:
(1) The average trade receivables turnover days for FY2014, FY2015 and FY2016 is calculated based on the
average of the opening and closing trade receivables balances for the relevant financial years divided by
billings for the relevant financial years and multiply by the number of calendar days in the relevant financial
years.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
A-51
The Target Group performs ongoing credit evaluation of its debtors’ financial condition. For
customers with payments outstanding for more than 180 days, provision for impairment of
trade receivables will usually be made on a case-by-case basis, depending on the
creditworthiness of the customer at the relevant time.
During the Period Under Review, there is no bad debt written off and no allowance for
doubtful receivables. In this regard, it should be noted that revenue is recognised to the
extent that it is probable that the economic benefit will flow to the Target Group and the
revenue can be measured reliably. In ascertaining whether a debt is to be written off or
allowance made for doubtful recoverability, a review is made on a case by case basis,
taking into account factors which include, but are not limited to, the amount outstanding,
the value of the unit purchased, and the allocation of risk under the contracts entered into
with the relevant debtor and the Target Group.
Ageing Analysis
The ageing schedule for the net trade receivables as at 30 June of each financial year is
as follows:
2014 2015 2016
30 June
2016
debtors
balance
as at the
Latest
Practicable
Date
RM’000 RM’000 RM’000 RM’000
Not due 5,395 83,883 73,112(1) 64,757(1)
Within 30 days 3,126 2,463 20,236 3,787
31 to 90 days 7,256 29,819 31,156 8,300
91 to 120 days 539 1,196 11,580 2,060
More than 120 days 5,910 11,069 67,009 29,622
Total 22,226 128,430 203,093 108,526
As at the Latest Practicable Date, RM108.5 million of the trade receivables remained
outstanding and has not been impaired as the management believes that the amount is
still recoverable. Out of such amount outstanding, RM15.4 million represents
stakeholders’ monies held by our solicitors. Please see Section 20 of this letter entitled
“Management’s Discussion and Analysis of Results of Operations and Financial Condition”
for further details.
Note:
(1) This includes accrued billings of RM61.0 million which are not due.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
A-52
7.3. Credit Terms from the Target Group’s Suppliers
The average trade payables’ turnover days for the Period Under Review are as follows:
FY2014 FY2015 FY2016
Average trade payables turnover days(1)(3) 156 146 334(2)
Trade payables, which consists mainly of amounts payable to contractors and suppliers
(excluding any progress billings and retention sum payables), stood at approximately
RM140.9 million and RM273.1 million at the end of FY2014 and FY2015 respectively,
representing an increase of RM132.2 million. This was in line with the increase in
construction activity of the ongoing projects. There was little change in the average trade
payables turnover days of 156 days and 146 days for FY2014 and FY2015 respectively.
Trade payables (excluding any progress billings and retention sums payables) of the
Target Group increased by RM114.3 million from RM273.1 million in FY2015 to
RM387.4 million in FY2016. With the completion of Hatten City Phase 1 in FY2016, the
average trade payables turnover days increased to 334 days in FY2016 mainly due to the
final completion account for Hatten City Phase 1 which was still outstanding and payable.
The final completion accounts are pending finalisation by various professionals including
the quantity surveyor, building consultant and mechanical and electrical consultant.
However, after taking into account the resulting effect of the Set-Off Agreement(2), setting
off amounts owed to Montane by RM232.3 million, the average trade payables turnover
days in FY2016 would have been 216 days.
As at the Latest Practicable Date, none of the trade creditors have issued any letters of
demand for payment of such trade payables. Based on the experience of the Proposed
Executive Directors, it is an industry norm to experience such delays in payment where
final completion accounts are being settled when a development is completed. There also
has not been any disruption of services provided by the trade creditors.
Notes:
(1) The average trade payables turnover days for FY2014, FY2015 and FY2016 is calculated based on the
average of the opening and closing trade payables balances for the relevant financial years divided by
purchases for the relevant financial years and multiplied by the number of calendar days in the relevant
financial years.
(2) As a result of the Set-Off Agreement, amounts owing to Montane, by virtue of Tan Ler Choo being the aunt
of the Tan Brothers and the beneficial owner of Montane, were set off by amounts owed to the Target Group
by the Hatten Group. Assuming that the Set-Off Agreement with Montane is taken into account, the
average trade payables turnover days for FY2016 would have been 216 days. Please see Section 24.4.1(f)
of this letter entitled “Set-Off Agreement” for further details.
(3) Assuming that the progress billings, retention sum payables and the Set-Off Agreement are taken into
account, the average trade payable turnover days for FY2014, FY2015 and FY2016 would be 257 days,
191 days and 289 days respectively.
7.4. Inventory Management
Due to the nature of the Target’s Group business, it does not carry inventory. For the
Period Under Review, there is no inventory recorded.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
A-53
8. COMPETITION AND COMPETITIVE STRENGTHS
8.1. Competition
The property development industry in Malaysia is highly competitive, with various small to
medium sized property developers and a few large established players. The barrier to
entry into the property development industry is relatively high as the property development
market is capital intensive and requires specialised industry knowledge.
To the best of the Proposed New Directors’ knowledge and belief, there are no published
statistics or official sources of information with respect to the market share of the Target
Group. The principal competitive factors influencing the property development sector
generally and in Malacca, Malaysia, where the Target Group operates, include the pricing
scheme adopted by the developers, the location of the properties and the concepts of the
property projects. The Target Group also encounters keen competition in relation to the
acquisition of development sites.
While there are no directly comparable competitors to the Target Group, we have
nevertheless identified the following companies that develop similar mixed development
property projects in Malacca as its key competitors:
8.1.1. Malacca-based Developers
(a) Faithview Group Sdn. Bhd.;
(b) Kerjaya Prospek (M) Sdn. Bhd.; and
(c) PB Realty Sdn. Bhd.
While there are few direct competitors in Malacca, the Target Group may face competition
from other Malaysian developers focusing on mixed developments which do not yet have
a presence in Malacca. They are:
8.1.2. National Developers (other than in Malacca)
(a) Eco World Development Group Berhad;
(b) Mah Sing Group Berhad;
(c) S P Setia Berhad;
(d) Matrix Concepts Holdings Berhad; and
(e) KSL Holdings Berhad.
Nonetheless, even though we operate in a competitive environment, we believe that our
specialisation in the niche market of integrated mixed-use properties with prominent
lifestyle features at accessible locations and developed amenities would enable us to
compete effectively in the property development market.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
A-54
Among the competitors listed above, we are the first to establish a stronghold in Malacca.
We believe that we differentiate ourselves from the competition due to various competitive
strengths that set the Target Group apart from its competitors and potential competitors.
To the best of the Proposed New Directors’ knowledge and belief, none of the Proposed
New Directors, Proposed New Executive Officers, or their respective associates have any
interest, direct or indirect, in any of the above competitors.
8.2. Competitive Strengths
We believe that the following key competitive strengths have and will continue to
contribute to our ability to compete in the property development market of Malacca,
Malaysia:
8.2.1. Established track record and reputation
We have an established track record for the development of well-designed
properties in Malacca and ability to meet our customers’ needs. Our established
track record and reputation is evident by our numerous accreditations and
awards. This has enabled us to maintain long-standing relationships with
customers, thereby resulting in repeat business contracts, recommendations and
referrals.
Additionally, the Tan Brothers were involved in the development of the largest
premier hotel in Malacca (Hatten Hotel) and the largest mall in Malacca (Dataran
Pahlawan Melaka Megamall). One of our current developments, SilverScape
Residences of Hatten City Phase 1, stands at 45 storeys and is the tallest building
in Malacca.
8.2.2. Established business relationships
We have throughout the years, developed strong professional relationships with
an extensive network of professionals such as contractors, suppliers, financiers
and consultants, whose professional advice and participation are pivotal to the
success of a property development project. With these established business
relationships, our project teams are able to manage the development projects
effectively and produce quality developments in a timely and efficient manner.
We also maintain close business relationships with various property agents who
provide us with first-hand information on potential development sites which are
available for sale, private tender or auction and this allows the Target Group to
capitalise quickly on suitable market opportunities for future growth.
8.2.3. Our ability to develop innovative properties that meet the changing needs and
desires of our customers
We are able to tailor our property developments so as to meet the changing
needs and desires of our customers in Malacca, Malaysia by specialising in
innovative integrated developments with prominent lifestyle features, accessible
locations and developed amenities. We believe that we are one of the first few
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
A-55
developers who have responded to such a growing trend in the market. By
staying constantly at the forefront of innovation and focusing on producing
avant-garde designs, we have established ourselves as a developer of world-
class facilities and luxury amenities within the context of urban convenience and
comfort. We are confident that our business model is flexible and adaptable so as
to deliver new and innovative concepts and remain competitive and viable in the
market.
8.2.4. Experienced and dedicated management team
The Target Group’s Managing Director, Dato’ Colin, and Deputy Managing
Director, Dato’ Edwin, field considerable experience in the property development
industry. The Target Group is also supported by a dedicated management team
that on average, has more than 10 years of experience in the industry. With their
experience, the Target Group’s management team is able to source for suitable
sites with potential for development, and to assess whether such sites offer good
investment returns or profitable development opportunities.
8.2.5. Hatten Group expertise and established business relationships
We tap into the strengths of the Hatten Group and its comprehensive and
vertically integrated business. This allows us to incorporate various elements of
the development process, ranging from design to management to hospitality
services, into our planning process, resulting in a consistent product that
highlights the Hatten Group’s high standard of excellence.
In particular, we have access to more than 20 land parcels and development
rights held by the Hatten Group as its Land Bank for future development. Through
the ROFR and the Call Options granted to the Company, the Enlarged Group is
able to periodically review whether such land parcels and development rights
held by the Hatten Group would be suitable for property development.
Please see Section 25 of this letter entitled “Potential Conflicts of Interest” for
more information relating to the ROFR and the Call Options granted to the Target
Group and Section 2.3 of this letter entitled “Structure of the Hatten Group” for
more information relating to the Hatten Group.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
A-56
9. AWARDS, ACCREDITATION AND RECOGNITIONS
As an endorsement of the quality of the products and services of the Hatten Group, the
Hatten Group and its property development projects have received a number of awards
and recognition as follows:
Award Award Title Project Year
1. International Hotel
Awards
Highly Commended
New Hotel Construction &
Design Malaysia
Hatten Square
Suites & Shoppes
2011
2. International Property
Awards Asia Pacific
Highly Commended
Development Marketing Malaysia
Hatten City 2012 – 2013
3. International Property
Awards Asia Pacific
Highly Commended
Mixed-Use Architecture Malaysia
Hatten City 2012 – 2013
4. International Property
Awards Asia Pacific
Best Retail Development
Malaysia
Elements Mall @
Hatten City
2012 – 2013
5. World Sense Of Place
Awards
New City Of The Year Hatten City 2013
6. Overseas Property
Professional Awards For
Excellence
Bronze
Best Developer – Asia
Hatten Group
Sdn. Bhd.
2013
7. South East Asia Property
Awards
Winner
Best Commercial Development
(Malaysia)
Elements Mall @
Hatten City
2013
8. South East Asia Property
Awards
Highly Commended
Best Commercial Architectural
Design
Elements Mall @
Hatten City
2013
9. South East Asia Property
Awards
Highly Commended
Best Commercial Development
(South East Asia)
Elements Mall @
Hatten City
2013
10. South East Asia Property
Awards
Highly Commended Best Condo
Development (Malaysia)
SilverScape @
Hatten City
2013
11. Asia Pacific Property
Awards Development
Highly Commended
Retail Development Malaysia
Dataran Pahlawan
Melaka Megamall
2013 – 2014
12. Asia Pacific Property
Awards Development
Highly Commended
Commercial High-Rise
Development Malaysia
Imperio Mall @
Hatten City
2013 – 2014
13. Asia Pacific Property
Awards Interior Design
Highly Commended
Interior Design Apartment
Malaysia
Imperio Residence
@ Hatten City
2013 – 2014
14. Asia Pacific Property
Awards Interior Design
Highly Commended
Interior Design Apartment
Malaysia
SilverScape @
Hatten City
2013 – 2014
15. Asia Pacific Property
Awards Architecture
Highly Commended
Mixed-Use Architecture Malaysia
Imperio @ Hatten
City
2013 – 2014
16. Asia Pacific Property
Awards Architecture
Highly Commended
Retail Architecture Malaysia
Dataran Pahlawan
Melaka Megamall
2013 – 2014
17. Asia Pacific Property
Awards Architecture
Highly Commended
Retail Architecture Malaysia
Elements Mall @
Hatten City
2013 – 2014
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
A-57
Award Award Title Project Year
18. Global Brands Magazine Best Property Development
Brand Malaysia
Hatten Group
Sdn. Bhd.
2014
19. IAIR Awards Best Company For Leadership
Property Investment Malaysia
Hatten Group
Sdn. Bhd.
2014
20. Pinnacle International
Excellence Awards 2014
National Order Property
Developer
Hatten Group
Sdn. Bhd.
2014
21. South East Asia Property
Awards
Highly Commended
Best Commercial Development
Imperio Mall @
Hatten City
2014
22. South East Asia Property
Awards
Highly Commended
Best Luxury Condo Development
(South Malaysia)
Imperio Residence
@ Hatten City
2014
23. South East Asia Property
Awards
Highly Commended
Best Mid-Range Condo
Development (South Malaysia)
SilverScape @
Hatten City
2014
24. South East Asia Property
Awards
Winner of Best Residential
Architectural Design
Imperio Residence
@ Hatten City
2014
25. BEI Asia Awards Regional Award Of The Year Hatten Group
Sdn. Bhd.
2014
26. Asia Pacific Property
Awards Architecture
Best Residential High-Rise
Architecture Malaysia
SilverScape @
Hatten City
2014 – 2015
27. Asia Pacific Property
Awards Development
Highly Commended
Residential High-Rise
Development Malaysia
SilverScape @
Hatten City
2014 – 2015
28. South East Asia Property
Awards
Highly Commended
Best Residential Architectural
Design (South East Asia,
Regional Category)
Imperio Residence
@ Hatten City
2014
29. Overseas Property
Professional (OPP)
Awards For Excellence
2014
Best Innovation – Bronze
(Hatten City Phase 1)
Hatten Group
Sdn. Bhd.
2014
30. World Finance Real
Estate Awards 2014
Best Retail Developer, Asia Hatten Group
Sdn. Bhd.
2014
31. Small Medium Enterprise
(SME) One Asia Awards
2014
The Hoffen Award Corporate
Social Responsibility
Hatten Group
Sdn. Bhd.
2014
32. Small Medium Enterprise
(SME) One Asia Awards
2014
Overseas Enterprise Award Lianbang Ventures
Sdn. Bhd.
2014
33. iProperty.Com Malaysia
People Choice Awards
Finalist
Best Integrated Development
Hatten City
(Parcel 1)
2014
34. iProperty.Com Malaysia
People’s Choice Awards
Finalist
Most Iconic Development
Hatten City
(Parcel 1)
2014
35. iProperty.Com Malaysia
People’s Choice Awards
Finalist
Best Commercial Development
Imperio Mall @
Hatten City
2014
36. iProperty.Com Malaysia
People’s Choice Awards
Finalist
Best High Rise Development
SilverScape @
Hatten City
2014
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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Award Award Title Project Year
37. Property Insight
Prestigious Property
Developer Awards
Outstanding Developer –
Southern Region
Hatten Group
Sdn. Bhd.
2015
38. Asia Pacific Property
Awards
Highly Commended
Commercial High-Rise
Development Malaysia
Harbour City 2015
39. Asia Pacific Property
Awards
Highly Commended
Hotel Interior Malaysia
Hatten Hotel
Melaka
2015
40. iProperty.Com Malaysia
People’s Choice Awards
Winner – Best Emerging
Developer
Hatten Group
Sdn. Bhd.
2015
41. iProperty.Com Malaysia
People’s Choice Awards
Winner – Best Integrated
Development
Harbour City 2015
42. 2015 Influential Brands
Awards
Top Brand – Property Developer
(Malaysia)
Hatten Group
Sdn. Bhd.
2015
43. Malaysian Property
Press Awards
Winner – Best Retail Project Harbour City 2015
44. Malaysian Property
Press Awards
Outstanding Achievement –
Catalyst Developer Malacca
Harbour City 2015
45. Sin Chew Business
Excellence Awards
Product & Service Excellence
Award
Fuyuu Resources
Sdn. Bhd.
2015
46. Sin Chew Business
Excellence Awards
Property Excellence Award Fuyuu
Development
Sdn. Bhd.
2015
47. International Property
Awards
Highly Commended
Mixed-Use Development
Harbour City 2016
48. South East Asia Property
Awards
Highly Commended
Luxury Condo Development –
South Malaysia
Imperio Residence
@ Hatten City
2016
49. HR Asia Recipient – Best Companies to
Work for in Asia 2016 Awards
Hatten Group
Sdn. Bhd.
2016
50. Nanyang Eagle Awards Golden Eagle Award
Eminent Eagle
Fuyuu Resources
Sdn. Bhd.
2016
51. Outstanding Brands Outstanding Brands
(Property Developer)
Hatten Group
Sdn. Bhd.
2016
10. RESEARCH AND DEVELOPMENT
We do not generally undertake any research and development due to the nature of our
business. During the Period Under Review, we have not incurred any significant research
and development expenditure.
We, however, conduct periodic market research to assess consumer trends and needs.
This allows for properties designed and developed to be at the forefront of innovation and
to meet the needs and requirements of consumers.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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11. QUALITY ASSURANCE
We place strong emphasis on quality control to ensure that our developments comply with
the relevant regulations.
We adopt internal controls, standards and procedures to regulate major processes in our
developments. They include:
(a) In selecting our main contractor for our developments, we require the contractors to
comply with all relevant regulations and standards in relation to the construction work
as well as our internal controls, standards and procedures. All findings of
non-compliance are to be reported.
(b) We evaluate architecture and design concepts thoroughly and appoint relevant third
party professionals to ensure compliance with relevant regulations and standards.
(c) We demand the use of quality building and construction materials. In choosing our
suppliers, we require them to provide the relevant certificates or permits, before
considering their services or allowing them to participate in the tender process.
(d) We engage third party professionals to help ensure that the building materials used
are in accordance with the relevant regulations and meet market standards.
Our development management team is responsible for the overall management and
supervision of the daily operations, progress and quality control of the construction of each
development. We also prepare periodic quality evaluation reports during the construction
process.
12. SALES AND MARKETING
Our sales and marketing department is responsible for marketing our property
development projects based on our competitive strengths. We focus on selling the iconic
designs of our developments and emphasize the sustainability of such mixed
developments.
In formulating our pricing and marketing strategy, we rely on our internal market research
processes (such as the Strengths, Weaknesses, Opportunities, Threats (SWOT) analysis)
to identify factors in the market such as the market price of similar properties and features
of existing developments. We aim for a unique selling proposition through product
differentiation so as to justify the premium pricing of our developments.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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Typically, our sales and marketing process is as follows:
Advertising, promotions,
roadshows, property
launch
Sales Presentation/
Negotiation
Unit sold
Documentation process
SPA signing
Progressive billing
Vacant Possession/
Handover
Resale/ Leasing Option
We reach out to potential buyers via numerous channels such as organising development
road shows and other activities to suit our target clientele. We typically utilise various
forms of media ranging from print advertising (flyers, brochures, billboard and
newspapers) to social media (our website and blog, Facebook, Instagram and YouTube).
Other forms include text messages, e-mail and exclusive invites for existing customers.
13. EMPLOYEES AND STAFF TRAINING
13.1. Employees
As at the Latest Practicable Date, the Target Group has 120 employees, all of whom are
located in Malaysia and Singapore. From time to time, we may also employ temporary staff
where required. We believe that the relationship between our employees and the
management has been good and is expected to continue to be so in the future. None of
our employees are unionised and we have not experienced any labour strikes or work
stoppages. The number of full-time employees is not subject to any material fluctuation.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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The table below sets out the breakdown of the Target Group’s full-time employees by
activity as at the end of each Period Under Review and as at the Latest Practicable Date:
FY2014 FY2015 FY2016
As at the Latest
Practicable Date
Finance 13 16 19 22
Human Resources &
Administration 10 15 14 32
Operations 2 6 16 19
Development Management 13 17 14 18
Marketing & Sales
Administration 10 8 14 24
Management 4 5 5 5
Total 52 67 82 120
Prior to 1 September 2016, employees of the Target Group were seconded from the Hatten
Group. While they only worked full-time for the Target Group, they remained employed
with the Hatten Group up until 31 August 2016. For the purposes of this section,
employees seconded to the Target Group were considered “full-time” with the Target
Group. This constitutes an interested person transaction. Please see Section 24.2.9 of this
letter entitled “Human Resources” for further details.
The increase in the number of employees in relation to Human Resources &
Administration and Marketing & Sales Administration is due to the corporatisation and
increase in expansionary activities, in line with the expansion plan of the Target Group.
13.2. Staff Training
We recognise that our employees represent a vital resource to the Target Group.
Therefore, we periodically implement training programmes to upgrade their skills and
knowledge. Recently, we implemented the “Learning and Development Initiatives”, which
was designed to instil commitment and promote continuous learning. The Learning and
Development Initiatives provide opportunities for our employees to attend and participate
in a series of workshops and programmes that feature training that range from
communication and leadership skills to finance and legal knowledge.
To aid our employees in their development, our human resources department works
closely with various heads of departments in tracking the number of hours put into training
and development.
13.3. Related Employees
As at the Latest Practicable Date, save for the Tan Brothers who are related to each other,
there are no employees of the Target Group that are related to the Proposed New
Directors or Proposed New Executive Officers.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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Datuk Wira Eric currently serves as the adviser and mentor of the Hatten Group who
provides input and shares his knowledge and experience with the Tan Brothers on
strategic issues. He is employed by Hatten Asset Management Sdn. Bhd., a company in
the Hatten Group and is not employed by the Target Group. He is not involved in the
day-to-day operations and decision making of the Hatten Group or the Target Group.
14. PROPERTIES AND FIXED ASSETS
As at the Latest Practicable Date, the list of material properties leased or otherwise
occupied by the Target Group is set out below:
Property and
location Use
Area
(m2) Lease term Rental Fee Landlord/Owner
No. 55-S-1-A,
Jalan Sultan
Ahmad Shah,
The Northam All
Suites, 10050
George Town,
Malaysia
Sales Office
and Gallery
206 Until
November 2018
RM10,000 per
month
Zun Holdings
Sdn. Bhd.
No. 73
Jalan Maarof,
Bangsar, 59100
Kuala Lumpur,
Malaysia
Sales Office
and Gallery
167 Until
October 2018 with
an option to renew
for two (2) years
RM23,320 per
month for the
first year
RM24,380 per
month for the
second year
Pacific Alliance
Capital Holdings
Sdn. Bhd.
10-01,
Hatten Square,
Jalan Merdeka,
75000 Bandar
Hilir Melaka,
Malaysia
Office 1,415 Until
December 2019
Aggregate of
RM64,585 per
month
Temasek Blooms
Sdn. Bhd.
53 Mohamed
Sultan Road,
#02-01/02, #03-
01/02, #04-01
/02 Singapore
238993
Office 1,338 Until June 2025 S$66,000 per
month up until
October 2018
and S$69,300
per month
thereafter
Link (THM) Biz
MS Pte. Ltd.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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As at the Latest Practicable Date, the list of material properties and fixed assets owned by
the Target Group is set out below:
Owner
Property and
location Use Area (m2) Tenure Encumbrances
GMSB Pulau Melaka
No. PN54208 &
PN54209,
No. Lot 10372 &
Lot 10373
Kawasan Bandar
XLIII,
Daerah Melaka
Tengah, Negeri
Melaka, Malaysia
Commercial Approximately
24,000
99 years,
expiring in 2110
Charged to
United Overseas
Bank (Malaysia)
Bhd
As at the Latest Practicable Date, certain of the motor vehicles owned by the Target Group
are not held directly by the Target Group but by individuals. These individuals hold such
motor vehicles on trust for the relevant Target Subsidiary. As at the Latest Practicable
Date, the book value of such motor vehicles is RM0.3 million. The Independent Auditors
and Reporting Accountants confirms that such vehicles beneficially owned by the Target
Group have been included in the calculation of the fixed assets of the Target Group.
Please see Appendix C to this Circular entitled “Independent Auditors’ Report on the
Combined Financial Statements of the Target Group for FY2014, FY2015 and FY2016” for
further details.
To the best of the knowledge and belief of the Proposed New Directors, there are no
regulatory requirements that may materially affect the Target Group’s utilisation of tangible
fixed assets.
15. INSURANCE
There are currently no mandatory requirements under Malaysian laws and regulations
which require a property developer to purchase insurance policies in relation to its
property developments.
As at the Latest Practicable Date, the Target Group maintains insurance policies to cover
its risks that may arise from its property development projects. We require our contractors
to be covered by contractor’s all risks and work injury compensation insurance during the
construction period up until completion of each project. For completed projects, we also
purchase fire insurance and public liability insurance for the relevant properties.
In addition, we purchase medical and hospitalisation insurance for our employees.
The Proposed New Directors are of the view that the insurance policies are adequate for
the Target Group’s existing operations. The Proposed New Directors will continue to
evaluate the existing insurance policies of the Target Group from time to time to determine
whether such policies, including the amounts insured are adequate.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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16. INTELLECTUAL PROPERTY
The Target Group uses the following trademarks which we believe are material to the
business of the Target Group:
Trademark Country Class(es) Reference Status
Singapore 35(1), 36(2), 37(3), 41(4), 43(5) 40201507159Y Registered
Malaysia 36(2), 37(3), 41(4), 45(6) 2011001924,
2011001934,
2011001935,
2011001936
Registered
Malaysia 35(1), 43(5) 2016071969,
2016071970
Pending
Singapore 35(1), 36(2), 37(3), 41(4), 43(5) 40201507157S Registered
Malaysia 37(3), 43(5), 45(6) 2011001925,
2011001926,
2011001929
Registered
Malaysia 35(1), 36(2), 41(4) 2016071965,
2016071967,
2016071968
Pending
Notes:
(1) Advertising; business management; business administration; office functions; all included in Class 35.
(2) Insurance; financial affairs; monetary affairs; real estate affairs; all included in Class 36.
(3) Building Construction; repair; installation services; all included in Class 37.
(4) Education; providing of training; entertainment; sporting and cultural activities; all included in Class 41.
(5) Services for providing food and drink; temporary accommodation; all included in Class 43.
(6) Personal and social services rendered by others to meet the needs of individuals; all included in Class 45.
On Completion, the Enlarged Group will be entering into a trademark licence agreement
with the owner of the above intellectual property, Hatten Group Sdn. Bhd. The trademark
licence agreement shall be a non-exclusive, worldwide licence (the “Trademark Licence”)
for a nominal consideration of RM1 per annum to use any and all of the above registered
trademarks as well as any unregistered intellectual property rights including unregistered
trademark “Hatten” and its accompanying logo and the reputation and goodwill of the word
“Hatten” and its accompanying logo (collectively, the “Trademarks”) in the countries in
which any Enlarged Group Company may carry on its business. The Trademark Licence
shall be valid for as long as the Tan Brothers remain substantial shareholders of the
Enlarged Group. The Proposed New Directors do not foresee any issues with the
registration of trademarks that are currently pending.
Save as disclosed above, the Target Group does not have any patents, trademarks or
other intellectual property rights which are material to its business or profitability.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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17. LICENCES, PERMITS AND GOVERNMENT REGULATIONS
As at the Latest Practicable Date, based on the knowledge of the Proposed New Directors,
the Target Group is in compliance with all applicable laws and regulations which are
material to its business operations and all relevant material licences and permits
necessary for its business operations have been obtained.
As at the Latest Practicable Date, the Target Group holds the following licences and
permits:
Holder
Licence/Permit
description Regulatory Body Issue Date Expiry Date
FRSB License to undertake
housing development
and advertisement
and sales permit for
SilverScape @ Hatten
City
Ministry of Urban
Wellbeing Housing
and Local
Government
25 July 2016 6 August
2017
FVSB License to undertake
property development
Ministry of Urban
Wellbeing Housing
and Local
Government
27 March
2013
25 March
2018
FVSB License to undertake
property development
and advertisement
and sales permit
Ministry of Urban
Wellbeing Housing
and Local
Government
8 November
2016
8 November
2017
FVSB Permit for signboard
and hoarding board
Malacca Historic
City Council
23 November
2016
31 December
2017
FVSB Permit for signboard
and hoarding board
Malacca Historic
City Council
16 December
2016
31 December
2017
FGSB Permit for hoarding
board
Malacca Historic
City Council
12 July 2016 31 December
2016(1)
FGSB License to carry out
business/advertisement
Malacca Historic
City Council
4 April 2016 31 March
2017
GMSB Permit for hoarding
board
Malacca Historic
City Council
16 December
2016
31 December
2017
GMSB Licence to carry out
business/advertisement
Malacca Historic
City Council
12 July 2016 27 April 2017
The Proposed New Directors are not aware of any reasons which would cause or lead to
non-renewal or cancellation of any of the relevant licences and permits necessary for its
business. The Proposed New Directors do not foresee any issues in relation to the
renewals of the above licences and/or permits that will be expiring in 1H2017. Such
licences and/or permits have been successfully renewed in the past.
Note:
(1) As Vedro by the River is due to be completed soon, the hoarding boards will be removed. Accordingly,
there is no longer a need for a permit for hoarding board for FGSB and such permit will not be renewed.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
A-66
18. CORPORATE SOCIAL RESPONSIBILITY
We have been and continue to be part of the Hatten Group’s corporate social responsibility
programme – Hatten Cares. Hatten Cares is an initiative by the Hatten Group that
consolidates all of the Hatten Group’s corporate social responsibility and charitable
efforts. Beginning in 2009, Hatten Cares has been actively promoting social awareness on
environmental issues, healthcare and social well-being. Hatten Cares is not limited to
activities relating to the business of the Hatten Group and has the single aim of creating
and nurturing a more caring community.
The Hatten Group received the Hoffen Award (Corporate Social Responsibility) at the SME
One Asia Awards 2014. The Hoffen Award recognises the faith and commitment of
companies that bring new life and revival to living spaces, as well as honouring the
companies which contribute to the betterment of the environment and people’s lives. This
award is bestowed onto corporations which go beyond profit making.
A list of activities of Hatten Cares from 2014 till the Latest Practicable Date is as follows:
2016
A Christmas Bundle of Joy
• Hatten Cares collaborated with local media houses in Malacca in a charity gift
collection drive with the intention of benefiting four (4) charity homes.
Sekolah Menengah San Min (Suwa) in Teluk Intan, Perak, Malaysia
• Hatten Cares contributed towards the renovation and upgrading of educational
facilities.
Sian Chay Medical Institution
• Hatten Cares contributed towards the renovation of Sian Chay Medical Institution
which provides free medical and health treatments to the needy in Singapore.
UNICEF Malaysia
• Hatten Cares donated to UNICEF Malaysia, charity beneficiary for the Hatten
Neon Run’15. Hatten Cares had pledged RM5 for each participant of the Hatten
Neon Run to charity.
60+ Earth Hour 2016
• Hatten Group participated in the 60+ Earth Hour 2016 where all of the mall facade
and exterior lights of the Dataran Pahlawan Melaka Megamall were switched off
from 8.30 pm till 10.00 pm.
2015
Amitofo Care Centre, Africa – Humanitarian Mission
• Hatten Cares teamed up with Hatten Hotel Malacca and sponsored the event
venue and all meals for the orphans and their caregivers.
“Bajuku Bajumu” – Hari Raya Charity Campaign
• Public donations were collected to treat the orphans from Kompleks Anak Yatim
Fatimah Al-Zaharah to a shopping spree for the purchase of new clothes for Hari
Raya.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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Old Folks Outing – Nyonya Memoirs
• The old folks from Pusat Jagaan Kasih Sayang Prasanna were invited to an
exclusive charity viewing of Nyonya Memoirs – Malaysia’s first 360° Live Theatre
Production.
Help Nepal – Donation Drive
• Hatten Cares organised an emergency donation drive to aid the survivors of the
April 2015 Nepal Earthquakes. Public donations were matched by the Hatten
Group. The funds were channelled through World Vision for ongoing rebuilding
works.
Eco-Chic Campaign
• Hatten Cares organised an awareness campaign to highlight environmental
concerns as well as sharing tips and ideas on how the public can help to conserve
energy and natural resources.
60+ Earth Hour – Blackout Party
• In conjunction with 60+ Earth Hour 2015, Hatten Cares organised a ‘blackout
party’ to draw attention to the importance of conserving energy.
Chinese New Year – Kind Hearts Campaign
• A special thematic booth was set up in Dataran Pahlawan Melaka Megamall where
shoppers could purchase daily necessities from the Kind Hearts Mini Mart which
were then donated on their behalf to Beringin Park Home in time for the New Year
celebrations.
2014
Christmas – Wish Upon A Star Campaign
• 150 Christmas gift wishes were given to the mentally-disabled students of
Hopehaven Centre for Children with Special Needs as well as the orphans from
Montfort Boys’ Home.
Hari Raya – Share Ramadan Campaign
• Orphaned boys from Rumah Budak-Budak Laki Tun Abdul Aziz Durian Daun were
treated to a Hari Raya Buffet and received money packets of ‘Duit Raya’. For the
home itself, Hatten Cares donated a washing machine and a personal computer.
Mother’s Day – Single Mom’s Special Day Outing
• 32 single mothers and their children from AgapeCARE Society, Malacca were
treated to a ‘Single Mom’s Special Day Out’ which included a movie, luncheon,
shopping spree, makeup tutorial and massage sessions.
60+ Earth Hour
• Hatten Cares pledged participation in the 60+ Earth Hour with Dataran Pahlawan
Melaka Megamall and Hatten Hotel Malacca powering down all non-essential
interior and facade lights.
Chinese New Year – ‘Prosperity Tour’
• Together with a team from Hatten Hotel, we visited four children’s homes and
made a trip to the remote new villages of Machap and Paya Ikan to old folks’
homes to distribute ‘ang pows’ and deliver approximately three months’ worth of
daily provisions.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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19. SELECTED FINANCIAL INFORMATION
The following selected financial information of the Target Group should be read in
conjunction with the full text of this Circular, including Appendix C entitled “Independent
Auditors’ Report on the Combined Financial Statements of the Target Group for FY2014,
FY2015 and FY2016”.
19.1. OPERATING RESULTS OF THE TARGET GROUP
RM’000 FY2014 FY2015 FY2016
Revenue 245,159 436,264 412,347
Cost of sales (180,019) (342,316) (257,627)
Gross profit 65,140 93,948 154,720
Other income/gains 4,420 6,246 12,155
Other items of expense
Selling and distribution expenses (17,679) (25,475) (22,422)
General and administrative expenses (23,765) (36,953) (47,157)
Finance costs (323) (712) (855)
Profit before tax 27,793 37,054 96,441
Income tax expenses (8,298) (11,274) (27,853)
Profit for the year 19,495 25,780 68,588
Other comprehensive income/(loss)
Items that may be reclassified
subsequently to profit or loss
Foreign currency translation 34 (31) (140)
Total comprehensive income
for the year 19,529 25,749 68,448
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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19.2. FINANCIAL POSITION OF THE TARGET GROUP
RM’000
As at
30 June
2014
As at
30 June
2015
As at
30 June
2016
Assets
Non-current assets
Plant and equipment 31,892 39,084 64,101
Deferred tax assets 23,986 39,077 51,294
Total non-current assets 55,878 78,161 115,395
Current assets
Properties under development 382,934 479,811 476,350
Trade and other receivables 185,735 352,219 212,546
Other current assets 31,466 43,091 47,084
Cash and cash equivalents 18,389 24,116 81,930
Total current assets 618,524 899,237 817,910
Total assets 674,402 977,398 933,305
Liabilities
Current liabilities
Loans and borrowings 55,057 40,357 51,899
Income tax payable 15,054 30,766 53,352
Trade and other payables 232,391 464,299 288,989
Amount due to shareholders 154 168 989
Other current liabilities 244,710 159,052 105,546
Total current liabilities 547,366 694,642 500,775
Net current assets 71,158 204,595 317,135
Non-current liabilities
Loans and borrowings 79,597 98,453 198,573
Other non-current liabilities 54,204 140,637 173,337
Total non-current liabilities 133,801 239,090 371,910
Total liabilities 681,167 933,732 872,685
Equity
Share capital 13,235 38,235 38,235
(Accumulated losses)/Retained earnings (20,034) 5,428 22,522
Translation reserve 34 3 (137)
Total equity (6,765) 43,666 60,620
Total equity and liabilities 674,402 977,398 933,305
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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20. MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
20.1. Overview
The Target Group is a property developer specialising in integrated residential, hospitality
and commercial developments and is one of the leading property developers in Malaysia.
The Target Group represents the property development arm of the Hatten Group. The
Hatten Group is owned by the Vendors with core businesses in property development,
property investment, hospitality, retail and education.
The current property development portfolio of the Target Group comprises three (3)
integrated mixed use developments in Malacca, Malaysia. They are (a) Hatten City
Phase 1 (incorporating Elements Mall, SilverScape Residences and Hatten Suites);
(b) Hatten City Phase 2 (incorporating Imperio Mall and Imperio Residence); and
(c) Harbour City (incorporating a mall, theme park and three (3) hotels). The Target Group
is also developing a retail mall in Malacca, Malaysia called Vedro by the River.
Revenue
The Target Group derives its revenue from sales of properties under development.
Audited
FY2014 FY2015 FY2016
Project RM’000
Percentage
of
Completion
(%) RM’000
Percentage
of
Completion
(%) RM’000
Percentage
of
Completion
(%)
Hatten City Phase 1 203,109 44.1 301,591 76.0 240,255 100.0
Hatten City Phase 2 41,866 10.0 82,526 24.7 116,091 58.1
Vedro by the River 184 0.2 47,447 43.5 41,997 72.7
Harbour City – – 4,700 0.0 14,004 5.0
Total 245,159 436,264 412,347
Revenue is recognised to the extent that it is probable that the economic benefits will flow
to the Target Group and the revenue can be reliably measured. Revenue is measured at
the fair value of consideration received or receivable, taking into account contractually
defined terms of payment and excluding taxes or duty.
(a) Sale of completed development properties
Revenue from the sale of development properties is recognised when there is a
finalised sales agreement and all risks and rewards of ownership have been
transferred to the buyer, and that it is probable that the economic benefits associated
with the sales agreement will flow to the Target Group.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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(b) Sale of development properties under construction
For uncompleted properties with finalised sales agreements, revenue is recognised
based on the percentage of completion method. Under the percentage of completion
method, revenue and costs are recognised by reference to the stage of completion
of the development activity at the balance sheet date, as measured by the proportion
that construction costs incurred to date relative to the estimated total construction
cost. When it is probable that total contract costs will exceed total contract revenue,
the expected loss is recognised as an expense immediately.
The three development projects, namely Hatten City Phase 1, Hatten City Phase 2,
and Vedro by the River contributed to the Target Group for the Period Under Review.
Harbour City started contributing to the Target Group’s revenue from FY2015 upon
launching of the project.
Factors affecting our revenue
The Target Group’s revenue may be affected by, among other things, the following key
factors:
(a) Percentage of completion recognition and delivery schedules of the Target Group’s
property developments;
(b) General property market environment in Malaysia, in particular Malacca, where the
Target Group operates predominantly;
(c) Ability to compete with competitors in terms of pricing, design, quality, location and
timely project delivery;
(d) Ability to continually attract and secure customers for the Target Group’s property
developments;
(e) The number of properties and the prices at which the properties are sold;
(f) Ability to acquire quality land for further development; and
(g) Pricing for different property development project types and mixes. Pricing for
integrated and non-integrated developments are different. Residential, retail and
hospitality units command different prices.
Please refer to the Section 27 of this letter entitled “Risk Factors Relating to the Target
Group” for details of the above factors and other factors which may affect the Target
Group’s business operations, revenue and overall financial performance.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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Cost of sales
The main cost components for the Target Group’s cost of sales are construction costs,
land costs, professional fees, authority fees, borrowing costs and incidental and other
related development cost. A breakdown is as follows:
Audited
Cost of sales by
nature FY2014 FY2015 FY2016
RM’000 % RM’000 % RM’000 %
Construction Costs 127,554 70.8 242,855 70.9 182,018 70.7
Land Costs 31,979 17.8 57,287 16.7 41,435 16.1
Professional Fees 12,576 7.0 23,333 6.8 18,645 7.2
Authority Fees 2,001 1.1 3,423 1.0 2,276 0.9
Borrowing Costs 5,718 3.2 13,069 3.9 11,942 4.6
Others 191 0.1 2,349 0.7 1,311 0.5
Total 180,019 100.0 342,316 100.0 257,627 100.0
A breakdown by projects is as follows:
Audited
Project FY2014 FY2015 FY2016
RM’000 RM’000 RM’000
Hatten City Phase 1 146,228 224,940 123,757
Hatten City Phase 2 33,667 77,011 90,458
Vedro by the River 124 37,075 33,608
Harbour City – 3,290 9,804
Total 180,019 342,316 257,627
Cost of sales comprises all costs that are directly attributable to development activities.
Development expenses are recognised in the income statement by using the percentage
of completion method. The percentage of completion is determined by the proportion of
property development costs incurred for work performed to date to the estimated total
property development costs.
The cost of sales varies for each project due mainly to the features, complexity and the
land cost. For the Period Under Review, cost of sales ranges from 62.5% to 78.5% of
revenue. A major portion of cost of sales is construction costs which typically amount to
approximately 70.0% of total cost of sales. Land costs are primarily amounts payable to
land owners. The amount of land cost for each project will mainly depend on the location
of the land and the form of payment which may be an upfront payment or in the form of
completed units to the land owner. Professional fees include those paid to architects,
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consulting engineers, designers and surveyors. Authority fees include statutory and
development plan fees paid to the relevant government authorities. Borrowing costs are in
respect of interest expenses incurred for project financing obtained from financial
institutions. Such borrowing costs are capitalised until the completion of the projects.
The Target Group’s cost of sales is affected by, among other things, the following key
factors:
(a) Ability to secure main contractors with the requisite skills at competitive cost;
(b) Ability to manage projects and avoid cost overrun;
(c) Fluctuations in the prices of raw materials which are in turn dependent on the
demand and supply conditions for the raw materials;
(d) Major changes in government rules and regulations; and
(e) Availability of financing and the interest rates on borrowings.
Gross profit and gross profit margin
The following tables provide a breakdown of the Target Group’s gross profit and gross
profit margin for the Period Under Review:
Audited
Gross Profit by
projects FY2014 FY2015 FY2016
RM’000 % RM’000 % RM’000 %
Hatten City Phase 1 56,881 87.3 76,651 81.6 116,498 75.3
Hatten City Phase 2 8,199 12.6 5,515 5.9 25,633 16.6
Vedro by the River 60 0.1 10,372 11.0 8,389 5.4
Harbour City – – 1,410 1.5 4,200 2.7
Total 65,140 100.0% 93,948 100.0% 154,720 100.0%
Audited
Gross Profit Margin by projects FY2014 FY2015 FY2016
Hatten City Phase 1 28.0% 25.4% 48.5%
Hatten City Phase 2 19.6% 6.7% 22.1%
Vedro by the River 32.6% 21.9% 20.0%
Harbour City – 30.0% 30.0%
Overall 26.6% 21.5% 37.5%
The Target Group’s overall gross profit margins were approximately 26.6%, 21.5% and
37.5% in FY2014, FY2015 and FY2016 respectively.
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Other income
Other income mainly comprises service fee income, rental income, forfeiture income,
realised and unrealised gain on foreign exchange, interest income, administrative fees
and other related property development sales income.
For the Period Under Review, other income amounted to approximately RM4.4 million,
RM6.2 million and RM12.2 million for FY2014, FY2015 and FY2016 respectively.
Selling and distribution expenses
Selling and distribution expenses mainly comprise advertising and promotion expenses,
launch event expenses, television commercial expenses, sales commissions, sales offices
rental expenses and maintenance costs, and real estate properties research cost.
For the Period Under Review, selling and distribution expenses amounted to
approximately RM17.7 million, RM25.5 million and RM22.4 million and accounted for
approximately 7.2%, 5.8% and 5.4% of the Target Group’s total revenue for FY2014,
FY2015 and FY2016 respectively.
General and administrative expenses
General and administrative expenses comprise expenses such as salaries and staff-
related expenses, utilities, depreciation charges, rental expenses, repair and
maintenance, telecommunication expenses, audit and professional fees, upkeep of office,
insurance expenses and other general office overhead expenses.
For the Period Under Review, general and administrative expenses amounted to
approximately RM23.8 million, RM37.0 million and RM47.2 million and accounted for
approximately 9.7%, 8.5% and 11.4% of the Target Group’s total revenue for FY2014,
FY2015 and FY2016 respectively.
Finance costs
Finance costs comprise mainly interest expense relating to loans and borrowings that
were not capitalised as cost of development properties. Interest expenses relating to
finance leases are reflected as finance costs. Interest costs from loans and borrowings
incurred for development projects are capitalised to cost of property development before
the project is completed. After the completion of the project, all interest costs thereon will
be reflected as finance costs.
For the Period Under Review, finance costs amounted to approximately RM0.3 million,
RM0.7 million and RM0.9 million and accounted for approximately 0.1% to 0.2% of the
Target Group’s total revenue for FY2014, FY2015 and FY2016.
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Income tax expense
Income tax expense includes current tax expense and deferred tax expense. Current tax
expense is the expected tax payable on the chargeable income. Deferred tax is a result
of temporary differences between carrying amounts of assets and liabilities for financial
accounting purposes and tax purposes. Deferred tax also includes the recognition of
unutilised tax losses and other tax credits.
The Target Group is subjected to prevailing tax regulations of Malaysia, in which the
applicable corporate income tax rate was 25% for FY2014 and FY2015 and 24% for
FY2016.
The Target Group’s effective and statutory tax rates for the Period Under Review are as
follows:
Audited
FY2014 FY2015 FY2016
RM’000 RM’000 RM’000
Profit before tax 27,793 37,054 96,441
Income tax expense 8,298 11,274 27,853
– Current income tax 17,384 26,349 39,192
– Deferred income tax (9,086) (15,075) (11,339)
Malaysia’s statutory tax rate 25% 25% 24%
Effective tax rate 30% 30% 29%
The higher effective tax rates for both FY2014 and FY2015 were mainly due to
non-deductible expenses. For FY2016, the effective tax rate was marginally lower as
compared to FY2014 and FY2015 because of the reduction in corporate income tax rate.
It was higher than the statutory tax rate as a result of under provision of tax expense in
respect of prior years.
Please refer to the section entitled “Exchange Rates, Exchange Controls and Taxation” of
this Circular for further details.
Inflation
The Target Group’s financial performance during the Period Under Review was not
materially affected by inflation.
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20.2. Review of Past Performance
FY2014 VS 2015
Revenue
Revenue increased by approximately RM191.1 million or 77.9% from approximately
RM245.2 million in FY2014 to approximately RM436.3 million in FY2015. The increase in
revenue was mainly due to a higher stage of completion recognised from Hatten City
Phase 1, Hatten City Phase 2 and Vedro by the River in FY2015. All projects also recorded
new sales in the year.
Revenue from Hatten City Phase 1 increased by approximately RM98.5 million in FY2015
mainly due to a higher percentage of completion recognised from 44.1% in FY2014 to
76.0% in FY2015. In addition, 64 more retail and residential units were sold in FY2015.
Revenue from Hatten City Phase 2 increased by approximately RM40.7 million in FY2015
mainly due to a higher percentage of completion recognised from 10.0% in FY2014 to
24.7% in FY2015. In addition, 15 more units were sold in FY2015.
Revenue from Vedro by the River increased substantially from approximately
RM0.2 million in FY2014 to approximately RM47.4 million in FY2015. There was a surge
in construction activity in FY2015 with percentage of completion reaching 43.5%
compared to 0.2% in FY2014. Furthermore, 128 retail units were sold in FY2015.
Harbour City started its initial launch in January 2015 and contributed approximately
RM4.7 million to the Target Group’s revenue in FY2015.
Cost of sales
The Target Group’s cost of sales increased by approximately RM162.3 million or 90.2%
from approximately RM180.0 million in FY2014 to approximately RM342.3 million in
FY2015 which was in line with the increase in revenue for the respective projects. The
Target Group’s cost of sales was accounted for using the percentage of completion
method for each individual project.
Gross profit and gross profit margin
The Target Group’s gross profit increased by approximately RM28.8 million, or 44.2% from
approximately RM65.1 million in FY2014 to approximately RM93.9 million in FY2015.
Hatten City Phase 1 was the main contributor to the Target Group’s gross profit in FY2014
and FY2015. As the stage of completion recognised rose from 44.1% in FY2014 to 76.0%
in FY2015, its gross profit increased by approximately RM19.8 million from approximately
RM56.9 million in FY2014 to approximately RM76.7 million in FY2015. In Hatten City
Phase 1, the lower gross profit margin in FY2015 was due to revisions made to gross
development costs.
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Gross profit attributable to Hatten City Phase 2 amounted to approximately RM5.5 million
in FY2015 compared to approximately RM8.2 million in FY2014 due to increase in cost of
sales attributable to soil stabilisation work which resulted in a lower gross profit margin in
FY2015. In terms of gross profit contribution, Hatten City Phase 2 contributed 12.6% and
5.9% to the Target Group’s total gross profit in FY2014 and FY2015 respectively.
Gross profit attributable to Vedro by the River increased from approximately RM0.1 million
in FY2014 to approximately RM10.4 million in FY2015 due to the increase in revenue in
FY2015. Gross profit margin was 21.9%. In FY2015, Vedro by the River contributed 11.0%
to total gross profit. For Vedro by the River, the lower gross profit margin in FY2015 was
due to costs incurred due to the soil stabilisation works carried out.
As Harbour City was only launched in January 2015, there was no gross profit in the
previous year. Gross profit attributable to Harbour City was approximately RM1.4 million
in FY2015.
Overall gross profit margin decreased from 26.6% in FY2014 to 21.5% in FY2015 due to
lower gross profit margin from Hatten City Phase 1, Hatten City Phase 2 and Vedro by the
River. This was partially offset by the higher gross profit margin attributable to Harbour
City.
Other income
Other income increased by approximately RM1.8 million or 41.3% from approximately
RM4.4 million in FY2014 to approximately RM6.2 million in FY2015. This was mainly due
to higher forfeiture income and unrealised gain on foreign exchange.
In FY2014, out of 37,113 square feet, representing the aggregate net saleable area of the
forfeited units for FY2014, 30,252 square feet was subsequently resold as at
31 October 2016. This represents 81.5% of the aggregate net saleable area of the
forfeited units for FY2014. In FY2015, out of 19,687 square feet, representing the
aggregate net saleable area of the forfeited units for FY2015, 7,374 square feet was
subsequently resold as at 31 October 2016. This represents 37.5% of the aggregate net
saleable area of the forfeited units for FY2015.
Selling and distribution expenses
Selling and distribution expenses increased by approximately RM7.8 million or 44.1% from
approximately RM17.7 million in FY2014 to approximately RM25.5 million in FY2015. This
was mainly due to more sales activities as reflected in the increase in revenue in FY2015.
General and administrative expenses
General and administrative expenses amounted to approximately RM37.0 million in
FY2015 compared to approximately RM23.8 million in FY2014. This was mainly due to
higher salary and related expenses and depreciation charges as a result of higher
business activity.
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Finance costs
In FY2015, finance costs amounted to approximately RM0.7 million. This was higher than
the finance costs incurred in FY2014 because of additional finance lease secured.
Profit before tax
As a result of the foregoing, the Target Group’s profit before tax increased by
approximately RM9.3 million from approximately RM27.8 million in FY2014 to
approximately RM37.1 million in FY2015.
FY2015 VS 2016
Revenue
Revenue decreased by approximately RM23.9 million or 5.5% from approximately
RM436.3 million in FY2015 to approximately RM412.3 million in FY2016. Revenue
attributable to Hatten City Phase 1 decreased from approximately RM301.6 million in
FY2015 to approximately RM240.3 million due to the completion of the project in FY2016.
Revenue from Vedro by the River also decreased from approximately RM47.4 million in
FY2015 to approximately RM42.0 million in FY2016 due to a lower increase in stage of
completion recognised in FY2016. This was offset by the increase in revenue attributable
to Hatten City Phase 2 from approximately RM82.5 million in FY2015 to approximately
RM116.1 million in FY2016 due to higher increase in stage of completion recognised in
FY2016. The percentage of completion increased substantially and reached 58.1% in
FY2016 compared to 24.7% in FY2015. Revenue attributable to Harbour City, which was
only launched in the second half of FY2015, also increased from approximately RM4.7
million in FY2015 to approximately RM14.0 million in FY2016.
Cost of sales
The Target Group’s cost of sales decreased by approximately RM84.7 million or 24.7%
from approximately RM342.3 million in FY2015 to approximately RM257.6 million in
FY2016 which was in line with the decrease in revenue. The Target Group’s cost of sales
was accounted for using the percentage of completion method. The decrease in cost of
sales was mainly due to adjustments made to account for the lower finalised cost items
incurred on completion of Hatten City Phase 1 in FY2016.
Gross profit and gross profit margin
The Target Group’s gross profit increased by approximately RM60.8 million, or 64.7% from
approximately RM93.9 million in FY2015 to approximately RM154.7 million in FY2016.
Gross profit attributable to Hatten City Phase 1, which was completed in FY2016,
amounted to approximately RM116.5 million in the year and resulted in the project
contributing 75.3% to the Target Group’s gross profit. Hatten City Phase 1 achieved a
higher gross profit margin of 48.5% in FY2016 due to adjustment made to account for the
lower finalised cost items incurred on completion of Hatten City Phase 1 in FY2016.
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Gross profit attributable to Hatten City Phase 2 was approximately RM25.6 million in
FY2016 compared to approximately RM5.5 million in FY2015. The increase was mainly
due to the downward revision of cost estimates of approximately RM19.8 million in FY2016
due to the write-back of provision for foreseeable losses. Such provision for foreseeable
losses was made and charged to the profit and loss account in FY2015, which arose from
budgeted gross development costs exceeding budgeted gross development value. Hatten
City Phase 2 contributed 16.6% to the Target Group’s gross profit in FY2016 compared to
5.9% in FY2015.
In line with the reduction in revenue in FY2016, gross profit attributable to Vedro by the
River decreased to approximately RM8.4 million compared to approximately RM10.4
million in FY2015. Vedro by the River contributed 5.4% to the Target Group’s gross profit
in FY2016.
Gross profit attributable to Harbour City increased from approximately RM1.4 million in
FY2015 to approximately RM4.2 million in FY2016.
Overall gross profit margin increased from 21.5% in FY2015 to 37.5% in FY2016 mainly
due to Hatten City Phase 1 which achieved a higher gross margin compared to the other
projects due to adjustment made to account for the lower finalised cost items incurred on
completion of Hatten City Phase 1 in FY2016.
Other income
Other income increased by approximately RM5.9 million or 94.6% from approximately
RM6.2 million in FY2015 to approximately RM12.2 million in FY2016. This was mainly due
to higher interest income from late payment interest charged to purchasers and service fee
income.
Selling and distribution expenses
Selling and distribution expenses decreased from approximately RM25.5 million in
FY2015 to approximately RM22.4 million in FY2016. This was mainly due to the
completion of Hatten City Phase 1 during the year.
General and administrative expenses
General and administrative expenses increased from approximately RM37.0 million in
FY2015 to approximately RM47.2 million in FY2016. This was mainly due to the expansion
of the Target Group activities which resulted in the increase in manpower from 67 in
FY2015 to 82 in FY2016. This resulted in higher salaries and related manpower expenses
in FY2016.
Finance costs
Finance costs increased from approximately RM0.7 million in FY2015 to approximately
RM0.9 million in FY2016. This was mainly attributable to additional finance leases
secured.
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Profit before tax
As a result of the foregoing, the Target Group’s profit before tax increased by
approximately RM59.3 million from approximately RM37.1 million in FY2015 to
approximately RM96.4 million in FY2016.
20.3. Review of Past Financial Position
Current assets
As at 30 June 2016
The Target Group’s current assets comprised properties under development, trade and
other receivables, cash and bank balances and other current assets. As at 30 June 2016,
the Target Group’s current assets amounted to approximately RM817.9 million or 87.6%
of the Target Group’s total assets.
The largest component of the Target Group’s current assets was properties under
development which amounted to approximately RM476.3 million or 58.2% of the Target
Group’s total current assets. Properties under development include the cost of land,
construction, professional fees, interest and related development costs.
A summary of the properties under development is as follows:
RM’000 FY2016
Hatten City Phase 1 149,891
Hatten City Phase 2 225,671
Vedro by the River 40,206
Harbour City 60,582
Total 476,350
Trade and other receivables amounted to approximately RM212.5 million or 26.0% of the
Target Group’s current assets. Trade receivables were approximately RM203.1 million
while other receivables and deposits which include prepayments, GST claimable and
sundry receivables were approximately RM9.4 million. As at the Latest Practicable Date,
approximately RM108.5 million of trade receivables remained outstanding and has not
been impaired as the management believes the amount is still recoverable.
Cash and cash equivalents amounted to approximately RM81.9 million and 10.0% of the
Target Group’s current assets of which approximately RM32.8 million includes cash in a
housing development account jointly managed by the financier, United Overseas Bank
(Malaysia) Bhd. and the relevant developers (FRSB and FVSB) of approximately RM3.0
million and project accounts managed by the financiers, United Overseas Bank (Malaysia)
Bhd., Bank Kerjasama Rakyat Malaysia Berhad and Malaysia Building Society Berhad, of
approximately RM29.8 million. Other assets which include capitalised costs of securing
contracts being amortisation of sales commission based on percentage of completion
amounted to approximately RM47.1 million or 5.8% of the Target Group’s current assets.
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Non-current assets
As at 30 June 2016
The Target Group non-current assets comprised of property, plant and equipment and
deferred tax assets. As at 30 June 2016, the Target Group’s non-current assets amounted
to approximately RM115.4 million or 12.4% of the Target Group’s total assets.
The largest component of the Target Group’s non-current assets was property, plant and
equipment which amounted to approximately RM64.1 million or 55.5% of the Target
Group’s non-current assets. This was mainly due to additions to construction-in-progress
of car parks. The other component of the Target Group’s non-current assets was deferred
tax assets which amounted to approximately RM51.3 million or 44.5% of the Target
Group’s non-current assets.
Non-current liabilities
As at 30 June 2016
The Target Group’s non-current liabilities comprised loans and borrowings, finance lease
liabilities and deferred revenue. As at 30 June 2016, the Target Group’s non-current
liabilities amounted to approximately RM371.9 million or 42.6% of the Target Group’s total
liabilities.
The largest component of the Target Group’s non-current liabilities was loans and
borrowings which amounted to approximately RM198.6 million or 53.4% of the Target
Group’s non-current liabilities. The loans and borrowings were in respect of development
project financing. The other components in the Target Group’s non-current liabilities were
deferred revenue in relation to the rental yield of the sale and leaseback arrangements
which amounted to approximately RM173.3 million or 46.6% of the Target Group’s
non-current liabilities. The rental yield is accounted for by the Target Group upfront,
according to the percentage of completion of the relevant project and is reflected in the
Target Group’s financials as “deferred revenue” under other liabilities.
Current liabilities
As at 30 June 2016
The Target Group’s current liabilities comprised trade and other payables, loans and
borrowings, income tax payable, amount due to shareholders and other current liabilities.
As at 30 June 2016, the Target Group’s current liabilities amounted to approximately
RM500.8 million or 57.4% of the Target Group’s total liabilities.
The largest component of the Target Group’s current liabilities was trade and other
payables which amounted to approximately RM289.0 million or 57.7% of the Target
Group’s current liabilities. Trade payables which amounted to approximately RM209.7
million mainly comprises of progress billings and retention sums due to suppliers of the
Target Group’s property development projects of approximately RM145.9 million and
RM55.7 million respectively. Other payables of approximately RM79.3 million were mainly
provision for developer interest bearing schemes of approximately RM27.1 million,
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deposits received of approximately RM8.7 million, accruals of approximately RM8.4
million and other payables which comprised advance payments by purchasers amounting
to approximately RM14.2 million and other provisions relating to consultant and
professional services amounting to approximately RM21.0 million.
Other current liabilities which comprised mainly of provision for landowner’s entitlement in
connection with the land acquisition agreements and deferred revenue in relation to the
rental yield of the sale and leaseback arrangements amounted to approximately RM105.5
million or 21.1% of the Target Group’s current liabilities.
Loans and borrowings which amounted to approximately RM51.9 million or 10.4% of the
Target Group’s current liabilities were mainly in respect of development project financing.
Income tax payables amounted to approximately RM53.4 million or 10.7% of the Target
Group’s current liabilities.
Shareholders’ equity
As at 30 June 2016
The Target Group’s shareholders’ equity of approximately RM60.6 million comprised share
capital of approximately RM38.2 million, retained earnings of approximately
RM22.5 million and a negative translation reserve of approximately RM0.1 million.
20.4. Liquidity and Capital Resources
The following table sets out a summary of the Target Group’s net cash flow for FY2014,
FY2015 and FY2016:
Audited
RM’000 FY2014 FY2015 FY2016
Net cash generated from/(used in)
operating activities (52,318) (12,429) 26,672
Net cash used in investing activities (14,881) (10,682) (29,026)
Net cash used in financing activities 60,611 28,838 60,168
Net increase/(decrease) in cash and
cash equivalents (6,588) 5,727 57,814
Cash and cash equivalents at beginning
of financial period 24,977 18,389 24,116
Cash and cash equivalents at end of
financial period 18,389 24,116 81,930
Please refer to the Section 20.5 entitled “Capitalisation and Indebtedness” of this letter for
further details of the Target Group’s cash and cash equivalents and level of borrowings.
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FY2014
Net cash used in operating activities
In FY2014, the Target Group recorded net cash outflow from operating activities of
approximately RM52.3 million, which comprised operating cash inflows before changes in
working capital of approximately RM29.8 million, net working capital outflows of
approximately RM79.1 million, net interest paid of approximately RM0.1 million and
income tax payment of approximately RM2.9 million.
The net working capital outflows were mainly due to (i) an increase in amount due from
related parties of approximately RM63.4 million mainly pertains to advances to the Hatten
Group; (ii) an increase in properties under development of approximately RM20.5 million;
(iii) an increase in other current assets of approximately RM15.2 million; and (iv) a
decrease in other liabilities of approximately RM8.9 million. This was partially offset by
(i) an increase in amount due to shareholders of approximately RM9.7 million; (ii) a
decrease in trade and other receivables of approximately RM9.6 million; and (iii) an
increase in trade and other payables of approximately RM9.5 million.
Net cash used in investing activities
In FY2014, the Target Group’s net cash used in investing activities amounted to
approximately RM14.9 million. This was mainly due to the acquisition of property, plant
and equipment of approximately RM19.3 million which was partially offset by the proceeds
from disposal of property, plant and equipment of approximately RM4.4 million.
Net cash generated from financing activities
In FY2014, the Target Group recorded net cash generated from financing activities of
approximately RM60.6 million. This was mainly due to (i) proceeds from loans and
borrowings of approximately RM57.4 million; and (ii) proceeds from issuance of shares of
approximately RM3.2 million.
As at 30 June 2014, the Target Group’s cash and cash equivalents amounted to
approximately RM18.4 million.
FY2015
Net cash used in operating activities
In FY2015, the Target Group recorded net cash outflow from operating activities of
approximately RM12.4 million, which comprised operating cash inflows before changes in
working capital of approximately RM39.6 million, net working capital outflows of
approximately RM41.2 million, net interest paid of approximately RM0.2 million and
income tax payment of approximately RM10.7 million.
The net working capital outflows were mainly due to (i) an increase in properties under
development of approximately RM97.9 million; (ii) an increase in trade and other
receivables of approximately RM97.1 million; (iii) an increase in amount due from related
parties of approximately RM67.9 million mainly pertains to advances to the Hatten Group;
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and (iv) an increase in other current assets of approximately RM11.9 million. This was
partially offset by (i) an increase in trade and other payables of approximately
RM233.3 million due to higher construction activity; and (ii) an increase in other liabilities
of approximately RM0.4 million.
Net cash used in investing activities
In FY2015, the Target Group’s net cash used in investing activities amounted to
approximately RM10.7 million. This was mainly due to the acquisition of property, plant
and equipment of approximately RM19.4 million which was partially offset by the proceeds
from disposal of property, plant and equipment of approximately RM8.7 million.
Net cash generated from financing activities
In FY2015, the Target Group recorded net cash generated from financing activities of
approximately RM28.8 million. This was mainly due to (i) proceeds from issuance of
shares of approximately RM25.0 million; and (ii) proceeds from loans and borrowings of
approximately RM4.2 million. This was partially offset by dividend paid of approximately
RM0.3 million.
As at 30 June 2015, the Target Group’s cash and cash equivalents amounted to
approximately RM24.1 million.
FY2016
Net cash generated from operating activities
In FY2016, the Target Group recorded net cash inflow from operating activities of
approximately RM26.7 million, which comprised operating cash inflows before changes in
working capital of approximately RM95.8 million, net working capital outflows of
approximately RM54.9 million, net interest received of approximately RM3.3 million and
income tax payment of approximately RM17.5 million.
The net working capital outflows were mainly due to (i) a decrease in trade and other
payables of approximately RM175.3 million due to the Set-Off Agreement; and (ii) an
increase in trade and other receivables of approximately RM70.1 million mainly due to the
retention of stakeholders’ monies by the solicitors after the completion of Hatten City
Phase 1. This was partially offset by a decrease in amounts due from related parties of
approximately RM207.7 million due to the Set-Off Agreement. The net cash generated
from operating activities and net assets of the Target Group for FY2016 shall remain
unchanged with or without the Set-Off Agreement. Please see Section 24.4.1(f) of this
letter entitled “Set-Off Agreement” for further details.
Net cash used in investing activities
In FY2016, the Target Group’s net cash used in investing activities amounted to
approximately RM29.0 million. This was mainly due to the acquisition of property, plant
and equipment of approximately RM36.3 million which was partially offset the proceeds
from disposal of property, plant and equipment of approximately RM7.2 million.
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Net cash generated from financing activities
In FY2016, the Target Group recorded net cash generated from financing activities of
approximately RM60.2 million. This was mainly due to proceeds from loans and
borrowings of approximately RM111.7 million which was partially offset by dividend
payment of approximately RM51.5 million.
As at 30 June 2016, the Target Group’s cash and cash equivalents amounted to
approximately RM81.9 million.
20.5. Capitalisation and Indebtedness
The following table shows the Target Group’s cash and bank balances and capitalisation
and indebtedness:
RM’000
As at
30 June 2016
As at
31 October 2016
Cash and bank balances 81,930 62,587
Indebtedness
Current
Loans and borrowings
– Secured and non-guaranteed 51,899 51,899
– Secured and non-guaranteed – –
– Unsecured and guaranteed – –
– Unsecured and non-guaranteed – –
Non-Current
Loans and borrowings
– Secured and guaranteed 198,573 234,277
– Secured and non-guaranteed – –
– Unsecured and guaranteed – –
– Unsecured and non-guaranteed – –
Total indebtedness 250,472 286,176
Shareholders’ equity 60,620 74,449
Total capitalisation and indebtedness 311,092 360,625
Save as disclosed above, there has been no material change in the Target Group’s
capitalisation and indebtedness from 30 June 2016 up to 31 October 2016.
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20.6. Banking Facilities
As at 30 June 2016, the Target Group had total banking facilities of approximately
RM486.0 million, of which approximately RM299.2 million had been utilised. Brief
particulars of the Target Group’s banking facilities (excluding any hire-purchase
agreements) as at 31 October 2016 are as follows:
Name of bank
Nature of
facilities/
purpose
Total
amount
available
RM’000
Utilised
RM’000
Unutilised
RM’000
Maturity
Profile Interest rate %
United Overseas Bank
(Malaysia) Bhd
Construction 120,000 29,204 90,796 27 Feb
2020
6.85%
Malaysia Building
Society Berhad
Construction 258,500 234,987 23,513 10 Feb
2019
As this is an
Islamic loan,
the term
interest
payable is not
applicable(1)
United Overseas Bank
(Malaysia) Bhd
Construction 55,000 55,000 – 31 Oct
2018
6.85%
Total 433,500 319,191 114,309
Note:
(1) Instead, the ceiling profit rate and the effective profit rate are as follows:
(a) ceiling profit rate – 15% per annum, where in any case the effective profit rate will not be increased
to exceed the ceiling profit rate in any circumstances save and except in a situation where penalty
is charged. The Murabahah profit shall be an amount equivalent to the ceiling profit rate to be
calculated on the outstanding Purchase Price under each utilisation, on the basis of a 365 day year;
and
(b) effective profit rate – Malaysian Building Society Berhad’s Islamic effective cost of fund of 6.85% per
annum plus 1.50% per annum. The effective Murabahah profit shall be an amount equivalent to the
effective profit rate to be calculated on the outstanding Purchase Price applicable for the entire
duration of the tenure, on the basis of a 365 day year (both start and end date inclusive).
For the purposes of this Section only, “Purchase Price” means the amount equivalent to the utilisation
amount under the purchase requisition, the aggregate of which shall not exceed RM258,500,000 at any
point in time throughout the period that the facilities remain available to FVSB.
As at 30 June 2016, the Target Group has two (2) outstanding banker’s guarantee as
follows:
Name of bank
Nature of facilities/
purpose
Total
amount
guaranteed
RM’000
Commission
%
Malayan
Banking Berhad
Banker’s Guarantee 6,500 0.05% per month
RHB Bank Berhad Banker’s Guarantee 220 1.5% per year
Total 6,720
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Based on the knowledge of the Proposed New Directors, the Target Group is not in breach
of any of the terms and conditions or covenants associated with any credit arrangement
or bank loan which could materially affect the Target Group’s financial position and results
of business operations or the investment of its shareholders. The banking facilities
provided by United Overseas Bank (Malaysia) Bhd and Malaysia Building Society Berhad
utilised by the Target Group and the banker’s guarantees provided by Malayan Banking
Berhad and RHB Bank Berhad contain provisions restricting the change of control of the
relevant Malaysian Subsidiary. Consents by United Overseas Bank (Malaysia) Bhd,
Malaysia Building Society Berhad, Malayan Banking Berhad and RHB Bank Berhad have
been provided for the change in shareholding of the relevant Malaysian Subsidiary. No
share pledging arrangements in relation to the shares held by the Tan Brothers in the
Target Group has been entered into. The Tan Brothers have also undertaken to notify the
Company in the event that they are aware of any share pledging arrangements relating to
their shareholding interests in the Enlarged Group.
As at 31 October 2016, the aggregate value outstanding under hire-purchase agreements
entered into by the Target Group is approximately RM7.9 million.
20.7. Working Capital
During the Period Under Review and for the period from 1 July 2016 up to the Latest
Practicable Date, the business operations of the Target Group has been funded by a
combination of internal and external sources of funds. Internal sources of funds comprise
mainly of cash generated from operating activities and cash and bank balances while
external resources comprise mainly of bank loans and capital contribution from
Shareholders.
As at 31 October 2016, the Target Group has cash and cash equivalents of approximately
RM62.6 million, net current assets of approximately RM354.0 million and banking facilities
of approximately RM433.5 million of which approximately RM114.3 million has not been
utilised. Please refer to the Section entitled “Capitalisation and Indebtedness” of this letter
for details of the latest available banking facilities, cash and cash equivalent and level of
borrowings of the Target Group.
The Proposed New Directors are of the reasonable opinion that, after having made due
and careful enquiry and after taking into account the cash flows generated from the
operations, the available banking facilities and the existing cash and cash equivalents, the
working capital and resources available to the Target Group as at the date of lodgement
of this Circular is sufficient for its present requirements (including capital commitments)
and for at least the next twelve (12) months after Completion. In addition to the above,
based on the status of the existing property development projects and the financing
facilities available for the property development projects, the Proposed New Directors are
of the reasonable opinion that the Target Group will have sufficient fund flows to complete
the construction of the existing three (3) property development projects.
The Financial Adviser is of the reasonable opinion that, after having made due and careful
enquiry and after taking into account the cash flows generated from the operations, the
available banking facilities and the existing cash and cash equivalents, the working capital
and resources available to the Target Group as at the date of lodgement of this Circular
is sufficient for its present requirements (including capital commitments) and for at least
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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the next twelve (12) months after Completion. In addition to the above, based on the status
of the existing property development projects and the financing facilities available for the
property development projects, the Financial Adviser is of the reasonable opinion that the
Target Group will have sufficient fund flows to complete the construction of the existing
three (3) property development projects.
20.8. Material Capital Expenditures and Divestments
Capital Expenditures
Capital expenditures made by the Target Group for FY2014, FY2015, FY2016 and for the
period from 1 July 2016 up to the Latest Practicable Date were as follows:
RM’000 Audited Unaudited
FY2014 FY2015 FY2016
1 July2016 up tothe Latest
PracticableDate
Motor Vehicle 14,679 11,147 3,100 2,320
Construction-in-progress 3,827 7,180 32,912 10,006
Office Equipment 450 485 18 9
Renovation 14 417 133 56
Others 338 135 96 62
Total 19,308 19,364 36,259 12,453
The above capital expenditures were financed by a combination of funds generated from
bank borrowings, finance leases and shareholders’ equity. All capital expenditures are
made in Malaysia and Singapore.
Capital Divestments
The divestments made by the Target Group for FY2014, FY2015, FY2016 and for the
period from 1 July 2016 up to the Latest Practicable Date were as follows:
RM’000 Audited Unaudited
FY2014 FY2015 FY2016
1 July2016 up tothe Latest
PracticableDate
Motor Vehicle 4,868 4,093 10,213 3,186
Construction-in-progress – 4,915 – –
Office Equipment – – 1 –
Renovation – – 356 –
Others – 40 164 –
Total 4,868 9,048 10,734 3,186
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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20.9. Capital Commitments
Capital expenditures contracted for as at the Latest Practicable Date but not recognised
in the financial statements in respect of the properties under development and
construction-in-progress in relation to the properties owned by the developer are as
follows:
RM’000
Audited as at
30 June 2016
As at the
Latest
Practicable
Date
Approved and contracted for 78,994 89,819
Less: Amount capitalised to capital work-in-progress (40,092) (64,790)
Less: Deposits paid – –
Total 38,902 25,029
These capital commitments are expected to be financed by cash generated from
operations and borrowings.
20.10. Operating Lease Commitments
As at the Latest Practicable Date, the Target Group has operating lease commitments as
follows:
(a) Operating lease commitments – as lessee
Future minimum rental payable under non-cancellable operating leases are as
follows:
RM’000
Audited as at
30 June 2016
As at the
Latest
Practicable
Date
Due within one (1) financial year 42,123 41,974
Due between one (1) and five (5)
financial years 198,202 95,002
Due after five financial years 106,007 15,593
Total 346,332 152,569
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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(b) Operating lease commitments – as lessor
The Target Group has entered into commercial leases on its equipment and part of
its property. These non-cancellable leases have remaining lease terms of between
two (2) and eight (8) years. Certain leases include a clause to enable upward revision
of the rental charge on an annual basis based on prevailing market conditions. Future
minimum rental receivable under non-cancellable operating leases are as follows:
RM’000
Audited as at
30 June 2016
As at the
Latest
Practicable
Date
Due within one (1) financial year 897 897
Due between one (1) and five (5)
financial years 1,375 964
Due after five (5) financial years – –
Total 2,272 1,861
Save as disclosed above and in the section entitled “Prospects, Business Strategies and
Future Plans” of this letter, the Target Group does not have other material plans on capital
expenditures, divestments and commitments as at the Latest Practicable Date.
20.11. Foreign Exchange Exposure
The Target Group’s business operations are mostly carried out in Malaysia and the Target
Group’s reporting currency is in Ringgit. During the Period Under Review, the Target
Group has exposure to foreign exchange risk as a result of transactions denominated in
a currency other than the functional currency of the Target Group.
The proportions of the Target Group’s revenue, cost of sales and other expenses
denominated in various foreign currencies for FY2014, FY2015 and FY2016 are as
follows:
Percentage of revenue
denominated in Audited
FY2014 FY2015 FY2016
RM 97.6% 97.0% 95.0%
S$ 2.4% 3.0% 5.0%
Total 100.0% 100.0% 100.0%
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
A-91
Percentage of cost of
sales denominated in Audited
FY2014 FY2015 FY2016
RM 100.0% 100.0% 100.0%
S$ – – –
Total 100.0% 100.0% 100.0%
Percentage of other
expenses denominated in Audited
FY2014 FY2015 FY2016
RM 84.7% 86.4% 84.2%
S$ 15.3% 13.6% 15.8%
Total 100.0% 100.0% 100.0%
To the extent that the Target Group’s revenue, cost of sales and expenses are not naturally
matched in the same currency and to the extent that there are timing differences between
invoicing and collection/payment, the Target Group may be exposed to adverse
fluctuations of the various currencies against the RM, which may adversely affect the
Target Group’s earnings.
To the extent that the Target Group may enter into transactions in currencies other than
RM in the future, the Target Group’s financial results may be subject to fluctuations
between such foreign currencies and the RM. Transactions in currencies other than the
functional currency during the period, if any, will be translated into the functional currency
at exchange rates in effect at the time of the transactions. Monetary assets and liabilities
denominated in currencies other than the functional currency at the balance sheet date,
if any, will be translated into the functional currency in effect at the balance sheet date.
Exchange gains and losses are dealt with in profit or loss of the Target Group.
The Target Group’s net foreign exchange exposure for FY2014, FY2015 and FY2016 are
as follows:
RM’000 Audited
FY2014 FY2015 FY2016
Net foreign exchange gain 171 1,101 1,297
As a percentage of revenue 0.1% 0.3% 0.3%
As a percentage of profit before tax 0.6% 3.0% 1.3%
Currently, the Target Group does not have any hedging policy with respect to foreign
exchange exposure and the Target Group did not use any financial instruments for
hedging purposes during the Period Under Review. There is no outstanding financial
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
A-92
instrument as at the Latest Practicable Date. The Target Group will continue to monitor the
Target Group’s foreign exchange exposure and may employ hedging instruments to
manage the Target Group’s foreign exchange exposure should the need arise.
20.12. Changes in Accounting Policies
Except as disclosed below and reproduced in Appendix C of this Circular, there have been
no changes in the Target Group’s accounting policies since the incorporation of the Target.
The accounting policies adopted are consistent throughout the financial years presented
where the Target Group has adopted all new and revised standards which are effective for
each of the respective periods reported on.
When preparing the combined financial statements, the Target Group has also adopted
FRS 115 Revenue from Contracts with Customers resulting in a change in the revenue
recognition policy of the Target Group in relation to its contracts with customers. Please
refer to Note 2.6 of Appendix C to this Circular for the related accounting policy. The Target
Group has not early adopted any other standard, interpretation or amendment that has
been issued but is not yet effective.
With the exception of the adoption of FRS 115, the application of the new standards did
not have a material impact on the combined financial statements of the Group.
20.13. Dividends
The Target Group has declared, approved and paid dividends for FY2014, FY2015 and
FY2016 and for the period from 1 July 2016 up to the Latest Practicable Date as follows:
RM’000 FY2014 FY2015 FY2016
1 July
2016 up to
the Latest
Practicable
Date
Dividends paid – 318 51,494 –
20.14. Contingent Liabilities
Entities within the Target Group provided corporate guarantees of the whole debt to the
extent of the amounts of RM2,000,000 on 8 January 2014, RM1,000,000 on 20 August
2014 and RM4,000,000 on 9 January 2015 to third parties in consideration of supply of
goods and services to a main contractor, Montane, for the construction of the Target
Group’s development projects. As at the date of this circular, there are no outstanding
corporate guarantees to such third parties. Please refer to Section 24.4.1(a) of this letter
entitled “Corporate Guarantees given by the Target Group” for further details.
