SINOBEST TECHNOLOGY HOLDINGS LTD. - listed companyokh.listedcompany.com/misc/IPO/Sinobest Technology Holdings Ltd... · YOUR ATTENTION IS DRAWN TO SECTION D ENTITLED “RISK FACTORS”

CIRCULAR DATED 31 DECEMBER 2012

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION.

IF YOU ARE IN DOUBT AS TO THE ACTION THAT YOU SHOULD TAKE, YOU SHOULD CONSULT YOUR LEGAL, FINANCIAL, TAX OROTHER PROFESSIONAL ADVISERS IMMEDIATELY.

If you have sold or transferred all your shares in the capital of Sinobest Technology Holdings Ltd. (the “Company”) held through The CentralDepository (Pte) Limited (“CDP”), you need not forward this Circular to the purchaser or transferee as arrangements will be made by CDPfor a separate Circular to be sent to the purchaser or transferee. If you have sold or transferred all your shares represented by physical sharecertificate(s), you should at once hand this Circular to the purchaser or transferee or to the bank, stockbroker or agent through whom youeffected the sale or transfer, for onward transmission to the purchaser or transferee.

The Company was placed on the watch-list of the Singapore Exchange Securities Trading Limited (the “SGX-ST”) on 3 March 2010. TheSGX-ST has granted the Company an extension of time until 28 February 2013 to meet the requirements to exit from the SGX-ST’s watch-list.Should the Company be unable to meet the requirements of Rule 1314 of the Listing Manual by 28 February 2013 or any extended timelineas approved by the SGX-ST, the SGX-ST may either remove the Company from its Official List, or suspend trading of the Shares with a viewto removing the Company from its Official List. Please refer to the Section 4.7 of this Circular entitled “Rationale for the Proposed Acquisition”for further details of Rule 1314 of the Listing Manual. The Company is proposing the transactions contemplated in this Circular, which uponcompletion, will place the Company in a better position to apply for the removal from the SGX-ST’s watch-list. However, there is no assurancethat the Proposed Transactions, when completed, will achieve the Company’s objective of applying for its removal from the SGX-ST’swatch-list. In the event that the SGX-ST exercises its power to remove the Company from its Official List at such time, any exit alternativeoffered by the Company may or may not be reasonable and Shareholders may lose some or all of their investment in the Company.

The SGX-ST assumes no responsibility for the contents of this Circular, including the correctness of any of the statements oropinions made or reports contained in this Circular. An application has been made to the SGX-ST for permission for the listing andquotation of the Consideration Shares, the Consolidated Shares and the Performance Shares on the Mainboard of the SGX-ST. The approvalin-principle granted by the SGX-ST to the Company for the listing and quotation on the Official List of the SGX-ST, of the ConsiderationShares, the Consolidated Shares and the Performance Shares, is not to be taken as an indication of, the merits of the ProposedTransactions, the OKH Group, the Enlarged Group, the Shares, the Consideration Shares, the Consolidated Shares or the PerformanceShares.

Terms appearing on the cover of this Circular bear the same meanings as defined in this Circular.

YOUR ATTENTION IS DRAWN TO SECTION D ENTITLED “RISK FACTORS” IN THE LETTER TO SHAREHOLDERS FROM OKH OF THISCIRCULAR WHICH YOU SHOULD REVIEW CAREFULLY.

SINOBEST TECHNOLOGY HOLDINGS LTD.(Company Registration No. 35479)

(Incorporated in Bermuda)

CIRCULAR TO SHAREHOLDERS

in relation to

(1) The proposed acquisition of the entire issued share capital of OKH Holdings Pte. Ltd. for the Purchase Consideration ofS$123,184,659;

(2) The proposed increase in the authorised share capital of the Company;(3) The proposed issue and allotment of 1,026,538,825 Consideration Shares in satisfaction of the Purchase Consideration for

the Proposed Acquisition;(4) The proposed cash distribution by the Company of approximately S$1.0 million in cash to its Shareholders by way of

capital reduction;(5) The proposed disposal of the Company’s shareholding interest in the Operating Subsidiaries to the Undertaking

Shareholders involving a selective share cancellation pursuant to the Disposal Agreement;(6) The proposed consolidation of every two Shares into one Consolidated Share;(7) The proposed change of auditors;(8) The proposed change of name of the Company from “Sinobest Technology Holdings Ltd.” to “OKH Global Ltd.”;(9) The proposed termination of the existing share option scheme and the proposed adoption of the OKH Performance Share

Plan; and(10) The proposed amendment to the Bye-Laws.

Financial Adviser to the Company in respect of the Proposed Acquisition and the Proposed Disposal

Asiasons WFG Capital Pte Ltd(Company Registration No. 200002789M)

(Incorporated in the Republic of Singapore)

Independent Financial Adviser in respect of the Proposed Disposal as an Interested Person Transaction

Provenance Capital Pte. Ltd.(Company Registration No.: 200309056E)

(Incorporated in the Republic of Singapore)

IMPORTANT DATES AND TIMES

Latest date and time for lodgement of Proxy Form : 21 January 2013 at 10.00 a.m

Date and time of Special General Meeting : 23 January 2013 at 10.00 a.m

Place of Special General Meeting : 1 Robinson Road

#18-00 AIA Tower

Singapore 048542

Page

CORPORATE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

INDICATIVE TIMETABLE FOR THE PROPOSED TRANSACTIONS . . . . . . . . . . . . . . . . 17

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS . . . . . . . . . . . 18

LETTER TO SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

1. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

2. SUMMARY OF THE PROPOSED TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . 21

3. SUBMISSION TO THE SGX-ST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

4. PROPOSED ACQUISITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

5. PROPOSED CASH DISTRIBUTION BY WAY OF CAPITAL REDUCTION . . . . . . . 35

6. PROPOSED INCREASE IN AUTHORISED SHARE CAPITAL . . . . . . . . . . . . . . . . 37

7. PROPOSED DISPOSAL INVOLVING THE PROPOSED SELECTIVE SHARE

CANCELLATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

8. PROPOSED CONSOLIDATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

9. PROPOSED CHANGE OF AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

10. PROPOSED CHANGE OF NAME OF THE COMPANY. . . . . . . . . . . . . . . . . . . . . . 48

11. PROPOSED TERMINATION OF THE EXISTING SHARE OPTION SCHEME AND

THE PROPOSED ADOPTION OF THE OKH PERFORMANCE SHARE PLAN . . . 49

12. PROPOSED AMENDMENT TO THE BYE-LAWS . . . . . . . . . . . . . . . . . . . . . . . . . . 55

13. PROPOSED COMPLIANCE PLACEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

14. FINANCIAL EFFECTS OF THE PROPOSED TRANSACTIONS . . . . . . . . . . . . . . . 58

15. THE ENLARGED GROUP AFTER THE PROPOSED TRANSACTIONS . . . . . . . . . 62

16. MATERIAL CONTRACTS OF THE SINOBEST GROUP . . . . . . . . . . . . . . . . . . . . . 68

17. MATERIAL LITIGATION OF THE SINOBEST GROUP . . . . . . . . . . . . . . . . . . . . . . 68

18. EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

19. INTERESTS OF EXPERTS AND OTHER RELATIONSHIPS. . . . . . . . . . . . . . . . . . 69

20. ADVICE OF THE IFA IN RELATION TO THE PROPOSED DISPOSAL . . . . . . . . . 69

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21. AUDIT COMMITTEE STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

22. INTERESTS OF DIRECTORS AND SUBSTANTIAL SHAREHOLDERS . . . . . . . . . 70

23. RECOMMENDATION OF THE DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

24. SPECIAL GENERAL MEETING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

25. ACTION TO BE TAKEN BY SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

26. RESPONSIBILITY STATEMENTS BY THE DIRECTORS . . . . . . . . . . . . . . . . . . . . 72

27. RESPONSIBILITY STATEMENT BY THE FINANCIAL ADVISER . . . . . . . . . . . . . . 73

28. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

29. ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74

LETTER TO SHAREHOLDERS FROM OKH

A. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

B. INFORMATION OF OKH GROUP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

B.1 History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

B.2 Business Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

B.3 Principal Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

B.4 Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79

B.5 Work Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

B.6 Quality Assurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90

B.7 Safety Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91

B.8 Awards and Accolades . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92

B.9 Sales and Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93

B.10 Production Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94

B.11 Properties and Fixed Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94

B.12 Research and Development. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96

B.13 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97

B.14 Seasonality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97

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B.15 Staff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97

B.16 Staff Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98

B.17 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98

B.18 Major Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99

B.19 Major Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100

B.20 Credit Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101

B.21 Inventory Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

B.22 Licences, Permits and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

B.23 Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

B.24 Competitive Strengths . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105

B.25 Government Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106

B.26 Exchange Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113

B.27 Additional Information on OKH Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114

C. PROPOSED MANAGEMENT OF THE ENLARGED GROUP . . . . . . . . . . . . . . . . . 115

D. RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124

E. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137

F. PROSPECTS, TREND INFORMATION, STRATEGY AND FUTURE PLANS . . . . . 160

G. MORATORIUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165

H. DIVIDEND POLICY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165

I. INTERESTED PERSON TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166

J. INFORMATION ON THE MEMBERS OF THE NEW BOARD AND THE PROPOSED

EXECUTIVE OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177

K. MATERIAL BACKGROUND INFORMATION ON THE NEW BOARD, PROPOSED

EXECUTIVE OFFICERS AND CONTROLLING SHAREHOLDERS. . . . . . . . . . . . . 179

L. CORPORATE GOVERNANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183

M. RESPONSIBILITY STATEMENT BY THE PROPOSED DIRECTORS AND THE

VENDOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186

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APPENDIX A: LETTER FROM PROVENANCE CAPITAL PTE. LTD. TO THE

INDEPENDENT DIRECTORS OF SINOBEST TECHNOLOGY HOLDINGS LTD. . . . . . . . A-1

APPENDIX B: INDEPENDENT AUDITORS’ REPORT AND THE CONSOLIDATED

FINANCIAL STATEMENTS OF OKH HOLDINGS PTE. LTD. AND ITS SUBSIDIARIES

FOR THE FINANCIAL YEAR ENDED JUNE 30, 2010, 2011 AND 2012 . . . . . . . . . . . . . B-1

APPENDIX C: COMPILATION REPORT ON THE UNAUDITED PROFORMA

CONSOLIDATED FINANCIAL INFORMATION ON THE ENLARGED GROUP. . . . . . . . . C-1

APPENDIX D: VALUATION CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D-1

APPENDIX E: TAXATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-1

APPENDIX F: RULES OF THE OKH PERFORMANCE SHARE PLAN . . . . . . . . . . . . . . F-1

APPENDIX G: PROPOSED AMENDMENT TO THE BYE-LAWS . . . . . . . . . . . . . . . . . . . G-1

NOTICE OF SPECIAL GENERAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N-1

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Current Board of Directors : Zou Gefei (Executive Chairman and Chief Executive

Officer)

Li Ziqiang (Executive Director)

Yu Zengping (Executive Director)

Tan Soo Kiat (Lead Independent Director)

Tan Swee Ling (Independent Director)

Ong Soon Teik (Independent Director)

Proposed New Board of

Directors (to be formed

subject to and upon

Completion)

: Bon Ween Foong (Executive Chairman and Chief

Executive Officer)

Lam Wee Yeow (Executive Director (Projects))

Ong Soon Teik (Lead Independent Director)

Tan Soo Kiat (Independent Director)


Company Secretary : Chew Kok Liang, LLB (Hons)

Registered Office : Canon’s Court

22 Victoria Street

Hamilton HM12

Bermuda

Registered Office of OKH

and New Principal Place of

Business of the Enlarged

Group after Completion

: 701 Sims Drive

#02-06 LHK Building

Singapore 387383

Singapore Share Transfer

Agent

: 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 and

Proposed Disposal

: Asiasons WFG Capital Pte Ltd

70 Anson Road

#24-01 Hub Synergy Point

Singapore 079905

Auditors to the Company : Nexia TS Public Accounting Corporation

Certified Public Accountants

100 Beach Road

#30-00 Shaw Tower

Singapore 189702

Partner-in-charge: Philip Tan Jing Choon, a member of

the Institute of Certified Public Accountants of

Singapore

CORPORATE INFORMATION

5

Auditors to OKH Group and

Reporting Accountants of

the Enlarged Group

: Deloitte & Touche LLP

Certified Public Accountants

6 Shenton Way

#32-00 DBS Building Tower Two

Singapore 068809

Partner-in-charge: Ernest Kan Yaw Kiong, a member of

the Institute of Certified Public Accountants of

Singapore

Legal Adviser on Singapore

Law concerning the

Proposed Transactions

: Opal Lawyers LLC

30 Raffles Place

#19-04 Chevron House

Singapore 048622

Legal Adviser to the

Company on Bermuda Law

concerning the Proposed

Transactions

: Conyers Dill & Pearman Pte. Ltd.

9 Battery Road

#20-01 Straits Trading Building

Singapore 049910

Legal Adviser to the

Company on Singapore Law

: Shook Lin & Bok LLP

1 Robinson Road

#18-00 AIA Tower

Singapore 048542

Independent Financial

Adviser in relation to the

Proposed Disposal

: Provenance Capital Pte. Ltd.

96 Robinson Road

#13-01 SIF Building

Singapore 068899

Valuer : Savills Valuation and Professional Services (S) Pte Ltd

30 Cecil Street

#20-03 Prudential Tower

Singapore 049712

Principal Banker of OKH

Group

: United Overseas Bank Limited

80 Raffles Place

UOB Plaza 1

Singapore 048624

CORPORATE INFORMATION

6

The following definitions apply throughout this Circular, unless the context requires otherwise:

Group Companies and Enlarged Group Companies

“Sinobest” or “Company” : Sinobest Technology Holdings Ltd.

“Group” or “Sinobest Group” : The Company and its subsidiaries

“Operating Subsidiaries” : The subsidiaries of Sinobest, namely Guangzhou Sinobest

Information Technology Ltd. and Sinobest Technologies

(H.K.) Limited

“Enlarged Group” : The Company and OKH Group after completion of the

Proposed Transactions

“OKH” : OKH Holdings Pte. Ltd.

“OKH Group” : OKH and its subsidiaries, namely OKH Management Pte.

Ltd., OKH Development Pte. Ltd., Foxx Media Pte. Ltd.,

Green Synergy Pte. Ltd. and OKH (Woodlands) Pte. Ltd.

Other Companies, Corporations and Organisations

“ANZ” : Australian and New Zealand Banking Group Limited

“BCA” : Building and Construction Authority

“CAAS” : Civil Aviation Authority of Singapore

“CDP” : The Central Depository (Pte) Ltd

“CIMB” : CIMB Bank Berhad

“CPF” : Central Provident Fund

“DBS” : DBS Bank Ltd.

“Financial Adviser” or

“Asiasons WFG Capital”

: Asiasons WFG Capital Pte Ltd

“HSBC” : Hong Kong and Shanghai Banking Corporation Limited

“IFA” : Provenance Capital Pte. Ltd.

“IRAS” : Inland Revenue Authority of Singapore

“MayBank” : Malayan Banking Berhad

DEFINITIONS

7

“MOM” : Ministry of Manpower of Singapore

“NEA” : National Environmental Agency of Singapore

“Placement Agent” : UOB Kay Hian Private Limited

“PUB” : Public Utilities Board of Singapore

“Reporting Accountants” : Deloitte & Touche LLP

“SCB” : Standard Chartered Bank

“SCDF” : Singapore Civil Defence Force

“SGX-ST” : Singapore Exchange Securities Trading Limited

“SIC” : Securities Industry Council of Singapore

“SMRT” : SMRT Corporation Ltd.

“UOB” : United Overseas Bank Limited

“URA” : Urban Redevelopment Authority of Singapore

“Valuer” : Savills Valuation and Professional Services (S) Pte Ltd

“WSH Council” : Workplace Safety and Health Council

General

“A&A works” : Alteration and addition works

“AGM” : The annual general meeting of the Company

“Associate” : (a) In relation to any director, chief executive officer,

substantial shareholder or controlling shareholder

(being an individual) means:

(i) his immediate family;

(ii) the trustees of any trust of which he or his

immediate family is a beneficiary or, in the case

of a discretionary trust, is a discretionary object;

and

(iii) any company in which he and his immediate

family together (directly or indirectly) have an

interest of 30.0% or more,

DEFINITIONS

8

(b) in relation to a substantial shareholder or a controlling

shareholder (being a company) means any other

company which is its subsidiary or holding company or

is a subsidiary of such holding company or one in the

equity of which it and/or such other company or

companies taken together (directly or indirectly) have

an interest of 30.0% or more

“Audit Committee” : The audit committee of the Company

“Bermuda Companies Act” : The Companies Act 1981 of Bermuda, as may be amended,

varied or supplemented from time to time

“Board” : The board of Directors of the Company as at the date of this

Circular

“Books Closure Date” : The date and time, to be determined by the Directors, at

and on which the Register of Members and the share

transfer books of the Company will be closed to determine

the entitlements of Consolidated Shares of Shareholders

under the Proposed Consolidation or Cash Distribution

Sum (as defined under Section 5.1 of this Circular) under

the Proposed Cash Distribution, as the case may be

“Bye-Laws” : The bye-laws of the Company, as amended from time to

time

“CEO” : Chief Executive Officer

“Circular” : This circular to Shareholders dated 31 December 2012,

including the Appendices to this Circular

“Code” : The Singapore Code on Take-overs and Mergers, as may

be amended, varied or supplemented from time to time

“Companies Act” : Companies Act (Chapter 50) of Singapore, as may be

amended, varied or supplemented from time to time

“Completion” : The completion of the sale and purchase of the Sale Shares

under the terms and conditions of the SPA

“Completion Date” : The date on which Completion occurs

“Compliance Shares” : Comprising up to 132,746,000 Consolidated Shares to be

offered by the Vendor pursuant to the Proposed

Compliance Placement at a placement price to be agreed

between the Vendor and the Placement Agent

DEFINITIONS

9

“Consideration Shares” : The 1,026,538,825 new Shares to be allotted and issued to

the Vendor at the Issue Price per Share in satisfaction of

the Purchase Consideration, which when issued, will rank

pari passu in all respects with the then existing Shares save

for any rights, benefits, dividends and entitlements, the

record date for which falls before the date of issue of the

Consideration Shares

“Consolidated Shares” : Ordinary shares of par value US$0.18 each following the

Proposed Consolidation

“Controlling Shareholder” : Means a person who:

(a) holds, directly or indirectly, 15.0% or more of the

nominal amount of all voting shares in the Company or

the Enlarged Group, as the case may be (unless

otherwise determined by SGX-ST); or

(b) in fact exercises control over the Company or the

Enlarged Group, as the case may be

“Directors” : The directors of the Company as at the date of this Circular

“Disposal Agreement” : The disposal agreement dated 27 December 2012 entered

into between (a) the Company; and (b) the Undertaking

Shareholders for the sale of the entire shareholding held by

the Company in its Operating Subsidiaries, Guangzhou

Sinobest Information Technology Ltd. and Sinobest

Technologies (H.K.) Limited, to the Undertaking

Shareholders

“Disposal Completion Date” : The date of the completion of the Proposed Disposal

“Disposal Consideration” : Has the same meaning ascribed to it in Section 7.2 of this

Circular

“Enlarged Share Capital” : The enlarged share capital of the Company after

completion of the Proposed Transactions

“EPS” : Earnings per share

“FRS” : Financial Reporting Standards

“FY” : The financial year ended or ending 30 June or 31

December, as the case may be

DEFINITIONS

10

“General Offer” : The requirement under Rule 14 of the Code for the Vendor

and/or parties acting in concert with him, if any, to make a

mandatory general offer to acquire all the issued Shares

(other than those already owned by them) arising from the

issuance of Consideration Shares

“IGLS” : Industrial Government Land Sales

“Independent Directors” : The Directors who are deemed to be independent for the

purpose of making a recommendation to Shareholders in

respect of the Proposed Disposal

“Interested Person” : Has the meaning ascribed to it in the Listing Manual

“Interested Person

Transactions”

