OVERVIEW OF HATTEN LAND LIMITEDinvestor.hattenland.com.sg/misc/VGO-Hatten-Circular-29Dec2016.pdf ·...

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



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


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

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


(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.

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


: 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


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


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


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


“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


“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”


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”


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”


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”


Letter

“Proposed Transactions” : Has the meaning ascribed to it in Section 1.2 of the VGO

Letter

“Proposed Whitewash

Resolution”


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”


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


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.


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.


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


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.


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.


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.


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


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.


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.


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


Commencement of Creditor Objection Period : 20 January 2017

End of Creditor Objection Period : 3 March 2017


Reduction

: 6 March 2017



Statement

: 24 February 2017


Placement

: 3 March 2017



: 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)


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


(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;


(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;


LETTER TO SHAREHOLDERS FROM THEBOARD OF DIRECTORS OF THE COMPANY

32

(11) THE PROPOSED NEW GENERAL SHARE ISSUE MANDATE; AND


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.


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;


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.


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.


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:





(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.


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.


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;


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;


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


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.


(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.


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.


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.


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


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;


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.


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.


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.


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:


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.


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,


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;


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.


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.


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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.


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


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.


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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.


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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.


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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


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.


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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.


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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.


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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.


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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.


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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;


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


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(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


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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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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(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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(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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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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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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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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(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).


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.


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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).


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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


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.


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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.


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.


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


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.


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.


more information on the present and ongoing interested person transactions of the Target

Group.


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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;


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.


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(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


Disposal, Proposed


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


Disposal, Proposed


Proposed Compliance

Placement

After the Proposed


Disposal, Proposed


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.


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15.6. Gearing

(S$’000)

Before the Proposed


Disposal, Proposed


Proposed Compliance

Placement

After the Proposed


Disposal, Proposed


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),


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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.


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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.


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.


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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


Whitewash Resolution; and

(b) the Proposed Disposal (which terms are fair and reasonable) is on normal


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


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.


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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.


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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


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.


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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.


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



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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

A-1

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


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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.


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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.


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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.


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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%


GMSB Dato’ Colin – 24.0%


Tong Yee Xing(2) – 52.0%

Dato’ Colin – 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.


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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.


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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.


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


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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.


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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.


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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


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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.


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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


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


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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)


(f) Highly Commended

Best Luxury Condo Development – South Malaysia (Imperio Residence)


(g) Highly Commended

Best Residential Architectural Design – South East Asia, Regional Category

(Imperio Residence)


(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)


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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


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


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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.


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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.


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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


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


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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.


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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.


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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.


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.


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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.


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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



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.


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%





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


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.


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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.


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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



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


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


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.


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.


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.


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


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



5 Hatten Suites 361 2016 1,066


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


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.


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


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


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


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.


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


Number ofShares



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


A-44


Number ofShares



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


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


Number ofShares



Numberof Shares

ShareCapital

Numberof Shares

ShareCapital

(RM) (’000) (’000) (RM’000) (’000) (RM’000)

6 January2015


shares to Dato’Colin

1,500,000 1,500

2,000 2,000 5,000 5,000

6 January2015


shares to Dato’Edwin

1,500,000 1,500

30 November2016



0.50(1) 2,500

5,000 5,000 5,000 5,000

30 November2016



0.50(1) 2,500

Note:







A-45

5.4. FVSB


Number of

Shares

issued or

transferred


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:







A-46

5.5. GMSB


Number ofShares



Numberof Shares

ShareCapital

Numberof Shares

ShareCapital

(RM) (RM) (’000) (RM’000)

29 January2015


shares to Dato’Edwin

239,990 239,990

20 20 1,000 1,00029 January2015


shares to Dato’Colin

239,990 239,990

29 January2015


shares to TongYee Xing

520,000 520,000

30 November2016


Tong Yee Xingto the Target

1 520,000 1,000,000 1,000,000 1,000 1,000

30 November2016



0.50(1) 240,000 1,000,000 1,000,000 1,000 1,000

30 November2016



0.50(1) 240,000 1,000,000 1,000,000 1,000 1,000

Note:






5.6. HIPL


Number ofShares



Numberof Shares

ShareCapital

Numberof Shares

ShareCapital

(S$) (’000) (’000) (S$’000) (’000) (S$’000)

20 December2016



707,826 250 500 500 500 500

20 December2016



707,826 250 500 500 500 500


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


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.