20.15. Dividend Policy
The Target Group has declared and paid dividends of approximately RM0.3 million and
approximately RM51.5 million in FY2015 and FY2016 respectively.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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The Target Group currently does not have a fixed dividend policy. Any declaration and
payment of dividends in the future will depend on, among other things, the Enlarged
Group’s operating results, financial conditions, cash flows, expected future earnings,
capital expenditure programme(s) and investment plans, the terms of the Enlarged
Group’s borrowing arrangements (if any) and other factors deemed relevant by the
Proposed New Directors. There can be no assurance that dividends will be paid in the
future or of the amount or timing of any dividends that will be paid in the future.
Any final dividend paid by the Enlarged Group must be approved by an ordinary resolution
of the Enlarged Group’s Shareholders at a general meeting and must not exceed the
amount recommended by the Enlarged Group’s board of Directors. The Enlarged Group’s
board of Directors may, without the approval of the Enlarged Group’s Shareholders, also
declare an interim dividend. All dividends will be paid in accordance with the Companies
Act.
Payment of cash dividends and distributions, if any, will be made in Singapore dollars to
CDP on behalf of Shareholders who maintain, either directly or through Depository Agents,
Securities Accounts with CDP.
Subject to the above, the Proposed New Directors intend to recommend and distribute
dividends of not less than 10.0% of the Enlarged Group’s net profits attributable to the
Enlarged Group’s Shareholders in FY2017 (“Proposed Dividend”). However, investors
should note that all the foregoing statements, including the statements on the Proposed
Dividend, are merely statements of the Enlarged Group’s present intention and do not
constitute a legally binding obligation on the part of the Company in respect of the
payment of any dividends, which may be subject to modification (including any reduction
or non-declaration thereof) in the Proposed New Directors’ sole and absolute discretion.
The amount of dividends declared and paid by the Target Group should not be taken to be
an indication of the dividends payable in the future by the Enlarged Group. No inference
should or can be made from any of the foregoing statements as to the Enlarged Group’s
actual profitability or the Enlarged Group’s ability to pay dividends in the future or any of
the periods discussed.
Please refer to the section of this Circular entitled “Exchange Rate, Exchange Controls
and Taxation” for information relating to Singapore taxes payable on dividends.
21. PROSPECTS, TRENDS AND FUTURE PLANS
The following discussion on the Target Group’s prospects, trends and strategy includes
forward looking statements that involve risks and uncertainties. Actual results could differ
materially from those that may be projected in these forward looking statements. Please
see the section entitled “Cautionary Note on Forward Looking Statements” of the Circular.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
A-94
21.1. Prospects
The Proposed New Directors are positive on the prospects of the Target Group for the
following reasons:
21.1.1. Economic growth
Based on the Industry Overview Report, the Malaysian economy grew by five
percent (5.0%) in 2015 and from 2011 to 2015 (with the exception of 2013), the
Malaysian GDP consistently recorded a growth of at least five percent (5.0%).
The Malacca GDP growth for 2015 was reported to be 5.5%.
21.1.2. Growing interest in the Malacca residential property market
Based on the Industry Overview Report, the outlook for the Malacca residential
market is positive and with the recognition of Malacca as a UNESCO World
Heritage Site in 2008, there is growing interest from foreign and local investors in
the residential property market.
The serviced apartment sector in Malacca is also becoming active. With
increasing median household income levels, Malacca home buyers are looking to
purchase better homes. Coupled with the upcoming KL-Singapore High Speed
Rail, which has a stop in Ayer Keroh, Malacca, the serviced apartment sector
should experience increased demand and an upward price trend.
21.1.3. Increased demand for hotels
Based on the Industry Overview Report, the outlook for Malacca’s tourism sector
is positive and Malacca saw a total of 15.74 million tourist arrivals in 2015. Tourist
receipts grew 39.5%, the highest annual growth since 2010, between 2014 and
2015. The increasing popularity of Malacca as a tourism destination would
inevitably lead to an increased demand for hotels and potentially more hospitality
developments.
21.1.4. Future development plans for Malacca
Based on the Industry Overview Report, the future development plans for
Malacca present increasing opportunities for growth, especially in the residential
property and hospitality sectors. The expansion of the Melaka International
Airport coupled with weekly scheduled flights to and from Guangdong, China to
be operated by China Southern Airlines may increase the number of Chinese
investors and tourists to Malacca.
Plans by the Malacca government in building the Melaka Gateway in the Straits
of Malacca and in particular the construction of the deep sea port will spur tourism
and investment, leading to an overall increase in demand for developed
properties.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
A-95
21.2. Trend Information
As at the Latest Practicable Date and barring any unforeseen circumstances, in relation
to FY2017, the Proposed New Directors observe the following trends based on the
operations of the Target Group which will affect the profitability of the Enlarged Group:
(a) The selling price of our new property development projects is expected to remain
stable subject to the market conditions in our industry and the general performance
of the local economy.
As and when we launch and sell additional property development projects, we will
recognise revenue as construction progresses.
(b) We expect construction costs to increase in connection with our property
development projects partly due to currency exchange rates. Both revenue and
construction costs are recognised using the percentage of completion method.
Please refer to Section 27 of this letter entitled “Risk Factors Relating to the Target
Group” for information on the risks associated with fluctuations in the costs of
construction materials, labour and equipment, and disruptions and delay in projects.
(c) We expect to incur corporate expenses as a listed company. Our staff cost is also
expected to increase due to an increased number of employees. Such increase is
due to the corporatisation of the Target Group and incurring fees which include the
listing expenses, directors’ and professionals’ fees, compliance expenses and
investor relation expenses.
We expect to incur listing expenses of approximately S$5.0 million and the Enlarged
Group is expected to record reverse acquisition costs.
Please refer to Section 4 of this letter entitled “Business of the Target Group” for
information on the Target Group’s property development projects and the Industry
Overview Report for information on the gross development values.
Save as discussed above and under Section 27 of this letter entitled “Risk Factors
Relating to the Target Group”, and barring any unforeseen circumstances, the Proposed
New Directors are not aware of any significant recent trends or any other known trends,
uncertainties, demands, commitments or events that are reasonably likely to have a
material effect on the Target Group’s revenue, profitability, liquidity or capital resources, or
that would cause the financial information disclosed in this letter to be not necessarily
indicative of our future operating results or financial condition.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
A-96
21.3. Business Strategies and Future Plans
The business strategies and future plans for the growth and expansion of the business of
the Target Group are as follows:
21.3.1. Expansion into the region
In addition to growing our existing business in mixed developments, we can also
leverage on our established business base in Malacca to explore opportunities to
expand into overseas markets such as in various South East Asian markets.
Furthermore, we believe that it will be beneficial for the long-term growth of the
Target Group to collaborate with landowners and other developers for prominent
developments.
21.3.2. Continued focus on developing integrated mixed development projects
We will continue our focus on developing integrated mixed use development
projects with prominent lifestyle features at accessible locations with developed
amenities. This will allow us to compete effectively in the property market.
Integrated mixed development projects provide us with the greatest opportunities
to respond to the changing needs and desires of our customers and to provide
innovative and unique designs.
21.3.3. Explore opportunities to expand through mergers and acquisitions, joint ventures
and/or strategic alliances
We may consider expanding our business through mergers and acquisitions, joint
ventures and/or strategic alliances with parties that create synergistic values with
our current business. Through such mergers and acquisitions, joint ventures
and/or strategic alliances, we will look to strengthen our market position and/or
expand into new business areas that are complementary to our existing business.
To date, we have not identified any specific opportunities for mergers and
acquisitions, joint ventures or strategic alliances. Should such opportunities
arise, we will seek approval, where necessary, from shareholders and the
relevant authorities in accordance with the requirements of the applicable rules
and regulations.
Upon Completion, and subject to shareholders’ approval (if necessary), we intend
to exercise our rights under the ROFR and Call Option to acquire the property
development companies relating to the Cyberjaya Project and the Thea Wellness
Project. Please see Section 25 of this letter entitled “Potential Conflicts of
Interests” for more information on the Cyberjaya Project and the Thea Wellness
Project.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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21.3.4. Attract, retain, motivate and develop a talented and result-oriented cadre of
professionals
We recognise the importance of attracting, retaining, motivating and developing
a talented and result-oriented cadre of professionals to manage the growth and
expansion of the Target Group. We therefore believe in investing in our
employees through a long-term human resources development plan which offers
long-term talent development and performance-linked incentive schemes.
Our human resources policies emphasise the long-term development of our
cadre of professionals through training and development, as well as the
promotion of a result-oriented corporate culture through performance-linked staff
evaluation and incentive schemes. We believe that such human resources
policies will attract, retain, motivate and develop our employees and provide us
with an appropriate depth of talents to address and manage challenges arising
from the growth and expansion of the Target Group.
22. ORDER BOOK
Due to the nature of our business as a property developer, we do not have order books.
23. DIRECTORS AND EXECUTIVE OFFICERS OF THE TARGET GROUP
23.1. Management Reporting Structure
As at the Latest Practicable Date, our management reporting structure is as follows:
Dato’ Colin
(Executive Chairman &
Managing Director and
Head of Marketing and
Sales)
Chong Foh
Siong
(Head of
Development
Management)
Board of Directors
Dato’ Edwin
(Executive Director &
Deputy Managing Director
and Head of Operations)
Chua Thiam
Siew, Johnson
(Group Financial
Controller)
Tan Kay Yan,
(Mark)
(Head of Business
Development)
Lee Sok Khian
John
(Executive
Director and Head
of Corporate &
Finance)
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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23.2. Proposed New Directors and Proposed New Key Executive Officers
As at the Latest Practicable Date, the particulars of the Proposed New Directors and the
Proposed New Key Executive Officers following Completion are as follows:
Name Age Address
Proposed Position in
the Enlarged Group
Proposed New
Directors
Dato’ Colin 33 53 Mohamed Sultan
Road #04-02,
Singapore 238993
Executive Chairman &
Managing Director
Dato’ Edwin 34 53 Mohamed Sultan
Road #04-02,
Singapore 238993
Executive Director &
Deputy Managing
Director
Lee Sok Khian John 64 53 Mohamed Sultan
Road #04-02,
Singapore 238993
Executive Director
Dato’ Wong King
Kheng
63 53 Mohamed Sultan
Road #04-02,
Singapore 238993
Lead Independent
Director
Loh Weng Whye 70 53 Mohamed Sultan
Road #04-02,
Singapore 238993
Independent Director
Foo Jong Han Rey 50 53 Mohamed Sultan
Road #04-02,
Singapore 238993
Independent Director
Proposed New Key
Executive Officers
Chong Foh Siong 57 10-01 Hatten Square,
Jalan Merdeka,
Bandar Hilir, 75000
Malacca, Malaysia
Head of Development
Management
Chua Thiam Siew,
Johnson
52 53 Mohamed Sultan
Road #04-02,
Singapore 238993
Group Financial
Controller
Tan Kay Yan (Mark) 49 53 Mohamed Sultan
Road #04-02,
Singapore 238993
Head of Business
Development
None of the Proposed Independent Directors are on the board of directors of the Target
Subsidiaries.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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Their present and past working experiences, areas of responsibility, qualifications and
directorships held for the past five (5) years are set out below:
23.2.1. Proposed New Directors
(a) Dato’ Colin
Dato’ Colin is the Proposed Executive Chairman and the Managing Director
of the Enlarged Group and is responsible for the overall management and
strategy. Dato’ Colin’s area of expertise and responsibilities include sales
and marketing, business growth and development and asset and land
acquisition.
Dato’ Colin was one of the founders of the Hatten Group and began his
journey in property development and management with Lianbang when he
joined as its business development manager in 2006. Together with his
brother Dato’ Edwin, they developed the Dataran Pahlawan Melaka
Megamall. Since the incorporation of Hatten Group Sdn. Bhd. in 2008, Dato’
Colin has served as the Hatten Group’s executive chairman and managing
director. Over the years, Dato’ Colin has also been responsible for a wide
range of business functions including sales and marketing, business growth
and development, asset and land acquisitions, investment and growth
strategies, governmental regulation and compliance, construction
management, market research and analysis and brand management.
On Completion, Dato’ Colin will be redesignated as the non-executive
chairman and non-executive director of the Hatten Group.
Dato’ Colin graduated from the University of Dublin with a Bachelor of
Science (Finance) in 2009.
(b) Dato’ Edwin
Dato’ Edwin is a Proposed Executive Director and the Deputy Managing
Director of the Enlarged Group and is responsible for the overall
management and strategy. Dato’ Edwin’s area of expertise and
responsibilities include operations, human resources and development
management.
Dato’ Edwin is the other founder of the Hatten Group and similarly began his
journey in property development and management as a business
development manager in Lianbang in 2004. Within the same year, he
became a director of Lianbang and, together with Colin, was responsible for
the development of the Dataran Pahlawan Melaka Megamall. Dato’ Edwin
took a stake in Lianbang in 2005. Since the incorporation of Hatten Group
Sdn. Bhd. in 2008, he has served as the Hatten Group’s executive director
and deputy managing director. Over the years, Dato’ Edwin was also in
charge of operations, human resources, development management,
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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hospitality strategy, planning and design, occupancy growth strategies,
tenancy management and tenant relations, leasing and management
strategy and facilities management.
On Completion, Dato’ Edwin will be redesignated as a non-executive
director of the Hatten Group.
Dato’ Edwin graduated from the University of Dublin with a Bachelor of
Science (Finance) in 2009.
(c) Lee Sok Khian John
John is a Proposed Executive Director. He joined the Target Group in May
2016 and serves as an Executive Director and the Head of the Corporate
and Finance department. John has more than 40 years of experience in
finance and accounting related matters.
Prior to joining the Target Group, John was the chief financial officer and
company secretary of Koh Brothers Group Ltd, a real estate developer and
contractor listed on the SGX-ST Mainboard, from December 2008 to
May 2016 where he was responsible for the corporate and financial
functions and was actively involved with corporate strategy, investment and
risk management. He is currently a non-executive director of Koh Brothers
Group Limited. His previous appointments include being the managing
director and subsequently the advisor (group finance) of Leeden Limited
(now known as Leeden National Oxygen Ltd), an industrial hardware
distributor listed on the SGX-ST Mainboard from January 1997 to
March 2005. From February 1984 to June 1993, John was with L&M Group
Investments Ltd as the group finance director and company secretary. He
was also previously from Ernst & Young.
John is a fellow of the Institute of Singapore Chartered Accountants. Other
professional qualifications include being an associate of the Chartered
Institute of Management Accountants and Chartered Secretaries Institute of
Singapore and a fellow of the Association of Chartered Certified
Accountants.
(d) Dato’ Wong King Kheng
Dato’ Wong King Kheng is the Proposed Lead Independent Director. He
currently serves as an independent director of the Company and was
appointed on 28 October 1996. Dato’ Wong is presently the Managing
Partner of KK Wong & Associates, a public accounting firm in Singapore
which he founded in 2000. In addition, he is also the Managing Director of
Soh & Wong Management Consultants Pte. Ltd. which provides consulting
services for regional tax planning, merger and acquisitions, strategic
business plans and advises on initial public offering services including
restructuring, feasibility studies and recruitment. He was the founder and
Managing Partner of Soh, Wong & Partners, a public accounting firm, from
1989 to 2000. Prior to that, he was an audit manager in an international
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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accounting firm which gave him extensive exposure in the fields of auditing,
tax planning, management consulting and public listing consulting. He is a
member of the Institute of Chartered Accountants in England and Wales.
Dato’ Wong will be the chairman of the New Audit and Risk Committee, a
member of the New Remuneration Committee and a member of the New
Nominating Committee for the Enlarged Group.
Dato’ Wong also holds directorships in listed companies, JCY International
Bhd (of which he is an executive director), a company listed on Bursa
Malaysia, and Ossia International Limited, a SGX-ST Mainboard listed
company.
(e) Loh Weng Whye
Loh Weng Whye is a Proposed Independent Director. His experience spans
four (4) decades, during which he has been extensively involved in and
contributed to infrastructure development and investment, public projects
and the power & energy industry in Singapore and the region. As disclosed
below, Mr Loh has served as a director on a number of local and foreign
companies including five (5) SGX-ST Mainboard listed companies.
Several of his notable appointments include being the founding general
manager of Tuas Power Limited, serving as President and Chief Executive
Officer of ST Energy Pte Ltd and SembCorp Energy Pte Ltd in the Singapore
Technologies Group and acting as advisers to a number of corporations
including Green Dot Capital under Temasek Holdings, YTL Power
International Berhad, OTM 21 (S) Pte Limited and China International Water
& Electric Corp (S) Pte Ltd.
Mr Loh will be the chairman of the New Nominating Committee, a member
of the New Audit and Risk Committee and a member of the New
Remuneration Committee for the Enlarged Group.
Mr Loh graduated from the University of Singapore in 1970 with a bachelor’s
degree in Mechanical Engineering and in 1979 with a master’s degree in
Industrial Engineering. Mr Loh is a fellow of the Institution of Engineers
Singapore, a qualified professional engineer with the Professional Engineer
Board of Singapore, a member of the Singapore Institute of Directors and a
fellow of the Chartered Management Institute of the United Kingdom.
(f) Foo Jong Han Rey
Foo Jong Han Rey is a Proposed Independent Director. He currently serves
as an independent director of the Company and was appointed on
16 January 2006. He had been a practicing lawyer for over 20 years since
he was called to the Singapore Bar in June 1992. He practices in the field
of civil litigation and corporate and commercial law. He is a partner of
Singapore law firm KSCGP Juris LLP. Mr Foo was called to English Bar as
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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a Barrister-at-law, Inner Temple in 1991. He holds a LLB Honours from
University of Buckingham and an LLM in Corporate and Commercial Law at
Queen Mary College, University of London.
Mr Foo will be the chairman of the New Remuneration Committee, a member
of the New Audit and Risk Committee and New Nominating Committee for
the Enlarged Group.
23.2.2. Proposed New Key Executive Officers
(a) Chong Foh Siong
Foh Siong is a Proposed New Key Executive Officer and serves as the Head
of Development Management in the Target Group. He is primarily
responsible for project development and its administration. His scope of
work includes leading the project and design teams on the execution of all
projects, ensuring that the planning and execution of projects meet specified
quality requirements and to review, identify and develop related strategies
and initiatives.
Prior to joining the Hatten Group in April 2007, Foh Siong was with two (2)
different architectural firms, Akitek AAP from 1994 to 2007 and Akitek KHP
from 1982 to 1994. At both firms, Foh Siong was responsible for
coordinating projects, submissions of plans to various authorities for
approval and ensured that all works carried out are in accordance with
specific standards, codes, guidelines and regulations.
Foh Siong graduated from the Federal Institute of Technology (Institut
Teknologi Federal) with a Technical Diploma in Architecture in 1981.
(b) Tan Kay Yan (Mark)
Mark is a Proposed New Key Executive Officer and his appointment in the
Target Group is the Head of Business Development. He is responsible for
new business development and corporate planning for the Target Group.
Prior to joining the Hatten Group in May 2015, Mark was a key executive
officer of UE E&C Ltd from 2010 to 2015. He held the position of general
manager, strategy and risk and has helped in the strategic direction and
growth of the company. Before his transfer to UE E&C Ltd, Mark served in
United Engineers Group from 2004 to 2010 in the area of corporate planning
and coordination where he tracked and rationalised part of the regional
portfolio of United Engineers Group.
Prior to joining the United Engineers Group, Mark worked in the
telecommunication and property sectors.
Mark graduated from the National University of Singapore in 1992 with a
Bachelor Degree of Engineering (Electrical), Hons. He obtained a Masters in
Business Administration from the Helsinki School of Economics in 2004.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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(c) Chua Thiam Siew, Johnson
Johnson is the Group Financial Controller for the Target Group and is
responsible for all aspects of the Target Group’s financial activities including
treasury, accounting, taxation, budgetary controls and systems and
processes. He has more than 30 years of experience in finance and
accounting related matters.
Prior to joining the Hatten Group in May 2016, Johnson was with the Koh
Brothers Group between April 2010 and May 2016 holding the positions of
Financial Controller of Koh Brothers Eco Engineering Limited, an
engineering solution group listed on the Catalist, and finance manager of
Koh Brothers Building & Civil Engineering Contractor (Pte.) Ltd. He was
responsible for the treasury, financial and accounting functions.
Between May 2000 to April 2010, Johnson held a number of regional
positions with The Ascott Limited, which is part of the CapitaLand group of
companies. His last appointment was as regional general manager, North
China and East China.
Johnson holds a Master of Business Administration from Southern Cross
University and a Master of Accounting from Curtin University of Technology
(Australia). He is an Associate Member of CPA Australia.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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23.2.3. Present and Past Directorships
The present and past directorships of each Proposed New Director and Proposed
New Key Executive Officer of the Enlarged Group held in the five (5) years
preceding the Latest Practicable Date are set out below:
Name Present Directorships Past Directorships
Proposed NewDirectors
Dato’ Colin Companies within the TargetGroupSky Win ManagementConsultancy Pte. Ltd.Gold Mart Sdn. Bhd.Fuyuu Ventures Sdn. Bhd.Fuyuu Group Sdn. Bhd.Fuyuu Resources Sdn. Bhd.
Companies within the HattenGroupHatten Asset ManagementSdn. Bhd.Hatten Properties Pte. Ltd.Hatten Holdings Pte. Ltd.Ultra Gold Holdings LimitedDataran Pahlawan MelakaHoldingsPahlawan Holdings LimitedLinkson Enterprises LimitedAdmiral Merger Sdn. Bhd.Cosha Retail Sdn. Bhd.EGAH Group Sdn. Bhd.Estadia Sdn. Bhd.Ensure Merger Sdn. Bhd.Fuyuu Advance Sdn. Bhd.Fuyuu Assets Sdn. Bhd.Fuyuu Avenue Sdn. Bhd.Fuyuu Capital Sdn. Bhd.Fuyuu City Sdn. Bhd.Fuyuu Development Sdn. Bhd.Fuyuu Dynamic Sdn. Bhd.Fuyuu Land Sdn. Bhd.Fuyuu Premium Sdn. Bhd.Fuyuu Properties Sdn. Bhd.Fuyuu Revenue Sdn. Bhd.Fuyuu Success Sdn. Bhd.Fuyuu Victory Sdn. Bhd.Golden Retail Sdn. Bhd.Hatten Brand ManagementSdn. Bhd.Hatten Edu Cates Sdn. Bhd.Hatten Group Sdn. Bhd.Hatten Hotel InternationalSdn. Bhd.Hatten Hotel (Melaka) Sdn.Bhd.Hatten Place Sdn. Bhd.(formerly known as NobletenHotel (Melaka) Sdn. Bhd.)
Capital 21 Pte. Ltd.(struck off)ECT Realty Sdn. Bhd.(Formerly known as HattenProperties (Melaka) Sdn.Bhd.)ECT Realty (Muar) Sdn. Bhd.(Formerly known as HattenProperties (Muar) Sdn. Bhd.)ECT Realty (JB) Sdn. Bhd.(Formerly known as HattenProperties (JB) Sdn. Bhd.)Rico Development Sdn. Bhd.Rico Ventures Sdn. Bhd.CCH Hospitality Sdn. Bhd.(formerly known as CapitalCity Hotel Sdn. Bhd.)CCRM Management Sdn. Bhd.(formerly known as CapitalCity Retail Management Sdn.Bhd.)
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Name Present Directorships Past Directorships
Hatten Property ManagementSdn. Bhd.Hatten Properties Sdn. Bhd.Hatten Retail ManagementSdn. Bhd.Hatten Support Services Sdn.Bhd.HGC Development Sdn. Bhd.Houfu Group Sdn. Bhd.Lianbang Holdings Sdn. Bhd.Lianbang Ventures Sdn. Bhd.Mayatrade Sdn. Bhd.Oscar Gain Sdn. Bhd.Pahlawan City Sdn. Bhd.Pahlawan TerminalManagementSdn. Bhd.Padang Pahlawan Sdn. Bhd.Parenthood Superstore(Hatten)Sdn. Bhd.Pavilion Hectares Sdn. Bhd.Prolific Acres Sdn. Bhd.Prolific Advance Sdn. Bhd.Prolific Assets Sdn. Bhd.Prolific Brilliance Sdn. Bhd.Prolific Hectares Sdn. Bhd.Prolific Holdings Sdn. Bhd.Prolific Properties Sdn. Bhd.Prolific Resources Sdn. Bhd.Prolific Revenue Sdn. Bhd.Prolific Synergy Sdn. Bhd.Rico Land Sdn. Bhd.Teddie Bear Group Sdn. Bhd.Teddie Bear Hotel (Melaka)Sdn. Bhd.Teddie Bear HotelInternationalSdn. Bhd.Teddie Bear Land Sdn. Bhd.Temasek Blooms Sdn. Bhd.Tunas Binamas Sdn. Bhd.Vibrant Valley Sdn. Bhd.Velvet Valley Sdn. Bhd.Velvet Valley ManagementSdn. Bhd.
Companies outside theHatten GroupCapital City Property Sdn.Bhd. Regal Fiesta Sdn. Bhd.United Asia Pacific GroupSdn. Bhd.
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Name Present Directorships Past Directorships
Dato’ Edwin Companies within the TargetGroupSky Win ManagementConsultancy Pte. Ltd.Hatten International Pte. Ltd.Gold Mart Sdn. Bhd.Fuyuu Ventures Sdn. Bhd.Fuyuu Group Sdn. Bhd.Fuyuu Resources Sdn. Bhd.
Companies within the HattenGroupHatten Asset ManagementSdn. Bhd.Hatten Properties Pte. Ltd.Hatten Holdings Pte. Ltd.Ultra Gold Holdings LimitedDataran Pahlawan MelakaHoldingsPahlawan Holdings LimitedDataran Pahlawan MelakaLimitedLink Asian Investment LimitedAdmiral Merger Sdn. Bhd.EGAH Group Sdn. Bhd.Estadia Sdn. Bhd.Ensure Merger Sdn. Bhd.Fuyuu Advance Sdn. Bhd.Fuyuu Assets Sdn. Bhd.Fuyuu Avenue Sdn. Bhd.Fuyuu Capital Sdn. Bhd.Fuyuu City Sdn. Bhd.Fuyuu Development Sdn. Bhd.Fuyuu Dynamic Sdn. Bhd.Fuyuu Land Sdn. Bhd.Fuyuu Premium Sdn. Bhd.Fuyuu Properties Sdn. Bhd.Fuyuu Revenue Sdn. Bhd.Fuyuu Success Sdn. Bhd.Fuyuu Victory Sdn. Bhd.Golden Retail Sdn. Bhd.Hatten Brand ManagementSdn. Bhd.Hatten Edu Cates Sdn. Bhd.Hatten Group Sdn. Bhd.Hatten Hotel InternationalSdn. Bhd.Hatten Hotel (Melaka) Sdn.Bhd.Hatten Place Sdn. Bhd.(formerly known as NobletenHotel (Melaka) Sdn. Bhd.)Hatten Property ManagementSdn. Bhd.
Capital 21 Pte. Ltd.(struck off)Rico Development Pte. Ltd.Rico Ventures Pte. Ltd.Rico Development Sdn. Bhd.Rico DevelopmentManagement Sdn. Bhd.Rico Ventures Sdn. Bhd.CCH Hospitality Sdn. Bhd.(formerly known as CapitalCity Hotel Sdn. Bhd.)CCRM Management Sdn. Bhd.(formerly known as CapitalCity Retail Management Sdn.Bhd.)
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Name Present Directorships Past Directorships
Hatten Properties Sdn. Bhd.Hatten Retail ManagementSdn. Bhd.HGC Development Sdn. Bhd.Houfu Group Sdn. Bhd.Lianbang Holdings Sdn. Bhd.Lianbang Ventures Sdn. Bhd.Mayatrade Sdn. Bhd.Oscar Gain Sdn. Bhd.Padang Pahlawan Sdn. Bhd.Pahlawan City Sdn. Bhd.Pahlawan TerminalManagementSdn. Bhd.Pavilion Hectares Sdn. Bhd.Prolific Acres Sdn. Bhd.Prolific Advance Sdn. Bhd.Prolific Assets Sdn. Bhd.Prolific Brilliance Sdn. Bhd.Prolific Hectares Sdn. Bhd.Prolific Holdings Sdn. Bhd.Prolific Properties Sdn. Bhd.Prolific Resources Sdn. Bhd.Prolific Revenue Sdn. Bhd.Prolific Synergy Sdn. Bhd.Rico Land Sdn. Bhd.Teddie Bear Group Sdn. Bhd.Teddie Bear Hotel (Melaka)Sdn. Bhd.Teddie Bear HotelInternationalSdn. Bhd.Teddie Bear Land Sdn. Bhd.Temasek Blooms Sdn. Bhd.Tunas Binamas Sdn. Bhd.Vibrant Valley Sdn. Bhd.Velvet Valley Sdn. Bhd.Velvet Valley ManagementSdn. Bhd.
Companies outside theHatten GroupCapital City Property Sdn.Bhd.Dharmapala Holdings Sdn.Bhd.Noblesse Oblige Sdn. Bhd.TYL Solutions Sdn. Bhd.United Asia Pacific GroupSdn. Bhd.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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Name Present Directorships Past Directorships
Lee Sok KhianJohn
Koh Brothers Group Limited Nagasvaraja Pte. Ltd.
Dato’ WongKing Kheng
Soh & Wong ManagementConsultants Pte LtdThe Business Exchange PteLtdIn-Tec Global Pte Ltd H2SGEnergy Pte LtdH2SG Technology Pte LtdLAWP Private LtdH2SG Energy (AUS) Pty LtdOssia International LimitedTiong Woon CorporationHolding LtdJCY International BhdJCY HDD Technology GroupPte. Ltd.Internet Technology GroupPte. Ltd.VGO Corporation Limited
Portek International PrivateLimited
Loh WengWhye
BH Global Corporation LimitedVastvest International Pte. Ltd.Layar Positif Sdn. Bhd.Moral Home for the Aged SickLtdKwong Wai Shiu Hospital Ltd
XinRen Aluminum HoldingsLimitedLeeden LimitedChina New Town DevelopmentCo LtdUnited Envirotech Ltd
Foo Jong HanRey
Central Wine ExchangePte. Ltd.Media Plus (M) Sdn. Bhd.VGO Corporation Limited
Internet Technology GroupPte. Ltd.Intravia InvestmentsPte. Ltd (struck off)Radcity Asia Pte. Ltd.(struck off)First Internet AsiaPte. Ltd.JR Consultants Pte. Ltd.
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Name Present Directorships Past Directorships
Proposed NewKey ExecutiveOfficers
Chong FohSiong
– Fuyuu Development Sdn. Bhd.Fuyuu ResourcesSdn. Bhd.Fuyuu VenturesSdn. Bhd.Dharmapala HoldingsSdn. Bhd.ECT Realty Sdn. Bhd.Fuyuu Capital Sdn. Bhd.Hatten Asset ManagementSdn. Bhd.Hatten Support ServicesSdn. Bhd.HG Property ManagementSdn. Bhd.Houfu Group Sdn. Bhd.Kuenbuild Sdn. Bhd.Padang PahlawanSdn. Bhd.Prolific Acres Sdn. Bhd.Temasek BloomsSdn. Bhd.
Tan Kay Yan(Mark)
Soon Lin (Private) Limited PT Unityone PowerEngineering ServicesPT Unityone Prima Nusantara
Chua ThiamSiew, Johnson
– –
Notwithstanding the multiple directorships of the Tan Brothers, the New
Nominating Committee and the Financial Adviser believe that the Tan Brothers
will be able to devote sufficient time to discharge their duties as executive
directors of the Target. The directorships held by the Tan Brothers mostly relate
to their roles in the Hatten Group. The Hatten Group has a good track record and
an experienced and capable management team. As such, the day to day
operations and businesses of the Hatten Group do not require the constant
supervision of the Tan Brothers and are managed by a management team,
separate from the management of the Target Group. The Tan Brothers shall only
be required to spend minimal time to act as statutory directors and shareholders
of the Hatten Group. Their roles will only involve decision-making on strategic
business directions and growth plans and protecting shareholders’ interests.
Of the Proposed New Directors, Lee Sok Khian John, Dato’ Wong King Kheng,
Loh Weng Whye and Foo Jong Han Rey have had experience as directors of
SGX-ST listed companies. Dato’ Colin and Dato’ Edwin do not have experience
as directors of SGX-ST listed companies and have accordingly undertaken
training in relation to roles and responsibilities of a listed company.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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Additionally, the New Nominating Committee is of the view that the appointment
of Lee Sok Khian John as a non-executive director of Koh Brothers Group
Limited, which is involved in the business of property development primarily in
Singapore, will not pose any conflicts of interests as the Target Group does not
have any property development project in Singapore.
Save for the relationship between the Tan Brothers, as at the Latest Practicable
Date, none of the Proposed New Directors, Proposed New Key Executive Officers
or substantial shareholders of the Target Group has any family relationship with
one another.
Save as disclosed in this Circular, to the best of the knowledge and belief of the
Proposed New Directors and Proposed New Key Executive Officers, there are no
arrangements or understandings with any of the substantial shareholders of the
Target Group, customers, suppliers or other persons, pursuant to which any of the
Proposed New Directors or Proposed New Key Executive Officers is to be
appointed.
None of the proposed independent Directors of the Enlarged Group sits on the
board of its principal subsidiaries that are based in jurisdictions other than
Singapore.
As evidenced by their business and working experiences set out above, the
Proposed New Directors possess the appropriate expertise to act as directors of
the Company following Completion.
23.3. Material background information on the Proposed New Directors, Proposed New
Key Executive Officers and the Tan Brothers
None of the Proposed New Directors or Proposed New Key Executive Officers:
(a) had at any time during the last ten (10) years, an application or a petition under any
bankruptcy laws of any jurisdiction filed against him or against a partnership of which
he was a partner at the time when he was a partner or at any time within two (2) years
from the date he ceased to be a partner;
(b) had at any time during the last ten (10) years, an application or a petition under any
law of any jurisdiction filed against an entity (not being a partnership) of which he was
a director or an equivalent person or a key executive, at the time when he was a
director or an equivalent person or a key executive of that entity or at any time within
two (2) years from the date he ceased to be a director or an equivalent person or a
key executive of that entity, for the winding up or dissolution of that entity or, where
that entity is the trustee of a business trust, that business trust, on the ground of
insolvency;
(c) has any unsatisfied judgment against him;
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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(d) has ever been convicted of any offence, in Singapore or elsewhere, involving fraud
or dishonesty, which is punishable by imprisonment, or has been the subject of any
criminal proceedings (including any pending criminal proceedings of which he is
aware) for such purpose;
(e) has ever been convicted of any offence, in Singapore or elsewhere, involving a
breach of any law or regulatory requirement that relates to the securities or futures
industry in Singapore or elsewhere, or been the subject of any criminal proceedings
(including any pending criminal proceedings of which he is aware) for such breach;
(f) had at any time during the last ten (10) years, judgment entered against him in any
civil proceedings in Singapore or elsewhere involving a breach of any law or
regulatory requirement that relates to the securities or futures industry in Singapore
or elsewhere, or a finding of fraud, misrepresentation or dishonesty on his part, or
been the subject of any civil proceedings (including any pending civil proceedings of
which he is aware) involving an allegation of fraud, misrepresentation or dishonesty
on his part;
(g) has ever been convicted in Singapore or elsewhere of any offence in connection with
the formation or management of any entity or business trust;
(h) has ever been disqualified from acting as a director or an equivalent person of any
entity (including the trustee of a business trust), or from taking part directly or
indirectly in the management of any entity or business trust;
(i) has ever been the subject of any order, judgment or ruling of any court, tribunal or
governmental body, permanently or temporarily enjoining him from engaging in any
type of business practice or activity;
(j) has ever, to his knowledge, been concerned with the management or conduct, in
Singapore or elsewhere, of the affairs of:
(i) any corporation which has been investigated for a breach of any law or
regulatory requirement governing corporations in Singapore or elsewhere;
(ii) any entity (not being a corporation) which has been investigated for a breach of
any law or regulatory requirement governing such entities in Singapore or
elsewhere;
(iii) any business trust which has been investigated for a breach of any law or
regulatory requirement governing business trusts in Singapore or elsewhere; or
(iv) any entity or business trust which has been investigated for a breach of any law
or regulatory requirement that relates to the securities or futures industry in
Singapore or elsewhere,
in connection with any matter occurring or arising during the period when he was so
concerned with the entity or business trust; or
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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(k) has been the subject of any current or past investigation or disciplinary proceedings,
or has been reprimanded or issued any warning, by the MAS or any other regulatory
authority, exchange, professional body or governmental agency, whether in
Singapore or elsewhere.
23.4. Remuneration
The amount of compensation paid or payable to the Proposed New Directors and the
Proposed New Key Executive Officers for services rendered to the Enlarged Group during
FY2015 and FY2016 (being the two (2) most recently completed financial years) and as
estimated for FY2017 (based on the Service Agreements excluding any discretionary
and/or performance bonus), in bands of S$250,000 per annum (including any benefits in
kind) are set out as follows:
FY2015 FY2016 FY2017(1)
Proposed New Directors
Dato’ Colin Band E Band E Band D
Dato’ Edwin Band E Band E Band C
Lee Sok Khian John – Band A Band B
Dato’ Wong King Kheng(2) Band A Band A Band A
Loh Weng Whye – – Band A
Foo Jong Han Rey(2) Band A Band A Band A
Proposed New Key Executive Officers
Chong Foh Siong Band A Band A Band A
Chua Thiam Siew, Johnson – Band A Band A
Tan Kay Yan (Mark) Band A Band A Band A
Legend:
Band A : Compensation of between S$1 to S$250,000 per annum.
Band B : Compensation of between S$250,001 to S$500,000 per annum.
Band C : Compensation of between S$500,001 to S$750,000 per annum.
Band D : Compensation of between S$750,001 to S$1,000,000 per annum.
Band E : Compensation of between S$1,000,001 to S$1,250,000 per annum.
Notes:
(1) The disclosed remuneration excludes any discretionary and/or performance bonuses.
(2) The directors’ fees paid to Dato’ Wong King Kheng and Foo Jong Han Rey in FY2015 and FY2016 were
for their services to the Company as independent directors of the Company before Completion.
Other than in respect of contributions which are mandated by the relevant laws, no
amounts have been set aside or accrued to provide for pension, retirement or similar
benefits to the Proposed New Directors or the Proposed New Key Executive Officers of the
Enlarged Group.
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Save as disclosed in Section 23.5 of this letter entitled “Service Agreements” below, no
bonus or profit-sharing plan or any other profit-linked agreement or arrangement is in
place for any of the Proposed New Directors or Proposed New Key Executive Officers of
the Enlarged Group as at the Latest Practicable Date.
23.5. Service Agreements
Upon Completion, the Company will enter into separate service agreements with the Tan
Brothers for an initial term of three (3) years commencing from the Completion Date, and
thereafter automatically renewed for subsequent periods of two (2) years each unless
otherwise terminated. The Service Agreements do not provide for benefits upon
termination of employment.
23.5.1. Salient Terms
Under the Service Agreements, Dato’ Colin and Dato’ Edwin are entitled to a
monthly salary of S$45,000 and S$35,000 respectively. Additionally, they are
each entitled to overseas living, medical, hospitalisation and dental expenses.
Each of the Tan Brothers is entitled to the use of a car, with the initial acquisition
price not exceeding S$600,000, and all running expenses of their respective cars
shall be borne by the Company. All travelling and travel-related, entertainment
and other out-of-pocket expenses incurred by the Tan Brothers during the course
of discharging their duties to the Enlarged Group shall be borne by the Enlarged
Group.
The Tan Brothers shall be entitled to participate in any of the Enlarged Group’s
share option schemes or any other compensation plans as adopted by the
Enlarged Group from time to time, subject to the relevant provisions of the rules
of the SGX-ST.
The Service Agreements provide that during the course of their employment with
the Company, the Tan Brothers shall, among other things, devote substantially
the whole of their time and attention during business hours to the business of the
Enlarged Group and to use all proper means in their power to develop, extend,
maintain, advise and promote the business of the Enlarged Group and to protect
and further the reputation, interests and success of the Enlarged Group,
undertake such responsibilities and perform such duties as may from time to time
be assigned to them by or under the authority of the Board, which include serving
on the board of directors of or holding executive or non-executive appointments
with any Enlarged Group Company, and complying with all directions made by or
under the authority of the board of Directors of the Company.
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23.5.2. Performance Based Incentive
Under the terms of the Service Agreements, the Tan Brothers are entitled to a
performance based incentive payable by the company in certain circumstances.
Subject to review by the New Remuneration Committee and the board of
Directors of the Company, the performance based incentive shall be determined
as follows:
(a) Dato’ Colin
Profit Amount Performance Based Incentive
Up to S$10,000,000 No performance based incentive
S$10,000,001 to S$15,000,000 Five percent (5.0%) of the Profit
Amount above S$10,000,000
S$15,000,001 to S$20,000,000 Six percent (6.0%) of the Profit
Amount above S$15,000,000
plus S$250,000
Above S$20,000,000 Seven percent (7.0%) of the Profit
Amount above S$20,000,000
plus S$550,000
(b) Dato’ Edwin
Profit Amount Performance Based Incentive
Up to S$10,000,000 No performance based incentive
S$10,000,001 to S$15,000,000 Four percent (4.0%) of the Profit
Amount above S$10,000,000
S$15,000,001 to S$20,000,000 Five percent (5.0%) of the Profit
Amount above S$15,000,000
plus S$200,000
Above S$20,000,000 Six percent (6.0%) of the Profit
Amount above S$20,000,000
plus S$450,000
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The performance based incentives payable to the Tan Brothers are on an
incremental basis. This means that any performance based incentive paid
shall correspond to the relevant band of Profit Amount. For illustrative
purposes, if the Profit Amount is S$25 million, the performance based
incentive paid to Dato’ Colin shall be S$900,000, being seven percent
(7.0%) of the Profit Amount above S$20 million plus S$550,000 (being the
aggregate of five percent (5.0%) of the Profit Amount above S$10 million but
below S$15 million and six percent (6.0%) of the Profit Amount above S$15
million but below S$20 million).
For the purposes of this Section 23.5 only, “Profit Amount” refers to the Enlarged Group’s
audited consolidated profit before tax income excluding the following: (i) provisions made
for fair value adjustments to investment and development projects; (ii) gain or loss from
disposal of investments; and (iii) profit before tax attributable to non-controlling interests.
There are no existing or proposed service contracts entered into or to be entered into by
the Enlarged Group with any of the Proposed New Directors which provide for
compensation in the form of stock options, or pension, retirement or other similar benefits,
or other benefits, upon the termination of employment.
The New Remuneration Committee, having reviewed the terms of the Service
Agreements, are of the opinion that the terms of the Service Agreements are in line with
the staff guidelines of the Target Group and are commensurate with the respective job
scope and level of responsibilities of the Tan Brothers.
23.6. Corporate Governance
The Proposed New Directors recognise the importance of corporate governance to
Shareholders, and will use their best efforts to implement the good practices
recommended in the Code of Corporate Governance.
Following the appointment of the Proposed New Directors, the Company will have six (6)
Directors, of which three (3) will be Independent Directors. In accordance with the Code
of Corporate Governance, Dato’ Wong King Kheng will be appointed as the Lead
Independent Director of the Company upon Completion. As Lead Independent Director,
Dato’ Wong King Kheng will be the contact person for Shareholders in situations where
there are concerns or issues, which communication with the Enlarged Group’s Executive
Chairman or Executive Directors has failed to resolve or where such communication is
inappropriate.
None of the Proposed Independent Directors have any existing business or professional
relationship of a material nature with the Group, the Hatten Group, the Target Group, the
current Directors of the Company, the Proposed Executive Directors and/or substantial
shareholders of the Group or the Target Group. None of the Proposed Independent
Directors are related to any of the current Directors, the other Proposed New Directors
and/or substantial shareholders of the Group or the Target Group.
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23.6.1. New Audit and Risk Committee
The New Audit and Risk Committee will comprise Dato’ Wong King Kheng, Loh
Weng Whye and Foo Jong Han Rey. The chairman of the New Audit and Risk
Committee will be Dato’ Wong King Kheng.
The Audit and Risk Committee will assist the board of Directors in discharging
their responsibilities to safeguard the assets, maintain adequate accounting
records, and develop and maintain effective systems of internal controls, with the
overall objective of ensuring that the management creates and maintains an
effective control environment in the Company following Completion. The Audit
and Risk Committee will provide a channel of communication between the board
of Directors, the management and the external auditors of the Company on
matters relating to audit following Completion.
In particular, the Audit and Risk Committee will meet at least quarterly, following
Completion, to do the following:
(a) review the scope of the audit plans of the external auditors, the results of the
external and internal auditors’ examination and their evaluation of internal
accounting control systems, their letter to management and the
management’s response to ensure that appropriate follow-up measures are
taken to satisfactorily address internal control weaknesses, if any;
(b) review the quarterly and annual financial statements before submission to
the board of Directors for approval, focusing in particular on changes in
accounting policies and practices, major risk areas, significant adjustments
resulting from the audit, compliance with accounting standards and
compliance with the Listing Manual and any other relevant statutory or
regulatory requirements;
(c) review the significant financial reporting issues and judgments so as to
ensure the integrity of the financial statements of the Company and any
announcements relating to the Company’s financial performance;
(d) review the risk profile of the Company, its internal control and risk
management procedures, including financial, operation, compliance and
information technology controls and the appropriate steps to be taken to
mitigate and manage risks at acceptable levels determined by the board of
Directors;
(e) ensure co-ordination between the external and internal auditors and the
management and review the assistance given by the management to the
auditors, and discuss problems and concerns, if any, arising from the interim
and final audits, and any matters which the auditors may wish to discuss (in
the absence of the management, where necessary);
(f) commission and review the findings of investigations by internal or external
auditors into matters where there is any suspected fraud or irregularity, or
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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suspected infringement of any relevant laws, rules or regulations, which has
or is likely to have a material impact on the Enlarged Group’s operating
results or financial position, and the management’s response;
(g) consider the appointment, remuneration, terms of engagement or
re-appointment of the external and internal auditors and matters relating to
the resignation or dismissal of the auditors;
(h) make recommendations to the board of Directors on the proposals to the
shareholders on the appointment, re-appointment and removal of the
external auditors, and approve the remuneration and terms of engagement
of the external auditors;
(i) review and recommend to the board of Directors any interested person
transactions falling within the scope of Chapter 9 of the Listing Manual;
(j) together with the Conflict Resolution Committee, review any potential
conflict of interests that may arise in respect of any Director(s) of the
Company for the time being;
(k) review the scope and results of the external audit, and the independence
and objectivity of the external auditors;
(l) review the adequacy and effectiveness of the Enlarged Group’s risk
management and internal audit function and ensure that a clear reporting
structure is in place between the Audit and Risk Committee and the internal
auditors;
(m) review arrangements by which staff of the Enlarged Group may, in
confidence, raise concerns about possible impropriety in matters of financial
reporting and other matters and the adequacy of procedures for
independent investigation and appropriate follow-up action in response to
such complaints;
(n) undertake such other reviews and projects as may be requested by the new
Board of Directors, and report to the board of Directors its findings from time
to time on matters arising and requiring the attention of the Audit and Risk
Committee;
(o) generally undertake such other functions and duties as may be required by
statute or the Listing Manual, or by such amendments as may be made
thereto from time to time;
(p) assess the performance of the financial director and/or the financial
controller (as the case may be), for the relevant period, on an annual basis
to determine his or her suitability for the position;
(q) on an annual basis or any other period that the Audit and Risk Committee
deems fit, ensure that trade receivables are stated at fair value, accurately
recorded in the financial statements and that credit policies are adhered to;
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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(r) monitor the cash flows of the Enlarged Group;
(s) monitor the use of proceeds to be raised from the Proposed Compliance
Placement and ensure that any change in the use of proceeds will be subject
to Shareholders’ approval; and
(t) review and establish procedures for receipt, retention and treatment of
complaints received in relation to the Enlarged Group, including criminal
offences involving the Enlarged Group or its employees, questionable
accounting, auditing, business, safety or other matters that may impact
negatively on the Enlarged Group and to ensure that arrangements are in
place for the independent investigations of such matter and for appropriate
follow-up.
The Target Group has commissioned PricewaterhouseCoopers Risk Services
Pte. Ltd.to conduct an internal control review of key business processes for
identifying gaps within the internal control framework and recommending controls
improvement plans to the Target Group.
Based on the internal control review conducted by PricewaterhouseCoopers Risk
Services Pte. Ltd. and the implementation of recommendations contained in such
internal controls review, the Proposed New Directors, with the concurrence of the
New Audit and Risk Committee, is of the opinion that the risk management and
internal controls of the Enlarged Group are adequate to address the financial,
operational and compliance and information technology risks.
In considering the suitability of Chua Thiam Siew, Johnson as the Group Financial
Controller of the Enlarged Group, the New Audit and Risk Committee has
reviewed Chua Thiam Siew, Johnson’s curriculum vitae, conducted interviews
and has:
(a) considered the education, professional qualifications and past working
experiences of Chua Thiam Siew, Johnson;
(b) considered Chua Thiam Siew, Johnson’s demonstration of the requisite
competency in finance-related matters in connection with the preparation of
the listing of the Target Group through the Proposed Acquisition;
(c) noted the absence of negative feedback on Chua Thiam Siew, Johnson from
Ernst & Young LLP, the Independent Auditors and Reporting Accountants;
and
(d) noted the absence of internal control weaknesses attributable to Chua
Thiam Siew, Johnson identified during the internal control review conducted
by the PricewaterhouseCoopers Risk Services Pte. Ltd.
The New Audit and Risk Committee and the Financial Adviser have made
reasonable enquiries into Chua Thiam Siew, Johnson’s past working experience,
education and professional qualifications (as set out in Section 23.2 entitled
“Proposed New Directors and Proposed New Key Executive Officers” of this
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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letter), and to the best of their knowledge and belief, nothing has come to their
attention to cause them to believe that Chua Thiam Siew, Johnson does not have
the competence, experience, character and integrity expected of a Group
Financial Controller of a listed issuer.
Accordingly, the New Audit and Risk Committee and the Financial Adviser are of
the opinion that Chua Thiam Siew, Johnson is suitable as the Group Financial
Controller of the Enlarged Group, and will be able to discharge his duties
satisfactorily.
In the event that a member of the Audit and Risk Committee is interested in any
matter being considered by the Audit and Risk Committee, he will abstain from
reviewing and deliberating on that particular transaction or voting on that
particular resolution.
Apart from the duties listed above, the Audit and Risk Committee shall
commission and review the findings of internal investigations into matters where
there is any suspected fraud or irregularity, or failure of internal controls, or
infringement of any relevant law, rule or regulation which has or is likely to have
a material impact on the Enlarged Group’s operating results and/or financial
position.
Internal audit function
Upon Completion, the Enlarged Group will outsource the internal audit function.
The Enlarged Group will appoint a suitable accounting firm, approved by the New
Audit and Risk Committee, as the internal auditors to review and assess the
adequacy and effectiveness of the Enlarged Group’s risk management and
internal control systems addressing financial, operational and compliance and
information technology risks of the Enlarged Group on an annual basis. The
internal auditors will report directly to the Audit and Risk Committee.
Before each annual internal audit, the internal auditors will propose an internal
audit plan to the Audit and Risk Committee and obtain the approval of the Audit
and Risk Committee before the internal auditors can proceed with the internal
audit plan. The findings of such internal audit will be submitted by the appointed
internal auditors to the Audit and Risk Committee for their review.
23.6.2. New Nominating Committee
The New Nominating Committee will comprise Loh Weng Whye, Dato’ Wong King
Kheng, Foo Jong Han Rey and Dato’ Colin. The chairman of the New Nominating
Committee will be Loh Weng Whye.
The Nominating Committee will be responsible for the following:
(a) reviewing and making recommendations to the board of Directors on all
appointments, board re-nominations, re-elections and removal of all
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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Directors of the Company, having regard to the relevant Director’s
contribution and performance and taking into account their respective
commitments outside the Enlarged Group;
(b) reviewing and determining a suitable size, structure and composition of the
board of Directors which facilitates effective decision-making, after taking
into consideration the scope and nature of the operations of the Enlarged
Group;
(c) in deciding the composition of the board of Directors, to take into account
the future requirements of the Enlarged Group, the appropriate balance and
diversity of skills, experience, gender and core competencies, such as
accounting or finance, business or management experience, industry
knowledge, strategic planning experience and customer-based experience
or knowledge, and knowledge of the Enlarged Group that the new Board of
Directors requires to function competently and efficiently;
(d) ensuring that all members of the board of Directors submit themselves for
re-nomination and re-election at regular intervals and at least once in every
three (3) years;
(e) determining on an annual basis whether a Director is independent;
(f) determining and recommending to our board of Directors the maximum
number of listed company board representations which any Director may
hold;
(g) reviewing the training and professional development programmes for the
board of Directors;
(h) developing a process for evaluation of the performance of the new Board of
Directors and assessing the performance of the board of Directors and
contribution of each Director to the effectiveness of the board of Directors;
and
(i) reviewing and approving any new employment of related persons and the
proposed terms of their employment.
The Nominating Committee will decide on how the performance of the board of
Directors is to be evaluated and propose objective performance criteria, subject
to the approval of the board of Directors, which addresses how the new Board of
Directors has enhanced long-term shareholder value. The board of Directors will
implement a process to be carried out by the Nominating Committee for the
assessing of the effectiveness of the board of Directors as a whole and for
assessing the contribution of each individual Director to the effectiveness of the
board of Directors.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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Each member of the Nominating Committee shall abstain from voting on any
resolutions, making any recommendations and/or participating in any
deliberations of the Nominating Committee in respect of the assessment of his
performance or re-nomination as a Director.
Each of the Proposed New Directors confirms that he is able to devote sufficient
time to discharge his duties as a director of the Enlarged Group following
Completion.
The New Nominating Committee, after having considered the following:
(a) the principal occupation and commitments of the Proposed Independent
Directors, including the number of listed company board representations
that each of them has;
(b) the attendance to-date at board meetings of listed companies in which Dato’
Wong King Kheng, Loh Weng Whye and Foo Jong Han Rey serve as
independent directors;
(c) the confirmation by the Proposed Independent Directors that they are able
to devote sufficient time and attention to the matters of the Enlarged Group;
(d) the professional experience and expertise of the Proposed Independent
Directors; and
(e) the composition of the new board of Directors,
is of the view that Dato’ Wong King Kheng, Loh Weng Whye and Foo Jong Han
Rey are able to commit sufficient time, attention and resources to discharge their
respective duties, and are suitable and possess the relevant experience to serve
as Proposed Independent Directors of the Enlarged Group.
In addition, in respect of Dato’ Wong King Kheng and Foo Jong Han Rey, taking
into account the need for progressive refreshing of the board of Directors, the
proposed new board of Directors (save for Dato’ Wong King Kheng and Foo Jong
Han Rey), and the Financial Adviser have subjected the independence of Dato’
Wong King Kheng and Foo Jong Han Rey to particularly rigorous review and are
of the view that notwithstanding the appointment of Dato’ Wong King Kheng and
Foo Jong Han Rey as independent directors of the Company since 1996 and
2006 respectively, their independence is not affected taking into consideration the
following:
(a) upon Completion, the existing Board will step down from the Company. The
appointment of Dato’ Wong King Kheng and Foo Jong Han Rey as
independent directors will be subject to Shareholders’ approval at the EGM
and is conditional upon the Proposed Acquisition being approved by
Shareholders at the same EGM;
(b) save for Dato’ Wong King Kheng and Foo Jong Han Rey, none of the
existing directors shall be appointed to the new board of Directors;
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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(c) concurrent with Completion, the Existing Business of the Group, which is in
the business of franchising, marketing and retailing of lifestyle sporting
goods, footwear, equipment, apparel and accessories, will be disposed of
through the Proposed Disposal and will not be part of the Enlarged Group.
The business of the Target Group, being property development, will be
injected into the Enlarged Group which is completely different and not
related to Existing Business of the Group. There is no business relationship
between the Existing Business and the property development business of
the Target Group;
(d) the new board of Directors shall comprise three new executive directors and
a new independent director. Save for Dato’ Wong King Kheng and Foo Jong
Han Rey none of the existing directors will be appointed as the directors of
the Enlarged Group. Neither of Dato’ Wong King Kheng and Foo Jong Han
Rey have any existing business or professional relationship of a material
nature with the Group, the Hatten Group, the Target Group, the current
Directors, the Proposed Executive Directors and/or substantial
shareholders of the Group or the Target Group. Neither of them are related
to any of the current Directors, the other Proposed New Directors and/or
substantial shareholders of the Target Group;
(e) Dato’ Wong King Kheng and Foo Jong Han Rey are not in any way related
to the controlling shareholders, Directors and key management of the Target
Group; and
(f) Dato’ Wong King Kheng and Foo Jong Han Rey with their relevant financial
and legal backgrounds and experience respectively will be able to value add
to the new board of Directors.
Based on the above, Guideline 2.4 of the Code of Corporate Governance 2012
has been complied with.
23.6.3. New Remuneration Committee
The New Remuneration Committee will comprise Foo Jong Han Rey, Loh Weng
Whye and Dato’ Wong King Kheng. The chairman of the New Remuneration
Committee will be Foo Jong Han Rey.
The Remuneration Committee will be responsible for recommending to the board
of Directors a framework of remuneration for the Directors and key executive
officers, and determine specific remuneration packages for each executive
Director and key executive officer of the Enlarged Group.
The recommendations of the Remuneration Committee will be submitted for
endorsement by the entire board of Directors. All aspects of remuneration,
including but not limited to director’s fees, salaries, allowances, bonuses,
options, share-based incentives and awards, and benefits-in-kind shall be
covered by the Remuneration Committee.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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In addition, the Remuneration Committee will (a) perform an annual review of the
remuneration of the employees who are immediate family members of the
Directors or the Chief Executive Officer (or equivalent position), whose
remuneration exceeds S$50,000 per annum to ensure transparency on their
remuneration packages; (b) review and approve any bonuses, pay increases
and/or promotions for these employees; and (c) review the Company’s
obligations arising in the event of termination of the executive Directors’ and key
executive officers’ contracts of service, to ensure that such contracts of service
contain fair and reasonable termination clauses which are not overly generous.
Each member of the Remuneration Committee shall abstain from voting on any
resolutions, making recommendations and/or participating in any deliberations of
the Remuneration Committee in respect of his remuneration package or that of
employees related to him (if any).
23.6.4. Information Disclosure
Following Completion, the Enlarged Group will continue to implement a policy of
providing full disclosure of material corporate information as commercially
appropriate through press announcements, press releases and shareholders’
circulars as well as through the statutory interim and annual financial results
announcements.
23.6.5. Internal Controls
The Proposed New Directors, with the concurrence of the New Audit and Risk
Committee, are of the opinion that the internal controls of the Target Group are
adequate to address operational, financial and compliance and information
technology risks. In arriving at such opinion, the Proposed New Directors have
given regard to the internal audit report by PricewaterhouseCoopers Risk
Services Pte. Ltd.
The Company will put in place a whistle-blowing framework endorsed by the Audit
and Risk Committee where employees of the Company may, without fear of
reprisals or victimisation and in confidence, raise concerns about possible
corporate improprieties in matters of financial reporting or other matters and to
ensure that arrangements are in place for the independent investigations of such
matters. The details of the whistle-blowing policies and arrangements will be
made available to all employees. The Audit and Risk Committee is obliged to
review all reports received and take or approve the appropriate actions. The
objective for such arrangement is to ensure independent investigation of such
matters and appropriate follow-up action.
In the event that a member of the Audit and Risk Committee is interested in any
matter being considered by the Audit and Risk Committee, he will abstain from
reviewing that particular transaction or voting on that particular transaction.
The Proposed New Directors will also periodically review the internal controls and
risk management systems of the Company regularly to ensure that there are
sufficient guidelines and procedures in place to monitor its operations.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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24. INTERESTED PERSON TRANSACTIONS
This section sets out the material interested person transactions entered into by the Target
Group for the Period Under Review and for the period from 1 July 2016 up to the Latest
Practicable Date. In line with Chapter 9 of the Listing Manual and the Catalist Rules, a
transaction which value is less than S$100,000 is not considered material in the context
of the Proposed Acquisition and is not taken into account for the proposes of aggregation
in this section.
Shareholders should note that upon Completion, any material transaction entered into
between the Entities at Risk and any Interested Persons, the details of which are set out
in this Section 24 and Appendix G, would be an interested person transaction.
Save as disclosed in this Section, there are no interested person transactions for the
Period Under Review and for the period from 1 July 2016 up to the Latest Practicable Date
involving the Target Group which are material.
24.1. Interested Persons
The following is a list of certain of the interested persons, who had transacted with the
Target Group during the Period Under Review and for the period from 1 July 2016 up to
the Latest Practicable Date:
(a) Dato’ Colin, the Executive Chairman and Managing Director of the Target Group;
(b) Dato’ Edwin, an Executive Director and Deputy Managing Director of the Target
Group;
(c) Fuyuu City Sdn. Bhd., a company wholly owned by the Tan Brothers;
(d) Fuyuu Development Sdn. Bhd., a company wholly owned by the Tan Brothers and
their associates;
(e) Hatten Asset Management Sdn. Bhd., a company wholly owned by the Tan Brothers;
(f) Hatten Properties Sdn. Bhd., a company wholly owned by the Tan Brothers and their
associates;
(g) Hatten Retail Management Sdn. Bhd., a company wholly owned by the Tan Brothers;
(h) Prolific Acres Sdn. Bhd., a company wholly owned by the Tan Brothers and their
associates;
(i) Temasek Blooms Sdn. Bhd., a company wholly owned by the Tan Brothers and their
associates;
(j) Montane Construction Sdn. Bhd., a company wholly owned by the aunt (sister of
Datuk Wira Eric) of the Tan Brothers, Tan Ler Choo. On this basis, Montane
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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Construction Sdn. Bhd. does not fall within the the definition of “interested persons”
under the Catalist Rules. We have, however, for transparency set out below details
relating to our transactions with Montane Construction Sdn. Bhd.; and
(k) Capital City Property Sdn. Bhd., a company in which the Tan Brothers, in aggregate,
currently hold 50.0% of the issued and paid-up share capital.
The full list of interested persons who have transacted with the Target Group during the
Period Under Review and for the period from 1 July 2016 up to the Latest Practicable Date
is set out in Appendix G of this Circular entitled “List of Interested Persons”.
24.2. Past Interested Person Transactions
24.2.1. Disposal of motor vehicles to interested persons
In FY2016, FVSB disposed of one (1) motor vehicle to Fuyuu Development Sdn.
Bhd. for a consideration of RM2,187,524.
In FY2016, FGSB disposed of one (1) motor vehicle to Fuyuu Development Sdn.
Bhd. for a consideration of RM1,062,333.
As at the Latest Practicable Date, both motor vehicles mentioned above are
legally held by Hatten Leasing on trust for Fuyuu Development Sdn. Bhd. Hatten
Leasing is in the process of transferring the legal title of the abovementioned
motor vehicles to the Hatten Group.
Each of the above transactions was not on an arm’s length basis and were not on
normal commercial terms and was prejudicial to the Target Group as the
consideration of each of the transactions was not based on the prevailing market
price of the motor vehicles. Moving forward, the Target Group does not intend to
enter into such transactions with interested persons.
24.2.2. Purchase of business of Hatten Leasing and Cosha Leasing
On 30 June 2016, Hatten International Pte. Ltd. purchased two (2) sole
proprietorships namely Cosha Leasing and Hatten Leasing which were held by
Dato’ Colin and Dato’ Edwin respectively. The consideration for each transaction
was S$1. The transactions were not on an arm’s length basis and were not on
normal commercial terms. They were not prejudicial to the Target Group as
Cosha Leasing and Hatten Leasing were holding motor vehicles on trust for the
Target Group. The purchase of Cosha Leasing and Hatten Leasing allowed the
Target Group to terminate any trust arrangements with Cosha Leasing and Hatten
Leasing, which, prior to 30 June 2016, were interested person transactions.
Moving forward, the Target Group does not intend to enter into such transactions
with interested persons.
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24.2.3. Advances to the Hatten Group
During the Period Under Review and up until the Latest Practicable Date, the
Target Group had granted advances to certain companies of the Hatten Group,
which aggregate value is as follows:
Aggregate amounts incurred (RM’000)
FY2014 FY2015 FY2016
1 July 2016
up until the
Latest
Practicable
Date
51,514 89,749 147,095 902
As these advances were interest-free, unsecured and had no fixed terms of
repayment, these advances were not on an arm’s length basis and were not on
normal commercial terms and were prejudicial to the interests of the Target
Group. As at the Latest Practicable Date, all such advances to the Hatten Group
for the Period Under Review have been repaid by way of set off further to the
Set-Off Agreement. Please see Section 24.4.1(f) of this letter entitled “Set-Off
Agreement” for more details on the Set-Off Agreement. As at the Latest
Practicable Date, all advances from 1 July 2016 up until the Latest Practicable
Date to the Hatten Group has been repaid by the Hatten Group.
Moving forward, we do not intend to continue to grant advances to interested
persons.
24.2.4. Advances from the Hatten Group
During the Period Under Review up until the Latest Practicable Date, the Target
Group had been granted advances from certain companies of the Hatten Group,
which aggregate value is as follows:
Aggregate amounts received (RM’000)
FY2014 FY2015 FY2016
1 July 2016
up until the
Latest
Practicable
Date
9,176 7,812 55,656 49
As these advances were interest-free, unsecured and had no fixed terms of
repayment, these advances were not extended to us on an arm’s length basis and
were not on normal commercial terms but were not prejudicial to the Target
Group. The advances to the Target Group were beneficial to the Target Group. As
at the Latest Practicable Date, all such advances from the Hatten Group for the
Period Under Review have been repaid by way of set off further to the Set-Off
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Agreement. Please see Section 24.4.1(f) of this letter entitled “Set-Off
Agreement” for more details on the Set-Off Agreement. As at the Latest
Practicable Date, all advances from 1 July 2016 up until the Latest Practicable
Date from the Hatten Group has been repaid by the Target Group.
Moving forward, we do not intend to continue to receive advances from interested
persons.
24.2.5. Advances to the Tan Brothers and their Associates
During the Period Under Review, FRSB had provided certain interest-free
advances to Dato’ Colin, Dato’ Edwin and Tong Yee Xing, which aggregate largest
amount outstanding during the Period Under Review was RM932,176,
RM868,486 and RM5,000,000 respectively.
Additionally, the Target Group has granted advances to certain companies owned
by Dato’ Colin and Dato’ Edwin in their personal capacity as follows:
Aggregate amounts incurred (RM’000)
FY2014 FY2015 FY2016
– 35 387
As the above advances were provided interest-free unsecured and had no fixed
terms of repayment, they were not provided on an arm’s length basis and were
not on normal commercial terms and were prejudicial to the Target Group. As at
the Latest Practicable Date, such advances to Dato’ Colin, Dato’ Edwin, Tong Yee
Xing and/or companies owned by them in their personal capacity have been
repaid by way of set off further to the Set-Off Agreement. Please see Section
24.4.1(f) of this letter entitled “Set-Off Agreement” for more details on the Set-Off
Agreement.
Moving forward, the Enlarged Group does not intend to provide any such
advances to its directors or such companies owned by them in their personal
capacities.
24.2.6. Advances from Le Vinnie Jewellery
During the Period Under Review, the Target Group has also received certain
advances from Le Vinnie Jewellery, a sole proprietorship owned by Dato’ Edwin
in his personal capacity as follows:
Aggregate amounts received (RM’000)
FY2014 FY2015 FY2016
363 1,194 1,558
The advances from Le Vinnie Jewellery have also been repaid by the Target
Group. As the advances were provided to the Target Group interest-free,
unsecured and had no fixed terms of repayment, they were not provided on an
arm’s length basis and were not on normal commercial terms but were not
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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prejudicial to the Target Group. The advances to the Target Group were beneficial
to the Target Group. Moving forward, the Enlarged Group does not intend to
obtain such advances from interested persons.
24.2.7. Collections on Behalf
During FY2014 and FY2015, the Target Group has made certain collections on
behalf of Capital City Property Sdn. Bhd. This was due to sales of the Capital City
Project that were conducted at the Target Group’s sales galleries. The aggregate
amounts are as follows:
Aggregate amounts (RM’000)
FY2014 FY2015 FY2016
106 13 –
During FY2014 and FY2016, Capital City Property Sdn. Bhd. has made certain
collections on behalf of the Target Group. This was due to sales of the Target
Group’s properties by Capital City Sdn. Bhd. The aggregate amounts are as
follows:
Aggregate amounts (RM’000)
FY2014 FY2015 FY2016
179 – 5
Monies collected on behalf were not subject to any interest, were unsecured and
had no fixed terms of repayment. Such collections were not on an arm’s length
basis and were not on normal commercial terms but as there were no fees
charged by either the Target Group or Capital City Property Sdn. Bhd. in relation
to such collections of behalf, they were not prejudicial to the Target Group. As at
the Latest Practicable Date, there are no outstanding monies owing from or due
to Capital City Property Sdn. Bhd.
Moving forward, we do not intend to continue to collect any monies on behalf of
interested persons.
24.2.8. Licence to Use Sales Premises
In FY2014 and FY2015, the Target Group licensed its premises in Singapore to
Capital City Property Sdn. Bhd. to carry out promotional activities for the Capital
City Project for aggregate sums as follows:
Aggregate amounts (RM’000)
FY2014 FY2015 FY2016
516 159 –
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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We are of the opinion that such licence was carried out on an arm’s length basis,
on normal commercial terms and therefore not prejudicial to the Company.
Moving forward, the Target Group does not intend to enter into such transactions
with Capital City Property Sdn. Bhd.
24.2.9. Human Resources
During the Period Under Review and up until 31 August 2016, employees of the
Target Group were seconded from Hatten Asset Management Sdn. Bhd., Hatten
Properties Sdn. Bhd., Hatten Brand Management Sdn. Bhd. and Hatten Retail
Management Sdn. Bhd. (the “HR Companies”). The HR Companies provided
payroll management services.
Save for reimbursement of salary in respect of such employees who were
seconded, no fee was paid to any of the HR Companies for their services. The
provision of such services, while not on an arm’s length basis and not on normal
commercial terms, were not prejudicial to the Target Group. Going forward, we do
not intend to continue to enter into similar transactions with the HR Companies.
All employees will be managed by the in-house human resources department of
the Target Group.
24.2.10. Personal Guarantees given by interested persons to the Target Group
During the Period Under Review and up until the Latest Practicable Date, the Tan
Brothers had provided guarantees for loans granted to the Target Group, details
of which are set out below:
Entity Guarantor
Largest AmountGuaranteed (’000)during the Period
Under Reviewand up untilthe Latest
Practicable DateLoans for
use byPurpose of
Loan
Bank KerjasamaRakyat Malaysia
Berhad
Dato’ ColinDato’ Edwin
RM129,164 FRSBPenyambung-I
under the principleof Bai’ Al Inah(1)
Bank KerjasamaRakyat Malaysia
Berhad
Dato’ ColinDato’ Edwin
RM123,892 FRSBPenyambung-I
under the principleof Bai’ Al Inah(1)
Bank KerjasamaRakyat Malaysia
Berhad
Dato’ ColinDato’ Edwin
RM69,195 FRSBPenyambung-I
under the principleof Bai’ Al Inah(1)
RHB Bank Berhad Dato’ Colin RM3,400(2) FRSBBanker’s
Guarantee
Public BankBerhad
Dato’ Colin RM140,000 FRSBPurchase of
motor vehicle
Malayan BankingBerhad
Dato’ ColinDato’ Edwin
RM148,000 FRSBPurchase of
motor vehicle
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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As no fee was paid to the Tan Brothers for the provision of the above guarantees,
such arrangements were not carried out on an arm’s length basis and were not
on normal commercial terms but were not prejudicial to the Target Group. The
guarantees provided were beneficial to the Target Group. As at the Latest
Practicable Date, the above guarantees have been discharged by the Tan
Brothers. There are certain present and ongoing guarantees and such other
security provided by the Tan Brothers, their associates and/or Chong Foh Siong,
a Proposed New Key Executive Officer, for facilities granted to the Target Group
as set out in Section 24.3.1 of this letter. Following Completion, the Target Group
intends to request for the release and discharge of all guarantees and such other
security provided by the Tan Brothers, their associates and/or Chong Foh Siong
from the respective financial institutions and to replace them with corporate
guarantees provided by the Enlarged Group which may be acceptable to the
respective financial institutions, subject to their consent. The Target Group does
not expect any material changes to other terms and conditions of the facilities
granted by the respective financial institutions. In the event that the financial
institutions do not accept the substitution of the guarantees and other security
and the Enlarged Group is unable to secure alternative facilities, the Tan Brothers
have agreed to continue, and to procure their associates to continue, providing
such guarantees until such time when the Enlarged Group is able to secure
alternative facilities. Chong Foh Siong has also agreed to continue providing such
security until such time when the Enlarged Group is able to secure alternative
facilities. Moving forward, the Target Group does not intend to enter into similar
transactions.
Notes:
(1) Business financing under Bridging-i pursuant to the principle of Bai’ Al-Inah is akin to a sale and
buyback contract. The principle refers to the selling of an asset to customers on deferred
payment and the asset is subsequently bought by the financier at a discounted price.
(2) This was not a guarantee but a placement of a fixed deposit with RHB Bank Berhad.
24.2.11. Property Sales
During the Period Under Review, certain of the properties sold by the Target
Group were purchased by the Tan Brothers and/or their associates. The
approximate aggregate value of such properties sold is as follows:
Aggregate amounts (RM’000)
FY2014 FY2015 FY2016
134 43,415 12,904
12 units in Elements Mall were sold to Fuyuu Development Sdn. Bhd. at an
aggregate sum of RM20.2 million, which represented 9.9% and 3.1% of the total
revenue of the Target Group for FY2015 and FY2016 respectively (based on
recognition on a percentage of completion basis) and 3.0% of the net saleable
area of Elements Mall and were sold at a 30.0% discount to the market rate, such
discount being extended due to the bulk purchase by Fuyuu Development Sdn.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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Bhd. The transaction was not on an arm’s length basis and was not on normal
commercial terms and was prejudicial to the Target Group. Such sales, however,
aided in the cash flow of the relevant development company.
Four (4) units in Elements Mall were sold to Temasek Blooms Sdn. Bhd. at an
aggregate sum of RM10.4 million, which represented 0.9% of the net saleable
area of Elements Mall. The units sold to Temasek Blooms Sdn. Bhd. was at a
50.0% discount to the market rate, such discount being extended due to the bulk
purchase by Temasek Blooms Sdn. Bhd. The transaction was not on an arm’s
length basis and was not on normal commercial terms and was prejudicial to the
Target Group. Such sales, however, aided in the cash flow of the relevant
development company.
One (1) unit in SilverScape Residences was sold to Regal Fiesta Sdn. Bhd. at
RM0.4 million, which represented 0.1% of the net saleable area of SilverScape
Residences. No discount was provided to Regal Fiesta Sdn. Bhd. The transaction
was on an arm’s length basis and was on normal commercial terms and was not
prejudicial to the Target Group.
Moving forward, the Target Group does not intend to enter into discounted
property sales with interested persons.
24.2.12. Exclusive Marketing and Leasing Agency
During the Period Under Review and up until the Latest Practicable Date, FRSB,
FGSB, FVSB and GMSB entered into agreements with Hatten Properties Sdn.
Bhd., appointing Hatten Properties Sdn. Bhd. as their exclusive marketing and
leasing agent. We are of the opinion that these agreements were entered into on
an arm’s length basis and on normal commercial terms and not prejudicial to the
Target Group. The fees to be paid to Hatten Properties Sdn. Bhd. were on a
commission basis and were in line with prevailing market rates. As at the Latest
Practicable Date, no fees have been paid in relation to leasing agency services.
Fees paid in relation to property agency management services have been
aggregated in Section 24.3.3 entitled “Property Agency Management Services”
below.
As at the Latest Practicable Date, such exclusive agreements have been
terminated. Moving forward, the Target Group does not intend to enter into
exclusive agreements with interested persons in relation to marketing and leasing
agency services. The Target Group will continue to engage Hatten Properties
Sdn. Bhd. in relation to property agency management services, which falls within
the Proposed IPT Mandate. Please see Section 24.3.3 entitled “Property Agency
Management Services” below for more details in relation to such services.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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24.3. Present and Ongoing Interested Person Transactions
24.3.1. Security provided by interested persons to the Target Group
During the Period Under Review and up until the Latest Practicable Date, the Tan
Brothers and other interested persons have provided various security for facilities
granted to the Target Group, details of which are set out below:
Guarantees
Entity Guarantor
Largest AmountGuaranteedduring the
Period UnderReview and upuntil the Latest
PracticableDate
AmountGuaranteed asat the LatestPracticable
Date
Facilityfor use
byPurpose of
Facility
Affin Bank Berhad Dato’ Edwin RM354,000 RM236,969 FRSB Purchase ofmotor vehicle
Public BankBerhad
Dato’ Colin RM158,000 RM37,285 FRSB Purchase ofmotor vehicle
RHB Bank Berhad Dato’ Colin RM220,000 RM220,000 FRSB Banker’sguarantee
United OverseasBank (Malaysia)
Bhd
Dato’ ColinDato’ Edwin
RM55,000,000 RM38,431,713 FGSB Bridging loan topart financeconstruction
costs
Malaysia BuildingSociety Berhad
FuyuuDevelopment
Sdn. Bhd.
RM258,500,000 RM230,001,954 FVSB Islamic termfinancing to
redeem a pieceof leasehold land
and Islamicbridging
financing to partfinance
constructioncosts
Malaysia BuildingSociety Berhad
Dato’ ColinDato’ Edwin
RM258,500,000 RM230,001,954 FVSB Islamic termfinancing to
redeem a pieceof leasehold land
and Islamicbridging
financing to partfinance
constructioncosts
United OverseasBank (Malaysia)
Bhd
Dato’ ColinDato’ Edwin
RM120,000,000 RM20,392,918 GMSB Bridging loan topart financeconstruction
costs
Public BankBerhad
Dato’ Edwin RM300,000 RM271,120 GMSB Purchase ofmotor vehicle
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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Other Security
EntitySecurity
Provided ByType ofSecurity
Largest AmountGuaranteedduring the
Period UnderReview and upuntil the Latest
PracticableDate
AmountGuaranteed
as at theLatest
PracticableDate
Facilityfor use
byPurpose of
Facility
MalayanBankingBerhad
Dato’ Colin Letter ofset-off infavour ofMalayanBanking
Berhad forthe placement
of fixeddeposit
RM6,500,000 RM6,500,00 FRSB Banker’sguarantee
UnitedOverseas
Bank(Malaysia)
Bhd
Dato’ ColinDato’ Edwin
Letter ofSubordination;
Letter ofUndertaking;
RM55,000,000 RM38,431,713 FGSB Bridgingloan for
financing ofconstruction
costs
MalaysiaBuildingSocietyBerhad
Dato’ ColinDato’ EdwinChong Foh
SiongTong Yee
Deed ofSubordination
(Shareholders)
RM258,500,000 RM228,001,954 FVSB Islamicterm
financing toredeem apiece of
leaseholdland andIslamicbridging
financing topart financeconstruction
costs
MalaysiaBuildingSocietyBerhad
Dato’ ColinDato’ EdwinChong Foh
Siong
Deed ofSubordination
(Directors)
RM258,500,000 RM228,001,954 FVSB Islamicterm
financing toredeem apiece of
leaseholdland andIslamicbridging
financing topart financeconstruction
costs
MalaysiaBuildingSocietyBerhad
FuyuuDevelopment
Sdn. Bhd.