: Transactions proposed to be entered or entered into

between an entity at risk and an Interested Person and has

the meaning ascribed to it in the Listing Manual

“Issue Price” : S$0.12, being the issue price for each of the Consideration

Shares

“IT” : Information technology

“Latest Practicable Date” : 18 December 2012, being the latest practicable date prior

to the printing of this Circular

“Listing Manual” : The listing manual of the SGX-ST, as may be amended,


“Market Day” : A day on which the SGX-ST is open for securities trading

“Members” : Holders of Shares who are registered in the Register of

Members

“Memorandum” : The memorandum of association of the Company, as

amended from time to time

“MRT” : Mass Rapid Transit

“NAV” : Net asset value

“New Board” : The new board of directors of the Company including the

Proposed Directors, as set out in Section 4.3 of this

Circular

“Nominating Committee” : The nominating committee of the Company

“Non-Executive Directors” : The non-executive Directors of the Company

DEFINITIONS

11

“Notice of SGM” : The notice of SGM as set out in the Section entitled “Notice

of Special General Meeting” of this Circular

“NTA” : Net tangible assets

“OKH Performance Share

Plan” or “Performance

Share Plan”

: The proposed OKH Performance Share Plan, the terms of

which are set out in Section 11 of this Circular, as may be


“Ordinary Resolution” : A resolution passed by a simple majority of the Members

present and voting in person or by proxy at a general

meeting of the Company

“Performance Shares” : The Shares transferred or new Shares which may be

allotted and issued from time to time pursuant to the vesting

of awards granted under the OKH Performance Share Plan

“PRC” : People’s Republic of China, excluding the special

administrative regions, Hong Kong and Macau, for the

purpose of this Circular and for geographical reference only

“Proposed Acquisition” : The proposed acquisition of the entire issued share capital

of OKH by the Company from the Vendor, on and subject to

the terms and conditions of the SPA

“Proposed Cash Distribution” : The proposed cash distribution by the Company of

approximately S$1.0 million (or S$0.009 for each Share) in

cash to its Shareholders in the manner described in Section

5 of this Circular

“Proposed Capital Reduction” : The proposed capital reduction exercise to be carried out

by the Company with the intention to effect the Proposed

Cash Distribution

“Proposed Compliance

Placement”

: The proposed placement of such number of Shares held by

the Vendor for the purposes of meeting the shareholding

distribution requirements of the Listing Manual at a

placement price to be agreed between the Vendor and the

Placement Agent

“Proposed Consolidation” : The proposed consolidation of every two existing Shares

held by Shareholders as at the Books Closure Date into one

Consolidated Share, fractional entitlements to be

disregarded

“Proposed Directors” : The new directors proposed to be appointed to the Board

following completion of the Proposed Transactions, namely

Bon Ween Foong and Lam Wee Yeow

DEFINITIONS

12

“Proposed Disposal” : The proposed disposal of the Company’s shareholding

interest in the Operating Subsidiaries to the Undertaking

Shareholders involving a selective share cancellation

pursuant to the Disposal Agreement

“Proposed Executive Officers” : The new executive officers proposed to be appointed

following the completion of the Proposed Transactions

“Proposed Increase in

Authorised Share Capital”

: The proposed increase in the Company’s authorised share

capital from US$30,000,000 to US$500,000,000

“Proposed Selective Share

Cancellation”

: The proposed share cancellation of the existing Shares

held by the Undertaking Shareholders pursuant to the

Proposed Disposal

“Proposed Transactions” : The Proposed Acquisition, the Proposed Increase In

Authorised Share Capital, the proposed issue and

allotment of the Consideration Shares, the Proposed Cash

Distribution by way of capital reduction, the Proposed

Disposal involving the Proposed Selective Share

Cancellation, the Proposed Consolidation, the proposed

change of auditors, the proposed change of name of the

Company, the proposed termination of the existing share

option scheme, the proposed adoption of the OKH

Performance Share Plan and the proposed amendment to

the Bye-Laws

“Proxy Form” : The proxy form in respect of the SGM as set out in this

Circular

“Public” : Persons other than:

(a) Directors, CEO, substantial shareholders or

controlling shareholders of the Company or its

subsidiary companies; and

(b) associates of the persons in paragraph (a)

“Purchase Consideration” : The sum of S$123,184,659 payable by the Company for the

Proposed Acquisition, to be satisfied by the issue and

allotment of the Consideration Shares. For more

information, please refer to Sections 2.1 and 4 of this

Circular

“Record Date” : In relation to any dividends, rights, allotments or other

distributions, the date as at the close of business (or such

other time as may have been notified by the Company) on

which Shareholders must be registered with the Company

or with CDP in order to participate in such dividends, rights,

allotments or other distributions

DEFINITIONS

13

“Register of Members” : The register of members of the Company

“Remuneration Committee” : The remuneration committee of the Company

“Sale Shares” : 6,500,000 ordinary shares in the capital of OKH,

representing the entire issued share capital of OKH on the

Completion Date

“Second Supplemental

Agreement”

: The supplemental agreement dated 4 July 2012 entered

into between the Company and the Vendor to vary certain

provisions of the SPA as described in Section 1 of the

Circular entitled “Introduction”

“Securities Account” : Securities account maintained by a Depositor with CDP but

does not include a securities sub-account maintained with

a Depository Agent

“Service Agreements” : The service agreements to be entered into between the

Company and the Proposed Directors, Bon Ween Foong

and Lam Wee Yeow respectively, as described in Section

C.6 in the Letter to Shareholders from OKH of this Circular

entitled “Service Agreements”

“SFA” : Securities and Futures Act (Chapter 289) of Singapore as

may be amended, varied or supplemented from time to time

“SFR” : Securities and Futures (Offers of Investments) (Shares and

Debentures) Regulations 2005 of Singapore, as may be


“SGM” : The special general meeting of the Company, notice of

which is set out in the Section entitled “Notice of Special

General Meeting” of this Circular

“Shareholders” : Registered holders of Shares in the Register of Members,

except that where the registered holder is CDP, the term

“Shareholders” shall, in relation to such Shares, mean the

Depositors whose Securities Accounts maintained with

CDP are credited with Shares

“Shares” : Ordinary shares in the capital of the Company

“SPA” : The sale and purchase agreement dated 4 July 2011

entered into between the Company and the Vendor, as

varied and supplemented by the Supplemental Agreement,

Second Supplemental Agreement and Third Supplemental

Agreement in relation to the Proposed Acquisition

DEFINITIONS

14

“Special Resolution” : A resolution passed by a majority of at least 75.0% of the

Members present and voting in person or by proxy at a

general meeting of the Company

“Substantial Shareholder” : A person who has an interest in one or more voting shares

in a company and the total votes attached to such share(s)

is not less than 5.0% of the total votes attached to all the

voting shares in a company

“Supplemental Agreement” : The supplemental agreement dated 20 January 2012

entered into between the Company and the Vendor to vary

certain provisions of the SPA as described in Section 1 of

this Circular entitled “Introduction”

“Third Supplemental

Agreement”

: The supplemental agreement dated 27 December 2012

entered into between the Company and the Vendor to vary

certain provisions of the SPA as described in Section 1 of

this Circular entitled “Introduction”

“TOP” : Temporary Occupation Permit

“Undertaking Shareholders” : Zou Gefei, Jin Changren and Profit Saver International

Limited

“USA” : United States of America

“Vendor” : Bon Ween Foong

Currencies, Units of Measurements and Others

“HK$” : Hong Kong dollars

“RMB” and “RMB cents” : PRC Renminbi and Renminbi cents, respectively

“S$” and “cents” : Singapore dollars and cents, respectively

“US$” and “US cents” : USA dollars and cents, respectively

“GFA” : Gross floor area

“m” : Metres

“sq ft” : Square feet

“sq m” : Square metres

“%” : Per centum or percentage

DEFINITIONS

15

Any capitalised terms relating to the Performance Share Plan, including Section 11, which are not

defined in this Section of this Circular shall have the meanings ascribed to them as stated in

Appendix F of this Circular.

The terms “acting in concert” or “concert parties” shall have the meaning ascribed to them

respectively in the Code.

The term “treasury share” shall have the meaning ascribed to it in the Bermuda Companies Act.

The term “subsidiary” shall have the meaning ascribed to it by Section 5 of the Companies Act.

The term “associated company” shall have the meaning ascribed to it in the Listing Manual. The

term “entity at risk” refers to a person falling within the meaning of the term in Section 1 of the

Fourth Schedule of the SFR or in Chapter 9 of the Listing Manual.

The terms “Depositor”, “Depository Agent” and “Depository Register” shall have the meanings

ascribed to them respectively in Section 130A of the Companies Act.

Under the Bermuda Companies Act, only those persons who agree to become shareholders of a

Bermuda company and whose names are entered on the register of members of such a company

are considered members. Accordingly, Depositors holding Shares through CDP would not be

recognised as Members under Bermuda law and their rights in respect of the Shares under

Bermuda law are derived through CDP.

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

and vice versa. References to persons shall include corporations.

Any reference in this Circular to any enactment is a reference to that enactment for the time being

amended or re-enacted. Any word defined under the SFA, the SFR, the Bermuda Companies Act,

the Companies Act, the Listing Manual or the Code or any statutory modification thereof and used

in this Circular shall, where applicable, have the meaning ascribed to it under the SFA, the SFR,

the Bermuda Companies Act, the Companies Act, the Listing Manual or the Code or any statutory

modification thereof as the case may be, unless the context requires otherwise.

Any reference in this Circular to Shares and/or new Shares being allotted and/or allocated to a

person includes allotment and/or allocation to CDP for the account of that person.

Any reference to a time of day in this Circular shall be a reference to Singapore time, unless

otherwise stated.

References to total number of Shares may ignore fractions.

Any discrepancies in the tables included herein between the amounts listed and the totals shown

thereof are due to rounding. Accordingly, figures shown as totals in certain tables may not be an

arithmetic aggregation of the figures which precede them.

DEFINITIONS

16

Subject to the approval of Shareholders at the SGM and approvals from the relevant authorities,

the tentative dates for the key events of the Proposed Transactions will be as follows:

Date Event

9 January 2013 : Notice of Books Closure Date for the Proposed Capital

Reduction

23 January 2013 : SGM

24 January 2013 : Shares traded cum ‘Proposed Capital Reduction’ basis

25 January 2013 : Shares traded ex-Proposed Capital Reduction

28 January 2013 : Completion of the Proposed Acquisition and allotment of the

Consideration Shares to the Vendor

Announcement of General Offer by the Vendor

29 January 2013 : Books Closure Date for the Proposed Capital Reduction

7 March 2013 : Notice of Books Closure Date for the Proposed Consolidation

18 March 2013 : Close of General Offer(1)

Completion of the Proposed Disposal (including the Proposed

Selective Share Cancellation)

19 March 2013 : Suspension of trading of Shares

20 March 2013 : Effective Trading Date of the Consolidated Shares (as defined

in Section 8.3 of this Circular)

22 March 2013 : Books Closure Date for Proposed Consolidation

End March 2013 : Completion of the Proposed Compliance Placement and

resume trading of Shares as OKH Global Ltd.(2)

Notes:

(1) This is based on prescribed timetable for an offer under the Code whereby the Vendor must despatch the offerdocument no later than 21 days from the date of the offer announcement and the Company must within 14 days fromthe date of the offer document, despatch the offeree circular. The General Offer will be open for 28 days after thedate on which the offer document is posted.

(2) Shareholders should note that there is no assurance that the Proposed Compliance Placement can be completedon or before the end of March 2013. In the event that the Proposed Compliance Placement cannot be carried outso as to meet the applicable shareholding spread and distribution requirements of the Listing Manual, the tradingof the Shares may be suspended and/or the SGX-ST may require the Shares to be de-listed.

Shareholders should note that, save for the date of the SGM, the above timetable isindicative only and is subject to change. Please refer to future announcement(s) by or onbehalf of the Company to the SGX-ST for the exact dates and times of such other events.

Where necessary, the Company may announce any changes to the timetable through the

SGX-ST’s website at http://www.sgx.com.

INDICATIVE TIMETABLE FOR THE PROPOSED TRANSACTIONS

17

All statements contained in this Circular, statements made in the press releases and oral

statements that may be made by the Company, employees acting on behalf of the Company, the

Group, OKH Group, the Vendor, the directors and the executive officers of OKH Group or

employees acting on behalf of OKH Group and/or any of OKH Group’s companies 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, you should note that

these words are not the exclusive means of identifying forward-looking statements. All statements

regarding the expected financial position, business strategies, plans and prospects of the

Company, the Group, OKH Group and/or the Enlarged Group are forward-looking statements.

These forward-looking statements, including but not limited to statements as to:

• revenue and profitability;

• any expected growth;

• expected industry trends;

• future expansion plans;

• anticipated completion and start-up dates for projects; and

• other matters of the Company, the Group, OKH Group and/or the Enlarged Group discussed

in this Circular regarding matters that are not historical fact,

are only predictions. These forward-looking statements involve known and unknown risks,

uncertainties and other factors that may cause the actual future results, performance or

achievements of the Company, the Group, OKH Group and/or the Enlarged Group 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 D entitled “Risk

Factors” in the Letter to Shareholders from OKH of this Circular.

Given the risks and uncertainties that may cause the actual future results, performance or

achievements of the Company, the Group, OKH Group and/or the Enlarged Group 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, OKH Group, the Financial Adviser, their respective directors and

executive officers are not representing or warranting to you that the actual future results,

performance or achievements of the Company, OKH Group and/or the Enlarged Group will be as

those discussed in those statements. The actual future results of the Company, OKH Group and/or

the Enlarged Group may differ materially from those anticipated in these forward-looking

statements as a result of the risks faced by the Company, OKH Group and/or the Enlarged Group.

Further, the Company, the Group, OKH Group and/or the Enlarged Group and the Financial

Adviser disclaim any responsibility to update any of those forward-looking statements or publicly

announce any revisions to those forward-looking statements to reflect their future developments,

events or circumstances.

Upon completion of the Proposed Acquisition, the Enlarged Group will be subject to the Listing

Manual regarding corporate disclosure.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

18

SINOBEST TECHNOLOGY HOLDINGS LTD.(Company Registration No. 35479)

(Incorporated in Bermuda)

Directors:

Zou Gefei (Executive Chairman and Chief Executive Officer)

Li Ziqiang (Executive Director)

Yu Zengping (Executive Director)

Tan Soo Kiat (Lead Independent Director)


Ong Soon Teik (Independent Director)

Registered Office:

Canon’s Court

22 Victoria Street

Hamilton HM12

Bermuda

31 December 2012

To: The Shareholders of Sinobest Technology Holdings Ltd.

Dear Sir/Madam:

(1) The proposed acquisition of the entire issued share capital of OKH Holdings Pte. Ltd.

for the Purchase Consideration of S$123,184,659;

(2) The proposed increase in the authorised share capital of the Company;

(3) The proposed issue and allotment of 1,026,538,825 Consideration Shares in

satisfaction of the Purchase Consideration for the Proposed Acquisition;

(4) The proposed cash distribution by the Company of approximately S$1.0 million in

cash to its Shareholders by way of capital reduction;

(5) The proposed disposal of the Company’s shareholding interest in the Operating

Subsidiaries to the Undertaking Shareholders involving a selective share cancellation

pursuant to the Disposal Agreement;

(6) The proposed consolidation of every two Shares into one Consolidated Share;

(7) The proposed change of auditors;

(8) The proposed change of name of the Company from “Sinobest Technology Holdings

Ltd.” to “OKH Global Ltd.”;

(9) The proposed termination of the existing share option scheme and the proposed

adoption of the OKH Performance Share Plan; and

(10) The proposed amendment to the Bye-Laws.

LETTER TO SHAREHOLDERS

19

1. INTRODUCTION

The Company was incorporated in Bermuda on 17 June 2004. The Group is a one-stop

solution provider of IT services and the Group’s business can be classified into system

integration for computer information systems and intelligent building systems, and software

development and technical services.

The Group conducts its business operations predominantly in the PRC and its main

customers include the various governmental authorities, departments, telecommunication

service operators and corporations (both state-owned and private-owned) in the PRC. The

Group’s head office is located in Guangzhou and it has five branch offices located in

Shenzhen, Fuzhou, Wuhan, Guiyang and Changsha.

The Company was placed on the watch-list of the SGX-ST on 3 March 2010. The SGX-ST

had on 16 February 2012, granted the Company an extension of time until 31 October 2012

to meet the requirements to exit from the SGX-ST’s watch-list. The SGX-ST had on 31

October 2012, granted the Company a further extension of time until 28 February 2013 to

meet the requirements to exit from the SGX-ST’s watch-list.

On 5 July 2011, the Company announced that it had on 4 July 2011 entered into the SPA

to undertake, inter alia, the Proposed Acquisition, the Proposed Disposal and such other

corporate action(s) in connection with the Proposed Acquisition and the Proposed Disposal,

as may be necessary.

On 20 January 2012, the Company announced that it had on 20 January 2012 entered into

the Supplemental Agreement to vary the terms of the SPA, pursuant to which the Purchase

Consideration shall be a sum calculated based on 7.8 times of the audited consolidated

profit after tax of OKH achieved for its financial year ended 30 June 2011 of S$15,051,969

(before restatement) and the number of Consideration Shares to be issued by the Company

shall be 978,377,985. The restated audited consolidated financial statements of OKH for

the financial year ended 30 June 2011 are found in Appendix B of this Circular.

On 4 July 2012, the Company announced that it had on 4 July 2012 entered into the Second

Supplemental Agreement to extend the long-stop date to complete the Proposed

Acquisition to 31 December 2012 or such further date as the parties may agree in writing.

On 28 December 2012, the Company announced that it had on 27 December 2012 entered

into the Third Supplemental Agreement to vary certain terms of the SPA, which includes,

inter alia, amending the Purchase Consideration to be a sum calculated based on 7.8 times

of the audited profits attributable to equity holders of OKH for its financial year ended 30

June 2012 of S$15,792,905 and the number of Consideration Shares to be issued by the

Company shall be 1,026,538,825.


into the Disposal Agreement with the Undertaking Shareholders for the proposed disposal

of the Company’s shareholding interest in the Operating Subsidiaries to the Undertaking

Shareholders at the Disposal Consideration of RMB145.2 million.

The Company has appointed Asiasons WFG Capital as its Financial Adviser in respect of

the Proposed Acquisition and the Proposed Disposal and Provenance Capital Pte. Ltd. as

the IFA to advise the Independent Directors on the Proposed Disposal.

The purpose of this Circular is to provide Shareholders with information relating to and to

seek Shareholders’ approval for the transactions mentioned on the cover of this Circular at

the forthcoming SGM. Specifically, approval by way of Ordinary Resolution will be sought


20

for the Proposed Acquisition, the Proposed Increase in Authorised Share Capital, the

proposed issue and allotment of Consideration Shares, the Proposed Consolidation, the

proposed change of auditors, the proposed termination of the existing share option scheme

and the proposed adoption of the OKH Performance Share Plan and approval by way of

Special Resolution will be sought for the Proposed Cash Distribution by way of capital

reduction, the Proposed Disposal involving the Proposed Selective Share Cancellation, the

proposed change of name of the Company and the proposed amendment to the Bye-Laws.

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 by the Company) or for any other purpose.

2. SUMMARY OF THE PROPOSED TRANSACTIONS

2.1 Proposed Acquisition

On 5 July 2011, the Company announced that it had on 4 July 2011, entered into the SPA

with the Vendor to acquire the entire issued share capital of OKH for an aggregate

Purchase Consideration of S$108 million which shall be satisfied in full by the issue and

allotment of such number of Consideration Shares in the capital of the Company to the

Vendor at the Issue Price per Consideration Share. A copy of the announcement is available

on the website of the SGX-ST at www.sgx.com.

The Purchase Consideration, estimated to be around S$108 million, was arrived at on a

willing-buyer and willing-seller basis after taking into account, inter alia:

(a) the consolidated profit after tax of OKH that was estimated to be around S$13.5 million

for the financial year ended 30 June 2011; and

(b) a price-earnings ratio of eight times based on the above mentioned consolidated profit

after tax of OKH.

The exact Purchase Consideration was to be finalised after the issue of OKH’s audited

financial statements for its financial year ended 30 June 2011.