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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


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.


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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.


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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.


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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.


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


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.


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


Awards Asia Pacific

Highly Commended


Hatten City 2012 – 2013


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


(Malaysia)

Elements Mall @

Hatten City

2013


Awards

Highly Commended

Best Commercial Architectural

Design

Elements Mall @

Hatten City

2013


Awards

Highly Commended


(South East Asia)

Elements Mall @

Hatten City

2013


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


Awards Development

Highly Commended

Commercial High-Rise

Development Malaysia

Imperio Mall @

Hatten City

2013 – 2014


Awards Interior Design

Highly Commended

Interior Design Apartment

Malaysia

Imperio Residence

@ Hatten City

2013 – 2014


Awards Interior Design

Highly Commended

Interior Design Apartment

Malaysia

SilverScape @

Hatten City

2013 – 2014


Awards Architecture

Highly Commended


Imperio @ Hatten

City

2013 – 2014


Awards Architecture

Highly Commended

Retail Architecture Malaysia

Dataran Pahlawan

Melaka Megamall

2013 – 2014


Awards Architecture

Highly Commended

Retail Architecture Malaysia

Elements Mall @

Hatten City

2013 – 2014


A-57


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


Awards

Highly Commended


Imperio Mall @

Hatten City

2014


Awards

Highly Commended

Best Luxury Condo Development

(South Malaysia)

Imperio Residence

@ Hatten City

2014


Awards

Highly Commended

Best Mid-Range Condo

Development (South Malaysia)

SilverScape @

Hatten City

2014


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


Awards Architecture

Best Residential High-Rise

Architecture Malaysia

SilverScape @

Hatten City

2014 – 2015


Awards Development

Highly Commended

Residential High-Rise


SilverScape @

Hatten City

2014 – 2015


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


Hatten City

(Parcel 1)

2014


People’s Choice Awards

Finalist

Most Iconic Development

Hatten City

(Parcel 1)

2014



Finalist


Imperio Mall @

Hatten City

2014



Finalist

Best High Rise Development

SilverScape @

Hatten City

2014


A-58


37. Property Insight

Prestigious Property

Developer Awards

Outstanding Developer –

Southern Region

Hatten Group

Sdn. Bhd.

2015


Awards

Highly Commended

Commercial High-Rise


Harbour City 2015


Awards

Highly Commended

Hotel Interior Malaysia

Hatten Hotel

Melaka

2015



Winner – Best Emerging

Developer

Hatten Group

Sdn. Bhd.

2015



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 –


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


Awards

Highly Commended


Harbour City 2016


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.


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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.


A-60

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.


A-61

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.


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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.


A-63

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.


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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.


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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.


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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.


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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.


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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


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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


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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


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.


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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.


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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 %



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


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.


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 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 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.


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 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 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.


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


FY2015

Net cash used in operating activities

In FY2015, the Target Group recorded net cash outflow from operating activities of



approximately RM41.2 million, net interest paid of approximately RM0.2 million and


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.




and equipment of approximately RM19.4 million which was partially offset by the proceeds




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.



FY2016

Net cash generated from operating activities

In FY2016, the Target Group recorded net cash inflow from operating activities of



approximately RM54.9 million, net interest received of approximately RM3.3 million and


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.




and equipment of approximately RM36.3 million which was partially offset the proceeds



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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.



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


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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


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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


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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%


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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


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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.


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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.


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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.


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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.


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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.


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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)


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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.


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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,


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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


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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


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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.


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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.


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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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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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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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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.


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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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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.


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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;


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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


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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


plus S$250,000

Above S$20,000,000 Seven percent (7.0%) of the Profit


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


S$15,000,001 to S$20,000,000 Five percent (5.0%) of the Profit


plus S$200,000

Above S$20,000,000 Six percent (6.0%) of the Profit


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


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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;


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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


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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


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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.


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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;


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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.


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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.