Assignmentof rights,
interests andbenefits of
parcelserected on
land
RM258,500,000 RM230,001,954 FVSB Islamicterm
financing toredeem apiece of
leaseholdland andIslamicbridging
financing topart financeconstruction
costs
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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EntitySecurity
Provided ByType ofSecurity
Largest AmountGuaranteedduring the
Period UnderReview and upuntil the Latest
PracticableDate
AmountGuaranteed
as at theLatest
PracticableDate
Facilityfor use
byPurpose of
Facility
MalaysiaBuildingSocietyBerhad
FuyuuDevelopment
Sdn. Bhd.
Debentures RM258,500,000 RM230,001,954 FVSB Islamicterm
financing toredeem apiece of
leaseholdland andIslamicbridging
financing topart financeconstruction
costs
UnitedOverseas
Bank(Malaysia)
Bhd
Dato’ ColinDato’ Edwin
Tong YeeXing
Letter ofSubordination;
Letter ofUndertaking
RM120,000,000 RM20,392,918 GMSB Bridgingloan to part
financeconstruction
costs
As no fee was paid to the Tan Brothers, their associates and/or Chong Foh Siong
for the provision of the above security, such arrangements were not carried out
on an arm’s length basis and were not on normal commercial terms but were not
prejudicial to the Target Group. Following Completion, the Target Group intends
to request for the release and discharge of all guarantees and such other security
provided by the Tan Brothers, their associates and/or Chong Foh Siong, a
Proposed New Key Executive Officer, from the respective financial institutions
and to replace them with corporate guarantees provided by the Enlarged Group
which may be acceptable to the respective financial institutions, subject to their
consent. The Target Group does not expect any material changes to other terms
and conditions of the facilities granted by the respective financial institutions. In
the event that the financial institutions do not accept the substitution of the
securities and the Enlarged Group is unable to secure alternative facilities, the
Tan Brothers have agreed to continue, and to procure that their associates
continue, providing such guarantees and/or such other security until such time
when the Enlarged Group is able to secure alternative facilities. Chong Foh Siong
has also agreed to continue providing such security until such time when the
Enlarged Group is able to secure alternative facilities. Moving forward, the Target
Group does not intend to enter into similar transactions.
24.3.2. Leasing of premises
During the Period Under Review and up until the Latest Practicable Date, the
Target Group has been able to occupy office space provided by the Hatten Group
without charge. The landlord is Temasek Blooms Sdn. Bhd. As there has been no
rent charged, the transaction is not on an arm’s length basis and not on normal
commercial terms. It is, however, not prejudicial to the Target Group.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
A-135
With effect from 1 January 2017, the Target Group will be leasing its office
premises from Temasek Blooms Sdn. Bhd. for a period of three (3) years with an
option to renew for a further three (3) years. The aggregate approximate floor
area leased is 15,232 sq.ft. and the aggregate monthly rental is RM64,585.
We are of the opinion that the charges for the provision of these services are
reasonable and on normal commercial terms. These charges were benchmarked
against market rates obtained by the Target Group from IVPS Property
Consultant Sdn. Bhd.
The leases of office premises will continue until the expiry of the leases.
Thereafter, the Enlarged Group intends to renew the lease in accordance with the
exception to interested person transactions under Rule 916(1) of the Catalist
Rules. Any future leases, of not more than three (3) years and having the terms
supported by an independent valuation, would not be required to satisfy Rule 906
of the Catalist Rules.
24.3.3. Property Agency Management Services
During the Period Under Review and up until the Latest Practicable Date, the
Target Group has engaged Hatten Properties Sdn. Bhd., Hatten Retail
Management Sdn. Bhd. and Hatten Asset Management Sdn. Bhd. for the
provision of property agency management services. Services provided include
the management of property agents and providing administrative support to
property agents. Details for such transactions are as follows:
Aggregate amounts incurred (RM’000)
FY2014 FY2015 FY2016
1 July 2016 and
up until the
Latest
Practicable
Date
9,201 14,559 9,810 15,509
We are of the opinion that the charges for the provision of these services are
reasonable and on normal commercial terms. These charges are comparable to
those paid (or will be paid) by the Target Group for similar services to unrelated
suppliers. The provision of property agency management services falls within the
Proposed IPT Mandate. Please see Section 13 of the VGO Letter entitled “The
Proposed IPT Mandate” for further details.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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24.4. Other Interested Person Transactions
24.4.1. Past Transactions
(a) Corporate Guarantees given by the Target Group
During the Period Under Review and up until the date of this Circular, the
Target Group provided corporate guarantees to the suppliers of Montane,
who is the main contractor of some of our property development projects.
Details are as follows:
Supplier Guarantor
Largest Amount
Guaranteed during the
Period Under Review
Buildcon Concrete Sdn. Bhd. FRSB RM1,000,000
Chuan Huat Industrial
Marketing Sdn. Bhd.
FRSB RM2,000,000
CHRB Selatan Sdn. Bhd. FRSB RM2,000,000
Hanson Building Materials
Malaysia Sdn. Bhd.
FVSB RM1,000,000
Lafarge Concrete (M)
Sdn. Bhd.
FVSB RM1,000,000
No fee was paid to the Target Group in respect of the above guarantees.
Such guarantees were not provided on an arm’s length basis and not on
normal commercial terms. They were, however, not prejudicial to the
interests of the Target Group. It was in the Target Group’s interests to ensure
that the main contractor’s suppliers were assured of payment so as to
facilitate the timely provision of materials and services. As at the date of this
Circular, all corporate guarantees provided to suppliers of Montane have
been cancelled. Based on the knowledge of the Proposed Executive
Directors, it is not uncommon for certain suppliers of the main contractor,
nominated or requested by the developer, to request for corporate
guarantees from the developer who has more established financial standing
than the main contractor. No fees are usually charged by the developer for
the provision of such corporate guarantees. Moving forward, the Target
Group does not intend to provide corporate guarantees to the suppliers of
Montane.
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(b) Advances to Montane
During the Period Under Review, the Target Group had provided certain
interest-free advances to Montane which aggregate amount is as follows:
Aggregate amounts (RM’000)
FY2014 FY2015 FY2016
508 11,770 39,479
As such advances were interest-free, unsecured and had no fixed terms of
repayment, they were not on an arm’s length basis and not on normal
commercial terms. The advances were, however, not prejudicial to the
interests of the Target Group as they were carried out in the context of all
other transactions with Montane. As at 30 June 2016, all such advances to
Montane have been repaid by way of set off further to the Set-Off
Agreement. Please see Section 24.4.1(f) entitled “Set-Off Agreement” below
for more details on the Set-Off Agreement.
Moving forward, the Target Group does not intend to provide any advances
to Montane.
(c) Advances from Montane
During the Period Under Review, there were certain interest-free advances
from Montane provided to the Target Group. The aggregate amount of these
advances are as follows:
Aggregate amounts (RM’000)
FY2014 FY2015 FY2016
1,052 4,752 10,862
As these advances were interest-free, unsecured and had no fixed terms of
repayment, these advances were not extended to us on an arm’s length
basis and were not on normal commercial terms but were not prejudicial to
the interests of the Target Group. The advances to the Target Group were
beneficial to the Target Group. As at 30 June 2016, all such advances from
the Montane have been repaid by way of set off further to the Set-Off
Agreement. Please see Section 24.4.1(f) entitled “Set-Off Agreement” below
for more details on the Set-Off Agreement.
Moving forward, the Target Group does not intend to receive advances from
Montane.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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(d) Dormitory Management
During the Period Under Review, GMSB was engaged to provide hostel
management services, including the provision of amenities and housing of
construction workers, to Montane for the following aggregate amounts:
Aggregate amounts (RM’000)
FY2014 FY2015 FY2016
– 4,700 2,493
Such transaction was carried out on an arm’s length basis and was on
normal commercial terms and was not prejudicial to the Target Group.
(e) Stabilisation Works
During FY2014, FGSB engaged Kuenbuild Sdn. Bhd. for services relating to
soil and stabilisation works in relation to Vedro by the River and paid a total
fee of RM24.3 million. It should be noted that Kuenbuild Sdn. Bhd. is
beneficially owned by Tan Ler Choo, who is the aunt of the Tan Brothers. On
this basis, Kuenbuild Sdn. Bhd. does not fall within the definition of
“interested persons” under the Catalist Rules. We have, however, for
transparency set out details relating to our transaction with Kuenbuild Sdn.
Bhd. The transaction was not carried out on an arms’ length basis and was
not on normal commercial terms (due to there being no independent quotes
received) but was not prejudicial to the Target Group. The rates provided by
Kuenbuild Sdn. Bhd. were lower than informal quotes obtained by the Target
Group.
Moving forward, the Target Group does not intend to enter into such
transactions with Kuenbuild Sdn. Bhd.
(f) Set-Off Agreement
On 30 June 2016, Montane, by virtue of Tan Ler Choo being the aunt of the
Tan Brothers and the beneficial owner of Montane, the Target Group and
certain of the companies in the Hatten Group entered into a set-off
agreement (the “Set-Off Agreement”). In accordance with the Set-Off
Agreement, the Target Group agreed to assign the benefit of its net
advances to the Hatten Group, as set out in Sections 24.2.3, 24.2.4 and
24.2.5 above, to Montane in consideration of Montane waiving the
equivalent amount of monies owed to Montane, in the sum of RM232.3
million, by the Target Group for construction services and for repayment of
such advances from Montane. The Set-Off Agreement was not carried out
on an arm’s length basis and not on normal commercial terms but was not
prejudicial to the interests of the Target Group.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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As a result of the Set-Off Agreement, the monies owing to Montane
decreased from approximately RM233.6 million to RM1.3 million.
Moving forward, the Target Group does not intend to enter into such
transactions with Montane.
24.4.2. Present and Ongoing Transactions
Construction Services
During the Period Under Review and up until the Latest Practicable Date, the
Target Group has engaged Montane as the main contractor for some of our
property development projects. Montane is wholly owned by Tan Ler Choo, who
is the aunt of the Tan Brothers. On this basis, Montane does not fall within the
definition of “interested persons” under the Catalist Rules. We have, however, for
transparency set out below details relating to our transactions with Montane.
Aggregate amounts incurred (RM’000)
FY2014 FY2015 FY2016
1 July 2016
up until the
Latest
Practicable
Date
227,396 378,862 285,895 131,080
Montane has been selected and appointed based on factors such as its licensed
qualifications, financial status, reliability, pricing, track record, ability to commit to
the project timeline, and quality of workmanship and finishing. We are of the
opinion that, while the transactions with Montane were not on an arm’s length
basis by virtue of Tan Ler Choo being the aunt of the Tan Brothers and were not
on normal commercial terms (due to there being no independent quotes
received), the charges for the provision of these services are reasonable. Based
on benchmark rates for the construction of similar developments by Langdon and
Seah, these charges are comparable to those paid (or will be paid) by the Target
Group or similar services to unrelated suppliers. Coupled with flexible payment
terms, the transactions with Montane were not prejudicial to the Target Group.
Please refer to Section 4.2 of this letter entitled “Business Process” for more
information on the selection of the main contractor for our property development
projects. The engagement of Montane for construction services falls within the
Proposed IPT Mandate. Please see Section 13 of the VGO Letter entitled “The
Proposed IPT Mandate” for further details.
24.5. Opinion of the New Audit and Risk Committee
The New Audit and Risk Committee has reviewed the above present and ongoing
interested person transactions and having considered, among other things, the bases
provided by the Target Group, is satisfied that where applicable, the present and ongoing
interested person transactions were carried out on an arm’s length basis, on normal
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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commercial terms consistent with the Enlarged Group’s usual business practices and on
terms which are generally not more favourable than those extended to unrelated third
parties and will not be prejudicial to the interests of the Enlarged Group and its minority
Shareholders. Where the present and ongoing interested person transactions are not
carried out on an arm’s length basis, not on normal commercial terms, such transactions
are not prejudicial to the Enlarged Group.
24.6. Future Interested Person Transactions in relation to Interested Persons
From time to time, the Enlarged Group may enter into interested person transactions with
any one or more of the Interested Persons. Shareholders should note that upon
Completion, any material transaction entered into between any Entity at Risk and any
Interested Persons would be an interested person transaction. For the avoidance of doubt,
such Interested Persons would include such persons who may, during such period while
such Proposed IPT Mandate is effective, become Interested Persons where previously
they were not so. Transactions with Interested Persons which do not fall within the ambit
of the Proposed IPT Mandate shall be subject to the relevant provisions of Chapter 9 of
the Listing Manual.
Please see Section 13 of the VGO Letter for more information on the Proposed IPT
Mandate.
In particular, in addition to the present and ongoing Interested Person Transactions, we
anticipate that the following Interested Person Transactions will be entered into:
(a) Trademark Licence
The Enlarged Group will be licensing certain trademarks from the Hatten Group.
Please refer to Section 16 of this letter entitled “Intellectual Property” for more
information on the Trademarks. The licensing period shall be for as long as the Tan
Brothers remain substantial shareholders of the Enlarged Group. As the licensing fee
charged to the Enlarged Group will be a nominal RM1 per annum, the licensing
agreement will not be on an arm’s length basis and not on normal commercial terms.
The Trademark Licence, however, will be beneficial to the Enlarged Group.
Additionally, the Tan Brothers and the Hatten Group shall license the Trademarks to
any entity in the Enlarged Group from time to time as long as the registration of the
Trademarks with the relevant authorities remain valid, and upon the expiry of any
validity period of the Trademarks, to apply for their renewal.
(b) Property Management and Support Services
Upon completion of the property development projects, it is envisaged that the
Enlarged Group will require property management services. Services required
include estate management, building maintenance and security services as set out in
Section 13 of the VGO Letter entitled “The Proposed IPT Mandate”.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
A-141
(c) Master Leasing of Hospitality Properties
In accordance with our marketing strategy for our hospitality developments, it is
envisaged that the Enlarged Group may enter into such master leasing arrangements
with the Hatten Group to lease all relevant hospitality units to provide the necessary
rental yield for the Enlarged Group to pay the same to its customers. Please see
Section 13 of the VGO Letter entitled “The Proposed IPT Mandate” for further details
in relation to the interested person transaction and Section 4.2.4 of this letter entitled
“Sales and Marketing” for further details relating to such marketing strategy.
(d) Leasing Agency Services
The Enlarged Group may engage the Hatten Group to provide leasing agency
services of any unsold retail units or sold units leased-back by the Enlarged Group
from its customers in accordance with such processes as set out in Section 4.2.4 of
this letter entitled “Sales and Marketing”. Please see Section 13 of the VGO Letter
entitled “The Proposed IPT Mandate” for further details in relation to the interested
person transaction.
25. POTENTIAL CONFLICTS OF INTERESTS
The Hatten Group, through its subsidiaries other than the Target Group or through the Tan
Brothers, will continue to operate in other core businesses of the Hatten Group. As the
Hatten Group remains held by the Tan Brothers, transactions with the other Hatten Group
entities will constitute interested person transactions. Please refer to Section 2.3 of this
letter entitled “Structure of the Hatten Group”, Section 24 of this letter entitled “Interested
Person Transactions” and Section 13 of the VGO Letter entitled “The Proposed IPT
Mandate” for more information about the core businesses of the Hatten Group as well as
the interested persons transactions that will be carried out between the Target Group and
the Hatten Group.
25.1. Potential Conflicts of Interests in relation to Property Development and Investment
25.1.1. Details of Retained Business of the Hatten Group
The Tan Brothers and/or the Hatten Group have other interests relating to
property development and investment which may give rise to potential conflict of
interests. Such interests are as follows:
(a) an 80% stake in Velvet Valley Sdn. Bhd., a joint venture property
development project in Seremban, Malaysia (“UniCity Project”);
(b) a 50% stake in Capital City Property Sdn. Bhd., a joint venture company
which is engaged in development of an integrated property project located
in Tampoi, Johor Bahru, Malaysia. On 9 June 2016, Terratech, which is listed
on Catalist and the shareholders of Capital City Property Sdn. Bhd. had
entered into the sale and purchase agreement to acquire all the shares of
Capital City Property Sdn. Bhd. which will constitute a reverse take-over
transaction (“Terratech RTO”);
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(c) a 100% stake in Admiral Merger Sdn. Bhd., a property development
company which is in the process of obtaining development rights over a
25.6-acre land held under H.S. (D) 36153, PT No. 50494 and H.S. (D)
36152, PT No. 50493 Mukim Dengkil, Daerah Sepang, Negeri Selangor. It is
envisaged that the land will be developed into a mixed property
development within approximately seven (7) years (the “Cyberjaya
Project”), which is subject to the ROFR and Call Option granted;
(d) a 100% stake in Prolific Properties Sdn. Bhd., a property development
company which is in the process of obtaining development rights over a
2-acre land located at Taman Melaka Raya, 75000 Melaka, Malaysia and
held under No. Pajakan Negeri 14975, No. Lot 850, Kawasan Bandar
XXXIX, Daerah Melaka Tengah, Melaka. It is envisaged that the land will be
developed into an integrated development including wellness suites, hotel
and serviced apartments within approximately four (4) years (the “Thea
Wellness Project”), which is subject to the ROFR and Call Option granted;
(e) a 100% stake in Fuyuu Land Sdn. Bhd. which has the development rights for
a 0.86-acre land in Johor Bahru, such land being owned by Dato’ Colin and
is included in the ROFR and Call Option granted;
(f) land parcels which are wholly or substantially owned by the Tan Brothers
and/or the Hatten Group for future development, as set out in Appendix H to
this Circular entitled “Assets Under Right of First Refusal and Call Option”;
(g) land parcels in which the Tan Brothers and/or the Hatten Group hold minority
interest for future development, as set out in Appendix H to this Circular
entitled “Assets Under Right of First Refusal and Call Option”;
(h) retail and hospitality investment properties,
(collectively, the “Retained Business”).
Prior to the Proposed Acquisition, the Hatten Group had carried out various
negotiations with relevant parties, including government authorities, land-owners
and other joint venture partners, for the acquisition of land for property
development. Certain of the Retained Business represent such projects that have
not obtained the relevant development approval from the authorities but are in the
process of doing so. Following Completion, the Target Group intends to acquire
such property development to expand its current portfolio.
25.1.2. Mitigating Steps
To mitigate any perceived or potential conflicts of interests in relation to property
development and investment, we have entered into a Non-Competition
Agreement with the Tan Brothers. Pursuant to the Non-Competition Agreement,
the Tan Brothers have agreed, among other things:
(a) not to, and to procure their associates not to, either alone or jointly with,
through or on behalf of any person, company or entity carry on, or be
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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engaged, or be interested in any capacity (save for interests in the nature of
investment in quoted or listed securities of up to five percent (5.0%) of the
total amount of issued securities of the same class in a corporation listed on
any stock exchange, with no control or influence over such entity) in any
other business in Singapore or elsewhere which is in competition with or
similar to the business carried on by any Enlarged Group Company,
including but not limited to the Property Development Business
(“Competing Business”), whether as shareholder or otherwise;
(b) if any business opportunity to engage in any Competing Business in the
territories in which the Enlarged Group operates is offered to any Relevant
Entity or any of our Associates, we shall immediately notify or cause the
Relevant Entity and/or our Associate to notify the Company of such business
opportunity, and if directed to do so by the Board, we will assist the Enlarged
Group to obtain such business opportunity on terms acceptable to the
Enlarged Group. Such business opportunity shall include the offer to
develop any land that forms part of the Relevant Assets;
(c) to irrevocably grant a right of first refusal (the “ROFR”) to the Company (or
such nominee) over any Relevant Asset, save for disposals of any interest
in the Relevant Assets by a Relevant Entity to a related corporation of such
Relevant Entity pursuant to a reconstruction, amalgamation, restructuring,
merger and/or any analogous event or transfer of shares of the Relevant
Entity between the shareholders of the Relevant Entity as may be provided
in any shareholders’ agreement; and
(d) to irrevocably grant a call option to the Company (or such nominee), subject
to any existing pre-emption rights, for any and all of the Relevant Assets (the
“Call Option”) on such purchase price to be mutually agreed between the
Company and such Relevant Entity with reference to the net tangible asset
value of such Relevant Asset or the fair value as determined by an
independent valuation of the Relevant Asset by a reputable independent
accounting firm or valuer.
Exercise of any of the rights under the Non-Competition Agreement by us are
interested person transactions and will be conducted in accordance with the
review procedures for non-mandated interested person transactions as set out in
Section 24 of this letter entitled “Interested Person Transactions”, and will be
subject to Chapter 9 of the Catalist Rules where applicable.
The Non-Competition Agreement will become effective upon Completion and
remain in full force until terminated upon the earlier of (a) the Tan Brothers and/or
their respective associates holding in aggregate, directly or indirectly, less than
15.0% of the total issued share capital of the Target Group or (b) the Target Group
no longer being listed on the SGX-ST (whether Catalist or Mainboard).
In relation to the Capital City Project, we are of the view that any potential conflict
of interests are mitigated. This is because the Capital City Project is a passive
investment of the Tan Brothers and will be managed by an unrelated third party,
Siow Chien Fu. Mr Siow is also the current executive director of and owns 50%
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of Capital City Property Sdn. Bhd. The Tan Brothers, being passive financial
investors and non-executive directors, are not involved in the running of the
business of the Capital City Project or Capital City Property Sdn. Bhd. Subject to
completion of the Terratech RTO, the Tan Brothers undertake that they will not be
directors of Terratech, not appoint any such nominee, and will not directly or
indirectly participate in the management of the Capital City Project, Terratech or
Capital City Property Sdn. Bhd. There will be no staff from the Target Group, or
the Hatten Group, seconded to Terratech or Capital City Property Sdn. Bhd. No
assets under the ROFR and Call Option shall be offered to Terratech or its
subsidiaries.
If the Terratech RTO is not completed, the interests of the Tan Brothers in the
Capital City Project, and any holding company holding such interest in the Capital
City Project, shall be subject to the ROFR and Call Option.
In relation to the Cyberjaya Project and the Thea Wellness Project, subject to
shareholder approval (if applicable), the Company intends to utilise part of the net
proceeds from the Proposed Compliance Placement to acquire the relevant
property development companies, being Admiral Merger Sdn. Bhd. and Prolific
Properties Sdn. Bhd., after Completion and completion of the Proposed
Compliance Placement. It is intended that the Cyberjaya Project will be acquired
on a “cost-plus” basis and the Thea Wellness Project will be acquired based on
an independent valuation of the land owned by Prolific Properties Sdn. Bhd. The
above acquisitions shall be in accordance with the Non-Competition Agreement
and will be considered interested person transactions and conducted in
accordance with the review procedures for non-mandated interested person
transactions as set out in Section 24 of this letter entitled “Interested Person
Transactions”, and subject to Chapter 9 of the Catalist Rules where applicable.
25.2. Potential Conflicts of Interests in relation to Hatten Group’s entitlement in retail and
hospitality properties developed by the Target Group
25.2.1. Details on potential conflict of interests
FRSB has, in accordance with its agreement with Prolific Acres Sdn. Bhd. dated
23 December 2009 and supplemented on 23 December 2009, 30 September
2011 and 12 April 2013, agreed to transfer the ownership of 277 units in
DoubleTree by Hilton, all parcels identified as car parks and the area known as
the Sky Deck located at levels 43 and 44 of SilverScape Residences to Prolific
Acres Sdn. Bhd. and/or its nominee. Such parcels to be transferred to the
landowner were chosen at the landowner’s discretion further to negotiations
between parties prior to entry into such agreement. This is in accordance with
such joint venture agreement between the parties where Prolific Acres Sdn. Bhd.,
being the landowner, agreed for FRSB to take over such land and develop it into
Hatten City Phase 1, consideration of which shall be paid by the transfer of the
relevant legal title of completed parcels of an equivalent value. Upon signing of
the joint venture agreement, the landowner shall agree with the developer to
construct the building on the land which the landowner will continue to hold the
land title. Upon completion of the construction of the building, the landowner shall
agree with the developer to apply for the strata titles to the subdivided building
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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lots from the relevant authorities. Hatten City Phase 1 has been completed and
the joint venture agreement will be concluded upon the transfer of the relevant
parcels to Prolific Acres Sdn. Bhd. and/or its nominee. The above parcels
represent 9.6% of the total net saleable area of Hatten City Phase 1 and are
equivalent to approximately RM200.0 million, based on the estimated gross
development value of Hatten City Phase 1.
FVSB has, in accordance with its agreement with Fuyuu Capital Sdn. Bhd. dated
16 November 2012, agreed to transfer the following parcels in Hatten City Phase
2 to Fuyuu Capital Sdn. Bhd. upon obtaining strata title of the same:
(a) All parcels located on the ground floor;
(b) All parcels located on the mezzanine level;
(c) Car parks located on the 6th, 7th and 8th floors;
(d) Cabanas located on the 13th floor; and
(e) Penthouses located on the 26th and 28th floors.
Such parcels to be transferred to the landowner were chosen at the landowner’s
discretion further to negotiations between parties prior to entry into such
agreement. This is in accordance with such joint venture agreement between the
parties where Fuyuu Capital Sdn. Bhd., being the landowner, agreed for FVSB to
take over such land and develop it into Hatten City Phase 2, consideration of
which shall be paid by the transfer of the relevant legal title of completed parcels
of an equivalent value. Upon signing of the joint venture agreement, the
landowner shall agree with the developer to construct the building on the land
which the landowner will continue to hold the land title. Upon completion of the
construction of the building, the landowner shall agree with the developer to apply
for the strata titles to the subdivided building lots from the relevant authorities. As
at the Latest Practicable Date, the strata title of the above parcels have not been
issued as Hatten City Phase 2 is still in the process of being built. Transfers of the
relevant parcels to Fuyuu Capital Sdn. Bhd. will take place when Hatten City
Phase 2 is completed and after issuance of the individual strata titles by the
relevant land authority. The above parcels represent 9.8% of the total net
saleable area of Hatten City Phase 2 and are equivalent to approximately
RM111.1 million based on the estimated gross development value of Hatten City
Phase 2.
For illustration purposes, upon signing of the relevant land acquisition
agreement, the value of the landowner’s entitlement is recorded as a provision for
landowners’ entitlement (liability) and the land cost is capitalised as properties
under development (asset). The land cost in properties under development
(asset) will be expensed to the profit and loss accounts progressively based on
the percentage of completion. Correspondingly, the revenue for the landowners’
entitlement units will be progressively recognised based on the percentage of
completion in the profit and loss accounts from the provision of landowners’
entitlement (liability).
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Potential conflicts of interests arise when both the Hatten Group and the Target
Group are leasing and selling its retail units, and in the management of its retail
and hospitality properties. Retail mall management services include cleaning,
maintenance and security of retail properties.
25.2.2. Mitigating Steps
The Tan Brothers, together with Prolific Acres Sdn. Bhd. and Fuyuu Capital Sdn.
Bhd., have undertaken that they shall not sell any of the subdivided lots and/or
parcels of the completed development received under the aforesaid agreements
for a period of three (3) years after the completion of the development unless
(i) any sale of such subdivided lots and/or parcels is done on an en bloc basis or
(ii) the prior written consent of the Target Group has been obtained prior to such
sale. For unsold retail units, the Target Group will outsource the leasing of retail
units to the Hatten Group as the leasing of retail units is not a core business of
the Target Group, which is to focus on selling all developed retail units to
maximise economic benefit as a property developer. Based on the experience
from and track record of precedent property development projects, the
reasonable period for a property development project to achieve its optimal sales
will be approximately three (3) years after the completion of the development
subject to the number of units and property types of the property development
project.
The Target Group will not have any exclusive arrangements with the Hatten
Group and may also engage other unrelated third party agents concurrently for
the leasing of such retail units. The Target Group will closely monitor the
performance of the Hatten Group in the provision of such services and in the
event that the Hatten Group is unable to perform up to the requisite standard as
determined by the independent directors of the Target Group, the Target Group
will terminate the Hatten Group’s services in this regard and engage unrelated
third party agents. The transaction with the Hatten Group will constitute an
interested person transaction and will be subject to the review procedures for
interested person transactions set out in Section 13.6 of the VGO Letter. Please
see Section 24 of this letter entitled “Interested Person Transactions” for further
details. Please also see Section 4.2 of this letter entitled “Business Process” for
further details in relation to how the Target Group integrates Hospitality and Retail
Management into its business.
The Target Group will, subject to the review procedures for interested person
transactions set out in Section 13.6 of the VGO Letter, also outsource its retail
mall management services to the Hatten Group as on-going interested persons
transactions in accordance with the relevant requirements under Chapter 9 of the
Catalist Listing Manual. The Target Group will closely monitor the performance of
the Hatten Group in the provision of such services and in the event that the
Hatten Group is unable to perform up to the requisite standard as determined by
the independent directors of the Target Group, the Target Group will terminate the
Hatten Group’s services and engage unrelated third parties for the provision of
such services.
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25.3. Conflict Resolution Committee
The Proposed New Directors shall form a Conflict Resolution Committee (“CRC”)
consisting entirely of independent directors. The CRC’s primary role is to review conflicts
or potential conflicts of interests that may arise from time to time in the course of the
Enlarged Group’s business or operations between the Enlarged Group and any controlling
shareholder, director or key executive officer of the Enlarged Group and/or their
associates.
The CRC will be adopting the following framework to resolve any conflicts or potential
conflicts of interest:
(a) first, to identify the conflict or potential conflict of interests and then assess and
evaluate its nature and extent; and
(b) to develop and implement one or more appropriate measures with the aim of
controlling, avoiding or mitigating such conflict or potential conflict of interests.
The CRC shall monitor the implementation by the Enlarged Group of the measures
imposed by the CRC in order to resolve or mitigate conflict or potential conflict of interests.
The CRC will apply this framework both in the course of day-to-day conduct of business,
as well as in the specific instances when a particular acquisition or disposal is
contemplated.
The CRC will periodically review the framework to ascertain how it has worked out in
practice and, where appropriate, will consider and implement further measures to
fine-tune the framework so as to make it better suited to the potential conflict of interests
issues that the Enlarged Group may face, including procedures to ensure that no
controlling shareholder of the Enlarged Group would be able to influence the evaluation of
potential acquisitions, disposals or other transactions in a manner contrary to the interests
of shareholders as a whole.
The CRC will have the power to appoint an independent adviser to advise on and
recommend procedures to resolve or mitigate such conflict or potential conflict of
interests, so as to enable the CRC to discharge its duties to the shareholders. The
independent adviser may also be called on to provide an opinion as to whether the
procedures recommended by the CRC to resolve or mitigate conflicts or potential conflicts
are carried out in an appropriate and effective manner.
The terms of reference of the CRC would exclude review of interested person transactions
which fall within the purview of the Audit and Risk Committee.
Proposed guidelines to the CRC framework:
(1) Where a conflict or potential conflict of interests arises in a transaction, and the
individual transaction is equal to or more than S$50.0 million or the aggregate value
of transactions with the same conflicted party in the same financial year is more than
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75.0% of the market capitalisation of the Company, such conflict or potential conflict
of interests shall fall within the purview of the CRC. Notwithstanding the above, all
transactions shall be reported to the CRC on quarterly basis.
(2) A conflict or potential conflict of interests that falls within the purview of the CRC
should be brought to the attention of the CRC immediately. If there are established
standard operating procedures for mitigating such conflict or potential conflict of
interests already in place, the CRC shall form a view of whether compliance with
such established procedures is an adequate means to control, avoid or mitigate the
conflict of interests. If not, a CRC meeting will be convened to discuss and develop
such measures as may be appropriate to address the conflicts.
(3) A distinction is to be made between the processes of participation in deliberation and
the voting in the transaction as a Director. An interested Director will be required to
abstain from voting on the transaction where there exists a conflict of interests but it
should not prohibit the interested Director from participating in the deliberations of
the relevant transaction.
(4) However, if an interested Director is also a direct counterparty (for example, if the
director is an officer or sits on the board of directors of the counterparty), such a
director will be required to not only abstain from voting, but also abstain from
deliberation of the transaction. The board of Directors may nonetheless invite such
an interested director, on a case by case basis, particularly where he has the relevant
expertise in the subject matter of the transaction, to attend board meetings and
discussions to assist the board of Directors in its deliberation of the transaction, and
in such event, the board of Directors should excuse the interested Director who is
also a counterparty from deliberations which involves sensitive information of the
transaction.
(5) It is acknowledged that a Director has a right to information but the decision whether
to disclose such sensitive information (for instance, where the transaction is that of
a competitive bid between interested persons) must be made in the best interests of
the Enlarged Group and this is to be decided on a case-by-case basis. Management
should consult the CRC in this respect.
(6) The undertakings provided and/or options and rights granted by the Tan Brothers
shall be periodically updated and reviewed by the CRC (with the assistance of the
management designated by the CRC).
(7) The CRC shall periodically review the land and/or property development project
acquisition policies of the Enlarged Group which will set out the qualitative and
quantitative assessment and selection criteria in order to facilitate the decision
making on the execution of the options and rights granted by the Tan Brothers.
(8) Any proposed joint venture or merger and acquisition transaction which will cause
potential conflicts of interests shall be assessed by the CRC (with the assistance of
the management designated by the CRC) with proposed mitigating and safeguard
measures for deliberation and assessment.
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26. GENERAL AND STATUTORY INFORMATION
26.1. Datuk Wira Eric
26.1.1. Bankruptcy
Datuk Wira Eric is currently an undischarged bankrupt. Datuk Wira Eric was made
a bankrupt by his creditors in 2001. Datuk Wira Eric’s businesses were affected
during the Asian financial crisis in the late 1990s. The downturn in the economy
had caused problems with cash flow and had resulted in forced sales of the
assets of companies owned by Datuk Wira Eric as well as calls being made on a
number of personal guarantees provided.
26.1.2. Debarment
Torie Construction Pte. Ltd., in which Datuk Wira Eric was a director and
shareholder, was debarred by the Public Works Department in 1989 from
tendering for public sector projects for a period of five (5) years (the
“Debarment”). This was due to discrepancies in Torie Construction Pte. Ltd.’s
reporting to the authorities on whether discounts were provided by its suppliers
mainly due to cash term. Torie Construction Pte. Ltd. had overlooked a
contractual clause relating to reimbursements for certain materials for a project
related to the construction of a walkway at the Padang. Subsequently, the period
of Debarment was shortened by the Public Works Department and Torie
Construction Pte. Ltd. continued to be awarded public sector projects by the
Public Works Department. Torie Construction Pte. Ltd. has since been struck off
by the Accounting and Corporate Regulatory Authority.
26.1.3. Investigations
Datuk Wira Eric was called up by the Commercial Affairs Department to assist in
an investigation in relation to the trading of shares of a certain SGX-listed
company around 2002 (the “Investigation”). Datuk Wira Eric was not involved in
the trading of shares of that SGX-listed company and was not the subject of the
Investigation. No disciplinary or regulatory actions were taken against Datuk Wira
Eric in relation to this matter and there have not been any further developments
in relation to this matter as at the Latest Practicable Date.
26.2. Taxation
Pursuant to a tax audit by the Inland Revenue Board Malaysia into the tax affairs of FRSB
for years of assessment 2011 to 2015, FVSB for years of assessment 2012 to 2015, FGSB
for years of assessment 2010 to 2015 and GMSB for years of assessment 2010 to 2015,
an aggregate additional income tax and penalties sum of RM5,571,100 is payable by the
Malaysian Subsidiaries. As at the Latest Practicable Date, the additional income tax has
been paid to the Inland Revenue Board Malaysia and the Inland Revenue Board Malaysia
has confirmed vide a letter dated 27 October 2016 that upon full settlement of the
additional income tax and penalties sum of RM5,571,100, the Malaysian Subsidiaries shall
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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have no outstanding tax liabilities up to the year of assessment 2015 and shall be in
compliance with the Income Tax Act 1967 of Malaysia. No other penalties or any other
action has been taken against the Malaysian Subsidiaries.
The additional income tax sum of RM5,571,100 represents approximately 5.8% of the
Target Group’s profit before tax for FY2016 and has been provided for in the accounts of
the Target Group up until FY2016. Such additional tax paid will not have a material impact
on the Target Group’s financials for FY2016.
Additionally, in connection with the additional income tax and penalties totalling
RM5,571,100, Malaysian tax law advice was obtained from Shearn Delamore & Co., a
Malaysian law firm, which provides as follows:
“{ upon the signing of the Standard Form Composite Agreements and the payment
of the agreed sum of tax and penalties set out in the Standard Form Composite
Agreements, the [Malaysian Subsidiaries] would at that time have no outstanding
income tax liabilities for the years of assessment specified in the Standard Form
Composite Agreements.”.
In order to prevent re-occurrence of similar issues, we have recruited experienced finance
managers, Lee Sok Khian John and Chua Thiam Siew, Johnson, as the Head of Corporate
Finance and Group Financial Controller respectively. This will enhance the financial
reporting (including tax reporting) of the Target Group. In addition, the Target Group
intends to engage an internationally recognised tax accounting firm as its tax consultant
to advise on all annual tax reporting matters of the Malaysian Subsidiaries.
26.3. Penalties for late filing of annual returns
Section 165(2) of the Malaysian Companies Act 1965 provides that the annual return must
be in accordance with the form set out in Part II of the Eighth Schedule or as near thereto
as circumstances admit and must be made up to the date of the annual general meeting
of the company in the year or a date not later than the 14th day after the date of the annual
general meeting.
If a company fails to comply with the abovementioned section, the company and every
officer of the company who is default is guilty of an offence against the Malaysian
Companies Act 1965 and is subject to a fine of RM2,000 with a default penalty.
Default penalty is defined to mean any person who is convicted of an offence against the
Malaysian Companies Act 1965 in relation to that section or part is guilty of a further
offence against the Malaysian Companies Act 1965 if the offence continues after he is so
convicted and liable to an additional penalty for each day during which the offence so
continues of not more than the amount expressed in the section or part as the amount of
the default penalty or, if an amount is not so expressed, of not more than RM200.
Each of FGSB, FVSB and GMSB have not filed their annual returns in accordance with
section 165(2) of the Malaysian Companies Act 1965 and may be liable for such penalty
under the Malaysian Companies Act 1965. Such penalty, which shall not exceed the total
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
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of RM2,000 per company and default penalty of RM200 per company, if imposed, will not
have a material impact on the Target Group’s financials for FY2016. As at the date of this
Circular, FGSB, FVSB and GMSB have filed their annual returns.
As at the date of this Circular, each of FGSB, FVSB and GMSB has not been subject to
any penalties. None of the officers of FGSB, FVSB and GMSB has been subject to any
penalties. As stated in the legal due diligence reports by Zaid Ibrahim & Co, the legal
advisers to the Company in respect of the Proposed Acquisition as to Malaysia law of the
Proposed Acquisition, it is likely that upon filing of the annual returns, the relevant
authority would allow the composition of the offence upon payment of the relevant sums
and the relevant officers of the Malaysian Subsidiaries will not face prosecution.
In relation to FRSB, the first annual general meeting of FRSB was not held within the
stipulated timeline and a penalty of RM200 had been imposed on FRSB. This penalty has
since been paid. Additionally, FRSB was late in filing its profit and loss account for 2015
and had paid RM150 in composition of such late filing.
In order to prevent re-occurrence of similar issues, we have recruited experienced finance
managers, Lee Sok Khian John and Chua Thiam Siew, Johnson, as the Head of Corporate
Finance and Group Financial Controller respectively. This will enhance the financial
reporting (including statutory reporting) of the Target Group.
26.4. Material Contracts of the Target Group
Save for the conditional share sale agreements entered into between the Target and the
Tan Brothers and the Set-off Agreement, there were no contracts, not being contracts
entered into in the ordinary course of business, have been entered into by the Target
Group within the two (2) years preceding the Latest Practicable Date that are or may be
material.
26.5. Material Litigation of the Target Group
The Target Group has received certain letters of demand from its customers in relation to
requests for refunds of monies paid for the purchase of property and claims for liquidated
agreed damages. As at the Latest Practicable Date, there are no ongoing legal
proceedings in relation to any of such letters of demand.
Such letters of demand from our customers in relation to liquidated agreed damages will
not have a material adverse effect on the Target Group. Potential losses that may arise
from such letters of demand are mitigated with a back-to-back arrangement with the main
contractor pursuant to the construction services agreement. We confirm, with the
concurrence of the Independent Auditors and Reporting Accountants that no provision of
such losses is required in the Target Group’s financials as there will be no impact on the
financial performance of the Target Group. Based on the sale and purchase agreements,
customers are only entitled to claim liquidated agreed damages in the event of failure to
deliver vacant possession within the stipulated time.
In the event that the Target Group is unable to claim such liquidated agreed damages from
its main contractor, Montane, the amount of liquidated agreed damages based on the
letters of demand received by the Target Group as at the Latest Practicable Date, is
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approximately RM1.2 million and will not have a material adverse effect on the financial
performance of the Target Group. The Proposed New Directors are of the view that the
liquidated agreed damages amount of RM1.2 million is not material in relation to the
financial standing of Montane and have no knowledge of any circumstances that will lead
to Montane being unable to fulfil its obligations to provide construction services and such
liquidated agreed damages (if any).
In relation to request of refunds, the Target Group has, as at the Latest Practicable Date,
received one (1) letter of demand requesting for refund due to the inability to obtain
financing by the purchaser. As inability by the purchaser to obtain financing does not
entitle the purchaser to request for refunds, the Target Group has not made any refunds
due to such letter of demand.
Save as disclosed above, none of the Target Group Companies are engaged, in the past
twelve (12) months before the Latest Practicable Date, in any litigation or arbitration
proceedings either as plaintiff or defendant in respect of any claims or amounts which are
material in the context of the Proposed Acquisition, and the Proposed New Directors have
no knowledge of any proceedings pending or threatened against any Target Group
Company or any facts likely to give rise to any litigation, claims or proceedings which might
have a material effect on the financial position or profitability of the Target Group as a
whole.
26.6. Miscellaneous
Save as disclosed in this letter, the Proposed New Directors are not aware of any relevant
event which has occurred since the end of FY2016 up to the Latest Practicable Date which
may have a material effect on the financial position and results of the Target Group or the
financial information provided in this Circular.
No expert named in this Circular (i) is employed on a contingent basis; (ii) has a material
interest, whether direct or indirect, in the shares of any of the Enlarged Group Companies;
or (iii) has a material economic interest, whether direct or indirect, in any of the Enlarged
Group Companies, including an interest in the success of the Proposed Acquisition.
The contact details of the Target are set out below:
Address of registered office : 53 Mohamed Sultan Road #04-02
Singapore 238993
Telephone number : (65) 6690 3136
Facsimile number : (65) 6690 3137
27. RISK FACTORS RELATING TO THE TARGET GROUP
Shareholders should carefully consider and evaluate each of the material risk factors
relating to the Target Group as described below, together with all of the other information
set forth in this Circular (and the warning regarding forward looking statements in this
Circular under “Cautionary Note on Forward Looking Statements”).
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If any of the following considerations and uncertainties develop into actual events, the
business, financial performance and prospects of the Target Group could be materially
and adversely affected.
To the best knowledge and belief of the Proposed New Directors, all risk factors which are
material to Shareholders in making an informed judgment of the Target Group have been
set out in this Section.
27.1. Risks Relating to our Business and Operations
The following describes some of the significant risks that could affect the Target Group.
Additionally, some risks may be unknown to the Proposed New Directors and other risks,
currently believed to be immaterial, could turn out to be material. All of these could
materially and adversely affect the Target Group’s business, financial condition, results of
operations and prospects.
Save as disclosed in this Circular, the Proposed New Directors are not aware of any
relevant material information including factors or risks which have materially affected or
could materially affect, directly or indirectly, the Target Group’s financial position and
results and business operations.
The Target Group is subject to risks associated with developing new properties/projects
New project developments are subject to a number of risks, many of which are outside the
Target Group’s control, including (a) market or site deterioration after acquisition; (b) the
possibility of discovering previously undetected defects or problems at a site; and (c) the
possibility of construction delays or cost overruns due to various reasons such as delayed
regulatory approvals, adverse weather, labour or material shortages, work stoppages,
time taken for land and site clearance, and the unavailability of construction and/or long
term financing.
Depending on the scale of the new project development, a period of four (4) to eight (8)
years normally elapses between the acquisition of the site and/or the development rights
and the project’s completion. Between the acquisition of the site and the project’s
completion, political or social conditions of the location or other conditions critical to the
success of the property or project may change, such that the Target Group is unable to
commence operations of the property or project, repay its debt financing and/or achieve
its projected returns. In such an event, the Target Group’s business, financial position and
results of operations could be adversely affected.
The Target Group usually finances the development of its properties or projects by way of
funds from third party investors and/or loans from financial institutions in addition to
internally generated funds. As a significant amount of funding is required for such
development projects, the Target Group would typically seek financing for a substantial
proportion of the cost of such developments. Such financing is usually secured by a
mortgage over the development as well as a charge over the securities of the relevant
property holding companies. The Target Group’s ability to engage in new developments
will depend on its ability to secure such financing at favourable terms or at all.
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In planning for the financing of its projects, the Target Group takes into consideration
various factors, including potential operating yield, the timing of completion, the expected
interest charges to be incurred for the entire duration of the project, the risk of recall of
loans and the possibility that financial institutions may require that the Target Group
provides additional security for its loans. A change in any of the factors may cause the
Target Group’s business, financial position and results of operations to be adversely
affected.
The Target Group is exposed to risks in the property sector in Malaysia in which it
operates
The Target Group’s current property development projects are based in Malaysia. As the
revenue of the Target Group is primarily derived from these businesses, its performance
may be adversely affected as a result of exposure to the risks inherent in these businesses
and markets. Relevant risks in relation to the property sector in Malaysia include episodic
oversupply of properties for sale or for lease, shortage of labour supply, competition from
other property developers, property downturns resulting from changes in the state of the
economy, increase in labour costs, construction costs, energy costs and prices of raw
materials, changes in government policies or changes in bank interest rates. These
changes may have a material and adverse impact on the Target Group’s operations,
financial position and/or performance. As the supply of land to property developers is also
government-regulated, changes in zoning or redevelopment plans may also have an
adverse impact on the Target Group’s business operations.
The Target Group’s business is also subject to the cyclical nature of the property industry.
It is hence vulnerable to any downturn in the residential and/or commercial property
development market in Malaysia as a downturn may result in decreased business
activities and lower market valuations of its properties, which may lead to adverse impact
to its financial performance and condition.
The Target Group endeavours to minimise these risks by developing quality properties to
suit the needs and preferences of its target markets and deliver value to its existing and
potential customers as well as maintaining strong relationship with its contractors.
Although the Target Group has taken and will continue to take various steps to mitigate its
business risks, there can be no assurance that cyclical property downturns and other
unfavourable economic, social and political conditions in Malaysia will not adversely affect
the Target Group’s business, financial position and results of operations.
The Target Group is subject to financing risks and may not have adequate capital
resources to finance existing and future property developments
Property development is capital intensive. The availability of adequate financing is crucial
to the Target Group’s ability to acquire land and to complete their development projects
according to plan. Generally, property developers in Malaysia finance their business
activities through a combination of internal and external sources of funds. Internal sources
of funds comprise mainly cash generated from their operation activities (which include
cash inflows arising from sales of the property developments) and cash and bank balances
while external sources comprise mainly banks and other loans and capital contribution
from shareholders. The mismatching cash flows nature of property development may
result in periods where the property developer may experience net negative operating
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cash flows that have to be financed through existing cash and bank balances and external
sources of funds, which represent greater reliance on such external sources of funds
during these periods.
Property developers may not have adequate capital resources available to finance their
business activities such as land acquisitions or property developments. This may arise
from inadequacy of (i) external sources of funds and/or (ii) internal funds such as low cash
levels and/or that the property developers are unable to achieve sufficient sales in order
to fund these property developments.
Although the Target Group has obtained financing in the past to fund their business
activities, there is no assurance that it will be able to continue to obtain such financing
support on commercially acceptable terms, or any financing support at all. In such event,
and where the Target Group requires but is unable (i) to rely on its existing cash and bank
balance due to insufficiency; and (ii) to obtain external sources of funds, it will not be able
to finance its existing and future developments, the Target Group may not be able to
finance its business activities and their cash flow, financial performance and financial
position will be adversely affected. Additionally, where the Target Group is unable to meet
sales quotas implemented by financial institutions required for the draw-down of facilities,
the Target Group may not be able to finance its activities and its cash flow, financial
performance and financial position will be adversely affected. There are certain sales
quota implemented by United Overseas Bank (Malaysia) Bhd in relation to the bank’s
financing of Harbour City Mall and Harbour City Suites. As at the Latest Practicable Date,
the Target Group has fulfilled two (2) out of three (3) tranches of such sales quota and is
on track to meet the third tranche of the sales quota. Save for the above, as at the Latest
Practicable Date, the Target Group has fulfilled such sales quotas implemented by
financial institutions required for the draw-down of facilities.
The Target Group may also require additional borrowings to fund its future development
projects. The incurrence of additional debt will increase its interest payments required to
service its debt obligations and could result in operating and financial covenants that
restrict its operations and its ability to pay dividends to its shareholders.
In addition, in line with typical financing facilities, the terms of the Target Group’s loans,
borrowings and trust financing arrangements may allow the banks, financial institutions
and/or trust financing companies to suspend or withdraw its financing in an event of
default. In the event the Target Group’s loans, borrowings and trust financing
arrangements are suspended or withdrawn, the Target Group may not have sufficient
capital resources to finance its business operations and/or repay the withdrawn financing
facilities. This may have a material adverse impact on the Target Group’s business,
financial performance and results of operations.
The Target Group experienced net operating cash outflows and shareholder
deficiency during the Period Under Review
The Target Group recorded net cash outflows from operating activities of approximately
RM52.3 million and RM12.4 million in FY2014 and FY2015, respectively. The Target Group
recorded net cash inflows from operating activities of approximately RM26.7 million in
FY2016. The net operating cash outflows from operating activities during FY2014 and
FY2015 were attributable to the increase in properties under development and amount
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due from related parties during this period. The properties under development for the
Period Under Review were financed primarily through the internal generated fund and
project financing facilities from financial institutions. All amounts due from related parties
had been settled as at 30 June 2016.
The Target Group also recorded shareholder deficiency of approximately RM6.8 million as
at 30 June 2014. The shareholder deficiency was mainly due to the provision of
foreseeable losses of RM48.4 million in FY2013 which was related to Hatten City Phase
1. The provision of foreseeable losses was subsequently written back in FY2014, FY2015
and FY2016. The provision of foreseeable losses was due to the the budgeted gross
development costs exceeding the budgeted gross development value for Hatten Suites,
which is part of Hatten City Phase 1, in FY2013. The write-back is a realisation of the
foreseeable loss as construction progressed. In effect, it offsets the actual loss so that
there is no gain or loss recognised as the project progresses. For more details, please
refer to the Sections 20.4 and 20.5 of this letter entitled “Liquidity and Capital Resources”
and “Capitalisation and Indebtedness”.
If the Target Group is unable to obtain sources of funds on a timely basis on conditions
acceptable to the Target Group, to address its net cash outflows from operating activities,
the business, financial performance and results of operations of the Target Group may be
adversely affected. As the Target Group continues to expand and grow its business and
operations, there can be no assurance that the Target Group will not experience net cash
outflows from operating activities in the future.
The Target Group is subject to risks relating to its hospitality and/or retail units
under sale and leaseback arrangements
As part of its marketing strategy relating to hospitality and retail developments, the Target
Group sells such developments with a sale and leaseback arrangement to provide rental
yield through a tenancy agreement entered into between the purchasers and the Target
Group at the same time as the sale and purchase agreement. In order to meet these
obligations, the Target Group enters into such agreements with the Hatten Group or such
other third parties to sub-lease such hospitality and retail units. The Target Group may also
be subject to risks of defaults by the lessees (whether the master lessee in relation to
hospitality units or individual lessees in relation to retail units) in their performance of their
respective obligations under master lease arrangements entered into by the Target Group.
In the event that the Target Group is unable to enter into favourable agreements with the
Hatten Group or such other third parties to sub-lease such hospitality and retail units or in
the event of defaults by the lessees, they will nevertheless have to continue fulfilling their
obligations to the purchasers under the relevant tenancy agreements. This may cause the
Target Group to experience cash flow deficit under the sale and leaseback arrangement
with its customers for its retail and hospitality properties and the Target Group’s business,
financial performance and results of operations may be adversely affected.
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The Target Group is subject to risks relating to sales prior to completion of
construction
The practice of selling properties under construction prior to the receipt of the CCC is
adopted in the property market industry of Malaysia. In line with industry practice, the
Target Group may sell most of the properties developed prior to completion. There are
certain risks relating to such sale of properties. In the event of a failure or delay in the
delivery of sold properties to purchasers, the Target Group may be liable for potential
losses that purchasers may suffer as a result.
There is no guarantee that these losses will not exceed the purchase price paid in respect
of the units sold. Failure to complete a property development on time may be attributed to
factors such as the time taken and costs involved in completing construction, which are in
turn adversely affected by factors such as delays in fitting out works, shortages of labour,
adverse weather conditions or natural disasters. If the delay in delivery extends beyond
the contractually specified period, the purchasers may also be entitled to terminate the
sale and purchase agreements and claim refunds of monies paid, damages and/or
compensation for late delivery.
There is no assurance that there will be no circumstances which will result in liabilities
arising from the sale of units which have experienced significant delays in completion or
delivery, resulting in the Target Group having to compensate purchasers for late delivery,
or refund of monies paid in situations where purchasers have terminated the sale and
purchase agreements. This will adversely affect the Target Group’s business and financial
performance. As at the Latest Practicable Date, there have been no occurrences of the
circumstances highlighted above.
The Target Group is subject to risks of purchaser defaults
The Target Group is subject to risks of purchasers defaulting in their payments for property
developments, whether in defaulting in their payments to the developer directly or
defaulting in their payments to the relevant financial institution providing such loan which
leads to a default by the relevant financial institution to the developer. The Target Group
sets out in its sale and purchase agreements with the purchasers of its property
developments its rights in the event of default. The rights of the Target Group in relation
to defaults in payments as currently found in our standard form sale and purchase
agreements are as follows (i) where a purchaser defaults in payment before receipt of the
CCC by the developer, the developer is entitled to take over the relevant property and
forfeit 20% to 30% (depending on the type of property) of the relevant purchase
consideration before refunding such excess to the purchaser; and (ii) where a purchaser
defaults in payment after the receipt of the CCC by the developer and prior to the issuance
of individual strata title, the developer has the right to forfeit the deposit paid by the
purchaser and force sell the relevant property, without any refund, to recover all costs.
Where the default takes place after individual strata title is issued, the relevant financial
institution will be responsible for recovering their costs from the relevant purchaser in the
event of any defaults. There can be no assurance that such defaults by purchasers of the
Target Group’s property developments will not adversely affect the Target Group’s
business, financial performance and results of operations. As at the Latest Practicable
Date, while there are certain purchasers who have defaulted in their payments, this does
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not have a material adverse effect on the Target Group. For each financial year under the
Period Under Review, the aggregate value of purchaser defaults represent less than one
percent (1.0%) of the Target Group’s annual sales.
The Target Group’s business is subject to economic, political and social conditions,
as well as governmental policies in the jurisdictions in which it operates
The Target Group’s operations in Singapore and Malaysia are subject to local economic,
legal and regulatory conditions in these jurisdictions including the amount and degree of
government regulation, growth rate and degree of development, uniformity in the
implementation and enforcement of laws, content of and control over capital investment,
control of foreign exchange and allocation of resources. Any unfavourable factor or
change in the economic, political and social conditions and/or the policies in the
jurisdictions in which it operates could have a material adverse effect on our business,
financial condition, results of operations and prospects.
The Target Group is subject to risks in relation to the increases in interest rate
The Target Group faces risks in relation to the interest rate movements as the Target
Group’s financing costs are affected by changes in interest rate. The Target Group expects
that the increases in interest rates will increase its financing costs in general and the
financing costs of leveraged property buyers, and as a result, may or may not delay
potential purchasers from making a purchase. The Target Group’s aggregate interest
expenses on bank borrowings and finance leases for FY2014, FY2015 and FY2016 were
RM15.7 million, RM17.2 million and RM38.0 million, respectively, of which RM15.4 million,
RM16.5 million and RM37.2 million were capitalised in the corresponding periods.
Changes in interest rates will affect the Target Group’s interest income and interest
expense from short-term deposits and other interest-bearing financial assets and
liabilities. This could in turn have a material and adverse effect on its net profits.
Furthermore, an increase in interest rates would also adversely affect the willingness and
ability of prospective customers to purchase its properties, its ability to service loans that
it has guaranteed and its ability to raise and service long-term debt.
If consumer bank financing becomes more costly or otherwise less attractive, the
Target Group’s sales will be affected
A majority of purchasers of the Target Group’s properties rely on bank financing to fund
their purchases. An increase in interest rates may significantly increase the cost of bank
financing to such purchasers and potential purchasers, thus adversely affecting the
affordability of residential properties.
In addition, the Malaysian government and commercial banks may also increase the down
payment requirements, impose other conditions or otherwise change the regulatory
framework in a manner that would make mortgage financing unavailable or unattractive to
potential property purchasers. As a result of the foregoing and/or any new adverse
changes, the Target Group’s business and financial performance could be materially and
adversely affected.
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The Target Group is subject to risks in relation to shortages of construction
materials and movements and changes in commodity prices relating to construction
materials
Construction materials represent a key component of costs of construction. Construction
materials include ready mixed concrete, steel reinforcement bars, pre-cast components,
tiles, concreting sand, bagged cement, steel welded mesh, steel strands, mild steel,
stainless steel, aluminum, glass, plywood and paint.
The Target Group’s construction materials’ costs for each project are dependent on the
size, design and material specifications of the project and the price levels of the materials.
Prices of these construction materials will fluctuate and are affected by, amongst others,
the interaction of their demand and supply in Malaysia and the region. Where the building
materials are obtained from other countries, the supply of such building materials will also
depend on the supply and demand in these countries due to market conditions or on
government regulations that restrict the export of such materials. Any sudden shortage of
supply or reduction in the allocation of construction materials for any reason may
adversely affect its business operations or result in the Target Group having to pay a
higher cost for these construction materials as such costs are normally passed down from
the contractors to the Target Group. A shortage or inability to obtain such construction
materials will also result in a delay in the completion of the construction of the Target
Group’s property development projects, resulting in an increase in overheads which may
adversely affect the Target Group’s business operations and financial performance.
Any increase in commodity prices for construction materials and equipment that the Target
Group or its independent contractors procure will increase the Target Group’s costs of
development. In the event that the Target Group is unable to increase the sale prices of
its properties accordingly, its financial performance will be adversely affected. The Target
Group’s construction costs comprise all costs incurred for the design and construction of
a project, including, among other things, payments to independent contractors and costs
of construction materials. The Target Group incurred construction costs of approximately
RM227.4 million, RM378.9 million and RM285.9 million for FY2014, FY2015 and FY2016,
respectively.
The Target Group is affected by the performance or defaults of third party
contractors and service providers
In its ordinary course of business, the Target Group relies on third party contractors and
service providers to provide various services, including architectural design, interior
design, piling and foundation, quantity survey, mechanical and electrical engineering,
structural engineering, plumbing, building and property fit-out works as well as installation
of air-conditioning units, escalators and elevators. The Target Group invites contractors
and service providers to tender bids taking into account, among other things, their
reputation for quality and track record. There can be no assurance that the services
rendered by these third party sub-contractors and service providers will be satisfactory or
match the quality level required or expected by the Target Group and its purchasers.
Moreover, contractors and service providers may experience financial or other difficulties
that may affect their ability to carry out the work for which they were contracted, thus
delaying the completion of the Target Group’s property development projects or resulting
in additional costs for the Target Group. They may also suffer negative publicity. In
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addition, if any of the contractors and service providers fail to perform the work in
accordance with the stipulated specifications and time schedule, or they default on their
obligations, the Target Group may be exposed to claims from purchasers. Any of these
above factors could adversely affect the Target Group’s business and reputation.
Consequently, any adverse effect to the Target Group’s reputation may adversely affect
the take up rate of the Target Group’s future development projects and hence, the Target
Group’s future financial performance. As at the Latest Practicable Date, there have been
no defaults by third party contractors and service providers.
Dependence on key members of the management team and skilled personnel
The Target Group’s success depends, to a significant extent, on the continued services of
the individual members of its management team, who have invaluable experience in the
industry and in Malaysia. The management team of the Target Group includes Dato’ Colin,
Dato’ Edwin, and John Lee. Dato’ Colin is the Proposed Executive Chairman and
Managing Director and is responsible for the Target Group’s overall management and
strategy. His area of expertise and responsibilities include sales and marketing, business
growth and development, asset and land acquisition. Dato’ Edwin is a Proposed Executive
Director and Deputy Managing Director and is primarily responsible for operations and
development management. John Lee, a Proposed Executive Director, is responsible for
overseeing the corporate development and finance matters of the Target Group.
The Target Group’s ability to continue to identify and develop opportunities depends on
management’s knowledge of, and expertise in, the industry, in Malaysia and on their
external business relationships. There can be no assurance that any management team
member will remain with the Target Group. Any loss of the services of key members of the
management team could have a material adverse effect on its business and operations.
The continued success of the Target Group in the future will in part be dependent on its
ability to retain the services of these key members and to ensure an effective succession
takes place upon their departure or retirement.
The Target Group’s business is also highly dependent on skilled personnel such as its
project and sales managers. Having a team of experienced and skilled personnel is
essential in maintaining the quality of services. A high turnover of such personnel without
suitable and timely replacements could have an adverse impact on the Target Group’s
business operations and competitiveness. The Target Group’s financial performance could
also be materially and adversely affected if it needs to increase employee compensation
levels substantially to attract and retain its existing key personnel, as well as any
additional personnel that they may require in the future.
The Target Group is subject to the risks in relation to higher labour costs
The construction industry in Malaysia is highly labour intensive. Such skilled workers are
employed by the Target Group’s main contractors, third party sub-contractors and/or by
the Target Group directly. Nevertheless, the Target Group’s business operations are
indirectly dependent on such skilled workers. There is no assurance that there will be an
adequate supply of skilled workers that will provide adequate services for the Target
Group’s property development projects. The Target Group’s operations and financial
performance are therefore vulnerable to any shortage in the supply of skilled workers.
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In the event of a shortage of such skilled workers in the construction industry, the
completion of the construction of the Target Group’s property development projects may
be delayed, resulting in an increase in overheads which may adversely affect the Target
Group’s business operations and financial performance.
In the event of any material increase in labour costs, the Target Group’s contractors may
pass on part or all of such additional costs to the Target Group. This will result in an
increase in overheads which may adversely affect the Target Group’s business operations,
profitability and financial performance.
The Target Group may be dependent on the supply of foreign workers
The Target Group from time to time may be dependent on foreign workers. Foreign
workers are usually employed by the Target Group’s main contractors and/or third party
sub-contractors. Nevertheless, the Target Group’s business operations are indirectly
dependent on foreign workers due to the shortage of local workers in the construction
industry.
The conditions imposed by the relevant authorities in relation to the employment of foreign
workers may change from time to time. Generally, applications to employ foreign workers
will only be considered when efforts to find qualified local workers have failed. In the event
that there is a shortage of supply of foreign workers or a restriction is imposed on the
number of foreign workers allowed to be employed by the Target Group’s contractors for
the Target Group’s development projects, the completion of the construction of the Target
Group’s property development projects may be delayed due to such shortage of workers
in carrying out the works at the Target Group’s development, resulting in an increase in
overheads which may adversely affect the Target Group’s business operations and
financial performance.
The Target Group is subject to risks caused by adverse weather conditions
The Target Group manages and monitors the costs of its development projects closely,
starting from the tender stage until installation and commission of the development
projects. In the preparation of tenders for its property development projects, the Target
Group carries out internal costing and budgeting estimates of labour and construction
material costs which are based on quotations given by its suppliers, contractors and
subcontractors, as well as other estimated costs to be incurred. However, due to
unforeseen circumstances, delays may arise as a result of adverse weather conditions,
including but not limited to the haze, and natural calamities.
Exposure to such external factors may affect the timely completion and launch of the
Target Group’s property development projects and may lead to cost implications that may
bring about cost overruns. Whilst such cost overruns are typically borne by the Target
Group’s contractors, in the event that the contractors are unable to bear the cost overruns,
the Target Group may be liable for such cost overruns. In such an event, the Target
Group’s profitability may be affected.
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The Target Group is exposed to the credit risk of its clients
The Target Group is exposed to the credit risk of its clients. From time to time, in the
ordinary course of business, certain clients may default on their payment obligations.
Although the Target Group regularly reviews its credit exposure to its clients, credit risk will
nevertheless arise from events or circumstances that are difficult to anticipate or detect or
are beyond the control of the Target Group. Such events may arise due to the inherent risk
from clients’ businesses, risk pertaining to the political, economic, social and legal
environment of the clients’ jurisdiction and foreign exchange risk. In the event that the
Target Group’s clients face cash flow problems, their ability to promptly settle amounts for
goods sold or services rendered will be jeopardised and accordingly, this will have an
adverse impact on the Target Group’s financial performance, financial position and
prospects.
There is no assurance that the Target Group’s plans will be commercially successful
The Target Group intends to strengthen and build up its existing business and land
reserves, strengthen its brand awareness and marketing efforts and expand into regions
in Malaysia outside of Malacca and internationally. There is no assurance that such
expansion plans will show results and improve its financial performance. The amount
earmarked for its expansion plans may also be insufficient and would require additional
expenditure. An increase in these expenses without a corresponding increase in revenue
would also adversely affect its profitability and financial performance.
The Target Group intends to explore opportunities in property markets outside of Malaysia.
Such new markets may differ from the Target Group’s existing markets in terms of the level
of economic development, demography, topography, property trends and regulatory
practices. Therefore, the Target Group may not be able to replicate its successful business
model in its existing markets to these other countries. In addition, as the Target Group
enters into new markets, it may not have the same level of familiarity with contractors,
business practices and customs and customer tastes, behaviour and preferences.
Therefore, the Target Group may not be able to successfully leverage its existing
experience to expand its Property Development Business into these other markets. The
Target Group may also face intense competition from other developers with more
established experience or presence in those markets.
The future plans and new initiatives embarked by the Target Group may not be profitable,
may not achieve sales levels and profitability that justify the investments made or may take
a long period of time before the Target Group could realise any return. The Target Group’s
property development activities may entail financial and operational risks, including
diversion of management attention, difficulty in recruiting suitable personnel and possible
negative impacts on the Target Group’s existing business relationships with its clients. The
Target Group may face significant financial risks before it can realise any benefits from its
future investments. If the Target Group’s expansion into new sectors and markets is not
successful, its reputation, business, prospects, financial performance and financial
condition could be materially and adversely affected.
Further, these future plans and new initiatives could be capital intensive and could also
result in potentially dilutive issuances of equity securities, the incurrence of capital
commitments, debt and contingent liabilities as well as increased operating expenses, all
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of which may materially and adversely affect the business and financial performance of the
Target Group. There is no assurance that these future plans will achieve the expected
results or outcome such as an increase in revenue that will be commensurate with the
Target Group’s investment costs, or the ability to generate any costs savings, operational
efficiencies and/or productivity improvements to the Target Group’s operations. There is
also no assurance that the Target Group will continue to succeed in securing more project
tenders and/or awards. If the results or outcome of the Target Group’s future plans do not
meet its expectations, if the Target Group fails to achieve a sufficient level of revenue or
if the Target Group fails to manage its costs efficiently, the Target Group will not be able
to recover its investment and the Target Group’s future financial performance, business
operations, and/or financial condition would be adversely affected.
The Target Group may not be able to secure land in prime locations
Property developers rely heavily on the availability of suitable land in prime locations to
deliver sustainable growth in business operations and financial performance. As such,
property developers constantly look out for suitable land in prime locations for future
development. Intense competition among property developers vying for strategically
located parcels of land has resulted in scarcity of such land as well as a corresponding
increase in land costs. Suitability of a piece of land for development is dependent on
various factors, including, amongst others, the size, location, government policies and
future prospects of the location. The Target Group may not be able to secure land in prime
locations for future development which may have a material and adverse effect on the
Target Group’s profitability and business growth.
The Target Group may not be able to identify or acquire land for development at
commercially acceptable prices
The Target Group believes that maintaining a sizable and high-quality land bank for future
development is critical to sustain its growth. This is done through the Target Group’s
access to the Land Bank held by the Hatten Group through the ROFR and the Call Option
and the Target Group’s land acquisition policy. There is no assurance that the Target
Group will be able to identify and acquire attractive sites in the future at commercially
acceptable prices, or at all. If the Target Group is not able to continue to identify and
acquire attractive new sites at commercially acceptable prices, this could impair its ability
to compete with other property developers and materially and adversely affect the Target
Group’s business and financial performance. As at the Latest Practicable Date, the Target
Group has been able to acquire the sites at commercially acceptable prices. If the Target
Group is not able to procure suitable land sites to carry out its property development
projects, property development projects on less favourable locations may not be as
marketable, resulting in the Target Group’s sales volume and profitability being adversely
affected. There is competition with other property developers for new land sites and there
is no assurance that suitable sites will always be available for the purposes of the Property
Development Business of the Target Group.
The Target Group is subject to risks resulting from market overhang
Property overhang is inherent in any uncontrolled property development in a particular
area and is, among other things, caused by an oversupply and/or low demand for new
property launches. Other factors contributing to property overhang include economic
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downturns and unfavourable financial conditions. Any occurrence of property overhang
will affect property developers and may have a material and adverse effect on the Target
Group’s profitability.
The Target Group’s unsold property development units will affect their financial
performance
In the future, the Target Group’s developed properties may not achieve anticipated sales.
In the event that the Target Group is unable to sell a significant proportion of the properties
it develops, the Target Group’s financial performance will be materially and adversely
affected. Furthermore, the unsold properties that the Target Group continues to hold for
sale post-completion may be relatively illiquid, which will limit the Target Group’s ability to
realise cash from unsold units on short notice. In the event of an urgent sale, the selling
price of these properties may be significantly reduced. This limits the Target Group’s ability
to vary its portfolio of property held for sale in response to changes in economic, political,
social or regulatory conditions in a timely manner. In such event, the Target Group’s cash
flow and financial performance will be adversely affected.
The Target Group is subject to potential delay or failure in completion of projects
In line with industry practices, the Target Group launches and sells its property
development projects prior to the completion of construction works. Any delay or failure in
completion may give rise to additional costs to the Target Group. The timely completion of
the Target Group’s projects is dependent upon many factors, some of which are beyond
the Target Group’s control such as obtaining permits with conditions which are acceptable
to the Target Group, obtaining regulatory approvals as scheduled, adequate supply of
labour, favourable weather conditions, ability to secure construction materials in adequate
amounts and at reasonable prices, absence of or minimal disputes with contractors,
absence of or minimal instances of accidents, changes in the priorities and policies of the
government, reliability and the satisfactory performance of building contractors appointed
to complete the Target Group’s development projects. There can be no assurance that any
adverse changes in these factors will not lead to unforeseen and significant delays in the
completion of the Target Group’s projects.
In the event of a failure or delay in the delivery of the Target Group’s properties to
purchasers, the Target Group may be liable for potential losses in the form of liquidated
agreed damages filed by purchasers against the Target Group.
There is no assurance that the Target Group will not experience significant delays or
failure in the completion and/or delivery of the properties to purchasers. In the event that
the Target Group encounters any delays or failure in the delivery of the Target Group’s
properties and incur or suffer any of the aforesaid damages and compensation
requirements, the results of the Target Group’s operations, the Target Group’s profitability
and the Target Group’s reputation may be adversely affected. As at the Latest Practicable
Date, Hatten City Phase 1 had experienced such delays in completion. Any liquidated
agreed damages arising from such delays are to be borne by the main contractor,
Montane. There will be no material adverse effect on the Target Group. In the event that
the Target Group is unable to claim such damages from Montane, the indicative amount
of liquidated agreed damages, based on the letters of demand received by the Target
Group as at the Latest Practicable Date is approximately RM1.2 million and will not have
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a material adverse effect on the financial performance of the Target Group. The Target
Group has not yet received any claims in relation to defects. As at the Latest Practicable
Date, no liquidated agreed damages have been paid by the Target Group.
Damage to the reputation of the Target Group could result in an erosion of
confidence in the Target Group which could have an adverse effect upon its
business
The quality, professionalism and ethics of work practices are of utmost importance to the
business of the Target Group. The continued success of the business of the Target Group
depends on its reputation and the “Hatten” branding. In the event of allegations of
negligence, design inadequacies, professional misconduct or other liability claims against
the Target Group, the Target Group and/or the Hatten Group may suffer from adverse
publicity which will undermine client confidence in its business as a whole and as a result,
the reputation of the Hatten Group and/or the Target Group could be significantly
damaged. Any damage to the name of the Hatten Group and/or Target Group and loss of
its market appeal may have an adverse impact on the reputation and business of the
Target Group. As at the Latest Practicable Date, there are no occurences of the
circumstances stated above that have had a material adverse effect on the Target Group.
The Target Group may be subject to claims for delays and defective works
The Target Group may face claims from and disputes with purchasers and/or the
management corporations in its development projects for reasons such as delay in
completion, alleged defects or non-conformance to contract specifications. In the event of
any successful claims from such purchasers and/or the management corporations of units,
the Target Group may have to pay damages and/or be subject to legal proceedings which
may result in an adverse impact on its profitability, financial performance and corporate
reputation.
While such claims will be made against contractors of the Target Group by the Target
Group, the Target Group’s business and financial position may be affected if the Target
Group has to pay significant amounts of compensation or spend significant amounts of
resources in legal costs in the event of legal proceedings. The Target Group’s reputation
may also be affected as a result of such proceedings.
Should the Target Group be unable to successfully or sufficiently claim the amount of
liquidated agreed damages paid or to be paid to purchasers as a result of its contractors’
delay or building defects, from its contractors, the Target Group’s business, financial
condition, results of operations and prospects may be materially and adversely affected.
As at the Latest Practicable Date, there have been certain claims against the Target Group
for defects in relation to Hatten City Phase 1. Any damages arising from such defects are
to be borne by the main contractor, Montane. There is no material adverse effect on the
Target Group. In the event that the Target Group is unable to claim such damages from
Montane, the indicative amount of liquidated agreed damages is approximately
RM1.2 million, based on the letters of demand received by the Target Group as at the
Latest Practicable Date, and will not have a material adverse effect on the financial
performance of the Target Group. The Target Group has not yet received any claims in
relation to defects. As at the Latest Practicable Date, no liquidated agreed damages have
been paid by the Target Group.
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The Target Group is subject to fluctuations in property prices
The performance of the Target Group may be subject to fluctuations in property prices as
well as the availability of suitable land sites. Should property market prices suffer a
downward trend, the Target Group’s earnings may be adversely affected as the Target
Group may have to postpone the sale of such property development project units to a later
date, when market conditions improve. The Target Group may also have to sell its property
development projects at lower prices, which in turn would adversely affect the Target
Group’s sales revenue and profit margin.
The Target Group operates in a competitive environment
The property market in Malaysia is highly competitive, with strong competition from
established industry players who may have more resources and funding or a longer track
record than the Target Group. Whilst the property development industry generally has a
higher barrier to entry, the Target Group faces competition from existing industry players
as well as new market entrants, in areas such as supply of raw materials and labour selling
prices of property and securing strategically located land parcels for development. There
are many local and foreign property developers undertaking property development
projects in Malaysia, thus putting downward pressure on property prices and creating
material and labour scarcity.
The Target Group competes by offering, among other things, competitive pricing for quality
developments. While the Target Group attempts to differentiate its developments from
those of its competitors, the Target Group is aware that there may be competing
developments within the vicinity of its developments that feature similar design concepts
or are within the same price range. The entry of new competitors into the Target Group’s
markets or the immediate area surrounding the Target Group’s property developments
may also affect its business. There is no assurance that the Target Group will be able to
develop comparable properties at lower prices or respond more quickly to market trends
than future or existing competitors. In the event that the Target Group is unable to compete
effectively, its results of operations and financial performance will be adversely affected.
The Target Group’s future growth will depend on its ability to continue to develop
properties that will meet the specific requirements of its customers. The Target Group has
to continuously enhance its existing range of properties and/or develop and introduce new
range of properties offering suitable designs, colours and finishes on a timely basis to
satisfy the increasingly sophisticated requirements of its customers. However, given the
constant change in architectural and design trends and tastes of customers, the Target
Group is unable to guarantee that its existing product ranges will continue to be relevant
to its customers’ needs or that it would be able to develop and introduce new products
range to meet customers’ demand or that its new products will be widely accepted by its
customers. In the event the Target Group is unable to keep abreast of the above
mentioned changes, the Target Group may lose its competitiveness and market share and
its operations and its financial performance will be adversely affected.
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Property valuations and decline in property values
Valuations of the Target Group’s properties conducted by professional valuers are based
on certain assumptions and are not intended to be a prediction of, and may not accurately
reflect, the actual values of these assets. The inspections of the properties and other
works undertaken in connection with a valuation exercise may not identify all material
defects, breaches of contracts, laws and regulations, and other deficiencies and factors
that could affect the valuation. In addition, unfavourable changes to the economic or
regulatory environment or other relevant factors may negatively affect the premises upon
which the valuations are based and hence, the conclusions of such valuations may be
adversely affected. As such, the properties of the Target Group may not retain the price at
which they may be valued or be realised at the valuations or property values which were
recorded. The value of the properties of the Target Group may fluctuate from time to time
due to market and other conditions. Such adjustments to the Target Group’s share of the
fair value of the properties in the Target Group’s portfolio could have an adverse effect on
the net asset value and profitability of the Target Group.
The Target Group may be exposed to risk of loss and potential liabilities that may
not be covered or adequately covered by insurance
The Target Group maintains insurance policies covering certain eventualities arising from
its business operations. Please refer to Section 15 of this letter entitled “Insurance” of this
letter for further details on the Target Group’s existing insurance coverage.
There are also certain losses for which insurance coverage is not available as it is not
commercially viable to do so, such as losses due to natural disasters, war or civil
disorders. In addition, there may be high excess value in such insurance coverage that
has to be borne by the Target Group. If the Target Group suffers any uninsured losses
and/or delays in claims for damages and liabilities in the course of the Target Group’s
operations and property development, the Target Group may not have sufficient funds to
cover any such losses, damages or liabilities or to replace any property development
which has been destroyed. In addition, any payment the Target Group makes to cover any
losses, damages or liabilities could have a material adverse effect on the Target Group’s
business, operations and financial condition and put a strain on the Target Group’s cash
flows for other development projects.
Accidents occurring at the Target Group’s premises may also result in injuries or death to
employees of the Target Group or third parties as well as damages to property owned by
the Target Group or third parties. In the event that such losses are uninsured or
uninsurable, the Target Group may be liable for damages or other penalties under the laws
of Malaysia. Major accidents, such as a fire or structural collapse, may also cause
significant reputational damage to the Target Group and may also be grounds for the
revocation of licences which the Target Group requires to carry on its business. If any of
the foregoing risks materialises, the operations and financial performance of the Target
Group may be adversely affected.
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The Target Group may be affected by the conduct of sales agents or ex-sales agents
The Target Group currently markets and sells its properties locally and abroad as part of
its business operations. While the Target Group does not employ sales agents directly, as
the sales agents that are in charge of selling the Target Group’s developments are mobile
and actively carrying out transactions, it is not practical or possible to manage their
conduct on a constant basis. Further, the actions of ex-sales agents who may continue to
pose as sales agents are beyond the control of the Target Group.
In the event that any sales agent or ex-sales agent commits fraud or misrepresentation or
does any illegal act in the capacity as a sales agent, the act of the sales agent or ex-sales
agent may cause a negative perception of the Target Group’s sales agents and affect the
Target Group’s reputation and business.
The Target Group cannot assure that dissatisfied customers may not lodge complaints or
take legal action against the Target Group for certain representations which the Target
Group or its sales agents may have made in the course of promoting projects and
properties and the Target Group’s sales activities in the future. In the event that the Target
Group is held liable for any damages suffered by the customers, the quantum payable may
materially affect the financial condition or results of operations of the Target Group.