On 20 January 2012, the Company announced that it had on 20 January 2012, entered into

the Supplemental Agreement to vary the terms of the SPA, pursuant to which the Purchase

Consideration shall be amended to a sum calculated based on 7.8 times of the audited

consolidated profit after tax of OKH achieved for its financial year ended 30 June 2011 of

S$15,051,969 (before restatement) and the number of Consideration Shares to be issued

by the Company shall be 978,377,985 upon mutual agreement between the parties after the

issue of the audited accounts of OKH. The restated audited consolidated financial

statements of OKH for the financial year ended 30 June 2011 are found in Appendix B of

this Circular.

The Purchase Consideration was amended to reflect: (i) the audited profit after tax of OKH

for the financial year ended 30 June 2011 of S$15,051,969 which differed from the earlier

estimate of S$13.5 million in the SPA, and (ii) reduction in the price-earning ratio from 8.0

times to 7.8 times.

With the passage of time, the audited accounts of OKH for the financial year ended 30 June

2012 were made available and the Third Supplemental Agreement has been entered into to

reflect the latest financials of OKH.


21

Accordingly, on 28 December 2012, the Company further announced that it had on 27

December 2012, entered into the Third Supplemental Agreement to vary the terms of the

SPA, which includes, inter alia, amending the Purchase Consideration to be a sum

calculated based on 7.8 times of the audited profits attributable to equity holders of OKH for

its financial year ended 30 June 2012 of S$15,792,905 and the number of Consideration

Shares to be issued by the Company shall be 1,026,538,825 upon mutual agreement

between the parties after the issue of the audited accounts of OKH.

The Proposed Acquisition would result in a reverse takeover of the Company under Rule

1015 of the Listing Manual.

Pursuant to Rule 1015 of the Listing Manual, approval from Shareholders and the SGX-ST

must be obtained for a “very substantial acquisition” or “reverse takeover” as defined in

Chapter 10 of the Listing Manual. Rule 1006 of the Listing Manual sets out the computations

for relative figures. Where any of the relative figures is 100% or more, or if the transaction

is one which will result in the change in control of a listed company, such a transaction is

a “very substantial acquisition” or “reverse takeover”.

The relative figures for the Proposed Acquisition computed on the bases set out in Rule

1006 of the Listing Manual based on the Third Supplemental Agreement are as follows:

(a) Net asset value of assets to be disposed of, compared

with the Group’s net asset value

Not applicable to an

acquisition of

assets

(b) Net profits attributable to the assets acquired,

compared with the Group’s net profits for FY2011

7,963.5%(1)

(c) Aggregate value of the purchase consideration given or

received, compared with the Company’s market

capitalisation as at 1 July 2011, being the Market Day

preceding the date of the SPA during which the Shares

were traded

2,208.6%(2)

(d) Number of equity securities issued by the Company as

consideration for the Proposed Acquisition, compared

with the number of equity securities previously in issue

926.7%(3)

Notes:

(1) Based upon OKH’s audited consolidated profit before tax of S$19,482,873 for the financial year ended 30

June 2012, the Company’s audited consolidated profit before tax of RMB1,235,000 for the financial year

ended 31 December 2011 and the exchange rate of S$1 = RMB5.048 for the financial year ended 30 June

2012.

(2) Based upon the 1,026,538,825 Consideration Shares and the adjusted net tangible assets of S$0.286 for

each Share (based on the Group’s audited net tangible assets as at 31 December 2011 and adjusted for the

Proposed Cash Distribution further detailed in Section 5 entitled “Proposed Cash Distribution by way of

Capital Reduction” in this Circular) and the Company’s market capitalisation of S$13,293,128 as at 1 July

2011, being the Market Day preceding the date of the SPA. The market capitalisation is calculated based

on S$0.12, being the volume weighted average price of the Shares traded on 1 July 2011.

(3) Based upon the 1,026,538,825 Consideration Shares to be issued and the 110,776,067 Shares in issue as

at the date of the announcement.

Rule 1003 of the Listing Manual has been complied with in relation to the computation of

Rule 1006(c) of the Listing Manual. As the relative figures computed on the bases set out

in paragraphs (b), (c) and (d) above exceed 100%, the Proposed Acquisition constitutes a

reverse takeover under Chapter 10 of the Listing Manual. In addition, as the Vendor will


22

hold approximately 96.66% of the enlarged issued share capital of the Company on

completion of the Proposed Acquisition and the Proposed Disposal, a change of control of

the Company will arise immediately upon Completion. Accordingly, the Proposed

Acquisition is subject to the approval of the SGX-ST and the Shareholders under Rule 1015

of the Listing Manual.

On completion of the Proposed Acquisition, the Vendor will be acquiring more than 30% of

the voting rights of the Company. Pursuant to Rule 14 of the Code, the Vendor and parties

acting in concert with him (if any) will incur an obligation to make a mandatory general offer

for all the remaining Shares not held by the Vendor and his concert parties. Accordingly, the

Vendor will make the General Offer for all the issued Shares not already owned, controlled

or agreed to be acquired by him and parties acting in concert with him.

Further information on the Proposed Acquisition is set out in Section 4 of this Circular

entitled “Proposed Acquisition”.

2.2 Proposed increase in authorised share capital of the Company

For purposes of the proposed issuance of Consideration Shares, the Company proposes to

increase its authorised share capital from US$30,000,000 comprising Shares of par value

US$0.09 each to US$500,000,000 comprising Shares of par value US$0.09 each.

Approval from Shareholders for the Proposed Increase in Authorised Share Capital will be

sought at the SGM. Further information on the Proposed Increase in Authorised Share

Capital is set out in Section 6 of this Circular entitled “Proposed Increase in Authorised

Share Capital”.

2.3 Proposed issue and allotment of the Consideration Shares

Pursuant to the SPA, the Company shall issue and allot such number of Consideration

Shares to the Vendor at the Issue Price in satisfaction of the Purchase Consideration of the

Proposed Acquisition.

2.4 Proposed cash distribution by the Company of approximately S$1.0 million in cash to

its Shareholders by way of capital reduction

Under the SPA, it is a condition precedent to completion of the Proposed Acquisition that

the Company shall distribute an amount of up to S$5.0 million in cash to its Shareholders

either through:

(i) the issue of special dividends to its Shareholders; or

(ii) the distribution in cash via capital reduction.

In connection therewith, the Company proposes to undertake the Proposed Cash

Distribution through the reduction of the share premium account of the Company by an

amount in RMB that is equivalent to approximately S$1.0 million by way of the Proposed

Capital Reduction.

The proposed cash distribution by the Company of approximately S$1.0 million in cash to

its Shareholders was arrived at after taking into account:

(i) the latest financial position of the Sinobest Group; and


23

(ii) the estimated cash requirements of the Operating Subsidiaries subsequent to the

Proposed Disposal.

Approval from Shareholders for the Proposed Cash Distribution by way of capital reduction

will be sought at the SGM. Please refer to Section 5 of this Circular entitled “Proposed Cash

Distribution by way of Capital Reduction” for further details.

2.5 Proposed disposal of the Company’s shareholding interest in the OperatingSubsidiaries to the Undertaking Shareholders involving a selective sharecancellation pursuant to the Disposal Agreement

In connection with the Proposed Acquisition, the existing business of the Group is proposed

to be divested so that it will not affect the financial results of the Group after the Proposed

Acquisition. On 27 December 2012, the Company entered into the Disposal Agreement with

the Undertaking Shareholders for the disposal of its Operating Subsidiaries which

undertake all of the Group’s existing business to the Undertaking Shareholders.

As a result of the Proposed Disposal, the existing Shares held directly or indirectly by the

Undertaking Shareholders (amounting to approximately 68.02% of the total issued share

capital of the Company as at the Latest Practicable Date) will be wholly cancelled via a

selective share cancellation exercise and the corresponding capital deemed returned to the

Undertaking Shareholders as part satisfaction of the purchase consideration payable by the

Undertaking Shareholders under the Disposal Agreement.

In connection therewith, the Company proposes to undertake the Proposed Selective Share

Cancellation.

As the Proposed Disposal involves the disposal of the entire existing business of the

Company, it constitutes a major transaction under Chapter 10 of the Listing Manual and

must therefore be made conditional upon approval of Shareholders in a general meeting.

In addition, the Proposed Disposal constitutes an Interested Person Transaction within the

meaning of Chapter 9 of the Listing Manual and accordingly, the Proposed Disposal also

requires the approval of Shareholders in a general meeting.

Pursuant to the requirements of Chapter 9 of the Listing Manual, the IFA has been

appointed to advise the Independent Directors in respect of the Proposed Disposal.

Approval from Shareholders for the Proposed Disposal involving the Proposed Selective

Share Cancellation will be sought at the SGM. In addition, the Proposed Disposal, if

approved and adopted by the Shareholders, shall take effect only upon the completion of

the Proposed Acquisition and at the close of the General Offer to be made by the Vendor.

Please refer to Section 7 of this Circular entitled “Proposed Disposal involving the Proposed

Selective Share Cancellation” for further details.

2.6 Proposed Consolidation

In connection with the Proposed Acquisition, the Company proposes to carry out the

Proposed Consolidation pursuant to which every two existing Shares will be consolidated

into one Consolidated Share. As at the Latest Practicable Date, the issued and paid-up

capital of the Company is US$9,969,846.03 comprising 110,776,067 Shares of par value

US$0.09 each. After the Proposed Transactions, the Company will have an issued and

paid-up capital of US$95,577,071.22 comprising 530,983,729 Consolidated Shares,

fractional Consolidated Shares being disregarded. Further details relating to the Proposed

Consolidation are set out in Section 8 of this Circular entitled “Proposed Consolidation”.


24

2.7 Proposed change of auditors

The present auditors of the Company are Nexia TS Public Accounting Corporation. They will

resign as auditors of the Company following the completion of the reverse take-over.

Deloitte & Touche LLP have agreed and consented to act as auditors of the Company

following the completion of the reverse take-over. Please refer to Section 9 of this Circular

entitled “Proposed Change of Auditors” for further details.

2.8 Proposed change of name

In view of the Proposed Acquisition, the Company is seeking the approval of Shareholders

to change the name of the Company to “OKH Global Ltd.” to reflect the new business

structure and ownership of the Company on Completion. Please refer to Section 10 of this

Circular entitled “Proposed Change of Name of the Company” for further details.

2.9 Proposed termination of the existing share option scheme and the proposed

adoption of the OKH Performance Share Plan

The Company proposes, subject to the approval of the Shareholders at the SGM, to

terminate the existing share option scheme and implement a performance share plan to be

known as the OKH Performance Share Plan. Further details of the OKH Performance Share

Plan and the rules of the OKH Performance Share Plan can be found in Section 11 of this

Circular entitled “Proposed Termination of the Existing Share Option Scheme and the

Proposed Adoption of the OKH Performance Share Plan” and Appendix F of this Circular

respectively.

2.10 Proposed amendment to the Bye-Laws

Under Rules 210(7) and 730 of the Listing Manual, an issuer must ensure that its Articles

of Association or constituent documents meet the requirements in Appendix 2.2 of the

Listing Manual and are consistent with all the listing rules prevailing at the time of

amendment. The Company is taking this opportunity to amend Bye-Law 102(A) of the

existing Bye-Laws to include a provision to provide that the office of a Director be vacated

where a Director is disqualified from acting as a director in any jurisdiction for reasons other

than on technical grounds to meet the requirements in Appendix 2.2 of the Listing Manual.

2.11 Inter-conditionality

(a) Shareholders’ approval for Ordinary Resolutions 1, 2, 3 and 4 and Special

Resolutions 8 and 9 are required in order for the Company to effect and complete

the Proposed Acquisition and are therefore inter-conditional upon one another.

(b) Ordinary Resolutions 5, 6 and 7 and Special Resolution 10 are subject to and

contingent upon the passing of the Ordinary Resolutions 1, 2, 3 and 4 and

Special Resolutions 8 and 9, which are matters to be effected following the


(c) The approval of Special Resolution 11 is not subject to or contingent upon

passing of any other resolutions set out in the Section entitled “Notice of

Special General Meeting” of this Circular.


25

3. SUBMISSION TO THE SGX-ST

3.1 Approval in-principle from the SGX-ST

The SGX-ST had on 12 December 2012 granted its approval in-principle for the listing and

quotation of new shares in the capital of the Company to be issued in connection with the

Proposed Acquisition (the “RTO”) and the proposed adoption of the OKH Performance

Share Plan. The approval in-principle granted is subject to, amongst others, the following

conditions:

(a) compliance with the SGX-ST’s listing requirements;

(b) Shareholders’ approval being obtained for the RTO and for all other necessary and

relevant proposals to be put forth at the forthcoming SGM;

(c) approval from the SIC for the proposed whitewash resolution1;

(d) compliance with Rules 113(2) and 210(5)(a) of the Listing Manual which require that:

(i) for two years after listing or such other time frame imposed by the SGX-ST, the

Company must prominently include a statement that the RTO of its shares was

sponsored by the Financial Adviser in all announcements made by it (on

SGXNET or otherwise) and in all information documents issued by it to

Shareholders; and

(ii) as a pre-quotation disclosure requirement, the Company must release a

statement via SGXNET or in the prospectus, offering memorandum or

introductory document identifying for each director, whether the person has prior

experience as a director of a listed company or if the person has no prior

experience as a director of a listed company, whether the person has undertaken

training in the roles and responsibilities of a director of a listed company;

(e) a written undertaking by the Enlarged Group that review by the Board of Directors or

the relevant committee of the Company’s key financial risk areas and the outcome of

these reviews must be disclosed in the annual reports or where the findings are

material, immediately announced via SGXNET;

(f) a written undertaking by the Enlarged Group of the following:

(i) the commissioning of an annual internal controls audit by a suitable and qualified

professional accounting firm until such time the Audit Committee (the “AC”) is

satisfied that the Enlarged Group’s internal controls are robust and effective

enough to mitigate the Enlarged Group’s internal control weaknesses. Prior to

decommissioning this annual audit, the Board is required to report to the SGX-ST

on how the key internal control weaknesses have been rectified, and the basis for

the decision to decommission the annual internal controls audit;

1 There will not be a proposed whitewash resolution at the SGM as the Vendor will make the General Offer for

all the issued Shares not already owned, controlled or agreed to be acquired by him and parties acting in

concert with him upon the Completion. The Company has applied to the SGX-ST and the SGX-ST confirmed

that condition(c) is not applicable. Please refer to Section 4.2 of this Circular for further details.


26

(ii) thereafter, such audits may subsequently be initiated by the AC as and when it

deems fit to satisfy itself that the Enlarged Group’s internal controls remain

robust and effective; and

(iii) upon completion of the internal controls audit, appropriate disclosure must be

made via SGXNET on any material, price-sensitive internal control weaknesses

or any follow-up to be taken by the Board;

(g) submission of the following:

(i) a written confirmation by the Financial Adviser that the signed moratorium

agreements with the relevant parties pursuant to Rule 227 of the Listing Manual

are in accordance with the requirements of Rules 228 and 229 of the Listing

Manual;

(ii) a written confirmation by the Financial Adviser that Rules 232, 233 and 240 of the

Listing Manual have been complied with;

(iii) a written confirmation from the Enlarged Group that Rules 735 and 736 of the

Listing Manual have been complied with;

(iv) a written confirmation from the Enlarged Group that Rule 210(4)(b) of the Listing

Manual have been complied with;

(v) a written confirmation from the Enlarged Group that Rule 210(1)(a) of the Listing

Manual have been complied with;

(vi) a written undertaking from the Enlarged Group that (i) it will seek Board approval

on the policy for entering into any foreign exchange hedging transactions; (ii) it

will put in place adequate procedures which must be reviewed and approved by

the AC; and (iii) the AC will monitor the implementation of the policy, including

reviewing the instruments, processes and practices in accordance with the policy

approved by the Board;

(vii) a written undertaking from each of the Enlarged Group’s directors in the form

prescribed by the SGX-ST and an undertaking from the Company to procure the

same written undertaking from any new director appointed to the Board after the

RTO;

(viii) a written undertaking from the Company that it will hold its shareholders’

meetings in Singapore; and

(ix) documents stipulated in Rules 248, 249 and 250 of the Listing Manual.

The approval in-principle granted by the SGX-ST is not to be taken as an indication of the

merits of the RTO (and all other necessary and relevant proposals to be put forth at the

forthcoming SGM), the Company, OKH, the Enlarged Group, its subsidiaries, the Shares or

the new Shares.

In the event that the Proposed Compliance Placement is not able to be carried out so as to

meet the applicable shareholding spread and distribution requirements of the Listing

Manual, the listing of the Shares (including the Consideration Shares and the Consolidated

Shares, as the case may be) may be suspended and/or the SGX-ST may require the Shares

(and the Consideration Shares and Consolidated Shares, as the case may be) to be

de-listed.


27

4. PROPOSED ACQUISITION

4.1 The Purchase Consideration

Pursuant to the SPA and the Third Supplemental Agreement, the Company will acquire the

entire issued share capital of OKH from the Vendor at the Purchase Consideration which

amounts to S$123,184,659 to be satisfied by the issue and allotment of 1,026,538,825

Consideration Shares. The aggregate number of Consideration Shares to be issued and

allotted represents approximately 96.66% of the Enlarged Share Capital after the Proposed

Transactions but before the Proposed Compliance Placement.

The Purchase Consideration was arrived at on a willing-buyer and willing-seller basis, after

taking into account, inter alia:

(a) the audited profits attributable to the equity holders of OKH of S$15,792,905 for the

financial year ended 30 June 2012; and

(b) a price-earnings ratio of 7.8 times based on the above mentioned audited profits

attributable to the equity holders of OKH.

The Purchase Consideration will be satisfied entirely by the issue and allotment to the

Vendor of 1,026,538,825 Consideration Shares at an issue price of S$0.12 each, fractional

Shares to be disregarded.

The Consideration Shares, when issued and allotted, shall rank pari passu in all respects

with the then existing Shares. The Issue Price:

(a) represents a discount of approximately 7.7% to the volume weighted average market

price of S$0.13 for each Share based on trades done on the SGX-ST on 4 July 2011,

being the Market Day on which the SPA was signed; and

(b) is equal to the volume weighted average market price of S$0.12 for each Share based

on trades done on the SGX-ST on 1 July 2011, being the Market Day preceding the

date of the SPA.