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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


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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


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:


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


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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:


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:


FY2014 FY2015 FY2016

516 159 –


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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)


Berhad





Berhad




RHB Bank Berhad Dato’ Colin RM3,400(2) FRSBBanker’s

Guarantee

Public BankBerhad

Dato’ Colin RM140,000 FRSBPurchase of

motor vehicle

Malayan BankingBerhad


RM148,000 FRSBPurchase of

motor vehicle


A-130

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:


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.


A-131

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.


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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


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


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


RM120,000,000 RM20,392,918 GMSB Bridging loan topart financeconstruction

costs

Public BankBerhad

Dato’ Edwin RM300,000 RM271,120 GMSB Purchase ofmotor vehicle


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Other Security

EntitySecurity

Provided ByType ofSecurity



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


Letter ofSubordination;

Letter ofUndertaking;

RM55,000,000 RM38,431,713 FGSB Bridgingloan for

financing ofconstruction

costs

MalaysiaBuildingSocietyBerhad

Dato’ ColinDato’ EdwinChong Foh

SiongTong Yee

Xing

Deed ofSubordination

(Shareholders)

RM258,500,000 RM228,001,954 FVSB Islamicterm

financing toredeem apiece of

leaseholdland andIslamicbridging

financing topart financeconstruction

costs


Dato’ ColinDato’ EdwinChong Foh

Siong

Deed ofSubordination

(Directors)





costs


FuyuuDevelopment

Sdn. Bhd.

Assignmentof rights,

interests andbenefits of

parcelserected on

land





costs


A-134

EntitySecurity

Provided ByType ofSecurity



PracticableDate

AmountGuaranteed

as at theLatest

PracticableDate

Facilityfor use

byPurpose of

Facility


FuyuuDevelopment

Sdn. Bhd.

Debentures RM258,500,000 RM230,001,954 FVSB Islamicterm




costs

UnitedOverseas

Bank(Malaysia)

Bhd


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


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.


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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


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:


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.


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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:


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:


FY2014 FY2015 FY2016

1,052 4,752 10,862


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.


A-138

(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:


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.


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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


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.


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


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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”.


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(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


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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


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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


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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


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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


A-173

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.


A-174

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


A-175

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


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


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.


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


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


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.


A-181

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B-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

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


Independent Auditor’s Report on Combined Financial Statements


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



C-2


Combined Statements of Comprehensive Income


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.



C-3


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


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


statements.



C-4


Combined Statements of Changes in Equity


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


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


capacity as owners 3,235 – – 3,235

At 30 June 2014 13,235 (20,034) 34 (6,765)


statements.



C-5


Combined Statements of Cash Flows



Note 2014 2015 2016

RM’000 RM’000 RM’000

Cash flows from operating activities


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


statements.



C-6


Notes to Combined Financial Statements


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


Pte Ltd

Singapore Marketing and

development consultancy

Tan June Teng Colin


Fuyuu Group

Sdn Bhd

Malaysia Property development Tan June Teng Colin


Fuyuu Resources Sdn

Bhd



Fuyuu Ventures

Sdn Bhd



Tong Yee Xing

Chong Foh Siong

Gold Mart Sdn Bhd Malaysia Property development Tan June Teng Colin


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.



C-7




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.



C-8




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.



C-9





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.



C-10





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.



C-11





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.



C-12





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.



C-13





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.



C-14





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.



C-15





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.



C-16





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.



C-17





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.



C-18





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.



C-19





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.



C-20





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.



C-21





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.



C-22





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.



C-23




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.



C-24





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.



C-25





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


2014 2015 2016

RM’000 RM’000 RM’000

Sale of properties under development 245,159 436,264 412,347



C-26




5. Other income/gains

The following items have been included in arriving at other income/gains:


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:


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



C-27




7. Income tax expense

Major components of income tax expense


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:


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



C-28




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



C-29




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


Disposals – (603) – – (1) (604)

Write-off – – – – (5) (5)


At 30 June 2015 – 4,289 287 205 666 5,447


Disposals – (3,761) (1) – – (3,762)

Write-off – – – (148) (71) (219)


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).



C-30




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



C-31




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.



C-32




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.



C-33




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:


(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:


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).



C-34




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.