Even if the Target Group is not held liable for any damages, the negative perception of the
Target Group may adversely affect the reputation and business of the Target Group. As at
the Latest Practicable Date, there have not been occurences of the circumstances stated
above that had a material adverse effect on the Target Group.
There is no assurance that the Target Group will be able to obtain the required
permits, approvals and consents from the various government agencies and
authorities to develop properties according to the desired specifications
In carrying out property development, the Target Group will be required to submit detailed
plans and drawings and seek approvals, permits and consents of various government
agencies and authorities. In the event that the Target Group experiences substantial delay
in obtaining or fails to obtain the required approvals, permits or consents or is unable to
develop properties according to the planned parameters such as certain desired land use
mix or expected plot ratio or is unable to develop properties according to the desired size,
site coverage, height, setbacks from the site boundaries or built-up area, the Target Group
may not be able to fully realise the expected potential of the land and the value of the land
may also be adversely and materially affected.
The Target Group’s future plans and the time required to carry out such plans may also be
affected by market conditions and the relevant laws, regulations and guidelines governing
various aspects such as workplace health and safety, zoning and development, planning,
building design and building construction, mortgage and financing and environmental
pollution control. There is no assurance that such laws, regulations and guidelines will
remain unchanged in the future, and if changed, will not have a negative impact on such
land, its development properties and the Target Group’s overall business and plans. In the
event that there are changes to applicable laws, regulations, rules or guidelines, the
Target Group may be compelled to alter or modify or amend its development plans. Such
changes may adversely affect the profitability and prospects of the Target Group. As at the
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Latest Practicable Date, the Target Group has not faced any rejection of material permit
applications and renewals or failed to obtain material regulatory approval necessary to
carry out its business.
The Target Group may not be able to protect its intellectual property effectively
The brand name “Hatten” is an important asset that the Target Group relies on for its
business and this will be licensed to the Enlarged Group from the Hatten Group.
“Hatten” is registered in Singapore and Malaysia. The right to use the trademark in
Malaysia and Singapore will be granted to the Enlarged Group under a non-exclusive
licence agreement. The Target Group believes that brand awareness, image and loyalty
are critical to its ability to achieve and maintain its success. The Enlarged Group expects
to expend resources to promote these brand names in the future. The Hatten Group,
however may terminate the Enlarged Group’s right to use the brand name and intellectual
property rights in the event of, amongst others, a material breach under the relevant
agreements. This will result in the Enlarged Group not being able to operate its business
under the “Hatten” trademark effectively if its right to use the trademark is terminated.
The Enlarged Group’s success will also depend on its awareness of and its ability to
prevent third parties from using its brands without consent. The Enlarged Group could
incur substantial costs in pursuing any claims relating to the trademarks. Issues relating
to intellectual property rights can be complicated and there is no assurance that disputes
will not arise or that any disputes in relation to the trademarks will be resolved in the
Enlarged Group’s favour.
The Target Group may face potential liability for environmental problems
The Target Group is subject to a variety of laws and regulations concerning the protection
of the environment. The particular environmental laws and regulations which apply to any
given project development site vary greatly according to the site’s location, the site’s
environmental condition, the present and former uses of the site, as well as adjoining
properties. Compliance with environmental laws and conditions may result in delays in
development, may cause the Target Group to incur substantial compliance and other costs
and could prohibit or severely restrict project development activity in environmentally-
sensitive regions or areas.
The Target Group may face potential material environmental liabilities that it is not aware
of, which could have a material adverse effect on the Target Group’s business, financial
condition, results of operations and prospects. In addition, the Target Group may face
future environmental liabilities for its future property development projects. The Target
Group also cannot assure that its contractors will not violate any environmental laws and
regulations in their operations that may be attributable to the Target Group. As at the
Latest Practicable Date, the Target Group has not had any environmental violations in its
operations that have had a material adverse effect on the Target Group.
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The Target Group operates in a region with historical sites
The Target Group has property development projects in Malacca, Malaysia, which is
populated by historical sites. If historical artifacts are discovered during the Target Group’s
land development process, the construction and delivery schedules of the Target Group’s
projects could be delayed, thereby adversely affecting the financial results of the Target
Group. As at the Latest Practicable Date, the Target Group has not discovered any
historical artifact during its land development process.
As Malacca is a UNESCO World Heritage Site, the Malaysian government may impose
certain requirements in relation to the exterior design and height restriction of properties
developed by the Target Group. If such requirements are imposed, the construction and
delivery schedules of the Target Group’s projects could be delayed and the profitability of
the Target Group’s projects may be reduced, thereby adversely affecting the financial
results of the Target Group.
The Target Group’s financial performance may fluctuate from period to period and
the fluctuations make it difficult to predict future performance
The Target Group is vulnerable to revenue volatility, which is characteristic of property
development companies. For property development business, the level of revenue that the
Target Group can achieve is subject to fluctuations and is dependent on, amongst others,
the demand for the Target Group’s development projects, the value and number of
property development projects and the overall schedules of its projects. Accordingly, it is
susceptible to revenue volatility between financial periods.
Because the Target Group derives substantially all of its revenue from the sale of
properties, its financial performance is affected by the demand for its properties and the
price at which it is able to sell them. To a large extent, the demand for and pricing of the
properties are affected by the general conditions of the property markets as well as
government regulations.
In the event that the Target Group is not able to continually and consistently secure new
projects, this would have an adverse impact on its future financial performance. In
addition, there may be a lapse of time between the completion of its existing projects and
the commencement of subsequent projects. As such, its financial performance during such
periods may be adversely affected.
There is no assurance that the amount of revenue and profits from the Target Group’s sale
of development properties will remain comparable each year. In the event that the Target
Group undertakes fewer or no new property development projects for any reason or if
there is any delay in the progress of any of the property development projects, the Target
Group’s revenue and profits recognised in that financial year, and accordingly its financial
position, may be adversely affected. As such, potential investors should note that the
historical financial performance and financial condition of the Target Group are not to be
taken as an indication of the future financial performance and financial condition of the
Target Group in any financial reporting period.
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Further, the Target Group’s profit margin varies with each property development and it may
not be able to sustain its profit margins. Factors that affect its gross profit margin include
(i) product mix; (ii) selling price; and (iii) cost of development. There is no assurance that
the Target Group is able to maintain or increase its gross profit margin. If it is unable to
maintain its gross profit margin, its profitability may be materially and adversely affected.
The value of the Land Bank is affected by factors beyond the control of the Target
Group
The potential of the Land Bank and other land parcels acquired or proposed to be acquired
by the Target Group is affected by, among other things, the economy, the demography of
the local population and the demand and supply of properties in Malacca, Malaysia which
are in turn affected by government policies and measures in Malaysia. Any change in the
political, economic and regulatory environment, such as bilateral relations between
Singapore and Malaysia, the impact of general elections in Malaysia, development relating
to the proposed high speed rail line known as the Rapid Transit System between Malaysia
and Singapore may have an impact on the value of the Land Bank and other land parcels
acquired or proposed to be acquired by the Target Group and the Target Group’s future
activities in Malacca, Malaysia. Generally, any change in government policy stance,
measures, incentives and plans particularly with regard to Malacca, Malaysia will have an
impact on the development potential and value of the Land Bank and other land parcels
acquired or proposed to be acquired by the Target Group.
Investments in Malacca, Malaysia are currently also driven by foreign investors and
accordingly, the property market is susceptible to unfavourable global developments.
There is no absolute assurance that the property market in Malacca, Malaysia can be
sustained at current levels. The value of the Land Bank and other land parcels acquired
or proposed to be acquired by the Target Group is affected by factors beyond the control
of the Target Group and may depreciate, thereby adversely affecting the business,
financial performance and results of operations of the Target Group.
The Target Group may be involved in legal and other proceedings arising from its
operations from time to time
Save as disclosed in Section 26.5 of this letter, the Target Group is not engaged in any
legal or arbitration proceedings (either as plaintiff or defendant), including those which are
pending or known to be contemplated, which may have or have had in the 12 months
immediately preceding the date of this Circular, a material effect on the Target Group’s
financial position or profitability.
However, the Target Group may be involved from time to time in disputes with various
parties involved in the development and sale of its properties such as main contractors,
sub-contractors, suppliers, construction companies, purchasers, other partners and
lenders. Disputes with purchasers may include claims relating to delays and defective
works as well as legal proceedings arising from guarantees provided to the banker in
respect of the mortgages provided to the Target Group’s customers. These disputes may
lead to legal and other proceedings, and may cause the Target Group to suffer additional
costs and delays.
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In addition, the Target Group may have disagreements with regulatory bodies in the course
of its operations as a result of a different understanding or interpretation with respect to
the implementation of the Malaysian laws and regulations promulgated by various
regulatory bodies, which may subject it to administrative proceedings and unfavourable
decrees that will result in financial losses and delay the construction or completion of its
projects. Any project delays arising from the above will affect the Target Group’s business
and financial performance. As at the Latest Practicable Date, the Target Group has not
experienced any such disagreement with regulatory bodies in the course of its operations
which has subjected it to administrative proceedings and unfavourable decrees that
resulted in material financial losses and delayed the construction or completion of its
projects.
The Target Group may be exposed to potential liability arising from development of
properties and/or loss arising from damages, injury or death occurring at
construction worksites
The Target Group may face the risk of liabilities arising from negligent designs and plans
which may result in, among other things, accidents involving its employees or third parties
on its development sites and warranty claims in respect of construction works or
completed developments. These liabilities may not be covered by the Target Group’s
insurance policies, or if claims are in excess of its insurance coverage and/or any of its
insurance claims are contested by its insurers, the Target Group will be required to pay
compensation and its financial performance may be materially and adversely affected.
Such insurance claims may also result in higher insurance premiums payable by the
Target Group. These may have an adverse effect on the Target Group’s financial results.
In addition, any accidents could also have an adverse impact on the Target Group’s
operations if it is required by regulatory authorities to suspend its operations for a period
of time. This may result in fines or delay in completion of the projects and, possibly, cost
overruns or liquidated agreed damages or other expenses and liabilities, which may in turn
affect the Target Group’s profitability.
The Target Group may be adversely affected by disruption in the global credit
markets and associated impacts
Disruption in the global credit markets, coupled with a re-pricing of credit risks, and a
slowdown in the global economy may create increasingly difficult conditions in the
financial markets. These developments may result in volatility in equity securities markets,
tightening of liquidity in credit markets, widening of credit spread and loss of market
confidence. Further, these developments have also resulted in the failure of a number of
financial institutions in the United States, the European Union and unprecedented actions
by governmental authorities and central banks around the world. There is a potential for
new laws and regulations regarding lending and funding practices and liquidity stands,
and governments and bank regulatory agencies are expected to be aggressive in adopting
such new measures in response to concerns and identified trends.
It is difficult to predict how long these developments and measures will exist and how the
Target Group may be affected. These developments may be exacerbated by persisting
volatility in the financial sector and the capital markets or concerns about, or a default by,
one or more institutions which could lead to significant market-wide liquidity problems,
losses or defaults by other institutions. Accordingly, these conditions could adversely
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affect the Target Group’s clients and projects, which may consequently impact its
business. In addition, the Target Group may become subject to litigation and regulatory or
governmental scrutiny, or may be subject to changes in applicable regulatory regimes that
may be materially adverse to the Target Group and its prospects. Furthermore, it is not
possible to predict what structural and/or regulatory changes may result from the current
market conditions or whether such changes may be materially adverse to the Target Group
and its prospects.
The Target may not be able to accurately make investment and business decisions
due to the lack of reliable and up-to-date statistics
The Target Group is subject to property market conditions in Malaysia. Reliable and
up-to-date statistics may not generally be available on the amount and nature of property
development activities, the demand and absorption rates for such developments, the
supply of new properties being developed or the availability of land and buildings suitable
for development. Consequently, the Target Group’s investment and business decisions
may not be based on accurate, complete and timely information. Inaccurate or incomplete
information may adversely affect the Target Group’s business decisions, which could
materially and adversely affect its future results of operations and financial condition as
well as its future growth and prospects.
The Target Group is exposed to risks in respect of outbreaks of infectious and/or
communicable diseases, or any other form of natural calamities
In recent years, the outbreak of various communicable diseases such as the influenza
virus and its variants including influenza A (“H1N1”) and the avian influenza (“H5N1”), the
Ebola virus, the Middle East respiratory syndrome, the Zika virus, or any other
communicable diseases or the recurrence and spread of severe acute respiratory
syndrome (“SARS”) have resulted in global economic and social uncertainties. There is no
assurance that the Target Group will not be affected should there be an outbreak of
communicable disease. The Target Group’s showrooms, property development sites
and/or office may have to be shut down temporarily or for a protracted amount of time and
the Target Group’s employees may be required to be quarantined if they are infected to
prevent the spread of the diseases. Such closures could severely delay the construction
and delivery schedule of the Target Group’s projects and adversely affect their results of
operations, business and financial condition.
Further, consumer sentiment and spending could be affected and may lead to
deterioration in economic conditions and adversely affect the development of the Target
Group’s real estate business. Therefore, the occurrence of such events will cause the
Target Group’s business and financial performance to be materially and adversely
affected.
In addition, natural disasters such as floods, typhoons or other calamities or emergencies
such as breakout of fire and other crises may also disrupt the Target Group’s business
operations and the construction of their development projects, and can result in significant
damage to their property assets and/or delay the construction and delivery schedule of the
Target Group’s projects, which will cause its business and financial performance to be
materially and adversely affected.
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Occurrence of any acts of God, war and terrorist attacks
Acts of God such as natural disasters are beyond the control of the Target Group and may
materially and adversely affect the economy, infrastructure and livelihood of the local
population in Malaysia. The Target Group’s business and operations may be materially
and adversely affected should such acts of God occur. There can also be no assurance
that any war, terrorist attack or other hostilities in any part of the world, potential,
threatened or otherwise, will not, directly or indirectly, have a material and adverse effect
on the Target Group’s business and operating results.
27.2. Risks Relating to Malaysia and its property industry
The Target Group’s assets and operations are predominantly located and conducted in
Malaysia. Accordingly, the Target Group’s business is significantly influenced by the
economic, political, and social developments in Malaysia, as well as certain actions and
policies which the Malaysian government may, or may not, take or adopt. Certain factors
affecting Malaysia and which could adversely affect the Target Group’s business are set
out below.
The Target Group faces increasing competition in Malaysia that could adversely
affect its business and financial position
In recent years, a large number of property developers have begun to undertake property
development in Malaysia. In addition, a number of international developers have
expanded their operations into Malaysia. Many of these developers, both private and
state-owned, have significant financial, managerial, marketing and other resources, as
well as experience in property and land development. Competition among property
developers is intense and may result in, among others, increased acquisition costs of land
for development, oversupply of properties in certain parts of Malaysia, a decrease in
property prices, a slowdown in the rate at which new property developments will be
approved or reviewed by the relevant government authorities, an increase in construction
costs and difficulty in obtaining high quality sub-contractors and qualified employees. Any
of the above mentioned factors may adversely affect the Target Group’s business in
Malaysia, results of operations and financial position in the future. In addition, the property
market in Malaysia is rapidly changing. If the Target Group cannot respond to changes in
the market conditions more swiftly or effectively than its competitors, its ability to generate
revenue, its financial condition and results of operations as well as future growth and
prospects may be adversely affected.
The Group’s business is dependent on the performance of the Malaysian property
sector and may be affected by changes in the social, political and economic
conditions in Malaysia
The Target Group’s property development projects are located mainly in Malacca,
Malaysia. The Target Group’s future plans in this respect are hence dependent on the
continuing growth of the Malaysian economy generally and the property sector of Malaysia
specifically. The property development and rental market may be adversely affected by
economic, political, social, regulatory or diplomatic developments affecting the Malaysian
property sector, which will in turn affect the Target Group’s business in Malaysia. Changes
in political leadership, monetary and fiscal policies, taxation laws, currency exchange
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controls, nationalisation, inflation, interest rates, or other regulatory, political, social or
economic factors in Malaysia may bring about political upheavals, civil commotions,
epidemics, financially prohibitive importation or other taxes and prohibitive policies and
may also present obstacles to the Target Group’s expansion in the Malaysian property
sector. This includes adverse developments in property prices or in the supply and
demand of building materials and property units. Further, the Target Group’s business is
also subject to the cyclical nature of the property industry. Any downturn in the residential
or commercial property demand and in the Malaysian rental market may require the Target
Group to postpone its expansion plans to a later date when market conditions improve.
While the Target Group adopts prudent financial management and operating procedures,
there can be no assurance that such adverse political and economic developments which
are beyond the Target Group’s control, will not materially and adversely affect the Target
Group’s business operations and financial performance.
The Target Group’s business and financial performance may be adversely affected
if it fails to obtain, or if there are material delays in obtaining, requisite
governmental approvals for its land acquisitions and property developments
The property development and construction industry in Malaysia is governed by
regulations, acts and requirements which have been established to regulate and protect
individual consumers as well as to determine the minimum standard for the property
development and construction industry. Malaysian real estate developers must comply
with these various requirements mandated by applicable laws and regulations, including
the policies and procedures established by local authorities designed for the
implementation of such laws and regulations. In order to develop and complete a property
development, a property developer must obtain various permits, licences, certificates and
other approvals from the relevant administrative authorities at various stages of the
property development process, including land use rights documents, planning permits,
construction permits, sale permits and certificates or confirmation of completion and
acceptance. Each approval is dependent on the satisfaction of certain conditions.
An example would be the licence issued pursuant to the Housing Development (Control
and Licensing) Regulations 1989 (for West Malaysia). Under the regulations, the Target
Group is required to obtain such a licence before it is able to engage in, carry on,
undertake or cause to be undertaken the business of housing development. Further, in
West Malaysia, the Town and Country Planning Act 1976 also requires the Target Group
to obtain permission before it is able to commence, undertake or carry out any building,
engineering or other similar operation in, on, over or under land or the making of any
material change in the use of land or building or the subdivision or amalgamation of land.
A licence from the Director General of Environmental Quality is also required pursuant to
the Environmental Quality Act 1974 before any activity which involves the discharge of
environmentally hazardous substances, pollutants or wastes which are hazardous or
potentially hazardous to public health, or to animals, birds, wildlife, fish or aquatic life, or
to plants may be carried out.
Although to-date, the Target Group has been in compliance with all relevant legislations
and regulations governing the conduct of the Target Group’s business, the Target Group
cannot be certain that it will not encounter problems in obtaining such government
approvals, such as getting the requisite approval for building plans or names of such
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
A-176
property developments, or in fulfilling the conditions required for obtaining the approvals,
or that it will be able to adapt itself to new laws, regulations or policies that may come into
effect from time to time with respect to the real estate industry in general or the particular
processes with respect to the granting of approvals. If it fails to obtain relevant approvals
or fulfil the conditions of those approvals for a significant number of its property
developments, these developments may not proceed on schedule, and its business and
financial performance may be adversely affected.
Changes in tax laws, regulations, policies, concessions and treatment may
materially and adversely affect the Group’s financial condition and results of
operations
The property development industry in Malaysia is subject to governmental regulations.
Such regulations include those affecting land and title acquisition, development planning,
design and construction as well as mortgage financing and refinancing. There is no
assurance that any changes in the abovementioned regulations or policies imposed by the
Malaysian government from time to time will not have an adverse effect on the Target
Group’s business, financial performance, its future growth and prospects.
In particular, the following changes/proposed changes in the regulations, policies,
concessions and treatment in the property development industry in Malaysia by the
authorities may materially and adversely affect the financial condition and the results of
the operations of the Target Group:
(a) Real Property Gains Tax (“RPGT”)
In efforts to promote a more stable and sustainable property markets, local
authorities in Malaysia have introduced certain regulatory restrictions and schemes.
The RPGT was reinstated by the Malaysian government in 2010 and the RPGT rates
were revised upwards thereafter in order to deter speculative activities in the
secondary property market. As announced in the Malaysian Budget 2014 (“2014
Budget”) effective from 1 January 2014, the RPGT rates for the disposal of
properties have been revised. There were no further adjustments to the RPGT rates
in the subsequent Malaysian Budget 2015 and 2016.
The current RPGT rates are as follows:
< RPGT rates (%) >
Date of disposal Companies
Individual
(citizens and
permanent
residents)
Individuals
(non-citizens)
Within 3 years from the
date of acquisition 30 30 30
In the 4th year 20 20 30
In the 5th year 15 15 30
After the 5th year 5 0 5
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
A-177
(b) Minimum purchase price
The Malaysian government imposes a minimum purchase price on properties
purchasable by foreigners. Currently, in Malacca, the minimum price for properties
with strata titles is RM500,000 and RM1,000,000 for landed properties.
(c) Maximum loan-to-value ratio
In 2010, Bank Negara Malaysia had also introduced a maximum loan-to-value
(“LTV”) ratio of 70% with regards to third home purchases. Under the ruling, potential
third home purchasers are only able to obtain loan-financing facility of up to 70% of
the value of their proposed third home purchases. This ruling was introduced by BNM
with the aim of discouraging speculation in the property market. In November 2013,
BNM issued a ruling that banks are required to give out property loans based on net
selling price of the properties, which excludes rebates and discounts as opposed to
the gross selling price of the subject properties.
As the financing facilities for the purchase of the first and second homes are not
affected by this ruling, the introduction of this new ruling is not expected, in general,
to have a material and adverse effect on the financial condition and the results of the
operations of the property development sector in Malacca, Malaysia. However, there
can be no assurance that the ruling will not have any impact on the Target Group’s
residential developments.
(d) Increase in the deposit required to be made by a development company with the
Controller of Housing pursuant to Section 6 of the Housing Development (Control and
Licensing) Act 1966 (“HDA”)
Pursuant to the amendments to the HDA which took effect from 1 June 2015,
developers are now required to make deposit of a sum equivalent to 3.0% of the
estimated cost of the construction of a housing development. Prior to 1 June 2015,
the deposit required to be made by a development company was a fixed amount of
RM200,000. The Target Group may be required to make an increased amount of
deposit for its subsequent housing development projects, and the cash flow of the
Target Group may be affected.
The above measures may affect the demand for properties which in turn may
adversely impact the Property Development Business of the Target Group. There is
no assurance that any historical or future changes to the existing policies and
regulations relating to the property markets in Malaysia will not have an adverse
effect on the Target Group’s results of operations and prospects.
Please refer to Appendix J to this Circular on “Summary of Applicable Laws and
Regulations in Malaysia” for a summary of some of the laws and regulations in Malaysia
applicable to the Target Group’s business.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
A-178
The Target Group’s business expansion plans may be subject to foreign investment
guidelines issued by the Economic Planning Unit, Prime Minister’s Department,
Malaysia or the Land and Mines Department of Malacca
The Economic Planning Unit in the Prime Minister’s Department (“EPU”) regulates and
prescribes guidelines on acquisition of properties in Malaysia by foreign interests through
the Guideline on the Acquisition of Properties (“EPU Property Acquisition Guideline”).
Where the EPU Property Acquisition Guideline is applicable, the approval of the EPU is
required. Strictly speaking, the EPU Property Acquisition Guideline does not have the
force of law (in the sense that it has not been enacted as legislation or promulgated as
regulations under any existing laws).
Under the EPU Property Acquisition Guideline which is effective from 30 June 2009 and
revised recently in 1 March 2014, EPU approval (which is granted at the sole discretion of
the EPU) is required for, save for acquisition of residential units:
(a) direct acquisition of property valued at RM20 million and above, resulting in the
dilution in the ownership of property held by bumiputera interest and/or government
agencies; and
(b) indirect acquisition of property by other than bumiputera interest through acquisition
of shares, resulting in a change of control of the company owned by bumiputera
interest and/or government agency, having property more than 50% of its total assets
and the said property being valued at more than RM20 million.
Such approval by the EPU will be subject to equity and share capital conditions. The equity
condition is that the company acquiring the property is required to have at least 30%
bumiputera equity. The share capital condition is that a local company owned by foreign
interest is required to have at least RM250,000 paid-up capital.
Further, foreign interests cannot acquire properties below specified threshold limits. The
threshold limit for the acquisition of properties with strata titles in Malacca by foreign
interests specified by the Land and Mines Department of Malacca is RM500,000 and
RM1,000,000 for landed properties.
There is no assurance that any changes in the EPU Property Acquisition Guideline, any
guidelines issued by the Land and Mines Department of Malacca or any new foreign
investment guidelines as may be issued by the EPU from time to time will not have an
adverse effect on the Target Group’s business, future growth and prospects.
For further details on the land laws of Malaysia, please refer to Appendix J to this Circular
on “Summary of Applicable Laws and Regulations in Malaysia”.
Environmental, health and safety laws could impose material liabilities on the Target
Group and could require them to incur material capital and operational costs
The Target Group is subject to environmental, health and safety laws and regulations in
Malaysia. In general, the Environmental Quality Act 1974 (“EQA”) and various subsidiary
regulations contain provisions restricting the emission of environmentally hazardous
substances including the emission of noise into the environment. The EQA further
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
A-179
provides the power to specify what are acceptable conditions for such emissions into the
environment and may set aside any area where such emissions are restricted. A licence
may be required under the EQA in certain situations if emissions are not within acceptable
conditions.
Failure to comply with any of these laws or regulations could cause the Target Group to
incur material liabilities and costs to comply with the same. In addition, the adoption of new
laws and regulations or any modification to the existing laws and regulations may result in
the Target Group having to incur additional compliance costs and expenses, which in turn
may result in the curtailment of its operations and the restriction in its ability to expand its
business. Accordingly, the Target Group’s business, financial position, future growth and
prospects may in turn be adversely and materially affected.
The Target Group may be adversely affected by the implementation of goods and
services tax (“GST”) in Malaysia and the adoption of new Malaysian laws and
regulations
The Government had announced that GST has been implemented with effect from
1 April 2015 at a fixed rate of 6.0%. Generally, GST is charged at every production and
distribution stage of the supply chain. Firstly, GST to be paid by the Target Group to its
suppliers is known as input tax. For example, building materials used in the construction
of the residential properties and professional services associated with such property
development, among others, will be subject to input tax. Secondly, GST to be collected
from the customers for the sale of the Target Group’s final products is known as output tax.
The input tax is allowed as input tax credits, which may, in most cases, be offset against
the output tax i.e. GST collected by the Target Group from its customers. Any balance of
the output tax that is not offset against the input tax credits will be remitted to the Royal
Malaysian Customs.
However, in certain circumstances, the Target Group may not be able to pass on its cost
for the input tax to its customers. This will happen if its final products are exempt from
GST. For example, if the Target Group is not able to charge GST to its customers for its
residential properties that it sells to its customers, the input tax that the Target Group pays
to its suppliers and consultants in respect of the development of such residential
properties will be a non-recoverable cost and this will directly increase the total costs and
the financial results of the Target Group may be adversely affected. On the other hand, if
the Target Group opts to increase the price of its residential properties to absorb the
additional cost, the customers’ ability to purchase its residential properties may be
adversely affected. Even if the Target Group is able to charge GST to its customers for
non-exempt goods, the ability of its customers to purchase such non-exempt goods may
also be adversely affected.
In addition, the Companies Act 2016 of Malaysia has been gazetted in Malaysia and is
likely to come into force on 1 January 2017 which will replace the current Companies Act
1965 of Malaysia. The new Companies Act 2016 of Malaysia which will apply to all
companies in Malaysia is a substantial overhaul of the current Malaysian Companies Act
1965. The changes are not unique to property owning or property development companies
but applies to all Malaysian companies once it comes into force. While the Target Group
has compliance procedures in place to ensure compliance with new legislations, the
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
A-180
Target Group may incur additional costs pursuant to the introduction of new or revised
regulations and there is no absolute certainty on the approach which will be taken by the
relevant regulators, including the Companies Commission of Malaysia.
The Target Group is subject to cash-flow issues caused by irregular timing of
billings to purchasers
Upon launching and securing sales of a development by the Target Group, the credit terms
between the Target Group and its customers are paid according to development
milestones. In the case of sale of residential properties, such development milestone
payments are provided for in standard form sale and purchase agreements as set out in
the Housing Developers (Control and Licensing) Regulations, 1989 in West Malaysia. As
a result, the Target Group’s cash flow is dependent on the payment schedules provided for
under the relevant sale and purchase agreements.
In the event the Target Group is unable to plan and stagger the launches and secure the
sales of its various property developments, the Target Group may experience cash flow
issues and may be unable to pay its suppliers or service providers to carry out the on-site
works at the Target Group’s property development projects. This will adversely affect the
Target Group’s financial and operational condition. For further details on the payment
terms between the Target Group and its purchasers, refer to Section 7.2 of this letter
entitled “Credit Management”.
The Target Group’s business expansion plans may be subject to changes to the
bumiputera lot quota policy followed by Malaysian housing developers
The Bumiputera lot quota policy was formed and implemented to give opportunity for
Bumiputeras to own properties and to purchase properties at a discounted price. The aim
of this policy is to balance the distribution of property ownership among the bumiputeras
and non bumiputeras. Pursuant to such policy, the Target Group has to allocate certain
property development units (be it residential or commercial) to bumiputeras, at discounted
rate between five (5) to 15 percent of the selling price. The allocation number differs from
time to time.
Depending on the location of the properties, bumiputera lots may be harder to sell as the
market is strictly confined to bumiputeras. Should the Target Group be unable to sell such
bumiputera lots, it may cause an adverse effect on the Target Group’s business, financial
performance and results of operations. In the event that such regulation and/or policy is
changed by the Malaysia Government, there is a risk that the current allocation
percentage of bumiputera lots may increase and may have an adverse effect on the Target
Group’s business, financial performance and results of operations.
APPENDIX A – LETTER TO SHAREHOLDERS FROMTHE PROPOSED NEW DIRECTORS
A-181
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This page has been intentionally left blank.
Sky Win Management Consultancy Pte Ltd and its Combined Entities
Independent Auditor’s Report on Combined Financial Statements
For financial years ended 30 June 2014, 2015 and 2016
29 December 2016
The Board of Directors
Sky Win Management Consultancy Pte Ltd
53 Mohamed Sultan Road #04-02
Singapore 238993
Dear Sirs
Report on the Financial Statements
We have audited the accompanying financial statements of Sky Win Management Consultancy
Pte Ltd (the “Company”) and its Combined Entities (collectively the “Group”), which comprise the
combined statements of financial position of the Group as at 30 June 2014, 2015 and 2016, and
the combined statements of comprehensive income, combined statements of changes in equity
and combined statements of cash flows of the Group for each of the years ended 30 June 2014,
2015 and 2016, and a summary of significant accounting policies and other explanatory
information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these combined financial
statements in accordance with Singapore Financial Reporting Standards, and for such internal
control as management determines is necessary to enable the preparation of combined financial
statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these combined financial statements based on our
audits. We conducted our audit in accordance with Singapore Standards on Auditing. Those
standards require that we comply with ethical requirements and plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the combined financial statements. The procedures selected depend on the
auditor’s judgment, including the assessment of the risks of material misstatement of the
combined financial statements, whether due to fraud or error. In making those risk assessments,
the auditor considers internal control relevant to the entity’s preparation and fair presentation of
the combined financial statements 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 entity’s
internal control. An audit also includes evaluating the appropriateness of accounting policies used
and the reasonableness of accounting estimates made by management, as well as evaluating the
overall presentation of the combined financial statements.
APPENDIX C – INDEPENDENT AUDITOR’S REPORT ONTHE COMBINED FINANCIAL STATEMENTS OF
THE TARGET GROUP FOR FY2014, FY2015 AND FY2016
C-1
Sky Win Management Consultancy Pte Ltd and its Combined Entities
Independent Auditor’s Report on Combined Financial Statements
For financial years ended 30 June 2014, 2015 and 2016
Report on the Financial Statements (Continued)
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.
Opinion
In our opinion, the combined financial statements present fairly, in all material respects, the
financial position of the Group as at 30 June 2014, 2015 and 2016, and its financial performance
and cash flows for each of the years ended 30 June 2014, 2015 and 2016 in accordance with
Singapore Financial Reporting Standards.
Restriction of distribution and use
This report has been prepared solely for the information of, and use by, the Board of Directors of
the Company, and for inclusion in the Circular to the shareholders of VGO Corporation Limited to
be issued in connection with the proposed acquisition of the entire issued and paid up share
capital of the Company and for no other purpose.
Ernst & Young LLP
Public Accountants and
Chartered Accountants
Singapore
APPENDIX C – INDEPENDENT AUDITOR’S REPORT ONTHE COMBINED FINANCIAL STATEMENTS OF
THE TARGET GROUP FOR FY2014, FY2015 AND FY2016
C-2
Sky Win Management Consultancy Pte Ltd and its Combined Entities
Combined Statements of Comprehensive Income
For financial years ended 30 June 2014, 2015 and 2016
For the years ended 30 June
Note 2014 2015 2016
RM’000 RM’000 RM’000
Revenue 4 245,159 436,264 412,347
Cost of sales (180,019) (342,316) (257,627)
Gross profit 65,140 93,948 154,720
Other income/gains 5 4,420 6,246 12,155
Other items of expense
Selling and distribution expenses (17,679) (25,475) (22,422)
General and administrative expenses (23,765) (36,953) (47,157)
Finance costs (323) (712) (855)
Profit before tax 6 27,793 37,054 96,441
Income tax expense 7 (8,298) (11,274) (27,853)
Profit for the year 19,495 25,780 68,588
Other comprehensive income:
Items that may be reclassified
subsequently to profit or loss
Foreign currency translation 34 (31) (140)
Total comprehensive income for the year 19,529 25,749 68,448
The accompanying accounting policies and explanatory notes form an integral part of the financial
statements.
APPENDIX C – INDEPENDENT AUDITOR’S REPORT ONTHE COMBINED FINANCIAL STATEMENTS OF
THE TARGET GROUP FOR FY2014, FY2015 AND FY2016
C-3
Sky Win Management Consultancy Pte Ltd and its Combined Entities
Combined Statements of Financial Position
As at 30 June 2014, 2015 and 2016
As at 30 June
Note 2014 2015 2016
RM’000 RM’000 RM’000
Assets
Non-current assets
Property, plant and equipment 9 31,892 39,084 64,101
Deferred tax assets 8 23,986 39,077 51,294
55,878 78,161 115,395
Current assets
Properties under development 10 382,934 479,811 476,350
Trade and other receivables 11 185,735 352,219 212,546
Other current assets 12 31,466 43,091 47,084
Cash and cash equivalents 13 18,389 24,116 81,930
618,524 899,237 817,910
Total assets 674,402 977,398 933,305
Liabilities
Current liabilities
Loans and borrowings 14 55,057 40,357 51,899
Income tax payable 15,054 30,766 53,352
Trade and other payables 15 232,391 464,299 288,989
Amount due to shareholders 154 168 989
Other current liabilities 16 244,710 159,052 105,546
547,366 694,642 500,775
Net current assets 71,158 204,595 317,135
Non-current liabilities
Loans and borrowings 14 79,597 98,453 198,573
Other non-current liabilities 16 54,204 140,637 173,337
133,801 239,090 371,910
Total liabilities 681,167 933,732 872,685
Equity
Share capital 17 13,235 38,235 38,235
(Accumulated losses)/Retained earnings (20,034) 5,428 22,522
Translation reserve 34 3 (137)
Total equity (6,765) 43,666 60,620
Total equity and liabilities 674,402 977,398 933,305
The accompanying accounting policies and explanatory notes form an integral part of the financial
statements.
APPENDIX C – INDEPENDENT AUDITOR’S REPORT ONTHE COMBINED FINANCIAL STATEMENTS OF
THE TARGET GROUP FOR FY2014, FY2015 AND FY2016
C-4
Sky Win Management Consultancy Pte Ltd and its Combined Entities
Combined Statements of Changes in Equity
For financial years ended 30 June 2014, 2015 and 2016
Attributable to equity holders of the Group
Share
capital
(Note 17)
Retained
earnings/
(Accumulated
losses)
Translation
reserve Total
RM’000 RM’000 RM’000 RM’000
2016
At 1 July 2015 38,235 5,428 3 43,666
Total comprehensive income for
the year – 68,588 (140) 68,448
Distributions to owners
Dividends on ordinary shares (Note 23) – (51,494) – (51,494)
Total transactions with owners in their
capacity as owners – (51,494) – (51,494)
At 30 June 2016 38,235 22,522 (137) 60,620
2015
At 1 July 2014 13,235 (20,034) 34 (6,765)
Total comprehensive income for the year – 25,780 (31) 25,749
Contributions by and distributions to
owners
Dividends on ordinary shares (Note 23) – (318) – (318)
Issuance of ordinary shares 25,000 – – 25,000
Total transactions with owners in their
capacity as owners 25,000 (318) – 24,682
At 30 June 2015 38,235 5,428 3 43,666
2014
At 1 July 2013 10,000 (39,529) – (29,529)
Total comprehensive income for the year – 19,495 34 19,529
Contributions by owners
Issuance of ordinary shares 3,235 – – 3,235
Total transactions with owners in their
capacity as owners 3,235 – – 3,235
At 30 June 2014 13,235 (20,034) 34 (6,765)
The accompanying accounting policies and explanatory notes form an integral part of the financial
statements.
APPENDIX C – INDEPENDENT AUDITOR’S REPORT ONTHE COMBINED FINANCIAL STATEMENTS OF
THE TARGET GROUP FOR FY2014, FY2015 AND FY2016
C-5
Sky Win Management Consultancy Pte Ltd and its Combined Entities
Combined Statements of Cash Flows
For financial years ended 30 June 2014, 2015 and 2016
For the years ended 30 June
Note 2014 2015 2016
RM’000 RM’000 RM’000
Cash flows from operating activities
Profit before tax 27,793 37,054 96,441
Adjustments for:
Depreciation of property, plant and equipment 9 2,061 3,764 4,537
Gain on disposal of property, plant and equipment 5 (89) (268) (442)
Interest income 5 (221) (498) (4,124)
Interest expense 323 712 855
Unrealised gain on foreign exchange 5 (151) (1,098) (1,248)
Others 34 (38) (228)
Operating cash flows before working capital changes 29,750 39,628 95,791
Decrease/(increase) in:
Properties under development (20,452) (97,877) 3,461
Trade and other receivables 9,590 (97,133) (70,122)
Amount due from related parties (63,411) (67,938) 207,671
Other current assets (15,165) (11,940) (621)
Increase/(decrease) in:
Trade and other payables 9,546 233,308 (175,310)
Other liabilities (8,854) 375 (20,806)
Amount due to shareholders 9,664 14 821
Cash flow generated (used in)/from operations (49,332) (1,563) 40,885
Interest paid (323) (712) (855)
Interest received 221 498 4,124
Income tax paid (2,884) (10,652) (17,482)
Net cash flows (used in)/generated from operating
activities (52,318) (12,429) 26,672
Cash flows from investing activities
Proceeds from disposal of property, plant and equipment 4,427 8,682 7,233
Additions to property, plant and equipment 9 (19,308) (19,364) (36,259)
Net cash flows used in investing activities (14,881) (10,682) (29,026)
Cash flows from financing activities
Proceeds from issuance of shares 3,235 25,000 –
Proceeds from loans and borrowings 57,376 4,156 111,662
Dividends paid – (318) (51,494)
Net cash flows generated from
financing activities 60,611 28,838 60,168
Net change in cash and cash equivalents (6,588) 5,727 57,814
Cash and cash equivalents at beginning 24,977 18,389 24,116
Cash and cash equivalents at end 13 18,389 24,116 81,930
The accompanying accounting policies and explanatory notes form an integral part of the financial
statements.
APPENDIX C – INDEPENDENT AUDITOR’S REPORT ONTHE COMBINED FINANCIAL STATEMENTS OF
THE TARGET GROUP FOR FY2014, FY2015 AND FY2016
C-6
Sky Win Management Consultancy Pte Ltd and its Combined Entities
Notes to Combined Financial Statements
For financial years ended 30 June 2014, 2015 and 2016
1. Business and organisation
The combined financial statements have been prepared in accordance with the following
principles and the accounting policies as set out in Note 2 to the combined financial
statements for inclusion in the Circular to the shareholders of VGO Corporation Limited to
be issued in connection with the proposed acquisition of the entire issued and paid up share
capital of Sky Win Management Consultancy Pte Ltd (the “Company”).
The Company is a limited liability company incorporated and domiciled in Singapore. Its
registered office and principal place of business of the Company is located at 53 Mohamed
Sultan Road, #04-02, Singapore 238993.
The preparation of the combined financial statements entails the aggregation of financial
information for each of the financial years ended 30 June 2014, 2015 and 2016 of the
Company and the following companies (the “Combined Entities”, and collectively, the
“Group”) which did not have a parent entity and were all under common control of the same
group of individuals. These entities do not comprise a group under FRS 110 Consolidated
Financial Statements.
Name of company
Country of
incorporation Principal activities Individual shareholder(s)
Sky Win Management
Consultancy Pte Ltd
Singapore Investment holding and
management
consultancy
Tan June Teng Colin
Tan Ping Huang Edwin
Hatten International
Pte Ltd
Singapore Marketing and
development consultancy
Tan June Teng Colin
Tan Ping Huang Edwin
Fuyuu Group
Sdn Bhd
Malaysia Property development Tan June Teng Colin
Tan Ping Huang Edwin
Fuyuu Resources Sdn
Bhd
Malaysia Property development Tan June Teng Colin
Tan Ping Huang Edwin
Fuyuu Ventures
Sdn Bhd
Malaysia Property development Tan June Teng Colin
Tan Ping Huang Edwin
Tong Yee Xing
Chong Foh Siong
Gold Mart Sdn Bhd Malaysia Property development Tan June Teng Colin
Tan Ping Huang Edwin
Tong Yee Xing
As a condition to the proposed acquisition, a restructuring will be carried out prior to the
proposed acquisition that will result in the Company holding directly or indirectly the entire
issued and paid up share capital of the Combined Entities set out above.
APPENDIX C – INDEPENDENT AUDITOR’S REPORT ONTHE COMBINED FINANCIAL STATEMENTS OF
THE TARGET GROUP FOR FY2014, FY2015 AND FY2016
C-7
Sky Win Management Consultancy Pte Ltd and its Combined Entities
Notes to Combined Financial Statements
For financial years ended 30 June 2014, 2015 and 2016
2. Summary of significant accounting policies
2.1 Basis of preparation
The combined financial statements of the Group have been prepared in accordance with
Singapore Financial Reporting Standards (FRS). In this respect, all transactions (including
unrealised profits) and balances amongst the Company and the Combined Entities have
been eliminated in accordance with the principles of combination as set out in Note 2.4(a)
to the combined financial statements.
The financial statements have been prepared on a historical cost basis except as disclosed
in the accounting policies below.
The financial statements are presented in Ringgit Malaysia (“RM”) and rounded to the
nearest thousand (RM’000), except when otherwise stated.
2.2 Changes in accounting policies
The accounting policies adopted are consistent throughout the financial years presented
where the Group has adopted all new and revised standards which are effective for each
of the respective periods reported on.
When preparing the combined financial statements, the Group has also adopted FRS 115
Revenue from Contracts with Customers resulting in a change in the revenue recognition
policy of the Group in relation to its contracts with customers. Please refer to Note 2.6 for
the related accounting policy. The Group has not early adopted any other standard,
interpretation or amendment that has been issued but is not yet effective.
With the exception of the adoption of FRS 115, the application of the new standards did not
have a material impact on the combined financial statements of the Group.
APPENDIX C – INDEPENDENT AUDITOR’S REPORT ONTHE COMBINED FINANCIAL STATEMENTS OF
THE TARGET GROUP FOR FY2014, FY2015 AND FY2016
C-8
Sky Win Management Consultancy Pte Ltd and its Combined Entities
Notes to Combined Financial Statements
For financial years ended 30 June 2014, 2015 and 2016
2. Summary of significant accounting policies (Continued)
2.3 Standards issued but not yet effective
The standards and amendments that are relevant and have been issued, but not yet
effective, up to the date of the issuance of the Group’s combined financial statements are
disclosed below. The Group intends to adopt these standards and amendments when they
become effective. Management does not anticipate these adoption, with the exception of
FRS 109 and FRS 116, to have a material impact on the combined financial statements of
the Group.
Description
Effective for
annual periods
beginning
on or after
Amendments to FRS 1 Disclosure Initiative 1 January 2016
Amendments to FRS 16 and FRS 38 Clarification of Acceptable
Methods of Depreciation and Amortisation
1 January 2016
Amendments to FRS 7 Disclosure Initiative 1 January 2017
Amendments to FRS 12 Recognition of Deferred Tax Assets for
Unrealised Losses
1 January 2017
FRS 109 Financial Instruments 1 January 2018
FRS 116 Leases 1 January 2019
In December 2014, the Accounting Standards Council issued the final version of FRS 109
which reflects all phases of the financial instruments project and replaces FRS 39. The
standard introduces new requirements for classification and measurement, impairment, and
hedge accounting. Under FRS 109, financial assets are classified according to their
contractual cash flow characteristics and the business model under which they are held.
The impairment requirements will be based on an expected credit loss model which
replaces the incurred loss model under FRS 39. The Group is assessing the impact of
adopting FRS 109. The adoption of the standard will have an effect on the classification and
measurement of the Group’s financial assets, but no impact on the classification and
measurement of the Group’s financial liabilities.
FRS 116 was issued in June 2016 and it supersedes FRS 17. FRS 116 introduces a single
model for accounting of lease and requires lessees to recognise assets and liabilities for
most leases, whereas the accounting for lessors remains substantially unchanged. The
Group is assessing the impact of adopting FRS 116. The adoption of the standard will result
in recognition of additional assets and liabilities for leases where the Group is a lessee.
APPENDIX C – INDEPENDENT AUDITOR’S REPORT ONTHE COMBINED FINANCIAL STATEMENTS OF
THE TARGET GROUP FOR FY2014, FY2015 AND FY2016
C-9
Sky Win Management Consultancy Pte Ltd and its Combined Entities
Notes to Combined Financial Statements
For financial years ended 30 June 2014, 2015 and 2016
2. Summary of significant accounting policies (Continued)
2.4 Basis of combination and business combinations
(a) Basis of combination
The combined financial statements comprise the financial statements of the Company
and the Combined Entities as at the end of each of the reporting periods. The financial
statements of the Combined Entities used in the preparation of the combined financial
statements are prepared for the same reporting date as the Company. Consistent
accounting policies are applied to like transactions and events in similar
circumstances.
All intra-group balances, income and expenses and unrealised gains and losses
resulting from intra-group transactions and dividends are eliminated in full consistent
with the principles of consolidation under FRS 110.
(b) Business combinations arising from entities under common control
When preparing the combined financial statements, business combinations arising
from transfers of interests in the Combined Entities to the Company that are under the
control of a common group of individuals are assumed. These transactions are
accounted for as if the acquisition of the Combined Entities by the Company had
occurred at the beginning of the earliest reporting period presented. The assets and
liabilities acquired are recognised at the carrying amounts recognised previously in
each of the Combined Entities’ financial statements and no goodwill is recognised. The
components of equity of the acquired entities are added to the same components
within Group equity and any gain/loss arising is recognised directly in equity.
APPENDIX C – INDEPENDENT AUDITOR’S REPORT ONTHE COMBINED FINANCIAL STATEMENTS OF
THE TARGET GROUP FOR FY2014, FY2015 AND FY2016
C-10
Sky Win Management Consultancy Pte Ltd and its Combined Entities
Notes to Combined Financial Statements
For financial years ended 30 June 2014, 2015 and 2016
2. Summary of significant accounting policies (Continued)
2.5 Foreign currency
The financial statements are presented in RM, which is also the Company’s functional
currency. Each entity in the Group determines its own functional currency and items
included in the financial statements of each entity are measured using that functional
currency.
(a) Transactions and balances
Transactions in foreign currencies are measured in the respective functional
currencies of the Company and the Combined Entities and are recorded on initial
recognition in the functional currencies at exchange rates approximating those ruling
at the transaction dates. Monetary assets and liabilities denominated in foreign
currencies are translated at the rate of exchange ruling at the end of the reporting
period. Non-monetary items that are measured in terms of historical cost in a foreign
currency are translated using the exchange rates as at the dates of the initial
transactions. Non-monetary items measured at fair value in a foreign currency are
translated using the exchange rates at the date when the fair value was measured.
Exchange differences arising on the settlement of monetary items or on translating
monetary items at the end of the reporting period are recognised in profit or loss.
(b) Translation
When preparing the combined financial statements, the assets and liabilities of foreign
operations are translated into RM at the rate of exchange ruling at the end of each of
the reporting periods and their profit or loss are translated at the exchange rates
prevailing at the date of the transactions. The exchange differences arising on the
translation are recognised in other comprehensive income. On disposal of a foreign
operation, the component of other comprehensive income relating to that particular
foreign operation is recognised in profit or loss.
APPENDIX C – INDEPENDENT AUDITOR’S REPORT ONTHE COMBINED FINANCIAL STATEMENTS OF
THE TARGET GROUP FOR FY2014, FY2015 AND FY2016
C-11
Sky Win Management Consultancy Pte Ltd and its Combined Entities
Notes to Combined Financial Statements
For financial years ended 30 June 2014, 2015 and 2016
2. Summary of significant accounting policies (Continued)
2.6 Revenue recognition
The Group has elected to adopt FRS 115 in the preparation of its combined financial
statements, and has applied the following accounting policy for revenue recognition:
(a) Sale of properties under development
The Group recognises revenue from contracts with customers based on a five-step
model as set out in FRS 115:
– Step 1. Identify contract(s) with a customer: A contract is defined as an
agreement between two or more parties that creates enforceable rights and
obligations and sets out the criteria for every contract that must be met.
– Step 2. Identify performance obligations in the contract: A performance obligation
is a promise in a contract with a customer to transfer a good or service to the
customer.
– Step 3. Determine the transaction price: The transaction price is the amount of
consideration to which the Group expects to be entitled in exchange for
transferring promised goods or services to a customer, excluding amounts
collected on behalf of third parties.
– Step 4. Allocate the transaction price to the performance obligations in the
contract: For a contract that has more than one performance obligation, the
Group allocates the transaction price to each performance obligation in an
amount that depicts the amount of consideration to which the Group expects to
be entitled in exchange for satisfying each performance obligation.
– Step 5. Recognise revenue when (or as) the Group satisfies a performance
obligation. The Group satisfies a performance obligation and recognises revenue
over time, if one of the following criteria is met:
(a) The Group’s performance does not create an asset with an alternate use to
the Group and the Group has an enforceable right to payment for
performance completed to date.
(b) The Group’s performance creates or enhances an asset that the customer
controls as the asset is created or enhanced.
(c) The customer simultaneously receives and consumes the benefits provided
by the Group’s performance as the Group performs.
APPENDIX C – INDEPENDENT AUDITOR’S REPORT ONTHE COMBINED FINANCIAL STATEMENTS OF
THE TARGET GROUP FOR FY2014, FY2015 AND FY2016
C-12
Sky Win Management Consultancy Pte Ltd and its Combined Entities
Notes to Combined Financial Statements
For financial years ended 30 June 2014, 2015 and 2016
2. Summary of significant accounting policies (Continued)
2.6 Revenue recognition (Continued)
(a) Sale of properties under development (Continued)
For sale of properties under development, revenue is recognised based on the
percentage-of-completion method. Under the percentage-of-completion method, profit
is brought to profit or loss only in respect of finalised sales contracts and to the extent
that such profit relates to the progress of construction work. The progress of
construction work is measured by the proportion of the construction and related costs
incurred to date to the estimated total construction and related costs for each project.
For performance obligations where one of the above conditions are not met, revenue
is recognised at the point in time at which the performance obligation is satisfied.
When the Group satisfies a performance obligation by delivering the promised goods
or services it creates a contract based asset on the amount of consideration earned
by the performance. Where the amount of consideration received from a customer
exceeds the amount of revenue recognised this gives rise to a contract liability.
Revenue is measured at the fair value of the consideration received or receivable,
taking into account contractually defined terms of payment and excluding taxes and
duty. The Group assesses its revenue arrangements against specific criteria to
determine if it is acting as principal or agent.
Revenue is recognised to the extent it is probable that the economic benefits will flow
to the Group and the revenue and costs, if applicable, can be measured reliably.
(b) Deferred revenue
For certain contracts entered for sale of properties under development, the Group
enters into leaseback arrangement with customers for contractually specified time
periods that typically commence upon completion of construction. Revenue in relation
to such tenancy arrangement is deferred initially and recognised in profit or loss based
on the percentage of the contractual tenancy period that has elapsed as at the end of
each reporting period.
(c) Rental income
Rental income arising from operating leases is accounted for on a straight-line basis
over the lease terms. The aggregate costs of incentives provided to lessees are
recognised as a reduction of rental income over the lease term on a straight-line basis.
APPENDIX C – INDEPENDENT AUDITOR’S REPORT ONTHE COMBINED FINANCIAL STATEMENTS OF
THE TARGET GROUP FOR FY2014, FY2015 AND FY2016
C-13
Sky Win Management Consultancy Pte Ltd and its Combined Entities
Notes to Combined Financial Statements
For financial years ended 30 June 2014, 2015 and 2016
2. Summary of significant accounting policies (Continued)
2.6 Revenue recognition (Continued)
(d) Interest income
Interest income is recognised using the effective interest method.
2.7 Leases
(a) As lessee
Operating lease payments are recognised as an expense in profit or loss on a
straight-line basis over the lease term. The aggregate benefit of incentives provided by
the lessor is recognised as a reduction of rental expense over the lease term on a
straight-line basis.
Where a sale-and-leaseback transaction results in an operating lease, and it is clear
that the transaction is established at fair value, any profit or loss shall be recognised
immediately. If the sale price is below fair value, any profit or loss shall be recognised
immediately except that, if the loss is compensated for by future lease payments by
the Group at below market price, it shall be deferred and amortised in proportion to the
lease payments over the period for which the asset is expected to be used. If the sale
price is above fair value, the excess over fair value shall be deferred and amortised
over the period for which the asset is expected to be used.
(b) As lessor
Leases in which the Group does not transfer substantially all the risks and rewards of
ownership of the asset are classified as operating leases. Initial direct costs incurred
in negotiating an operating lease are added to the carrying amount of the leased asset
and recognised over the lease term on the same bases as rental income. The
accounting policy for rental income is set out in Note 2.6(c). Contingent rents are
recognised as revenue in the period in which they are earned.
2.8 Borrowing costs
Borrowing costs are capitalised as part of the cost of a qualifying asset if they are directly
attributable to the acquisition, construction or production of that asset. Capitalisation of
borrowing costs commences when the activities to prepare the asset for its intended use or
sale are in progress and the expenditures and borrowing costs are incurred. Borrowing
costs are capitalised until the assets are substantially completed for their intended use or
sale. All other borrowing costs are expensed in the period they occur. Borrowing costs
consist of interest and other costs that an entity incurs in connection with the borrowing of
funds.
APPENDIX C – INDEPENDENT AUDITOR’S REPORT ONTHE COMBINED FINANCIAL STATEMENTS OF
THE TARGET GROUP FOR FY2014, FY2015 AND FY2016
C-14
Sky Win Management Consultancy Pte Ltd and its Combined Entities
Notes to Combined Financial Statements
For financial years ended 30 June 2014, 2015 and 2016
2. Summary of significant accounting policies (Continued)
2.9 Employee benefits
(a) Defined contribution plans
The Group participates in national pension schemes as defined by the laws of the
countries in which it has operations. In particular, the Singapore companies in the
Group make contributions to the Central Provident Fund scheme in Singapore, and the
Malaysian companies in the Group make contributions to the Employees Provident
Fund scheme in Malaysia, which are defined contribution pension schemes.
Contributions to defined contribution pension schemes are recognised as expense in
the period in which the related service is performed.
(b) Employee leave entitlement
Employee entitlements to annual leave are recognised as a liability when they are
accrued to the employees. The undiscounted liability for leave expected to be settled
wholly before twelve months after the end of the reporting period is recognised for
services rendered by employees up to the end of the reporting period. The liability for
leave expected to be settled beyond twelve months from the end of the reporting
period is determined using the projected unit credit method. The net total of service
costs, net interest on the liability and remeasurement of the liability are recognised in
profit or loss.
2.10 Taxes
(a) Current income tax
Current income tax assets and liabilities for the current and prior periods are
measured at the amount expected to be recovered from or paid to the taxation
authorities. The tax rates and tax laws used to compute the amount are those that are
enacted or substantively enacted at the end of the reporting period, in the countries
where the Group operates and generates taxable income.
Current income taxes are recognised in profit or loss except to the extent that the tax
relates to items recognised outside profit or loss, either in other comprehensive
income or directly in equity. Management periodically evaluates positions taken in the
tax returns with respect to situations in which applicable tax regulations are subject to
interpretation and establishes provisions where appropriate.
APPENDIX C – INDEPENDENT AUDITOR’S REPORT ONTHE COMBINED FINANCIAL STATEMENTS OF
THE TARGET GROUP FOR FY2014, FY2015 AND FY2016
C-15
Sky Win Management Consultancy Pte Ltd and its Combined Entities
Notes to Combined Financial Statements
For financial years ended 30 June 2014, 2015 and 2016
2. Summary of significant accounting policies (Continued)
2.10 Taxes (Continued)
(b) Deferred tax
Deferred tax is provided using the liability method on temporary differences at the end
of the reporting period between the tax bases of assets and liabilities and their carrying
amounts for financial reporting purposes.
Deferred tax liabilities are recognised for all temporary differences, except where the
deferred tax liability arises from the initial recognition of goodwill or of an asset or
liability in a transaction that is not a business combination and, at the time of the
transaction, affects neither the accounting profit nor taxable profit or loss.
Deferred tax assets are recognised for all deductible temporary differences, the carry
forward of unused tax credits and unused tax losses, to the extent that it is probable
that taxable profit will be available against which the deductible temporary differences,
and the carry forward of unused tax credits and unused tax losses can be utilised
except where the deferred tax asset relating to the deductible temporary difference
arises from the initial recognition of an asset or liability in a transaction that is not a
business combination and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss.
The carrying amount of deferred tax assets is reviewed at the end of each reporting
period and reduced to the extent that it is no longer probable that sufficient taxable
profit will be available to allow all or part of the deferred tax asset to be utilised.
Unrecognised deferred tax assets are reassessed at the end of each reporting period
and are recognised to the extent that it has become probable that future taxable profit
will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to
apply in the year when the asset is realised or the liability is settled, based on tax rates
(and tax laws) that have been enacted or substantively enacted at the end of each
reporting period.
APPENDIX C – INDEPENDENT AUDITOR’S REPORT ONTHE COMBINED FINANCIAL STATEMENTS OF
THE TARGET GROUP FOR FY2014, FY2015 AND FY2016
C-16
Sky Win Management Consultancy Pte Ltd and its Combined Entities
Notes to Combined Financial Statements
For financial years ended 30 June 2014, 2015 and 2016
2. Summary of significant accounting policies (Continued)
2.10 Taxes (Continued)
(c) Sales tax
Revenue, expenses and assets are recognised net of the amount of sales tax except:
– Where the sales tax incurred on a purchase of assets or services is not
recoverable from the taxation authority, in which case the sales tax is recognised
as part of the cost of acquisition of the asset or as part of the expense item as
applicable; and
– Receivables and payables that are stated with the amount of sales tax included.
2.11 Property, plant and equipment
All items of property, plant and equipment are initially recorded at cost. Subsequent to
recognition, property, plant and equipment are measured at cost less accumulated
depreciation and any accumulated impairment losses.
The cost of an item of property, plant and equipment includes its purchase price and any
cost that is directly attributable to bringing the asset to the location and condition necessary
for it to be capable of operating in the manner intended by management. The projected cost
of dismantlement, removal or restoration is also included as part of the cost of property,
plant and equipment if the obligation for dismantlement, removal or restoration is incurred
as a consequence of acquiring or using the asset. Expenditure relating to construction is
capitalised as capital work-in-progress when incurred and no depreciation is provided until
the construction is completed.
Depreciation is computed on a straight-line basis over the estimated useful lives of the
assets as follows:
Motor vehicles – 5 years
Office equipment – 3 – 10 years
Renovation – 3 – 10 years
Freehold land has an unlimited useful life and therefore is not depreciated.
Properties under construction are not depreciated as these assets are not yet available for
use.
APPENDIX C – INDEPENDENT AUDITOR’S REPORT ONTHE COMBINED FINANCIAL STATEMENTS OF
THE TARGET GROUP FOR FY2014, FY2015 AND FY2016
C-17
Sky Win Management Consultancy Pte Ltd and its Combined Entities
Notes to Combined Financial Statements
For financial years ended 30 June 2014, 2015 and 2016
2. Summary of significant accounting policies (Continued)
2.11 Property, plant and equipment (Continued)
The carrying values of property, plant and equipment are reviewed for impairment when
events or changes in circumstances indicate that the carrying value may not be
recoverable.
The residual value, useful life and depreciation method are reviewed at each financial
year-end, and adjusted prospectively, if appropriate.
An item of property, plant and equipment is derecognised upon disposal or when no future
economic benefits are expected from its use or disposal. Any gain or loss on derecognition
of the asset is included in profit or loss in the year the asset is derecognised.
2.12 Properties under development
Properties under development are properties acquired or being constructed for sale in the
ordinary course of business, rather than to be held for the Group’s own use, rental or capital
appreciation.
Properties under development are held as inventories and are measured at the lower of
cost and net realisable value.
Non-refundable commissions paid to sales or marketing agents on the sale of real estate
units are capitalised and amortised to profit or loss as the Group expects to recognise the
related revenue.
Net realisable value of properties under development is the estimated selling price in the
ordinary course of business, based on market prices at the reporting date and discounted
for the time value of money if material, less the estimated costs of completion and the
estimated costs necessary to make the sale.
The costs of properties under development recognised in profit or loss on disposal are
determined with reference to the specific costs incurred on the property sold and an
allocation of any non-specific costs based on the relative size of the property sold.
APPENDIX C – INDEPENDENT AUDITOR’S REPORT ONTHE COMBINED FINANCIAL STATEMENTS OF
THE TARGET GROUP FOR FY2014, FY2015 AND FY2016
C-18
Sky Win Management Consultancy Pte Ltd and its Combined Entities
Notes to Combined Financial Statements
For financial years ended 30 June 2014, 2015 and 2016
2. Summary of significant accounting policies (Continued)
2.13 Impairment of non-financial assets
The Group assesses at each reporting date whether there is an indication that an asset may
be impaired. If any indication exists, or when an annual impairment testing for an asset is
required, the Group makes an estimate of the asset’s recoverable amount.
An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair
value less costs of disposal and its value in use and is determined for an individual asset,
unless the asset does not generate cash inflows that are largely independent of those from
other assets or group of assets. Where the carrying amount of an asset or cash-generating
unit exceeds its recoverable amount, the asset is considered impaired and is written down
to its recoverable amount. Impairment losses are recognised in profit or loss.
A previously recognised impairment loss is reversed only if there has been a change in the
estimates used to determine the asset’s recoverable amount since the last impairment loss
was recognised. If that is the case, the carrying amount of the asset is increased to its
recoverable amount. That increase cannot exceed the carrying amount that would have
been determined, net of depreciation, had no impairment loss been recognised previously.
Such reversal is recognised in profit or loss.
2.14 Financial instruments
(a) Financial assets
Financial assets are recognised when, and only when, the Group becomes a party to
the contractual provisions of the financial instrument. The Group determines the
classification of its financial assets at initial recognition.
When financial assets are recognised initially, they are measured at fair value, plus
directly attributable transaction costs. Subsequent to initial recognition, financial
assets are measured at amortised cost using the effective interest method, less
impairment. Gains and losses are recognised in profit or loss when the assets are
derecognised or impaired, and through the amortisation process.
A financial asset is de-recognised where the contractual right to receive cash flows
from the asset has expired. On de-recognition of a financial asset in its entirety, the
difference between the carrying amount and the sum of the consideration received is
recognised in profit or loss.
APPENDIX C – INDEPENDENT AUDITOR’S REPORT ONTHE COMBINED FINANCIAL STATEMENTS OF
THE TARGET GROUP FOR FY2014, FY2015 AND FY2016
C-19
Sky Win Management Consultancy Pte Ltd and its Combined Entities
Notes to Combined Financial Statements
For financial years ended 30 June 2014, 2015 and 2016
2. Summary of significant accounting policies (Continued)
2.14 Financial instruments (Continued)
(b) Financial liabilities
Financial liabilities are recognised when, and only when, the Group becomes a party
to the contractual provisions of the financial instrument. The Group determines the
classification of its financial liabilities at initial recognition.
All financial liabilities are recognised initially at fair value, plus directly attributable
transaction costs. After initial recognition, financial liabilities are subsequently
measured at amortised cost using the effective interest method. Gains and losses are
recognised in profit or loss when the liabilities are derecognised, and through the
amortisation process.
A financial liability is de-recognised when the obligation under the liability is
discharged or cancelled or expires.
2.15 Impairment of financial assets
The Group assesses at each reporting date whether there is any objective evidence that a
financial asset is impaired.
(a) Financial assets carried at amortised cost
For financial assets carried at amortised cost, the Group first assesses whether
objective evidence of impairment exists individually for financial assets that are
individually significant, or collectively for financial assets that are not individually
significant. If the Group determines that no objective evidence of impairment exists for
an individually assessed financial asset, whether significant or not, it includes the
asset in a Group of financial assets with similar credit risk characteristics and
collectively assesses them for impairment. Assets that are individually assessed for
impairment and for which an impairment loss is, or continues to be recognised are not
included in a collective assessment of impairment.
If there is objective evidence that an impairment loss on financial assets carried at
amortised cost has been incurred, the amount of the loss is measured as the
difference between the asset’s carrying amount and the present value of estimated
future cash flows discounted at the financial asset’s original effective interest rate. If
a loan has a variable interest rate, the discount rate for measuring any impairment loss
is the current effective interest rate. The carrying amount of the asset is reduced
through the use of an allowance account. The impairment loss is recognised in profit
or loss.
APPENDIX C – INDEPENDENT AUDITOR’S REPORT ONTHE COMBINED FINANCIAL STATEMENTS OF
THE TARGET GROUP FOR FY2014, FY2015 AND FY2016
C-20
Sky Win Management Consultancy Pte Ltd and its Combined Entities
Notes to Combined Financial Statements
For financial years ended 30 June 2014, 2015 and 2016
2. Summary of significant accounting policies (Continued)
2.15 Impairment of financial assets (Continued)
(a) Financial assets carried at amortised cost (Continued)
When the asset becomes uncollectible, the carrying amount of impaired financial asset
is reduced directly or if an amount was charged to the allowance account, the amounts
charged to the allowance account are written off against the carrying value of the
financial asset.
To determine whether there is objective evidence that an impairment loss on financial
assets has been incurred, the Group considers factors such as the probability of
insolvency or significant financial difficulties of the debtor and default or significant
delay in payments.
If in a subsequent period, the amount of the impairment loss decreases and the
decrease can be related objectively to an event occurring after the impairment was
recognised, the previously recognised impairment loss is reversed to the extent that
the carrying amount of the asset does not exceed its amortised cost at the reversal
date. The amount of reversal is recognised in profit or loss.
(b) Financial assets carried at cost
If there is objective evidence (such as significant adverse changes in the business
environment where the issuer operates, probability of insolvency or significant
financial difficulties of the issuer) that an impairment loss on financial assets carried
at cost has been incurred, the amount of the loss is measured as the difference
between the asset’s carrying amount and the present value of estimated future cash
flows discounted at the current market rate of return for a similar financial asset. Such
impairment losses are not reversed in subsequent periods.
2.16 Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and on hand, demand deposits, and
short-term, highly liquid investments that are readily convertible to known amount of cash
and which are subject to an insignificant risk of changes in value. These also include bank
overdrafts that form an integral part of the Group’s cash management.
APPENDIX C – INDEPENDENT AUDITOR’S REPORT ONTHE COMBINED FINANCIAL STATEMENTS OF
THE TARGET GROUP FOR FY2014, FY2015 AND FY2016
C-21
Sky Win Management Consultancy Pte Ltd and its Combined Entities
Notes to Combined Financial Statements
For financial years ended 30 June 2014, 2015 and 2016
2. Summary of significant accounting policies (Continued)
2.17 Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive)
as a result of a past event, it is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation and the amount of the obligation can be
estimated reliably.
Provisions are reviewed at the end of each reporting period and adjusted to reflect the
current best estimate. If it is no longer probable that an outflow of economic resources will
be required to settle the obligation, the provision is reversed. If the effect of the time value
of money is material, provisions are discounted using a current pre tax rate that reflects,
where appropriate, the risks specific to the liability. When discounting is used, the increase
in the provision due to the passage of time is recognised as a finance cost.
2.18 Financial guarantees
A financial guarantee contract is a contract that requires the issuer to make specified
payments to reimburse the holder for a loss it incurs because a specified debtor fails to
make payment when due in accordance with the terms of a debt instrument.
Financial guarantees are recognised initially as a liability at fair value, adjusted for
transaction costs that are directly attributable to the issuance of the guarantee. Subsequent
to initial recognition, financial guarantees are recognised as income in profit or loss over the
period of the guarantee. If it is probable that the liability will be higher than the amount
initially recognised less amortisation, the liability is recorded at the higher amount with the
difference charged to profit or loss.
2.19 Related parties
A related party is defined as follows:
(a) A person or a close member of that person’s family is related to the Group and
Company if that person:
(i) has control or joint control over the Company;
(ii) has significant influence over the Company; or
(iii) is a member of the key management personnel of the Group or Company or of
a parent of the Company.
APPENDIX C – INDEPENDENT AUDITOR’S REPORT ONTHE COMBINED FINANCIAL STATEMENTS OF
THE TARGET GROUP FOR FY2014, FY2015 AND FY2016
C-22
Sky Win Management Consultancy Pte Ltd and its Combined Entities
Notes to Combined Financial Statements
For financial years ended 30 June 2014, 2015 and 2016
2. Summary of significant accounting policies (Continued)
2.19 Related parties (Continued)
(b) An entity is related to the Group and the Company if any of the following conditions
applies:
(i) the entity and the Company are members of the same group (which means that
each parent, subsidiary and fellow subsidiary is related to the others).
(ii) one entity is an associate or joint venture of the other entity (or an associate or
joint venture of a member of a group of which the other entity is a member).
(iii) both entities are joint ventures of the same third party.
(iv) one entity is a joint venture of a third entity and the other entity is an associate
of the third entity.
(v) the entity is a post-employment benefit plan for the benefit of employees of either
the Company or an entity related to the Company. If the Company is itself such
a plan, the sponsoring employers are also related to the Company.
(vi) the entity is controlled or jointly controlled by a person identified in (a).
(vii) a person identified in (a)(i) has significant influence over the entity or is a member
of the key management personnel of the entity (or of a parent of the entity).
3. Critical accounting judgments and key sources of estimation uncertainty
While applying the accounting policies as stated in Note 2 to the combined financial
statements, management of the Group has made certain judgments, estimates and
assumptions that are not readily apparent from other sources. The estimates and
associated assumptions are based on historical experience and other factors that are
considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Financial
impact arising from revision to accounting estimates is recognised in the period in which the
estimate is revised if the revision affects only that period, or in the period of the revision and
future periods if the revision affects both current and future periods.
APPENDIX C – INDEPENDENT AUDITOR’S REPORT ONTHE COMBINED FINANCIAL STATEMENTS OF
THE TARGET GROUP FOR FY2014, FY2015 AND FY2016
C-23
Sky Win Management Consultancy Pte Ltd and its Combined Entities
Notes to Combined Financial Statements
For financial years ended 30 June 2014, 2015 and 2016
3. Critical accounting judgments and key sources of estimation uncertainty (Continued)
3.1 Critical judgments in applying accounting policies
Significant judgments made by management that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within the next financial
year are:
Classification of properties
In the process of classifying properties, management has made various judgments.
Judgment is needed to determine whether a property qualifies as an investment property,
property, plant and equipment and/or property held for sale. The Group develops criteria so
that it can exercise that judgment consistently in accordance with the definitions of
investment property, property, plant and equipment and property held for sale. In making its
judgment, management considered the detailed criteria and related guidance for the
classification of properties as set out in FRS 2, FRS 16 and FRS 40, and in particular, the
intended usage of property as determined by the management.
Judgments in relation to contracts with customers
Satisfaction of performance obligations
The Group is required to assess each of its contracts with customers to determine whether
performance obligations are satisfied over time or at a point in time in order to determine
the appropriate method for recognising revenue. The Group has assessed that based on
the contracts entered into with customers and the provisions of relevant laws and
regulations, the Group recognises revenue over time where contracts are entered into for
development (sale of properties to customers), the Group does not create an asset with an
alternative use to the Group and has an enforceable right to payment for performance
completed to date.
Where the above criteria are not met, revenue is recognised at a point in time. Where
revenue is recognised at a point of time, the Group assesses each contract with customers
to determine when the performance obligation of the Group under the contract is satisfied.
APPENDIX C – INDEPENDENT AUDITOR’S REPORT ONTHE COMBINED FINANCIAL STATEMENTS OF
THE TARGET GROUP FOR FY2014, FY2015 AND FY2016
C-24
Sky Win Management Consultancy Pte Ltd and its Combined Entities
Notes to Combined Financial Statements
For financial years ended 30 June 2014, 2015 and 2016
3. Critical accounting judgments and key sources of estimation uncertainty (Continued)
3.1 Critical judgments in applying accounting policies (Continued)
Judgments in relation to contracts with customers (Continued)
Determination of transaction prices
The Group is required to determine the transaction price in respect of each of its contracts
with customers. In making such judgment the Group assesses the impact of any variable
consideration in the contract, due to discounts or penalties, the existence of any significant
financing component and any non-cash consideration in the contract.
3.2 Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation
uncertainty at the end of the reporting period, that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within the next financial
year, are discussed below:
Allocation of transaction price to performance obligations in contracts with
customers
The Group has elected to apply the input method in allocating the transaction price to
performance obligations where revenue is recognised over time. The Group considers that
the use of the input method, which requires revenue recognition on the basis of the Group’s
efforts to the satisfaction of performance obligation, provides the best reference of revenue
actually earned. In applying the input method, the Group estimates the efforts or inputs to
the satisfaction of a performance obligation. These estimates mainly include: (a) for
development contracts, the cost of development and related infrastructure; and (b) for
services contracts, the time elapsed.
Estimation of net realisable value for properties under development
Properties under development are stated at lower of cost or net realisable value (NRV).
NRV is assessed with reference to sales prices of recent market transactions, costs of
completion and advances received and market conditions existing at the end of the
reporting period.
APPENDIX C – INDEPENDENT AUDITOR’S REPORT ONTHE COMBINED FINANCIAL STATEMENTS OF
THE TARGET GROUP FOR FY2014, FY2015 AND FY2016
C-25
Sky Win Management Consultancy Pte Ltd and its Combined Entities
Notes to Combined Financial Statements
For financial years ended 30 June 2014, 2015 and 2016
3. Critical accounting judgments and key sources of estimation uncertainty (Continued)
3.2 Key sources of estimation uncertainty (Continued)
Impairment of trade and other receivables
An estimate of the collectible amount of trade and other receivables is made when
collection of the full amount is no longer probable. This determination of whether the
receivables are impaired, entails management’s evaluation of the specific credit and
liquidity position of the customers and related parties and their historical recovery rates,
including discussion with the legal department and review of the current economic
environment. Management is satisfied that no additional impairment is required on its trade
and other receivables in excess of amount already provided.
Taxes
Uncertainties exist with respect to the interpretation of complex tax regulations and the
amount and timing of future taxable income. The Group establishes provisions, based on
reasonable estimates, for possible consequences of audits by the tax authorities of the
respective countries in which it operates. The amount of such provisions is based on
various factors, such as experience of previous tax audits and differing interpretations of tax
regulations by the taxable entity and the relevant tax authority. Such differences of
interpretation may arise on a wide variety of issues depending on the conditions prevailing
in the respective Group’s domicile.
Deferred tax assets are recognised for all unused tax losses to the extent that it is probable
that taxable profit will be available against which the losses can be utilised. Significant
management judgment is required to determine the amount of deferred tax assets that can
be recognised, based upon the likely timing and level of future taxable profits together with
future tax planning strategies.
4. Revenue
For the years ended 30 June
2014 2015 2016
RM’000 RM’000 RM’000
Sale of properties under development 245,159 436,264 412,347
APPENDIX C – INDEPENDENT AUDITOR’S REPORT ONTHE COMBINED FINANCIAL STATEMENTS OF
THE TARGET GROUP FOR FY2014, FY2015 AND FY2016
C-26
Sky Win Management Consultancy Pte Ltd and its Combined Entities
Notes to Combined Financial Statements
For financial years ended 30 June 2014, 2015 and 2016
5. Other income/gains
The following items have been included in arriving at other income/gains:
For the years ended 30 June
2014 2015 2016
RM’000 RM’000 RM’000
Service fee income 1,600 1,290 2,352
Rental income 966 785 1,049
Forfeiture income 780 1,379 1,094
Interest income 221 498 4,124
Gain on disposal of property,
plant and equipment 89 268 442
Realised gain on foreign exchange 20 3 49
Unrealised gain on foreign exchange 151 1,098 1,248
Administrative fees 184 – 415
Others 409 925 1,382
4,420 6,246 12,155
6. Profit before tax
The following items have been included in arriving at profit before tax:
For the years ended 30 June
2014 2015 2016
RM’000 RM’000 RM’000
Depreciation of property,
plant and equipment 2,061 3,764 4,537
Directors’ remuneration
– Salaries and other emoluments 3,780 6,549 7,610
– Defined contribution plans 57 65 76
Staff costs
– Salaries, wages and bonus 5,127 6,787 10,147
– Defined contribution plans 492 615 879
– Others 705 620 259
APPENDIX C – INDEPENDENT AUDITOR’S REPORT ONTHE COMBINED FINANCIAL STATEMENTS OF
THE TARGET GROUP FOR FY2014, FY2015 AND FY2016
C-27
Sky Win Management Consultancy Pte Ltd and its Combined Entities
Notes to Combined Financial Statements
For financial years ended 30 June 2014, 2015 and 2016
7. Income tax expense
Major components of income tax expense
For the years ended 30 June
2014 2015 2016
RM’000 RM’000 RM’000
Combined statement of comprehensive
income:
Current income tax
– Current year 17,337 26,349 35,965
– Underprovision in respect of prior years 47 – 3,227
17,384 26,349 39,192
Deferred income tax
– Origination and reversal of temporary
differences (9,086) (15,075) (12,201)
– Underprovision in respect of prior years – – 862
(9,086) (15,075) (11,339)
Income tax expense recognised in profit or
loss 8,298 11,274 27,853
Relationship between tax expense and accounting profit
A reconciliation prepared by aggregating separate reconciliations for each national
jurisdiction is as follows:
For the years ended 30 June
2014 2015 2016
RM’000 RM’000 RM’000
Tax at the domestic rates applicable to
profits in the countries where the Group
operates 7,014 8,077 23,826
Adjustments:
Non-deductible expenses 1,392 2,380 739
Effect of change in statutory tax rate – 951 –
Underprovision in respect of prior years 47 – 4,089
Deferred tax assets not recognised – 88 –
Effect of tax exemption and tax relief – (158) (587)
Income not subject to taxation – – (146)
Others (155) (64) (68)
Income tax expense recognised in profit or
loss 8,298 11,274 27,853
APPENDIX C – INDEPENDENT AUDITOR’S REPORT ONTHE COMBINED FINANCIAL STATEMENTS OF
THE TARGET GROUP FOR FY2014, FY2015 AND FY2016
C-28
Sky Win Management Consultancy Pte Ltd and its Combined Entities
Notes to Combined Financial Statements
For financial years ended 30 June 2014, 2015 and 2016
8. Deferred tax assets
2014 2015 2016
RM’000 RM’000 RM’000
Deferred tax assets:
Deferred revenue 13,552 33,754 51,248
Unutilised tax losses 4,418 5,337 4,531
Provision for foreseeable losses 10,039 5,331 1,446
Provision for developer interest-bearing
scheme 9,272 7,742 6,495
37,281 52,164 63,720
Deferred tax liabilities:
Differences in depreciation for tax purposes 145 151 94
Capitalised costs of obtaining contracts 3,618 4,097 6,189
Deferred expenses 3,579 4,613 5,021
Progress billings 5,317 2,531 1,104
Others 636 1,695 18
13,295 13,087 12,426
Net deferred tax assets 23,986 39,077 51,294
9. Property, plant and equipment
Construction-
in-progress
Motor
vehicles
Office
equipment Renovation Others Total
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Cost
At 1 July 2013 15,780 2,728 51 263 896 19,718
Additions 3,827 14,679 450 14 338 19,308
Disposals – (4,868) – – – (4,868)
At 30 June 2014 19,607 12,539 501 277 1,234 34,158
Additions 7,180 11,147 485 417 135 19,364
Disposals (4,915) (4,093) – – (10) (9,018)
Write-off – – – – (30) (30)
Exchange difference – – 40 – 17 57
At 30 June 2015 21,872 19,593 1,026 694 1,346 44,531
Additions 32,912 3,100 18 133 96 36,259
Disposals – (10,213) (1) (339) – (10,553)
Write-off – – – (17) (164) (181)
Exchange difference – – 35 23 20 78
At 30 June 2016 54,784 12,480 1,078 494 1,298 70,134
APPENDIX C – INDEPENDENT AUDITOR’S REPORT ONTHE COMBINED FINANCIAL STATEMENTS OF
THE TARGET GROUP FOR FY2014, FY2015 AND FY2016
C-29
Sky Win Management Consultancy Pte Ltd and its Combined Entities
Notes to Combined Financial Statements
For financial years ended 30 June 2014, 2015 and 2016
9. Property, plant and equipment (Continued)
Construction-
in-progress
Motor
vehicles
Office
equipment Renovation Others Total
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Accumulated
depreciation
At 1 July 2013 – 488 6 26 215 735
Charge for the year – 1,737 80 54 190 2,061
Disposals – (530) – – – (530)
At 30 June 2014 – 1,695 86 80 405 2,266
Charge for the year – 3,197 185 122 260 3,764
Disposals – (603) – – (1) (604)
Write-off – – – – (5) (5)
Exchange difference – – 16 3 7 26
At 30 June 2015 – 4,289 287 205 666 5,447
Charge for the year – 3,746 287 162 342 4,537
Disposals – (3,761) (1) – – (3,762)
Write-off – – – (148) (71) (219)
Exchange difference – – 17 7 6 30
At 30 June 2016 – 4,274 590 226 943 6,033
Net carrying amount
At 30 June 2014 19,607 10,844 415 197 829 31,892
At 30 June 2015 21,872 15,304 739 489 680 39,084
At 30 June 2016 54,784 8,206 488 268 355 64,101
Included in the above balances are motor vehicles that are under hire purchase with net
book values of RM10,834,000 as at 30 June 2014, RM15,158,000 as at 30 June 2015 and
RM8,091,000 as at 30 June 2016.