4.2 Conditions Precedent

Completion of the SPA is conditional upon, inter alia:

(a) the Company being satisfied with the results of the due diligence (whether legal,

financial, contractual, tax or otherwise) (the “Due Diligence Investigations”) to be

carried out by the Company and/or its advisers on OKH Group, 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, and any other information

disclosed to the Company;

(b) the rectification, or the procurement of such rectification, to the satisfaction of the

Company by the Vendor, of all issues or irregularities uncovered by the Company

during the Due Diligence Investigations on OKH Group;

(c) the Vendor being satisfied with the results of the Due Diligence Investigations to be

carried out by the Vendor and/or his advisers on the Company, including without


28

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;

(d) confirmation to the Company’s satisfaction that the Vendor has available to himself

sufficient financial resources to satisfy full acceptance of the General Offer for all the

issued Shares in the capital of the Company following completion of the Proposed

Acquisition, such confirmation to be received by the Company immediately upon

receiving approval from the Shareholders of the Company to allot and issue the new

shares referred to in paragraph (e) below;

(e) the Company receiving the following approvals from its Shareholders at a SGM to be

convened, for:

(i) the Proposed Acquisition;

(ii) the Proposed Disposal; and

(iii) such other corporate action(s) in connection with the Proposed Acquisition, as

may be necessary;

(f) there being no delisting of the existing Shares of the Company from the SGX-ST

Mainboard prior to the Completion Date;

(g) the appointment of such directors nominated by the Vendor to form the Company’s

Board of Directors on the Completion Date;

(h) the Vendor and the Company not having received notice of any injunction or other

order, directive or notice restraining or prohibiting the consummation of the

transactions contemplated by the SPA, and there being no action seeking to restrain

or prohibit the consummation thereof, or seeking damages in connection therewith,

which is pending or any such injunction, other order or action which is threatened;

(i) all consents, approvals and authorisation of bankers, financial institutions, landlord of

leases, relevant third parties, government, statutory or regulatory authorities in

Singapore and Bermuda (if any) which are necessary or desirable in connection with

the transfer of the Sale Shares from the Vendor to the Company, the Proposed

Disposal and such other corporate action(s) as may be necessary having been

obtained, and such consents, approvals and waivers not having been amended or

revoked before the Completion Date, and if subject to conditions, on such conditions

acceptable to the Company, prior to the Completion Date;

(j) there being no material breach by either the Vendor or the Company of the

representations, warranties, covenants and indemnities contained in the SPA;

(k) the Company being satisfied in its sole and absolute discretion that there has been no

material adverse change, or events, acts or omissions likely to lead to such a change,

in the business, assets, prospects, performance, financial position or results of

operations of OKH from the date of the SPA;

(l) approval in-principle being granted by the SGX-ST for the listing and quotation for the

Consideration Shares, such approval not being revoked, rescinded or cancelled prior

to Completion and, where such approval in-principle is granted subject to any

conditions, such conditions being reasonably acceptable to the Vendor and the

Company;


29

(m) the delivery of a disclosure letter by the Vendor to the Company and the Company

being satisfied with the contents thereof of the disclosure letter as on the Completion

Date;

(n) the Company’s distribution of the amount of up to S$5.0 million in cash to its

Shareholders either through:


(ii) the distribution in cash via a capital reduction;

(o) the Proposed Disposal, such that:

(i) the existing Shares held directly or indirectly by the Undertaking Shareholders

(amounting to approximately 68.02% of the total issued share capital of the

Company as at the date of the SPA) will be wholly cancelled via a selective share

cancellation exercise as part satisfaction for the purchase consideration payable

by the Undertaking Shareholders under the Disposal Agreement;

(ii) in consideration thereto, the Company shall transfer its entire ownership and

interest in the Company’s existing business (including the relevant subsidiaries

involved in such business) to the Undertaking Shareholders (in such proportion

to be agreed between them and notified to the Company) at a purchase

consideration, mutually agreed by the Company, the Vendor and the Undertaking

Shareholders; and

(iii) the Undertaking Shareholders will pay cash to the Company to settle the

difference (if any) between the value of their shares cancelled and the purchase

consideration for the Company’s and its subsidiaries’ existing business to be sold

by the Company;

(p) OKH Group meets and complies with all the requirements for listing on the Mainboard

of the SGX-ST; and

(q) the allotment, issue and subscription of the Consideration Shares, the Proposed

Disposal and other corporate action(s) not being prohibited by any statute, order, rule,

regulation, directive or request promulgated or issued by any legislative, executive or

regulatory body or authority of Singapore or elsewhere, which is applicable to OKH

and/or the Company.

Effective from 10 August 2012, Rule 241 of the Listing Manual requires the issue price of

shares offered for a subscription or sale, for which a listing is sought, to be at least S$0.50

each. However, the previous criteria of S$0.20 will be applicable as the minimum issue price

(the “Minimum Issue Price”), as the mandate with Asiasons WFG Capital was signed by

the Company prior to 10 August 2012.

If any of the conditions precedent is not fulfilled or waived by mutual consent of the parties

on or before 12 months from the date of the SPA (or such further date as may be agreed

between the Company and the Vendor), the SPA shall, ipso facto, cease and determine

(save for any antecedent breach of the SPA) and neither party shall have any claim against

the other party for costs, damages, compensation or anything whatsoever. Pursuant to the

SPA, the Company and/or the Vendor may waive any of the conditions precedent by written


30

notice to the other party, save for conditions (d), (e), (i), (l), (o), (p) and (q) above. As at the

Latest Practicable Date, save and except for conditions (a), (b), (c), (l) and (p), all the

conditions precedent are pending fulfilment. An announcement will be made by the

Company to notify Shareholders of the fulfilment or waiver of the conditions precedent in

due course.

Completion of the Proposed Acquisition is to take place within seven (7) days after all the

conditions precedent set out above have been fulfilled (or if not fulfilled, are waived by the

Company or the Vendor in accordance with the SPA).

The Vendor had submitted an application to the SIC on 24 February 2012 seeking a waiver

from the SIC of his obligation to make a general offer under Rule 14 of the Code

(“Whitewash Waiver”).

On 12 June 2012, the Company announced that it had received a written reply from the SIC

on 8 June 2012 informing the Company that it has decided not to grant the Whitewash

Waiver as the proposed selective share cancellation exercise under the Proposed Disposal

is regarded by the SIC as disqualifying the Vendor and his concert parties from the

Whitewash Waiver.

Subsequently, the Company, the Vendor and the parties involved in the Proposed

Acquisition reviewed the terms and structure of the Proposed Acquisition and had on 15

June 2012 submitted a revised structure on the Proposed Disposal (“Revised Structure”)

to the SIC for its consideration.

On 12 December 2012, the SGX-ST granted its approval in-principle for the listing and

quotation of new Shares in the capital of the Company to be issued in connection with the

Proposed Acquisition and the proposed adoption of the OKH Performance Share Plan,

based on the Revised Structure, subject to, inter alia, the receipt of the approval from the

SIC for the proposed whitewash resolution and other conditions.

On 26 December 2012, the SIC informed that the SIC does not exempt the Vendor and his

concert parties from the requirement under Rule 14 of the Code to make a mandatory offer

for the Company in the event that the Vendor and his concert parties increase their

percentage of total voting rights to more than 30% of the Company based on its enlarged

share capital as a result of the Vendor and his concert parties acquiring the Consideration

Shares in connection with the Proposed Acquisition.

On 27 December 2012, the SGX-ST confirmed that condition 2(c) of the approval

in-principle granted (as set out in Section 3.1 of this Circular) is not applicable in view of the

SIC’s reply on 26 December 2012.

On completion of the Proposed Acquisition, the Vendor will be acquiring more than 30% of

the voting rights of the Company. Pursuant to Rule 14 of the Code, the Vendor and parties

acting in concert with him (if any) is required to make a mandatory general offer for the

Company.

Accordingly, the Vendor will be making a general offer for all the remaining Shares not held

by the Vendor and his concert parties upon the completion of the Proposed Acquisition at

an offer price of S$0.12 for each Share.

Further details on the General Offer will be disclosed in the offer document to be issued by

the Vendor and despatched to the Shareholders in due course. The Company will also be

issuing an offeree circular (containing the advice of the IFA and the recommendations of the


31

Directors (who are independent for the purpose of making a recommendation to the

Shareholders on the General Offer) on the General Offer to its Shareholders within 14 days

of the posting of the offer document by the Vendor.

4.3 Appointment of New Directors to the Board on Completion of the ProposedAcquisition

On Completion, the Board shall procure the resignation of Zou Gefei, Li Ziqiang and Yu

Zengping, and propose the appointment of the Proposed Directors. The New Board shall

comprise:

(i) Bon Ween Foong;

(ii) Lam Wee Yeow;

(iii) Ong Soon Teik;

(iv) Tan Soo Kiat; and

(v) Tan Swee Ling.

Further information on the Proposed Directors is set out in Section C.1 in the Letter to

Shareholders from OKH of this Circular entitled “Directors”.

4.4 Undertakings by the Company

The Company has agreed with and undertaken to the Vendor, inter alia, that:

(a) it will take all necessary steps to convene a special general meeting as soon as

practicable to approve the Proposed Transactions, and in this regard, the Company

shall use its best endeavours to procure irrevocable undertakings from a majority of

the existing Shareholders of the Company to vote in favour of the transactions

contemplated under the SPA at the SGM to be convened;

(b) it will submit an additional listing application to the SGX-ST for the listing and quotation

of the Consideration Shares (if necessary) and that it will at all times promptly furnish

any undertakings and do all such acts and things as may be within its powers and

required for such purposes and use its best endeavours to maintain such listing and

comply with all requirements and procedures of the SGX-ST and CDP relating to the

listing and quotation of the same;

(c) it shall not carry on any business or operations or enter into any agreement, contract

(whether orally or in writing) or contractual commitments without the prior consent of

the Vendor, save where it is for the purpose of effecting any transaction contemplated

under the SPA or in connection with the acquisition of the Sale Shares or in

furtherance of or to carry out the business of the Company;

(d) it shall not provide or give any guarantee or indemnity to secure the debts or liabilities

of any of its subsidiaries or any third party, or otherwise create any contingent liability;

(e) it shall not issue, allot or grant to any person the right (whether conditional or

otherwise) to call for the issue or allotment of any shares or debentures in the

Company (including any options or right of pre-emption or conversion) and that the

Company will not enter into any agreement or arrangement for the foregoing, save for

the SPA; and


32

(f) it shall not do anything to cause the delisting or suspension of the trading of the Shares

on the SGX-ST.

4.5 Undertaking by the Undertaking Shareholders

The Undertaking Shareholders have agreed with and undertaken to the Vendor that they

will not accept the General Offer to be made by the Vendor for all the issued Shares of the

Company following completion of the Proposed Acquisition.

4.6 Undertaking by the Vendor

Following completion of the Proposed Acquisition, the Vendor had undertaken under the

SPA that he shall immediately, on completion of the Proposed Acquisition, issue an

announcement of a General Offer under Rule 14 of the Code to acquire all the issued

Shares of the Company other than those already held by him and/or parties acting in

concert with him, at an offer price of S$0.12 for each Share.

4.7 Rationale for the Proposed Acquisition

The Company had been loss-making for the three financial years ended 31 December 2007,

2008 and 2009. Consequently, the Company was placed on the SGX-ST’s watch-list on 3

March 2010. Under Rule 1315 of the Listing Manual, the Company is required to take active

steps to meet the requirements of Rule 1314 of the Listing Manual for removal from the

SGX-ST’s watch-list. Rule 1314 of the Listing Manual requires the Company to satisfy one

of the two following criteria:

(a) consolidated pre-tax profit for one year and an average daily market capitalisation of

at least S$40.0 million over the last 120 Market Days; or

(b) operations of the Group meet SGX-ST Mainboard admission criteria.

Should the Company be unable to meet the requirements of Rule 1314 of the Listing Manual

by 3 March 2012, the SGX-ST may either remove the Company from its Official List, or

suspend trading of the Shares with a view to removing the Company from its Official List.

On 15 March 2010, the Company announced that it was in negotiations with certain parties

on a potential acquisition and entered into a three-month exclusivity agreement with a view

to assist the Company’s future application for removal from the watch-list of the SGX-ST.

However, on 29 June 2010, the Company announced that the three-month exclusivity

agreement which was entered into with other independent third parties had lapsed.

Nonetheless, the Company has been continuously exploring various opportunities to

remove itself from the SGX-ST’s watch-list.

The Company reported consolidated profit after tax of RMB1.89 million and RMB1.16

million for the financial years ended 31 December 2010 and 31 December 2011 respectively

and loss after tax of RMB1.15 million for the six months period ended 30 June 2012. The

Company is of the view that the profitability for traditional IT businesses will continue to be

under pressure in view of the increased competition in the PRC market.

The Proposed Acquisition provides the Company with an opportunity to acquire a profitable

business in the property development and construction industry. The Proposed Acquisition

is expected to increase its market capitalisation and hence enhance its profile with the

investment community, henceforth leading to improved investor interest and trading liquidity


33

for its Shares. The increased market capitalisation, investor interest and trading liquidity

arising from the Proposed Acquisition are expected to assist in the Company’s future

application for removal from the SGX-ST’s watch-list.

In connection with the Proposed Acquisition, the existing business of the Group is proposed

to be divested so that it will not affect the financial results of the Group after the Proposed

Acquisition. Please refer to Section 7 of this Circular for more information on the Proposed

Disposal.

The SGX-ST had on 16 February 2012, granted the Company an extension of time until 31

October 2012 to meet the requirements to exit from the SGX-ST’s watch-list. On 31 October

2012, the Company announced that the SGX-ST had granted the Company a further

extension of time until 28 February 2013 to meet the requirements to exit from the

SGX-ST’s watch-list as set out above, subject to the following conditions:

(i) the Company announcing the period of extension granted, the reasons for seeking the

extension of time and the conditions as required under Rule 107 of the Listing Manual;

(ii) the Proposed Acquisition satisfying the SGX-ST Mainboard admission criteria;

(iii) the Proposed Acquisition complying with Rule 1015 of the Listing Manual;

(iv) Shareholders’ meeting to be held and approved for the Proposed Acquisition by 31

December 2012; and

(v) the Financial Adviser to immediately submit a written confirmation stating the basis

whether the Proposed Acquisition is able to satisfy SGX-ST Mainboard admission

criteria and Rule 1015 of the Listing Manual.

The corporate structure of the Group before completion of the Proposed Transactions as at

the Latest Practicable Date, is as follows:

Sinobest

Technology

Holdings Ltd.

Guangzhou

Sinobest

Information

Technology Ltd.

Sinobest

Technologies (H.K.)

Limited

100%99%


34

The details of the Group before the completion of the Proposed Transactions as at the

Latest Practicable Date, are as follows:

Name

Date and

country of

incorporation

Principal

place of

business

Total issued and

paid-up capital

Principal

businesses

Effective

percentage

held by the

Company

before

Completion

(%)

Sinobest

Technology

Holdings Ltd.

17 June 2004,

Bermuda

PRC US$9,969,846.03 Investment

holding

—

Guangzhou

Sinobest

Information

Technology

Ltd.

8 June 2000,

PRC

PRC RMB93,000,000.00 Provision of

computer and

network

system

integration

and software

development

and technical

services

99(1)

Sinobest

Technologies

(H.K.) Limited

29 December

2004,

Hong Kong

Hong Kong HK$1.00 Trading and

procurement

of IT

equipment

100

Note:

(1) Guangzhou Sinobest Information Technology Ltd. is a sino-foreign equity joint venture enterprise andGuangzhou Huanan Information System Integration Ltd. owns the remaining 1% shareholding interest.

None of the above subsidiaries is listed on any stock exchange.

Save as disclosed above, the Group has no other subsidiaries and associated companies.

Save as disclosed in this Circular, none of the Directors, Substantial Shareholders and/or

the Proposed Directors has any interest, whether direct or indirect, in the Group or any of

the subsidiaries and associated companies of the Group.

The Proposed Acquisition, if successful, will transform the principal business of the

Company into a property development and construction business. Upon Completion, the

Company will have a new board of directors and a new management team, who are

experienced in the property development and construction business.

The Directors of the Company believe that the Proposed Acquisition will benefit the

Company and that it is in the best interests of all Shareholders.

5. PROPOSED CASH DISTRIBUTION BY WAY OF CAPITAL REDUCTION

5.1 Details of the Proposed Cash Distribution by way of capital reduction

Pursuant to the SPA, the Company shall distribute an amount of up to S$5.0 million in cash

to its Shareholders either through:


(ii) the distribution in cash via capital reduction.


35

At the point of signing of the SPA, the exact amount of cash to be distributed to

Shareholders had not been determined.

The Company has decided to distribute approximately S$1.0 million in cash to

Shareholders and is proposing the capital reduction involving an aggregate cash

distribution of approximately S$1.0 million (the “Cash Distribution Sum”), or S$0.009 for

each Share held as at the Books Closure Date.

The Proposed Cash Distribution by the Company of approximately S$1.0 million in cash to

its Shareholders was arrived at after taking into account:

(i) the latest financial position of the Sinobest Group; and

(ii) the estimated cash requirements of the Operating Subsidiaries subsequent to the

Proposed Disposal.

The Proposed Cash Distribution by way of capital reduction will involve the following:

(a) the reduction of the share premium account of the Company by an amount in RMB that

is equivalent to approximately S$1.0 million; and

(b) the return to Shareholders of the credit amount arising from the reduction of the share

premium account in the sum of approximately S$1.0 million as the Cash Distribution

Sum to Shareholders.

The aggregate amount of cash to be paid to such Shareholders pursuant to the Proposed

Cash Distribution will be adjusted by rounding any fraction of a cent to the nearest cent,

where applicable.

The Proposed Cash Distribution would allow a substantial cash distribution to be made to

Shareholders, while enabling each Shareholder to maintain the same proportionate

shareholding in the Company.

The Proposed Cash Distribution will not change the number of issued and paid-up shares

in the share capital of the Company. The Shares will continue to rank pari passu in all

respects with each other.

The Company will fund the Proposed Cash Distribution by internally generated resources.

5.2 Conditions

The implementation of the Proposed Cash Distribution by way of capital reduction is subject

to, inter alia, the following:

(a) approval for the Proposed Cash Distribution by way of capital reduction, which will be

proposed as a Special Resolution at the SGM;

(b) compliance with the relevant legal procedures and requirements under Bermuda law

and Singapore law (if any) to effect the Proposed Cash Distribution by way of capital

reduction;

(c) the obtaining of all necessary approvals from the regulatory authorities (if any) as may

be required in respect of the Proposed Cash Distribution by way of capital reduction;

and


36

(d) the approval of the SGX-ST (where applicable).

For the avoidance of doubt, the Company is not required to obtain the approval of the

Bermuda courts for the Proposed Cash Distribution by way of capital reduction.

5.3 Administrative Procedures

The following paragraphs set out the administrative procedures for the Proposed Cash

Distribution by way of capital reduction.

Books Closure Date

Members and Depositors whose Securities Accounts are credited with Shares as at the

Books Closure Date will be entitled to the Proposed Cash Distribution, based on the number

of Shares held as at the Books Closure Date.

The Company will announce the Books Closure Date in due course.

Payment of the Cash Distribution Sum

Payment of the Cash Distribution Sum pursuant to the Proposed Cash Distribution will be

made in the following manner:

(a) Shareholders holding scrip Shares

Shareholders whose Shares are registered in the Register of Members as at the Books

Closure Date will have the cheques for payment of their entitlements to the Cash

Distribution Sum under the Proposed Cash Distribution despatched to them by

ordinary post at their own risk addressed to their respective addresses in the Register

of Members on the Books Closure Date to be announced in due course (the “Expected

Payment Date”). The Company shall not be liable for any loss in transmission.

(b) Depositors

Persons who are Depositors and who have Shares standing to the credit of their

Securities Accounts as at the Books Closure Date will have the cheques for payment

of their respective entitlements to the Cash Distribution Sum under the Proposed

Distribution despatched to them by CDP by ordinary post at their own risk, tentatively,

on the Expected Payment Date. Neither the Company nor CDP shall be responsible or

liable for any loss in transmission. Alternatively, such Depositors will have payment of

their respective entitlements to the Cash Distribution Sum under the Proposed Cash

Distribution made in such other manner as they may have agreed with CDP for the

payment of dividends or other distributions, tentatively, on the Expected Payment

Date.

6. PROPOSED INCREASE IN AUTHORISED SHARE CAPITAL

The existing authorised share capital of the Company is US$30,000,000 comprising

333,333,333 Shares of par value US$0.09 each. This is insufficient for the proposed

issuance of Consideration Shares.


37

Accordingly, the Company proposes to increase its authorised share capital to

US$500,000,000 comprising 5,555,555,555 Shares of par value US$0.09 each.

The Proposed Increase in Authorised Share Capital must be approved by Shareholders at

the SGM.

7. PROPOSED DISPOSAL INVOLVING THE PROPOSED SELECTIVE SHARE

CANCELLATION

7.1 Background of the Proposed Disposal

One of the conditions precedent in the SPA is for the proposed disposal of all the Group’s

existing business on the terms and subject to the conditions set out in the Disposal

Agreement to be entered between the Company and the Undertaking Shareholders for the

sale of its Operating Subsidiaries, which undertake the existing business of the Group, to

the Undertaking Shareholders, such that:

(i) the Shares directly or indirectly held by the Undertaking Shareholders (being

75,347,433 Shares representing approximately 68.02% of the total issued share

capital of the Company as at the date of this Circular) will be wholly cancelled via a

selective share cancellation exercise and the corresponding capital deemed returned

to the Undertaking Shareholders as part satisfaction of the purchase consideration

payable by the Undertaking Shareholders to the Company under the Disposal

Agreement;

(ii) in consideration thereof, the Company shall transfer its entire ownership and interest

in the Group’s existing business (including the Operating Subsidiaries involved in such

business) to the Undertaking Shareholders (in such proportion to be agreed between

them and notified to the Company) at the purchase consideration to be mutually

agreed by the Company, the Vendor and the Undertaking Shareholders; and

(iii) the Undertaking Shareholders will pay cash to the Company to settle the difference (if

any) between the value of their Shares cancelled and the purchase consideration for

the Operating Subsidiaries to be sold by the Company.


into the Disposal Agreement with the Undertaking Shareholders for the Proposed Disposal.