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.


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.



C-35




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.



C-36




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



C-37




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.



C-38




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



C-39




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



C-40




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:


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


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



C-41




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.



C-42




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


liabilities 356,957 222,823 4,432 584,212

Total net undiscounted

financial liabilities (62,481) (222,823) (4,432) (289,736)



C-43





(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




assets 376,335 – – 376,335





liabilities 506,102 109,917 9,570 625,589



2014

Financial assets




assets 204,124 – – 204,124





liabilities 299,043 73,592 5,833 378,468





C-44





(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)



C-45




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:


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.



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)



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


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”):





(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.




of the Enlarged Share Capital (as defined below) on Completion.



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”).


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”).



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


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



D-4

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



D-5

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.



D-6

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.



D-7

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;



D-8

(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.




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.



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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.;



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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.



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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.”



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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 for the year attributable to owners

of the Company

19,495 25,780 68,588



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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


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



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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



D-16

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



D-18

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”)



D-19

(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:



D-20

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.



D-21

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.



D-22

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.



D-23

(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.





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



D-24

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.







D-25

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.



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.



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.



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.



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.



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.



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)



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.



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.



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



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.


(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



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



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.



D-38

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.



D-39

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.



D-40

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:


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.



D-41


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



D-42

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



D-43

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.



D-44

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.


(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.



D-45

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:


(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.



D-46

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.



D-47

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.;



D-48

(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.



D-49

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;



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


Independent Shareholders. Accordingly, we advise the Independent Directors to


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.


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.



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



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D-58

E-1

APPENDIX E – ASSET VALUATION REPORT

E-2


E-3


E-4


E-5


E-6


E-7


E-8


E-9


E-10


E-11


E-12


E-13


F-1

APPENDIX F – BUSINESS VALUATION REPORT

F-2


F-3


F-4


F-5


F-6


F-7


F-8


F-9


F-10


F-11


F-12


F-13


F-14


F-15


F-16


F-17


F-18


F-19


F-20


F-21


F-22


F-23


F-24


F-25


F-26


F-27


F-28


F-29


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



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



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.


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.


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.


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.


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.


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.


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.


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.


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


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.


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


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.


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.


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


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”.


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.


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.


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


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.


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.


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


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,


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


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.


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


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.


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.


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.


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.


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


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


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.


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


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.


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.


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.


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


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,


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.


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


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);


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).


I-43

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.


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.


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).


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;


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(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,


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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.


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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.


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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


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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.


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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


(iv) FRSB’s current authorised share capital is RM5,000,000 and its issued paid-up capital


APPENDIX K – ABRIDGED LEGAL OPINION OF THE LEGAL ADVISERSTO THE COMPANY IN RELATION TO THE PROPOSED

ACQUISITION AS TO MALAYSIA LAW

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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.



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;



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.



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.



K-5

L-1

APPENDIX L – VALUATION CERTIFICATE IN RELATION TOTHE DISPOSAL VALUATION REPORT

L-2


L-3



(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



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




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




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.


N-2

ORDINARY RESOLUTION 7: THE PROPOSED APPOINTMENT OF TAN PING HUANG EDWIN

AS DIRECTOR


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


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



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



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


N-3




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.


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


N-5


(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


c/o Tricor Barbinder Share Registration Services

(A division of Tricor Singapore Pte. Ltd.)

80 Robinson Road #11-02

Singapore 068898

Fold flap

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -1st fold here

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -2nd fold here

Affix

Postage

Stamp

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -3rd fold here

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


Winner

Best Retail Project

Outstanding Achievement


Winner


Highly Commended


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


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




Statement


Placement



Hatten City Phase 1

Hatten City Phase 2

Harbour City

Vedro by the River




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


The market value of the 100% equity in the Target Group as at


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.


(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;


(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;


(11) THE PROPOSED NEW SHARE ISSUE MANDATE; AND


THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. PLEASE READ IT CAREFULLY.

CIRCULAR DATED 29 DECEMBER 2016


HATTEN LAND LIMITED

(Incorporated in the Republic of Singapore)


(To be renamed as Hatten Land Limited

following the completion of the Proposed

Acquisition)


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.

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