Interest expense capitalised in construction-in-progress during the financial year ended
30 June 2016 amounted to RM966,000 (2015: RM103,000; 2014: Nil).
APPENDIX C – INDEPENDENT AUDITOR’S REPORT ONTHE COMBINED FINANCIAL STATEMENTS OF
THE TARGET GROUP FOR FY2014, FY2015 AND FY2016
C-30
Sky Win Management Consultancy Pte Ltd and its Combined Entities
Notes to Combined Financial Statements
For financial years ended 30 June 2014, 2015 and 2016
10. Properties under development
Leasehold
land
Development
costs Total
RM’000 RM’000 RM’000
At 30 June 2014 267,959 155,130 423,089
Costs incurred during the year 11,526 409,449 420,975
Recognised in cost of sales (55,268) (286,773) (342,041)
At 30 June 2015 224,217 277,806 502,023
Costs incurred during the year – 256,575 256,575
Recognised in cost of sales (74,332) (201,891) (276,223)
At 30 June 2016 149,885 332,490 482,375
Less: Allowance for foreseeable losses:
At 30 June 2014 (40,155)
Allowance utilised 17,943
At 30 June 2015 (22,212)
Allowance utilised 16,187
At 30 June 2016 (6,025)
Net carrying amount:
At 30 June 2014 382,934
At 30 June 2015 479,811
At 30 June 2016 476,350
APPENDIX C – INDEPENDENT AUDITOR’S REPORT ONTHE COMBINED FINANCIAL STATEMENTS OF
THE TARGET GROUP FOR FY2014, FY2015 AND FY2016
C-31
Sky Win Management Consultancy Pte Ltd and its Combined Entities
Notes to Combined Financial Statements
For financial years ended 30 June 2014, 2015 and 2016
10. Properties under development (Continued)
Properties under development include borrowing costs arising from bank loans borrowed
specifically for the purpose of the construction of the properties. Borrowing costs capitalised
as cost of properties under development amounted to RM36,220,000 (2015:
RM16,388,000, 2014: RM15,367,000). The rate used to determine the amount of borrowing
costs eligible for capitalisation was 7.9% (2015: 7.5%, 2014: 7.6%) per annum, which is the
effective interest rate of the specific borrowings.
Details of the properties under development held by the Group as at 30 June 2016 are as
follows:
Project Name Location Description
Vedro by the River Malacca, Malaysia Freehold retail mall development
Hatten City Phase 1 Malacca, Malaysia 99-year leasehold integrated mall and
residential development
Hatten City Phase 2 Malacca, Malaysia 99-year leasehold integrated mall and
residential development
Harbour City Malacca, Malaysia 99-year leasehold mixed commercial
development consisting of a retail
mall and 3 hotels
11. Trade and other receivables
2014 2015 2016
RM’000 RM’000 RM’000
Trade receivables 22,226 128,430 203,093
Amounts due from related parties 139,733 207,671 –
Amount due from directors – 693 –
Deposits 21,692 4,710 3,526
Other receivables 2,084 10,715 5,927
Total trade and other receivables 185,735 352,219 212,546
Trade receivables are non-interest bearing and are generally on 30 to 60 days’ terms. They
are recognised at their original invoice amounts which represent their fair values on initial
recognition. Amounts due from related parties are unsecured, non-interest bearing,
repayable on demand and to be settled in cash.
APPENDIX C – INDEPENDENT AUDITOR’S REPORT ONTHE COMBINED FINANCIAL STATEMENTS OF
THE TARGET GROUP FOR FY2014, FY2015 AND FY2016
C-32
Sky Win Management Consultancy Pte Ltd and its Combined Entities
Notes to Combined Financial Statements
For financial years ended 30 June 2014, 2015 and 2016
11. Trade and other receivables (Continued)
Receivables that are past due but not impaired
The Group has trade receivables that are past due at the end of the reporting period but not
impaired. These receivables are unsecured and the analysis of their aging at the end of the
reporting period is as follows:
2014 2015 2016
RM’000 RM’000 RM’000
Lesser than 30 days 3,126 2,463 20,236
30 – 60 days 2,984 1,244 16,273
61 – 90 days 4,272 28,575 14,883
91 – 120 days 539 1,196 11,580
More than 120 days 5,910 11,069 67,009
16,831 44,547 129,981
12. Other current assets
2014 2015 2016
RM’000 RM’000 RM’000
Capitalised costs of obtaining contracts 31,437 42,025 46,156
Others 29 1,066 928
31,466 43,091 47,084
13. Cash and cash equivalents
2014 2015 2016
RM’000 RM’000 RM’000
Fixed deposits 2,445 1,890 3,037
Cash and bank balances 15,944 22,226 78,893
18,389 24,116 81,930
Cash at banks earns interest at floating rates based on daily bank deposit rates. Fixed
deposits are made for varying periods between 1 and 365 days from the financial year end.
Interest rates of the Group’s fixed deposits are fixed at 3.3% per annum from 2014 to 2016.
APPENDIX C – INDEPENDENT AUDITOR’S REPORT ONTHE COMBINED FINANCIAL STATEMENTS OF
THE TARGET GROUP FOR FY2014, FY2015 AND FY2016
C-33
Sky Win Management Consultancy Pte Ltd and its Combined Entities
Notes to Combined Financial Statements
For financial years ended 30 June 2014, 2015 and 2016
13. Cash and cash equivalents (Continued)
Cash and cash equivalents denominated in foreign currencies at 30 June are as follows:
2014 2015 2016
RM’000 RM’000 RM’000
United States Dollar 14 15 18
Renminbi (Yuan) 2,267 3,179 3,025
Singapore Dollar 1,655 3,405 8,059
14. Loans and borrowings
2014 2015 2016
RM’000 RM’000 RM’000
Current:
Obligations under finance leases
(Note 19(d)) 1,588 3,428 2,439
Term loans 53,469 36,929 49,460
55,057 40,357 51,899
Non-current:
Obligations under finance leases
(Note 19(d)) 7,323 11,262 5,809
Term loans 72,274 87,191 192,764
79,597 98,453 198,573
Total loans and borrowings 134,654 138,810 250,472
Details of the Group’s loans and borrowings are as follow:
Obligations under finance leases
The Group entered into finance leases in respect of motor vehicles. Interest rates implicit
in these leases range between 3.20% and 5.44% (2015 and 2014: 3.20% and 4.92%) per
annum as at 30 June 2016. As at 30 June 2016, obligations under these finance leases are
scheduled to mature between 2016 and 2022 (2015 and 2014: 2016 and 2021).
APPENDIX C – INDEPENDENT AUDITOR’S REPORT ONTHE COMBINED FINANCIAL STATEMENTS OF
THE TARGET GROUP FOR FY2014, FY2015 AND FY2016
C-34
Sky Win Management Consultancy Pte Ltd and its Combined Entities
Notes to Combined Financial Statements
For financial years ended 30 June 2014, 2015 and 2016
14. Loans and borrowings (Continued)
RM98,000,000 loan at base funding rate + 1.50% per annum
The loan was obtained to finance a development project and has a tenure of 36 months from
the date of its first disbursement. The Group had an outstanding loan balance of
RM42,594,000 as at 30 June 2014 before it matured and was fully repaid in August 2014.
The loan was secured by a legal charge over the project land under development, legal
assignment over designated bank account and monies, and legal assignment of sales
proceeds from the sale of project units in favour of the lender. The loan was also jointly and
severally guaranteed by directors of the borrowing entity in their personal capacity.
RM94,000,000 loan at base funding rate + 1.00% per annum
The loan has a tenure of 36 months from the date of its first disbursement and was repaid
in full in December 2015 upon maturity. The Group had outstanding balances of
RM71,222,000 under the loan as at 30 June 2014, and RM30,658,000 as at 30 June 2015.
The loan was secured by a legal charge over the project land under development,
debenture over fixed and floating present and future assets of the borrowing entity, legal
assignment over designated bank account and monies, and legal assignment of sales
proceeds from the sale of project units in favour of the lender. The loan was also jointly and
severally guaranteed by directors of the borrowing entity in their personal capacity.
RM52,500,000 loan at base funding rate + 1.00% per annum
The loan has a tenure of 36 months from the date of its first disbursement and is scheduled
to mature in April 2017. As at 30 June 2016, the Group had an outstanding balance of
RM6,772,000 (2015: RM42,461,000; 2014: RM11,928,000) under the loan. The loan was
secured by a legal charge over the project land under development, debenture over fixed
and floating present and future assets of the borrowing entity, legal assignment over
designated bank account and monies, and legal assignment of sales proceeds from the sale
of project units in favour of the lender. The loan was also jointly and severally guaranteed
by directors of the borrowing entity in their personal capacity.
APPENDIX C – INDEPENDENT AUDITOR’S REPORT ONTHE COMBINED FINANCIAL STATEMENTS OF
THE TARGET GROUP FOR FY2014, FY2015 AND FY2016
C-35
Sky Win Management Consultancy Pte Ltd and its Combined Entities
Notes to Combined Financial Statements
For financial years ended 30 June 2014, 2015 and 2016
14. Loans and borrowings (Continued)
RM258,500,000 loan at cost of fund + 1.50% per annum
The loan was obtained to fund the development of a project and has a tenure of 48 months
from the date of its first disbursement. As at 30 June 2016, the Group had an outstanding
balance of RM168,121,000 (2015: RM27,783,000; 2014: Nil) under the loan. The loan is
secured by a legal charge over the project land under development, third party first legal
assignment over certain property assets owned by related parties, debenture over fixed and
floating present and future assets of the borrowing entity, legal assignment over designated
bank account and monies, legal assignment of sales proceeds from the sale of project units
in favour of the lender, corporate guarantee by a related party and deed of subordination of
advances due to shareholders and directors. The loan is also jointly and severally
guaranteed by directors of the borrowing entity in their personal capacity.
RM55,000,000 loan at base lending rate per annum
The loan was obtained to finance construction of a development project. As at 30 June
2016, the Group had an outstanding balance of RM48,275,000 (2015: RM23,218,000;
2014: Nil) under the loan. The loan is repayable by monthly instalments of principal and
interest for 27 months commencing from the 19th month from the date of the first loan
disbursement.
The loan is secured by a legal charge over the project land under development, fixed and
floating charges over all assets of the project, legal assignment of project bank account in
favour of the lender, and jointly and severally guaranteed by directors of the borrowing
entity.
RM120,000,000 loan at base lending rate per annum
The loan was obtained to finance construction of a development project and is repayable
by monthly instalments of principal and interest for 24 months commencing from the 25th
month from the date of the first loan disbursement. As at 30 June 2016, the Group had an
outstanding balance of RM19,056,000 (2015 and 2014: Nil) under the loan.
The loan is secured by a legal charge over the project land under development, legal
assignment of all project sales proceeds in favour of the lender, fixed and floating charges
over all assets of the project, joint and several guarantee from directors of the entity, and
letter of undertaking from directors and shareholders to cover any construction cost overrun
and to complete the development project.
APPENDIX C – INDEPENDENT AUDITOR’S REPORT ONTHE COMBINED FINANCIAL STATEMENTS OF
THE TARGET GROUP FOR FY2014, FY2015 AND FY2016
C-36
Sky Win Management Consultancy Pte Ltd and its Combined Entities
Notes to Combined Financial Statements
For financial years ended 30 June 2014, 2015 and 2016
15. Trade and other payables
2014 2015 2016
RM’000 RM’000 RM’000
Trade payables 177,877 360,860 209,679
Amount due to directors 1,400 – –
Deposits received 7,443 27,128 8,665
Provision for developer interest-bearing
scheme 37,083 32,257 27,062
Accruals 786 10,011 8,416
Other payables 7,802 34,043 35,167
Total trade and other payables 232,391 464,299 288,989
Trade payables are non-interest bearing and are generally settled on credit term of 30 to 90
days.
16. Other liabilities
2014 2015 2016
RM’000 RM’000 RM’000
Current:
Deferred revenue – – 35,408
Provision for land owners’ entitlement 243,198 157,794 67,206
Others 1,512 1,258 2,932
Total current other liabilities 244,710 159,052 105,546
Non-current:
Deferred revenue 54,204 140,637 173,337
APPENDIX C – INDEPENDENT AUDITOR’S REPORT ONTHE COMBINED FINANCIAL STATEMENTS OF
THE TARGET GROUP FOR FY2014, FY2015 AND FY2016
C-37
Sky Win Management Consultancy Pte Ltd and its Combined Entities
Notes to Combined Financial Statements
For financial years ended 30 June 2014, 2015 and 2016
17. Share capital
No. of shares RM’000
Issued and fully paid ordinary shares
At 1 July 2013 10,000,024 10,000
Issuance of ordinary shares 2,499,996 3,235
At 30 June 2014 and 1 July 2014 12,500,020 13,235
Issuance of ordinary shares 24,999,980 25,000
At 30 June 2015 and 1 July 2015 37,500,000 38,235
Issuance of ordinary shares 2 –
At 30 June 2016 37,500,002 38,235
The holders of ordinary shares are entitled to receive dividends as and when declared by
entities within the Group. All ordinary shares carry one vote per share without restriction.
500,000 (2015 and 2014: 500,000) of the ordinary shares have no par value and are
denominated in Singapore dollars. The carrying value of these shares is RM1,235,000
(2015 and 2014: RM1,235,000). The remaining ordinary shares have par value of RM1 per
share and are denominated in RM.
18. Contingent liabilities
Entities within the Group have agreed and undertaken to provide corporate guarantees of
the whole debt to the extent of the amounts of RM2,000,000 on 8 January 2014,
RM1,000,000 on 20 August 2014 and RM4,000,000 on 9 January 2015 to third parties in
consideration of supply of goods and services to a main contractor.
APPENDIX C – INDEPENDENT AUDITOR’S REPORT ONTHE COMBINED FINANCIAL STATEMENTS OF
THE TARGET GROUP FOR FY2014, FY2015 AND FY2016
C-38
Sky Win Management Consultancy Pte Ltd and its Combined Entities
Notes to Combined Financial Statements
For financial years ended 30 June 2014, 2015 and 2016
19. Commitments
(a) Capital commitments
Capital expenditure contracted for as at the end of the reporting period but not
recognised in the financial statements in respect of the properties under development
and construction-in-progress are as follows:
2014 2015 2016
RM’000 RM’000 RM’000
Approved and contracted for 83,037 87,238 78,994
Less: Amount capitalised to capital
work-in-progress (18,628) (12,094) (40,092)
Deposits paid (3,614) (3,614) –
60,795 71,530 38,902
(b) Operating lease commitments – as lessee
Future minimum rental payable under non-cancellable operating leases as at the end
of each reporting period are as follows:
2014 2015 2016
RM’000 RM’000 RM’000
Not later than one year 2,059 2,225 42,123
Later than one year but not later than
five years 125,178 170,946 198,202
Later than five years 76,628 69,567 106,007
203,865 242,738 346,332
APPENDIX C – INDEPENDENT AUDITOR’S REPORT ONTHE COMBINED FINANCIAL STATEMENTS OF
THE TARGET GROUP FOR FY2014, FY2015 AND FY2016
C-39
Sky Win Management Consultancy Pte Ltd and its Combined Entities
Notes to Combined Financial Statements
For financial years ended 30 June 2014, 2015 and 2016
19. Commitments (Continued)
(c) Operating lease commitments – as lessor
The Group has entered into commercial leases on its equipment and part of its
property. These non-cancellable leases have remaining lease terms of between two
and eight years. Certain of leases include a clause to enable upward revision of the
rental charge on an annual basis based on prevailing market conditions. Future
minimum rental receivable under non-cancellable operating leases at the end of the
reporting period are as follows:
2014 2015 2016
RM’000 RM’000 RM’000
Not later than one year 680 826 897
Later than one year but not later than
five years 2,724 2,113 1,375
Later than five years 8 – –
3,412 2,939 2,272
(d) Hire purchase payables
The Group has entered into hire purchase loans in relation to its property, plant and
equipment. Future minimum payments together with the present value of the net
minimum payments are as follows:
2014 2015 2016
RM’000 RM’000 RM’000
Not later than one year 2,153 4,149 3,037
Later than one year and not later than
two years 2,287 3,274 1,991
Later than five years 5,833 9,570 4,432
Total minimum payments 10,273 16,993 9,460
Less: Amount representing finance
charges (1,362) (2,303) (1,212)
Present value of minimum payments 8,911 14,690 8,248
APPENDIX C – INDEPENDENT AUDITOR’S REPORT ONTHE COMBINED FINANCIAL STATEMENTS OF
THE TARGET GROUP FOR FY2014, FY2015 AND FY2016
C-40
Sky Win Management Consultancy Pte Ltd and its Combined Entities
Notes to Combined Financial Statements
For financial years ended 30 June 2014, 2015 and 2016
20. Related party transactions
(a) Transactions with related parties outside the Group
In addition to the related party information disclosed elsewhere in the financial
statements, the Group engaged in significant transactions with related companies
which are controlled by certain directors and key management personnel of the Group.
The following significant transactions took place at terms agreed between the parties
during the reporting periods:
For the years ended 30 June
2014 2015 2016
RM’000 RM’000 RM’000
Services provided to/(by) related
companies:
– Marketing 1,590 1,308 –
– Rental 1,121 846 484
– Property agent management (10,687) (20,916) (17,316)
Advances to related companies 67,002 100,635 149,415
Advances from related companies 17,309 26,660 58,565
(b) Compensation of key management personnel
For the years ended 30 June
2014 2015 2016
RM’000 RM’000 RM’000
Salaries, wages, bonuses and
other costs 4,027 6,918 9,263
Contributions to defined contribution
plans 102 109 214
4,129 7,027 9,477
Comprise amounts paid to:
Directors 3,837 6,614 7,686
Other key management personnel 292 413 1,791
4,129 7,027 9,477
APPENDIX C – INDEPENDENT AUDITOR’S REPORT ONTHE COMBINED FINANCIAL STATEMENTS OF
THE TARGET GROUP FOR FY2014, FY2015 AND FY2016
C-41
Sky Win Management Consultancy Pte Ltd and its Combined Entities
Notes to Combined Financial Statements
For financial years ended 30 June 2014, 2015 and 2016
21. Financial risk management objectives and policies
The Group is exposed to financial risks arising from their operations and the use of financial
instruments. The key financial risks include credit risk, liquidity risk and interest rate risk.
The boards of directors review and agree policies and procedures for the management of
these risks. It is, and has been throughout the current financial year and previous financial
year, the Group’s policy that no derivatives shall be undertaken except for the use as
hedging instruments where appropriate and cost efficient. The Group does not apply hedge
accounting.
All financial transactions with the banks are governed by banking facilities duly approved by
the boards of directors. All financial transactions require two authorised signatories.
The following sections provide details regarding the Group’s exposure to the above-
mentioned financial risks and the objectives, policies and processes for the management of
these risks.
There has been no change to the Group’s exposure to these financial risks or the manner
in which it manages and measures the risks.
(a) Credit risk
Credit risk is the risk of loss that may arise on outstanding financial instruments should
a counterparty default on its obligations. The Group’s exposure to credit risk arises
primarily from trade and other receivables.
The Group’s objective is to seek continual revenue growth while minimising losses
incurred due to credit risk exposure. It is the Group’s policy to provide credit terms to
credit worthy customers. These debts are continually monitored and, therefore, the
Group does not expect to incur material credit losses.
At the end of the reporting period, the Group’s maximum exposure to credit risk is
represented by the carrying amount of trade and other receivables and cash and cash
equivalents. No other financial assets carry a significant exposure to credit risk.
Financial assets that are neither past due nor impaired
Trade and other receivables that are neither past due nor impaired are with
creditworthy receivables with good payment record with the Group. Cash and cash
equivalents are placed with or entered into with reputable financial institutions or
companies with high credit ratings and no history of default.
APPENDIX C – INDEPENDENT AUDITOR’S REPORT ONTHE COMBINED FINANCIAL STATEMENTS OF
THE TARGET GROUP FOR FY2014, FY2015 AND FY2016
C-42
Sky Win Management Consultancy Pte Ltd and its Combined Entities
Notes to Combined Financial Statements
For financial years ended 30 June 2014, 2015 and 2016
21. Financial risk management objectives and policies (Continued)
(a) Credit risk (Continued)
Financial assets that are past due or impaired
Information regarding financial assets that are either past due or impaired is disclosed
in Note 11.
(b) Liquidity risk
The Group and Company monitors its liquidity risk and maintains a level of cash and
cash equivalents deemed adequate by management to finance the Group’s and
Company’s operations and to mitigate the effects of fluctuations in cash flows, and
having adequate amounts of committed credit facilities.
The table below summarises the maturity profile of the Group’s financial assets and
liabilities at the end of each reporting period based on contractual undiscounted
payments.
Less than
one year
Two to
five years
More than
five years Total
2016 RM’000 RM’000 RM’000 RM’000
Financial assets
Trade and other receivables 212,546 – – 212,546
Cash and cash equivalents 81,930 – – 81,930
Total undiscounted financial
assets 294,476 – – 294,476
Financial liabilities
Trade and other payables 289,978 – – 289,978
Loans and borrowings 66,979 222,823 4,432 294,234
Total undiscounted financial
liabilities 356,957 222,823 4,432 584,212
Total net undiscounted
financial liabilities (62,481) (222,823) (4,432) (289,736)
APPENDIX C – INDEPENDENT AUDITOR’S REPORT ONTHE COMBINED FINANCIAL STATEMENTS OF
THE TARGET GROUP FOR FY2014, FY2015 AND FY2016
C-43
Sky Win Management Consultancy Pte Ltd and its Combined Entities
Notes to Combined Financial Statements
For financial years ended 30 June 2014, 2015 and 2016
21. Financial risk management objectives and policies (Continued)
(b) Liquidity risk (Continued)
Less than
one year
Two to
five years
More than
five years Total
2015 RM’000 RM’000 RM’000 RM’000
Financial assets
Trade and other receivables 352,219 – – 352,219
Cash and cash equivalents 24,116 – – 24,116
Total undiscounted financial
assets 376,335 – – 376,335
Financial liabilities
Trade and other payables 464,467 – – 464,467
Loans and borrowings 41,635 109,917 9,570 161,122
Total undiscounted financial
liabilities 506,102 109,917 9,570 625,589
Total net undiscounted
financial liabilities (129,767) (109,917) (9,570) (249,254)
2014
Financial assets
Trade and other receivables 185,735 – – 185,735
Cash and cash equivalents 18,389 – – 18,389
Total undiscounted financial
assets 204,124 – – 204,124
Financial liabilities
Trade and other payables 232,545 – – 232,545
Loans and borrowings 66,498 73,592 5,833 145,923
Total undiscounted financial
liabilities 299,043 73,592 5,833 378,468
Total net undiscounted
financial liabilities (94,919) (73,592) (5,833) (174,344)
APPENDIX C – INDEPENDENT AUDITOR’S REPORT ONTHE COMBINED FINANCIAL STATEMENTS OF
THE TARGET GROUP FOR FY2014, FY2015 AND FY2016
C-44
Sky Win Management Consultancy Pte Ltd and its Combined Entities
Notes to Combined Financial Statements
For financial years ended 30 June 2014, 2015 and 2016
21. Financial risk management objectives and policies (Continued)
(c) Interest rate risk
The primary source of the Group’s interest rate risk relates to interest bearing bank
deposits and its borrowings from banks and financial institutions. The interest bearing
loans and borrowings of the Group are disclosed in Note 14 to the financial
statements. As certain rates are based on interbank offer rates, the Group is exposed
to cash flow interest rate risk. This risk is not hedged. Interest bearing bank deposits
are short to medium-term in nature but given the significant cash and bank balances
held by the Group, any variation in the interest rates may have a material impact on
the results of the Group.
The Group manages its interest rate risk by having a mixture of fixed and variable
rates for its deposits and borrowings.
Interest rate sensitivity
The sensitivity analyses below have been determined based on the exposure to
interest rates for bank deposits and interest bearing financial liabilities at the end of
the reporting period and the stipulated change taking place at the beginning of the year
and held constant throughout the reporting period in the case of instruments that have
floating rates. A 50-basis point increase or decrease is used and represents
management’s assessment of the possible change in interest rates.
Table below shows the sensitivity of profit before tax affected by changes in interest
rates.
Increase/(decrease)
profit before tax
2014 2015 2016
Change in interest rates RM’000 RM’000 RM’000
50 basis points decrease 360 416 644
50 basis points increase (360) (416) (644)
APPENDIX C – INDEPENDENT AUDITOR’S REPORT ONTHE COMBINED FINANCIAL STATEMENTS OF
THE TARGET GROUP FOR FY2014, FY2015 AND FY2016
C-45
Sky Win Management Consultancy Pte Ltd and its Combined Entities
Notes to Combined Financial Statements
For financial years ended 30 June 2014, 2015 and 2016
22. Capital management
The primary objective of the Group’s capital management is to ensure that it maintains a
strong credit rating and health capital ratios in order to support its business and maximise
shareholder value.
The Group manages its capital structure and makes adjustments to it, in light of changes
in economic conditions. To maintain or adjust the capital structure, the Group may adjust
the dividend payment to shareholders, return capital to shareholders or issue new shares.
No changes were made in the objectives, policies or processes during the years ended
30 June 2016, 2015 and 2014.
23. Dividends
Dividends on ordinary shares declared and paid are as follows:
For the years ended 30 June
2014 2015 2016
RM’000 RM’000 RM’000
Hatten International Pte Ltd
(2014: Nil per share; 2015: RM0.64 per
share; 2016: RM2.99 per share) – 318 1,494
Fuyuu Resources Sdn Bhd
(2014: Nil per share; 2015: Nil per share;
2016: RM10.00 per share) – – 50,000
– 318 51,494
24. Authorisation of financial statements for issue
The combined financial statements for the financial years ended 30 June 2014, 2015 and
2016 were authorised for issue in accordance with a resolution of the Board of Directors of
the Company on 29 December 2016.
APPENDIX C – INDEPENDENT AUDITOR’S REPORT ONTHE COMBINED FINANCIAL STATEMENTS OF
THE TARGET GROUP FOR FY2014, FY2015 AND FY2016
C-46
29 December 2016
To: The Independent Directors of VGO Corporation Limited
(in relation to the Proposed Whitewash Resolution and Proposed Disposal)
Dato’ Wong King Kheng
Mr Anthony Clifford Brown
Mr Foo Jong Han Rey
(Independent Director)
(Independent Director)
(Independent Director)
To: The Audit and Risk Committee of VGO Corporation Limited
(in relation to the Proposed IPT Mandate)
Dear Sirs
(1) THE PROPOSED WHITEWASH RESOLUTION IN CONNECTION WITH THE
PROPOSED ACQUISITION OF THE ENTIRE ISSUED AND PAID-UP SHARE CAPITAL
OF SKY WIN MANAGEMENT CONSULTANCY PTE LTD;
(2) THE PROPOSED DISPOSAL OF THE COMPANY’S ENTIRE INTEREST IN THE
EXISTING BUSINESS AS AN INTERESTED PERSON TRANSACTION; AND
(3) THE PROPOSED ADOPTION OF THE INTERESTED PERSON TRANSACTIONS
MANDATE IN RESPECT OF RECURRENT INTERESTED PERSON TRANSACTIONS TO
BE ENTERED INTO BY THE COMPANY SUBSEQUENT TO THE COMPLETION OF THE
PROPOSED ACQUISITION
Unless otherwise defined or the context otherwise requires, all terms defined in the Circular shall
have the same meanings herein.
1. INTRODUCTION
On 6 June 2016 (the “Announcement Date”), the board of directors of VGO Corporation
Limited (the “Company”) announced (the “Announcement”) that the Company had on the
same day entered into a sale and purchase agreement (the “SPA”) with Dato’ Tan June
Teng, Colin and Dato’ Tan Ping Huang, Edwin (the “Vendors”), pursuant to which the
Company will acquire the entire issued and paid-up share capital (the “Sale Shares”) of
Sky Win Management Consultancy Pte. Ltd. (the “Target”) from the Vendors (and/or their
designated nominees), upon the terms and conditions of the SPA (the “Proposed
Acquisition”). On 6 September 2016, the Company announced that it had on the same
day entered into a supplemental agreement (“Supplemental Agreement”) to the SPA to
amend and/or vary certain terms and conditions of the SPA. For the purposes of this letter,
references to the SPA shall, where relevant, mean the SPA as amended, modified and
supplemented by the Supplemental Agreement. The Proposed Acquisition constitutes a
reverse takeover offer (“RTO”) of the Company under Chapter 10 of the Listing Manual.
The aggregate consideration of the Proposed Acquisition is S$386 million (the
“Consideration”) and shall be satisfied in full by the allotment and issuance of
1,187,692,308 new ordinary shares (the “Consideration Shares”) at the issue price of
S$0.325 (the “Issue Price”) for each Consideration Share to the Vendors (and/or their
designated nominees) on Completion (as defined in the Circular).
APPENDIX D – LETTER FROM SAC CAPITAL PRIVATE LIMITEDTO THE INDEPENDENT DIRECTORS AND THE AUDIT AND
RISK COMMITTEE OF VGO CORPORATION LIMITED
D-1
The Target Group (as defined below) is primarily engaged in the business of property
development in Malacca, Malaysia. As a condition to the Proposed Acquisition, the
Vendors and the Target carried out such steps in the restructuring such that the Target
holds directly the entire issued and paid-up share capital of the following companies (the
“Restructuring”):
(a) Hatten International Pte. Ltd.;
(b) Fuyuu Group Sdn. Bhd.;
(c) Fuyuu Resources Sdn. Bhd.;
(d) Fuyuu Ventures Sdn. Bhd.; and
(e) Gold Mart Sdn. Bhd.,
(collectively, the “Target Subsidiaries” and together with the Target, the “Target Group”).
Proposed Whitewash Resolution
Under Rule 14 of the Code and section 139 of the SFA, where (a) any person acquires,
whether by a series of transactions over a period of time or not, shares which (taken
together with shares held or acquired by persons acting in concert with him) carry 30.0%
or more of the voting rights of a company, or (b) any person who, together with persons
acting in concert with him, holds not less than 30.0% but not more than 50.0% of the voting
rights and such person, or any person acting in concert with him, acquires in any period
of six (6) months additional shares carrying more than 1.0% of the voting rights, such
person must extend offers immediately to the holders of any class of share capital of the
company which carries votes and in which such person, or persons acting in concert with
him, hold shares.
In view of the requirements under Rule 14 of the Code, the Vendors would be required,
together with its concert parties (collectively, the “Target Obliged Parties”) to make a
general offer following the allotment and issuance of the Consideration Shares upon
Completion.
The Securities Industry Council (“SIC”) had on 4 October 2016, granted the Vendors a
waiver of the requirement to make a general offer under Rule 14 of the Code as a result
of the allotment and issuance of the Consideration Shares to the Vendors under the
Proposed Acquisition (the “Whitewash Waiver”), subject to, inter alia, (a) a majority of
holders of voting rights of the Company approve at a general meeting, before the issue of
the Consideration Shares to the Vendors, a resolution by way of poll to waive their rights
to receive a general offer from the Vendors and parties acting in concert with them (the
“Proposed Whitewash Resolution”), and (b) the Company appoints an independent
financial adviser to advise its Independent Shareholders (as defined in the Circular) on the
Proposed Whitewash Resolution.
As at the Latest Practicable Date, the Target Obliged Parties do not hold any interest in
any Shares. Upon Completion and prior to the Proposed Compliance Placement, the
Target Obliged Parties will hold 1,187,692,308 Shares, representing approximately 92.8%
of the Enlarged Share Capital (as defined below) on Completion.
APPENDIX D – LETTER FROM SAC CAPITAL PRIVATE LIMITEDTO THE INDEPENDENT DIRECTORS AND THE AUDIT AND
RISK COMMITTEE OF VGO CORPORATION LIMITED
D-2
Proposed Disposal
Pursuant to the Proposed Acquisition and as a condition of the SPA, the Company has
undertaken to dispose of all assets and liabilities of its Existing Business1 prior to the
completion of the Proposed Acquisition. Accordingly, the Company had on 12 December
2016 entered into a disposal agreement (the “Disposal Agreement”) with the controlling
Shareholders and Directors of the Company, namely, Goh Ching Huat, Steven, Goh Ching
Wah, George and Goh Ching Lai, Joe (collectively, the “Purchasers”), to dispose of the
Existing Business through the disposal of the entire issued and fully paid-up ordinary
shares (the “Disposal Shares”) in the capital of W.O.S. World Of Sports (M) Sdn. Bhd.
(“WOS”) and VGO International Pte. Ltd. (“VGO International”) (collectively, the
“Disposal Companies”) owned by the Company to the Purchasers (the “Proposed
Disposal”).
As at the Latest Practicable Date, the Purchasers collectively hold a direct and indirect
shareholding of 57,915,368 shares representing approximately 62.7% of the issued
Shares of the Company.
The Purchasers are controlling Shareholders and Directors of the Company and
accordingly would, for the purposes of Chapter 9 of the Listing Manual and the Proposed
Disposal, be regarded as interested persons of the Company. Pursuant to Rule 906 of the
Listing Manual, the Company is required to obtain approval from the shareholders of the
Company (the “Shareholders”) for any interested person transaction of a value equal to
or more than 5% of the Group’s latest audited net tangible assets (“NTA”). As the Disposal
Consideration (as defined in paragraph 7.4 of this letter) of approximately S$2.3 million for
the Proposed Disposal exceeds 5% of the Group’s latest audited consolidated NTA of
S$1,195,000 as at 31 March 2016, the Company will be seeking Independent
Shareholders’ approval for the Proposed Disposal at an extraordinary general meeting of
the Company to be convened (the “EGM”).
Proposed IPT Mandate
The Company wishes to seek the approval of the Shareholders at the EGM for the
proposed adoption of a general mandate (“Proposed IPT Mandate”) for the Enlarged
Group on Completion to enter into recurrent transactions with certain Interested Persons
(the “Mandated Transactions”) as set out in section 13 of the “Letter to Shareholders
from the Board of Directors of the Company” in the Circular (the “VGO Letter”).
In connection with the above, the Company has appointed us as the independent financial
adviser (“IFA”) to advise the directors of the Company (the “Directors”) who are
independent for the purposes of the Proposed Whitewash Resolution and the Proposed
Disposal (the “Independent Directors”), and the Audit and Risk Committee of the
Company for the purpose of the Proposed IPT Mandate, to provide an opinion on whether
(a) the Proposed Whitewash Resolution in connection with the Proposed Acquisition is
prejudicial to the interests of the Company and the Independent Shareholders, (b) the
Proposed Disposal is on normal commercial terms and is not prejudicial to the interests of
1 The existing business of the Company as at the Latest Practicable Date, which comprises of the assets and liabilities
of the existing operations of franchising, marketing and retailing of lifestyle sporting goods, footwear, equipment,
apparel and accessories under the World of Sports trademark of specialty sports retail shops in Singapore and
Malaysia (the “Existing Business”).
APPENDIX D – LETTER FROM SAC CAPITAL PRIVATE LIMITEDTO THE INDEPENDENT DIRECTORS AND THE AUDIT AND
RISK COMMITTEE OF VGO CORPORATION LIMITED
D-3
the Company and the Independent Shareholders, and (c) the guidelines and review
procedures for determining the transaction prices of the Mandated Transactions, if
adhered to, are sufficient to ensure that the Mandated Transactions will be conducted on
normal commercial terms and will not be prejudicial to the interests of the Company and
its minority Shareholders.
This letter, which sets out our evaluation and advice, has been prepared for the use of the
Independent Directors in connection with the Proposed Whitewash Resolution and the
Proposed Disposal, and the Audit and Risk Committee in connection with the Proposed
IPT Mandate and their recommendation to the minority Shareholders arising thereof.
2. TERMS OF REFERENCE
We have been appointed as the independent financial adviser to advise the Independent
Directors in respect of the Proposed Whitewash Resolution in connection with the
Proposed Acquisition and the Proposed Disposal as an Interested Person Transaction,
and to the Audit and Risk Committee in respect of the Proposed IPT Mandate.
We are not and were not involved in any aspect of the negotiations entered into by the
Company or in the deliberations leading up to the decision of the Directors to undertake,
inter alia, the Proposed Whitewash Resolution in connection with the Proposed Acquisition
and the Proposed Disposal. Accordingly, we do not, by this letter, warrant the merits of the
Proposed Acquisition or the Proposed Disposal other than to express an opinion on
whether (a) the Proposed Whitewash Resolution in connection with the Proposed
Acquisition, from a financial point of view, is prejudicial to the interests of the Company
and the Independent Shareholders, and (b) the Proposed Disposal is on normal
commercial terms and is not prejudicial to the interests of the Company and the
Independent Shareholders.
For the purposes of arriving at our opinion in respect of the Proposed Whitewash (in
connection with the Proposed Acquisition) and the Proposed Disposal, we have confined
our analysis to the financial terms of the Proposed Acquisition and the Proposed Disposal.
We are not and were not privy to the negotiations entered into by the Company in relation
to the Mandated Transactions as contemplated under the Proposed IPT Mandate nor were
we involved in the deliberations leading up to the decision of the Directors to adopt the
Proposed IPT Mandate. We do not, by this letter, warrant the merits of the Proposed IPT
Mandate other than to express an opinion on whether the guidelines and review
procedures for determining the transaction prices of the Mandated Transactions, if
adhered to, are sufficient to ensure that the Mandated Transactions will be conducted on
normal commercial terms and will not be prejudicial to the interests of the Company and
its minority Shareholders. We have also not conducted a comprehensive independent
review of the business, operations or financial condition of the Entities at Risk (as defined
in paragraph 8.1 of this letter) or any of the Mandated Interested Persons (as defined in
paragraph 8.1 of this letter).
For the purposes of arriving at our opinion in respect of the Proposed IPT Mandate, we
have considered the review procedures of the Company for determining transaction prices
for the Mandated Transactions but have not evaluated, and have not been requested to
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comment on, the strategic, commercial or financial merits and/or risks of the Proposed IPT
Mandate or the prospects or earnings potential of the Entities at Risk after the adoption of
the Proposed IPT Mandate.
In the course of our evaluation, we have held discussions with the Directors and
management of the Company (the “Management”), and the management of the Target
Group (“Target Management”) and their professional advisers and have relied on the
information and representations, whether written or verbal, collated by us as well as
information provided to us by the Target Management, the Directors, the Management and
the professional advisers of the Company, including information contained in the Circular.
The Directors (including those who may have delegated detailed supervision of the
Circular) have confirmed that, having made all reasonable enquiries and to the best of
their knowledge and belief, (a) all material information available to them in connection with
the Proposed Whitewash Resolution (in connection with the Proposed Acquisition), the
Proposed Disposal and the Proposed IPT Mandate have been disclosed in the Circular, (b)
such information is true and accurate in all material respects, and (c) there is no other
material information or fact, the omission of which would cause any information disclosed
in the Circular to be inaccurate, incomplete or misleading in any material respect. The
Directors have jointly and severally accepted full responsibility for such information
described herein.
The Proposed New Directors and the Vendors (and/or their designated nominees) have
also confirmed to us similar responsibility statement with respect to the information on the
Vendors (and/or their designated nominees) and the Target Group.
We have not independently verified such information or representations and accordingly
cannot and do not warrant or accept responsibility for the accuracy, completeness or
adequacy of these information or representations. Accordingly, no representation or
warranty, expressed or implied, is made and no responsibility is accepted by us
concerning the accuracy, completeness or adequacy of such information or facts. We
have, however, made reasonable enquiries and exercised our judgment (as we deemed
necessary) in assessing the information and representations provided to us, and have
found no reason to doubt the accuracy of such information or representations which we
have relied on.
Save as disclosed, we would like to highlight that all information relating to the Company
and its subsidiaries (collectively, the “Group”) and the Target Group that we have relied
upon in arriving at our opinion has been obtained from the Circular, publicly available
information and/or from the Target Management, the Directors and the Management of the
Company. We have not independently assessed and do not warrant or accept any
responsibility as to whether the aforesaid information adequately represents a true and
fair position of the financial, operational and business affairs of the Company, the Group,
the Target and/or the Target Group at any time or as at 18 December 2016 (the “Latest
Practicable Date”). We have also not made any independent evaluation or appraisal of
the assets and liabilities of the Company, the Group and/or the Target Group and have not
been furnished with any such evaluation or appraisal, except for the independent valuation
reports prepared by the respective independent valuers to perform an independent
valuation analysis of the fair market value of (a) the property development portfolios
(collectively, the “Projects”) held under the Target Group as at 30 June 2016, (b) the
APPENDIX D – LETTER FROM SAC CAPITAL PRIVATE LIMITEDTO THE INDEPENDENT DIRECTORS AND THE AUDIT AND
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revalued net asset value of and 100% equity interest in the Target Group as at 30 June
2016, and (c) the WOS Property (as defined in paragraph 7.4.2 of this letter) held under
the Group as at 21 October 2016. The valuation reports and a summary of the respective
valuation reports (the “Summary Valuation Letters”) are set out in Appendices E, F and L
to the Circular. As we are not experts in the evaluation or appraisal of the assets set out
in the Summary Valuation Letters, we have placed sole reliance on the independent
valuation in relation to the aforementioned assets.
The scope of our appointment does not require us to conduct a comprehensive
independent review of the business, operations or financial condition of the Company, the
Group, the Target and the Target Group, or to express, and we do not express, any view
on the strategic or commercial merits, risks, future growth prospects, value and earnings
potential of the Group or the Target Group after the Proposed Acquisition and the
Proposed Disposal. We have not obtained from the Company, the Group, the Target and/or
the Target Group, any projection of the future performance including financial performance
of the Company, the Group, the Target and/or the Target Group, and further, we did not
conduct discussions with the Directors, the Management or the Target Management on,
and did not have access to, any business plan and financial projections of the Company,
the Group, the Target and/or the Target Group.
In addition, we are not expressing any view herein as to the prices at which the Shares
may trade or the future value, financial performance or condition of the Company, upon or
after completion of the Proposed Acquisition and the Proposed Disposal or if the Proposed
Acquisition and the Proposed Disposal are not effected. Such review or comment, if any,
remains the responsibility of the Directors and the Management, although we may draw
upon their views or make such comments in respect thereof (to the extent required by the
Code and/or the SGX-ST Listing Manual and/or deemed necessary or appropriate by us)
in arriving at our opinion as set out in this letter.
Our opinion, as set out in this letter, is based on the market, economic, industry and other
applicable conditions prevailing on, and the information made available to us, as at the
Latest Practicable Date. Such conditions may change significantly over a relatively short
period of time and we assume no responsibility to update, revise or reaffirm our opinion
in the light of any subsequent development after the Latest Practicable Date that may
affect our opinion contained herein. In arriving at our opinion, with the consent of the
Directors and/or the Company, we have taken into account certain other factors and have
made certain assumptions as set out in this letter.
In arriving at our opinion, we have not had regard to the specific investment objectives,
financial situation, tax position or unique needs and constraints of any individual
Shareholder or any specific group of Shareholders. We recommend that any individual
Shareholder or specific group of Shareholders who may require specific advice in relation
to his or their investment portfolio(s) should consult his or their legal, financial, tax or other
professional adviser. Shareholders should further take note of any announcements which
may be released by the Company after the Latest Practicable Date which are relevant to
the Proposed Acquisition, the Proposed Whitewash Resolution, the Proposed Disposal,
the Proposed IPT Mandate and other related corporate actions.
APPENDIX D – LETTER FROM SAC CAPITAL PRIVATE LIMITEDTO THE INDEPENDENT DIRECTORS AND THE AUDIT AND
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Our opinion in relation to the Proposed Whitewash Resolution, the Proposed
Disposal and the Proposed IPT Mandate should be considered in the context of the
entirety of this letter and the Circular.
The Company has been separately advised by its own advisers in the preparation of the
Circular (other than this letter). We have had no role or involvement and have not provided
any advice, financial or otherwise, in the preparation, review and verification of the
Circular (other than this letter). Accordingly, we take no responsibility for and express no
views, expressed or implied, on the contents of the Circular (other than this letter).
3. BACKGROUND
3.1. Background Information on the Company
The Company was incorporated in Singapore on 9 March 1993 under the name Ossia
Shin-Ei Pte Ltd. It adopted the name eWorld of Sports.com Limited on 6 July 2000 and
subsequently VGO Corporation Limited on 2 March 2004. The Company is listed on the
Mainboard of the SGX-ST since 4 August 2000.
Currently, the principal activities of the Company are that of franchising, marketing and
retailing of lifestyle sporting goods, footwear, equipment, apparel and accessories under
the World of Sports trademark of specialty sports retail shops in Singapore and Malaysia.
As at the Latest Practicable Date, the Company has 92,388,045 issued and fully paid-up
ordinary shares (“Shares”). The Company does not have any treasury shares.
Based on the last transacted share price of S$0.180 prior to the Latest Practicable Date,
the Company has a market capitalisation of approximately S$16.6 million.
As announced on 3 March 2016, the Company had been included on the SGX-ST
watch-list due to the minimum trading price (“MTP”) requirement, wherein issuers listed on
the Mainboard of the SGX-ST should maintain a minimum of S$0.20 per share as a
continuing listing requirement.
3.2. Background Information on the Target Group
Detailed information on the Target Group including, a description of its history, business,
risk factors, prospects and financial performance is set out in Appendix A to the Circular,
entitled “Letter to Shareholders from the Proposed New Directors” (the “Target Letter”).
The following highlights selected information on the Target Group for your reference.
The Target is a private company limited by shares incorporated in Singapore on 19 March
2013 and its entire issued and paid-up share capital is legally and beneficially owned by
the Vendors. The current issued share capital of Target is S$4 comprising 4 ordinary
share.
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The Target Group is one of the leading property developers in Malaysia specialising in
integrated residential, hotel and commercial developments and are headquartered in
Malacca, Malaysia. The Target Group represents the property development arm of the
Hatten Group. The Hatten Group is a conglomerate owned by the Vendors with core
businesses in property development, property investment, hospitality, retail and
education.
The current development portfolio of the Target Group comprises three (3) integrated
mixed use development projects in Malacca, Malaysia. They are (a) Hatten City Phase 1
(incorporating Elements Mall, SilverScape Residence and Hatten Suites), (b) Hatten City
Phase 2 (incorporating Imperio Mall and Imperio Residence) and (c) Harbour City
(incorporating a mall, a theme park and three (3) hotels). The Target Group has also
designed and is developing a retail mall in Malacca, Malaysia called Vedro by the River.
Further details on the developments are set out in section 4 of the Target Letter.
The Target is wholly-owned by Dato’ Tan June Teng, Colin (50%) and Dato’ Tan Ping
Huang, Edwin (50%). Following the completion of the Proposed Acquisition, Dato’ Tan
June Teng, Colin is proposed to be the Executive Chairman and Managing Director, and
Dato’ Tan Ping Huang, Edwin as the Executive Director and Deputy Managing Director of
the proposed new Board of Directors.
3.3. Overview of the Proposed Acquisition, the Proposed Disposal and related corporate
actions being considered at the EGM
The Proposed Acquisition of the Target Group, to be satisfied in full by way of the allotment
and issuance of up to 1,187,692,308 Consideration Shares, constitutes a RTO exercise of
the Company. The Proposed Acquisition will transform the Group into a property developer
in Malaysia and will result in a change in the control of the Company. Hence, the Company
has also proposed to exit from the existing business by way of the Proposed Disposal of
the Existing Business of the Group to the Purchasers.
In connection with the Proposed Acquisition, various corporate actions are also being
proposed to be approved by Shareholders at the EGM and these corporate actions may
or may not be proceeded with if the Proposed Acquisition is not approved by Shareholders
at the EGM.
The various corporate actions that will be subject to Shareholders’ approvals at the EGM,
inter alia, are as follows:
(a) the Proposed Acquisition;
(b) the Proposed issuance of Consideration Shares;
(c) the Proposed Compliance Placement;
(d) the Proposed Listing Transfer;
(e) the Proposed Disposal;
(f) the Proposed Capital Reduction;
APPENDIX D – LETTER FROM SAC CAPITAL PRIVATE LIMITEDTO THE INDEPENDENT DIRECTORS AND THE AUDIT AND
RISK COMMITTEE OF VGO CORPORATION LIMITED
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(g) the Proposed Whitewash Resolution;
(h) the Proposed Change of Name;
(i) the Proposed Appointment of the Proposed New Directors;
(j) the Proposed Adoption of the New Constitution;
(k) the Proposed New Share Issue Mandate; and
(l) the Proposed IPT Mandate,
(collectively, the “Proposed Transactions”).
Based on the Issue Price of S$0.325 for each Consideration Share for the Proposed
Acquisition, the enlarged share capital of the Company comprising 1,280,080,353 Shares
(the “Enlarged Share Capital”) after the Proposed Acquisition but prior to the Proposed
Compliance Placement, the market capitalisation of the Company will be approximately
S$416.0 million.
The above is an overview of the proposed corporate actions to be undertaken by the
Company and should be read in the context of the entirety of the Circular. Further details
of the Proposed Acquisition, the Proposed Whitewash Resolution and the Proposed
Disposal are set out in paragraphs 4, 5 and 6 of this letter respectively.
4. OVERVIEW OF THE PROPOSED ACQUISITION
4.1. Key terms of the Proposed Acquisition
The details of the Proposed Acquisition and related matters are set out in section 3 of the
VGO Letter. The key terms and certain pertinent matters of the Proposed Acquisition are
highlighted below for your reference:
(a) The Consideration for the Sale Shares payable by the Company is the sum of S$386
million. The Consideration shall be satisfied in full by the allotment and issuance of
1,187,692,308 Consideration Shares by the Company to the Vendors (and/or their
designated nominees) on Completion at the issue price of S$0.325, subject to
adjustments as agreed between the parties, such as share consolidation and in any
event, in compliance with Rule 1015(3)(c) of the Catalist Rules, shall not be less than
S$0.20. Where the Issue Price is adjusted, the number of Consideration Shares to be
issued shall be adjusted accordingly. For the avoidance of doubt, the Vendors may,
in their absolute discretion, renounce all or any part of the Consideration Shares in
favour of any other party as the Vendors may deem fit.
(b) The Consideration Shares will, when allotted and issued, be credited as fully-paid
ordinary shares in the capital of the Company free from any and all encumbrances
and shall rank pari passu in all respects with and carry all rights similar to the shares
of the Company in issue as at the Completion Date, except that they will not rank for
any dividend, right, allotment or other distributions, the record date of which falls on
or before the date of issue of the Consideration Shares.
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(c) The Consideration was arrived at on a willing-buyer-willing-seller basis and on
mutual agreement between the parties in consultation with the financial adviser for
the Proposed Acquisition based on the market value as set out in the asset valuation
report prepared by the Independent Property Valuer (as defined below) valuing the
properties of the Target Group, the revalued net asset value and the equity value as
set out in the business valuation report prepared by the independent business valuer.
Jones Lang LaSalle Corporate Appraisal and Advisory Limited (“JLL” or the
“Independent Business Valuer”) has been appointed by the Target as the
independent valuer for the business valuation of the revalued net asset value of and
100% equity value in the Target Group (the “Independent Business Valuation”) and
Nawawi Tie Leung Property Consultants Sdn. Bhd. (the “Independent Property
Valuer”) have been appointed by the Target as the independent valuer for the
Projects held under the Target Group. Based on the Independent Business Valuation
report dated 29 December 2016, as set out in Appendix F to the Circular, the
Independent Business Valuer has opined that the market values of the revalued net
asset value (“RNAV”) of and 100% equity interest in the Target Group as at 30 June
2016 is S$506.4 million and S$462.0 million respectively.
(d) The Proposed Acquisition is subject to various conditions precedent which are set out
in section 3.4.3 of the VGO Letter. In particular, the Proposed Acquisition is
conditional upon, inter alia, the approval of Shareholders at the EGM, Independent
Shareholders’ approval for the Proposed Whitewash Resolution, SIC having granted
the Whitewash Waiver to the Target Obliged Parties and the approval in principle
being received from the SGX-ST for the Proposed Acquisition.
5. THE PROPOSED WHITEWASH RESOLUTION
The Proposed Acquisition of the Target Group constitutes a RTO and on Completion will
result in a change in control of the Company. The Consideration of the Proposed
Acquisition is S$386 million to be satisfied in full by the allotment and issuance of
1,187,692,308 Consideration Shares to the Vendors (and/or their designated nominees)
on Completion at the Issue Price of S$0.325 upon Completion. In addition, the Vendors
may, in their absolute discretion, renounce all or any part of the Consideration Shares in
favour of any other party as the Vendors may deem fit.
As at the Latest Practicable Date, the Target Obliged Parties do not hold any interest in
any Shares. Upon Completion and prior to the Proposed Compliance Placement, the
Target Obliged Parties will hold 1,187,692,308 Shares, representing approximately 92.8%
of the Enlarged Share Capital on Completion.
Pursuant to Rule 14 of the Code, the Target Obliged Parties would therefore be required
to make a general offer for all the remaining Shares not already owned, controlled or
agreed to be acquired by them, except where the SIC grants them a waiver of their
obligations to make a general offer under Rule 14 of the Code.
The Vendors had applied to the SIC for the Whitewash Waiver to waive the Vendors and
their concert parties of their obligation to make the general offer for the Company under
Rule 14 of the Code as a result of them receiving the Consideration Shares. The SIC had,
on 4 October 2016, granted the Whitewash Waiver to the Vendors subject to the
satisfaction of certain conditions as set out in section 8.2.2 of the VGO Letter.
APPENDIX D – LETTER FROM SAC CAPITAL PRIVATE LIMITEDTO THE INDEPENDENT DIRECTORS AND THE AUDIT AND
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The Independent Shareholders should note that:
(a) the approval of the Proposed Whitewash Resolution is a condition precedent to
Completion pursuant to the terms of the Sale and Purchase Agreement, and if
Independent Shareholders do not vote in favour of the Proposed Whitewash
Resolution, the Proposed Acquisition will not take place;
(b) the issue of the Consideration Shares will result in the Target Obliged Parties
holding Shares carrying over 49.0% of the voting rights of the Company, and
the Target Obliged Parties will be free to acquire further Shares without
incurring any obligation under Rule 14 of the Code to make a general offer; and
(c) by voting in favour of the Proposed Whitewash Resolution, they will be waiving
their rights to receive a general offer for all of their Shares from the Vendors at
the highest price paid by the Target Obliged Parties for the Shares in the past
six (6) months preceding the commencement of the offer.
Further details on the Proposed Whitewash Resolution are set out in section 8 of the VGO
Letter and Shareholders are advised to read the information carefully.
6. OVERVIEW OF THE PROPOSED DISPOSAL
6.1. Key terms of the Proposed Disposal
The details of the Proposed Disposal and related matters are set out in section 6 of the
VGO Letter. The key terms and certain pertinent matters of the Proposed Disposal are
highlighted below:
(a) On the terms and conditions of the Disposal Agreement, the Company shall sell, and
the Purchasers shall buy, the Disposal Shares free from all encumbrances or third
party interests and together with all rights, benefits and entitlements attaching
thereto as at the date of completion of the Proposed Disposal and thereafter. As the
Existing Business in Singapore is currently held by the Company directly, the
Company will be undertaking such restructuring (the “Disposal Restructuring”) to
transfer the Existing Business in Singapore to VGO International. Upon completion
of the Disposal Restructuring, the Existing Business (in both Singapore and
Malaysia) will be held through VGO International and WOS, and the Company shall
not own any assets or have any liabilities, save for the net proceeds arising from the
Proposed Disposal and non-operational liabilities such as professional, audit and tax
fees and corporate expenses incurred or to be incurred by the Company (the
“Non-Operating Liabilities”). For the avoidance of doubt, assets owned by and the
liabilities of the Disposal Companies after the Disposal Restructuring and the
liabilities arising from the Disposal Restructuring shall not constitute assets and
liabilities of the Company. The Non-Operating Liabilities shall not, collectively,
exceed S$550,000.;
APPENDIX D – LETTER FROM SAC CAPITAL PRIVATE LIMITEDTO THE INDEPENDENT DIRECTORS AND THE AUDIT AND
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(b) The aggregate consideration payable by the Purchasers to the Company for the sale
and purchase of the Disposal Shares shall be calculated as follows:
Disposal Consideration = (Initial NTA + Property Revaluation Surplus) + S$550,000
(the “Disposal Consideration”),
provided always that the Disposal Consideration shall not fall below S$550,000.
Where:
“Initial NTA” means the net tangible asset value of the Disposal Companies based
on the audited consolidated statements of the Company as at 31 March 2016.
“Property Revaluation Surplus” means the difference between the market value of
the WOS Property as at 21 October 2016 as set out in the valuation report by Nawawi
Tie Leung Property Consultants Sdn. Bhd. dated 25 October 2016, and the net
carrying amount of the WOS Property as at 31 March 2016 as set out in the annual
report of the Company for the financial year ended 31 March 2016.
The Disposal Consideration will be subject to a further adjustment based on a revised
NTA value of the Disposal Companies to be determined based on the combined
balance sheet of the Disposal Companies as at the last day of the month preceding
the month in which the EGM will be held, for the approval by Independent
Shareholders for the Proposed Disposal, and such balance sheet shall be prepared
by the management of the Company and reviewed by the auditors of the Company
in accordance with prevailing professional standards in Singapore and shall be
delivered by the Company, along with such evidence of review, to the Purchasers not
more than 30 days after the EGM whereby approval of the Proposed Disposal by
Independent Shareholders is obtained (the “EGM Balance Sheet”).
(c) On the date on which the approval of Independent Shareholders is obtained for the
Proposed Disposal, based on the EGM Balance Sheet, in order to accurately reflect
the latest financial position of the Disposal Companies, the Company and the
Purchasers agree that:
(i) if the net tangible asset value of the Disposal Companies as stated in the EGM
Balance Sheet (the “Adjusted NTA”) exceeds the Initial NTA, the Disposal
Consideration shall be increased by an amount equal to such excess of the
Adjusted NTA over the Initial NTA; and
(ii) if the Adjusted NTA is less than the Initial NTA, the Disposal Consideration shall
be reduced by an amount equal to such deficit of the Adjusted NTA below the
Initial NTA.
For the avoidance of doubt, the Disposal Consideration shall not fall below
S$550,000.
The Disposal Consideration shall be fully satisfied in cash to be paid on the date of
completion of the Proposed Disposal, which will be on the same day as the date of
Completion of the Proposed Acquisition.
APPENDIX D – LETTER FROM SAC CAPITAL PRIVATE LIMITEDTO THE INDEPENDENT DIRECTORS AND THE AUDIT AND
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(d) The Proposed Disposal is subject to various conditions precedent which is set out in
section 6.2.3 of the VGO Letter, including, inter alia, the following:
(i) the approval of Shareholders having been obtained at the EGM for the
Proposed Acquisition; and
(ii) the approval of Independent Shareholders having been obtained at the EGM for
the Proposed Disposal.
Further details on the Proposed Disposal are set out in section 6 of the VGO Letter and
Shareholders are advised to read the information carefully.
7. EVALUATION OF THE PROPOSED WHITEWASH RESOLUTION AND PROPOSED
DISPOSAL
In our evaluation of the Proposed Whitewash Resolution (in connection with the Proposed
Acquisition) and the Proposed Disposal, we have given due consideration to, inter alia, the
following key factors:
(a) rationale for the Proposed Acquisition and the Proposed Disposal;
(b) assessment of the Consideration for the Proposed Acquisition;
(c) assessment of the Issue Price of the Consideration Shares to be issued for the
Proposed Acquisition;
(d) assessment of the Disposal Consideration for the Proposed Disposal; and
(e) other relevant considerations.
7.1. Rationale for the Proposed Acquisition and Proposed Disposal
The full text of the rationale for the Proposed Acquisition and the Proposed Disposal are
set out in sections 3.2 and 6.1 in the VGO Letter respectively, and has been reproduced
below:
Rationale for the Proposed Acquisition
“The Proposed Acquisition is in line with the Group’s corporate strategy to venture into a
new business area that has the potential for growth. The Board is of the view that the
Proposed Acquisition is beneficial to the Company and likely to enhance the long term
interests of Shareholders.
The Board further refers to the Company’s announcement to Shareholders dated 3 March
2016 in relation to its inclusion on the watch-list due to the failure to meet the MTP
Requirement of S$0.20 per share for shares of issuers listed on the Mainboard of the
SGX-ST as a continuing listing requirement. The Board has considered the options
available to the Company to comply with the MTP Requirement and is of the view that the
Proposed Acquisition will facilitate the Company’s ability to satisfy the MTP Requirement.”
APPENDIX D – LETTER FROM SAC CAPITAL PRIVATE LIMITEDTO THE INDEPENDENT DIRECTORS AND THE AUDIT AND
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Rationale for the Proposed Disposal
“As announced by the Company on 6 June 2016 and 6 September 2016, the Company
entered into the Sale and Purchase Agreement with the Vendors in relation to the
Proposed Acquisition. As a condition of the Sale and Purchase Agreement, the Company
is to undertake a disposal of all assets and liabilities of its Existing Business prior to
completion of the Proposed Acquisition. Accordingly, the Company is undertaking the
Proposed Disposal to fulfil the condition precedent to the Proposed Acquisition. As a result
of the Proposed Disposal and prior to Completion, the Company will cease to have any
operating business and become a cash company.”
7.2. Assessment of the Consideration for the Proposed Acquisition
In assessing the Consideration for the Proposed Acquisition, we have considered the
following:
(a) the historical financial performance and condition of the Target Group;
(b) the comparison of the Consideration to the Independent Business Valuation;
(c) the valuation ratios of selected listed companies whose businesses are broadly
comparable with the Target Group; and
(d) the valuation ratios of selected privatisation/general offers of listed companies whose
businesses are broadly comparable with the Target Group.
7.2.1. Historical financial performance and condition of the Target Group
A summary of the key financial information on the Target Group for the financial years
ended 30 June 2014, 30 June 2015 and 30 June 2016 (“FY2014”, “FY2015” and
“FY2016” respectively) is set out below:
Combined Statements of
Comprehensive Income Audited
(RM’000) FY2014 FY2015 FY2016
Revenue 245,159 436,264 412,347
Gross profit 65,140 93,948 154,720
Profit before tax 27,793 37,054 96,441
Profit for the year attributable to owners
of the Company
19,495 25,780 68,588
APPENDIX D – LETTER FROM SAC CAPITAL PRIVATE LIMITEDTO THE INDEPENDENT DIRECTORS AND THE AUDIT AND
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Combined Statements of
Financial Position Audited
As at 30 June
(RM’000) 2014 2015 2016
Current assets 618,524 899,237 817,910
Current liabilities 547,366 694,642 500,775
Working capital 71,158 204,595 317,135
Non-current assets 55,878 78,161 115,395
Non-current liabilities 133,801 239,090 371,910
Equity attributable to owners of the
Company (6,765) 43,666 60,620
Combined Statements of
Cash Flows Audited
(RM’000) FY2014 FY2015 FY2016
Net cash flows (used in)/generated from
operating activities
(52,318) (12,429) 26,672
Net cash flows used in investing activities (14,881) (10,682) (29,026)
Net cash flows generated from financing
activities
60,611 28,838 60,168
Net increase/(decrease) in cash and cash
equivalents
(6,588) 5,727 57,814
Cash and cash equivalents at end of
financial year
18,389 24,116 81,930
Source: Appendix C entitled “Independent Auditor’s Report on the Combined Financial Statements of the Target
Group for FY2014, FY2015 and FY2016”
We note the following:
(a) Revenue. The Target Group’s revenue increased by RM191.1 million from RM245.2
million in FY2014 to RM436.3 million in FY2015, mainly due to a higher stage of
completion recognised from Hatten City Phase 1, Hatten City Phase 2 and Vedro by
the River in FY2015. The Target Group’s revenue decreased by RM23.9 million from
RM436.3 million in FY2015 to RM412.3 million in FY2016, mainly due to the
decrease in revenue attributable to (i) Hatten City Phase 1 as a result of completion
of the project in FY2016 and (ii) Vedro by the River due to a lower increase in stage
of completion recognised in FY2016. The decrease in revenue was partially offset by
the increase in revenue attributable to Hatten City Phase 2 from RM82.5 million in
FY2015 to RM116.1 million in FY2016 due to higher increase in stage of completion
recognised in FY2016.
(b) Gross profit and net profit for the year. Gross profit increased by RM28.8 million
from RM65.1 million in FY2014 to RM93.9 million in FY2015, mainly attributable to
the increase in stage of completion recognised in the Hatten City Phase 1 project in
FY2015. The Target Group’s net profit increased by RM6.3 million from RM19.5
APPENDIX D – LETTER FROM SAC CAPITAL PRIVATE LIMITEDTO THE INDEPENDENT DIRECTORS AND THE AUDIT AND
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million in FY2014 to RM25.8 million in FY2015, mainly attributable to a higher gross
profit recorded in FY2015, partially offset by the increase in (i) selling and distribution
expenses of RM7.8 million which was in line with the increase in revenue, and
(ii) administrative and general expenses of RM13.2 million mainly due to higher
salary and related expenses recorded as a result of higher business activity.
The Target Group’s gross profit increased by RM60.8 million from RM93.9 million in
FY2015 to RM154.7 million in FY2016, mainly attributable to the higher gross profit
attributable to (i) Hatten City Phase 1 due to adjustments made to account for the
lower finalised cost items incurred on completion of the project in FY2016, and
(ii) Hatten City Phase 2 mainly due to the downward revision of cost estimates of
RM19.8 million in FY2016 due to the write-back of provision of foreseeable losses,
where such provision for foreseeable losses was made and charged to the profit and
loss account in FY2015, which arose from budgeted gross development costs
exceeding budgeted gross development value. The Target Group’s net profit
increased by RM42.8 million from RM25.8 million in FY2015 to RM68.6 million in
FY2016. This was mainly attributable to (i) a higher gross profit recorded in FY2016,
and (ii) an increase in other income/gains of RM5.9 million due to higher interest
income from late payment interest charged to purchasers and service fee income
recorded in FY2016, partially offset by an increase in administrative and general
expenses of RM10.2 million due to higher salaries and related manpower expenses
incurred in FY2016.
(c) Working capital. The Target Group’s positive working capital increase by RM133.4
million from RM71.2 million as at 30 June 2014 to RM204.6 million as at 30 June
2015, mainly due to (i) the increase in properties under development of RM96.9
million, (ii) the increase in trade and other receivables of RM166.5 million, and
(iii) the decrease in the provision for land owners’ entitlement of RM85.4 million,
partially offset by the increase in trade and other payables of RM231.9 million. As at
30 June 2016, the Target Group recorded positive working capital of RM317.1 million
as compared to the positive working capital of RM204.6 million as at 30 June 2015,
mainly attributable to (i) the decrease in trade and other payables of RM175.3 million
and (ii) the increase in cash and cash equivalents of RM57.8 million, partially offset
by the decrease in trade and other receivables of RM139.7 million. The decrease in
trade and other payables and the trade and other receivables were mainly due to the
Set-Off Agreement entered into with Montane Construction Sdn. Bhd. as set out in
section 24.4.1 of the Target Letter.
(d) Equity attributable to owners of the Company. Equity attributable to owners of the
Company had generally been increasing from negative RM6.8 million as at 30 June
2014 to a positive RM60.6 million as at 30 June 2016, mainly due to higher net profit
recorded over the years.
(e) Operating cash flows. The Target Group recorded net cash flows used in operating
activities of RM52.3 million in FY2014, as compared to lower net cash flows used in
operating activities of RM12.4 million in FY2015, mainly due to an increase in trade
and other payables, partially offset by an increase in properties under development
and trade and other receivables. The Group recorded net cash flows generated from
operating activities of RM26.7 million in FY2016, as compared to net cash flows used
APPENDIX D – LETTER FROM SAC CAPITAL PRIVATE LIMITEDTO THE INDEPENDENT DIRECTORS AND THE AUDIT AND
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in operating activities of RM12.4 million in FY2015, mainly attributable to (i) the
higher profit before tax recorded in FY2016, and (ii) the decrease in amount due from
related parties, partially offset by a decrease in trade and other payables.
(f) Cash and cash equivalents. The Target Group recorded cash and cash equivalents
of RM18.4 million, RM24.1 million and RM81.9 million as at the end of FY2014,
FY2015 and FY2016.
The Target Group’s consolidated financial statements for FY2014, FY2015 and FY2016
have been prepared in accordance with the Singapore Financial Reporting Standards and
are set out in Appendix C to the Circular. The management discussion and analysis of
results of the operations and financial condition of the Target Group for the period under
review is set out in section 20 of Target Letter, Shareholders are advised to read the
information carefully.
7.2.2. Comparison of the Consideration to the Independent Business Valuation
Valuation of the Projects held under the Target Group
The Target Group had commissioned the Independent Property Valuer to carry out a
market valuation of all the Projects held by the Target Group as at 30 June 2016. A
summary of the market valuation of the Projects are set out below:
Project Type
Market value of the Target
Group’s interest in the joint venture
(RM’ million)
Hatten City Phase 1 Mixed use development 628.0
Hatten City Phase 2 Mixed use development 363.0
Harbour City Mixed use development 849.0
Vedro by the River Commercial 65.0
We note that the valuations have been prepared on the basis of Market value which is
defined as:
“the highest value at which the sale interest in property might reasonably be expected to
have been completed at the date of valuation, assuming, (a) a willing seller and a willing
buyer in an arm’s length transaction, (b) that, prior to the date of valuation, there had been
a reasonable period (having regard to the nature of the property and the state of the
market) for the proper marketing of the interest, for the agreement of price and terms for
the completion of the sale, (c) that no account is taken of any additional bid by a
prospective purchaser with a special interest, and (d) that both parties to the transaction
had acted knowledgeably, prudently and without compulsion.”
In arriving at the Market value of the properties, the Independent Property Valuer had
adopted the Residual Method of Valuation “as this method is most suitable to assess the
market value for an on-going development.”
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The Residual Method of Valuation:
“requires an estimate of the Gross Development Value (GDV) of the proposed
development assuming it is completed, from which the various costs of development such
as construction costs, professional fees, Goods and Services Tax (GST), financial &
holding charges on the land & construction, developer’s profit, cost of sale, promotion &
legal fees, etc are deducted to arrive at the Residual land value which would represent
what a prudent developer would pay for the site with all its potentialities.
The Gross Development Value (“GDV”) is the value of the proposed development when it
is fully completed and sold. The Total Development Costs (“TDC”) is the estimated cost of
completing the proposed development, which includes building and infrastructure costs,
professional fees, administrative and management expenses as well as financing cost.
The difference between GDV and TDC represents the residual value of the land which is
then deferred for a period of time at an appropriate discount rate reflecting the market
condition and expectation of the development to arrive at the present value of the subject
property.”
The summary valuation reports dated 11 August 2016 prepared by the Independent
Property Valuer on the Projects held under the Target Group as at 30 June 2016 are set
out in Appendix E to the Circular.
Revalued net asset value of and 100% equity interest in the Target Group
The parties have agreed that the Consideration for the Proposed Acquisition is S$386
million. The Consideration was arrived at on a willing-buyer-willing-seller basis and on
mutual agreement between the parties in consultation with the financial adviser for the
Proposed Acquisition based on the market value as set out in the asset valuation report
prepared by the Independent Property Valuer valuing the properties of the Target Group,
the RNAV of and equity value as set out in the Business Valuation Report prepared by the
Independent Business Valuer.
In this regard, JLL was appointed as the Independent Business Valuer to provide an
opinion of the market values of the RNAV of and 100% equity interest in the Target Group
as at 30 June 2016. JLL had carried out the valuation of the Target Group based on a
market value basis, where the Market Value is defined as:
“the estimated amount for which an asset or liability should exchange on the valuation
date between a willing buyer and a willing seller in an arm’s length transaction after proper
marketing and where the parties had each acted knowledgeably, prudently and without
compulsion.”
Details on the valuation and the valuation methodologies used by JLL are set out in the
Independent Business Valuation report dated 29 December 2016 in Appendix F to the
Circular.
JLL had assessed the RNAV of the Target Group based on the book value of the Target
Group and by adjusting the revaluation surplus between the market values of its properties
under development calculated by the Independent Property Valuer and the book values.
Having obtained the RNAV of the Target Group, JLL applied relevant and appropriate
APPENDIX D – LETTER FROM SAC CAPITAL PRIVATE LIMITEDTO THE INDEPENDENT DIRECTORS AND THE AUDIT AND
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marketability discount to arrive at the valuation for 100% equity interest in the Target
Group. JLL had also conducted another valuation assessment under the income approach
as a cross-check for the market value of 100% equity interest in the Target Group based
on RNAV.
Based on the above, JLL had ascribed the market values of the RNAV of and 100% equity
interest in the Target Group as at 30 June 2016 to be S$506.4 million and S$462.0 million
respectively. Accordingly, the Consideration of S$386 million represents a discount of
23.8% and 16.5% to the RNAV of and 100% equity interest in the Target Group as at
30 June 2016 respectively.
7.2.3. Comparison of valuation ratios of selected listed companies whose businesses are
broadly comparable with the Target Group
For the purpose of assessing the Consideration, we have referred to selected companies
whose businesses are broadly comparable with the Target Group. As the Target Group is
principally engaged in the business of property development in Malaysia, we have
considered companies that are involved in property development activities as a core
business with property portfolios in Malaysia, which can be considered as broad proxies
to the Target Group. We have considered the comparable companies which are listed and
traded on the SGX-ST to give an indication of the current market valuation of these
businesses as at the Latest Practicable Date. For a more meaningful comparison, we have
only considered such companies listed on the SGX-ST with market capitalisation of
between S$85 million and S$1.5 billion. In addition, we have also considered comparable
companies which are listed and traded on Bursa Malaysia Berhad (“Bursa”) with market
capitalisation of between S$330 million and S$1.3 billion. Based on the above selection
criteria, we have a listing of 16 comparable companies:
Comparable companies listed on the SGX-ST (the “SGX-ST Target Comparable
Companies”)
(a) Oxley Holdings Limited (“Oxley Holdings”)
(b) Wing Tai Holdings Limited (“Wing Tai”)
(c) GSH Corporation Limited (“GSH Corp”)
(d) Tee Land Limited (“Tee Land”)
Comparable companies listed on Bursa (the “Bursa Target Comparable Companies”)
(e) Eco World Development Group Berhad (“Eco World”)
(f) UOA Development Bhd (“UOA”)
(g) Mah Sing Group Berhad (“Mah Sing”)
APPENDIX D – LETTER FROM SAC CAPITAL PRIVATE LIMITEDTO THE INDEPENDENT DIRECTORS AND THE AUDIT AND
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(h) IGB Corporation Berhad (“IGB Corp”)
(i) Eastern & Oriental Berhad (“Eastern & Oriental”)
(j) Tropicana Corporation Berhad (“Tropicana Corp”)
(k) Matrix Concepts Holdings Berhad (“Matrix Concepts”)
(l) MKH Berhad (“MKH”)
(m) MCT Berhad (“MCT”)
(n) KSL Holdings Berhad (“KSL Holdings”)
(o) LBS Bina Group Berhad (“LBS Bina”)
(p) Kerjaya Prospek Group Berhad (“Kerjaya Prospek”)
(collectively, the “Target Comparable Companies”).
Details on the Target Comparable Companies, including their business descriptions and
selected key financials are set out in Annex 1 to this letter.
We have held discussions with the Target Management about the suitability and
reasonableness of the selected Target Comparable Companies acting as a basis for
comparison with the Target Group. Relevant information have been extracted from
Bloomberg L.P., publicly available information including annual reports and/or
announcements of the selected Target Comparable Companies. We make no
representations or warranties, expressed or implied, as to the accuracy or completeness
of such information. The selected Target Comparable Companies’ accounting policies with
respect to the values for which the assets or the revenue and cost are recorded may differ
from that of the Target Group.
We wish to highlight that the Target Comparable Companies are not exhaustive and they
differ from the Target Group in terms of, inter alia, market capitalisation, size of operations,
clientele base, composition of business activities, asset base, geographical spread and
markets, track record, operating and financial leverage, risk profile, liquidity, accounting
policies, future prospects and other relevant criteria. As such, any comparison made is
necessarily limited and merely serves as an illustrative guide.
In assessing the financial terms of the Proposed Acquisition, we have used the following
valuation parameters in our analysis:
APPENDIX D – LETTER FROM SAC CAPITAL PRIVATE LIMITEDTO THE INDEPENDENT DIRECTORS AND THE AUDIT AND
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Valuation parameter Description
Price-earnings ratio
(“PER”)
The historical PER, which illustrates the ratio of the market
price of a company’s shares relative to its historical
consolidated earnings per share, is commonly used for the
purpose of illustrating the profitability, and hence valuation
of a company.
We have considered the historical PERs of the Target
Comparable Companies based on their respective last
transacted prices on the Latest Practicable Date and latest
full-year net earnings per share vis-à-vis the corresponding
historical PER of Target Group based on the Consideration
and the latest full-year net earnings of the Target Group.