The Proposed Disposal is an Interested Person Transaction under Chapter 9 of the Listing

Manual and a major transaction under Chapter 10 of the Listing Manual. Accordingly, the

Proposed Disposal is subject to the approval of the Shareholders at the SGM.

7.2 Disposal Consideration

Pursuant to the Disposal Agreement, the Company has agreed to sell its 99% equity interest

in Guangzhou Sinobest Information Technology Ltd. and its 100% equity interest in

Sinobest Technologies (H.K.) Limited for an aggregate consideration of RMB145,203,810

(the “Disposal Consideration”). Please refer to Section 4.7 of this Circular for more

information on the Operating Subsidiaries.


38

The Disposal Consideration was determined based on arm’s length negotiations and was

arrived at on a willing-buyer and willing-seller basis taking into account:

(a) the aggregate audited NTA of the Operating Subsidiaries of RMB136,398,762 (based

on their respective audited accounts as at 30 June 2012), after adjusting for:

(i) RMB6.4 million as dividends to be declared and paid by the Operating

Subsidiaries to its shareholders (mainly the Company, for the Company to settle

related expenses of the reverse take-over and to meet the Proposed Cash

Distribution);

(ii) the reversal of dividends aggregating RMB31.2 million declared but not paid by

the Operating Subsidiaries to the Company as at the date of the Disposal

Agreement; and

(iii) the non-controlling interests in the Operating Subsidiaries of RMB1.6 million; and

(b) other factors relevant to the ongoing concern of the Operating Subsidiaries’

businesses such as the financial condition of the relevant subsidiaries and the

prevailing business environment and market conditions.

The Disposal Consideration shall be satisfied, in full, by:

(a) the cancellation of 75,347,433 Shares directly or indirectly held by the Undertaking

Shareholders based on the cancellation price of approximately RMB1.36 for each

Share to be cancelled (aggregating RMB102,646,323) after taking into account the

audited NTA attributable to equity holders of the Group as at 30 June 2012 and

adjusting for the Proposed Cash Distribution;

(b) the offset of net amounts owing from the Company to the Operating Subsidiaries of

RMB10,095,300; and

(c) the balance of RMB32,462,187 in cash to be paid by the Undertaking Shareholders to

the Company.

7.3 Details of the Proposed Selective Share Cancellation

Pursuant to the Disposal Agreement, the 75,347,433 Shares directly or indirectly held by

the Undertaking Shareholders (amounting to approximately 68.02% of the total issued

share capital of the Company as at the Latest Practicable Date) will be wholly cancelled via

a selective share cancellation exercise and the corresponding capital deemed returned to

the Undertaking Shareholders as part satisfaction of the purchase consideration payable by

the Undertaking Shareholders under the Disposal Agreement.

On the completion of the Proposed Disposal, the Undertaking Shareholders shall deliver to

the Company:

(a) the share certificates for cancellation of 75,347,433 Shares held by the Undertaking

Shareholders; and

(b) cash to the Company to settle the difference (if any) between the value of their Shares

cancelled and the Disposal Consideration.


39

Pursuant to the Proposed Selective Share Cancellation, the number of Shares in issue will

be reduced from 110,776,067 Shares to 35,428,634 Shares.

The Proposed Selective Share Cancellation will not involve the diminution of any liability in

respect of the unpaid capital or the payment to any Shareholders of any fully paid-up share

capital of the Company.

The cancellation price of each Share to be cancelled under the Proposed Selective Share

Cancellation is proposed to be approximately RMB1.36, which is based on the audited NTA

attributable to equity holders of the Group as at 30 June 2012 and adjusting for the

Proposed Cash Distribution. This is in consideration that the Undertaking Shareholders are

acquiring the Company’s equity interest in the Operating Subsidiaries based on the

adjusted NTA of the Operating Subsidiaries as set out in Section 7.2 of the Circular.


The Proposed Disposal is conditional upon, inter alia:

(a) the Company obtaining the approval of its Shareholders in the SGM for the Proposed

Disposal involving a selective share cancellation as an Interested Person Transaction

under Chapter 9 of the Listing Manual and a major transaction under Chapter 10 of the

Listing Manual;

(b) the completion of the Proposed Acquisition and such other corporate action(s) in

connection with the Proposed Disposal, as may be necessary;

(c) all consents, approvals and authorisation of bankers, financial institutions, landlord of

leases, relevant third parties, government, statutory or regulatory authorities in

Singapore, Bermuda (if any), Hong Kong and the PRC which are necessary or

desirable in connection with the Proposed Disposal, and such other corporate

action(s) as may be necessary having been obtained, and such consents, approvals

and waivers not having been amended or revoked before the Disposal Completion

Date, and if subject to conditions, on such conditions acceptable to the Undertaking

Shareholders, prior to the Disposal Completion Date;

(d) approval in-principle being obtained by the Company from the SGX-ST for this Circular

to the Shareholders of the Company in respect of the transactions contemplated in the

SPA and not having been revoked or amended and, where such approval is subject to

conditions (which are not normally imposed by the SGX-ST for a transaction of a

similar nature), to the extent that any conditions are required to be fulfilled on or before

the Disposal Completion Date, they are so fulfilled; and

(e) the receipt of the independent financial adviser’s opinion to the Independent Directors

of the Company, appointed by the Company in connection with the Proposed Disposal.

As at the date of this Circular, save and except for conditions (d) and (e), all the conditions

precedent are pending fulfilment. An announcement will be made by the Company to notify

Shareholders of the fulfilment or waiver of the conditions precedent in due course.


40

The implementation of the Proposed Selective Share Cancellation is subject to, inter alia,

the following:

(a) compliance with the relevant legal procedures and requirements under Bermuda law

and Singapore law (if any) to effect the Proposed Selective Share Cancellation;

(b) the obtaining of all necessary approvals from the regulatory authorities (if any) as may

be required in respect of the Proposed Selective Share Cancellation; and

(c) the approval of the SGX-ST (where applicable).

If any of the conditions precedent is not fulfilled within 12 months from the date of the

Disposal Agreement, the Disposal Agreement shall lapse and cease to have further effect

and all obligations and liabilities of the parties shall cease and determine and neither party

shall have any claim against the others for costs, damages, compensation or otherwise,

except when such non-fulfilment is caused by the default of any of the parties.

7.5 Chapter 9 of the Listing Manual

Under Chapter 9 of the Listing Manual, where a listed company proposes to enter into a

transaction with its director, CEO or Controlling Shareholder or any of their associates,

shareholders’ approval and/or an immediate announcement is required in respect of that

transaction if its value is equal to or exceeds certain financial thresholds. In particular,

shareholders’ approval is required where the value of such transaction with any such

persons is equal to or more than:

(a) 5.0% of the listed company’s latest audited NTA; or

(b) 5.0% of the listed company’s latest audited NTA, when aggregated with the value of all

other transactions entered into with the same Interested Person during the same

financial year.

As at the date of this Circular, Zou Gefei is a director of the Company. Zou Gefei, Jin

Changren and Profit Saver International Limited are Controlling Shareholders of the

Company. Accordingly, Zou Gefei, Jin Changren and Profit Saver International Limited are

deemed to be interested in the Proposed Disposal under Chapter 9 of the Listing Manual.

Based on the Company’s latest audited accounts for FY2011, its consolidated NTA as at

31 December 2011 was approximately RMB158,661,000. The Disposal Consideration

represents approximately 91.5% of the Company’s latest audited consolidated NTA.

Accordingly, pursuant to Chapter 9 of the Listing Manual, the Proposed Disposal constitutes

an Interested Person Transaction and requires the approval of Shareholders.

Pursuant to Chapter 9 of the Listing Manual, the IFA has been appointed to provide an

opinion on whether the Proposed Disposal is on normal commercial terms and whether it

is prejudicial to the interests of the Company and its minority Shareholders. A copy of the

letter from the IFA to the Independent Directors is set out in Appendix A of this Circular.

7.6 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 for a disposal exceeds 20.0%, such transaction is classified

as a major transaction.


41

The relative figures computed on the bases set out in Rule 1006 of the Listing Manual are

as follows:

(a) Adjusted net asset value of the Operating Subsidiaries,

compared with the Group’s net asset value as at 30

June 2012

101.5%(1)

(b) Net profits attributable to the Operating Subsidiaries

compared with the Group’s net loss for the six months

financial period ended 30 June 2012

(239.7)%(2)

(c) Aggregate value of the Disposal Consideration

received, compared with the Company’s market

capitalisation on 6 December 2012, being the last

Market Day preceding the date of the Disposal

Agreement during which the Shares were traded

181.3%(3)

(d) The number of new Shares to be issued by the

Company as consideration for the Proposed Disposal,

compared with the number of Shares of the Company

previously in issue

Not applicable

Notes:

(1) Based upon the Group’s unaudited net asset value of RMB157,210,934 as at 30 June 2012 and the adjusted

net asset value of the Operating Subsidiaries of RMB159,610,070 as at 30 June 2012.

(2) Based upon the Group’s unaudited loss before tax of RMB1,149,000 for the six months financial period

ended 30 June 2012 and the audited profit before tax of the Operating Subsidiaries of RMB2,754,000 for the

six months ended 30 June 2012.

(3) Based on the Disposal Consideration and the Company’s market capitalisation of S$14,988,002 as at 6

December 2012, being the last Market Day preceding the date of the Disposal Agreement during which the

Shares were traded. The market capitalisation is calculated based on S$0.1353, being the volume weighted

average price of the Shares traded on 6 December 2012.

On the basis of Rules 1006(a), 1006(b) and 1006(c), the Proposed Disposal is a “Major

Transaction” under Rule 1013 of the Listing Manual for which the approval of Shareholders

is required pursuant to Rule 1014 of the Listing Manual.

7.7 Financial Effects of the Proposed Disposal

The pro forma financial effects of the Proposed Disposal as set out below are purely for

illustrative purposes only and are neither indicative of the actual financial effects of the

Proposed Disposal on the consolidated NTA and EPS of the Company nor the prospective

financial performance of the Group.

The pro forma financial effects have been prepared based on the audited consolidated

financial statements of the Group for the financial year ended 31 December 2011

(“FY2011”) with the following key assumptions:

(i) for the purposes of computing the NTA per Share of the Group, it is assumed that the

Proposed Disposal had been effected on 31 December 2011;

(ii) for the purposes of computing the EPS of the Group, it is assumed that the Proposed

Disposal had been effected on 1 January 2011;

(iii) transaction costs of the Proposed Disposal are assumed to be insignificant and

ignored for computational purposes; and


42

(iv) the assumption that the Company will recognise a loss of RMB14.4 million from the

Proposed Disposal as further detailed in Section 7.8 of this Circular. The actual gain

or loss has to be determined at the completion of the Proposed Disposal and may be

materially different from the amount derived based on the assumptions used.

(a) Share Capital

Before the

Proposed

Disposal

After the

Proposed

Disposal

Number of Shares 110,776,067 35,428,634

Share capital (RMB’000) 82,802 26,721

(b) NTA per Share

Before the

Proposed

Disposal

After the

Proposed

Disposal

NTA (RMB’000) 158,661 31,513

Number of Shares 110,776,067 35,428,634

NTA per Share (RMB) 1.43 0.89

(c) EPS

Before the

Proposed

Disposal

After the

Proposed

Disposal

Profit after tax attributable to

owners of the Company (RMB’000) 1,083 20,124

Number of Shares 110,776,067 35,428,634

EPS (RMB cents) 0.98 (56.80)

(d) Gearing

There is no impact to gearing as the Group does not have any borrowings.

7.8 Loss on the Proposed Disposal and Use of Proceeds

The Company expects to recognise a net loss of approximately RMB14.4 million from the

Proposed Disposal subject to any other accounting adjustments which may be necessary

upon the finalisation of the transaction.

The net loss from the Proposed Disposal is for illustrative purposes only and is, therefore,

not indicative of the actual financial performance or position of the Company after the

completion of the Proposed Disposal. The net loss arising from the Proposed Disposal has

been prepared based on the audited consolidated financial statements of the Group for the

financial year ended 30 June 2012, the audited financial statements of the Operating

Subsidiaries and the following assumptions:


43

(a) the Proposed Disposal is assumed to have been completed on 30 June 2012; and

(b) the NTA of the Operating Subsidiaries are adjusted to reflect the terms and conditions

of the Disposal Agreement as stated in, inter alia, Section 7.2 of this Circular.

As the Disposal Consideration will be partially satisfied by the cancellation of Shares held

by the respective Undertaking Shareholders, the Company will receive a cash top up from

the Undertaking Shareholders for the difference between the value of the Undertaking

Shareholders’ Shares cancelled and the Disposal Consideration amounting to

RMB32,462,187 (“Net Cash Proceeds”). The Company intends to utilise the Net Cash

Proceeds for general working capital and for funding new potential investments and

business expansion.

7.9 Completion

The Proposed Disposal, if approved and adopted by the Shareholders, shall take effect only

upon the completion of the Proposed Acquisition and at the close of the General Offer to be

made by the Vendor.

8. PROPOSED CONSOLIDATION

8.1 Proposed Consolidation

Effective from 10 August 2012, Rule 241 of the Listing Manual requires the issue price of

shares offered for a subscription or sale, for which a listing is sought, to be at least S$0.50

each. However, the previous criteria of S$0.20 will be applicable as the Minimum Issue

Price, as the mandate with Asiasons WFG Capital was signed by the Company prior to 10

August 2012.

To comply with the Minimum Issue Price, the Company proposes to undertake the Proposed

Consolidation pursuant to which the Company will consolidate every two Shares of par

value US$0.09 into one Consolidated Share.

The Proposed Consolidation will be made effective on the Books Closure Date whereupon

the Register of Members and the Depository Register will be updated to reflect the number

of Consolidated Shares held by each Shareholder and each Depositor based on the number

of Shares held by each Shareholder and each Depositor as at the Books Closure Date.

Shareholders should note that the number of Consolidated Shares whichShareholders are entitled to, based on their shareholdings as at the Books ClosureDate, will be rounded down to the nearest whole Consolidated Share and anyfractions thereof arising from the Proposed Consolidation will be disregarded.

As the proceeds of the sale of fractions of Consolidated Shares arising from the Proposed

Consolidation are likely to be less than the administrative costs and expenses involved in

despatching such proceeds to the Shareholders, fractions of Consolidated Shares arising

from the Proposed Consolidation will be aggregated and dealt with in such manner as the

Directors may, in their absolute discretion, deem fit in the interest of the Company. Each

Consolidated Share will rank pari passu with each other and will be traded in board lots of

1,000 Consolidated Shares.

As at the Latest Practicable Date, the Company has a total issued share capital of

US$9,969,846.03 divided into 110,776,067 existing Shares. Following the Proposed

Acquisition, the Proposed Disposal involving the Proposed Selective Share Cancellation

and implementation of the Proposed Consolidation, the Company will have a total issued

share capital of US$95,577,071.22 divided into approximately 530,983,729 Consolidated

Shares.


44

The Proposed Consolidation will not involve the diminution of any liability in respect of

unpaid capital or the payment to any Shareholder of any paid-up capital of the Company,

and has no effect on the Shareholders’ funds of the Group. Shareholders will not be

required to make any payment to the Company in respect of the Proposed Consolidation.

8.2 Rationale for the Proposed Consolidation

The Proposed Consolidation will rationalise the share capital of the Company by reducing

the number of Shares outstanding. This should reduce the transaction costs for investors

in their dealings in the Shares. In addition, the Proposed Consolidation will enable the

Company to meet the Minimum Issue Price. Accordingly, the Directors believe that the

Proposed Consolidation will be beneficial to the Company and its Shareholders.

Shareholders should note, however, that there can be no assurance that the

Proposed Consolidation will achieve the desired results stated above, nor is there

assurance that such results (if achieved) can be sustained in the longer term.

8.3 Conditions Precedent for the Proposed Consolidation

Pursuant to Bye-Law 62(A), the implementation of the Proposed Consolidation is subject to

Shareholders’ approval by way of an Ordinary Resolution at the SGM. The approval of the

SGX-ST for the listing of, and quotation for, all the Consolidated Shares is also required.

On 12 December 2012, the Company received the approval in-principle from the SGX-ST

for the listing of and quotation for up to 530,983,729 Consolidated Shares on the Main

Board of the SGX-ST, subject to compliance with the SGX-ST’s listing requirements and

Shareholders’ approval for the Proposed Consolidation being obtained at the SGM to be

convened.

The approval in-principle granted by the SGX-ST is in no way reflective of and is not to be

taken as an indication of the merits of the Proposed Consolidation, the Consolidated

Shares, the Company and/or its subsidiaries.

Subject to Shareholders’ approval being obtained for the Proposed Consolidation, an

announcement will be made by the Company to notify Shareholders of the Books Closure

Date and the date on which the Shares will be traded on the SGX-ST in board lots of 1,000

Consolidated Shares (the “Effective Trading Date”).

8.4 Updating of Register of Members and Depository Register for the Shares

If the Ordinary Resolution in the Notice of SGM relating to the Proposed Consolidation is

passed at the SGM, the Register of Members will be updated to reflect the number of

Consolidated Shares held by Shareholders based on their shareholdings in the Company

as at the Books Closure Date. The Depository Register will be updated accordingly. The

Shares will trade in board lots of 1,000 Consolidated Shares on the Effective Trading Date.

8.5 Deposit of Share Certificates with CDP

Shareholders who hold physical share certificates for the existing shares in their own

names (“Old Share Certificates”) and who wish to deposit the same with CDP and have

their Consolidated Shares credited to their Securities Accounts maintained with CDP must

deposit their Old Share Certificates, together with duly executed instruments of transfer in

favour of CDP, no later than five Market Days prior to the Books Closure Date.


45

After the Books Closure Date, CDP will only accept for deposit new share certificates for

Consolidated Shares (“New Share Certificates”). Shareholders who wish to deposit their

share certificates with CDP after the Books Closure Date must first deliver their Old Share

Certificates to the Singapore share transfer agent, Tricor Barbinder Share Registration

Services, located at 80 Robinson Road, #02-00, Singapore 068898, for cancellation and

issue of New Share Certificates in replacement thereof as described below.

8.6 Issue of New Share Certificates

Shareholders who have deposited their Old Share Certificates with CDP at least five Market

Days prior to the Books Closure Date need not take any action. The Company will arrange

with CDP to facilitate the exchange of New Share Certificates pursuant to the Proposed

Consolidation. Depositors also do not need to take any action.

Shareholders who have not deposited their Old Share Certificates as aforesaid or who do

not wish to deposit their Old Share Certificates with CDP are advised to forward all their Old

Share Certificates to the Singapore share transfer agent no later than five Market Days after

the Books Closure Date for cancellation and exchange for New Share Certificates. No

receipt will be issued by the Singapore share transfer agent for the receipt of the physical

Old Share Certificates. The New Share Certificates will be sent by ordinary mail to the

registered addresses of the Shareholders at their own risk within 10 Market Days from the

Books Closure Date or the date of receipt of the Old Share Certificates, whichever is later.

Shareholders should note that New Share Certificates will not be issued toShareholders unless their Old Share Certificates have been tendered to theSingapore Share Transfer Agent for cancellation.

Shareholders should notify the Singapore share transfer agent if they have lost any of their

existing Old Share Certificates or if there is any change in their address from that reflected

in the Register of Members of the Company.

Shareholders are to deliver their respective Old Share Certificates to the Singapore share

transfer agent or CDP in accordance with the provisions set out above only after the

announcement of the Books Closure Date by the Company.

8.7 Share Certificates not valid for settlement of trades on SGX-ST

Shareholders who hold physical share certificates are reminded that their Old Share

Certificates will not be valid for settlement of trading in the Consolidated Shares on the

SGX-ST (as the Company is under a book-entry (scripless) settlement system) but will

continue to be accepted for cancellation and issue of New Share Certificates in replacement

thereof for an indefinite period by the Singapore share transfer agent. Notwithstanding, the

New Share Certificates will not be valid for delivery for trades done on the SGX-ST although

they will continue to be prima facie evidence of legal title.