Price-to-book NAV ratio
(“P/NAV”)
An NAV-based approach is useful to illustrate the extent
that the value of each share is backed by assets, and would
be more relevant in the case where the group were to
change the nature of its business or realise or convert the
use of all or most of its assets. The NAV-based valuation
approach may provide an estimate of the value of a
company or group assuming the hypothetical sale of all its
assets over a reasonable period of time at the aggregate
value of the assets used in the computation of the NAV, with
the balance to be distributed to its shareholders after the
settlement of all the liabilities and obligations of the
company or group.
We have considered the historical price-to-NAV ratios of
the Target Comparable Companies based on their
respective last transacted prices on the Latest Practicable
Date and latest available NAV per share vis-à-vis the
corresponding price-to-NAV ratio of the Target Group based
on the Consideration and the latest available NAV per
Share of the Target Group.
The NAV-based approach would be a more appropriate methodology in comparing the
valuation ratios of property development companies instead of the PER approach as the
property development companies are asset based businesses and the financial
performance of property development companies may be subject to significant year-on-
year variations.
Further, we wish to note that the comparison on the basis of P/RNAV ratio would have
been a more relevant and useful benchmark for property development companies rather
than the P/NAV ratio as RNAV would be more reflective of the current market valuations
of the properties and development projects held by the Target Comparable Companies.
However, such RNAV information of the Target Comparable Companies is normally not
publicly available. Hence, the comparison on P/NAV basis has certain limitations and
merely serves as an illustrative guide.
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SGX-ST Target
Comparable Companies
Market capitalisation
as at the Latest
Practicable Date
(S$ million)
Historical PER
(times)
Historical P/NAV
(times)
Oxley Holdings 1,301.8 6.36 1.65
Wing Tai 1,236.9 175.68 0.39
GSH Corp 999.1 61.61 2.82
Tee Land 89.4 12.19 0.56
High 175.68 2.82
Mean 26.72(1) 1.36
Median 12.19(1) 1.11
Low 6.36 0.39
Target Group (implied
by the Consideration)
16.74(2) 19.02(3)
(based on
FY2016 earnings)
(P/NAV as at
30 June 2016)
0.76(4)
(P/RNAV)
0.84(5)
(P/RNAV)
Source: Bloomberg L.P., annual reports and/or announcements of the respective Target Comparable Companies.
Notes:
(1) Being statistical outlier, Wing Tai has been excluded from the computation of the mean and median
historical PER ratios.
(2) Based on the 1 year average exchange rate of S$1:RM2.9739 for the period between 1 July 2015 and
30 June 2016.
(3) Based on the closing exchange rate of S$1:RM2.9865 as at 30 June 2016.
(4) Based on the RNAV of the Target Group of S$506.4 million as at 30 June 2016 as set out in the
Independent Business Valuation.
(5) Based on the 100% equity interest in the Target Group of S$462.0 million as at 30 June 2016 as set out
in the Independent Business Valuation.
Based on the above, as at the Latest Practicable Date, we note that:
(a) The historical PER of the Target Group of 16.74 times as implied by the
Consideration is within the range of historical PERs of the SGX-ST Target
Comparable Companies of between 6.36 times and 175.68 times, and is below the
mean but above the median of the historical PERs of the SGX-ST Target Comparable
Companies of 26.72 times and 12.19 times respectively; and
(b) On the P/NAV basis, the historical P/NAV ratio of the Target Group of 19.02 times as
implied by the Consideration is above the range of historical P/NAV ratios of the
SGX-ST Target Companies of 0.39 times and 2.82 times, and is above the mean and
median of the historical P/NAV ratios of the SGX-ST Target Comparable Companies
of 1.36 times and 1.11 times respectively.
APPENDIX D – LETTER FROM SAC CAPITAL PRIVATE LIMITEDTO THE INDEPENDENT DIRECTORS AND THE AUDIT AND
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However, on the P/RNAV basis, the Target Group is valued at 0.76 times and 0.84
times based on the RNAV of and 100% equity interest in the Target Group as at
30 June 2016 respectively, which is within the range of historical P/NAV ratios of the
SGX-ST Target Companies of 0.39 times and 2.82 times, and below the mean and the
median of the SGX-ST Target Comparable Companies of 1.36 times and 1.11 times
respectively.
Bursa Target
Comparable Companies
Market capitalisation
as at the Latest
Practicable Date
(S$ million)(1)
Historical PER
(times)
Historical P/NAV
(times)
Eco World 1,243.6 25.39 1.00
UOA 1,209.0 8.12 1.08
Mah Sing 1,172.3 9.14 1.14
IGB Corp 1,053.8 15.08 0.74
Eastern & Oriental 575.2 47.37 1.10
Tropicana Corp 459.9 7.63 0.46
Matrix Concepts 451.5 5.13(2) 1.46
MKH 387.9 5.87 0.94
MCT 374.2 15.01 1.58
KSL Holdings 351.7 3.83 0.50
LBS Bina 347.1 11.92 0.93
Kerjaya Prospek 339.5 11.67 1.43
High 47.37 1.58
Mean 9.34(3) 1.03
Median 8.63(3) 1.04
Low 3.83 0.46
Target Group (implied
by the Consideration)
16.74(4) 19.02(5)
(based on
FY2016 earnings)
(P/NAV as at
30 June 2016)
0.76(6)
(P/RNAV)
0.84(7)
(P/RNAV)
Source: Bloomberg L.P., annual reports and/or announcements of the respective Target Comparable Companies.
Notes:
(1) Based on the closing exchange rate of S$1:RM3.1034 as at 16 December 2016.
(2) Matrix Concepts changed its financial year end to 31 March and the full year results for FY2016 comprises
the 15 months period from 1 January 2015 to 31 March 2016.
(3) Being statistical outliers, Eco World and Eastern & Oriental have been excluded from the computation of
the mean and median historical PER ratios.
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(4) Based on the 1 year average exchange rate of S$1:RM2.9739 for the period between 1 July 2015 and
30 June 2016.
(5) Based on the closing exchange rate of S$1:RM2.9865 as at 30 June 2016.
(6) Based on the RNAV of the Target Group of S$506.4 million as at 30 June 2016 as set out in the
Independent Business Valuation.
(7) Based on the 100% equity interest in the Target Group of S$462.0 million as at 30 June 2016 as set out
in the Independent Business Valuation.
Based on the above, as at the Latest Practicable Date, we note that:
(a) The historical PER of the Target Group of 16.74 times as implied by the
Consideration is within the range of historical PERs of the Bursa Target Comparable
Companies of between 3.83 times and 47.37 times, and is above the mean and
median of the historical PERs of the Bursa Target Comparable Companies of 9.34
times and 8.63 times respectively; and
(b) On the P/NAV basis, the historical P/NAV ratio of the Target Group of 19.02 times as
implied by the Consideration is above the range of historical P/NAV ratios of the
Bursa Target Companies of 0.46 times and 1.58 times, and is above the mean and
median of the historical P/NAV ratios of the Bursa Target Comparable Companies of
1.03 times and 1.04 times respectively.
However, on the P/RNAV basis, the Target Group is valued at 0.76 times and 0.84 times
based on the RNAV of and 100% equity interest in the Target Group as at 30 June 2016
respectively, which is within the range of historical P/NAV ratios of the Bursa Target
Companies of 0.46 times and 1.58 times, and below the mean and the median of the Bursa
Target Comparable Companies of 1.03 times and 1.04 times respectively.
7.2.4. Comparison of valuation ratios of selected privatisation/general offers of listed
companies whose businesses are broadly comparable with the Target Group
As the historical P/NAV ratios of the Target Comparable Companies are not comparable
with the P/RNAV of the Target Group as discussed in paragraph 7.2.3 above, we have
made a comparison of the P/RNAV ratios of selected privatisation or general offers of
listed property development companies announced since 1 January 2014 which had been
successfully completed as at the Latest Practicable Date (“RNAV Comparable
Companies”) where P/RNAV information is publicly available. These privatisations were
carried out either by way of voluntary delisting offers under Rules 1307 and 1309 of the
Listing Manual or general take-over offers under the Code, where the offeror has stated
its intentions to delist the target company from the Official List of SGX-ST. P/RNAV ratios
of the RNAV Comparable Companies would be a more meaningful benchmark for
comparison with the P/RNAV of the Target Group as implied by the Consideration.
However, we wish to highlight that the RNAV of and 100% equity interest in the Target
Group which is based on the Independent Business Valuation may be carried out on
different valuation methodologies from the revalued NAVs of the RNAV Comparable
Companies and hence may not be directly comparable.
We wish to highlight that the RNAV Comparable Companies are not exhaustive and they
differ from the Target Group in terms of, inter alia, market capitalisation, size of operations,
clientele base, composition of business activities, asset base, geographical spread and
markets, track record, operating and financial leverage, risk profile, liquidity, accounting
policies, valuation methodology, future prospects and other relevant criteria. In addition,
the circumstances surrounding the RNAV Comparable Companies are from the
APPENDIX D – LETTER FROM SAC CAPITAL PRIVATE LIMITEDTO THE INDEPENDENT DIRECTORS AND THE AUDIT AND
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perspective of the controlling shareholders of the respective companies making an offer to
buy out the remaining shares of the listed company, whereas for the Target Group, it is
from the perspective of the controlling shareholder selling his company to the listed
company. As such, any comparison made is necessarily limited and merely serves as an
illustrative guide.
The following is a summary of the P/RNAV ratios of the RNAV Comparable Companies:
RNAV Comparable Companies Announcement Date
P/RNAV
(times)
Sim Lian Group Limited 8 August 2016 0.782
Indiabulls Properties Investment Trust 27 April 2016 0.180
Eastern Holdings Ltd 22 September 2015 0.825
Keppel Land Limited 23 January 2015 0.666(1)
Forterra Trust 4 November 2014 0.581
Perennial China Retail Trust 27 October 2014 0.886
Lee Kim Tah Holdings Limited 25 September 2014 0.976
Capitamalls Asia Limited 14 April 2014 0.974(2)
Singapore Land Limited 24 February 2014 0.670
High 0.98
Mean 0.73
Median 0.78
Low 0.18
Target Group (implied by the
Consideration)
0.76(3)
(P/RNAV)
0.84(4)
(P/RNAV)
Source: Bloomberg L.P., circulars and/or announcements of the respective RNAV Comparable Companies.
Notes:
(1) Based on the base offer price of S$4.38 and the sum-of-parts value per share of S$6.58 as set out in the
letter from the independent financial adviser of Keppel Land Limited.
(2) Based on the offer price of S$2.22 and the value per share of S$2.28 as set out in the letter from the
independent financial adviser of Capitamalls Asia Limited.
(3) Based on the RNAV of the Target Group of S$506.4 million as at 30 June 2016 as set out in the
Independent Business Valuation.
(4) Based on the 100% equity interest in the Target Group of S$462.0 million as at 30 June 2016 as set out
in the Independent Business Valuation.
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We note that the P/RNAV of the Target Group as implied by the Consideration of 0.76times based on the RNAV of the Target Group as at 30 June 2016, is within the range ofthe P/RNAV of the RNAV Comparable Companies of 0.18 times and 0.98 times, and isabove the mean but below the median of the RNAV Comparable Companies of 0.73 timesand 0.78 times respectively.
We note that the P/RNAV of the Target Group as implied by the Consideration of 0.84times based on the 100% equity interest in the Target Group as at 30 June 2016, is withinthe range of the P/RNAV of the RNAV Comparable Companies of 0.18 times and 0.98times, and is above the mean and median of the RNAV Comparable Companies of 0.73times and 0.78 times respectively.
7.3. Assessment of the Issue Price of the Consideration Shares to be issued for the
Proposed Acquisition
In connection with the Proposed Acquisition, the Consideration shall be satisfied in full bythe allotment and issuance of 1,187,692,308 Consolidated Shares by the Company to theVendors (and/or their designated nominees) on Completion at the Issue Price of S$0.325for each Consolidated Share.
In assessing the Issue Price, we have considered the following:
(a) market quotation and trading activity of the Shares;
(b) NTA per Share of the Group; and
(c) comparison of valuation statistics of selected listed companies which havecompleted reverse takeover transactions.
7.3.1. Market quotation and trading activity of the Shares
The trend of daily closing prices and trading volume of the Shares for the periodcommencing 12 months prior to the Announcement Date and ending on the LatestPracticable Date is set out in the chart below:
Source: Bloomberg L.P.
APPENDIX D – LETTER FROM SAC CAPITAL PRIVATE LIMITEDTO THE INDEPENDENT DIRECTORS AND THE AUDIT AND
RISK COMMITTEE OF VGO CORPORATION LIMITED
D-26
A summary of the salient announcements and key events relating to the Company during
the aforesaid period is set out below:
Date Event
15 July 2015 Announcement on the annual report for the financial year ended
31 March 2015 (“FY2015”) which reported a net loss of S$5.0
million in FY2015 as compared to a net loss (from continuing
operations) of S$0.4 million in FY2014.
29 July 2015 Announcement on receipt of queries regarding the FY2015
annual report from the SGX-ST, to which the Company replied
that, inter alia, the Board had carried out a rigorous review of the
independence status of the Independent Directors and is of the
view that the Mr Wong King Kheng, Mr Anthony Clifford Brown
and Mr Foo Jong Han Rey continue as the Independent
Directors, notwithstanding that their service has been more than
nine years.
12 November 2015 Announcement on the unaudited interim financial results for the
6-month financial period ended 30 September 2015 (“6M2016”)
which reported a net loss attributable to equity holders of the
Company of S$3.1 million in 6M2016 as compared to a net loss
of S$1.6 million in 6M2015.
3 March 2016 Announcement on the notification by SGX-ST that the Company
would be placed on the watch-list due to the Minimum Trading
Price (MTP) Entry Criterion with effect from 3 March 2016.
31 May 2016 Announcement on the unaudited results for the financial year
ended 31 March 2016 (“FY2016”) which reported a net loss
attributable to equity holders of the Company of S$9.3 million in
FY2016 as compared to a net loss of S$5.0 million in FY2015.
6 June 2016 Announcement on, inter alia, the Proposed Acquisition and the
Proposed Disposal.
10 June 2016 Announcements on receipt of queries regarding the unaudited
full year results and the Proposed Acquisition announcements
from the SGX-ST, to which the Company replied that, inter alia,
the Group is able to meet its short-term obligations and provided
further details to the Proposed Acquisition, the Target Group and
the Vendors.
17 June 2016 Announcement on the re-designation of Mr Goh Ching Lai from
Non-Executive Director to Executive Director of the Company.
APPENDIX D – LETTER FROM SAC CAPITAL PRIVATE LIMITEDTO THE INDEPENDENT DIRECTORS AND THE AUDIT AND
RISK COMMITTEE OF VGO CORPORATION LIMITED
D-27
Date Event
14 July 2016 Announcement on the clarifications made on the differences
between the unaudited financial statements and the audited
financial statements for FY2016, which reported an increase in
net loss from operations from S$9.3 million in the unaudited
financial statements to S$9.4 million in the audited financial
statements.
The Company also updated that Ernst & Young LLP (the
“Auditors”), without qualifying their opinion, have included in the
Independent Auditor’s Report an emphasis of matter on the
consolidated financial statements of the Group for FY2016.
17 August 2016 Announcement on receipt of the SGX-ST’s waiver and that the
SGX-ST has no objection to granting the Company a waiver from
Rules 1015(1)(a)(ii) and 1015(4)(a) of the Catalist Rules in
respect of disclosure of pro forma financial information of the
Enlarged Group after the completion of the Proposed
Acquisition, which are subject to certain conditions.
6 September 2016 Announcement on the signing of the Supplemental Agreement to
the SPA to amend and/or vary certain terms and conditions of the
SPA.
4 October 2016 Announcement on the receipt of the waiver from SIC in respect
of the obligation of the Vendors and their concert parties to make
a general offer under Rule 14 of the Code as a result of the
allotment and issuance of the Consideration Shares to the
Vendors and their concert parties under the Proposed
Acquisition, subject to certain conditions.
24 October 2016 Announcement on the incorporation of a wholly owned
subsidiary in Singapore, VGO International Pte Ltd which
business activities are franchising and retailing of lifestyle
sporting goods, footwear, equipment, apparel and accessories.
3 November 2016 Announcement on the unaudited interim financial results for the
6-month financial period ended 30 September 2016 (“6M2017”)
which reported a net loss attributable to equity holders of the
Company of S$0.2 million in 6M2017 as compared to a net loss
of S$3.1 million in 6M2016.
12 December 2016 Announcement on the increase in the capital of VGO
International from S$10 to S$2,000,000 through the issue and
allotment of 1,999,990 ordinary shares of S$1.00 each fully paid
for a total cash consideration of S$1,999,990.
12 December 2016 Announcement on, inter alia, the entering of the Disposal
Agreement and the waiver of the completion of the Proposed
Capital Reduction as a condition precedent in the SPA for the
completion of the Proposed Acquisition.
APPENDIX D – LETTER FROM SAC CAPITAL PRIVATE LIMITEDTO THE INDEPENDENT DIRECTORS AND THE AUDIT AND
RISK COMMITTEE OF VGO CORPORATION LIMITED
D-28
In addition to the share price chart above, information on the volume-weighted average
prices (“VWAP”) for the period commencing 12 months prior to the Announcement Date
and ending on the Latest Practicable Date, and other trading statistics is set out below:
Lowest
closing
price
(S$)
Highest
closing
price
(S$)
VWAP
(S$)
Premium
of Issue
Price
over
VWAP
(%)
Average
daily
trading
volume(1)
(’000)
Average daily
trading
volume as a
percentage of
free float(2)
(%)
Periods prior to Announcement Date
Last 12 months 0.054 0.180 0.074 339.2 6 0.017
Last 6 months 0.054 0.149 0.068 377.9 11 0.031
Last 3 months 0.054 0.149 0.067 385.1 19 0.056
Last 1 month 0.070 0.149 0.087 273.6 19 0.056
23 May 2016
(being the
“Last Market Day”(3)) 0.128 0.128 0.128 153.9 15 0.045
Period after the Announcement and up to the Latest Practicable Date
From 7 June
2016 to Latest
Practicable Date(4) 0.110 0.220 0.196 65.8 23 0.068
Latest
Practicable Date(4) 0.180 0.180 0.180 80.6 10 0.029
Source: Bloomberg L.P.
Notes:
(1) The average daily trading volume of the Shares is calculated based on the total volume of Shares traded
divided by the number of Market Days during the relevant periods.
(2) Free float refers to the Shares other than those held by the Directors, chief executive officer, substantial
Shareholders, or controlling Shareholders and their associates (as defined in the Listing Manual) which
amounted to approximately 34,472,677 Shares as at the Latest Practicable Date.
(3) This refers to 23 May 2016, being the last market day on which the Shares were traded prior to the
Announcement which was released on the SGXNET on 6 June 2016 at 10.30 a.m.. There were no shares
traded from 24 May 2016 to 5 June 2016, where upon which a trading halt was imposed on 6 June 2016
at 8.34 a.m..
(4) As the Shares were not traded on the Latest Practicable Date, this refers to the closing price of the Shares
of S$0.180 on 13 December 2016, being the last market day on which the Shares were traded prior to the
Latest Practicable Date.
APPENDIX D – LETTER FROM SAC CAPITAL PRIVATE LIMITEDTO THE INDEPENDENT DIRECTORS AND THE AUDIT AND
RISK COMMITTEE OF VGO CORPORATION LIMITED
D-29
We note the following with regard to the prices of the Shares:
(a) During the 12-month period prior to the Announcement Date, the closing prices of the
Shares ranged between a low of S$0.054 and a high of S$0.180. The Issue Price
represents a significant premium of S$0.271 (or 501.9%) over the lowest closing
price of the Shares and a significant premium of S$0.145 (or 80.6%) over the highest
closing price of the Shares;
(b) The Issue Price represents a significant premium of 339.2%, 377.9%, 385.1% and
273.6% over the VWAP of the Shares for the 12-, 6-, 3- and one-month periods
respectively, prior to the Announcement Date;
(c) The Issue Price represents a significant premium of 153.9% over the last transacted
price of S$0.128 on 23 May 2016, being the Last Market Day prior to the
Announcement;
(d) The Issue Price represents a premium of 65.8% over the VWAP of the Shares of
S$0.196 for the period after the Announcement and up to the Latest Practicable Date;
and
(e) The Issue Price represents a premium of 80.6% over the closing price of the Shares
of S$0.180 on 13 December 2016, being the last market day on which the Shares
were traded prior to the Latest Practicable Date.
We also note the following with regard to the trading liquidity of the Shares:
(a) The average daily trading volume of the Shares for the 12-, 6-, 3- and one-month
period prior to the Announcement Date represented only 0.017%, 0.031%, 0.056%
and 0.056% of the free float respectively;
(b) During the 12-month period prior to the Announcement Date, the Shares were traded
on 26 Market Days during the period, with an average daily trading volume of
approximately 6,000 Shares, representing 0.017% of the free float; and
(c) During the period after the Announcement and up to the Latest Practicable Date, the
Shares were traded on 50 Market Days during the period, with an average daily
trading volume of approximately 23,000 Shares representing 0.068% of the free float.
Shareholders should note that the market price performance of the Shares may be due to
various market factors, the individual factors of which may not be easily isolated and
identified with certainty. As such, Shareholders should note that past trading performance
of the Shares should not be relied upon as a promise of its future trading performance.
APPENDIX D – LETTER FROM SAC CAPITAL PRIVATE LIMITEDTO THE INDEPENDENT DIRECTORS AND THE AUDIT AND
RISK COMMITTEE OF VGO CORPORATION LIMITED
D-30
7.3.2. The NTA per Share of the Group
The unaudited NTA of the Group as at 30 September 2016 amounted to S$408,000 or NTA
per Share of S$0.0044. Accordingly, the Issue Price of S$0.325 represents a significant
premium of 73.86 times over the unaudited NTA per Share of S$0.0044 as at
30 September 2016.
In addition, if the Proposed Disposal is completed, the Company will effectively en-cash
its existing businesses based on the Disposal Consideration for approximately S$2.3
million (based on the assumptions set out in paragraph 7.4 of this letter). Accordingly, the
Issue Price of S$0.325 will represent a premium of 13.05 times over en-cashed NTA per
Share of S$0.0249.
7.3.3. Comparison of valuation statistics of selected listed companies which have
completed reverse takeover transactions
In our assessment of the reasonableness of the Issue Price, we have also compared the
valuation statistics implied by the Issue Price with those of selected recently completed
RTOs of companies listed on the SGX-ST as announced during the period from 1 January
2013 and up to the Announcement Date and which had been completed as at the Latest
Practicable Date (the “RTO Transactions”).
The following statistics are used for comparison:
(a) the premium/discount represented by the issue price over/to the last transacted price
prior to the announcement of the respective RTO Transactions; and
(b) the premium/discount represented by the issue price over/to the NTA per share of the
respective listed companies.
We wish to highlight that the list of companies involved in the RTO Transactions as set out
in the analysis below are not directly comparable to the Group or the Target Group in terms
of size, market capitalisation, business activities, asset base, geographical spread and
markets, track record, accounting policy, future prospects and other relevant criteria. Each
transaction must be judged on its own commercial and financial merits. In addition, the list
of RTO Transactions is by no means exhaustive and information relating to the RTO
Transactions was compiled from publicly available information. Therefore, any comparison
with the RTO Transactions is for illustrative purpose only and merely serves as a guide to
illustrate the relative premia or discounts for the transactions.
APPENDIX D – LETTER FROM SAC CAPITAL PRIVATE LIMITEDTO THE INDEPENDENT DIRECTORS AND THE AUDIT AND
RISK COMMITTEE OF VGO CORPORATION LIMITED
D-31
Company
Date of
Announcement
Issue Price
(S$)
Premium/
(Discount)
of Issue Price
over/(to) last
transacted price
prior to
announcement
(%)
Issue price
over NTA
per share
(times)
R H Energy Ltd.
(currently known
as Chiwayland
International Limited)
25 January 2013 0.690 60.8 1.70(1)
Pteris Global Limited 6 February 2013 0.650 (15.5) (2) 0.78(3)
NH Ceramics Ltd
(currently known as
BlackGold Natural
Resources Limited)
28 March 2013 0.295 20.4 1.49(4)
W Corporation Limited
(currently known
as YuuZoo
Corporation Limited)
15 April 2013 1.000 23.5(5) 208.33(6)
Scorpio East Holdings
Ltd (currently known as
KOP Limited)
26 August 2013 0.210 15.4 1.12(7)
Hisaka Holdings Ltd
(currently known as
Regal International
Group Limited)
24 July 2013 0.825 (5.17) (8) 1.11(9)
HanKore Environment
Tech Group Limited
(currently known as
China Everbright Water
Limited)
30 December
2013
0.625 (21.9) 1.42(10)
St James Holdings Ltd
(currently known as
Perennial Real Estate
Holdings Limited)
14 March 2014 0.027 (50.6) 9.54(11)
E2-Capital Holdings
Limited (currently known
as Astaka Holdings
Limited)
17 September
2014
0.268 25.8 4.49(12)
Brooke Asia Limited
(currently known as
China Star Food Group
Limited)
5 November
2014
0.200 37.0 2.56(13)
APPENDIX D – LETTER FROM SAC CAPITAL PRIVATE LIMITEDTO THE INDEPENDENT DIRECTORS AND THE AUDIT AND
RISK COMMITTEE OF VGO CORPORATION LIMITED
D-32
Company
Date of
Announcement
Issue Price
(S$)
Premium/
(Discount)
of Issue Price
over/(to) last
transacted price
prior to
announcement
(%)
Issue price
over NTA
per share
(times)
High 60.8 208.33
Mean 9.0 2.69(14)
Median 17.9 1.49(14)
Low (50.6) 0.78
The Company 6 June 2016 0.325 153.9 73.86(15)
13.06(16)
Source: Bloomberg L.P., circulars and/or announcements of the respective companies and/or SAC Capital’s
computations.
Notes:
(1) Based on the issue price of S$0.23 on a pre-share consolidation basis and the adjusted NTA per share of
S$0.135 as at 31 March 2014.
(2) Based on the effective issue price of S$0.104 on a pre-share consolidation basis (computed based on the
aggregate purchase consideration of S$137.6 million and the issuance of an aggregate of 1,322,901,005
new shares under the Base Scenario as set out in the letter from the independent financial adviser of Pteris
Global Limited) and the last transacted price of S$0.123 prior to the announcement of the signing of a
memorandum of understanding relating to the proposed acquisition of the entire issued share capital of
Shenzhen CIMC-Tianda Airport Support Ltd. on 6 February 2013.
(3) Based on the effective share price of S$0.104 on a pre-share consolidation basis and the revalued NTA
of Pteris Global Limited as at 31 March 2014.
(4) Based on the issue price of S$0.059 on a pre-share consolidation basis and the NTA per share of
S$0.0396 as at 30 September 2014.
(5) Based on the issue price of S$0.10 on a pre-share consolidation basis and the last transacted price of
S$0.081 prior to the announcement of the signing of the shares and options exchange agreement relating
to the acquisition of the entire issued and paid-up share capital of YuuZoo Corporation on 15 April 2013.
(6) Based on the issue price of S$0.10 on a pre-share consolidation basis and the unaudited NTA per share
of US$0.000379 (or S$0.00048 based on the closing exchange rate of S$1:US$1.2575 on 31 March 2014).
(7) Based on the issue price on a pre-share consolidation basis of S$0.105 and taking into consideration the
revalued NTA of Scorpio East Holdings Ltd as at 31 October 2013.
(8) Based on the issue price on a pre-share consolidation basis of S$0.275 and the last transacted price of
S$0.290 prior to the announcement of the signing of a memorandum of understanding relating to the
proposed acquisition of the entire issued share capital of Regal Capital Sdn Bhd on 24 July 2013.
(9) Based on the issue price on a pre-share consolidation basis of S$0.275 and the unaudited NTA of Hisaka
Group as at 30 June 2014.
(10) Based on the effective issue price of S$0.625 and the audited NTA of HanKore Environment Tech Group
Limited as at 30 June 2014.
(11) Based on the unaudited NTA per share of St James Holdings Ltd as at 30 June 2014.
(12) Based on the issue price on a pre-share consolidation basis of S$0.0893 and the unaudited NTA of
E2-Capital Holdings Limited as at 31 August 2015.
APPENDIX D – LETTER FROM SAC CAPITAL PRIVATE LIMITEDTO THE INDEPENDENT DIRECTORS AND THE AUDIT AND
RISK COMMITTEE OF VGO CORPORATION LIMITED
D-33
(13) Based on the unaudited NTA of Brooke Asia Limited as at 31 May 2015.
(14) Being statistical outlier, W Corporation Limited had been excluded from the computation of the mean and
median Issue Price over NTA per Share ratios.
(15) Based on the Issue Price and the Group’s unaudited NTA as at 30 September 2016.
(16) Based on the Issue Price and the en-cashed NTA per Share of S$0.0249 as set out in paragraph 7.3.2 of
this letter.
Based on the above, we note that:
(a) the premium implied by the Issue Price to the last transacted price prior to the
Announcement Date of 153.9% is above the range of the premia/discounts of the
RTO Transactions of between a discount of 50.6% and a premium of 60.8%, and is
above the mean and median statistics of the RTO Transactions of 9.0% and 17.9%
respectively; and
(b) the Issue Price over NTA per Share ratio of 73.86 times based on the NTA per Share
of S$0.0044 as at 30 September 2016, is within the range of Issue Price over NTA
per Share ratios of the RTO Transactions of between 0.78 times and 208.33 times,
and is above the mean and median statistics of the RTO Transactions of 2.69 times
and 1.49 times respectively. In addition, the Issue Price over the en-cashed NTA per
Share ratio of 13.06 times based on the en-cashed NTA per Share of S$0.0249, is
within the range of Issue Price over NTA per Share ratios of the RTO Transactions of
between 0.78 times and 208.33 times, and is above the mean and median statistics
of the RTO Transactions of 2.69 times and 1.49 times respectively.
7.4. Assessment of the Disposal Consideration for the Proposed Disposal
In assessing the Disposal Consideration for the Proposed Disposal, we have considered
the following:
(a) the historical financial performance and condition of the Group;
(b) the valuation of the land and building asset of the Group;
(c) the Revalued NTA of the Group; and
(d) the comparison of valuation ratios of selected listed companies whose businesses
are broadly comparable with those of the Group.
Based on the definition of the Disposal Consideration as set out in paragraph 6.1 of this
letter and for the purposes of our analysis in this letter, we have assumed the Disposal
Consideration to amount to approximately S$2.3 million, comprising the Initial NTA of the
Disposal Companies amounting to S$1.5 million as provided by the Management, the
Property Revaluation Surplus as set out in paragraph 7.4.3 of this letter amounting to
S$280,000, and the Non-Operational Liabilities amounting to S$550,000.
APPENDIX D – LETTER FROM SAC CAPITAL PRIVATE LIMITEDTO THE INDEPENDENT DIRECTORS AND THE AUDIT AND
RISK COMMITTEE OF VGO CORPORATION LIMITED
D-34
7.4.1. Historical financial performance and condition of the Group
The salient historical financial information of the Group for the financial years ended
31 March 2014, 2015 and 2016 (“FY2014”, “FY2015” and “FY2016” respectively), and
the 6-month financial periods ended 30 September 2015 and 2016 (“6M2016” and
“6M2017” respectively) is set out below:
Consolidated
Statement of
Comprehensive
Income Audited Unaudited
(S$’000) FY2014(1) FY2015 FY2016 6M2016 6M2017
Revenue 78,287 70,670 57,732 29,032 22,074
Gross profit 44,475 37,063 27,424 15,390 12,747
Loss before income tax (173)(2) (4,891) (9,273) (3,083) (244)
Net loss for the year
attributable to owners
of the Company
(413)(2) (4,981) (9,430) (3,053) (244)
Balance Sheet
Audited Unaudited
As at 31 March 30 September
(S$’000) 2014 2015 2016 2016
Current assets 34,886 36,202 23,502 22,159
Current liabilities 23,353 29,636 24,311 23,441
Working capital 11,533 6,566 (809) (1,282)
Non-current assets 5,539 5,230 2,775 2,347
Non-current liabilities 1,023 846 771 657
Equity attributable to
owners of the Company
16,049 10,950 1,195 408
APPENDIX D – LETTER FROM SAC CAPITAL PRIVATE LIMITEDTO THE INDEPENDENT DIRECTORS AND THE AUDIT AND
RISK COMMITTEE OF VGO CORPORATION LIMITED
D-35
Consolidated
Statement of
Cash Flow Audited Unaudited
(S$’000) FY2014(1) FY2015 FY2016 6M2016 6M2017
Net cash flows
generated from/(used
in) operating activities
(710) (1,090) 6,734 2,717 530
Net cash flows used in
investing activities
(3,321) (1,657) (518) (387) (98)
Net cash flows
generated from/(used
in) financing activities
540 2,134 (4,697) (3,085) (1,653)
Net increase/(decrease)
in cash and cash
equivalents
(3,491) (613) 1,519 (755) (1,221)
Cash and cash
equivalents at end of
financial year/period
(790) (1,375) 218 (417) (656)
Source: Annual reports of the Company for FY2014, FY2015, FY2016 and announcement of the unaudited
financial statements for 6M2017.
Notes:
(1) The Group had on 5 November 2013, announced the change of its financial year end from 31 December
to 31 March. The full year results for FY2014 comprises the 15 months period from 1 January 2013 to
31 March 2014.
(2) Excludes profit from discontinued operations, net of tax. Taking into account profit from discontinued
operations, net profit for the year attributable to owners of the Company amounted to S$0.7 million in
FY2014.
We note the following:
(a) Revenue. The Group’s revenue decreased from S$78.3 million in FY2014 (for the
15-month period from 1 January 2013 to 31 March 2014) to S$70.7 million in FY2015
(for the 12-month period from 1 April 2014 to 31 March 2015). The decrease in
revenue was mainly due to the inclusion of the 3 months’ revenue from 1 January
2013 to 31 March 2014 in FY2014, partially offset by the increase of sales attributable
to the opening of new outlets and new wholesale customers in FY2015. Revenue
decreased by S$12.9 million from S$70.6 million in FY2015 to S$57.7 million in
FY2016, mainly due to the closure of under-performing fashion outlets and some
sports outlets in FY2016. The Group’s revenue decreased from S$29.0 million in
6M2016 to S$22.0 million in 6M2017, mainly due to the closure of outlets in both
Singapore and Malaysia.
(b) Gross profit and net loss after tax. The Group’s gross profit decreased by S$7.4
million from S$44.5 million in FY2014 to S$37.1 million in FY2015, due to higher
promotional discount, markdown given on the past seasons’ merchandise and early
settlement discount given to wholesale dealers in WOS. The Group recorded a net
loss after tax of S$0.4 million in FY2014 and a net loss after tax of S$5.0 million in
FY2015, mainly attributable to the lower gross profit recorded in FY2015, partially
offset by the decrease in distribution costs of S$2.9 million and administrative and
general expenses of S$0.7 million. Gross profit decreased from S$37.1 million in
APPENDIX D – LETTER FROM SAC CAPITAL PRIVATE LIMITEDTO THE INDEPENDENT DIRECTORS AND THE AUDIT AND
RISK COMMITTEE OF VGO CORPORATION LIMITED
D-36
FY2015 to S$27.4 million in FY2016, mainly due to (i) higher promotional discounts
and markdowns given on past seasons merchandise and early settlement discount
given to dealers of its wholesale business in WOS, and (ii) the provision of stock
obsolescence of S$3.1 million in FY2016. Net loss after tax increased from S$5.0
million in FY2015 to S$9.4 million in FY2016, mainly attributable to the lower gross
profit recorded in FY2016, partially offset by the increase in other income of S$0.5
million due to the increase in membership fee income and the decreased in
distribution costs of S$5.1 million due to the closure of under-performing outlets in
FY2016.
The Group’s gross profit decreased by 17.2% from S$15.4 million in 6M2016 to
S$12.7 million in 6M2017, mainly due to the decrease in the cost of sales attributable
to the write-back of provision for stock obsolescence of S$1.06 million in 6M2017.
Net loss after tax decreased from S$3.1 million in 6M2016 to S$0.2 million in
6M2017, mainly attributable to (i) the decrease in distribution cost of S$4.3 million
due to a decrease in rental expenses and overhead costs from closure of outlets in
6M2017 and (ii) the decrease in administrative and general expenses of S$0.5 million
due to lower staff costs from reduction in headcount in the headquarter and office
divisions in 6M2017.
(c) Working capital. The Group’s positive working capital decreased by S$4.9 million
from S$11.5 million as at 31 March 2014 to S$6.6 million as at 31 March 2015, mainly
due to (i) the increase in amounts due to related parties of S$3.8 million that was
largely attributable to the purchase of inventory and (ii) the increase in bills payable
of S$2.7 million due to the purchase of inventories from overseas suppliers. As at
31 March 2016, the Group recorded negative working capital of S$0.8 million, as
compared to the positive working capital of S$6.6 million as at 31 March 2015, mainly
attributable to the decrease in inventories by S$10.7 million mainly due to more
clearance sales of old stocks in Singapore and Malaysia and the provision of stock
obsolescence of S$3.1 million in FY2016, partially offset by the decrease in bills
payable of S$4.8 million due to repayment.
As at 30 September 2016, the Group’s negative working capital increased to S$1.3
million mainly attributable to (i) the decrease in inventories of S$1.0 million due to
reduction in stock purchase, (ii) the increase in trade payables of S$0.3 million and
(ii) the increase in amounts due to directors of S$0.2 million due to additional loans
received, partially offset by the decrease in bills payable and bank borrowings of
S$1.9 million due to repayment.
(d) Equity attributable to owners of the Company. Equity attributable to owners of the
Company had generally been decreasing from S$16.0 million as at 31 March 2014 to
S$0.4 million as at 30 September 2016 mainly due to losses incurred over the years.
(e) Operating cash flows. The Group recorded an increase in the cash flows used in
operating activities from S$0.7 million in FY2014 to S$1.1 million in FY2015 due to
the increase in inventories and decrease in balances with related parties in FY2015.
The Group recorded net cash flows generated from operating activities of S$6.7
million in FY2016, as compared to net cash flows used in operating activities of S$1.1
million in FY2015, mainly attributable to the decrease in inventories and increase in
amount due to directors in FY2016. The Group recorded net cash flows generated
APPENDIX D – LETTER FROM SAC CAPITAL PRIVATE LIMITEDTO THE INDEPENDENT DIRECTORS AND THE AUDIT AND
RISK COMMITTEE OF VGO CORPORATION LIMITED
D-37
from operating activities of S$2.7 million and S$0.5 million in 6M2016 and 6M2017
respectively, mainly attributable to the increase in inventories and increase in
balances with related parties in 6M2017.
(f) Cash and cash equivalents. Taking into account of bank overdrafts and fixed
deposits which are pledged to the banking facilities granted, the Group recorded
cash and cash equivalent of negative S$0.8 million, negative S$1.4 million, S$0.2
million and negative S$0.7 million as at the end of FY2014, FY2015, FY2016 and
6M2017 respectively.
We note the following statement in the annual report for FY2016, whereby Ernst & Young
LLP has highlighted an emphasis of matter:
“The Group and the Company incurred net losses of $9.4 million and $7.3 million
respectively during the financial year ended 31 March 2016 and as at that date, the Group
and the Company have net current liabilities of $0.8 million and $1.2 million respectively.
These conditions indicate the existence of a material uncertainty that may cast significant
doubt about the Group’s and the Company’s ability to continue as a going concern.... the
directors are of the view that it remains appropriate to prepare these financial statements
on a going concern basis on the assumption that the Group and the Company expect to
generate sufficient cash flows from operations to meet their obligations as and when they
fall due. In addition, the Group and the Company have obtained confirmation from the
banks that they will not withdraw their support to the Group and the Company. The Group
and the Company have also obtained an undertaking from the controlling shareholders to
not demand repayment of existing loans extended to the Group and the Company as well
as to provide continuing financial support to the Group and the Company to meet their
obligations as and when they fall due. Our opinion is not qualified in respect of this matter.”
We also note that the following statement on the significant trends and competitive
conditions of the industry that the Group operates for the next 12 months was made in its
unaudited 6M2017 financial results announcement on 3 November 2016:
“The retail industry remains competitive and challenging. Nevertheless, the Group will
continue to focus on its core business, improving operational efficiency and cost
management measures in order to stay competitive in the market.”
7.4.2. Valuation of the land and building asset of the Group
In connection with the Proposed Disposal, the Company had commissioned Nawawi Tie
Leung Property Consultants Sdn. Bhd. (“NTL”) to carry out an asset valuation on the land
and building (“WOS Property”) held by the Group.
NTL’s valuation of the WOS Property as at 21 October 2016 is set out in its report dated
25 October 2016. Please refer to the summary valuation report as set out in Appendix L
to the Circular.
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RISK COMMITTEE OF VGO CORPORATION LIMITED
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Valuation Methodology
In arriving at the market value of the WOS Property, NTL had “adopted the Comparison
Method of Valuation. The Comparison Method is a common method adopted in valuation
for a semi-detached factory. Other methods such as Income Method is still an alternative
method in assessing such property. However, the subject property is owner occupied
which do not generate any income. As a result, we are of the view that it is not suitable to
adopt the income method in this valuation. The Comparison Method of Valuation seeks to
determine the Market Value of the subject property by comparing and adopting, as a
yardstick, recent recorded transactions of comparable properties in the locality. Due
consideration is also given for factors such as location; accessibility; size; building
condition; time element and design etc. The characteristics, merits and demerits of these
properties are noted and appropriate adjustments thereof are then made to arrive at the
capital value of the subject property.”
In arriving at the market value, NTL had considered 3 comparable transactions that are
located within the nearby vicinity that were transacted within 2 years from the date of
valuation. After relevant adjustments for differences in location, accessibility, size, building
condition, time element and design, NTL is of the opinion that the market value of the WOS
Property, in its existing condition, free from all encumbrances and with the benefit of
vacant possession is RM4 million.
7.4.3. Revalued NTA of the Group
As discussed in paragraph 7.4 of this letter, the Disposal Consideration for the Proposed
Disposal is assumed to be approximately S$2.3 million. This was arrived at after taking
into account, inter alia, the Initial NTA of the Disposal Companies of S$1.5 million as at
31 March 2016 as provided by Management, adjusted for the Property Revaluation
Surplus and the Non-Operational Liabilities. The revalued NTA (“Revalued NTA”) of the
Group as at 31 March 2016 and 30 September 2016 is derived as follows:
31 March
2016
30 September
2016
S$’000 S$’000
Audited/unaudited NTA of the Group 1,195 408
Add: Property Revaluation Surplus(1) 280 280
Revalued NTA of the Group 1,475 688
Premium of Disposal Consideration to the
Revalued NTA 55.9% 132.6(2)%
Notes:
(1) The Property Revaluation Surplus is calculated based on the aggregate net carrying amount of the
freehold land and the freehold building which amounted to S$1.1 million as disclosed in the FY2016 annual
report, and the independent valuation carried out on the Group’s land and building assigning a market
value of RM4 million as at 21 October 2016 (or S$1.3 million based on the closing exchange rate of
S$1:RM3.0031 on 21 October 2016).
(2) Based on the adjusted Disposal Consideration of approximately S$1.6 million, comprising the latest
available unaudited NTA of the Disposal Companies as at 30 September 2016 amounting to S$0.8 million
as provided by Management, the Property Revaluation Surplus and the Non-Operational Liabilities.
APPENDIX D – LETTER FROM SAC CAPITAL PRIVATE LIMITEDTO THE INDEPENDENT DIRECTORS AND THE AUDIT AND
RISK COMMITTEE OF VGO CORPORATION LIMITED
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Based on the Revalued NTA of the Group of S$1.5 million as at 31 March 2016, the
Disposal Consideration of S$2.3 million represents a premium of 55.9% to the Revalued
NTA of the Group as at 31 March 2016.
Based on the Revalued NTA of the Group of S$0.7 million as at 30 September 2016, the
adjusted Disposal Consideration of S$1.6 million represents a premium of 132.6% to the
Revalued NTA of the Group as at 30 September 2016.
7.4.4. Comparison of valuation ratios of selected listed companies whose businesses are
broadly comparable with those of the Group
For the purpose of assessing the Disposal Consideration, we have considered companies
whose businesses are broadly comparable with the Group. As the Company has
substantial business in carrying out the retail and distribution of fashion and/or sporting
goods, apparel, equipment, footwear and/or accessories, we have considered companies
with similar involvement, which can be considered as broad proxies to the Group and
which are listed and traded on the SGX-ST and the Bursa to give an indication of the
current market valuation of these businesses.
Based on the above selection criteria, we have a listing of 8 comparable companies
(collectively, the “Disposal Comparable Companies”):
(a) Isetan Singapore Limited (“Isetan”) / Singapore
(b) Ossia International Limited (“Ossia”) / Singapore
(c) FJ Benjamin Holdings Ltd (“FJ Benjamin”) / Singapore
(d) Bonia Corporation Berhad (“Bonia”) / Malaysia
(e) Voir Holdings Berhad (“Voir”) / Malaysia
(f) Asia Brands Berhad (“Asia Brands”) / Malaysia
(g) Cheetah Holdings Berhad (“Cheetah”) / Malaysia
(h) Jerasia Capital Berhad (“Jerasia”) / Malaysia
Details on the Disposal Comparable Companies, including their business descriptions and
selected key financials are set out in the Annex 1 to this letter.
We have had discussions with the Company about the suitability and reasonableness of
the Disposal Comparable Companies as a basis for comparison with the Group. Relevant
information has been extracted from Bloomberg L.P., publicly available annual reports
and/or public announcements of the Disposal Comparable Companies. We make no
representations or warranties, expressed or implied, as to the accuracy or completeness
of such information. The selected Disposal Comparable Companies’ accounting policies
with respect to the values for which the assets or the revenue and cost are recorded may
differ from that of the Group.
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RISK COMMITTEE OF VGO CORPORATION LIMITED
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We wish to highlight that the Disposal Comparable Companies are not exhaustive and
they differ from the Group in terms of, inter alia, market capitalisation, size of operations,
clientele base, composition of business activities, asset base, geographical spread, track
record, operating and financial leverage, risk profile, liquidity, accounting policies, future
prospects and other relevant criteria. As such, any comparison made is necessarily limited
and merely serves as an illustrative guide.
In assessing the Disposal Consideration, we have used the following valuation parameters
in our analysis:
Valuation parameter Description
Price-earnings ratio
(“PER”)
The historical PER, which illustrates the ratio of the market
price of a company’s shares relative to its historical
consolidated earnings per share, is commonly used for the
purpose of illustrating the profitability, and hence valuation of
a company.
We have considered the historical PERs of the Disposal
Comparable Companies based on their respective last
transacted prices on the Latest Practicable Date and the
latest full-year net earnings per share vis-à-vis the
corresponding historical PER of the Group based on the
Disposal Consideration and the latest full-year net earnings of
the Group.
Price-to-NTA ratio
(“P/NTA”)
An NTA-based approach is useful to illustrate the extent that
the value of each share is backed by tangible assets, and
would be more relevant in the case where the group were to
change the nature of its business or realise or convert the use
of all or most of its assets. The NTA-based valuation approach
may provide an estimate of the value of a company or group
assuming the hypothetical sale of all its assets over a
reasonable period of time at the aggregate value of the assets
used in the computation of the NTA, with the balance to be
distributed to its Shareholders after the settlement of all the
liabilities and obligations of the company or group.
We have considered the historical price-to-NTA ratios of the
Disposal Comparable Companies based on their respective
last transacted prices on the Latest Practicable Date and
latest available NTA per share vis-à-vis the corresponding
price-to-NTA ratio of the Group based on the Disposal
Consideration and the latest available NTA per Share of the
Group.
APPENDIX D – LETTER FROM SAC CAPITAL PRIVATE LIMITEDTO THE INDEPENDENT DIRECTORS AND THE AUDIT AND
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Valuation parameter Description
Enterprise value to
EBITDA (“EV/EBITDA”)
ratio
The historical EV/EBITDA ratio illustrates the ratio of the
market value of a company’s business relative to its historical
consolidated pre-tax operating cash flow performance,
without regard to its capital structure, and provides an
indication of current market valuation relative to operating
performance. “EV” is the sum of a company’s market
capitalisation, preferred equity, minority interests, short-and
long-term debts less cash and cash equivalents, and
represents the actual cost to acquire the entire company.
“EBITDA” refers to historical consolidated earnings before
interest, tax, depreciation and amortisation expenses.
EBITDA can be used to analyse the profitability between
companies as it eliminates the effects of financing and
accounting decisions.
We have considered the historical EV/EBITDA ratios of the
Disposal Comparable Companies based on their respective
last transacted prices on the Latest Practicable Date, latest
available balance sheet values and latest full-year EBITDA
vis-à-vis the corresponding historical EV/EBITDA ratio of the
Group based on the Disposal Consideration, latest available
balance sheet values and latest full-year EBITDA.
The following table sets out the comparative valuation statistics of the Disposal
Comparable Companies vis-à-vis the Group as implied by the Disposal Consideration:
Disposal Comparable
Companies
Historical PER
(times)(1)
Historical
Price-to-NTA
(times)
Historical
EV/EBITDA
(times)(1)
Isetan n.m. 0.94 n.m.
Ossia n.m. 1.33 n.m.
FJ Benjamin n.m. 0.55 n.m.
Bonia 18.98 1.44 6.86
Voir n.m. 1.06 20.46
Asia Brands n.m. 12.80 n.m.
Cheetah 23.56 0.42 4.34
Jerasia 6.23 0.39 5.19
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Disposal Comparable
Companies
Historical PER
(times)(1)
Historical
Price-to-NTA
(times)
Historical
EV/EBITDA
(times)(1)
High 23.56 12.80 20.46
Mean 16.26 0.88(2) 5.46(3)
Median 18.98 0.94(2) 5.19(3)
Low 6.23 0.39 4.34
Group (implied by
Disposal Consideration)
n.m.(1) 5.64 n.m.(1)
1.56(4)
(P/Revalued NTA)
2.31(5)
(P/Revalued NTA)
Source: Bloomberg L.P., annual reports and/or announcements of the respective Disposal Comparable
Companies.
Notes:
(1) n.m. denotes not meaningful as these Disposal Comparable Companies were loss-making or reported
losses before interest, tax, depreciation and amortisation in their respective latest full-year earnings.
(2) Being statistical outlier, Asia Brands has been excluded from the computation of the mean and median
historical price-to-NTA ratios.
(3) Being statistical outlier, Voir has been excluded from the computation of the mean and median historical
EV/EBITDA ratios.
(4) Based on the Revalued NTA of the Group as at 31 March 2016 as set out in paragraph 7.4.3 of this letter.
(5) Based on the adjusted Disposal Consideration and the Revalued NTA of the Group as at 30 September
2016 as set out in paragraph 7.4.3 of this letter.
Based on the above, comparing the valuation ratios of the Disposal Comparable
Companies with the valuation ratios for the Group as at the Latest Practicable Date, we
note that:
(a) the PER and EV/EBITDA statistics could not be meaningfully compared as the Group
was loss-making and recorded negative EBITDA for FY2016; and
(b) the P/NTA ratio of the Group as implied by the Disposal Consideration of 5.64 times
is within the range of historical P/NTA ratios of the Disposal Comparable Companies
of 0.39 times and 12.80 times, and is above the mean and median of the historical
P/NTA ratios of the Disposal Comparable Companies of 0.88 times and 0.94 times
respectively.
On the P/Revalued NTA basis, the P/Revalued NTA ratio of the Group as implied by
the Disposal Consideration and the adjusted Disposal Consideration of 1.56 times
and 2.31 times based on the Revalued NTA of the Group of S$1.5 million and S$0.7
million as at 31 March 2016 and 30 September 2016 respectively, is within the range
APPENDIX D – LETTER FROM SAC CAPITAL PRIVATE LIMITEDTO THE INDEPENDENT DIRECTORS AND THE AUDIT AND
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of historical P/NTA ratios of the Disposal Comparable Companies of 0.39 times and
12.80 times, and is above the mean and median of the historical P/NTA ratios of the
Disposal Comparable Companies of 0.88 times and 0.94 times respectively.
7.5. Other Relevant Considerations
7.5.1. Potential entry into the watch-list under the Financial Entry Criteria
With effect from 2 December 2016, an issuer will be placed on the watch-list of the
SGX-ST, under either of the following:
(a) if it records pre-tax losses for the three (3) most recently completed consecutive
financial years (based on audited full year consolidated accounts); and an average
daily market capitalisation of less than S$40 million over the last six (6) months (the
“Financial Entry Criteria”); or
(b) if it records a volume weighted average price of less than S$0.20 and an average
daily market capitalisation of less than S$40 million over the last six (6) months (the
“MTP Entry Criterion”).
As announced on 3 March 2016, the Company had been included on the SGX-ST
watch-list due to the MTP Entry Criterion.
As detailed in paragraph 7.4.1 of this letter, we noted that the Group had recorded
consecutive pre-tax losses for the last two completed financial years ended 31 March
2015 and 31 March 2016 (taking into account of profit from discontinued operations, the
Group recorded profit for the year for FY2014), and for the 6-month financial period ended
30 September 2016. In addition, as set out in section 5.2.1 of the VGO Letter, the
Company’s average daily market capitalisation over the last six (6) months preceding the
Latest Practicable Date has been approximately S$18.5 million.
Based on the forgoing, the Company may potentially be placed on the watch-list of the
SGX-ST under the Financial Entry Criteria, and if so, the Company will be expected to
undertake substantive corporate actions (including, without limitation, restructuring and
business acquisitions) to meet the requirements of Rule 1314 of the Listing Manual for the
Company to be removed from the watch-list due to both the MTP Entry Criterion and the
Financial Entry Criteria.
7.5.2. Inter-conditionality of the Proposed Acquisition, the Proposed Whitewash
Resolution and the Proposed Disposal
As set out in section 1.3 of the VGO Letter, we note that the Key Resolutions (as defined
in the Circular) are inter-conditional.
Accordingly, if the Proposed Whitewash Resolution is not passed, the Proposed
Acquisition will not take place. Similarly, if the Proposed Disposal Resolution is not
passed, the Proposed Acquisition will not take place.
APPENDIX D – LETTER FROM SAC CAPITAL PRIVATE LIMITEDTO THE INDEPENDENT DIRECTORS AND THE AUDIT AND
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7.5.3. Financial Effects of the Proposed Acquisition, the Proposed Disposal, the Proposed
Capital Reduction and the Proposed Compliance Placement
The proforma financial effects of the Proposed Acquisition, the Proposed Disposal, the
Proposed Capital Reduction and the Proposed Compliance Placement on the Group have
been set out in section 15 of the VGO Letter for illustration purposes only and should not
be construed to mean that the actual results, performance or achievements of the Group
will be as expected, expressed or implied in such financial effects.
For illustration purposes, the proforma financial effects of the Proposed Acquisition, the
Proposed Disposal, the Proposed Capital Reduction and the Proposed Compliance
Placement have been prepared based on the audited consolidated financial statements of
the Group for the financial year ended 31 March 2016 and the audited combined financial
statements of the Target Group for the financial year ended 30 June 2016, without any
adjustment to align the financial year-end of the Company with that of the Target Group.
The financial year-end of the Company is 31 March while the financial year-end of the
Target Group is 30 June. It is intended that after Completion, the financial year-end of the
Company will be changed to 30 June.
Shareholders are advised to read the information set out in section 15 of the VGO Letter
carefully, including the bases and assumptions set out therein.
We note the following:
(a) the issued and paid-up share capital of the Group would increase from S$27.9 million
as at 31 March 2016 to S$426.0 million after the Proposed Acquisition, the Proposed
Disposal, the Proposed Capital Reduction and the Proposed Compliance Placement;
(b) the NTA per Share of the Group would increase from 1.29 cents as at 31 March 2016
to 4.31 cents after the Proposed Acquisition, the Proposed Disposal, the Proposed
Capital Reduction and the Proposed Compliance Placement;
(c) the earnings per Share of the Group would improve from loss per Share of 10.21
cents for FY2016 to earnings per Share of 1.68 cents after the Proposed Acquisition,
the Proposed Disposal, the Proposed Capital Reduction and the Proposed
Compliance Placement; and
(d) the net gearing ratio of the Group would improve from 6.7 times as at 31 March 2016
to 0.3 times after the Proposed Acquisition, the Proposed Disposal, the Proposed
Capital Reduction and the Proposed Compliance Placement.
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7.5.4. Dilution impact arising from the Proposed Acquisition and the Proposed
Compliance Placement on the Independent Shareholders
The shareholding interests structure of the Company before and after the Proposed
Acquisition and the Proposed Compliance Placement are set out in Appendix B to the
Circular:
We note the following:
(a) Upon Completion of the Proposed Acquisition, the Vendors (and/or their designated
nominees) and their concert parties will hold approximately 92.8% of the Shares of
the Enlarged Share Capital.
(b) After the Proposed Acquisition and the Proposed Compliance Placement, the
Vendors (and/or their designated nominees) and their concert parties will have its
shareholding diluted slightly to 81.1% of the enlarged issued shares.
Under all the above scenarios, the Vendors (and/or their designated nominees) and their
concert parties will have majority shareholding control of the Company. Existing public
Shareholders will have their shareholding interests diluted substantially from 37.3% to
approximately 2.7% as a result of the RTO but before the Proposed Compliance
Placement, and to approximately 2.5% after the Proposed Compliance Placement.
Having regard to the controlling stake in the Company held by the Vendors (and/or their
designated nominees) and their concert parties after Completion, the Company may be in
a relatively less favourable position in the context of interest from potential parties seeking
control of the Company or who may have intentions to acquire a significant or controlling
interest in the Company.
7.5.5. Implications of the Proposed Whitewash Resolution
The Independent Shareholders should note that:
(a) by voting in favour of the Proposed Whitewash Resolution, they will be waiving their
rights to receive a general offer for all of their Shares from the Vendors at the highest
price paid by the Target Obliged Parties for the Shares in the past six (6) months
preceding the commencement of the offer; and
(b) the issue of the Consideration Shares will result in the Target Obliged Parties holding
Shares carrying over 49.0% of the voting rights of the Company, and the Target
Obliged Parties will be free to acquire further Shares without incurring any obligation
under Rule 14 of the Code to make a general offer.
7.5.6. Disposal Consideration being entirely in cash
The Disposal Consideration is to be fully satisfied in cash. This is beneficial to the
Company as it could utilise the cash resources for its future requirements. As disclosed in
section 6.5 of the VGO Letter, the Company intends to utilise the net proceeds arising from
the Proposed Disposal for working capital requirements.
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7.5.7. Risk factors relating to the Target Group
Upon completion of the Proposed Acquisition, the risk factors relating to the Target Group
will also be relevant to the Enlarged Group. Such risk factors will include those relating to
the Target Group’s business, operations and industry (as set out in Section 27 of the
Target Letter), and Shareholders are advised to read the information carefully.
7.5.8. Moratorium on the Consideration Shares
Upon Completion, the Vendors are entitled to receive 1,187,692,308 Consideration
Shares in accordance with the terms of the SPA and the Vendors intend to renounce the
1,187,692,308 Consideration Shares in favour of Hatten Holdings Pte. Ltd., which is a
Singapore incorporated company jointly owned by the Vendors.
To demonstrate their commitment to the Company following the completion of the RTO
exercise, Hatten Holdings Pte. Ltd. and the Vendors have given their respective
undertakings to moratorise all of their holdings of the Consideration Shares respectively
for a period of six (6) months commencing from the date of listing of the Compliance
Placement Shares on the Catalist of the SGX-ST and 50.0% of their respective holdings
of Consideration Shares thereafter, as required under the Catalist Rules. In addition, the
Vendors have also undertaken not to, inter alia, sell or dispose their interest in the shares
in Hatten Holdings Pte. Ltd. for a period of one (1) year from the date of the listing of the
Compliance Placement shares on the Catalist of SGX-ST. Details of the moratorium
undertakings are set out in section 17 of the VGO Letter.
7.5.9. Dividend track record
We note that over the last three financial years from FY2014 to FY2016, the Company had
not declared any dividend. The Directors have confirmed that the Company does not have
any fixed dividend policy.
7.5.10. Alternative offers for the Existing Business from third parties
As at the Latest Practicable Date, other than the Proposed Disposal, there is no publicly
available evidence of an alternative offer for the shares of the Company or the Existing
Business from any third party. Further, the Directors have confirmed that as at the Latest
Practicable Date, apart from the Proposed Disposal by the Purchasers, they have not
received any offer for the shares of the Company or the Existing Business from any third
party.
7.5.11. Abstention from voting
In accordance with the conditions of the Whitewash Waiver, notwithstanding the lack of
any voting rights in the Company, we note that the Vendors and their concert parties will
abstain from voting at the EGM on the ordinary resolution relating to the Proposed
Whitewash Resolution. The Vendors and their concert parties will also decline to accept
appointment as proxies for voting at the EGM in respect of the resolution relating to the
Proposed Whitewash Resolution unless the Independent Shareholders appointing them
as proxies give specific instructions in their proxy forms as to the manner in which their
votes are to be cast in respect of the said resolution.
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In addition, as the Proposed Acquisition is conditional upon the Proposed Disposal, and
the Key Resolutions are inter-conditional upon each other, the Purchasers, being existing
controlling shareholders of the Company are therefore interested in the Proposed
Acquisition. Accordingly, we note that the Purchasers will also abstain and procure that
their associates abstain from voting at the EGM on the resolutions relating to the Proposed
Transactions (including the Proposed Acquisition, Proposed Whitewash Resolution and
the Proposed Disposal). The Purchasers will decline to accept appointment as proxies for
voting at the EGM in respect of the resolutions relating to the Proposed Transactions
(including the Proposed Acquisition, the Proposed Whitewash Resolution and the
Proposed Disposal) unless specific instructions as to voting have been given.
Accordingly, the Proposed Whitewash Resolution and the Proposed Disposal would
proceed only if a majority of the Independent Shareholders were to vote in favour of the
Proposed Whitewash Resolution and Proposed Disposal.
8. THE PROPOSED ADOPTION OF THE IPT MANDATE
8.1. Introduction
The Company wishes to seek Shareholders’ approval for a general mandate for interested
person transactions pursuant to Part VIII of Chapter 9 of the Catalist Rules between (a) the
Company, (b) each of the Enlarged Group Companies, and (c) an associated company of
the Company that is not listed on the SGX-ST or an approved exchange, provided that the
Enlarged Group, or the Enlarged Group and its interested person(s), has control over the
associated company, (collectively, the “Entities at Risk”) and certain entities within the
Hatten Group, given that the Vendors will be controlling shareholders of the Enlarged
Group upon Completion and their ownership of the entities within the Hatten Group
(collectively, the “Mandated Interested Persons”).
The Proposed IPT Mandate will apply to Mandated Transactions with the Mandated
Interested Persons that relate to, inter alia:
(a) the engagement of property agency management services in respect of
(i) management of property agents; (ii) management of agent commission; and
(iii) administrative support to property agents from Hatten Properties Sdn. Bhd.;
(b) the engagement of mall/complex/property management services in respect of
(i) estate management; (ii) building maintenance services; and (iii) building security
services from Hatten Retail Management Sdn. Bhd.;
(c) the engagement of construction services from Montane Construction Sdn. Bhd.;
(d) the leasing of the relevant hospitality properties under a master lease arrangement,
in accordance to such processes as set out in section 4.2.4 of the Target Letter
entitled “Sales and Marketing”, to Hatten Hotel International Sdn. Bhd. and/or Hatten
Place Sdn. Bhd.;
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(e) the engagement of agency services in respect of the leasing of any unsold retail units
of the Enlarged Group, or sold units leased-back by the Enlarged Group from its
customers, in accordance to such processes as set out in section 4.2.4 of the Target
Letter entitled “Sales and Marketing”, from Hatten Retail Management Sdn. Bhd.;
(f) the provision of property development management services to future property
development projects which are not wholly owned by the Enlarged Group, whether
through joint ventures or otherwise;
(g) the provision of administrative and logistical support (where required) in relation to the
provision of, and/or obtaining of products and/or services in sub-paragraphs (a) to (f)
above; and
(h) the provision and/or obtaining of management and support services in the area of
professional, administrative and support services, including but not limited to,
corporate events, information technology, and management information systems,
intellectual property rights, and any other professional, administrative and support
services that may arise from time to time. For the avoidance of doubt, services set
out in this sub-section are not incidental to the products and/or services as set out in
sub-sections (a) to (f) above,
(collectively, the “Mandated Transactions”).
The Proposed IPT Mandate assumes that Completion has taken place, and the listing of
the Shares has been transferred to the Catalist.
Pursuant to Chapter 9 of the Listing Manual of the SGX-ST, the Company has appointed
us as the independent financial adviser (the “IFA”) to the Audit and Risk Committee.
This letter, which sets out our evaluation of the review procedures under the Proposed IPT
Mandate, will form part of the Circular to seek the approval of the Shareholders for the
Proposed IPT Mandate.
8.2. The Proposed IPT Mandate
8.2.1. Rationale and Benefits to Shareholders
The rationale and benefits of the Proposed IPT Mandate are set out on sections 13.2 and
13.3 of the VGO Letter, and Shareholders are advised to read the information carefully.
8.2.2. Validity of the Proposed IPT Mandate
The validity of the Proposed IPT Mandate is set out in section 13 of the VGO Letter, and
Shareholders are advised to read the information carefully.
8.2.3. Classes of Mandated Interested Persons
The classes of mandated interested persons are set out in section 13.4 of the VGO Letter,
and Shareholders are advised to read the information carefully.
APPENDIX D – LETTER FROM SAC CAPITAL PRIVATE LIMITEDTO THE INDEPENDENT DIRECTORS AND THE AUDIT AND
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8.2.4. Categories of Mandated Transactions
The categories of Mandated Transactions to which the Proposed IPT Mandate will apply
are set out in section 13.5 of the VGO Letter, and Shareholders are advised to read the
information carefully.
8.2.5. Review Procedures for Mandated Transactions with Mandated Interested Persons
The review procedures for the Mandated Transactions are set out in section 13.6 of the
VGO Letter, and Shareholders are advised to read the information carefully.
9. OUR OPINION
Proposed Whitewash and Proposed Disposal
In arriving at our opinion in respect of the Proposed Whitewash and Proposed Disposal,
we have taken into account the following key considerations:
(a) rationale for the Proposed Acquisition and Proposed Disposal, as detailed in
paragraph 7.1 of this letter;
(b) assessment of the Consideration for the Proposed Acquisition, as detailed in
paragraph 7.2 of this letter;
(c) assessment of the Issue Price of the Consideration Shares to be issued for the
Proposed Acquisition, as detailed in paragraph 7.3 of this letter;
(d) assessment of the Disposal Consideration for the Proposed Disposal as set out in
paragraph 7.4 of this letter; and
(e) other relevant considerations as follows:
(i) the potential entry into the watch-list under the Financial Entry Criteria;
(ii) the inter-conditionality of the Proposed Acquisition, the Proposed Whitewash
Resolution and the Proposed Disposal;
(iii) the financial effects of the Proposed Acquisition, the Proposed Disposal, the
Proposed Capital Reduction and the Proposed Compliance Placement;
(iv) the dilution impact arising from the Proposed Acquisition and the Proposed
Compliance Placement on the Independent Shareholders;
(v) the implications of the Proposed Whitewash Resolution;
(vi) the Disposal Consideration being entirely in cash;
(vii) the risk factors relating to the Target Group;
(viii) the moratorium on the Consideration Shares;
(ix) the past dividend track record;
APPENDIX D – LETTER FROM SAC CAPITAL PRIVATE LIMITEDTO THE INDEPENDENT DIRECTORS AND THE AUDIT AND
RISK COMMITTEE OF VGO CORPORATION LIMITED
D-50
(x) the absence of alternative offers for the Existing Business from third parties;
and
(xi) the parties’ abstention from voting.
Based on our analysis and after having considered carefully the information available to
us, our opinions are as follows:
(a) the Proposed Whitewash Resolution, from a financial point of view, when considered
in the context of the Proposed Acquisition (which terms are fair and reasonable), is
not prejudicial to the interests of the Company and the Independent Shareholders.
Accordingly, we advise the Independent Directors to recommend the Independent
Shareholders to vote in favour of the Proposed Whitewash Resolution; and
(b) the Proposed Disposal (which terms are fair and reasonable) is on normal
commercial terms and is not prejudicial to the interests of the Company and the
Independent Shareholders. Accordingly, we advise the Independent Directors to
recommend the Independent Shareholders to vote in favour of the Proposed
Disposal.
The Independent Directors should note that we have arrived at these conclusions based
on information made available to us prior to and including the Latest Practicable Date. Our
advice on the Proposed Whitewash Resolution and the Proposed Disposal cannot and
does not take into account the future trading activity or patterns or price levels that may
be established for the Shares as these are governed by factors beyond the scope of our
review and would not fall within our terms of reference in connection with the Proposed
Whitewash Resolution and the Proposed Disposal.
Proposed IPT Mandate
Having considered, inter alia, the rationale and benefits of the Proposed IPT Mandate, the
review procedures of the Company for the Mandated Transactions and the role of the Audit
and Risk Committee of the Company in enforcing the Proposed IPT Mandate, and subject
to the qualifications and assumptions set out herein, we are of the opinion that the review
procedures for determining transaction prices of the Mandated Transactions as set out in
section 13.6 of the VGO Letter, if adhered to, are sufficient to ensure that the Mandated
Transactions will be conducted on normal commercial terms and will not be prejudicial to
the interests of the Company and its minority Shareholders.
Our opinions are addressed to the Independent Directors in connection with and for the
purposes of their consideration of the Proposed Whitewash Resolution and the Proposed
Disposal, and the Audit and Risk Committee for the purposes of the Proposed IPT
Mandate. The recommendation to be made by them to the Independent Shareholders shall
remain the sole responsibility of the Independent Directors and the Audit and Risk
Committee, as the case may be.
APPENDIX D – LETTER FROM SAC CAPITAL PRIVATE LIMITEDTO THE INDEPENDENT DIRECTORS AND THE AUDIT AND
RISK COMMITTEE OF VGO CORPORATION LIMITED
D-51
Whilst a copy of this letter may be reproduced in the Circular, neither the Company nor the
Directors may reproduce, disseminate or quote this letter (or any part thereof) for any
other purpose at any time and in any manner without the prior written consent of SAC
Capital Private Limited in each specific case, except for the forthcoming EGM and for the
purposes of the Proposed Whitewash Resolution, Proposed Disposal, and the Proposed
IPT Mandate.
Our opinion is governed by, and construed in accordance with, the laws of Singapore, and
is strictly limited to the matters stated herein and do not apply by implication to any other
matter.
Yours faithfully
For and on behalf of
SAC CAPITAL PRIVATE LIMITED
Bernard Lim
Executive Director
APPENDIX D – LETTER FROM SAC CAPITAL PRIVATE LIMITEDTO THE INDEPENDENT DIRECTORS AND THE AUDIT AND
RISK COMMITTEE OF VGO CORPORATION LIMITED
D-52
An
ne
x1
SG
X-S
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30
Ju
ne
1,3
01
.89
81
.42
06
.0
Win
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su
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inve
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30
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1,2
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.57
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so
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ore
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31
De
ce
mb
er
99
9.1
16
2.0
16
.4
TE
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an
dL
imit
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TE
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an
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isa
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en
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la
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ore
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ort
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/or
an
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ies.
AP
PE
ND
IXD
–L
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TE
RF
RO
MS
AC
CA
PIT
AL
PR
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nt
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31
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31
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31
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31
De
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mb
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3,2
70
.51
,16
7.1
21
6.9
AP
PE
ND
IXD
–L
ET
TE
RF
RO
MS
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31
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31
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61
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31
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ild
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31
De
ce
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er
1,0
77
.16
80
.37
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D-58
E-1
APPENDIX E – ASSET VALUATION REPORT
E-2
APPENDIX E – ASSET VALUATION REPORT
E-3
APPENDIX E – ASSET VALUATION REPORT
E-4
APPENDIX E – ASSET VALUATION REPORT
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APPENDIX E – ASSET VALUATION REPORT
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APPENDIX E – ASSET VALUATION REPORT
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F-1
APPENDIX F – BUSINESS VALUATION REPORT
F-2
APPENDIX F – BUSINESS VALUATION REPORT
F-3
APPENDIX F – BUSINESS VALUATION REPORT
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APPENDIX F – BUSINESS VALUATION REPORT
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APPENDIX F – BUSINESS VALUATION REPORT
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APPENDIX F – BUSINESS VALUATION REPORT
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APPENDIX F – BUSINESS VALUATION REPORT
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APPENDIX F – BUSINESS VALUATION REPORT
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APPENDIX F – BUSINESS VALUATION REPORT
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Interested Persons Within the Hatten Group
1. Dato’ Tan June Teng, Colin @ Chen JunTing
2. Dato’ Tan Ping Huang, Edwin @ Chen BingHuang
3. Tong Yee Xing
4. Admiral Merger Sdn. Bhd.
5. Dataran Pahlawan Management Sdn. Bhd.
6. Dataran Pahlawan Melaka Ltd
76. EGAH Group Sdn. Bhd.
8. Ensure Merger Sdn. Bhd.
9. Estadia Sdn. Bhd.
10. Fuyuu Advance Sdn. Bhd.
11. Fuyuu Avenue Sdn. Bhd.
12. Fuyuu Capital Sdn. Bhd.
13. Fuyuu City Sdn. Bhd.
14. Fuyuu Development Sdn. Bhd.
15. Fuyuu Dynamic Sdn. Bhd.
16. Fuyuu Land Sdn. Bhd.
17. Fuyuu Properties Sdn. Bhd.
18. Fuyuu Revenue Sdn. Bhd.
19. Fuyuu Success Sdn. Bhd.
20. Fuyuu Victory Sdn. Bhd.
21. Golden Retail Sdn. Bhd.
22. Hatten Asset Management Sdn. Bhd.
23. Hatten Brand Management Sdn. Bhd.
24. Hatten Educates Sdn. Bhd.
25. Hatten Group Sdn. Bhd.
26. Hatten Hotel (Melaka) Sdn. Bhd.
27. Hatten Hotel International Sdn. Bhd.
28. Hatten Properties Pte. Ltd.
29. Hatten Properties Sdn. Bhd.
30. Hatten Property Management Sdn. Bhd.
31. Hatten Retail Management Sdn. Bhd.
32. Hatten Square Management Sdn. Bhd.
33. Hatten Support Services Sdn. Bhd.
34. Houfu Group Sdn. Bhd.
35. Lianbang Ventures Sdn. Bhd.
36. Mayatrade Sdn. Bhd.
APPENDIX G – LIST OF INTERESTED PERSONS
G-1
Interested Persons Within the Hatten Group
37. Padang Pahlawan Sdn. Bhd.
38. Pahlawan Terminal Management Sdn. Bhd.
39. Pavilion Hectares Sdn. Bhd.
40. Prolific Acres Sdn. Bhd.
41. Prolific Assets Sdn. Bhd.
42. Prolific Hectares Sdn. Bhd.
43. Prolific Properties Sdn. Bhd.
44. Prolific Resources Sdn. Bhd.
45. Prolific Revenue Sdn. Bhd.
46. Prolific Synergy Sdn. Bhd.
47. Rico Land Sdn. Bhd.
48. Temasek Blooms Sdn. Bhd.
49. Tunas Binamas Sdn. Bhd.
50. United Asia Pacific Group Sdn. Bhd.
51. Velvet Valley Sdn. Bhd.
52. Vibrant Valley Sdn. Bhd.
Interested Persons Outside the Hatten Group
1. Capital City Property Sdn. Bhd.
2. Dharmapala Holdings Sdn. Bhd.
3. Euphonie Sound Effects Sdn. Bhd.
4. Kuenbuild Sdn. Bhd.
5. Le Vinnie Jewellery
6. Montane Construction Sdn. Bhd.
7. Regal Fiesta Sdn. Bhd.
8. United Development Capital Sdn. Bhd.
APPENDIX G – LIST OF INTERESTED PERSONS
G-2
Property Development
Location Name of Company Name of Project
Percentageshareholdingowned by theTan Brothers
and/or theHatten Group (%)
In Seremban 1. Velvet Valley Sdn. Bhd.(1) UniCity Project(with 1.96 acresfreehold land)
80.0
In Cyberjaya 2. Admiral Merger Sdn. Bhd. Cyberjaya Project(with developmentright over 25.55acres freeholdland)
100.0
In Johor Bahru
3. Fuyuu Land Sdn. Bhd.(2) – 100.0
4. Capital City Property Sdn.Bhd(3)
Capital CityProject (withdevelopment rightover 10.09 acresfreehold land)
50.0
Land Bank
Name of Company/Owner of Land
Description ofLand
Percentageshareholdingowned by theTan Brothers
and/or theHatten Group (%)
Land owned inMalacca
1. Prolific Hectares Sdn. Bhd. 17.97 acresleasehold land
100.0
2. Pavilion Hectares Sdn. Bhd. 5.96 acresleasehold land
100.0
3. Mayatrade Sdn. Bhd. 11.83 acresfreehold land and0.97 acresleasehold land
100.0
4. Prolific Properties Sdn. Bhd. 2.05 acresleasehold land
100.0
5. Prolific Assets Sdn. Bhd. 0.26 acresfreehold land
100.0
6. Prolific Resources Sdn. Bhd. 0.91 acresfreehold land
100.0
7. Prolific Synergy Sdn. Bhd. 0.81 acresfreehold land
100.0
8. Prolific Revenue Sdn. Bhd. 9.34 acresleasehold land
100.0
APPENDIX H – ASSETS UNDER RIGHT OFFIRST REFUSAL AND CALL OPTION
H-1
Name of Company/Owner of Land
Description ofLand
Percentageshareholdingowned by theTan Brothers
and/or theHatten Group (%)
9. Fuyuu Success Sdn. Bhd. 2.0 acresleasehold land
100.0
10. Fuyuu Assets Sdn. Bhd. 6.06 acresfreehold land
100.0
11. Fuyuu Properties Sdn. Bhd. 8.63 acresfreehold land
100.0
12. Prolific Acres Sdn. Bhd. 10.51 acresleasehold land
100.0
13. Prolific Holdings Sdn. Bhd. 13.97 acresfreehold land and2.95 acresleasehold land
100.0
14. Rico Land Sdn. Bhd. 3.42 acresfreehold land
100.0
15. EGAH Group Sdn. Bhd. 66.0 acresleasehold landto be reclaimed
70.0
16. Rico Ventures Sdn. Bhd.(4) 6.71 acresleasehold land
25.0
17. Rico Development Sdn.Bhd.(5)
6.14 acresfreehold land
15.0
Land owned inJohor Bahru
18. Dato’ Colin(1) 0.86 acresfreehold land
100.0
Total accumulated land area for land bank and development rights is approximately 215.0 acres.
Notes:
(1) The joint venture partner for the Unicity Project located in Seremban is Yap Wei Shen, who owns 20.0% of theproject company, Velvet Valley Sdn Bhd. The remaining 80.0% is owned by Dato’ Colin and Dato’ Edwin in equalproportion. Yap Wei Shen does not wish for the property development project to be in part of the listing portfolio.Yap Wei Shen is not related to the Proposed New Directors or controlling shareholders of the Enlarged Group.
(2) Fuyuu Land Sdn. Bhd. is the property developer for the 0.86 acres freehold land owned by Dato’ Colin.
(3) Capital City Project is a passive investment of the Tan Brothers and will be managed by an unrelated third party,Siow Chien Fu, who owns 50.0% of the project company, Capital City Property Sdn. Bhd. Please refer to Section25.1.2 of the Target Letter entitled “Mitigating Steps” for further information on the mitigation of any potential conflictof interests in relation to the Capital City Project. Siow Chien Fu is not related to the Proposed New Directors orcontrolling shareholders of the Enlarged Group.