8.8 Trading arrangements for the Consolidated Shares

Subject to the approval for the Proposed Consolidation by the Shareholders at the SGM,

with effect from 9.00 a.m. on the Effective Trading Date, trading in the Consolidated Shares

will be in board lots of 1,000 Consolidated Shares. Trading in the existing Shares will cease

after 5.00 p.m. on the Market Day immediately preceding the Effective Trading Date.

8.9 Trading arrangements for odd lots

All fractional entitlements arising upon the implementation of the Proposed Consolidation

will be aggregated and dealt with in such manner as the Directors (as the case may be)

may, in their absolute discretion, deem fit in the interest of the Company.


46

The existing Shares are currently traded in board lots of 1,000 Shares in the ready market.

Following the Proposed Consolidation, the Securities Accounts maintained with CDP of

Shareholders (being Depositors) may be credited with odd lots of Consolidated Shares (that

is, lots other than board lots of 1,000 Consolidated Shares). Shareholders who receive odd

lots of Consolidated Shares pursuant to the Proposed Consolidation and who wish to trade

in odd lots on the SGX-ST should note that the unit share market has been set up to allow

trading in odd lots with a minimum size of one Consolidated Share on the SGX-ST. The unit

share market will enable trading in odd lots in any quantity less than one board lot of the

underlying Consolidated Shares in the ready market.

8.10 Temporary Trading Counter

An application will be made to the SGX-ST for the setting up of a temporary counter to allow

Shareholders to trade in board lots of 100 Consolidated Shares. The Company will update

Shareholders on the outcome of this application through a SGXNET announcement in due

course. This temporary counter will be maintained for a period of one calendar month

commencing from the Effective Trading Date (“Concessionary Period”). Thereafter,

Shareholders can trade in odd lots of Consolidated Shares on the SGX-ST unit share

market.

The set-up of the temporary trading counter is strictly of a provisional nature. Shareholders

who continue to hold odd lots of less than 1,000 Consolidated Shares after the

Concessionary Period may find difficulty and/or have to bear disproportionate transaction

costs in realising the fair market price of such Consolidated Shares.

Shareholders should note that under the SPA, Shareholders’ approval for the Proposed

Consolidation is a condition precedent to Completion. If Shareholders’ approval of the

Proposed Consolidation is not obtained, the Proposed Acquisition will not proceed to

Completion. Shareholders should note Section 2.11 of this Circular entitled

“Inter-conditionality” on the inter-conditionality of all the resolutions contained in this

Circular.

9. PROPOSED CHANGE OF AUDITORS

The present auditors of the Company, Nexia TS Public Accounting Corporation, were

appointed on 27 April 2007. Subject to the approval of Shareholders at the SGM, Nexia TS

Public Accounting Corporation will resign as auditors of the Company upon the completion

of the reverse take-over.

Deloitte & Touche LLP is the member firm of Deloitte Touche Tohmatsu Limited in Singapore

and is registered with the Accounting and Corporate Regulatory Authority. Deloitte & Touche

LLP were the reporting accountants in connection with the reverse take-over exercise

involving the acquisition of OKH Group and the partner-in-charge is Ernest Kan Yaw Kiong,

a member of the Institute of Certified Public Accountants of Singapore.

The Directors of the Company recognise that retaining their services will ensure continuity

of the audit process. Accordingly, the Company has approached Deloitte & Touche LLP to

act as the auditors of the Company following the resignation of Nexia TS Public Accounting

Corporation. Subject to the approval of Shareholders at the SGM, Deloitte & Touche LLP

have agreed and consented to act as the auditors of the Company upon the completion of

the reverse take-over.

The proposed change of auditors of the Company has been reviewed and is recommended

by the Audit Committee. The Directors (in consultation with the Audit Committee), having

considered the adequacy of the resources and experience of Deloitte & Touche LLP, the


47

number and experience of the supervisory and professional staff to be assigned to the audit

of the consolidated financial statements of the Company and the Group, Deloitte & Touche

LLP’s proposed audit arrangements for the Company and the size and complexity of the

Enlarged Group’s operations, is of the opinion that Deloitte & Touche LLP will be able to

meet the audit requirements of the Company and the Enlarged Group.

Accordingly, the Company and the Enlarged Group have complied with Rules 712 and 715


The Company and the Directors have confirmed that they are not aware of (i) any

disagreements with the auditors on accounting treatments within the 12 months preceding

the Latest Practicable Date; or (ii) any other circumstances connected with the change of

auditors that need to be brought to the attention of the Shareholders. Nexia TS Public

Accounting Corporation has confirmed that they are not aware of any professional reasons

why Deloitte & Touche LLP should not accept appointment as auditors of the Company.

The appointment of Deloitte & Touche LLP as the auditors of the Company following the

resignation of Nexia TS Public Accounting Corporation must be approved by an Ordinary

Resolution. Subject to the approval by Ordinary Resolution of the change of auditors of the

Company and the completion of the reverse take-over, Deloitte & Touche LLP will act as the

auditors of the Company for the financial period ending 30 June 2013 and will hold office

until the conclusion of the next AGM of the Company.

10. PROPOSED CHANGE OF NAME OF THE COMPANY

In view of the Proposed Acquisition, the Board proposes to change the name of the

Company to “OKH Global Ltd.” (the “New Name”).

The proposed change of the Company’s name to “OKH Global Ltd.” is subject to (i) the

passing of the Special Resolution at the SGM; and (ii) the entry on the register by the

Registrar of Companies in Bermuda.

The Company will carry out the necessary filing procedures with the Registrar of

Companies in Bermuda. The New Name will take effect from the date on which the Registrar

of Companies in Bermuda enters the New Name on the register in place of the former name.

The Registrar of Companies in Bermuda is expected to issue the certificate of incorporation

on change of name thereafter.

The proposed change of name will not affect any of the rights of the Shareholders. All

existing share certificates of the Company in issue bearing the existing name of the

Company will, after the proposed change of name becoming effective, continue to be

evidence of title to shares of the Company and will remain to be valid for trading, settlement,

registration and delivery purposes.

Shareholders who hold physical share certificates of the Company may exchange for

certificates bearing the New Name free of charge within one month from the effective date

of the proposed change of name by submitting their existing share certificates to the

Company’s Singapore share transfer agent, Tricor Barbinder Share Registration Services,

located at 80 Robinson Road, #02-00, Singapore 068898.

Upon the proposed change of name becoming effective, any new share certificates of the

Company will be issued under the New Name.


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11. PROPOSED TERMINATION OF THE EXISTING SHARE OPTION SCHEME AND THEPROPOSED ADOPTION OF THE OKH PERFORMANCE SHARE PLAN

For the purposes of this Section, unless otherwise defined in the Section entitled

“Definitions” of this Circular, all terms and expressions used herein shall have the meanings

defined in Rule 2 of Appendix F of this Circular.

11.1 The existing share option scheme

Pursuant to the general meeting held on 27 September 2004, the Company adopted the

Sinobest Employee Share Option Scheme for the purpose of providing incentives to

Directors and eligible employees. Eligible participants include any confirmed employee,

including executive directors of the Company and the Company’s subsidiaries. The

Sinobest Employee Share Option Scheme will expire on 26 September 2014, unless

otherwise terminated by the Remuneration Committee or by a resolution of Shareholders at

a general meeting.

No share options have been granted or agreed to be granted by the Company under the

Sinobest Employee Share Option Scheme since the adoption date of the Sinobest

Employee Share Option Scheme.

In view of the Proposed Acquisition, the Company is proposing to terminate the Sinobest

Employee Share Option Scheme. The termination of the Sinobest Employee Share Option

Scheme is subject to Shareholders’ approval and will be proposed as an Ordinary

Resolution at the SGM.

If approved by the Shareholders at the SGM, the termination of the Sinobest Employee

Share Option Scheme will take effect from the Completion Date. No further options will be

issued under the Sinobest Employee Share Option Scheme upon its termination.

Shareholders who are eligible to participate in the Sinobest Employee Share Option

Scheme are to abstain from voting on the Ordinary Resolution relating to the proposed

termination of the Sinobest Employee Share Option Scheme and should not accept

nominations as proxies unless specific instructions have been given in the proxy instrument

by the independent Shareholders appointing them on how they wish their votes to be cast.

As the existing executive Directors (namely Zou Gefei, Li Ziqiang and Yu Zengping) are

participants of the Sinobest Employee Share Option Scheme, they shall abstain from

making any recommendations on any resolutions in relation to the Sinobest Employee

Share Option Scheme.

11.2 Rationale for and objectives of the Performance Share Plan

The Company proposes, subject to the approval of the Shareholders at the SGM, to adopt

and implement a performance share plan to be known as the OKH Performance Share Plan.

If approved by the Shareholders at the SGM, the OKH Performance Share Plan will take

effect from the Completion Date.

The purpose of the Performance Share Plan is to provide an opportunity for Group

Employees who have met the Performance Conditions to be remunerated not just through

cash bonuses but also by an equity stake in the Company.

The Performance Share Plan is primarily a share incentive scheme that recognises the

importance of Group Employees to the success and continued well-being of the Enlarged

Group. The specific objectives of the Performance Share Plan are set out in Rule 3 of

Appendix F of this Circular.


49

The New Board believes that with the Performance Share Plan and any other share-based

incentive scheme which the Enlarged Group may adopt, the Enlarged Group is equipped

with a set of flexible remuneration tools with which the Enlarged Group would be better able

to attract and retain talent.

11.3 Rationale for participation by executive directors and employees of the Enlarged Group

It is desired that the Enlarged Group should have a performance share plan which caters

to the executive directors and employees of the Enlarged Group.

The Performance Share Plan allows the Enlarged Group to have a fair and equitable system

to reward executive directors and employees who have made and who continue to make

contributions to the long-term growth of the Enlarged Group. The success of the Enlarged

Group’s business is dependent on the Enlarged Group’s ability to attract and retain good

personnel and the New Board believes that the Performance Share Plan will be an essential

part of the Enlarged Group’s strategy for the recruitment and retention of capable

personnel.

The New Board recognises that it is important to the well-being and stability of the Enlarged

Group that the Enlarged Group acknowledges the services and contributions made by the

executive directors and employees and that the Enlarged Group continues to receive their

support and contributions.

11.4 Rationale for participation by the directors and employees of the Associated Companies

It is also desired that the Enlarged Group should have a performance share plan which

caters to the persons who are not employed within the Enlarged Group but work closely with

the Enlarged Group and who, by reason of their relationship with the Enlarged Group, are

in a position to contribute their experience, knowledge and expertise to the development

and prosperity of the Enlarged Group. Such other persons include the directors and

employees of the Associated Companies.

By implementing the Performance Share Plan, the Enlarged Group will have a means of

providing for those who, while not directors or employees of the Enlarged Group, are

nonetheless closely associated with the Enlarged Group as well as the performance of the

Enlarged Group through participation in the equity of the Enlarged Group. It is hoped that

by doing so, the Enlarged Group will also strengthen its working relationships with the

directors and employees of the Associated Companies by inculcating in them a stronger

and more lasting sense of identification with the Enlarged Group.

As at the Latest Practicable Date, the Enlarged Group does not have any Associated

Companies (over whose management the Company and/or the controlling shareholder

have control). The Performance Conditions set for the directors and employees of the

Associated Companies will be similar to that of the Performance Conditions set for the

directors and employees of the Enlarged Group which shall be determined by the Awards

Committee in due course.

11.5 Rationale for participation by non-executive directors

It is recognised that there are other persons who, though not employed within the Enlarged

Group, may make significant contributions to the Enlarged Group through their close

working relationships with the Enlarged Group. The non-executive directors of the Enlarged

Group are persons from different professions and working backgrounds, bringing to the


50

Enlarged Group their wealth of knowledge, business expertise and business strategies by

allowing the Enlarged Group to draw on their backgrounds and diverse working experience.

It is crucial for the Enlarged Group to attract, retain and incentivise the non-executive

directors. By aligning the interests of the non-executive directors with the interests of the

Shareholders, the Enlarged Group aims to inculcate a sense of commitment on the part of

the non-executive directors towards serving the short and long-term objectives of the

Enlarged Group.

However, as the Performance Share Plan is intended to cater primarily to the employees

and executives of the Enlarged Group and Associated Companies who will comprise the

bulk of the Participants of the Performance Share Plan, the New Board anticipates that the

number of Shares which are the subject of the Awards that may be granted to the

non-executive directors pursuant to the Performance Share Plan would not comprise a

significant portion of the Shares that may be granted under the Performance Share Plan.

The Awards Committee shall act judiciously in the exercise of its discretion in respect of the

grant of Awards to the non-executive directors. In deciding whether to grant Awards to the

non-executive directors, the Awards Committee will take into consideration, among other

things, the services and contributions made to the growth of the Enlarged Group,

attendance and participation in meetings and the years of service of a particular

non-executive director. The Awards Committee may also, where it considers relevant, take

into account other factors such as the economic conditions and the Enlarged Group’s

performance. It is envisaged that the vesting of Awards, and hence the number of Shares

to be delivered to the non-executive directors based on the criteria set out above will be

relatively small. The Board does not envisage that the aggregate number of Shares set

aside for the Non-Executive Directors collectively will exceed 1% of the total issued share

capital of the Company from time to time. Based on this, the New Board is of the view that

the participation by the non-executive directors in the Performance Share Plan will not

compromise their independent status. The non-executive directors would generally,

continue to be remunerated for their services by way of directors’ fees.

A non-executive director will abstain from voting as a director or member of the Awards

Committee when the grant of Awards to him is being deliberated.

11.6 Rationale for participation by Controlling Shareholders and their Associates

The New Board is of the view that employees and directors of the Enlarged Group who are

also Controlling Shareholders or their Associates should be remunerated for their

contribution to the Enlarged Group on the same basis as other employees and directors of

the Enlarged Group who are not Controlling Shareholders or their Associates. Although

Controlling Shareholders would already have shareholding interests in the Company, the

extension of the Performance Share Plan to encompass them will ensure that they are

equally entitled, together with the other eligible employees and the directors of the Enlarged

Group who are not Controlling Shareholders or their Associates, to take part and benefit

from the Performance Share Plan. The Performance Share Plan is intended to be part of the

remuneration package for employees and directors of the Enlarged Group and the New

Board is of the view that employees and directors who are Controlling Shareholders or their

Associates should not be unduly discriminated against by virtue only of their shareholding

in the Company. The New Board is of the view that the extension of the Performance Share

Plan to Controlling Shareholders and their Associates will enhance the long-term

commitment of such Controlling Shareholders and their Associates.

In compliance with Rule 845 of the Listing Manual, (i) the aggregate number of Shares

available to the Controlling Shareholders and their Associates will not exceed 25% of the

Shares under the Performance Share Plan; and (ii) the number of Shares available to each

Controlling Shareholder or his Associate will not exceed 10% of the Shares available under

the Performance Share Plan.


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Pursuant to Rule 853 of the Listing Manual, and subject to the adoption of the Performance

Share Plan, independent Shareholders’ approval will be sought for the participation by

Controlling Shareholders and their Associates in the Performance Share Plan. The

Company will seek independent Shareholders’ approval before granting any Award to

Controlling Shareholders and their Associates and will specify in the relevant resolution the

number of Shares to be granted pursuant to such Award.

11.7 Summary of the Performance Share Plan

The detailed rules of the Performance Share Plan are set out in Appendix F of this Circular.

A summary of the Performance Share Plan is set out below:

Eligibility

The following persons shall be eligible to participate in the Performance Share Plan at the

absolute discretion of the Awards Committee:

(a) Group Employees (including Group Executive Directors and Group Non-Executive

Directors);

(b) Associated Company Employees (including the directors of the Associated Company);

and

(c) Controlling Shareholders and their Associates, subject to Rules 4.2 and 8 of Appendix

F of this Circular.

However, pursuant to Rule 845 of the Listing Manual, (i) the aggregate number of Shares

available to the Controlling Shareholders and their Associates must not exceed 25% of the

Shares under the Performance Share Plan; and (ii) the number of Shares available to each

Controlling Shareholder or his Associate must not exceed 10% of the Shares available

under the Performance Share Plan.

Pursuant to Rule 853 of the Listing Manual, participation in the Performance Share Plan by

Controlling Shareholders and their Associates must be approved by independent

Shareholders of the Company and a separate resolution must be passed for each such

person and to approve the actual number and terms of Awards to be granted to such

person.

Awards

Awards represent the right of a Participant to receive fully paid Shares free of charge,

provided that certain prescribed performance targets (if any) are met and upon expiry of the

prescribed performance period. The prescribed performance targets include targets based

on criteria such as sales growth, EPS, share price and return on investment.

Participation by a Group Employee, the quantum of Shares awarded and the prescribed

performance targets is subject to the absolute direction of the Awards Committee but shall

have regard to factors such as the rank, job performance, year(s) of service and potential

for future development and his contribution to the success and development of the Enlarged

Group and the extent of effort required to achieve the performance targets within the

performance period of the Participant.

The Awards Committee may amend or waive the performance period and/or the

performance condition in respect of any Award and Awards may be granted at any time in

the course of a financial year. The Performance Share Plan provides specific provisions in

relation to the vesting and lapsing of Awards. These provisions include, inter alia, the

termination of the employment or bankruptcy of a Participant.


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Plan Administration

The Performance Share Plan shall be administered by the Awards Committee with powers

to determine, inter alia, the following:

(a) the performance conditions to be set for the grant of Awards;

(b) number of Shares, which are the subject of the Awards to be granted; and

(c) recommendations for modifications to the Performance Share Plan.

The Awards Committee will consist of Directors (including Directors or persons who may be

participants of the Performance Share Plan). A member of the Awards Committee who is

also a Participant will not be involved in its deliberation in respect of Awards granted or

which will be granted to him.

Size and Duration of the Performance Share Plan

The aggregate nominal amount of new Shares which may be issued pursuant to Awards

granted under the Performance Share Plan on any date, when added to the nominal amount

of new Shares issued and issuable in respect of:

(a) all Awards granted under the Performance Share Plan; and

(b) any other share-based incentive scheme of the Company

shall not exceed 15% of the issued and paid-up share capital of the Company on the day

preceding that date.

The Performance Share Plan shall continue in force at the discretion of the Awards

Committee, subject to a maximum period of 10 years commencing on the date the

Performance Share Plan is adopted by the Company in general meeting, provided always

that the Performance Share Plan may continue beyond the above stipulated period with the

approval by Ordinary Resolution in general meeting and of any relevant authorities which

may then be required. Notwithstanding the expiry or termination of the Performance Share

Plan, any Awards made to Participants prior to such expiry or termination will continue to

remain valid.

Operation of the Performance Share Plan

Subject to the prevailing legislation and rules, guidelines and measures applicable to the

Company and the SGX-ST listing rules, the Awards Committee may determine in its sole

discretion to deliver the Shares to the Participants upon the release of their Awards by way of:

(a) the allotment and issuance to each Participant of the number of New Shares, deemed

to be fully paid or credited upon their allotment and issuance; and/or

(b) delivering existing Shares to the Participant, whether such existing Shares are

acquired pursuant to a share purchase mandate or (to the extent permitted by law)

held as treasury Shares or otherwise.

The Awards Committee, in its absolute discretion, may determine to release an Award,

wholly or partly, in the form of cash rather than Shares, in which event the Participant shall

receive the aggregate market value of such Shares on the vesting date.


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Modification or Alterations to the Performance Share Plan

The rules of the Performance Share Plan may be modified and/or altered from time to time

by a resolution of the Awards Committee, subject to compliance with the SGX-ST listing

rules and such other regulatory authorities as may be necessary. Save as provided in the

Performance Share Plan, no modification or alteration shall alter adversely the rights

attached to any Award granted prior to such modification or alteration except with the

consent in writing of such number of Participants.

No modification or alteration shall be made to the rules of the Performance Share Plan to

the advantage of the Participants except with the prior approval of Shareholders in a

general meeting.

Listing Approval

On 12 December 2012, the SGX-ST granted approval in-principle for the listing and

quotation for the Shares to be issued pursuant to the Performance Share Plan on the

Official List of the Main Board of the SGX-ST subject to, inter alia, specific Shareholders’

approval being obtained for the Performance Share Plan. Such approval in-principle by the

SGX-ST is not an indication of the merits of the Performance Share Plan. Please refer to

Section 3.1 of this Circular for further details of the approval in-principle granted by the

SGX-ST.

11.8 Financial Effects of the Performance Share Plan

Share capital

The Performance Share Plan will result in an increase in the Enlarged Group’s issued share

capital only if new Shares are issued to Participants pursuant to the grant of the Awards.

This will in turn depend on, inter alia, the number of Shares comprised in the Awards to be

issued. If, instead of issuing new Shares to participants, existing Shares are purchased for

delivery to participants, the Performance Share Plan will have no impact on the Enlarged

Group’s issued share capital.

NTA

The Performance Share Plan will result in a charge to the Enlarged Group’s profit and loss

account equal to the market value at which the new Shares are issued or the existing

Shares are purchased to meet delivery under the Awards. Accordingly, the consolidated

NTA per share of the Enlarged Group would decrease by the amount charged (after any

adjustment for tax).

It should be noted that Awards are granted only on a selective basis and will be granted to

Participants whom the Company believes have contributed or will contribute significant

value in its success in terms of its, inter alia, financial performance. Therefore, Participants

would have contributed to or will significantly value-add to the NTA of the Enlarged Group

before the Awards are granted and Shares delivered. Accordingly, any Award under the

Performance Share Plan would have been premised upon significant value having been

added to the Enlarged Group’s consolidated NTA before Shares are delivered.

EPS

The Performance Share Plan will result in a charge to earnings over the period from the

grant date to the vesting date, equivalent to the market value at which existing Shares are

purchased or the market value on the date on which the new Shares are issued.


54

Although the Performance Share Plan will have a dilutive impact on the Enlarged Group’s

consolidated EPS, it should be noted that Awards are granted only on a selective basis and

will be granted to Participants whom the Company believes have contributed or will

contribute significant value in its success in terms of its, inter alia, financial performance

and resulting in, inter alia, added value to Shareholders. Accordingly, the earnings of the

Enlarged Group should have grown before the Awards are granted and the Shares

delivered.

Potential Cost of Awards

As Shares will be issued to the Participants free of charge under the Performance Share

Plan, such grant of Awards will have a financial effect on the Enlarged Group.

FRS 102 ‘Share-based payment’ requires the recognition of an expense in respect of

Awards granted under the Performance Share Plan. The expenses will be based on the fair

value of the Awards at the date of the grant and will be recognised over the expected

Vesting Period. However, no expense will ultimately be recognised for any Awards granted

that do not vest because of failure to satisfy the vesting conditions.

In accordance with FRS 102, paragraph 15, the Company will account for the grant of

Awards during the Vesting Period, with a corresponding increase in equity. As per FRS 102,

paragraph 19, on a cumulative basis, no amount is recognised for services received if the

equity instruments granted do not vest because of failure to satisfy a vesting condition.

Also, as per FRS 102, paragraph 20, the Company shall recognise an amount for the

services received during the Vesting Period based on the best available estimate of the

number of equity instruments expected to vest and shall revise that estimate, if necessary.

Therefore, grant of Award is recognised to income statement over the expected Vesting

Period. If an employee leaves before end of the Vesting Period, the Company should revise

the estimated number of equity instruments expected to vest.

11.9 Rights of Shares arising from the Performance Share Plan

Shares allotted and issued upon the release of an Award shall be subject to all provisions

of the Memorandum and Bye-Laws of the Company (including provisions relating to

liquidation) and shall be eligible for all entitlements, including dividends or other

distributions declared or recommended in respect of the then existing Shares, the Record

Date for which is on or after the relevant vesting date of the Award, and shall in all other

respects rank pari passu with other existing Shares then in issue.

11.10 Abstention from voting and making recommendation on the Performance Share Plan

Shareholders who are eligible to participate in the Performance Share Plan are to abstain

from voting on the Ordinary Resolution relating to the Performance Share Plan and should

not accept nominations as proxies unless specific instructions have been given in the proxy

instrument by the independent Shareholders appointing them on how they wish their votes

to be cast.

As the Directors are eligible participants of the Performance Share Plan, they shall abstain from

making any recommendations on any resolutions in relation to the Performance Share Plan.

12. THE PROPOSED AMENDMENT TO THE BYE-LAWS

12.1 Rationale

Under Rules 210(7) and 730 of the Listing Manual, an issuer must ensure that its Articles

of Association or constituent documents meet the requirements in Appendix 2.2 of the

Listing Manual and are consistent with all the listing rules prevailing at the time of


55

amendment. The Company is taking this opportunity to amend Bye-Law 102(A) of the

existing Bye-Laws to include a provision to provide that the office of a Director be vacated

where a Director is disqualified from acting as a director in any jurisdiction for reasons other

than on technical grounds to bring the Bye-Laws in line with the latest amendments to the

Listing Manual.

12.2 Text of Bye-Law to be amended

The text of the Bye-Law which is proposed to be amended in Appendix G to this Circular is

as follows:

Existing Bye-Law 102(A)

A Director shall vacate his office:

(i) if he becomes bankrupt or compounds with his creditors generally; or

(ii) if he becomes a lunatic or of unsound mind; or

(iii) if he absents himself from the meetings of the Board during a continuous period of six

(6) months, without special leave of absence from the Board, and his alternate Director

(if any) shall not during such period have attended in his stead, and the Board passes

a resolution that he has by reason of such absence vacated his office; or

(iv) if he becomes prohibited by law from acting as a Director; or

(v) if by notice in writing delivered to the Company at its Registered Office or at the Head

Office he resigns his office; or

(vi) if he shall be removed from office by an Ordinary Resolution of the Company under

Bye-Law 109.

Proposed Amendment to Bye-Law 102(A)

Deleting Bye-Law 102(A) in its entirety and substituting therefor the following:




(iii) if he absents himself from the meetings of the Board during a continuous period of six

(6) months, without special leave of absence from the Board, and his alternate Director

(if any) shall not during such period have attended in his stead, and the Board passes

a resolution that he has by reason of such absence vacated his office; or

(iv) if he becomes prohibited by law from acting as a Director or disqualified from acting

as a Director in any other jurisdiction for reasons other than on technical grounds; or

(v) if by notice in writing delivered to the Company at its Registered Office or at the Head

Office he resigns his office; or


56

(vi) if he shall be removed from office by an Ordinary Resolution of the Company under

Bye-Law 109.

13. PROPOSED COMPLIANCE PLACEMENT

13.1 Proposed Compliance Placement

After completing the Proposed Transactions but before the Proposed Compliance

Placement, the Vendor will own approximately 96.66% of the enlarged issued share capital

of the Company while approximately 3.34% of the enlarged issued share capital of the

Company will be held by the Public.

In accordance with Rule 724 of the Listing Manual, as the public float of the Company will

fall below 10% after the allotment of the Consideration Shares to the Vendor, the SGX-ST

may suspend the trading of the Shares. As required under Rule 14 of the Code, the Vendor

will make the General Offer for all the issued Shares not already owned, controlled or

agreed to be acquired by him and parties acting in concert with him upon the completion of

the Proposed Acquisition.

Accordingly, the SGX-ST has approved the Company’s application to suspend the trading

of the Shares only at the close of the General Offer.

As the Company is expected to have a market capitalisation of less than S$300 million

following Completion, in compliance with Rule 1015(3) and Rule 210(1)(a) of the Listing

Manual, at least 25% of the issued share capital of the Company must be held in the hands

of at least 500 shareholders who are members of the Public upon Completion.

Assuming that the Vendor receives valid acceptances of the General Offer in respect of

100% of the total number of issued Shares (other than Shares already held by the Vendor

and his concert parties) from all existing Shareholders, the Vendor will hold 100% of the

enlarged issued share capital of the Company on completion of the Proposed Transactions

(including the cancellation of all 75,347,433 Shares held by the Undertaking Shareholders

in relation to the Proposed Disposal and Proposed Selective Share Cancellation). In such

event, the Vendor shall take appropriate actions to comply with Rules 1015(3) and 210(1)(a)

of the Listing Manual, including but not limited to increasing the size of the Consolidated

Shares he owns in the share capital of the Company for sale to the Public and/or carrying

out a placement of new Shares such that at least 25% of the Shares are held by at least 500

Shareholders who are members of the Public.

For the purposes of meeting the shareholding distribution requirements set out in Rule

210(1)(a) of the Listing Manual, the Vendor has opted to participate in the Proposed

Compliance Placement by offering up to 132,746,000 Consolidated Shares he will hold in

the share capital of the Company for sale to the Public at a placement price to be agreed

between the Vendor and the Placement Agent, but will not be less than S$0.20 per Share,

subject to the prevailing market conditions at the time of placement. It is proposed that the

placees for the Proposed Compliance Placement may be institutional investors, retail

investors, and/or existing Shareholders so long as such placees are acceptable to the

SGX-ST for the purposes of fulfilling the free float requirements under Rule 210(1)(a) of the

Listing Manual.

13.2 Details of the Proposed Compliance Placement

The Vendor intends to appoint UOB Kay Hian Private Limited as the Placement Agent for

the Proposed Compliance Placement. As at the Latest Practicable Date, the terms of the

Proposed Compliance Placement have yet to be finalised pending the entry by the Vendor

into a definitive placement agreement with UOB Kay Hian Private Limited for the Proposed

Compliance Placement of Compliance Shares.


57

14. FINANCIAL EFFECTS OF THE PROPOSED TRANSACTIONS

14.1 Bases and Assumptions

The financial effects of the Proposed Transactions on the share capital, earnings, NTA and

gearing of the Enlarged Group have been prepared based on the following:

(i) audited consolidated financial statements of OKH Group for the financial year ended

30 June 2012; and

(ii) audited consolidated financial statements of Sinobest Group for the financial year

ended 31 December 2011, audited consolidated financial statements of Sinobest

Group for the six months period ended 30 June 2012 and its comparative period ended

30 June 2011 which have been used to derive the unaudited consolidated financial

information of Sinobest Group for financial year ended 30 June 2012 in order to be

co-terminus with the financial year end of OKH of 30 June.

For the purposes of illustrating the financial effects of the Proposed Transactions, the

financial effects have been prepared based on, inter alia, the following assumptions:

(a) the financial effects of the Proposed Transactions on the earnings and EPS of the

Group are computed assuming that the Proposed Transactions were completed on 1

July 2011;

(b) the financial effects of the Proposed Transactions on the NTA and gearing of the Group

are computed assuming that the Proposed Transactions were completed on 30 June

2012;

(c) the proforma financial effects of the Proposed Transactions have taken into account

the requirements for reverse acquisition accounting as set out in FRS 103 Business

Combination for the Proposed Acquisition;

(d) the cost of reverse acquisition of the Company by OKH in the form of equity issue to

the owners of the Company has been assumed to be S$0.12 per share for the purpose

of this transaction. The difference between the cost of reverse acquisition and the fair

values of the net assets acquired is accounted as goodwill/negative goodwill. The fair

values of the net assets acquired are assumed to be S$6,532,942 which is equivalent

to the carrying amounts of the net assets of the Company as at 30 June 2012 for the

purposes of preparation of the unaudited proforma consolidated financial information

of the Enlarged Group. This may differ from the fair values of the net assets as at the

actual date of completion of the Proposed Transactions. As the actual

goodwill/negative goodwill will have to be determined at the completion of the

Proposed Transactions, the actual goodwill could be materially different from the

amount derived based on the assumption used;

(e) certain operating expenses of the Group for the 12 months ended 30 June 2012 have

been carved out as these expenses are not expected to be incurred by the Enlarged

Group. These expenses mainly relate to remuneration paid to executive directors of

the Group;

(f) the remaining transaction costs relating to the Proposed Transactions are assumed to

be S$280,000. This may differ from the actual cost at the completion of the Proposed

Transactions; and


58

(g) the issue of 1,026,538,825 new Shares with par value of US$0.09 by the Group in

connection with the Proposed Acquisition is translated using the exchange rate of

US$1 = S$1.23111. This may differ from the actual exchange rate at the completion of

the Proposal Acquisition.

The financial effects stated below are proforma in nature and are for illustrative purposes

only. They are not indicative of the actual financial effects of the Proposed Transactions on

the share capital, EPS, NTA per Share and gearing of the Company.

14.2 Share Capital

Number of

Issued Shares

Issued and

paid up share

capital

(S$)

Share capital of Sinobest as at 30 June 2012 110,776,067 16,593,002(1)

Share capital of OKH as at 30 June 2012 6,500,000 6,500,000

Issuance of the Consideration Shares 1,026,538,825 113,740,399(2)

Effect of reverse acquisition accounting (6,500,000) (114,795,772)

After issuance of the Consideration Shares 1,137,314,892 22,037,629

Shares cancelled pursuant to the Proposed Disposal (75,347,433) (11,286,193)

After the Proposed Disposal 1,061,967,459 10,751,436

After the Proposed Share Consolidation 530,983,729 10,751,436

Share capital after the Proposed Transactions 530,983,729 10,751,436

Notes:

(1) Based on the Company’s share capital of RMB82,450,626 and the exchange rate of S$1 = RMB4.969.

(2) Based on 1,026,538,825 Consideration Shares of par value US$0.09 each and the exchange rate of

US$1 = S$1.23111.

Before the

Proposed

Transactions

After the

Proposed

Transactions

Issued and paid up share capital (S$) 16,593,002 10,751,436

Number of issued shares of the Company 110,776,067 530,983,729

14.3 Earnings

S$

Sinobest Group’s profit after tax for the 12 months ended

30 June 2012 433,454(1)

Less: Loss on Proposed Disposal (2,899,227)

Less: Profit after tax of the Operating Subsidiaries arising from the

Proposed Disposal (1,634,751)

Add: OKH Group’s profit after tax for financial year ended

30 June 2012 15,723,636

Add: Negative goodwill arising from the Proposed Acquisition 2,561,506


59

S$

Add: Carve out certain general and administrative expenses not

expected to be incurred by the Enlarged Group 869,170

Less: Remaining transaction costs relating to the Proposed

Transactions (280,000)

Profit after tax for the Enlarged Group for the 12 months ended

30 June 2012 14,773,788

Note:

(1) Based on the Group’s net profit of RMB2,179,000 for the 12 months ended 30 June 2012 and the exchange

rate of RMB1 = S$0.198923. See bases and assumptions 14.1(ii) above.

Before the

Proposed

Transactions

After the

Proposed

Transactions

Profit after tax (S$) 433,454 14,773,788

Number of issued Shares of the Company 110,776,067 530,983,729

Earnings per Share (S$) 0.004 0.028

14.4 NTA

S$

Sinobest Group’s NTA as at 30 June 2012 31,638,345(1)

Add: OKH Group’s NTA as at 30 June 2012 25,612,811

Less: S$1.0 million for Proposed Cash Distribution (1,000,000)

Less: Adjustments for the Proposed Disposal, cancellation of

Undertaking Shareholders’ Shares and effect of reverse acquisition

accounting (23,825,403)

Less: Remaining transaction costs relating to the Proposed

Transactions (280,000)

Enlarged Group’s NTA 32,145,753

Note:

(1) Based on Sinobest Group’s NTA of RMB157,210,934 as at 30 June 2012 and the exchange rate of S$1 =

RMB4.969.

Before the

Proposed

Transactions

After the

Proposed

Transactions

NTA (S$) 31,638,345 32,145,753

Number of issued Shares of the Company 110,776,067 530,983,729

NTA per Share (S$) 0.286 0.061


60

14.5 Gearing

Before the

Proposed

Transactions

After the

Proposed

Transactions

Total borrowings (S$) — 207,198,492(1)

Total equity (S$) 31,638,345(2) 32,145,753

Gearing (times) — 6.45(3)

Notes:

(1) Total borrowings include bank borrowings and finance leases.

(2) Based on the Group’s total equity of RMB157,210,934 as at 30 June 2012 and the exchange rate of

S$1 = RMB4.969.

(3) Gearing is calculated as total borrowings divided by total equity.

14.6 Proposed Change of Financial Year End

The Company’s current financial year end falls on 31 December of each year, whereas

OKH’s financial year end falls on 30 June of each year. The Company intends to change its

financial year end from 31 December to 30 June so as to coincide its financial year end with

that of OKH after completion of the Proposed Transactions. The change of financial year

end is subject to the approval of Shareholders for the Proposed Acquisition and of the New

Board, and upon such change, the first financial period of the Enlarged Group will be from

1 January 2013 to 30 June 2013.


61

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62

The details of the Enlarged Group are as follows:

Name

Date and

country of

incorporation

Principal

place of

business

Total issued

and paid-up

capital

Principal

businesses

Effective

percentage

held by the

Company

after

Completion

(%)

Sinobest

Technology

Holdings Ltd.(1)

17 June 2004

Bermuda

PRC US$9,969,846.03 Investment

holding

—

OKH

Holdings

Pte. Ltd.

16 February

1998

Singapore

Singapore S$6,500,000 General

contractors

100

OKH

Management

Pte. Ltd.

3 December

2008

Singapore

Singapore S$2,000 Property

development

100

OKH

Development

Pte. Ltd.

5 May 2010

Singapore

Singapore S$2,000,000 Property

development

85(2)

Foxx Media

Pte. Ltd.

1 December

2009

Singapore

Singapore S$10,000 Advertising

and related

activities

100

Green

Synergy

Pte. Ltd.

4 February

2010

Singapore

Singapore S$1,000,000 Building

construction

activities

100

OKH

(Woodlands)

Pte. Ltd.

11 October

2011

Singapore

Singapore S$1,000,000 Real estate

developers

100

Notes:

(1) After the completion of the Proposed Acquisition, the name of the Company will be changed to “OKH Global Ltd.”

(2) A shareholders’ agreement was entered into between OKH, OKH Development Pte. Ltd. and ZACD

(Woodlands) Pte. Ltd. (“ZACD”) on 5 April 2012 (as superseded and varied by a further shareholders’

agreement dated 11 October 2012) to provide for the rights and obligations of the parties following ZACD

becoming a shareholder of OKH Development Pte. Ltd., holding a 30% share of the assets and liabilities

relating to the business of the development and sale of the units of the industrial property at Land Parcel

824, Woodlands Avenue 12, Singapore (Parcel 3), notwithstanding ZACD having a shareholding interest of

15% of the issued and paid up capital of OKH Development Pte. Ltd.

Notwithstanding that ZACD is a shareholder of OKH Development Pte. Ltd., ZACD’s participation in the

business, assets, liabilities and any other affairs of OKH Development Pte. Ltd. shall be confined and/or

limited to only the business relating to the development and sale of the units of the industrial property at

Land Parcel 824, Woodlands Avenue 12, Singapore (Parcel 3). In this regard, it is agreed that OKH and

ZACD will be entitled to 70% and 30% shares respectively of the profits, assets and liabilities relating to

industrial property at the Land Parcel 824, Woodlands Avenue 12, Singapore (Parcel 3), provided that ZACD

maintains its ownership of 15% of the issued and paid-up capital of OKH Development Pte. Ltd.

The sole shareholder of ZACD is ZACD Investments Pte. Ltd., whose shares are held by Sim Kain Kain

(49%) and Yeo Choon Guan (51%), both of whom are unrelated third parties.


63

The details of the associated company, assuming the Proposed Transactions have been

completed as at the Latest Practicable Date, are as follows:

Name

Date and

country of

incorporation

Principal

place of

business

Total issued

and paid-up

capital

Principal

businesses

Effective

percentage

held by the

Company

after

Completion

(%)

OKH DLRE

JV Pte. Ltd.

21 June 2012

Singapore

Singapore S$10,000 Electricity

generation by

other sources

and related

activities

50(1)

Note:

(1) The remaining 50% issued share capital is held by Daily Life Renewable Energy Pte. Ltd., which is the joint

venture partner. Daily Life Renewable Energy Pte. Ltd. is not related to the directors or Substantial

Shareholders of OKH Group.

None of the above subsidiaries and associated companies of the Enlarged Group is listed

on any stock exchange.

Save as disclosed above, OKH Group has no other subsidiaries and associated companies.

Save as disclosed in this Circular, none of the Directors, Substantial Shareholders and/or

the Proposed Directors has any interest, whether direct or indirect, in the Enlarged Group

or any of the subsidiaries and associated companies of the Enlarged Group.