(4) Rico Ventures Sdn. Bhd. is a passive investment by the Tan Brothers. The Tan Brothers and/or the Hatten Groupdo not hold a majority and/or controlling stake in Rico Ventures Sdn. Bhd. The other shareholders of Rico VenturesSdn. Bhd. are Machmud Harjanto @ Yauw Tong Keng @ Yahya Syahada Machmud Harjanto (10.0%), Lim BengChew (15.0%), Wong Kim Wah (25.0%) and Keak Lai Heng (25.0%). None of the shareholders listed above arerelated to the Proposed New Directors or controlling shareholders of the Enlarged Group.
(5) Rico Development Sdn. Bhd. is a passive investment by the Tan Brothers. The Tan Brothers and/or the Hatten Groupdo not hold a majority and/or controlling stake in Rico Development Sdn. Bhd. The other shareholders of RicoDevelopment Sdn. Bhd. are Machmud Harjanto @ Yauw Tong Keng @ Yahya Syahada Machmud Harjanto (15.0%),Lim Beng Chew (15.0%), Wong Kim Wah (20.0%), Keak Lai Heng (15.0%), Chua Swee Wah (10.0%), Lim YongGuan (5.0%) and Poh Boon Kher, Melvin (Fu WenKe, Melvin) (5.0%). None of the shareholders listed above arerelated to the Proposed New Directors or controlling shareholders of the Enlarged Group.
APPENDIX H – ASSETS UNDER RIGHT OFFIRST REFUSAL AND CALL OPTION
H-2
THE CONSTITUTION
THE COMPANIES ACT, CHAPTER 50
PUBLIC COMPANY LIMITED BY SHARES
CONSTITUTION
OF
HATTEN LAND LIMITED
INTERPRETATION
1. In this Constitution, if not inconsistent with the subject or context, the words
standing in the first column of the Table next hereinafter contained shall bear
the meanings set opposite to them respectively in the second column
thereof:
WORDS MEANINGS
“The Act” The Companies Act, Cap. 50 or any statutory
modification, amendment or re-enactment
thereof for the time being in force or any and
every other act for the time being in force
concerning companies and affecting the
Company and any reference to any provision
as so modified, amended or re-enacted or
contained in any such subsequent
Companies Act or other act concerning
companies and affecting the Company.
“Chairman” The chairman of the Directors or the
chairman of the General Meeting as the case
may be.
“The Company” The abovenamed Company by whatever
name from time to time called.
“This Constitution” This Constitution or other regulations of the
Company for the time being in force.
APPENDIX I – NEW CONSTITUTION
Interpretation
I-1
“Director” Includes any person acting as a Director of
the Company and includes any person duly
appointed and acting for the time being as an
alternate Director.
“Directors” The Directors for the time being of the
Company or such number of them as have
authority to act for the Company.
“dividend” Includes bonus.
“General Meeting” A general meeting of the Company.
“market day” A day on which the Singapore Exchange
Securities Trading Limited is open for trading
in securities.
“Member” A Member of the Company, save that
references in this Constitution to “Member”
shall, where the Act requires, exclude the
Company where it is a Member by reason of
its holding of its shares as treasury shares.
“month” Calendar month.
“Office” The registered office of the Company for the
time being.
“paid-up” Includes credited as paid-up.
“registered address” or
“address”
In relation to any Member, his physical
address for the service or delivery of notices
or documents personally or by post, except
where otherwise expressly provided in this
Constitution.
“Seal” The Common Seal of the Company or in
appropriate cases the Official Seal or
duplicate Common Seal.
“Secretary” The Secretary or Secretaries appointed
under this Constitution and shall include any
person entitled to perform the duties of the
Secretary temporarily.
APPENDIX I – NEW CONSTITUTION
I-2
“Writing” and “Written” Written or produced by any substitute for
writing or partly one and partly another and
shall include (except where otherwise
expressly specified in this Constitution or the
context otherwise requires, and subject to
any limitations, conditions or restrictions
contained in the Act) any representation or
reproduction of words, symbols or other
information which may be displayed in a
visible form, whether in a physical document
or in an electronic communication or form or
otherwise howsoever.
“year” Calendar year.
The expressions “Depositor”, “Depository”, “Depository Agent” and
“Depository Register” shall have the meanings ascribed to them respectively
in the Securities and Futures Act, Cap. 289.
The expressions “current address”, “electronic communication”, “relevant
intermediary” and “treasury shares” shall have the meanings ascribed to
them respectively in the Act.
References in this Constitution to “holder(s)” of shares or a class of shares
shall:
(a) exclude the Depository or its nominee (as the case may be) except
where otherwise expressly provided in this Constitution or where the
term “registered holders” or “registered holder” is used in this
Constitution;
(b) where the context so requires, be deemed to include references to
Depositors whose names are entered in the Depository Register in
respect of those shares; and
(c) except where otherwise expressly provided in this Constitution,
exclude the Company in relation to shares held by it as treasury
shares,
and “holding” and “held” shall be construed accordingly.
Words denoting the singular number only shall include the plural and vice
versa.
Words denoting the masculine gender only shall include the feminine
gender.
Words denoting persons shall include corporations.
APPENDIX I – NEW CONSTITUTION
I-3
Save as aforesaid, any words or expressions used in the Act and the
Interpretation Act, Cap. 1 shall, if not inconsistent with the subject or
context, bear the same meanings in this Constitution.
Any reference in this Constitution to any enactment is a reference to that
enactment as for the time being amended or re-enacted.
A Special Resolution shall be effective for any purpose for which an Ordinary
Resolution is expressed to be required under any provision of this
Constitution.
The headnotes and marginal notes are inserted for convenience of
reference only and shall not affect the construction of this Constitution.
NAME
2. The name of the Company is “HATTEN LAND LIMITED”.
REGISTERED OFFICE
3. The Office of the Company will be situated in the Republic of Singapore.
BUSINESS
4. Subject to the provisions of the Act, any other written law, or this
Constitution, any branch or kind of business is expressly or by implication
authorised to be undertaken by the Company and may be undertaken by the
Directors at such time or times as they shall think fit, and further may be
suffered by them to be in abeyance, whether such branch or kind of
business may have been actually commenced or not, so long as the
Directors may deem it expedient not to commence or proceed with such
branch or kind of business.
LIABILITY OF MEMBERS
5. The liability of the Members is limited.
SHARES
6. The Company may, subject to and in accordance with the Act, purchase or
otherwise acquire its issued shares on such terms and in such manner as
the Company may from time to time think fit. If required by the Act, any share
which is so purchased or acquired by the Company shall, unless held in
treasury in accordance with the Act, be deemed to be cancelled immediately
on purchase or acquisition by the Company. On the cancellation of any
share as aforesaid, the rights and privileges attached to that share shall
expire. In any other instance, the Company may hold or deal with any such
share which is so purchased or acquired by it in such manner as may be
permitted by, and in accordance with, the Act.
APPENDIX I – NEW CONSTITUTION
Name
Office
Business
Liability of
Members
Power to
repurchase
shares
I-4
7. Subject to the Act and this Constitution, no shares may be issued by the
Directors without the prior approval of the Company in General Meeting but
subject thereto and to article 53, and to any special rights attached to any
shares for the time being issued, the Directors may allot and issue shares
or grant options over or otherwise dispose of the same to such persons on
such terms and conditions and for such consideration (if any) and at such
time and subject or not to the payment of any part of the amount (if any)
thereof in cash as the Directors may think fit, and any shares may be issued
with such preferential, deferred, qualified or special rights, privileges or
conditions as the Directors may think fit, and preference shares may be
issued which are or at the option of the Company are liable to be redeemed,
the terms and manner of redemption being determined by the Directors
provided always that:
(a) (subject to any direction to the contrary that may be given by the
Company in General Meeting) any issue of shares for cash to Members
holding shares of any class shall be offered to such Members in
proportion as nearly as may be to the number of shares of such class
then held by them and the provisions of the second sentence of article
53(1) with such adaptations as are necessary shall apply; and
(b) any other issue of shares, the aggregate of which would exceed the
limits referred to in article 53(2), shall be subject to the approval of the
Company in General Meeting.
8. (1) The rights attaching to shares of a class other than ordinary shares
shall be expressed in this Constitution.
(2) The Company may issue shares for which no consideration is payable
to the Company.
(3) Preference shares may be issued subject to such limitation thereof as
may be prescribed by any stock exchange upon which the shares of the
Company may be listed. Preference shareholders shall have the same
rights as ordinary shareholders as regards receiving of notices, reports
and balance sheets and attending General Meetings, and preference
shareholders shall also have the right to vote at any General Meeting
convened for the purpose of reducing the capital or winding-up or
sanctioning a sale of the undertaking of the Company or where the
proposal to be submitted to the General Meeting directly affects their
rights and privileges or when the dividend on the preference shares is
more than six months in arrears.
(4) The Company has power to issue further preference capital ranking
equally with, or in priority to, preference shares already issued.
9. The Company shall not exercise any right in respect of treasury shares other
than as provided by the Act. Subject thereto, the Company may hold or deal
with its treasury shares in the manner authorised by, or prescribed pursuant
to, the Act.
APPENDIX I – NEW CONSTITUTION
Issue of shares
Issue of shares
for which no
consideration is
payable to the
Company and
preference
shares
Treasury Shares
I-5
10. If, at any time the share capital is divided into different classes, subject to
the provisions of the Act, preference capital, other than redeemable
preference capital, or any alteration of preference shareholders’ rights, may
be repaid and the special rights attached to any class (unless otherwise
provided by the terms of issue of the shares of that class) may, whether or
not the Company is being wound up, be varied or abrogated with the
sanction of a Special Resolution passed at a separate General Meeting of
the holders of shares of the class and to every such Special Resolution the
provisions of the Act shall with such adaptations as are necessary apply. To
every such separate General Meeting the provisions of this Constitution
relating to General Meetings shall mutatis mutandis apply; but so that the
necessary quorum shall be two persons at least holding or representing by
proxy at least one-third of the issued shares of the class and any holder of
shares of the class present in person or by proxy may demand a poll.
Provided always that where the necessary majority for such a Special
Resolution is not obtained at such General Meeting, consent in writing if
obtained from the holders of three-fourths of the issued shares of the class
concerned within two months of the General Meeting shall be as valid and
effectual as a Special Resolution carried at the General Meeting.
11. The rights conferred upon the holders of the shares of any class issued with
preferred or other rights shall, unless otherwise expressly provided by the
terms of issue of the shares of that class or by this Constitution as is in force
at the time of such issue, be deemed to be varied by the issue of further
shares ranking equally therewith.
12. The Company may pay commission or brokerage on any issue of shares at
such rate or amount and in such manner as the Directors may deem fit. Such
commission or brokerage may be satisfied by the payment of cash or the
allotment of fully or partly paid shares or partly in one way and partly in the
other.
13. If any shares of the Company are issued for the purpose of raising money
to defray the expenses of the construction of any works or buildings or the
provision of any plant which cannot be made profitable for a long period, the
Company may, subject to the conditions and restrictions mentioned in the
Act, pay interest on so much of the share capital (except treasury shares) as
is for the time being paid-up and may charge the same to capital as part of
the cost of the construction or provision.
14. Except as required by law, no person shall be recognised by the Company
as holding any share upon any trust and the Company shall not be bound by
or compelled in any way to recognise (even when having notice thereof) any
equitable, contingent, future or partial interest in any share or any interest in
any fractional part of a share or (except only as by this Constitution or by law
otherwise provided) any other rights in respect of any share, except an
absolute right to the entirety thereof in the person (other than the Depository
or its nominee (as the case may be)) entered in the Register of Members as
the registered holder thereof or (as the case may be) the person whose
name is entered in the Depository Register in respect of that share.
APPENDIX I – NEW CONSTITUTION
Variation of
rights
Issue of further
shares with
special rights
Power to pay
commission and
brokerage
Power to charge
interest on
capital
Exclusion of
equities
I-6
15. Except as herein provided no person shall exercise any rights or privileges
of a Member until he is registered in the Register of Members or (as the case
may be) the Depository Register as a Member and shall have paid all calls
and other moneys due for the time being on every share held by him.
16. When two or more persons are registered as the holders of any share they
shall be deemed to hold the same as joint tenants with benefit of
survivorship subject to the provisions following:
(a) The Company shall not be bound to register more than three persons
as the holders of any share except in the case of executors or
administrators (or trustees) of the estate of a deceased Member.
(b) For the purposes of a quorum joint-holders of any share shall be
treated as one Member.
(c) Only one certificate shall be issued in respect of any share.
(d) Only the person whose name stands first in the Register of Members
as one of the joint-holders of any share shall be entitled to delivery of
the certificate relating to such share or to receive notices from the
Company. Any notice served on any one of the joint-holders shall be
deemed to have been duly served on all of them.
(e) The joint-holders of any share shall be liable severally as well as jointly
in respect of calls and any other payments which ought to be made in
respect of such share.
(f) Any one of the joint-holders of any share may give effectual receipts for
any dividend, return of capital or other sum of money payable to such
joint-holders in respect of such share.
(g) On the death of any one of the joint-holders of any share the survivor
or survivors shall be the only person or persons recognised by the
Company as having any title to such share but the Directors may
require such evidence of death as they think necessary to call for.
(h) If more than one of such joint-holders are present in person or proxy at
any General Meeting only that one of the joint-holders or his attorney
or proxy, whose name stands first in the Register of Members or (as the
case may be) the Depository Register amongst those so present in
person or proxy shall be entitled to vote in respect of any of the shares
so held.
SHARE CERTIFICATES
17. Every certificate shall be issued under the Seal and shall specify the number
and class of shares to which it relates, whether the shares are fully or partly
paid-up, and the amount (if any) unpaid thereon. No certificate shall be
issued representing shares of more than one class.
APPENDIX I – NEW CONSTITUTION
Exercise of
Member’s rights
Joint holders
Certificates
I-7
18. Every person whose name is entered as a Member in the Register of
Members shall be entitled within ten market days (or such other period as
may be approved by any stock exchange upon which the shares of the
Company may be listed) of the closing date of any application for shares or,
as the case may be, the date of lodgement of a registrable transfer or on a
transmission of shares to one certificate for all his shares of any one class
or several certificates in reasonable denominations each for a part of the
shares so allotted or transferred. If a Member shall require several
certificates each for a part of the shares so allotted or transferred or
included in the transmission or if a Member transfers part only of the shares
comprised in a certificate or requires the Company to cancel any certificate
or certificates and issue new certificates for the purpose of subdividing his
holding in a different manner the Member shall pay prior to the issue of the
certificates or certificate a fee not exceeding $2 for each such new
certificate as the Directors may determine.
19. Subject to the provisions of the Act, if any certificate shall be defaced, worn
out, destroyed, lost or stolen, a new certificate may be issued in lieu thereof
on such evidence being produced and a letter of indemnity (if required)
being given by the shareholder, transferee, person entitled, purchaser,
member firm or member company of any stock exchange upon which the
shares of the Company may be listed or on behalf of its or their client or
clients as the Directors shall require, and (in case of defacement or wearing
out) on delivery up of the old certificate and in any case on payment of such
sum not exceeding $2 as the Directors may from time to time require. In the
case of destruction, loss or theft, a shareholder or person entitled to whom
such new certificate is given shall also bear the loss and pay to the
Company all expenses incidental to the investigations by the Company of
the evidence of such destruction or loss.
TRANSFER OF SHARES
20. Subject to the provisions of this Constitution, all transfers of shares shall be
effected by written instrument of transfer in the form as approved by any
stock exchange upon which the shares of the Company may be listed or in
any other form acceptable to the Directors.
21. The instrument of transfer of any share shall be signed by or on behalf of
both the transferor and the transferee and be witnessed, provided that an
instrument of transfer in respect of which the transferee is the Depository or
its nominee (as the case may be) shall be effective although not signed or
witnessed by or on behalf of the Depository or its nominee (as the case may
be). The transferor shall remain the holder of the share concerned until the
name of the transferee is entered in the Register of Members in respect
thereof.
22. No shares shall in any circumstances be transferred to any infant, bankrupt
or person who is mentally disordered and incapable of managing himself or
his affairs.
APPENDIX I – NEW CONSTITUTION
Entitlement to
certificates
New certificates
may be issued
Form of transfer
of shares
Execution of
transfer of
shares
Person under
disability
I-8
23. There shall be no restriction on the transfer of fully paid-up shares (except
as required by law, the listing rules of any stock exchange upon which the
shares of the Company may be listed or the rules and/or bye-laws governing
any stock exchange upon which the shares of the Company may be listed)
but the Directors may in their discretion decline to register any transfer of
shares upon which the Company has a lien and in the case of shares not
fully paid-up may refuse to register a transfer to a transferee of whom they
do not approve.
24. If the Directors refuse to register a transfer of any share, they shall within ten
market days after the date on which the transfer was lodged with the
Company, send to the transferor and the transferee notice of refusal as
required by the Act.
25. The Directors may decline to register any instrument of transfer unless:
(a) such fee not exceeding $2 as the Directors may from time to time
require, is paid to the Company in respect thereof;
(b) the amount of proper duty (if any) with which each instrument of
transfer is chargeable under any law for the time being in force relating
to stamps is paid;
(c) the instrument of transfer is deposited at the Office or at such other
place (if any) as the Directors may appoint accompanied by a
certificate of payment of stamp duty (if any), the certificates of the
shares to which the transfer relates, and such other evidence as the
Directors may reasonably require to show the right of the transferor to
make the transfer and, if the instrument of transfer is executed by some
other person on his behalf, the authority of the person so to do; and
(d) the instrument of transfer is in respect of only one class of shares.
All instruments of transfer which are registered may be retained by the
Company, but any instrument of transfer which the Directors may decline to
register shall be returned to the person depositing the same except in the
case of fraud.
26. The registration of transfers may be suspended at such times and for such
period as the Directors may from time to time determine provided always
that such registration shall not be suspended for more than thirty days in any
year. The Company shall give prior notice of such closure as may be
required to any stock exchange upon which the shares of the Company may
be listed, stating the period and the purpose or purposes of such closure.
27. Nothing in this Constitution shall preclude the Directors from recognising a
renunciation of the allotment of any share by the allottee in favour of some
other person.
APPENDIX I – NEW CONSTITUTION
Directors’ power
to decline to
register
Notice of refusal
Terms of
registration of
transfers
Suspension of
registration
Renunciation of
allotment
I-9
TRANSMISSION OF SHARES
28. (1) In the case of the death of a Member whose name is entered in the
Register of Members, the survivor or survivors where the deceased
was a joint-holder, and the executors or administrators of the deceased
where he was a sole or only surviving holder, shall be the only persons
recognised by the Company as having any title to his interest in the
shares.
(2) In the case of the death of a Member who is a Depositor, the survivor
or survivors where the deceased was a joint-holder, and the executors
or administrators of the deceased where he was a sole or only
surviving holder and where such executors or administrators are
entered in the Depository Register in respect of any shares of the
deceased Member, shall be the only persons recognised by the
Company as having any title to his interest in the shares.
(3) Nothing in this article shall release the estate of a deceased holder
from any liability in respect of any share solely or jointly held by him.
29. Any person becoming entitled to the legal title in a share in consequence of
the death or bankruptcy of a Member whose name is entered in the Register
of Members, and any guardian of an infant becoming entitled to the legal title
in a share and whose name is entered in the Register of Members, and any
person as properly has the management of the estate of a Member whose
name is entered in the Register of Members and who is mentally disordered
and incapable of managing himself or his affairs may, upon such evidence
being produced as may from time to time properly be required by the
Directors and subject as hereinafter provided, elect either to be registered
himself as holder of the share or transfer the share to some other person,
but the Directors shall, in either case, have the same right to decline or
suspend registration as they would have had in the case of a transfer of the
share by a Member.
30. If the person so becoming entitled shall elect to be registered himself, he
shall deliver or send to the Company a notice in writing in a form approved
by the Directors signed by him stating that he so elects. If he shall elect to
transfer the share to another person he shall testify his election by executing
to that person a transfer of the share. All the limitations, restrictions and
provisions of this Constitution relating to the right to transfer and the
registration of transfers of shares shall be applicable to any such notice or
transfer as aforesaid as if the event upon which transmission took place had
not occurred and the notice or transfer were a transfer signed by the person
from whom the title by transmission is derived.
31. A person becoming entitled to a share by transmission shall be entitled to
receive and give a discharge for the same dividends and be entitled to the
other advantages to which he would be entitled if he were the Member in
respect of the share, except that he shall not, before being registered as a
Member in the Register of Members or before his name shall have been
APPENDIX I – NEW CONSTITUTION
Survivor,
executors or
administrators
entitled to shares
of a deceased
Member
Transmission of
shares
Requirements
regarding
transmission of
shares
Rights of
persons entitled
to a share by
transmission
I-10
entered in the Depository Register in respect of the share, be entitled in
respect of it to exercise any right conferred by membership in relation to
General Meetings.
32. The Directors may at any time give notice requiring any person entitled to a
share by transmission to elect either to be registered himself or to transfer
the share, and if the notice is not complied with within ninety days the
Directors may thereafter withhold payment of all dividends, or other moneys
payable in respect of the share until the requirements of the notice have
been complied with.
33. There shall be paid to the Company in respect of the registration of any
probate, letters of administration, certificate of marriage or death, power of
attorney or other document relating to or affecting the title to any shares,
such fee not exceeding $2 as the Directors may from time to time require or
prescribe.
CALLS ON SHARES
34. The Directors may from time to time make calls upon the Members in
respect of any moneys unpaid on their shares and not by the conditions of
allotment thereof made payable at fixed times, and each Member shall
(subject to receiving at least fourteen days’ notice specifying the time or
times and place of payment) pay to the Company at the time or times and
place so specified the amount called on his shares. A call may be revoked
or postponed as the Directors may determine.
35. A call shall be deemed to have been made at the time when the resolution
of the Directors authorising the call was passed and may be required to be
paid by instalments.
36. If a sum called in respect of a share is not paid before or on the day
appointed for payment thereof, the person from whom it is due shall pay
interest on the sum from the day appointed for payment thereof to the time
of actual payment at such rate not exceeding eight per cent per annum as
the Directors may determine, but the Directors shall be at liberty to waive
payment of such interest wholly or in part.
37. Any sum which by the terms of issue of a share becomes payable on
allotment or at any fixed date shall for the purposes of this Constitution be
deemed to be a call duly made and payable on the date on which by the
terms of issue the same becomes payable, and in case of non-payment all
the relevant provisions of this Constitution as to payment of interest and
expenses, forfeiture or otherwise shall apply as if such sum had become
payable by virtue of a call duly made and notified.
38. The Directors may, on the issue of shares, differentiate between the holders
as to the amount of calls to be paid and the times of payment.
APPENDIX I – NEW CONSTITUTION
Person entitled
may be required
to register or
transfer share
Fee for
registration of
probate, etc
Amounts and
periods
When made
Interest on
overdue calls
On allotment
Directors may
differentiate
between holders
I-11
39. The Directors may, if they think fit, receive from any Member willing to
advance the same all or any part of the moneys uncalled and unpaid-upon
the shares held by him and such payments in advance of calls shall
extinguish, so far as the same shall extend, the liability upon the shares in
respect of which it is made, and upon the moneys so received or so much
thereof as from time to time exceed the amount of the call then made upon
the shares concerned, the Company may pay interest at such rate not
exceeding eight per cent per annum as the Member paying such sum and
the Directors agree upon. Capital paid on shares in advance of calls shall
not whilst carrying interest confer a right to participate in profits.
40. The Directors may apply all dividends which may be declared in respect of
any shares in payment of any calls made or instalments payable and which
may remain unpaid in respect of the same shares.
LIEN AND FORFEITURE
41. The Company shall have a first and paramount lien and charge on every
share (not being a fully paid share) registered in the name of each Member
(whether solely or jointly with others) and on the dividends declared or
payable in respect thereof. Such lien shall be restricted to unpaid calls and
instalments upon the specific shares in respect of which such moneys are
due and unpaid, and to such amount as the Company may be called upon
by law to pay in respect of the shares of the Member or deceased Member.
42. For the purpose of enforcing such lien the Directors may sell all or any of the
shares subject thereto in such manner as they think fit but no sale shall be
made until such time as the moneys owing to the Company are presently
payable and until a notice in writing stating the amount due and demanding
payment and giving notice of intention to sell in default shall have been
served in such manner as the Directors shall think fit on such Member or the
person (if any) entitled to effect a transmission of the shares and who shall
have produced to the Company satisfactory evidence of such capacity and
default in payment shall have been made by him or them for fourteen days
after such notice. Provided always that if a Member shall have died or
become mentally disordered and incapable of managing himself or his
affairs or bankrupt and no person shall have given to the Company
satisfactory proof of his right to effect a transmission of the shares held by
such Member the Directors may exercise such power of sale without serving
any such notice.
43. Upon any sale being made by the Directors of any shares to satisfy the lien
of the Company thereon the proceeds shall be applied first in the payment
of the costs of such sale, next in satisfaction of the debt, obligation,
engagement or liability of the Member to the Company and the residue (if
any) shall be paid to the Member whose shares have been forfeited or as he
shall direct or to his executors, administrators or assigns.
44. A statutory declaration in writing that the declarant is a Director and that a
share has been duly forfeited or surrendered or sold to satisfy a lien of the
Company on a date stated in the declaration shall be conclusive evidence of
the facts stated therein as against all persons claiming to be entitled to the
APPENDIX I – NEW CONSTITUTION
Payment in
advance of calls
Lien on
dividends to pay
call
Company’s lien
Notice to pay the
amount due, and
sale on non-
compliance
therewith
Application of
sale proceeds
Title to shares
forfeited or
surrendered or
sold to satisfy a
lien
I-12
share, and such declaration and the receipt of the Company for the
consideration (if any) given for the share on the sale, re-allotment or
disposal thereof together (where the same be required) with the share
certificate delivered to a purchaser (or where the purchaser is a Depositor,
to the Depository or its nominee (as the case may be)) or allottee thereof
shall (subject to the execution of a transfer if the same be required)
constitute good title to the share and the share shall be registered in the
name of the person to whom the share is sold, re-allotted or disposed of or,
where such person is a Depositor, the Company shall procure that his name
be entered in the Depository Register in respect of the share so sold,
re-allotted or disposed of. Such person shall not be bound to see to the
application of the purchase money (if any) nor shall his title to the share be
affected by any irregularity or invalidity in the proceedings relating to the
forfeiture, surrender, sale, re-allotment or disposal of the share.
45. In the event of a forfeiture of shares or a sale of shares to satisfy the
Company’s lien thereon the Member or other person who prior to such
forfeiture or sale was entitled thereto shall be bound to deliver and shall
forthwith deliver to the Company the certificate or certificates held by him for
the shares so forfeited or sold.
46. If a Member fails to pay any call or any part thereof on the day appointed for
payment thereof, the Directors may, at any time thereafter during such time
as any part of the call or instalment remains unpaid, serve a notice on him
requiring payment of so much of the call or instalment as is unpaid, together
with any interest which may have accrued and any expenses incurred by the
Company by reason of such non-payment.
47. The notice shall name a further day (not earlier than the expiration of
fourteen days from the date of service of the notice) on or before which the
payment required by the notice is to be made, and shall state that in the
event of non-payment at or before the time appointed, the shares in respect
of which the call was made will be liable to be forfeited.
48. If the requirements of such notice as aforesaid are not complied with, any
share in respect of which the notice has been given may at any time
thereafter before all payments required by the notice have been made, be
forfeited by a resolution of the Directors to that effect. Such forfeiture shall
include all dividends declared in respect of the forfeited share and not
actually paid before the forfeiture. The Directors may accept a surrender of
any share liable to be forfeited hereunder.
49. A share so forfeited or surrendered shall become the property of the
Company and may be sold, re-allotted or otherwise disposed of either to the
person who was before such forfeiture or surrender the holder thereof or
entitled thereto, or to any other person, upon such terms and in such manner
as the Directors shall think fit, and at any time before a sale, re-allotment or
disposition the forfeiture or surrender may be cancelled on such terms as
the Directors think fit. To give effect to any such sale, the Directors may, if
necessary, authorise some person to transfer or effect the transfer of a
forfeited or surrendered share to any such person as aforesaid.
APPENDIX I – NEW CONSTITUTION
Certificate of
shares to be
delivered to the
Company
If call or
instalment not
paid, notice may
be given
Form of notice
If notice not
complied with
shares may be
forfeited
Sale of shares
forfeited
I-13
50. A Member whose shares have been forfeited or surrendered shall cease to
be a Member in respect of the shares, but shall notwithstanding the
forfeiture or surrender remain liable to pay to the Company all moneys which
at the date of forfeiture or surrender were payable by him to the Company
in respect of the shares with interest thereon at eight per cent per annum (or
such lower rate as the Directors may approve) from the date of forfeiture or
surrender until payment, but such liability shall cease if and when the
Company receives payment in full of all such money in respect of the shares
and the Directors may waive payment of such interest either wholly or in
part.
51. The provisions of this Constitution as to forfeiture shall apply in the case of
non-payment of any sum which, by the terms of issue of a share, becomes
payable at a fixed time as if the same had been payable by virtue of a call
duly made and notified.
ALTERATION OF CAPITAL
52. Without prejudice to any special rights previously conferred on the holders
of any shares or class of shares for the time being issued, any share in the
Company may be issued with such preferred, deferred or other special,
limited or conditional rights, or subject to such restrictions, whether as
regards dividend, return of capital, voting or otherwise, or which do not
confer voting rights, as the Company may from time to time by Ordinary
Resolution or, if required by the Act, by Special Resolution determine (or, in
the absence of any such determination, but subject to the Act, as the
Directors may determine) and subject to the provisions of the Act, the
Company may issue preference shares which are, or at the option of the
Company are, liable to be redeemed.
53. (1) Subject to any direction to the contrary that may be given by the
Company in General Meeting or except as permitted under the listing
rules of the Singapore Exchange Securities Trading Limited, all new
shares shall before issue be offered to such persons who as at the date
of the offer are entitled to receive notices from the Company of General
Meetings in proportion as far as the circumstances admit, to the
number of the existing shares to which they are entitled. In offering
such new shares in the first instance to all the then holders of any class
of shares the offer shall be made by notice specifying the number of
shares offered and limiting the time within which the offer if not
accepted will be deemed to be declined and after the expiration of that
time or on the receipt of an intimation from the person to whom the offer
is made that he declines to accept the shares offered, the Directors
may dispose of those shares in such manner as they think most
beneficial to the Company and the Directors may as they think most
beneficial to the Company dispose of any such new shares which by
reason of the proportion borne by them to the shares held by holders
entitled to any such offer or by reason of any other difficulty in
apportioning the same cannot, in the opinion of the Directors, be
conveniently offered under this article.
APPENDIX I – NEW CONSTITUTION
Rights and
liabilities of
Members whose
shares have
been forfeited or
surrendered
Forfeiture applies
to non-payment
of call due at
fixed time
Rights and
privileges of new
shares
Issue of new
shares to
Members
I-14
(2) Notwithstanding article 53(1) but subject to article 8(3), the Company
may by Ordinary Resolution in General Meeting give to the Directors a
general authority, either unconditionally or subject to such conditions
as may be specified in the Ordinary Resolution, to:
(a) issue shares of the Company (“shares”) whether by way of rights,
bonus or otherwise and/or make or grant offers, agreements or
options (collectively, “Instruments”) that might or would require
shares to be issued, including but not limited to the creation and
issue of (as well as adjustments to) warrants, debentures or other
instruments convertible into shares; and
(b) (notwithstanding the authority conferred by the Ordinary
Resolution may have ceased to be in force) issue shares in
pursuance of any Instrument made or granted by the Directors
while the Ordinary Resolution was in force, provided that:
(i) the aggregate number of shares to be issued pursuant to the
Ordinary Resolution (including shares to be issued in
pursuance of Instruments made or granted pursuant to the
Ordinary Resolution) shall be subject to such limits and
manner of calculation as may be prescribed by the
Singapore Exchange Securities Trading Limited;
(ii) in exercising the authority conferred by the Ordinary
Resolution, the Company shall comply with the provisions of
the listing rules of the Singapore Exchange Securities
Trading Limited for the time being in force (unless such
compliance is waived by the Singapore Exchange Securities
Trading Limited) and this Constitution; and
(iii) (unless revoked or varied by the Company in General
Meeting) the authority conferred by the Ordinary Resolution
shall not continue in force beyond the conclusion of the
Annual General Meeting next following the passing of the
Ordinary Resolution, or the date by which such Annual
General Meeting is required by law to be held, or the
expiration of such other period as may be prescribed by the
Act (whichever is the earliest).
54. Except so far as otherwise provided by the conditions of issue or by this
Constitution, all new shares shall be subject to the provisions of the Act and
this Constitution with reference to allotments, payment of calls, lien,
transfer, transmission, forfeiture and otherwise.
55. (1) The Company may by Ordinary Resolution:
(a) consolidate and divide all or any of its shares;
(b) subdivide its shares or any of them (subject nevertheless to the
provisions of the Act and this Constitution) provided always that in
such subdivision the proportion between the amount paid and the
APPENDIX I – NEW CONSTITUTION
New shares
otherwise subject
to provisions of
the Act and this
Constitution
Power to
consolidate,
subdivide,
redenominate
and convert
shares
I-15
amount (if any) unpaid on each reduced share shall be the same
as it was in the case of the share from which the reduced share
is derived; and
(c) subject to the provisions of this Constitution and the Act, convert
its share capital or any class of shares from one currency to
another currency.
(2) The Company may by Special Resolution, subject to and in accordance
with the Act and other applicable laws, convert one class of shares into
another class of shares.
56. The Company may by Special Resolution reduce its share capital, or any
other undistributable reserve in any manner and subject to any incident
authorised and consent required by law. Without prejudice to the generality
of the foregoing, upon cancellation of any share purchased or otherwise
acquired by the Company pursuant to this Constitution and the Act, the
number of issued shares of the Company shall be diminished by the number
of the shares so cancelled, and, where any such cancelled share was
purchased or acquired out of the capital of the Company, the amount of
share capital of the Company shall be reduced accordingly.
CONVERSION OF SHARES INTO STOCK
57. The Company may by Ordinary Resolution convert any paid-up shares into
stock, and may from time to time by like resolution re-convert any stock into
paid-up shares of any denomination.
58. The holders of stock may transfer the same or any part thereof in the same
manner and subject to the same articles as and subject to which the shares
from which the stock arose might previously to conversion have been
transferred or as near thereto as circumstances admit; but the Directors may
from time to time fix the minimum number of stock units transferable and
restrict or forbid the transfer of fractions of that minimum.
59. The holders of stock shall, according to the number of stock units held by
them, have the same rights, privileges and advantages as regards dividend,
return of capital, voting and other matters, as if they held the shares from
which the stock arose; but no such privilege or advantage (except as
regards dividend and return of capital and the assets on winding up) shall be
conferred by any such number of stock units which would not if existing in
shares have conferred that privilege or advantage; and no such conversion
shall affect or prejudice any preference or other special privileges attached
to the shares so converted.
60. The provisions of this Constitution which are applicable to paid-up shares
shall, so far as circumstances will admit, apply to stock, and the words
“share” and “shareholder” therein shall include “stock” and “stockholder”.
APPENDIX I – NEW CONSTITUTION
Power to reduce
capital
Conversion of
shares into
stock and
re-conversion
Transfer of stock
Rights of
stockholders
Shares/stock
I-16
GENERAL MEETINGS
61. (1) Save as otherwise permitted under the Act, an Annual General Meeting
shall be held once in every year, at such time (within a period of not
more than 15 months after the holding of the last preceding Annual
General Meeting) and place as may be determined by the Directors.
(2) All General Meetings other than Annual General Meetings shall be
called Extraordinary General Meetings.
62. The Directors may, whenever they think fit, convene an Extraordinary
General Meeting and Extraordinary General Meetings shall also be
convened by such requisition or, in default, may be convened by such
requisitionists, in accordance with the provisions of the Act. If at any time
there are not within Singapore sufficient Directors capable of acting to form
a quorum at a meeting of Directors, any Director may convene an
Extraordinary General Meeting in the same manner as nearly as possible as
that in which meetings may be convened by the Directors.
NOTICE OF GENERAL MEETINGS
63. (1) Any General Meeting at which it is proposed to pass a Special
Resolution or (save as provided by the Act) a resolution of which
special notice has been given to the Company shall be called by at
least twenty-one days’ notice in writing and any Annual General
Meeting and any other Extraordinary General Meeting by at least
fourteen days’ notice in writing. The period of notice shall in each case
be exclusive of the day on which it is served or deemed to be served
and of the day on which the General Meeting is to be held and shall be
given in the manner hereinafter mentioned to such persons as are
under the provisions herein contained and the Act entitled to receive
such notices from the Company; Provided that a General Meeting
notwithstanding that it has been called by a shorter notice than that
specified above shall be deemed to have been duly called if it is so
agreed:
(a) in the case of an Annual General Meeting by all the Members
entitled to attend and vote thereat; and
(b) in the case of an Extraordinary General Meeting by a majority in
number of the Members having a right to attend and vote thereat,
being a majority together holding not less than 95 per cent of the
total voting rights of all the Members having a right to vote at that
meeting.
Provided also that the accidental omission to give notice to, or the
non-receipt by any person entitled thereto, shall not invalidate the
proceedings at any General Meeting.
At least fourteen days’ notice of any General Meeting shall be given by
advertisement in the daily press and in writing to any stock exchange
upon which the shares of the Company may be listed.
APPENDIX I – NEW CONSTITUTION
Annual General
Meeting
Calling
Extraordinary
General
Meetings
Notice of
General
Meetings
I-17
(2) Notice of every General Meeting shall be given to:
(a) every Member;
(b) every person entitled to a share in consequence of the death or
bankruptcy or otherwise of a Member who but for the same would
be entitled to receive notice of the General Meeting; and
(c) the Auditor for the time being of the Company.
64. (1) Every notice calling a General Meeting shall specify the place and the
day and hour of the meeting, and there shall appear with reasonable
prominence in every such notice a statement that a Member entitled to
attend and vote is entitled to appoint a proxy to attend and to vote
instead of him and that a proxy need not be a Member.
(2) In the case of an Annual General Meeting, the notice shall also specify
the meeting as such.
(3) In the case of any General Meeting at which business other than
routine business is to be transacted, the notice shall specify the
general nature of the business; and if any resolution is to be proposed
as a Special Resolution or as requiring special notice, the notice shall
contain a statement to that effect.
65. Routine business shall mean and include only business transacted at an
Annual General Meeting of the following classes, that is to say:
(a) declaring dividends;
(b) considering and adopting the financial statements, the Directors’
statement, the Auditor’s report and other documents required to be
attached to the financial statements;
(c) appointing or re-appointing the Auditor and fixing the remuneration of
the Auditor or determining the manner in which such remuneration is to
be fixed; and
(d) appointing or re-appointing Directors in place of those retiring by
rotation or otherwise and fixing the remuneration of the Directors.
66. Any notice of a General Meeting to consider special business shall be
accompanied by a statement regarding the effect of any proposed resolution
in respect of such special business.
PROCEEDINGS AT GENERAL MEETINGS
67. No business shall be transacted at any General Meeting unless a quorum is
present at the time when the meeting proceeds to business. Save as herein
otherwise provided, five Members present in person or by proxy shall form
a quorum.
APPENDIX I – NEW CONSTITUTION
Contents of
notice
Routine business
Special business
Quorum
I-18
68. If within half an hour from the time appointed for the General Meeting (or
such longer interval as the Chairman of the meeting may think fit to allow)
a quorum is not present, the meeting, if convened on the requisition of
Members, shall be dissolved. In any other case it shall stand adjourned to
the same day in the next week (or if that day is a public holiday then to the
next business day following that public holiday) at the same time and place,
or to such other day and at such other time and place as the Directors may
determine, and if at such adjourned meeting a quorum is not present within
fifteen minutes from the time appointed for holding the meeting, the
Members present in person or by proxy shall be deemed to be a quorum.
69. The Chairman, if any, of the Directors shall preside as Chairman at every
General Meeting. If there be no such Chairman or if at any General Meeting
he be not present within fifteen minutes after the time appointed for holding
the meeting or be unwilling to act, the Members present shall choose some
Director to be Chairman of the meeting or, if no Director be present or if all
the Directors present decline to take the chair, one of their number present
to be Chairman.
70. The Chairman may, with the consent of any General Meeting at which a
quorum is present (and shall if so directed by the meeting) adjourn the
meeting from time to time (or sine die) and from place to place, but no
business shall be transacted at any adjourned meeting except business
which might lawfully have been transacted at the meeting from which the
adjournment took place. Where a General Meeting is adjourned sine die, the
time and place for the adjourned meeting shall be fixed by the Directors.
When a General Meeting is adjourned for thirty days or more or sine die,
notice of the adjourned meeting shall be given as in the case of the original
meeting. Save as aforesaid, it shall not be necessary to give any notice of
an adjournment or of the business to be transacted at an adjourned General
Meeting.
71. (1) If required by the listing rules of any stock exchange upon which the
shares of the Company may be listed, all resolutions at General
Meetings shall be voted by poll (unless such requirement is waived by
such stock exchange).
(2) Subject to article 71(1), at any General Meeting a resolution put to the
vote of the meeting shall be decided on a show of hands unless a poll
be (before or on the declaration of the result of the show of hands)
demanded:
(a) by the Chairman; or
(b) by at least five Members present in person or by proxy and
entitled to vote thereat; or
(c) by any Member or Members present in person or by proxy and
representing not less than five per cent of the total voting rights of
all the Members having the right to vote at the General Meeting;
or
APPENDIX I – NEW CONSTITUTION
Adjournment if
quorum not
present
Chairman
Adjournment
Mandatory
polling
I-19
(d) by a Member or Members present in person or by proxy, holding
shares conferring a right to vote at the General Meeting, being
shares on which an aggregate sum has been paid-up equal to not
less than five per cent of the total sum paid-up on all the shares
conferring that right.
A demand for a poll made pursuant to this article 71(2) shall not prevent
the continuance of the General Meeting for the transaction of any
business, other than the question on which the poll has been
demanded. Unless a poll be so demanded (and the demand be not
withdrawn) a declaration by the Chairman that a resolution has been
carried or carried unanimously or by a particular majority or lost and an
entry to that effect in the minute book shall be conclusive evidence of
the fact without proof of the number or proportion of the votes recorded
in favour of or against the resolution. A demand for a poll may be
withdrawn.
72. Where a poll is taken, it shall be taken in such manner (including the use of
ballot or voting papers or tickets) as the Chairman may direct and the result
of the poll shall be deemed to be the resolution of the General Meeting. The
Chairman may (and, if required by the listing rules of any stock exchange
upon which the shares of the Company may be listed or if so requested by
the meeting, shall) appoint scrutineers and may adjourn the meeting to
some place and time fixed by him for the purpose of declaring the result of
the poll.
73. If any votes be counted which ought not to have been counted or might have
been rejected, the error shall not vitiate the result of the voting unless it be
pointed out at the same General Meeting or at any adjournment thereof and
not in any case unless it shall in the opinion of the Chairman be of sufficient
magnitude.
74. In the case of an equality of votes, whether on a poll or on a show of hands,
the Chairman of the meeting at which the poll or show of hands takes place
shall be entitled to a casting vote.
75. A poll on the election of a Chairman or on a question of adjournment shall
be taken forthwith. A poll on any other question shall be taken either
immediately or at such subsequent time (not being more than thirty days
from the date of the General Meeting) and place as the Chairman may
direct. No notice need be given of a poll not taken immediately.
76. After the Chairman of any meeting shall have declared the General Meeting
to be over and shall have left the chair no business or question shall under
any pretext whatsoever be brought forward or discussed.
APPENDIX I – NEW CONSTITUTION
Taking a poll
Votes counted in
error
Chairman’s
casting vote
Time for taking a
poll
End of General
Meeting
I-20
VOTES OF MEMBERS
77. (1) Subject and without prejudice to any special privileges or restrictions
as to voting for the time being attached to any special class of shares
for the time being forming part of the capital of the Company and to
article 9, each Member entitled to vote may vote in person or by proxy.
Every Member who is present in person or by proxy shall:
(a) on a poll, have one vote for every share which he holds or
represents; and
(b) on a show of hands, have one vote, provided that:
(i) in the case of a Member who is not a relevant intermediary
and who is represented by two proxies, only one of the two
proxies as determined by that Member or, failing such
determination, by the Chairman of the meeting (or by a
person authorised by him) in his sole discretion shall be
entitled to vote on a show of hands; and
(ii) in the case of a Member who is a relevant intermediary and
who is represented by two or more proxies, each proxy shall
be entitled to vote on a show of hands.
For the purpose of determining the number of votes which a Member,
being a Depositor, or his proxy may cast at any General Meeting on a
poll, the reference to shares held or represented shall, in relation to
shares of that Depositor, be the number of shares entered against his
name in the Depository Register as at 72 hours before the time of the
relevant General Meeting as certified by the Depository to the
Company.
(2) Save as otherwise provided in the Act:
(a) a Member who is not a relevant intermediary may appoint not
more than two proxies to attend, speak and vote at the same
General Meeting. Where such Member’s form of proxy appoints
more than one proxy, the proportion of the shareholding
concerned to be represented by each proxy shall be specified in
the form of proxy; and
(b) a Member who is a relevant intermediary may appoint more than
two proxies to attend, speak and vote at the same General
Meeting, but each proxy must be appointed to exercise the rights
attached to a different share or shares held by such Member.
Where such Member’s form of proxy appoints more than two
proxies, the number and class of shares in relation to which each
proxy has been appointed shall be specified in the form of proxy.
APPENDIX I – NEW CONSTITUTION
Voting rights of
Members
I-21
(3) In any case where a Member is a Depositor, the Company shall be
entitled and bound:
(a) to reject any instrument of proxy lodged by that Depositor if he is
not shown to have any shares entered against his name in the
Depository Register as at 72 hours before the time of the relevant
General Meeting as certified by the Depository to the Company;
and
(b) to accept as the maximum number of votes which in aggregate
the proxy or proxies appointed by that Depositor is or are able to
cast on a poll a number which is the number of shares entered
against the name of that Depositor in the Depository Register as
at 72 hours before the time of the relevant General Meeting as
certified by the Depository to the Company, whether that number
is greater or smaller than the number specified in any instrument
of proxy executed by or on behalf of that Depositor.
(4) The Company shall be entitled and bound, in determining rights to vote
and other matters in respect of a completed instrument of proxy
submitted to it, to have regard to the instructions (if any) given by and
the notes (if any) set out in the instrument of proxy.
78. Any corporation which is a Member may by resolution of its directors or other
governing body authorise such person as it thinks fit to act as its
representative at any General Meeting or of any class of Members and the
persons so authorised shall be entitled to exercise the same powers on
behalf of the corporation as the corporation would exercise if it were an
individual Member and such corporation shall for the purpose of this
Constitution (but subject to the Act) be deemed to be present in person at
any such General Meeting if a person so authorised is present thereat.
79. Where there are joint holders of any share any one of such persons may
vote and be reckoned in a quorum at any General Meeting either personally
or by proxy as if he were solely entitled thereto and if more than one of such
joint holders be so present at any General Meeting that one of such persons
so present whose name stands first in the Register of Members or (as the
case may be) the Depository Register in respect of such share shall alone
be entitled to vote in respect thereof. Several executors or administrators of
a deceased Member in whose name any share stands shall for the purpose
of this article be deemed joint holders thereof.
80. Subject to the provisions of this Constitution every Member shall be entitled
to be present and to vote at any General Meeting either personally or by
proxy and to be reckoned in a quorum in respect of any share or shares
upon which all calls due have been paid.
81. No objection shall be raised to the qualification of any voter except at the
General Meeting or adjourned General Meeting at which the vote objected
to is given or tendered and every vote not disallowed at such meeting shall
APPENDIX I – NEW CONSTITUTION
Corporations
acting by
representatives
Voting rights of
joint holders
Rights to vote
Objections
I-22
be valid for all purposes. Any such objection made in due time shall be
referred to the Chairman of the meeting whose decision shall be final and
conclusive.
82. On a poll votes may be given either personally or by proxy and a person
entitled to more than one vote need not use all his votes or cast all the votes
he uses in the same way.
83. (1) An instrument appointing a proxy shall be in writing and:
(a) in the case of an individual shall be:
(i) signed by the appointor or his attorney if the instrument of
proxy is delivered personally or sent by post; or
(ii) authorised by that individual through such method and in
such manner as may be approved by the Directors, if the
instrument is submitted by electronic communication; and
(b) in the case of a corporation shall be:
(i) either given under its common seal or signed on its behalf by
an attorney or a duly authorised officer of the corporation if
the instrument of proxy is delivered personally or sent by
post; or
(ii) authorised by that corporation through such method and in
such manner as may be approved by the Directors, if the
instrument is submitted by electronic communication.
The Directors may, for the purposes of articles 83(1)(a)(ii) and
83(1)(b)(ii), designate procedures for authenticating any such
instrument, and any such instrument not so authenticated by use of
such procedures shall be deemed not to have been received by the
Company.
The signature on, or authorisation of, such instrument need not be
witnessed. Where an instrument appointing a proxy is signed or
authorised on behalf of the appointor (which shall, for purposes of this
paragraph include a Depositor) by an attorney, the letter or power of
attorney or a duly certified copy thereof must (failing previous
registration with the Company) be lodged with the instrument of proxy
pursuant to article 85, failing which the instrument may be treated as
invalid.
(2) The Directors may, in their absolute discretion:
(a) approve the method and manner for an instrument appointing a
proxy to be authorised; and
(b) designate the procedure for authenticating an instrument
appointing a proxy,
APPENDIX I – NEW CONSTITUTION
Votes on a poll
Execution of
proxies
I-23
as contemplated in articles 83(1)(a)(ii) and 83(1)(b)(ii) for application to
such Members or class of Members as they may determine. Where the
Directors do not so approve and designate in relation to a Member
(whether of a class or otherwise), article 83(1)(a)(i) and/or (as the case
may be) article 83(1)(b)(i) shall apply.
84. A proxy need not be a Member.
85. (1) An instrument appointing a proxy or the power of attorney or other
authority, if any:
(a) if sent personally or by post, must be left at the Office or such
other place (if any) as is specified for the purpose in the notice
convening the General Meeting; or
(b) if submitted by electronic communication, must be received
through such means as may be specified for that purpose in or by
way of note to or in any document accompanying the notice
convening the General Meeting,
and in either case not less than 72 hours before the time appointed for
the holding of the General Meeting or adjourned General Meeting (or in
the case of a poll before the time appointed for the taking of the poll)
to which it is to be used and in default shall not be treated as valid.
(2) The Directors may, in their absolute discretion, and in relation to such
Members or class of Members as they may determine, specify the
means through which instruments appointing a proxy may be submitted
by electronic communications, as contemplated in article 85(1)(b).
Where the Directors do not so specify in relation to a Member (whether
of a class or otherwise), article 85(1)(a) shall apply.
86. An instrument appointing a proxy shall be deemed to include the right to
demand or join in demanding a poll, to move any resolution or amendment
thereto and to speak at the General Meeting.
87. An instrument appointing a proxy shall be in writing in any usual or common
form or in any other form which the Directors may approve. An instrument
appointing a proxy shall, unless the contrary is stated therein be valid as
well for any adjournment of the General Meeting as for the General Meeting
to which it relates and need not be witnessed.
88. A vote given in accordance with the terms of an instrument of proxy (which
for the purposes of this Constitution shall also include a power of attorney)
shall be valid notwithstanding the previous death or mental disorder of the
principal or revocation of the proxy, or of the authority under which the proxy
was executed or the transfer of the share in respect of which the proxy is
given, provided that no intimation in writing of such death, mental disorder,
revocation or transfer shall have been received by the Company at the
Office (or such other place as may be specified for the deposit of
APPENDIX I – NEW CONSTITUTION
Proxy need not
be a member
Deposit of
proxies
Rights of proxies
Form of proxies
Intervening death
or mental
disorder of
principal not to
revoke proxy
I-24
instruments appointing proxies) before the commencement of the General
Meeting or adjourned General Meeting (or in the case of a poll before the
time appointed for the taking of the poll) at which the proxy is used.
DIRECTORS
89. The number of Directors all of whom shall be natural persons shall not be
less than four nor unless otherwise determined by a General Meeting more
than twelve.
90. A Director need not be a Member and shall not be required to hold any share
qualification unless and until otherwise determined by the Company in
General Meeting but he shall be entitled to attend and speak at General
Meetings.
91. The general remuneration of the Directors shall from time to time be
determined by the Company in General Meeting. Such remuneration shall
be divided among them in such proportions and manner as the Directors
may agree or failing agreement, equally. Fees payable to Directors shall not
be increased except pursuant to a resolution passed at a General Meeting,
where notice of the proposed increase has been given in the notice
convening the meeting.
92. (1) Each Director shall in addition to any other remuneration be entitled to
be recouped all travelling hotel and other expenses properly incurred
by him for the purpose of attending meetings of the Directors or of any
committee or any General Meeting or otherwise in the course of the
Company’s business.
(2) The Directors may grant special remuneration to any of their number
who being called upon shall be willing to render any special or extra
services to the Company or to go or reside abroad in connection with
the conduct of any of the affairs of the Company. Such special
remuneration may be made payable to such Director in addition to or
in substitution for his ordinary remuneration as a Director, and may be
made payable by a lump sum or by way of salary, or, except in the case
of a non-executive director, by a percentage of profits, or by any or all
of those modes.
(3) Fees payable to non-executive Directors shall be by a fixed sum, and
not by a commission on or a percentage of profits or turnover. Salaries
payable to executive Directors may not include a commission on or a
percentage of turnover.
93. The Directors on behalf of the Company may pay a gratuity or pension or
allowance on retirement to any Director who has held any other salaried
office or place of profit with the Company or to his widow or dependents and
may make contributions to any fund and pay premiums for the purchase or
provision of any such gratuity, pension or allowance.
APPENDIX I – NEW CONSTITUTION
Appointment and
number of
Directors
Share
qualification
Remuneration of
Directors
Expenses and
extra
remuneration
Pensions
I-25
94. Other than the office of Auditor, a Director may hold any other office or place
of profit under the Company and he or any firm of which he is a member may
act in a professional capacity for the Company in conjunction with his office
of Director for such period and on such terms (as to remuneration and
otherwise) as the Directors may determine. No Director or proposed Director
shall be disqualified by his office from contracting or entering into any
arrangement or transaction with the Company either as vendor, purchaser or
otherwise nor shall such contract, arrangement or transaction or any
contract, arrangement or transaction entered into by or on behalf of the
Company in which any Director shall be in any way interested be avoided
nor shall any Director so contracting or being so interested be liable to
account to the Company for any profit realised by any such contract,
arrangement or transaction by reason only of such Director holding that
office or of the fiduciary relation thereby established but every Director and
Chief Executive Officer (or person(s) holding an equivalent position) shall
observe the provisions of the Act relating to the disclosure of the interests of
the Directors and Chief Executive Officers (or person(s) holding an
equivalent position) in transactions or proposed transactions with the
Company or of any office or property held by a Director or a Chief Executive
Officer (or person(s) holding an equivalent position) which might create
duties or interests in conflict with his duties or interests as a Director or a
Chief Executive Officer (or an equivalent position), as the case may be.
A Director shall not vote in respect of any contract or arrangement or any
other proposal whatsoever in which he has any personal material interest,
directly or indirectly. Save as provided in Article 110, a Director shall not be
counted in the quorum at a meeting in relation to any resolution on which he
is debarred from voting.
95. (1) A Director may be or become a director of or hold any office or place
of profit (other than as Auditor) or be otherwise interested in any
company in which the Company may be interested as vendor,
purchaser, shareholder or otherwise and unless otherwise agreed shall
not be accountable for any fees, remuneration or other benefits
received by him as a director or officer of or by virtue of his interest in
such other company.
(2) The Directors may exercise the voting power conferred by the shares
in any company held or owned by the Company in such manner and in
all respects as the Directors think fit in the interests of the Company
(including the exercise thereof in favour of any resolution appointing
the Directors or any of them to be directors of such company or voting
or providing for the payment of remuneration to the directors of such
company) and any such Director may vote in favour of the exercise of
such voting powers in the manner aforesaid notwithstanding that he
may be or be about to be appointed a director of such other company.
96. The Directors may from time to time appoint one or more of their body to be
managing director or deputy managing director of the Company (or such
person or persons holding equivalent position(s)) and may from time to time
(subject to the provisions of any contract between him or them and the
APPENDIX I – NEW CONSTITUTION
Power of
Directors to hold
office or profit
and to contract
with Company
Holding of office
in other
companies
Appointment of
Managing
Director
I-26
Company) remove or dismiss him or them from office and appoint another or
others in his or their place or places. Where an appointment is for a fixed
term such term shall not exceed five years.
97. A Managing Director (or person holding an equivalent position) who is a
Director shall subject to the provisions of any contract between him and the
Company be subject to the same provisions as to retirement by rotation,
resignation and removal as the other Directors.
98. The remuneration of a Managing Director (or person holding an equivalent
position) shall from time to time be fixed by the Directors and may subject
to this Constitution be by way of salary or commission or participation in
profits or by any or all these modes but he shall not under any circumstances
be remunerated by a commission on or a percentage of turnover.
99. A managing director (or person holding an equivalent position) shall at all
times be subject to the control of the Directors.
ALTERNATE DIRECTORS
100. (1) A Director who is absent or about to be absent from Singapore, may
appoint any person (other than another Director) approved by the
majority of his co-Directors to be his alternate Director in the Company
and may at any time remove any such alternate Director so appointed
from office.
(2) An alternate Director shall (subject to his giving to the Company an
address in Singapore) be entitled to receive notices of all meetings of
the Directors and to attend and vote as a Director at such meetings at
which the Director appointing him is not personally present and
generally to perform all functions of his appointor as a Director in his
absence.
(3) An alternate Director shall ipso facto cease to be an alternate Director
if his appointor ceases for any reason to be a Director otherwise than
by retiring and being re-elected at the same meeting.
(4) All appointments and removals of alternate Directors shall be effected
in writing under the hand of the Director making or terminating such
appointment left at the Office.
(5) A person shall not act as alternate Director to more than one Director
at the same time.
(6) An alternate Director shall be entitled to contract and be interested in
and benefit from contracts or arrangements or transactions and to be
repaid expenses and to be indemnified to the same extent mutatis
mutandis as if he were a Director but he shall not be entitled to receive
from the Company in respect of his appointment as alternate Director
any remuneration except only such part (if any) of the remuneration
otherwise payable to his principal as such principal may by notice in
writing to the Company from time to time direct.
APPENDIX I – NEW CONSTITUTION
Managing
Director to be
subject to
retirement by
rotation
Remuneration of
Managing
Director
Powers of
Managing
Director
Alternate
Director
I-27
GENERAL POWERS OF DIRECTORS
101. The business and the affairs of the Company shall be managed by, or under
the direction or supervision of, the Directors. The Directors may exercise all
such powers of the Company as are not by the Act or this Constitution
required to be exercised by the Company in General Meeting. The Directors
shall not carry into effect any proposals for selling or disposing of the whole
or substantially the whole of the Company’s undertaking unless such
proposals have been approved by Members in a General Meeting. The
general powers given by this article shall not be limited or restricted by any
special authority or power given to the Directors by any other article.
102. The Directors may from time to time by power of attorney under the Seal
appoint any company, firm or person or any fluctuating body of persons
whether nominated directly or indirectly by the Directors to be the attorney
or attorneys of the Company for such purposes and with such powers,
authorities and discretions (not exceeding those vested in or exercisable by
the Directors under this Constitution) and for such period and subject to
such conditions as they may think fit, and any such power of attorney may
contain such provisions for the protection and convenience of persons
dealing with such attorney as the Directors may think fit and may also
authorise any such attorney to subdelegate all or any of the powers,
authorities and discretions vested in him.
103. The Directors may establish any local boards or agencies for managing any
affairs of the Company, either in Singapore or elsewhere and may appoint
any persons to be members of such local boards or any managers or agents,
and may fix their remuneration, and may delegate to any local board,
manager or agent any of the powers, authorities and discretions vested in
the Directors, with power to subdelegate, and may authorise the members
of any local board or any of them to fill any vacancies therein and to act
notwithstanding vacancies, and any such appointment or delegation may be
made upon such terms and subject to such conditions as the Directors may
think fit and the Directors may remove any person so appointed, and may
annul or vary any such delegation but no person acting in good faith and
without notice of any such annulment or variation shall be affected thereby.
104. The Company or the Directors on behalf of the Company may in exercise of
the powers in that behalf conferred by the Act cause to be kept a Branch
Register, or Branch Registers, of Members and the Directors may (subject
to the provisions of the Act) make and vary such regulations as they may
think fit in respect of the keeping of any such Register.
105. All cheques, promissory notes, drafts, bills of exchange, and other
negotiable or transferable instruments and all receipts for moneys paid to
the Company shall be signed, drawn, accepted, endorsed or otherwise
executed, as the case may be, in such manner as the Directors shall from
time to time by resolution determine.
APPENDIX I – NEW CONSTITUTION
General powers
of Directors to
manage
Company’s
business
Power to appoint
attorneys
Power to
establish local
boards, etc
Power to keep a
Branch register
Signature of
cheque and bills
I-28
BORROWING POWERS
106. The Directors may borrow or raise money from time to time for the purpose
of the Company or secure the payment of such sums as they think fit and
may secure the repayment or payment of such sums by mortgage or charge
upon all or any of the property or assets of the Company or by the issue of
debentures (whether at par or at discount or premium) or otherwise as they
may think fit.
MEETINGS AND PROCEEDINGS OF DIRECTORS
107. (1) The Directors may meet together either in person or by Meetings of
telephone, radio, conference television or similar Directors
communication equipment or any other form of audio, audio-visual,
electronic or instantaneous communication by which all persons
participating in the meeting are able to hear and be heard by all other
participants, for the dispatch of business and adjourn and otherwise
regulate their meetings as they think fit and a quorum for such
teleconference meetings shall be the same as the quorum required of
a Directors’ meeting provided under this Constitution. A resolution
passed by such a conference shall, notwithstanding that the Directors
are not present together at one place at the time of conference, be
deemed to have been passed at a meeting of the Directors held on the
day and at the time at which the conference was held and shall be
deemed to have been held at the Office of the Company, unless
otherwise agreed, and all Directors participating at that meeting shall
be deemed for all purposes of this Constitution to be present at that
meeting.
(2) Questions arising at any meeting shall be decided by a majority of
votes and in case of an equality of votes the Chairman of the meeting
shall have a second or casting vote except when only two Directors are
present and form a quorum, the Chairman at which only such a quorum
is present, or only two Directors are competent to vote on the question.
108. A Director may, and the Secretary on the requisition of a Director shall, at
any time summon a meeting of the Directors but it shall not be necessary to
give notice of a meeting of Directors to any Director for the time being
absent from Singapore.
109. The quorum necessary for the transaction of the business of the Directors
may be fixed by the Directors and unless so fixed at any other number shall
be three. A meeting of the Directors at which a quorum is present shall be
competent to exercise all the powers and discretions for the time being
exercisable by the Directors.
110. A Director notwithstanding his interest may be counted in the quorum
present at any meeting whereat he or any other Director is appointed to hold
any such office or place of profit under the Company or whereat the terms
of any such appointment are arranged, and he may vote on any such
appointment or arrangement other than his own appointment or the
arrangement of the terms thereof.
APPENDIX I – NEW CONSTITUTION
Directors’
borrowing
powers
Meetings of
Directors
Notice of
meeting
Quorum
Effect of interest
of Director on
quorum
I-29
111. The continuing Directors may act notwithstanding any vacancies but if and
so long as the number of Directors is reduced below the minimum number
fixed by or in accordance with this Constitution the continuing Directors or
Director may act for the purpose of filling up such vacancies or of
summoning General Meetings but not for any other purpose (except in an
emergency). If there be no Directors or Director able or willing to act, then
any two Members may summon a General Meeting for the purpose of
appointing Directors.
112. The Directors may from time to time elect a Chairman and if desired a
Deputy Chairman and determine the period for which he is or they are to
hold office. The Deputy Chairman will perform the duties of the Chairman
during the Chairman’s absence for any reason. The Chairman and in his
absence the Deputy Chairman shall preside as Chairman at meetings of the
Directors but if no such Chairman or Deputy Chairman be elected or if at any
meeting the Chairman and the Deputy Chairman be not present within five
minutes after the time appointed for holding the same, the Directors present
shall choose one of their number to be Chairman of such meeting.
113. A resolution in writing signed by a majority of the Directors shall be as
effective as a resolution passed at a meeting of the Directors duly convened
and held and may consist of several documents in the like form each signed
by one or more of the Directors. The expressions “in writing” and “signed”
include approval by any such Director by telefax, telex, cable or telegram or
any form of electronic communication approved by the Directors for such
purpose from time to time incorporating, if the Directors deem necessary,
the use of security and/or identification procedures and devices approved by
the Directors.
114. The Directors may delegate any of their powers to committees consisting of
such member or members of their body and (if thought fit) one or more other
persons co-opted as hereinafter provided. Any committee so formed shall in
the exercise of the powers so delegated conform to any regulations that may
be imposed on them by the Directors. Any such regulations may provide for
or authorise the co-option to the committee of persons other than Directors
and for such co-opted members to have voting rights as members of the
committee.
115. The meetings and proceedings of any such committee consisting of two or
more members shall be governed by the provisions of this Constitution
regulating the meetings and proceedings of the Directors, so far as the same
are applicable and are not superseded by any regulations made by the
Directors under the last preceding article.
116. All acts done by any meeting of Directors or of a committee of Directors or
by any person acting as Director shall as regards all persons dealing in good
faith with the Company, notwithstanding that there was some defect in the
appointment of any such Director or person acting as aforesaid or that they
or any of them were disqualified or had vacated office or were not entitled
to vote be as valid as if every such person had been duly appointed and was
qualified and had continued to be a Director and had been entitled to vote.
APPENDIX I – NEW CONSTITUTION
Proceedings in
case of
vacancies
Chairman and
Deputy
Chairman of
Directors
Resolutions in
writing
Power to appoint
committees
Proceedings at
committee
meeting
Validity of acts of
Directors in spite
of some formal
defect
I-30
ROTATION OF DIRECTOR
117. Subject to this Constitution and to the provisions of the Act, at each Annual
General Meeting one-third of the Directors for the time being, or if their
number is not a multiple of three, the number nearest to but not less than
one-third with a minimum of one, shall retire from office and a Director at an
Annual General Meeting shall retain office until the close of the meeting,
whether adjourned or not.
118. The Directors to retire in every year shall be those who, being subject to
retirement by rotation, have been longest in office since their last re-election
or appointment, but as between persons who became or were last
re-elected Directors on the same day those to retire shall (unless they
otherwise agree among themselves) be determined by lot. A retiring Director
shall be eligible for re-election.
119. The Company at the General Meeting at which a Director retires under any
provision of this Constitution may by Ordinary Resolution fill up the vacated
office, by electing a person thereto. In default the retiring Director shall be
deemed to have been re-elected, unless:
(a) at such General Meeting it is expressly resolved not to fill up such
vacated office or a resolution for the re-election of such Director is put
to the meeting and lost; or
(b) such Director is disqualified under the Act from holding office as a
Director or has given notice in writing to the Company that he is
unwilling to be re-elected; or
(c) such Director is disqualified from acting as a director in any jurisdiction
for reasons other than on technical grounds.
120. No person other than a Director retiring at the General Meeting shall unless
recommended by the Directors for election be eligible for appointment as a
Director at any General Meeting and at least eleven clear days before the
day appointed for the General Meeting there shall have been left at the
Office notice in writing signed by some Member duly qualified to attend and
vote at the General Meeting for which such notice is given of his intention to
propose such person for election and also notice in writing duly signed by
the nominee giving his consent to the nomination and signifying his
candidature for the office. Provided that in the case of a person
recommended by the Directors for election nine clear days’ notice only shall
be necessary and notice of each and every candidate for election shall be
served on all Members at least seven clear days prior to the General
Meeting at which the election is to take place.
121. In accordance with the provisions of the Act, the Company may by Ordinary
Resolution of which special notice has been given remove any Director
before the expiration of his period of office, notwithstanding any provision of
this Constitution or of any agreement between the Company and such
Director but without prejudice to any claim he may have for damages for
breach of any such agreement. The Company in General Meeting may
APPENDIX I – NEW CONSTITUTION
Retirement of
Directors by
rotation
Selection of
Directors to retire
Filling vacated
office
Notice of
intention to
appoint Director
Vacation of office
of Directors
I-31
appoint another person in place of a Director so removed from office and any
person so appointed shall be subject to retirement by rotation at the same
time as if he had become a Director on the day on which the Director in
whose place he is appointed was last elected a Director. In default of such
appointment the vacancy so arising may be filled by the Directors as a
casual vacancy.
122. The Company may by Ordinary Resolution appoint any person to be a
Director either to fill a casual vacancy or as an additional Director. Without
prejudice thereto the Directors shall have power at any time so to do but so
that the total number of Directors shall not at any time exceed the maximum
number fixed by or in accordance with this Constitution. Any person so
appointed by the Directors shall hold office only until the next Annual
General Meeting and shall then be eligible for re-election but shall not be
taken into account in determining the number of Directors who are to retire
by rotation at such meeting.
VACATION OF OFFICE OF DIRECTORS
123. The office of a Director shall be vacated in any one of the following events,
namely:
(a) if he shall become prohibited by law from acting as a Director;
(b) if he shall become disqualified from acting as a director in any
jurisdiction for reasons other than on technical grounds (in which case
he must immediately resign from the Board);
(c) if he becomes bankrupt or suspends payment of his debts or makes
any arrangement or composition with his creditors generally;
(d) if he becomes mentally disordered and incapable of managing himself
or his affairs;
(e) if he resigns his office by notice in writing to the Company;
(f) if he or any alternate appointed by him shall absent himself from the
meetings of the Directors during a period of two calendar months
without special leave of absence from the Directors; or
(g) if he be removed from office by a resolution of the Company in General
Meeting.
SECRETARY
124. The Secretary or Secretaries shall and a Deputy or Assistant Secretary or
Secretaries may be appointed by the Directors for such term, at such
remuneration and upon such conditions as they may think fit, and any
Secretary, Deputy or Assistant Secretary so appointed may be removed by
them, but without prejudice to any claim he may have for damages for
APPENDIX I – NEW CONSTITUTION
Power to fill
casual vacancies
and to appoint
additional
Director
Vacation of office
of Directors
Secretary
I-32
breach of any contract of service between him and the Company. The
appointment and duties of the Secretary or Secretaries shall not conflict with
the provisions of the Act.
SEAL
125. (1) The Directors shall provide for the safe custody of the Seal which shall
not be used without the authority of the Directors or of a committee
authorised by the Directors in that behalf.
(2) Every instrument to which the Seal shall be affixed shall be signed
autographically by two Directors, or by one Director and the Secretary
or some other person appointed by the Directors in place of the
Secretary for the purpose, save that as regards any certificates for
shares or debentures or other securities of the Company the Directors
may by resolution determine that such signatures or either of them
shall be affixed by some method or system of mechanical signature.
(3) The Company may exercise the powers conferred by the Act with
regard to having an Official Seal for use abroad, and such powers shall
be vested in the Directors.
(4) The Company may have a duplicate Common Seal as referred to in the
Act which shall be a facsimile of the Common Seal with the addition on
its face of the words “Share Seal”.
AUTHENTICATION OF DOCUMENTS
126. Any Director or the Secretary or any person appointed by the Directors for
the purpose shall have power to authenticate any documents affecting the
constitution of the Company and any resolutions passed by the Company or
the Directors or any committee, and any books, records, documents,
accounts and financial statements relating to the business of the Company,
and to certify copies thereof or extracts therefrom as true copies or extracts;
and where any books, records, documents, accounts or financial statements
are elsewhere than at the Office, the local manager and other officer of the
Company having custody thereof shall be deemed to be a person appointed
by the Directors as aforesaid. Any authentication or certification made
pursuant to this article may be made by any electronic means approved by
the Directors from time to time for such purpose incorporating, if the
Directors deem necessary, the use of security procedures or devices
approved by the Directors.
127. A document purporting to be a copy of a resolution of the Directors or an
extract from the minutes of a meeting of Directors which is certified as such
in accordance with the provisions of the last preceding article shall be
conclusive evidence in favour of all persons dealing with the Company upon
the faith thereof that such resolution has been duly passed or, as the case
may be, that such extract is a true and accurate record of a duly constituted
meeting of the Directors.
APPENDIX I – NEW CONSTITUTION
Seal
Power to
authenticate
documents
Certified copies
of resolutions of
the Directors
I-33
MINUTES AND BOOKS
128. The Directors shall cause minutes to be kept in books to be provided for the
purpose:
(a) of all appointments of officers made by the Directors;
(b) of the names of the Directors present at each meeting of Directors and
of any committee of Directors; and
(c) of all resolutions and proceedings at all General Meetings and of any
class of Members, of the Directors and of committees of Directors.
129. Any register, index, minute book, accounting record, minute or other book
required by this Constitution or by the Act to be kept by or on behalf of the
Company may, subject to and in accordance with the Act, be kept in hard
copy form or in electronic form, and arranged in the manner that the
Directors think fit. If such records are kept in electronic form, the Directors
shall ensure that they are capable of being reproduced in hard copy form,
and shall provide for the manner in which the records are to be
authenticated and verified. In any case where such records are kept
otherwise than in hard copy form, the Directors shall take reasonable
precautions for ensuring the proper maintenance and authenticity of such
records, guarding against falsification and facilitating the discovery of any
falsifications.
FINANCIAL STATEMENTS
130. The Directors shall cause to be kept such accounting and other records as
are necessary to comply with the provisions of Directors to keep proper
accounting records the Act and shall cause those records to be kept in such
manner as to enable them to be conveniently and properly audited.
131. Subject to the provisions of the Act, the books of accounts shall be kept at
the Office or at such other place or places as the Directors think fit within
Singapore. No Member (other than a Director) shall have any right of
inspecting any account or book or document or other recording of the
Company except as is conferred by law or authorised by the Directors or by
an Ordinary Resolution of the Company.
132. In accordance with the provisions of the Act, the Directors shall cause to be
prepared and to be laid before the Company in General Meeting such
financial statements, balance sheets, reports, statements and other
documents as may be necessary. Whenever so required, the interval
between the close of a financial year of the Company and the date of the
Company’s Annual General Meeting shall not exceed four months (or such
other period as may be permitted by the Act).
133. A copy of the financial statements and, if required, the balance sheet
(including every document required by the Act to be attached thereto), which
is duly audited and which is to be laid before the Company in General
Meeting accompanied by a copy of the Auditor’s report thereon, shall not
APPENDIX I – NEW CONSTITUTION
Minutes
Form of
registers, etc
Directors to keep
proper
accounting
records
Location and
inspection
Presentation of
financial
statements
Copies of
financial
statements
I-34
less than fourteen days before the date of the General Meeting be sent to
every Member and to every other person who is entitled to receive notices
of General Meetings from the Company under the provisions of the Act or of
this Constitution, provided that:
(a) these documents may be sent less than fourteen days before the date
of the General Meeting if all persons entitled to receive notices of
General Meetings from the Company so agree; and
(b) this article shall not require a copy of these documents to be sent to
any person of whose address the Company is not aware or to more
than one of the joint holders of a share in the Company or the several
persons entitled thereto in consequence of the death or bankruptcy of
the holder or otherwise but any Member to whom a copy of these
documents has not been sent shall be entitled to receive a copy free of
charge on application at the Office.
AUDITOR
134. An Auditor shall be appointed and his duties regulated in accordance with
the provisions of the Act. Every Auditor of the Company shall have a right of
access at all times to the accounting and other records of the Company and
shall make his report as required by the Act.
135. Subject to the provisions of the Act all acts done by any person acting as an
Auditor shall, as regards all persons dealing in good faith with the Company,
be valid, notwithstanding that there was some defect in his appointment or
that he was at the time of his appointment not qualified for appointment.
136. An Auditor shall be entitled to attend any General Meeting and to receive all
notices of and other communications relating to any General Meeting which
any Member is entitled to receive and to be heard at any General Meeting
on any part of the business of the General Meeting which concerns him as
Auditor.
DIVIDENDS
137. The Company in General Meeting may declare dividends, but no dividend
shall exceed the amount recommended by the Directors.
138. The Directors may from time to time pay to the Members such interim
dividends as appear to the Directors to be justified by the profits of the
Company.
139. No dividend shall be paid otherwise than out of profits.
APPENDIX I – NEW CONSTITUTION
Appointment of
Auditor
Validity of acts of
Auditor in spite
of some formal
defect
Auditor’s right to
receive notices
of and attend
General
Meetings
Declaration of
ordinary dividend
Interim dividend
Dividend only out
of profits
I-35
140. Subject to any rights or restrictions attached to any shares or class of shares
and except as otherwise permitted under the Act:
(a) all dividends in respect of shares must be paid in proportion to the
number of shares held by a Member but where shares are partly paid
all dividends must be apportioned and paid proportionately to the
amounts paid or credited as paid on the partly paid shares; and
(b) all dividends must be apportioned and paid proportionately to the
amounts so paid or credited as paid during any portion or portions of
the period in respect of which the dividend is paid.
For the purposes of this article, an amount paid or credited as paid on a
share in advance of a call is to be ignored.
141. Whenever the Directors or the Company in General Meeting have resolved
or proposed that a dividend (including an interim, final, special or other
dividend) be paid or declared on the ordinary share capital of the Company,
the Directors may further resolve that Members entitled to such dividend be
entitled to elect to receive an allotment of ordinary shares credited as fully
paid in lieu of cash in respect of the whole or such part of the dividend as
the Directors may think fit.
142. The Directors may retain any dividends or other moneys payable on or in
respect of a share on which the Company has a lien, and may apply the
same in or towards satisfaction of the debts, liabilities, or engagements in
respect of which the lien exists.
143. Any General Meeting declaring a dividend may direct payment of such
dividend wholly or partly by the distribution of specific assets and in
particular of paid-up shares, debentures or debenture stock of any other
company or in any one or more of such ways, and the Directors shall give
effect to such resolution and where any difficulty arises in regard to such
distribution, the Directors may settle the same as they think expedient, and
in particular may issue fractional certificates and fix the value for distribution
of such specific assets or any part thereof and may determine that cash
payments shall be made to any Members upon the footing of the value so
fixed in order to adjust the rights of all parties and may vest any such
specific assets in trustees as may seem expedient to the Directors. No
valuation, adjustment or arrangement so made shall be questioned by any
Member.
144. Any dividend, interest or other moneys payable in cash on or in respect of
shares may be paid by cheque, draft, warrant or Post Office order sent
through the post directed to the registered address of the holder or in the
case of joint holders, to the registered address of that one of the joint
holders who is first named in the Register of Members or (as the case may
be) the Depository Register or to such person and to such address as the
holder or joint holders may in writing direct. Every such cheque, draft,
warrant or Post Office order shall be payable to the order of the person to
whom it is sent.
APPENDIX I – NEW CONSTITUTION
Application and
apportionment of
dividends
Scrip Dividend
Scheme
Dividend may be
retained
Payment of
dividend in
specie
Payment by post
I-36
145. Every such cheque, draft, warrant or Post Office order shall be sent at the
risk of the person entitled to the money represented thereby, and the
Company shall not be responsible for the loss of any cheque, draft, warrant
or Post Office order which shall be sent by post duly addressed to the
person for whom it is intended.
146. No unpaid dividend shall bear interest against the Company.
147. A transfer of shares shall not pass the right to any dividend declared thereon
before the registration of the transfer.
148. The Directors may retain the dividends payable upon shares in respect of
which any person is under the provisions as to the transmission of shares
hereinbefore contained entitled to become a Member or which any person
under that article is entitled to transfer, until such person shall become a
Member in respect thereof or shall duly transfer the same.
149. The payment by the Directors of any unclaimed dividends or other moneys
payable on or in respect of a share into a separate account shall not
constitute the Company a trustee in respect thereof. All dividends unclaimed
after being declared may be invested or otherwise made use of by the
Directors for the benefit of the Company and any dividend unclaimed after
a period of six years from the date of declaration of such dividend may be
forfeited and if so shall revert to the Company but the Directors may at any
time thereafter at their absolute discretion annul any such forfeiture and pay
the dividend so forfeited to the person entitled thereto prior to the forfeiture.
If the Depository returns any such dividend or moneys to the Company, the
relevant Depositor shall not have any right or claim in respect of such
dividend or moneys against the Company if a period of six years has
elapsed from the date of the declaration of such dividend or the date on
which such other moneys are first payable.
150. A payment by the Company to the Depository of any dividend or other
moneys payable to a Depositor shall, to the extent of the payment made,
discharge the Company from any liability to the Depositor in respect of that
payment.
RESERVES
151. The Directors may from time to time set aside out of the profits of the
Company and carry to reserve such sums as they think proper which, at the
discretion of the Directors, shall be applicable for meeting contingencies or
for the gradual liquidation of any debt or liability of the Company or for
repairing or maintaining the works, plant and machinery of the Company or
for special dividends or bonuses or for equalising dividends or for any other
purpose to which the profits of the Company may properly be applied and
pending such application may either be employed in the business of the
Company or be invested. The Directors may divide the reserve into such
special funds as they think fit and may consolidate into one fund any special
funds or any parts of any special funds into which the reserve may have
been divided. The Directors may also without placing the same to reserve
carry forward any profits which they may think it not prudent to divide.
APPENDIX I – NEW CONSTITUTION
Company not
responsible for
loss
No interest
No dividend
before
registration
Power to retain
dividends
pending
transmission
Unclaimed
dividends
Payment to
Depository good
discharge
Power to carry
profit to reserve
I-37
CAPITALISATION OF PROFITS AND RESERVES
152. (1) The Directors may, with the sanction of an Ordinary Resolution of the
Company, including any Ordinary Resolution passed pursuant to article
53(2) (but subject to article 8(3)):
(a) issue bonus shares for which no consideration is payable to the
Company to the persons registered as holders of shares in the
Register of Members or (as the case may be) the Depository
Register at the close of business on:
(i) the date of the Ordinary Resolution (or such other date as
may be specified therein or determined as therein provided);
or
(ii) (in the case of an Ordinary Resolution passed pursuant to
article 53(2)) such other date as may be determined by the
Directors,
in proportion to their then holdings of shares; and/or
(b) capitalise any sum standing to the credit of any of the Company’s
reserve accounts or other undistributable reserve or any sum
standing to the credit of profit and loss account by appropriating
such sum to the persons registered as holders of shares in the
Register of Members or (as the case may be) in the Depository
Register at the close of business on:
(i) the date of the Ordinary Resolution (or such other date as
may be specified therein or determined as therein provided);
or
(ii) (in the case of an Ordinary Resolution passed pursuant to
article 53(2)) such other date as may be determined by the
Directors,
in proportion to their then holdings of shares and applying such
sum on their behalf in paying up in full new shares (or, subject to
any special rights previously conferred on any shares or class of
shares for the time being issued, new shares of any other class
not being redeemable shares) for allotment and distribution
credited as fully paid-up to and amongst them as bonus shares in
the proportion aforesaid.
(2) The Directors may do all acts and things considered necessary or
expedient to give effect to any such bonus issue or capitalisation under
article 152(1), with full power to the Directors to make such provisions
as they think fit for any fractional entitlements which would arise on the
basis aforesaid (including provisions whereby fractional entitlements
are disregarded or the benefit thereof accrues to the Company rather
than to the Members concerned). The Directors may authorise any
person to enter on behalf of all the Members interested into an
APPENDIX I – NEW CONSTITUTION
Power to
capitalise profits
I-38
agreement with the Company providing for any such bonus issue or
capitalisation and matters incidental thereto and any agreement made
under such authority shall be effective and binding on all concerned.
(3) In addition and without prejudice to the powers provided for by articles
152(1) and 152(2), the Directors shall have power to issue shares for
which no consideration is payable and/or to capitalise any undivided
profits or other moneys of the Company not required for the payment
or provision of any dividend on any shares entitled to cumulative or
non-cumulative preferential dividends (including profits or other
moneys carried and standing to any reserve or reserves) and to apply
such profits or other moneys in paying up in full new shares, in each
case on terms that such shares shall, upon issue:
(a) be held by or for the benefit of participants of any share incentive
or option scheme or plan implemented by the Company and
approved by shareholders in General Meeting and on such terms
as the Directors shall think fit; or
(b) be held by or for the benefit of non-executive Directors as part of
their remuneration under article 91 and/or article 92(2) approved
by shareholders in General Meeting in such manner and on such
terms as the Directors shall think fit.
The Directors may do all such acts and things considered necessary or
expedient to give effect to any of the foregoing.
NOTICES
153. (1) Any notice or document (including a share certificate) may be served
by the Company on any Member either personally or by sending it
through the post in a prepaid letter or wrapper addressed to such
Member at his registered address entered in the Register of Members
or (as the case may be) the Depository Register, or (if he has no
registered address within Singapore) to the address, if any, within
Singapore supplied by him to the Company or (as the case may be)
supplied by him to the Depository as his address for the service of
notices, or by delivering it to such address as aforesaid.
(2) Without prejudice to the provisions of article 153(1), but subject
otherwise to the Act and any regulations made thereunder relating to
electronic communications, any notice or document (including, without
limitation, any accounts, balance-sheet, financial statements or report)
which is required or permitted to be given, sent or served under the Act
or under this Constitution by the Company, or by the Directors, to a
Member may be given, sent or served using electronic
communications:
(a) to the current address of that person; or
(b) by making it available on a website prescribed by the Company
from time to time,
APPENDIX I – NEW CONSTITUTION
Service of
notices
I-39
in accordance with the provisions of this Constitution, the Act and/or
any other applicable regulations or procedures.
(3) For the purposes of article 153(2), a Member shall be deemed to have
agreed to receive such notice or document by way of such electronic
communications and shall not have a right to elect to receive a physical
copy of such notice or document.
(4) Notwithstanding article 153(3), the Directors may, at their discretion, at
any time give a Member an opportunity to elect within a specified
period of time whether to receive such notice or document by way of
electronic communications or as a physical copy, and a Member shall
be deemed to have consented to receive such notice or document by
way of electronic communications if he was given such an opportunity
and he failed to make an election within the specified time, and he shall
not in such an event have a right to receive a physical copy of such
notice or document.
154. All notices with respect to any shares to which persons are jointly entitled
shall be given to whichever of such persons is named first on the Register
of Members or (as the case may be) the Depository Register and notice so
given shall be sufficient notice to all the holders of such shares.
155. A Member who (having no registered address within Singapore) has not
supplied to the Company or (as the case may be) the Depository an address
within Singapore for the service of notices or documents shall not be entitled
to receive any notice or document from the Company.
156. A person entitled to a share in consequence of the death or bankruptcy of a
Member or otherwise upon supplying to the Company such evidence as the
Directors may reasonably require to show his title to the share, and upon
supplying also to the Company or (as the case may be) the Depository an
address within Singapore for the service of notices, shall be entitled to have
served upon him at such address any notice or document to which the
Member but for his death or bankruptcy or otherwise would be entitled and
such service shall for all purposes be deemed a sufficient service of such
notice or document on all persons interested (whether jointly with or as
claiming through or under him) in the share. Save as aforesaid any notice or
document delivered or sent by post to or left at the address of any Member
or given, sent or served by electronic communications in pursuance of this
Constitution shall (notwithstanding that such Member be then dead or
bankrupt or otherwise not entitled to such share and whether or not the
Company have notice of the same) be deemed to have been duly served in
respect of any share registered in the name of such Member in the Register
of Members or, where such member is a Depositor, entered against his
name in the Depository Register as sole or first-named joint holder.
APPENDIX I – NEW CONSTITUTION
Service of
notices in
respect of joint
holders
Service of
notices on
Members abroad
Service of
notices after
death etc. on a
Member
I-40
157. (1) Any notice or other document if sent by post and whether by airmail or
not shall be deemed to have been served at the time the envelope or
wrapper containing the same is posted, and in proving such service by
post it shall be sufficient to prove that the letter or wrapper containing
the same was properly addressed and put into the post office as a
prepaid letter or wrapper.
(2) Where a notice or document is given, sent or served by electronic
communications:
(a) to the current address of a person pursuant to article 153(2)(a), it
shall be deemed to have been duly given, sent or served at the
time of transmission of the electronic communication by the email
server or facility operated by the Company or its service provider
to the current address of such person (notwithstanding any
delayed receipt, non-delivery or “returned mail” reply message or
any other error message indicating that the electronic
communication was delayed or not successfully sent), unless
otherwise provided under the Act and/or any other applicable
regulations or procedures; and
(b) by making it available on a website pursuant to article 153(2)(b),
it shall be deemed to have been duly given, sent or served on the
date on which the notice or document is first made available on
the website, or unless otherwise provided under the Act and/or
any other applicable regulations or procedures.
158. When a given number of days’ notice or notice extending over any other
period is required to be given the day of service shall, unless it is otherwise
provided or required by this Constitution or by the Act, be not counted in
such number of days or period.
WINDING UP
159. If the Company shall be wound up the liquidator may, with the sanction of a
Special Resolution of the Company and any other sanction required by the
Act, divide amongst the Members in specie or kind the whole or any part of
the assets of the Company (including any shares in any other company
received by the liquidator as consideration for the sale of the whole or part
of the Company’s assets and whether they shall consist of property of the
same kind or not) and any such division may be otherwise than in
accordance with the existing rights of the Members and may, for such
purpose set such value as he deems fair upon any property to be divided as
aforesaid and may determine how such division shall be carried out as
between the Members or different classes of Members. The liquidator may,
with the like sanction, vest the whole or any part of such assets in trustees
upon such trusts for the benefit of the contributories as the liquidator, with
the like sanction, shall think fit, but so that no Member shall be compelled to
accept any shares or other securities whereon there is any liability. This
article is without prejudice to the rights of persons whose shares are issued
on special terms. If any division is resolved on otherwise than in accordance
APPENDIX I – NEW CONSTITUTION
When notices
deemed served
Day of service
not counted
Winding up
I-41
with the existing rights of the Members, the Members shall have the same
right of dissent and consequential rights as if such resolution were a Special
Resolution passed pursuant to Section 306 of the Act.
INDEMNITY
160. Subject to the provisions of and so far as may be permitted by the Act, every
Director, Auditor, Secretary or other officer of the Company shall be entitled
to be indemnified by the Company against all costs, charges, losses,
expenses and liabilities incurred or to be incurred by him in the execution
and discharge of his duties or in relation thereto. Without prejudice to the
generality of the foregoing no Director, Secretary or other officer of the
Company shall be liable for the acts, receipts, neglects or defaults of any
other Director or officer or for joining in any receipt or other act for
conformity or for any loss or expense happening to the Company through
the insufficiency or deficiency of title to any property acquired by order of the
Directors for or on behalf of the Company or for the insufficiency or
deficiency of any security in or upon which any of the moneys of the
Company shall be invested or for any loss or damage arising from the
bankruptcy insolvency or tortious act of any person with whom any moneys,
securities or effects shall be deposited or left or for any other loss, damage
or misfortune whatsoever which shall happen in the execution of the duties
of his office or in relation thereto unless the same shall happen through his
own negligence, wilful default, breach of duty or breach of trust.
SECRECY
161. No Member shall be entitled to require discovery of or any information
respecting any detail of the Company’s trade or any matter which may be in
the nature of a trade secret, mystery of trade or secret process which may
relate to the conduct of the business of the Company and which in the
opinion of the Directors it will be inexpedient in the interest of the Members
to communicate to the public save as may be authorised by law or required
by the listing rules of any stock exchange upon which the shares of the
Company may be listed.
PERSONAL DATA
162. (1) A Member who is a natural person is deemed to have consented to the
collection, use and disclosure of his personal data (whether such
personal data is provided by that Member or is collected through a third
party) by the Company (or its agents or service providers) from time to
time for any of the following purposes:
(a) implementation and administration of any corporate action by the
Company (or its agents or service providers);
(b) internal analysis and/or market research by the Company (or its
agents or service providers);
(c) investor relations communications by the Company (or its agents
or service providers);
APPENDIX I – NEW CONSTITUTION
Indemnity of
Directors and
officers
Secrecy
Personal data of
members
I-42
(d) administration by the Company (or its agents or service providers)
of that Member’s holding of shares in the Company;
(e) implementation and administration of any service provided by the
Company (or its agents or service providers) to its Members to
receive notices of meetings, annual reports and other shareholder
communications and/or for proxy appointment, whether by
electronic means or otherwise;
(f) processing, administration and analysis by the Company (or its
agents or service providers) of proxies and representatives
appointed for any General Meeting (including any adjournment
thereof) and the preparation and compilation of the attendance
lists, minutes and other documents relating to any General
Meeting (including any adjournment thereof);
(g) implementation and administration of, and compliance with, any
provision of this Constitution;
(h) compliance with any applicable laws, listing rules, take-over rules,
regulations and/or guidelines; and
(i) purposes which are reasonably related to any of the above
purpose.
(2) Any Member who appoints a proxy and/or representative for any
General Meeting and/or any adjournment thereof is deemed to have
warranted that where such Member discloses the personal data of such
proxy and/or representative to the Company (or its agents or service
providers), that Member has obtained the prior consent of such proxy
and/or representative for the collection, use and disclosure by the
Company (or its agents or service providers) of the personal data of
such proxy and/or representative for the purposes specified in articles
162(1)(f) and 162(1)(h).
APPENDIX I – NEW CONSTITUTION
I-43
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The following is for general information only and does not purport to be a comprehensive
description or exhaustive statement of applicable laws and regulations. This description is based
on laws, regulations and interpretations now in effect and available as at the Latest Practicable
Date. The laws, regulations and interpretations, however, may change at any time, and any
change could be retroactive. These laws and regulations are also subject to various
interpretations and the relevant authorities or the courts could later disagree with the explanations
or conclusions set out below.
As at the Latest Practicable Date, Zaid Ibrahim & Co., the legal advisers to the Company in
relation to the Proposed Acquisition as to Malaysia law had advised that the following statements
in this Appendix J constitute the current position under the laws of West Malaysia.
The following is a brief description of the material licences, approvals and permits typically
obtained for the Target Group’s Property Development Business:
Companies Act 1965 (the “Malaysian CA”)
Fuyuu Group Sdn Bhd, Fuyuu Resources Sdn Bhd, Fuyuu Ventures Sdn Bhd and Gold Mart Sdn
Bhd (collectively, the “Malaysian Subsidiaries”) were incorporated under the Malaysian CA and
their principal activities are found in Section 4 of the Target Letter. The Malaysian CA is intended
to ensure proper conduct of the affairs of the companies and to protect the interests of the
members and creditors of the company. The Malaysian CA specifies requirements which the
Malaysian Subsidiaries have to comply with, which include, amongst other things:
(a) operational requirements such as the requirements to hold annual general meetings, to keep
accounts and to have at least two directors who have a principal or only place of residence
within Malaysia;
(b) operational requirements such as the calling of meetings by notice in writing and the removal
of auditors or directors; and
(c) reporting obligations such as filing certain documents with the Companies Commission of
Malaysia. A person is guilty of an offence against the Malaysian CA if (a) he does that which
he is forbidden to do under the Malaysian CA; (b) he does not do that which he is required
or directed to do; or (c) if he otherwise contravenes or fails to comply with any provision of
the Malaysian CA.
Housing Development (Control and Licensing) Act 1966
The Housing Development (Control and Licensing) Act 1966 only applies to Peninsular Malaysia
and it provides that no housing development shall be engaged in, carried on, undertaken or
caused to be undertaken except by a housing developer in possession of a licence issued under
this Act. The application for such licence is governed under the Housing Development (Control
and Licensing) Regulations 1989.
An advertisement and sale permit must be obtained from the relevant authority before any
licensed housing developer can advertise or sell properties.
APPENDIX J – SUMMARY OF APPLICABLE LAWS AND REGULATIONSIN MALAYSIA
J-1
Town and Country Planning Act 1976
Under the Town and Country Planning Act 1976, no person, other than a local authority in relation
to lands in Peninsular Malaysia only, shall commence, undertake, or carry out any building,
engineering, mining, industrial, or other similar operation in, on, over, or under such land, the
making of any material change in the use of any land or building or any part thereof, or the
subdivision or amalgamation of land unless planning permission in respect of such development
has been granted.
Street, Drainage and Building Act 1974
The Street, Drainage and Building Act 1974 only applies to buildings in Peninsular Malaysia and
it provides that no person shall erect any building without prior written permission of the local
authority. The required plans and specifications of the building must be submitted by the relevant
qualified person to obtain such written permission of the local authority. In addition, no person
shall carry out any earthworks without having first submitted to the local authority plans and
specifications in respect of the earthworks and obtained the approval of the local authority under
the Street, Drainage and Building Act 1974. Earthworks for this purpose include any act of
excavation, levelling, filling with any material, piling, the construction of foundations, or felling of
trees, on any land, or any other act of dealing with or disturbing any land.
National Land Code 1965
The National Land Code 1965 (“NLC”) applies to certain states in Peninsular Malaysia including
Malacca. The conversion and subdivision of land is subject to approval of the state authority under
the NLC. Further, there is a restriction on any acquisition by, a non-citizen or foreign entity of land
(other than industrial land) in West Malaysia unless the prior approval of the relevant state
authority in which the land is situated has been obtained.
In general, the following persons are regarded as non-citizen or foreign entities under the NLC:
(a) a natural person who is not a citizen of Malaysia (“Non-Malaysian”);
(b) a company, corporation, society, association or other body corporate incorporated outside
Malaysia or an unincorporated society, association or other body which under the law of its
place of origin may be sued or be sued, or hold property in the name of the secretary or other
officer of the body or association duly appointed for that purpose, and which does not have
its head office or principal place of business in Malaysia (each a “Foreign Company”);
(c) a Malaysian incorporated company with 50% or more of its voting shares being held by a
Non-Malaysian or by a Foreign Company, or both (known as “Foreign Controlled Local
Company”); or
(d) a Malaysian incorporated company with 50% or more of its voting shares being held by a
Foreign Controlled Local Company, or by a Foreign Controlled Local Company together with
a Non-Malaysian or a Foreign Company.
APPENDIX J – SUMMARY OF APPLICABLE LAWS AND REGULATIONSIN MALAYSIA
J-2
Under the Guideline on the Acquisition of Properties issued by the Economic Planning Unit of the
Prime Minister’s Department, foreign interest means any interest, associated group of interests or
parties acting in concert which comprises:
(a) a Non-Malaysian; and/or
(b) an individual who is a permanent resident in Malaysia; and/or
(c) a Foreign Company; and/or
(d) a local company or local institution whereby the parties as stated in item (a) and/or (b) and/or
(c) hold more than 50% of the voting rights in that local company or local institution.
Property acquisition (except for residential units) which falls under the following thresholds
requires the approval of the Economic Planning Unit of the Prime Minister’s Department:
(a) a direct acquisition of property valued at RM20 million and above, resulting in the dilution in
the ownership of property held by Bumiputera interest and/or government agency; and
(b) an indirect acquisition of property by other than Bumiputera interest through acquisition of
shares, resulting in a change of control of the company owned by Bumiputera interest and/or
government agency, having property more than 50% of its total assets, and the said property
is valued at more than RM20 million.
Conditions for the acquisition of property as described in (a) and (b) above are subject to equity
and paid-up conditions as follows:
(a) Equity condition – applicant companies are to have at least 30% Bumiputera interest
shareholdings;
(b) Paid-up capital – (i) local company owned by local interest is to have at least RM100,000.00
paid-up capital; and (ii) local company owned by foreign interest is to have at least
RM250,000.00 paid-up capital.
Under the Guidelines on acquisition of properties by foreigners/foreign companies in the state of
Malacca, foreign interest is allowed to acquire (a) properties with strata titles at a price above
RM500,000 and (b) landed properties including “landed” strata at a price above RM1,000,000.
However, foreign interest is not allowed to acquire:
(a) residential unit/shop under the category of low or low-medium cost;
(b) single storey or one and a half storeys terrace residential unit;
(c) shop or terrace shop/office unit of less than 3 storeys;
(d) property allocated to Malays in any development project;
(e) land that has been issued with a court order for sale or is under public auction pursuant to
section 256 to section 260 of the NLC; and
(f) Malacca Customary Land.
APPENDIX J – SUMMARY OF APPLICABLE LAWS AND REGULATIONSIN MALAYSIA
J-3
Environmental Quality Act 1974
A licence from the Director General of Environmental Quality is required for any activity which
involves the discharge of environmentally hazardous substances, pollutants or wastes which is
hazardous or potentially hazardous to public health, or to animals, birds, wildlife, fish or aquatic
life, or to plants. Real estate developments for housing development covering an area of 50
hectares or more in both Peninsular Malaysia may have to undergo an environmental impact
assessment prior to approval and implementation of the development.
Activities subject to the environment impact assessment are agriculture, airport, drainage and
irrigation, land reclamation, fisheries, forestry, housing, industry, infrastructure, ports, mining,
petroleum, power generation and transmission, quarries, railways, transportation, resort and
recreational development, waste treatment and disposal and water supply.
The directors of the Target Group confirm that as at the Latest Practicable Date:
(a) the Target Group had obtained all necessary approvals and complied with the relevant laws
and regulations that would materially affect their business operations; and
(b) none of the aforesaid material licences, permits or approvals have been suspended or
revoked and to the best of the knowledge and belief of the directors of the Target, there are
at present no facts or circumstances which would cause such licences, permits or approvals
to be suspended or revoked or for any applications for, or for the renewal of, any of these
licences to be rejected by the relevant authorities.
The laws and regulations applicable to the operations are subject to change and it is expected
that, given the nature of the business, it will continue to be subjected to increasingly stringent laws
and regulations. See also Section 27 of the Target Letter entitled “Risk Factors Relating to the
Target Group” for further details.
The Malaysian land system
Land law in Malaysia is premised on the Torrens system (also known as the System of Titles and
Interests by Registration). However, the deed system still governs some lands in the States of
Penang and Malacca. The National Land Code (Penang and Malacca Titles) Act 1963 was
enacted to govern such lands and to convert the deed system in Penang and Malacca to the
Torrens system used under the NLC. Land matters generally lie within the jurisdiction of state
governments as provided for in the Federal Constitution but the Federal Constitution specifically
provides for federal legislation in such matters for the purposes of ensuring uniformity of law and
policy of two or more states in various aspects of land matters. Such powers of the Federal
Constitution are not exercisable with regard to the States of Sabah and Sarawak. There are
currently four primary pieces of legislation governing land law in Malaysia, namely:
(a) the NLC;
(b) the National Land Code (Penang & Malacca Titles) 1963;
(c) Sarawak Land Code (Cap 81); and
(d) Sabah Land Ordinance (Cap 68).
APPENDIX J – SUMMARY OF APPLICABLE LAWS AND REGULATIONSIN MALAYSIA
J-4
The operation of these statutes is supplemented by the various subsidiary legislation such as the
various State Land Rules in force in the respective States in Peninsular Malaysia, Sabah and
Sarawak.
The National Land Code (Penang & Malacca Titles) Act 1963 makes provisions for the conversion
of the system of registration of deeds (as opposed to the Torrens system of registration) practiced
prior to 1966 to the Torrens system as provided for in the NLC.
The NLC provides that such Code shall not (except where it is expressly provided to the contrary)
affect the provisions of more specific statutes such as:
(a) any law relating to Malay reservations or Malay holdings;
(b) the Land (Group Settlement Areas) Act 1960;
(c) any law relating to mining;
(d) any law relating to sultanate lands;
(e) any law relating to wakaf or bait-ul-mal;
(f) any law relating to customary tenure;
(g) the Terengganu Settlement Enactment 1856;
(h) the Padi Cultivators (Control of Rent and Security of Tenure) Act 1967;
(i) the Kelantan Land Settlement Act 1955;
(j) the Perlis Land Settlement Enactment 1966; and
(k) any law for the time being in force relating to exemptions from the payment of land revenue.
Powers of the State Authority
The State Authority is vested with the entire property in all State lands.
The State Authority refers to the Ruler or Governor of the State, as the case may be and “State
land” refers to all land in the state other than land that has already been alienated or reserved
(whether as forest or otherwise) or mining land or any land which, under the provisions of any law
relating to forests is for the time being reserved forest.
In relation to State land, the State has the power to:
(a) alienate land;
(b) grant leases of reserve land not exceeding 21 years, subject to express conditions imposed;
APPENDIX J – SUMMARY OF APPLICABLE LAWS AND REGULATIONSIN MALAYSIA
J-5
(c) permit temporary occupation of State land, mining land not for the time being used for the
purposes of mining, or reserved land not for the time being used for the purposes for which
it was reserved;
(d) permit the extraction, removal and transportation of rock material (otherwise than for the
purpose of obtaining metal or mineral therefrom) from State land, alienated land, mining
land, or reserved land;
(e) permit the use of air space on or above State land and reserved land for a period not
exceeding 21 years, provided that in a case involving reserved land, consent of the officer
having control thereof shall first have been obtained; and
(f) dispose of underground land.
Of the various methods of disposal of land, the power to alienate is the most commonly exercised.
According to the NLC, the State has power to alienate land:
(a) for a term not exceeding 99 years (commonly referred to as leasehold); or
(b) in perpetuity (commonly referred to as freehold);
(c) in consideration of payment of annual rent;
(d) in consideration of payment of a premium (this is subject to exemption by the State
Authority);
(e) subject to category of land use; and
(f) subject to restrictions in interest which may be imposed by the State Authority.
Alienated land that is subject to leasehold interests shall upon the expiry of the lease revert to the
State. However, it is possible to extend the leasehold interest by applying for an extension of the
leasehold period and paying a premium to the State.
Land use
Land use under the Malaysian Torrens system may be subject to restrictions and conditions
imposed by the State Authority. These conditions serve as a means for control of land use.
Specific conditions may relate to the categories of land use. Land in Malaysia is divided into three
general categories of land use, namely agricultural, industrial and building. Each category of land
use is subject to implied conditions. Failure to comply with express or implied conditions of land
use may result in the forfeiture of land by the State. Where lands are alienated pursuant to the
NLC, such category of land use shall be endorsed on the document of title when any land is
alienated by the State Authority. However, the State Authority may, on approving the alienation of
any land, direct that no category of land use be endorsed on the document of title if the State
Authority is satisfied that the use thereof could be more appropriately controlled by imposition of
express conditions. The proprietor of any alienated land may apply to the State Authority for the
alteration of any category of land use to which the land is for the time being subject, or where it
is not so subject, for the imposition of any category. In addition to general categories of land use,
APPENDIX J – SUMMARY OF APPLICABLE LAWS AND REGULATIONSIN MALAYSIA
J-6
titles to land may also specify specific uses of the land. In the case of agricultural land, the land
titles may specify that the land is to be cultivated with a particular crop. Non-compliance with
conditions of title may result in the forfeiture of land.
Dealings in land
Lands alienated by the State may be transferred, leased and charged. Easements (commonly
known as “rights of way”) may also be created on such lands. However, restrictions on transfers
may be imposed, such as in cases where the transfer involves estate land to person or persons
without the prior approval of the Estate Land Board. The rationale for this is to discourage the
fragmentation of estate lands. The NLC governs the dealings in land and interest in land (which
in the context of the NLC includes a registered transfer, lease, charge or easement as well as a
statutory lien or a tenancy exempt from registration created in respect thereof).
Dealings under the NLC may be divided into:
(a) dealings capable of registration which are transfers, charges, leases and easements; and
(b) dealings not capable of registration which are tenancies exempt from registration and
statutory liens which are protected by way of an endorsement and the entry of a lien-holder’s
caveat.
Under the NLC, no instrument effecting any dealing with respect to alienated lands and interests
will be effective to transfer the title or interest to any person until it has been duly registered. Upon
registration, the party in whose favour the registration has been effected will obtain an
indefeasible title to or interest in the land (Section 340(1) of the NLC), that is, a title or interest
which is free of all adverse claims or encumbrances not noted on the register. Indefeasibility is,
however, not absolute, as under certain circumstances (e.g. fraud or forgery) a registered title or
interest may be set aside or defeated by one with a superior claim.
Leases and tenancies
The NLC distinguishes tenancies from leases. Tenancies may be granted for terms not exceeding
three (3) years. There is no registration requirement for tenancies under the NLC. Interests of a
tenant under a tenancy exempt from registration can be protected by way of an endorsement on
the document of title to the land. The proprietor of any alienated land (whether freehold or
leasehold) may grant leases of the whole or any part thereof. A lease granted must be more than
three years and:
(a) and up to 99 years if it relates to the whole of the land; or
(b) up to 30 years if it relates to a part only thereof.
The lease granted is required to be registered with the relevant Land Registry/Office in order to
vest in the lessee the lease. Any lease which is not registered will not be able to vest in the lessee
any interest in respect of the lease.
APPENDIX J – SUMMARY OF APPLICABLE LAWS AND REGULATIONSIN MALAYSIA
J-7
Restraints on dealings
There may be restraints on dealings where the land in question involves Malay reserved land,
customary land or native land. The Malay Reservation Enactments of the various states seek to
secure the Malays’ interest in such land by generally prohibiting the disposition of such land by the
State and prohibiting private dealings in Malay reserved land. Any disposal, dealing or attempt to
dispose of or deal in Malay reserved land in contravention of the respective enactments will be
rendered null and void and no action for breach of contract shall be maintained in respect of such
disposal or dealing. The prohibition imposed by the Malay Reserve Enactments of the respective
states can be classified as a prohibition against disposition by the States and against private
dealings.
The present Malay Reservation legislation in the Malay states (namely, Kedah, Perlis, Kelantan,
Terengganu and Johor) has adopted the policy of providing for exceptions to the prohibition by
permitting alienation and dealings in favour of certain specified persons and bodies with the
approval of the Ruler of the State in Council of the respective states. In the same manner,
customary land (in the state of Malacca) shall only be transferred, charged, leased or transmitted
to a Malay. With regard to native land in Sabah and Sarawak, dealings in respect of the same are
prohibited except in the circumstances provided for in the Sabah Land Ordinance and the
Sarawak Land Code.
Restrictions in interest
Restrictions in interest are limitations expressly endorsed on the document of title to the property
which limits the powers of the property owner to deal with the property. An example of a restriction
is such as the property owner may not being permitted to sell, transfer and charge the property
in favour of any third party without consent of the State Authority of the relevant State. Restrictions
in interest imposed on the title will run with the property. This means that the restrictions bind not
only the present owner but also all future owners of the property. In the case of a strata title
property, where the restriction in interest has been endorsed on the master title, the restrictions
apply to the beneficial owner as well, even though the strata title may not have been issued.
Private caveats
Under the NLC, where a person has a claim to a title or any registrable interest in any alienated
land, he may lodge a private caveat to protect his interest. Once a private caveat is lodged, the
registered proprietor may not register or endorse any dealing on his title without first removing the
private caveat or first obtaining the consent in writing of the person who lodged the caveat. A
proprietor (or any aggrieved person or body) may apply to the Registrar of Titles/Land
Administrator or the courts for the removal of the private caveat. A private caveat, if not earlier
withdrawn or removed by the Registrar of Titles/Land Administrator or the court, will expire six
years from the time of entry. However, the private caveat will not be able to prevent the registration
or endorsement of a dealing by the registered proprietor if the application for
registration/endorsement of the dealing was made before entry of the private caveat.
APPENDIX J – SUMMARY OF APPLICABLE LAWS AND REGULATIONSIN MALAYSIA
J-8
Charge over land
In Malaysia, it is common for financiers to take a security (such as a charge) over properties
(including land) of the borrower for the financing provided. A charge over land takes effect upon
registration so as to render the land or lease in question liable as security. A chargee is entitled
to enforce the charge in the event of a breach by the chargor of any of the agreements on his part.
Where the chargee enforces the charge by way of sale of the land or lease, the chargee is
required to serve a default notice in form 16D as prescribed by the NLC to the chargor requiring
the breach to be remedied within 1 month (unless specified otherwise) of the date on which the
notice is served or such period specified in the charge. If the breach has not been remedied after
the expiry of the period specified, the whole sum secured by the charge shall become due and
payable to the chargee, and the chargee is entitled to apply to the court (for registry titles) or the
Land Administrator (for land office titles) for an order for sale.
Buying and selling of real property
The practice and procedures of buying and selling of real estate properties in Malaysia have been
shaped by legal concepts specific to dealings in real property in Malaysia. It has also been shaped
by constraints of the original documents not yet in the physical possession of the relevant property
owner. It is accepted in Malaysia that real property with or without individual documents of title
issued is capable of sale and purchase. The transfer of property with individual title is effected by
registration of an instrument of transfer, Form 14A, as prescribed under the NLC at the relevant
Land Registry/Office. In the case of property without individual documents of title, conveyance of
the property is made by way of a legal assignment of all the rights, interest and title in respect of
the property under the principal sale and purchase agreement (made between the original
proprietor and/or the developer (as the seller) and the first purchaser) in favour of a new
purchaser.
Strata Property
Sub-division of land
The Strata Titles Act 1985 (“STA”) governs the sub-division of land and buildings into parcels and
the disposition of titles in relation to the same. Under the STA, it is compulsory for an owner of a
building which has sold or agreed to sell any parcel comprised in his building to any person, to
apply for individual strata title to the parcel within the certain period stipulated in the STA.
Section 17 of the Strata Management Act 2013, a joint management body must be established
upon the convening of the first annual general meeting of that joint management body if (a) vacant
possession was delivered before the commencement of this Ac, not later than 12 months from the
commencement of the Act or (b) if vacant possession is delivered after the commencement of the
Act, not later than 12 months from the date of delivery of vacant possession of a parcel to a
purchaser.
A developer must give written notice of the first annual general meeting of the joint management
body to all purchasers not less than 14 days before the meeting, and a copy of such written notice
must be displayed at a conspicuous part of the development area. In addition, the developer must
prepare and place before the first annual general meeting of the joint management body for
consideration an annual budget that sufficiently sets the expected and estimated expenditure to
APPENDIX J – SUMMARY OF APPLICABLE LAWS AND REGULATIONSIN MALAYSIA
J-9
properly maintain and manage the buildings or lands intended for subdivision into parcels and the
common property which must be for a period of 12 months starting on the first day of the month
following the date of the first annual general meeting.
If the developer fails to convene the first annual general meeting of the joint management body
within the period specified above, the Commissioner of Buildings may appoint any person to
convene the first annual general meeting of the joint management body within such time as may
be specified by the Commissioner of Buildings, and the developer is required to pay all the
expenses incurred for that purpose.
Acquisition of property by a non-Malaysian citizen or a foreign company
The NLC
Under Section 433B of the NLC, a non-Malaysian citizen or foreign company is not allowed to
acquire any land (other than industrial land) in Peninsular Malaysia unless prior approval of the
state authority has been obtained. Under the NLC, a foreign company means:
(a) a company, corporation, society, association, or other body incorporated outside Malaysia;
(b) an unincorporated society, association, or other body which under the law of its place of
origin may sue or be sued, or hold property in the name of the secretary or other officer of
the body or association duly appointed for that purpose and which does not have its head
office or principal place of business in Malaysia;
(c) a company incorporated under the Companies Act of Malaysia with 50.0% or more of its
voting shares held by a non-Malaysian citizen, or by a foreign company referred to in
paragraph (a) and (b), or by both, at the time of the proposed acquisition of any land or any
interest in land or at the time of the execution of the instrument or deed in respect of any
alienated land or any interest therein, as the case may be;
(d) a company incorporated under the Companies Act of Malaysia with 50.0% or more of its
voting shares held by a company referred to in paragraph (c), or by a company referred to
in paragraph (c) together with a non-citizen or a foreign company referred to in paragraphs
(a) and (b), at the time of the proposed acquisition of any land or any interest in land or at
the time of the execution of the instrument or deed in respect of any alienated land or any
interest therein, as the case may be.
APPENDIX J – SUMMARY OF APPLICABLE LAWS AND REGULATIONSIN MALAYSIA
J-10
The following is an abridged version of the Malaysia Legal Opinion.
Due incorporation
(a) Each of Gold Mart Sdn. Bhd. (Company No. 808187-T), Fuyuu Ventures Sdn. Bhd.
(Company No. 1005179-W), Fuyuu Group Sdn. Bhd. (Company No. 806582-M) and Fuyuu
Resources Sdn. Bhd. (Company No. 881434-W) respectively, (collectively, the “Malaysian
Subsidiaries” and each “Malaysian Subsidiary”) has been duly and properly incorporated,
and validly exists as a legal entity with limited liability under the laws of Malaysia, having the
full capacity, power and authority to enter into legally binding and enforceable contracts and
undertakings and to sue or be sued in its own name under the laws of Malaysia.
(b) Each of the Malaysian Subsidiary has the corporate power and authority necessary to own
its assets, including such licenses, permits, certificates and approvals as are relevant to its
business, operations and the Agreements (as defined in the Malaysia Legal Opinion), to
perform businesses in the manner conducted by it as contained in its memorandum and
articles of association.
Memorandum and articles of association
(c) The memorandum and articles of associations of each of the Malaysian Subsidiary comply
with the requirements of applicable laws of Malaysia and are in full force and effect.
(d) The current board of directors of each of the Malaysian Subsidiary were properly constituted
and in compliance with all applicable laws of Malaysia and the Malaysian Subsidiaries’
memorandum and articles of association. As at the date of this Malaysia Legal Opinion, the
directors for each of the Malaysian Subsidiary are Tan Ping Huang Edwin and Tan June Teng
Colin.
(e) Based on the Bankruptcy Search Results (as defined in the Malaysia Legal Opinion), the
present directors of the Malaysian Subsidiaries as referred to in paragraph (d) above are not
declared bankrupt.
Share capital
(f) (i) GMSB’s current authorised share capital is RM1,000,000 and its issued paid-up capital
is RM1,000,000 consisting of 1,000,000 ordinary shares of par value RM1 each.
(ii) FVSB’s current authorised capital is RM50,000,000 and its issued paid-up capital is
RM26,000,000 consisting of 26,000,000 ordinary shares of par value RM1 each.
(iii) FGSB’s current authorised share capital is RM5,000,000 and its issued paid-up capital
is RM5,000,000 consisting of 5,000,000 ordinary shares of par value RM1 each.
(iv) FRSB’s current authorised share capital is RM5,000,000 and its issued paid-up capital
is RM5,000,000 consisting of 5,000,000 ordinary shares of par value RM1 each.
APPENDIX K – ABRIDGED LEGAL OPINION OF THE LEGAL ADVISERSTO THE COMPANY IN RELATION TO THE PROPOSED
ACQUISITION AS TO MALAYSIA LAW
K-1
Each of the Malaysian Subsidiary’s current authorised share capital and issued and paid-up
share capital (i) have been duly authorised and validly issued in compliance with all
applicable laws in Malaysia and are non-assessable, and (ii) were not issued in violation of
any pre-emptive rights, resale rights, rights of first refusal or similar rights of any holder of
securities issued by any of the Malaysian Subsidiary, under:
(aa) the memorandum and articles of association of each of the Malaysian Subsidiary;
(bb) the applicable laws of Malaysia;
(cc) any Agreement; or
(dd) to which any of the properties that each of the Malaysian Subsidiary is subject,
and their description thereof conform as to the Malaysian legal matters to the description
thereof contained under “Group Structure of Target Group” to Circular in relation to the
purpose of the Proposed Acquisition which will result in a reverse take-over of VGO.
For the purposes of this paragraph, the term “non-assessable” in relation to the ordinary
shares in the Malaysian Subsidiaries’ current authorised share capital and issued and
paid-up share capital means that holders of such ordinary shares, having fully paid up all
amounts due on such ordinary shares, are under no further personal liability to contribute to
the assets or liabilities of each Malaysian Subsidiary in their capacities purely as holders of
such ordinary shares.
(g) All of the issued shares in the capital of each of the Malaysian Subsidiaries are registered
in the name of Sky Win Management Consultancy Pte. Ltd.
(h) Save for restrictions contained in (i) the memorandum and articles of association of each of
the Malaysian Subsidiaries, (ii) the facilities agreement dated 15 December 2015 entered
between GMSB and United Overseas Bank (Malaysia) Bhd, Malaysia (“UOB Malaysia”),
(iii) facilities agreement dated 30 January 2015 entered between FVSB and Malaysia
Building Society Berhad, Malaysia, (iv) letter of offer dated 7 December 2015 issued by
Malayan Banking Berhad, Malaysia, (v) letter of offer dated 26 August 2015 issued by RHB
Bank Berhad, Malaysia and (vi) facilities agreement dated 6 January 2015 entered between
FGSB and UOB Malaysia, there are no restrictions on transfers or holdings of the shares in
each Malaysian Subsidiary imposed by any applicable law of Malaysia. There are no
restrictions on the right of persons deemed or designated “non-resident” for exchange
control purposes under the laws of Malaysia or foreign shareholders to hold or exercise the
voting rights attached to the share capital of each Malaysian Subsidiary imposed by any
applicable law of Malaysia.
(i) Each Malaysian Subsidiary does not have treasury shares and has never issued any
preference shares or share options.
(j) As of the date hereof, each Malaysian Subsidiary has not entered into any contract to issue
new shares.
APPENDIX K – ABRIDGED LEGAL OPINION OF THE LEGAL ADVISERSTO THE COMPANY IN RELATION TO THE PROPOSED
ACQUISITION AS TO MALAYSIA LAW
K-2
Compliance with laws, rules and regulations
(k) Each Malaysian Subsidiary has obtained all the necessary authorisations, approvals,
permits, licenses or certificate required to perform its businesses and operations, and such
Licenses and Approvals (as defined in the Opinion) are valid, subsisting and in full force and
effect, and will not cease to be valid, subsisting or in full force and effect as a result of the
Proposed Acquisition.
(l) Each Malaysian Subsidiary is in compliance with all the laws, rules and regulations of
Malaysia that would affect its business and operations, and to the best of our knowledge and
relying on the Statutory Declarations, each Malaysian Subsidiary have not received any
notice relating to the revocation of any license, permit, order, certificate, approval or other
authorisation.
(m) There is no governmental law, decree, regulatory requirement or restriction in the
constitutional documents of each Malaysian Subsidiary or any other requirement in Malaysia
which may affect the repatriation of capital and remittance of profits (in the form of dividends
or otherwise) by or to each Malaysian Subsidiary.
(n) No taxes, fees or charges (including stamp duty) are payable (either by direct assessment
or withholding) to the government or other taxing authority in Malaysia under the laws of
Malaysia in respect of the payment of dividends declared and payable on the shares of each
of the Malaysian Subsidiaries.
(o) Each Malaysian Subsidiary has obtained the insurances as referred to in the due diligence
reports. Insurance is not a requirement under the law for the business operations of each
Malaysian Subsidiary.
Litigation
(p) Based solely and strictly on the Statutory Declarations:
(i) there are no outstanding judgments, orders or awards against the Malaysian
Subsidiaries and/or their respective assets;
(ii) there are no claims, demands, lawsuits, litigation, governmental proceedings (including
environmental disputes, disputes with tax and customs authorities, administrative
proceedings, and industrial tribunal actions), inquiries, investigations, probes or special
audits (but excluding routine debt collection which is not material) pending or
threatened by, or against any of the Malaysian Subsidiaries or their respective assets,
any matters pending or threatened litigations or claims including any unasserted claims
or any matters involving possible contingent liabilities against any of the Malaysian
Subsidiaries, save for the following:
(aa) letters of demand for monetary claims in respect of progress billings, interest
charges and other miscellaneous charges issued by GMSB against some of
purchasers of units at Harbour City Suites @ Harbour City and Harbour City Mall
@ Harbour City respectively;
APPENDIX K – ABRIDGED LEGAL OPINION OF THE LEGAL ADVISERSTO THE COMPANY IN RELATION TO THE PROPOSED
ACQUISITION AS TO MALAYSIA LAW
K-3
(bb) letter of demand for refund of deposit issued by a purchaser against GMSB in
relation to one commercial unit at Harbour City Mall @ Harbour City;
(cc) letters of demand for monetary claims in respect of progress billing, interest
charges and miscellaneous charges issued by FGSB against some of the
purchasers of units at Project Vedro;
(dd) letter of demand for refund of deposit issued by a purchaser against FGSB in
relation to units at Project Vedro;
(ee) letters of demand for monetary claims in respect of progress billings, interest
charges and other miscellaneous charges issued by FRSB against some of the
purchasers of units at Project Elements Mall @ Hatten City, Project Hatten Suites
@ Hatten City, Project Silverscape @ Hatten City respectively;
(ff) letters of demand for liquidated agreed damages issued by some of the
purchasers against FRSB in relation to units at Project Silverscape @ Hatten City
and Project Elements Mall @ Hatten City; and
(iii) no steps have been, or are being taken, for the appointment of an administrator, a
receiver or a liquidator or similar person to, or for the winding-up, dissolution,
reconstruction or reorganisation of, the Malaysian Subsidiaries, and no such
proceedings have been threatened, instituted or are pending against the Malaysian
Subsidiaries.
(q) Each of the Malaysian Subsidiaries is subject to civil and commercial laws of Malaysia and
is not entitled to claim sovereign immunity in relation to itself or its assets in connection with
any legal proceedings in Malaysia or in connection with the obtaining or execution in
Malaysia of any judgment or order arising from such proceedings.
Proposed Acquisition
(r) The Proposed Acquisition (i) does not breach any laws or regulations that are applicable to
each Malaysian Subsidiary and (ii) does not conflict with or constitute a default under any
provision of the memorandum and articles of association of each Malaysian Subsidiary or
Agreements and the Licenses and Approvals.
(s) The applicable laws and regulations of Malaysia do not prohibit or restrict any part of the
proceeds from the Proposed Acquisition from being transferred by VGO Corporation Limited
to each Malaysian Subsidiary or from being used by each Malaysian Subsidiary in Malaysia
for the purposes described in the Circular.
Foreign exchange control regulations
(t) All dividends and other distributions declared and payable on the shares in the share capital
of each Malaysian Subsidiary to shareholders (both individuals and corporations) not
resident in Malaysia may under Malaysian laws be paid in Malaysia and may be converted
into appropriate foreign currency and freely transferred out of Malaysia.
APPENDIX K – ABRIDGED LEGAL OPINION OF THE LEGAL ADVISERSTO THE COMPANY IN RELATION TO THE PROPOSED
ACQUISITION AS TO MALAYSIA LAW
K-4
Enforceability of Agreements
(u) Each of the Agreements constitute legally valid and binding obligations of each of the
Malaysian Subsidiary and are:
(i) enforceable by (subject to (aa) all applicable foreign laws, regulations and policies;
(bb) recognition by the relevant foreign courts, arbitration centres or tribunals; or (cc)
rules and regulations of any other parties involved in such enforcement proceedings, to
any such enforcement actions by each Malaysian Subsidiary in the relevant foreign
jurisdiction against the relevant foreign party to the Agreements) each Malaysian
Subsidiary in accordance with its terms; and
(ii) enforceable against each Malaysian Subsidiary in accordance with its terms.
Title to, Validity and Enforceability of Rights to Assets
(v) GMSB is the legal owner of 2 leasehold lands of 99 years expiring on 28 September 2110
described as (i) PN 54208, Lot 10372, Kawasan Bandar XLIII, Melaka Tengah, Melaka and
(ii) PN 54209, Lot 10373, Kawasan Bandar XLIII, Melaka Tengah, Melaka.
Circular
(w) The statements in the Circular under the captions “Exchange Rates, Exchange Controls and
Taxation” and in Appendix J entitled “Summary of Applicable Laws and Regulations in
Malaysia”, in so far as they purport to summarise the provisions of Malaysian law, Malaysian
legal matters or documents governed by Malaysian law and excluding the paragraphs
relating to Malaysian taxation are true and accurate in all material respects.
APPENDIX K – ABRIDGED LEGAL OPINION OF THE LEGAL ADVISERSTO THE COMPANY IN RELATION TO THE PROPOSED
ACQUISITION AS TO MALAYSIA LAW
K-5
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APPENDIX L – VALUATION CERTIFICATE IN RELATION TOTHE DISPOSAL VALUATION REPORT
L-2
APPENDIX L – VALUATION CERTIFICATE IN RELATION TOTHE DISPOSAL VALUATION REPORT
L-3
APPENDIX L – VALUATION CERTIFICATE IN RELATION TOTHE DISPOSAL VALUATION REPORT
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VGO CORPORATION LIMITED(Incorporated in the Republic of Singapore)
(Company Registration No.: 199301388D)
Unless otherwise defined or the context otherwise requires, all capitalised terms herein shall bear
the same meaning as used in the circular dated 29 December 2016 issued by the Company (the
“Circular”).
NOTICE IS HEREBY GIVEN that an Extraordinary General Meeting of VGO CORPORATION
LIMITED (the “Company”) will be held at Level 2, 53 Mohamed Sultan Road, Singapore 238993
on 20 January 2017 at 10 a.m. for the purpose of considering and, if thought fit, passing with or
without modifications, the following resolutions set out in this Notice of EGM.
Shareholders should note that:
(a) Ordinary Resolutions 1, 2, 3, 4, 5, 6, 7, 12, and 13 (“Key Resolutions”) are inter-conditional
upon each other; and
(b) Ordinary Resolutions 8, 9, 10 and 11 are conditional upon the passing of the Key Resolutions
(“Conditional Resolutions”).
This means that if any of the Key Resolutions is not passed, the other Key Resolutions would not
be passed, and if any of the Key Resolutions is not passed, the Conditional Resolutions would not
be passed.
AS ORDINARY RESOLUTIONS
ORDINARY RESOLUTION 1: THE PROPOSED ACQUISITION
That subject to and contingent upon the passing of the Key Resolutions, the Proposed Acquisition
be and is hereby approved and that authority be and is hereby given to the Directors:
(a) to carry out and implement the Proposed Acquisition in accordance with the Sale and
Purchase Agreement; and
(b) to complete and do all such acts and things, including, without limitation, executing all such
documents and approving any amendments, alterations or modifications to any documents
as they may consider necessary, desirable or expedient to give effect to this Ordinary
Resolution 1.
ORDINARY RESOLUTION 2: THE PROPOSED ALLOTMENT AND ISSUANCE OF
CONSIDERATION SHARES
That subject to and contingent upon the passing of the Key Resolutions, authority be and is hereby
given to the Directors:
(a) to allot and issue to the Vendors (or their respective nominees) an aggregate of
1,187,692,308 Consideration Shares, credited as fully paid-up, at an issue price of S$0.325
each on the terms and subject to the conditions set out in the Sale and Purchase Agreement
(as amended, modified or supplemented from time to time); and
NOTICE OF EXTRAORDINARY GENERAL MEETING
N-1
(b) to complete and do all such acts and things including, without limitation, executing all such
documents and approving any amendments, alterations or modifications to any documents
as they may consider necessary, desirable or expedient to give effect to this Ordinary
Resolution 2.
ORDINARY RESOLUTION 3: THE PROPOSED DISPOSAL
That subject to and contingent upon the passing of the Key Resolutions, the Proposed Disposal
be and is hereby approved and that authority be and is hereby given to the Directors:
(a) to carry out and implement the Proposed Disposal in accordance with the Disposal
Agreement; and
(b) to complete and do all such acts and things, including, without limitation, executing all such
documents and approving any amendments, alterations or modifications to any documents
as they may consider necessary, desirable or expedient to give effect to this Ordinary
Resolution 3.
ORDINARY RESOLUTION 4: THE PROPOSED COMPLIANCE PLACEMENT
That subject to and contingent upon the passing of the Key Resolutions, the Proposed
Compliance Placement be and is hereby approved and that authority be and is hereby given to the
Directors:
(a) to issue up to 123,100,000 new Compliance Placement Shares at such discount to
determined by the Directors in their absolute discretion (in which case the discount may not
be more than 10.0% to the weighted average price for trades done on the SGX-ST for the full
market day or which the placement or subscription agreement is signed), provided that such
issue price shall not be less than S$0.20; and
(b) to complete and do all such acts and things, including, without limitation, executing all such
documents and approving any amendments, alterations or modifications to any documents
as they may consider necessary, desirable or expedient to give effect to this Ordinary
Resolution 4.
ORDINARY RESOLUTION 5: THE PROPOSED WHITEWASH RESOLUTION
That subject to and contingent upon the passing of the Key Resolutions, the Independent
Shareholders of the Company, hereby unconditionally and irrevocably waive their right under Rule
14 of the Singapore Code on Take-Overs and Mergers to receive a mandatory general offer from
the Vendors and parties acting in concert with the Vendors, for all the shares in the capital of the
Company in issue not already owned, controlled or agreed to be acquired by the Vendors and
parties acting in concert with the Vendors, as a result of the allotment and issuance of the
Consideration Shares upon Completion.
ORDINARY RESOLUTION 6: THE PROPOSED APPOINTMENT OF TAN JUNE TENG COLIN AS
DIRECTOR
That subject to and contingent upon the passing of the Key Resolutions and completion of the
Proposed Acquisition, Tan June Teng Colin @ Chen JunTing be and is hereby appointed as a
director of the Company with effect from Completion.
NOTICE OF EXTRAORDINARY GENERAL MEETING
N-2
ORDINARY RESOLUTION 7: THE PROPOSED APPOINTMENT OF TAN PING HUANG EDWIN
AS DIRECTOR
That subject to and contingent upon the passing of the Key Resolutions and completion of the
Proposed Acquisition, Tan Ping Huang Edwin @ Chen BingHuang be and is hereby appointed as
a director of the Company with effect from Completion.
ORDINARY RESOLUTION 8: THE PROPOSED APPOINTMENT OF LEE SOK KHIAN JOHN AS
DIRECTOR
That subject to and contingent upon the passing of the Key Resolutions and completion of the
Proposed Acquisition, Lee Sok Khian John be and is hereby appointed as a director of the
Company with effect from Completion.
ORDINARY RESOLUTION 9: THE PROPOSED APPOINTMENT OF WONG KING KHENG AS
INDEPENDENT DIRECTOR
That subject to and contingent upon the passing of the Key Resolution sand completion of the
Proposed Acquisition, Wong King Kheng be and is hereby appointed as an independent director
of the Company with effect from Completion.
ORDINARY RESOLUTION 10: THE PROPOSED APPOINTMENT OF LOH WENG WHYE AS
INDEPENDENT DIRECTOR
That subject to and contingent upon the passing of the Key Resolutions and completion of the
Proposed Acquisition, Loh Weng Whye be and is hereby appointed as an independent director of
the Company with effect from Completion.
ORDINARY RESOLUTION 11: THE PROPOSED APPOINTMENT OF FOO JONG HAN REY AS
INDEPENDENT DIRECTOR
That subject to and contingent upon the passing of the Key Resolutions and completion of the
Proposed Acquisition, Foo Jong Han Rey be and is hereby appointed as an independent director
of the Company with effect from Completion.
ORDINARY RESOLUTION 12: THE PROPOSED NEW GENERAL SHARE ISSUE MANDATE
That subject to and contingent upon the passing of the Key Resolutions, the Proposed New Share
Issue Mandate be and is hereby approved and that authority be and is hereby given to the
Directors:
(a) pursuant to Section 161 of the Companies Act and subject to and in accordance with the
terms of the Constitution of the Company, to allot and issue Shares at any time and upon
such terms and conditions, and to such persons as the Directors shall in their absolute
discretion deem fit, provided that the aggregate number of new Shares to be issued pursuant
to such authority shall not exceed 100% of the then existing issued share capital of the
Company, and that the aggregate number of shares to be issued other than on a pro-rata
basis to the then existing Shareholders shall not exceed 50% of the then existing issued
share capital of the Company, and, unless revoked or varied by the Shareholders in general
meeting, such authority shall continue in full force until the conclusion of the next annual
general meeting or the date by which the next annual general meeting is required by law to
be held, whichever is earlier; and
NOTICE OF EXTRAORDINARY GENERAL MEETING
N-3
(b) to complete and do all such acts and things, including, without limitation, executing all such
documents and approving any amendments, alterations or modifications to any documents
as they may consider necessary, desirable or expedient to give effect to this Ordinary
Resolution 12.
ORDINARY RESOLUTION 13: THE PROPOSED INTERESTED PERSON TRANSACTION
MANDATE
That subject to and contingent upon the passing of the Key Resolutions, the Proposed IPT
Mandate be and is hereby approved and that approval be and is hereby given to the Directors to
complete and do all such acts and things, including, without limitation, executing all such
documents and approving any amendments, alterations or modifications to any documents as
they may consider necessary, desirable or expedient to give effect to this Ordinary Resolution 13.
AS SPECIAL RESOLUTIONS
SPECIAL RESOLUTION 1: THE PROPOSED TRANSFER OF THE LISTING OF THE COMPANY
FROM THE MAINBOARD TO THE CATALIST
That subject to and contingent upon the passing of the Key Resolutions, approval be and is hereby
given, pursuant to Rule 410(4) of the Catalist Rules for the Company to transfer from the SGX-ST
Mainboard to the Catalist.
SPECIAL RESOLUTION 2: THE PROPOSED CAPITAL REDUCTION
That subject to and contingent upon the passing of the Key Resolutions and pursuant to Section
78A read with Section 78C of the Companies Act, the Proposed Capital Reduction be and is
hereby approved and that approval be and is hereby given to the Directors to complete and do all
such acts and things, including, without limitation, executing all such documents and approving
any amendments, alterations or modifications to any documents as they may consider necessary,
desirable or expedient to give effect to this Special Resolution 2.
SPECIAL RESOLUTION 3: THE PROPOSED CHANGE OF NAME
That subject to and contingent upon the passing of the Key Resolutions and subject to the
approval of the Accounting and Corporate Regulatory Authority, the Proposed Change of Name of
the Company from “VGO Corporation Limited” to “Hatten Land Limited” be and is hereby
approved, and that the Directors be and are hereby authorised to complete and do all such acts
and things as they may consider necessary or expedient to give effect to this Special Resolution 3.
NOTICE OF EXTRAORDINARY GENERAL MEETING
N-4
SPECIAL RESOLUTION 4: THE PROPOSED ADOPTION OF THE NEW CONSTITUTION OF
THE COMPANY
That subject to and contingent upon the passing of the Key Resolutions, that the New Constitution
of the Company as set out in Appendix I to the Circular be and are hereby approved and adopted
as the Constitution of the Company in substitution for, and to the exclusion of, the existing
Constitution and that the Directors be and are hereby authorised to complete and do all such acts
and things as they may consider necessary or expedient to give effect to this Special Resolution 4.
BY ORDER OF THE BOARD
29 December 2016
NOTICE OF EXTRAORDINARY GENERAL MEETING
N-5
This page has been intentionally left blank.
VGO CORPORATION LIMITED(Incorporated in the Republic of Singapore)
(Company Registration No.: 199301388D)
IMPORTANT
1. Pursuant to Section 181(1C) of the Companies Act, Cap. 50 of Singapore (the“Act”), Relevant Intermediaries may appoint more than two (2) proxies to attend,speak and vote at the Extraordinary General Meeting.
2. For investors who have used their CPF monies to buy shares in the Company(“CPF Investors”), this proxy form is not valid for use and shall be ineffective forall intents and purposes if used or purported to be used by them.
3. CPF Investors are requested to contact their respective Agent Banks for anyqueries they may have.
Personal Data Privacy
By submitting an instrument appointing a proxy(ies) and/or representative(s),the member accepts and agrees to the personal data privacy terms set out in theNotice of Extraordinary General Meeting dated 29 December 2016.
PROXY FORM
*I/We NRIC/Passport No, of
being *a member/members of VGO Corporation Limited (the “Company”), hereby appoint
Name AddressNRIC/
Passport No.
Proportion ofshareholdings to be
represented by proxy(%)
*and/or
or failing *him/them the Chairman of the meeting as *my/our *proxy/proxies to vote for *me/us on *my/our behalfand, if necessary, to demand a poll, at the Extraordinary General Meeting of the Company to be held at Level 2,53 Mohamed Sultan Road, Singapore 238993 on 20 January 2017 at 10.00 a.m. and at any adjournment thereof.
*I/we direct *my/our *proxy/proxies to vote for or against the Ordinary and Special Resolutions to be proposed atthe Extraordinary General Meeting as indicated with an “X” in the spaces provided hereunder. If no specifieddirections as to voting are given, the *proxy/proxies will vote or abstain from voting at *his/their discretion.
No. Ordinary Resolutions
Voting by way of a poll
For Against
1 The Proposed Acquisition
2 The Proposed Allotment and Issuance of Consideration Shares
3 The Proposed Disposal
4 The Proposed Compliance Placement
5 The Proposed Whitewash Resolution
6 The Proposed Appointment of Tan June Teng Colin as Director
7 The Proposed Appointment of Tan Ping Huang Edwin as Director
8 The Proposed Appointment of Lee Sok Khian John as Director
9 The Proposed Appointment of Wong King Kheng as IndependentDirector
10 The Proposed Appointment of Loh Weng Whye as IndependentDirector
11 The Proposed Appointment of Foo Jong Han Rey as IndependentDirector
12 The Proposed New General Share Issue Mandate
13 The Proposed Interested Person Transactions Mandate
No. Special Resolutions
Voting by way of a poll
For Against
1 The Proposed Transfer of Listing from the Main Board to theCatalist
2 The Proposed Capital Reduction
3 The Proposed Change of Name
4 The proposed Adoption of the New Constitution of the Company
Dated this day of 2017
Total Number of Shares in:
(a) CDP Register
(b) Register of Members
Signature(s) of Member(s)/Common Seal
* Delete accordingly
IMPORTANT. Please read notes overleaf
-----------------------------------------------------------------------------------------------------------------------------------------------
"
Notes:
1. A member who is not a relevant intermediary is entitled to appoint not more than two proxies to attend, speak and vote at the meeting.Where such member’s form of proxy appoints more than one proxy, the proportion of his shareholding concerned to be represented byeach proxy shall be specified in the form of proxy. If no proportion is specified, the Company shall be entitled to treat the first namedproxy as representing the entire shareholding and any second named proxy as an alternate to the first named or at the Company’s optionto treat this Proxy Form as invalid.
A member who is a relevant intermediary is entitled to appoint more than two proxies to attend, speak and vote at the meeting, but eachproxy must be appointed to exercise the rights attached to a different share or shares held by such member. Where such member’s formof proxy appoints more than two proxies, the number and class of shares in relation to which each proxy has been appointed shall bespecified in the form of proxy.
“Relevant intermediary” has the meaning ascribed to it in Section 181 of the Companies Act, Chapter 50.
2. A proxy need not be a member of the Company.
3. Where a member of the Company appoints two proxies, he shall specify the proportion of his shareholding (expressed as a percentageof the whole) to be represented by each such proxy.
4. The instrument appointing a proxy or proxies must be under the hand of the appointer or his attorney duly authorised in writing. Wherethe instrument appointing a proxy or proxies is executed by a corporation, it must be executed under its common seal or under the handof its attorney or duly authorised officer.
5. A corporation which is a member of the Company may authorise by resolution of its directors or other governing body such person asit thinks fit to act as its representative at the Annual General Meeting, in accordance with its Articles of Association and Section 179 ofthe Companies Act, Chapter 50 of Singapore.
6. The instrument appointing proxy or proxies, together with the power of attorney or other authority (if any) under which it is signed, ornotarially certified copy thereof, must be deposited at the Share Registration Office of the Company at Tricor Barbinder ShareRegistration Services (A division of Tricor Singapore Pte. Ltd.), 80 Robinson Road #11-02, Singapore 068898 not later than 48 hoursbefore the time set for the Extraordinary General Meeting.
7. A member should insert the total number of shares held. If the member has shares entered against his name in the Depository Register(as defined in Section 81SF of the Securities and Future Act, Chapter 289 of Singapore), he should insert that number of shares. If themember has shares registered in his name in the Register of Members of the Company, he should insert the number of shares. If themember has shares entered against his name in the Depository Register and shares registered in his name in the Register of Membersof the Company, he should insert the aggregate number of shares. If no number is inserted, this form of proxy will be deemed to relateto all the shares held by the member of the Company.
8. The Company shall be entitled to reject the instrument appointing a proxy or proxies if it is incomplete, improperly completed or illegibleor where the true intentions of the appointor are not ascertainable from the instructions of the appointor specified in the instrumentappointing a proxy or proxies. In addition, in the case of members of the Company whose shares are entered against their names in theDepository Register, the Company may reject any instrument appointing a proxy or proxies lodged if such members are not shown tohave shares entered against their names in the Depository Register 72 hours before the time appointed for holding the ExtraordinaryGeneral Meeting as certified by The Central Depository (Pte) Limited to the Company.
9. A Depositor shall not be regarded as a member of the Company entitled to attend the Extraordinary General Meeting and to speak andvote thereat unless his name appears on the Depository Register 72 hours before the time set for the Extraordinary General Meeting.
10. An investor who buys shares using CPF monies (“CPF Investor”) and/or SRS monies (“SRS Investor”) (as may be applicable) may attendand cast his vote(s) at the Meeting in person. CPF and SRS Investors who are unable to attend the Meeting but would like to vote, mayinform their CPF and/or SRS Approved Nominees to appoint the Chairman of the Meeting to act as their proxy, in which case, the CPFand SRS Investors shall be precluded from attending the Meeting
PERSONAL DATA PRIVACY
By submitting an instrument appointing a proxy(ies) and/or representative(s), the member accepts and agrees to the personal data privacyterms set out in the Notice of Extraordinary General Meeting dated 29 December 2016.
The Company Secretary
VGO CORPORATION LIMITED
c/o Tricor Barbinder Share Registration Services
(A division of Tricor Singapore Pte. Ltd.)
80 Robinson Road #11-02
Singapore 068898
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Affix
Postage
Stamp
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VEDRO BY THE RIVER
UNDER DEVELOPMENT
HARBOUR CITY
International
Property Awards
Malaysian Property
Press Awards
Malaysian Property
Press Awards
iProperty.Com
Malaysia People’s
Choice Awards
Asia Pacific
Property Awards
Highly Commended
Mixed-Use Development
Winner
Best Retail Project
Outstanding Achievement
Catalyst Developer Malacca
Winner
Best Integrated Development
Highly Commended
Commercial High-Rise Development Malaysia
2016
2015
2015
2015
2015
UNDER DEVELOPMENT
AWARD WINNING PROPERTY DEVELOPMENTS UNDER HATTEN LAND LIMITED
A PANORAMICPORTFOLIO
The future development plans for Malacca present increasing opportunities for growth, especially in the residential property and hospitality sectors.
The expansion of the Malacca International Airport coupled with weekly scheduled flights to and from Guangdong, China to be operated by China Southern Airlines may increase the number of Chinese investors and tourists to Malacca. (Source: Industry Overview Report)
Plans by the Malacca government in building the Malacca Gateway in the Straits of Malacca and in particular the construction of the deep sea port will spur tourism and investment, leading to an overall increase in demand for developed properties.
FUTURE DEVELOPMENT PLANS FOR MALACCA
Malaysian economy grew by five percent (5%) in 2015 and from 2011 to 2015 (with the exception of 2013), the Malaysian GDP consistently recorded a growth of at least five percent (5%).
The Malacca GDP growth for 2015 was reported to be 5.5%. (Source: Industry Overview Report)
CONSISTENT ECONOMIC GROWTH
The outlook for the Malacca residential market is positive and with the recognition of Malacca as a UNESCO World Heritage Site in 2008, there is growing interest from foreign and local investors in the residential property market. (Source: Industry Overview Report)
The serviced apartment sector in Malacca is also becoming active. With increasing median household income levels, Malacca home buyers are looking to purchase better homes. Coupled with the upcoming KL-Singapore High Speed Rail, which has a stop in Ayer Keroh, Malacca, the serviced apartment sector is unlikely to face an oversupply situation in the short-to-medium term, resulting in an upward price trend.
GROWING INTEREST IN THE MALACCA RESIDENTIAL PROPERTY MARKET
The outlook for Malacca’s tourism sector is positive and Malacca saw a total of 15.74 million tourist arrivals in 2015. Tourist receipts grew by 39.5% in 2015, the highest annual growth since 2010.
The increasing popularity of Malacca as a tourism destination would inevitably lead to an increased demand for hotels and potentially more hospitality developments. (Source: Industry Overview Report)
INCREASED DEMAND FOR HOTELS
GROWTH PROSPECTS
SINGAPORE
JOHORBAHRU
SEREMBAN
KUALALUMPUR
PENANG
2.5HRS
2HRS
1HR
1.5HRS
5HRS
MALACCA - HIGH GROWTH CITY
5.5% GDP growth in 2015
Tourism receipts grew 39.5% in 2015
Upcoming KL-Singapore High Speed Rail, which has a
stop in Ayer Keroh, Malacca
Weekly scheduled flights to and from Guangdong, China
Construction of the Melaka Gateway in the Straits
of Malacca
MALACCAGATEWAY
BANDARMALACCA
MALACCAINTERNATIONAL
AIRPORT
Land Bank & Development Rights
AYER KEROH & SURROUNDINGS
AYER KEROH
UTeMALOR GAJAHDSITRICT
NORTH-SOUTH HIGH WAY PROPOSEDHIGH SPEED RAIL
STATION:AYER KEROH
KUALA LUMPUR - SINGAPORE HIGH SPEED RAIL (HSR)
SINGAPORE
50 Mins40 Mins
KUALALUMPUR
MALACCA
OVERVIEW OF PROPOSED TRANSACTIONS
Hatten Land Limited is one of the leading property developers in Malaysia
specialising in integrated residential, hotel and commercial developments
and is headquartered in Malacca, Malaysia. It is the property development
arm of the Hatten Group, which is a leading brand in Malaysia with core
businesses in property development, property investment, hospitality, retail
and education.
The name “Hatten” derives from the Japanese word (發展) for “growth and
development”.
The current development portfolio comprises three (3) integrated mixed use
development projects and one retail mall in Malacca, Malaysia. They are:
Hatten City Phase 1 (incorporating Elements Mall, SilverScape Residences, Hatten Suites, and a tower block that has been taken up by DoubleTree by Hilton);
Hatten City Phase 2 (incorporating Imperio Mall and Imperio Residence);
Harbour City (incorporating a mall, a theme park and three (3) hotels); and
Vedro by the River (a retail mall).
a.
b.
c.
d.
OVERVIEW OF HATTEN LAND LIMITEDCORPORATE PROFILE
CONSIDERATION AND VALUATION INDICATIVE TIMETABLE
Note: Save for the date of the EGM, the dates set out in the above timetable are
indicative and may be subject to change. The Company will make further announce-
ments on the exact dates of such events.
Date of EGM
Suspension in Trading of Existing Shares
Completion of Proposed Acquisition &
Proposed Disposal
Commencement of Creditor Objection Period
End of Creditor Objection Period
Estimated Completion of Proposed Capital
Reduction
20 January 2017
24 January 2017
24 January 2017
20 January 2017
3 March 2017
6 March 2017
24 February 2017
3 March 2017
6 March 2017
In relation to the Proposed Acquisition & Proposed Disposal
In relation to the Proposed Capital Reduction
In relation to the Proposed Compliance Placement
Estimated Despatch of Offer Information
Statement
Completion of Proposed Compliance
Placement
Expected Lifting of the Suspension of the
Trading of the Shares
Hatten City Phase 1
Hatten City Phase 2
Harbour City
Vedro by the River
Mixed use development
Mixed use development
Mixed use development
Commercial
628
363
849
65
1,905
Project Type
Market Value of the Target Group’s
Interest in the Project (RM’ million)
Total Market Value:
Total market value of the projects as at 30 June 2016 is approximately
RM1.9 billion.
A summary of the market value of the projects are set out below:
The Revalued Net Asset Value (RNAV) of the Target Group as at
30 June 2016 is S$506.4 million.
The market value of the 100% equity in the Target Group as at
30 June 2016 is S$462.0 million.
The Proposed Acquisition's Consideration of S$386.0 million
represents a discount of 23.8% and 16.5% to the RNAV of the
Target Group and market value of 100% equity in the Target Group
as at 30 June 2016 respectively.
FINANCIAL HIGHLIGHTS
REVENUE COMPOUNDED ANNUAL GROWTH RATE: 29.7%
Revenue Gross Profit Net Profit
RM’ million
Revenue
Gross Profit
Profit before tax
Profit for the Year
Gross Profit Margin
Net Profit Margin
450
400
350
300
250
200
150
100
50
0
2014
245.2
65.1
27.8
19.5
27%
8%
2015
436.3
93.9
37.1
25.8
22%
6%
2016
412.3
154.7
96.4
68.6
38%
17 %
2014
RM’ million
2015 2016
245.2
436.3
22%38%
27%
6%17%
8%
412.3
SKY WIN MANAGEMENT CONSULTANCY PTE. LTD.
GOLD MARTSDN. BHD.
FUYUU GROUPSDN. BHD.
FUYUUVENTURESSDN. BHD.
FUYUURESOURCESSDN. BHD.
HATTENINTERNATIONALPTE. LTD.
Marketing & Development Consultancy Services
Vedro by the River
Hatten City Phase 2
Harbour CityHatten City Phase 1
Financial Adviser
to the Company in respect of the Proposed Acquisition
UOB KAY HIAN PRIVATE LIMITED(Incorporated in the Republic of Singapore)
(Company Registration No. 197000447W)
SAC CAPITAL PRIVATE LIMITED(Incorporated in the Republic of Singapore)
(Company Registration No. 200401542N)
in respect of the Proposed Whitewash Resolution,
the Proposed Disposal and the Proposed IPT Mandate
Independent Financial Adviser
IF YOU ARE IN ANY DOUBT AS TO THE ACTION YOU SHOULD TAKE, YOU SHOULD CONSULT YOUR LEGAL, FINANCIAL, TAX OR OTHER PROFESSIONAL ADVISERS IMMEDIATELY.
If you have sold or transferred all your ordinary shares (the “Shares”) in the capital of VGO Corporation Limited (“VGO” or the “Company”) held through The Central Depository (Pte) Limited (the “CDP”), you need not forward this Circular to the purchaser or transferee as arrangements will be made by CDP for a separate Circular to be sent to the purchaser or transferee. If you have sold or transferred all your Shares represented by physical share certificate(s), you should immediately forward this Circular, the enclosed Notice of Extraordinary General Meeting and the accompanying Proxy Form to the purchaser or the transferee, or to the bank, stockbroker or agent through whom the sale or the transfer was effected for onward transmission to the purchaser or the transferee.
Neither the Monetary Authority of Singapore (the “Authority”) nor the Singapore Exchange Securities Trading Limited (the “SGX-ST” or the “Exchange”) has examined or approved the contents of this Circular. Neither the Authority nor the SGX-ST assumes any responsibility for the contents of this Circular, including the correctness or accuracy of any of the statements made, reports contained or opinions expressed. The lodgement of this Circular with the SGX-ST, acting as agent on behalf of the Authority, does not imply that the Securities and Futures Act, Cap. 289, of Singapore (the “SFA”), or any other legal or regulatory requirements, or requirements under the Catalist Rules (as defined herein), have been complied with.
An application has been made to the SGX-ST for the transfer of the Company from the SGX-ST Mainboard to the Catalist, and for permission for the listing and quotation of the Shares, the Consideration Shares and the new Shares to be alloted and issued further to the Proposed Compliance Placement on the Catalist. The listing and quotation notice, if issued by the SGX-ST, is not to be taken as an indication of the merits of the Proposed Transactions, the Company, the Group, the Target Group, the Enlarged Group, the Shares, the Consideration Shares or the Compliance Placement Shares (all as defined herein). Terms appearing on the cover of this Circular bear the same meanings as defined in this Circular.
Companies listed on the Catalist may carry higher investment risk when compared with larger or more established companies listed on the SGX-ST Mainboard. In particular, companies may list on the Catalist without a track record of profitability and there is no assurance that there will be a liquid market in the Shares traded on the Catalist. You should be aware of the risks of investing in such companies and should make the decision to invest only after careful consideration and, if appropriate, consultation with your professional adviser(s).
INVESTING IN THE COMPANY’S SHARES INVOLVES RISKS WHICH ARE DESCRIBED IN SECTION 3.6 ENTITLED “RISK FACTORS” OF THE LETTER TO SHAREHOLDERS FROM THE BOARD OF DIRECTORS OF THE COMPANY. YOUR ATTENTION IS ALSO DRAWN TO SECTION 27 ENTITLED “RISK FACTORS RELATING TO THE TARGET GROUP” IN THE LETTER TO THE SHAREHOLDERS OF THE COMPANY FROM THE PROPOSED NEW DIRECTORS, WHICH YOU SHOULD READ CAREFULLY.
IF ANY OF THE RISKS SET OUT IN THE SECTIONS ABOVE DEVELOPS INTO ACTUAL EVENTS, THE ENLARGED GROUP’S BUSINESS, FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS COULD BE MATERIALLY AND ADVERSELY AFFECTED. IN SUCH CASES, THE TRADING PRICES OF THE SHARES COULD DECLINE AND YOU MAY LOSE ALL OR PART OF YOUR INVESTMENTS.
CIRCULAR TO SHAREHOLDERS IN RELATION TO:
(1) THE PROPOSED ACQUISITION OF THE ENTIRE ISSUED AND PAID-UP SHARE CAPITAL OF SKY WIN MANAGEMENT CONSULTANCY PTE LTD FOR AN AGGREGATE CONSIDERATION OF S$386.0 MILLION;
(2) THE PROPOSED ALLOTMENT AND ISSUANCE OF 1,187,692,308 CONSIDERATION SHARES TO THE VENDORS FOR THE PROPOSED ACQUISITION;
(3) THE PROPOSED COMPLIANCE PLACEMENT OF UP TO 172,400,000 COMPLIANCE PLACEMENT SHARES COMPRISING NEW SHARES AND VENDOR SHARES;
(4) THE PROPOSED TRANSFER OF THE LISTING OF THE COMPANY FROM THE MAINBOARD TO THE CATALIST;
(5) THE PROPOSED DISPOSAL OF THE COMPANY’S ENTIRE INTEREST IN THE EXISTING BUSINESS AS A MAJOR TRANSACTION AND AN INTERESTED PERSON TRANSACTION;
(6) THE PROPOSED CAPITAL REDUCTION;
(7) THE PROPOSED WHITEWASH RESOLUTION FOR THE WAIVER BY INDEPENDENT SHAREHOLDERS OF THEIR RIGHT TO RECEIVE A MANDATORY TAKE-OVER OFFER FROM THE VENDORS AND THEIR CONCERT PARTIES;
(8) THE PROPOSED CHANGE OF NAME OF THE COMPANY FROM “VGO CORPORATION LIMITED” TO “HATTEN LAND LIMITED”;
(9) THE PROPOSED APPOINTMENT OF THE PROPOSED NEW DIRECTORS TO THE COMPANY;
(10) THE PROPOSED ADOPTION OF THE NEW CONSTITUTION OF THE COMPANY;
(11) THE PROPOSED NEW SHARE ISSUE MANDATE; AND
(12) THE PROPOSED INTERESTED PERSON TRANSACTIONS MANDATE.
THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. PLEASE READ IT CAREFULLY.
CIRCULAR DATED 29 DECEMBER 2016
VGO CORPORATION LIMITED
HATTEN LAND LIMITED
(Incorporated in the Republic of Singapore)
(Company Registration No. 199301388D)
(To be renamed as Hatten Land Limited
following the completion of the Proposed
Acquisition)
VGO Corporation Limited
10 Changi South Lane, #06-01
Singapore 486162
Tel : +65 6543 5828
Fax : +65 6543 5829
Hatten Land Limited
53, Mohamed Sultan Road, #04-02
Singapore 238993
Tel : +65 6690 3136
Fax : +65 6690 3137
CONTACTINFORMATION
All images in this circular are artist impressions and computer generated.