Save as disclosed in this Circular, as at the Latest Practicable Date:

(i) no person has, or has the right to be given, an option to subscribe for any Shares;

(ii) there is no arrangement which involves the employees of the Company, the directors

or employees of a subsidiary or an associated company of the Company in the capital

of the Company that involves the issue or grant of options or Shares or any other

securities in the Company, and no option to subscribe for Shares has been granted to,

or was exercised by, any Director or the CEO of the Company; and

(iii) none of the Shares are held by or on behalf of the Company.

There is no shareholding qualification for the Directors of the Company in its Bye-Laws.

There are no restrictions on the free transferability of the Shares which are fully paid-up

under the Bye-Laws.


64

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67

15.3 Vendor

The Vendor (who will become the Controlling Shareholder and a Director of the Company

after Completion) and the number of Consolidated Shares which he will offer pursuant to

the Proposed Compliance Placement (assuming that the Vendor receives valid

acceptances of the General Offer in respect of 100% of the total number of issued Shares

(other than Shares already held by the Vendor and his concert parties) from all existing

Shareholders) are set out below:

Number of

Consolidated Shares

held immediately

before the Proposed

Compliance

Placement

Number of

Consolidated Shares

offered pursuant to

the Proposed

Compliance

Placement

Number of

Consolidated Shares

held immediately

after the Proposed

Compliance

Placement

Bon Ween Foong 530,983,729 132,746,000 398,237,729

16. MATERIAL CONTRACTS OF THE SINOBEST GROUP

Save as disclosed below, there are no contracts, not being contracts entered into in the

ordinary course of business of the Group, entered into by the Group within the two years

preceding the date of this Circular that are or may be material:

(i) an investment transfer agreement dated 15 July 2011 between a subsidiary of the

Company, Guangzhou Sinobest Information Technology Ltd., and Neusoft Corporation

for the sale of the Sinobest Group’s 8.33% equity interest in Beijing LBS Social

Insurance Information Technology Co., Ltd for a cash consideration of RMB1,585,375,

as announced by the Company on 15 August 2011;

(ii) the SPA made between the Company and the Vendor in relation to the Proposed

Acquisition at the Purchase Consideration, as varied by the supplemental agreements;

and

(iii) the Disposal Agreement between (a) the Company; and (b) the Undertaking

Shareholders for the sale of the entire shareholding held by the Company in its

Operating Subsidiaries.

17. MATERIAL LITIGATION OF THE SINOBEST GROUP

Save as disclosed below, the Sinobest Group is not engaged, in the last 12 months before

the date of this Circular, in any litigation or arbitration either as plaintiff or defendant or

claimant or respondent which may have a material effect on its financial position or

business, and the directors of the Sinobest Group have no knowledge of any proceedings

pending or threatened against the Sinobest Group or any facts likely to give rise to any

litigation, claims or proceedings which may have a material effect on the financial position

or the business of the Sinobest Group.

In November 2007, Guangzhou Sinobest Information Technology Ltd (“Guangzhou

Sinobest”), a 99%-owned subsidiary of the Company, entered into two supply contracts

with Harbin Synjones Electronic Co., Ltd. (哈爾濱新中電子股份公司) (“Harbin Synjones”),

pursuant to which Guangzhou Sinobest agreed to supply certain IT equipment to Harbin


68

Synjones at a sale consideration of RMB633,000 and US$225,687.50 respectively.

Guangzhou Sinobest had delivered the IT equipment to Harbin Synjones and pursuant to

the terms and conditions of the supply contracts, Harbin Synjones is required to settle all

outstanding amounts due by 22 April 2008. On 3 June 2011, Guangzhou Sinobest through

its solicitors issued a letter of demand to Harbin Synjones seeking full settlement of the

outstanding sum of RMB633,000 and US$135,687. As at the Latest Practicable Date, the

Sinobest Group has not received any response from Harbin Synjones. The outstanding

amount is not expected to have a material effect on the Sinobest Group’s financial position

as the Company has made full provision for the outstanding amount in FY2011.

18. EXPENSES

The estimated expenses (based on circumstances known to the Company as at the Latest

Practicable Date, which may change) for the Proposed Transactions which will be borne by

the Company in the event the Proposed Acquisition is completed including fees of the

Financial Adviser, the IFA and the legal advisers to the Company, are set out below:

S$

Professional fees and charges 330,000

19. INTERESTS OF EXPERTS AND OTHER RELATIONSHIPS

No expert named in this Circular is employed on a contingent basis by OKH Group, or has

a material interest, whether direct or indirect, in the shares of OKH Group, or has a material

economic interest, whether direct or indirect, in OKH Group, including an interest in the

success of the Proposed Transactions.

Save for the fact that Asiasons WFG Capital is the Financial Adviser to the Company in

respect of the Proposed Acquisition and the Proposed Disposal, Asiasons WFG Capital

does not, in the reasonable opinion of the Directors, have any material relationship with the

Company and OKH Group.

20. ADVICE OF THE IFA IN RELATION TO THE PROPOSED DISPOSAL

Provenance Capital Pte. Ltd. has been appointed as the IFA to advise the Independent

Directors in relation to the Proposed Disposal.

The IFA’s opinion is extracted and set out in italics as follows:

In arriving at our opinion, we have taken into account the following key considerations which

we consider to be pertinent in our assessment of the Proposed Disposal:

(a) rationale for the Proposed Disposal;

(b) the Proposed Selective Share Cancellation being a term of the settlement for the

Proposed Disposal;

(c) assessment of the disposal consideration for the Proposed Disposal;

(d) assessment of the value of the Proposed Selective Share Cancellation; and

(e) other relevant considerations.


69

Having considered all of the above and the information available to us as at the Latest

Practicable Date, we are of the opinion that the financial terms of the Proposed Disposal are

on normal commercial terms and are not prejudicial to the interests of the Company and the

Independent Shareholders.

A copy of the letter from the IFA in relation to the Proposed Disposal is reproduced in

Appendix A of this Circular.

21. AUDIT COMMITTEE STATEMENT

The Audit Committee having reviewed, inter alia, the rationale for, the terms and conditions

and the financial effects of the Proposed Acquisition and the Proposed Disposal and having

considered the advice of the IFA in relation to the Proposed Acquisition and the Proposed

Disposal, is of the unanimous opinion that the terms of the Proposed Disposal are on

normal commercial terms and are not prejudicial to the interests of the Company and the

Shareholders.

22. INTERESTS OF DIRECTORS AND SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, the interests of Directors and/or the Substantial

Shareholders of the Company in the issued and paid-up share capital as recorded in the

Company’s Register of Directors’ Shareholdings and the Register of Substantial

Shareholders are as follows:

Direct interest Deemed interest

Directors

No. of

Shares %

No. of

Shares %

Zou Gefei(1) 576,000 0.52 56,271,433 50.80

Li Ziqiang — — — —

Yu Zengping — — — —

Tan Soo Kiat — — — —

Tan Swee Ling — — — —

Ong Soon Teik — — — —

Substantial Shareholders

(other than Directors)

Jin Changren 18,500,000 16.70 — —

Profit Saver 56,271,433 50.80 — —

Note:

(1) Zou Gefei is deemed to be interested in the Shares held by Profit Saver, as he owns more than 20% of the

issued paid-up share capital of Smart Asia International Limited, which in turn owns more than 20% of the

issued and paid-up share capital of Profit Saver.

Save as disclosed in this Circular, none of the Directors or Substantial Shareholders has

any interest, whether direct or indirect, in the Proposed Transactions.


70

23. RECOMMENDATION OF THE DIRECTORS

Shareholders should note that:

(a) Shareholders’ approval for Ordinary Resolutions 1 (Proposed Acquisition), 2

(Proposed Increase in Authorised Share Capital of the Company), 3 (Proposed Issue

and Allotment of Consideration Shares) and 4 (Proposed Consolidation) and Special

Resolutions 8 (Proposed Cash Distribution by way of the Proposed Capital Reduction)

and 9 (Proposed Disposal involving the Proposed Selective Share Cancellation) are

required in order for the Company to effect and complete the Proposed Acquisition and

are therefore inter-conditional upon one another;

(b) Ordinary Resolutions 5 (Proposed Change of Auditors of the Company), 6 (Proposed

Termination of the Sinobest Employee Share Option Scheme) and 7 (Proposed

Adoption of the OKH Performance Share Plan) and Special Resolution 10 (Proposed

Change of Name of the Company) are subject to and contingent upon the passing of

the Ordinary Resolutions 1, 2, 3 and 4 and Special Resolutions 8 and 9, which are

matters to be effected following the Proposed Acquisition; and

(c) The approval of Special Resolution 11 (Proposed Amendment to the Bye-Laws) is not

subject to or contingent upon passing of any other resolutions set out in the Section

entitled “Notice of Special General Meeting” of this Circular.

Save as provided below, having considered and reviewed, amongst other things, the terms

of the SPA and the Disposal Agreement, the rationales for and the financial effects of the

Proposed Transactions, the advice of the IFA in relation to the Proposal Disposal, the risk

factors and other investment considerations, and all other relevant facts set out in this

Circular, the Directors are of the opinion that all the resolutions as set out in the Section

entitled “Notice of Special General Meeting” of this Circular are in the best interests of the

Company. Accordingly, they recommend that Shareholders vote in favour of all the

resolutions to be proposed at the SGM, notice of which has been set out in the Section

entitled “Notice of Special General Meeting” of this Circular.

Zou Gefei, who is a Director, is also one of the Undertaking Shareholders in respect of the

Proposed Disposal, and is therefore interested in the Proposed Disposal. Each of the

Directors, Li Ziqiang and Yu Zengping, has an interest of 19.9% respectively in Profit Saver,

an Undertaking Shareholder in respect of the Proposed Disposal, and is therefore

interested in the Proposed Disposal. Zou Gefei, Li Ziqiang and Yu Zengping have

accordingly abstained from making any recommendations on Special Resolution 9 relating

to the Proposed Disposal involving the Proposed Selective Share Cancellation, as well as

Ordinary Resolutions 1, 2, 3 and 4, and Special Resolution 8 which are inter-conditional

upon one another. Zou Gefei, Li Ziqiang, Yu Zengping and their associates shall also

abstain from voting in respect of Special Resolution 9 relating to the Proposed Disposal, as

well as Ordinary Resolutions 1, 2, 3 and 4, and Special Resolution 8 which are

inter-conditional upon one another. Zou Gefei, Li Ziqiang, Yu Zengping and their associates

will also decline to accept appointment as proxies for Shareholders to vote on Ordinary

Resolutions 1, 2, 3 and 4, and Special Resolutions 8 and 9 which are inter-conditional upon

one another unless the Shareholder concerned shall have given specific instructions in his

proxy form as to the manner in which his votes are to be cast in respect of such resolutions.

As the existing executive Directors (namely Zou Gefei, Li Ziqiang and Yu Zengping) are

participants and are therefore interested in the Sinobest Employee Share Option Scheme,

they have accordingly abstained from making any recommendation on Ordinary Resolution

6 proposed in the Notice of SGM.


71

As all the Directors would be eligible to participate in, and are therefore interested in the

OKH Performance Share Plan, they have accordingly abstained from making any

recommendation on Ordinary Resolution 7 proposed in the Notice of SGM.

24. SPECIAL GENERAL MEETING

The SGM, notice of which has been set out in the Section entitled “Notice of Special

General Meeting” of this Circular, will be held at 1 Robinson Road, #18-00 AIA Tower,

Singapore 048542 on 23 January 2013 at 10.00 a.m for the purpose of considering and, if

thought fit, passing the resolutions (with or without modifications) set out in the Notice of

SGM.

25. ACTION TO BE TAKEN BY SHAREHOLDERS

If a Member is unable to attend the SGM and wishes to appoint a proxy to attend and vote

on his behalf, he should complete, sign and return the attached proxy form in accordance

with the instructions printed thereon as soon as possible and, in any event, so as to reach

the Company’s Singapore share transfer agent at Tricor Barbinder Share Registration

Services at 80 Robinson Road, #02-00, Singapore 068898 no later than 10.00 a.m on 21

January 2013. The completion and return of the proxy form by a Member will not prevent

him from attending and voting at the SGM in person if he so wishes.

Depositors will not be regarded as Members entitled to attend the SGM and to speak and

vote thereat. A Depositor who wishes to attend and vote at the SGM, and whose name is

shown in the records of CDP as at a time not earlier than 48 hours prior to the time of the

SGM, may attend as CDP’s proxy. A Depositor who is an individual and who wishes to

attend the SGM in person need not take any further action and can attend and vote at the

SGM without the lodgement of any proxy form. A Depositor who is an individual and is

unable to attend the SGM personally and wishes to appoint his nominee or nominees to

attend and vote on his behalf, and a Depositor which is a corporation, must complete, sign

and return the proxy form attached to this Circular (“Depositor Proxy Form”) in accordance

with the instructions printed thereon as soon as possible and, in any event, so as to reach

the office of the Company’s Singapore share transfer agent at Tricor Barbinder Share

Registration Services at 80 Robinson Road, #02-00, Singapore 068898 no later than 10.00

a.m on 21 January 2013, 48 hours prior to the time of the SGM. The completion and return

of a Depositor Proxy Form by an individual depositor does not preclude him from attending

and voting in person at the SGM if he so wishes, in place of his nominee or nominees.

Shareholders who are eligible to participate in the OKH Performance Share Plan should

abstain from voting on Ordinary Resolution 7 proposed at the SGM, and should not accept

nominations as proxies unless specific instructions have been given in the proxy instrument

by the independent Shareholders appointing them on how they wish their votes to be cast

for Ordinary Resolution 7 at the SGM.

26. RESPONSIBILITY STATEMENT BY THE DIRECTORS

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, the Company and its subsidiaries, and the

Directors are not aware of any facts the omission of which would make any statement in this

Circular misleading.


72

Where information in the Circular 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 the Circular in its proper form and context.

27. RESPONSIBILITY STATEMENT BY THE FINANCIAL ADVISER

To the best of the Financial Adviser’s knowledge and belief, this Circular constitutes full and

true disclosure of all material facts about the Proposed Transactions, the Company and its

subsidiaries, and the Financial Adviser is not aware of any facts the omission of which

would make any statement in the document misleading.

28. MISCELLANEOUS

28.1 Consents

(a) The Reporting Accountants has given and has not withdrawn its written consent to the

issue of this Circular with the inclusion herein of the (i) Independent auditors’ report on

the consolidated financial statements of OKH Holdings Pte. Ltd. and its subsidiaries

for the financial year ended June 30, 2010, 2011 and 2012; and (ii) Compilation report

on the unaudited proforma consolidated financial information of the Enlarged Group

set out in Appendix B and Appendix C of this Circular respectively, in the form and

context in which they appear in this Circular and references to its name in the form and

context in which it appears in this Circular and to act in such capacity in relation to this

Circular.

(b) The IFA has given and has not withdrawn its written consent to the issue of this

Circular with the inclusion herein of the IFA’s advice in respect of the Proposed

Disposal set out in Appendix A of this Circular and references to its name in the form

and context in which it appears in this Circular and to act in such capacity in relation

to this Circular.

(c) The Valuer has given and has not withdrawn its written consent to the issue of this

Circular with the inclusion herein of the Valuation Certificates set out in Appendix D of

this Circular and references to its name in the form and context in which it appears in

this Circular and to act in such capacity in relation to this Circular.

(d) The Financial Adviser, the Legal Adviser on Singapore Law concerning the Proposed

Transactions, the Legal Adviser to the Company on Bermuda Law concerning the

Proposed Transactions, the Legal Adviser to the Company on Singapore Law, the

Auditors to the Company and the Principal Banker of OKH Group have each given and

have not withdrawn their respective written consents to the issue of this Circular with

the inclusion herein of their respective names and references to their respective

names in the forms and context in which they respectively appear in this Circular and

to act in such respective capacities in relation to this Circular.

28.2 Documents Available for Inspection

The following documents may be inspected at the registered office of the Company during

normal business hours for a period of six months from the date of this Circular:

(a) Memorandum and Bye-Laws;


73

(b) The letter from the IFA as set out in Appendix A of this Circular;

(c) Independent auditors’ report and the consolidated financial statements of OKH

Holdings Pte. Ltd. and its subsidiaries for the financial year ended June 30, 2010, 2011

and 2012 as set out in Appendix B of this Circular;

(d) Compilation report on the unaudited proforma consolidated financial information of the

Enlarged Group as set out in Appendix C of this Circular;

(e) Valuation Certificates as set out in Appendix D of this Circular;

(f) Rules of the OKH Performance Share Plan as set out in Appendix F of this Circular;

(g) The letters of consent referred to in Section 28.1 entitled “Consents” of this Circular;

(h) The material contracts referred to in Section 16 entitled “Material Contracts of the

Sinobest Group” of this Circular;

(i) The Service Agreements;

(j) The audited consolidated financial statements of the Group for the six months ended

30 June 2012; and

(k) The audited financial statements of the Operating Subsidiaries for the six months

ended 30 June 2012.

29. ADDITIONAL INFORMATION

Your attention is drawn to the additional information set out in the Letter to Shareholders

from OKH and the Appendices to this Circular.

Yours faithfully

For and on behalf of Sinobest Technology Holdings Ltd.

Zou Gefei

Executive Chairman and Chief Executive Officer


74

31 December 2012

To: The Shareholders of Sinobest Technology Holdings Ltd.

Dear Sir/Madam

PROPOSED ACQUISITION BY SINOBEST TECHNOLOGY HOLDINGS LTD. OF OKH GROUP

A. INTRODUCTION

This letter has been prepared by the directors of OKH Group, on behalf of OKH Group, for

inclusion in this Circular. Except where the context otherwise requires, capitalised terms

defined in this Circular shall apply throughout this letter.

B. INFORMATION OF OKH GROUP

B.1 History

Incorporated as a limited exempt private company in 1998, OKH started as a local

contractor undertaking renovation projects and minor A&A works. Recognising the

potential for specialised building construction and A&A works in land-scarce Singapore, the

Vendor acquired the entire shareholding of OKH to pursue related business opportunities

in 2000. OKH then had a BCA grading under CW01 — General Building with a financial

grading of C3 which enabled it to handle public sector projects with a contract value of

below S$100,000 at that time. It was then handling minor construction and A&A works for

Town Councils and PUB.

Over time, OKH upgraded its BCA grading and obtained a BCA grading under CW01 —

General Building with a financial grading of C1 by 2004 which enabled it to handle public

sector projects with a contract value of below S$3.0 million at that time. Since then, OKH

has acquired valuable experience, knowledge and capabilities in construction and project

management which enabled OKH Group to subsequently venture into building construction

and A&A works projects.

The year 2004 marked a significant milestone for OKH as it secured two contracts from

Singapore Turf Club with a total value of approximately S$3.93 million to carry out interior

fit-out works to off-course betting centres.

In early 2005, OKH upgraded its BCA grading to CW01 — General Building with a financial

grading of B1, which qualified OKH Group to undertake public sector projects with a higher

contract value of not more than S$30.0 million, which was based on the prevailing BCA

guidelines applicable at that time.

In 2005, OKH formed a joint-venture partnership with Dai-Dan Co., Ltd.

(“Dai-Dan OKH JV”) to provide A&A works to commercial spaces at various MRT stations

with a total contract value of S$67.33 million for SMRT. On 1 November 2011, OKH entered

into a disposal agreement with Bon Ween Foong, to dispose of its 50% interest in Dai-Dan

OKH JV at a consideration of S$3,546,432.46 taking effect from 30 June 2011. The reason

for the disposal was because the projects which were undertaken under the Dai-Dan OKH

JV have been substantially completed. The consideration was arrived at on a willing-buyer

and willing-seller basis after taking into account, inter alia, the capital contribution of

Dai-Dan OKH JV and the outstanding amount due from Dai-Dan OKH JV to OKH. The sale

consideration had been settled in full as at 1 November 2011 by way of setting-off against

part of the outstanding advances owed by OKH to Bon Ween Foong.


75

After being involved in numerous SMRT projects over the years, OKH established a

long-standing working relationship with SMRT. Subsequently in 2011, OKH was engaged

by SMRT to undertake the provision of A&A works to commercial spaces at Woodlands

MRT station for a contract value of S$17.45 million.

With its growing track record for working on “fast-track” projects, OKH managed to secure

projects of larger contract values in recent years which included the expansion works for

the Singapore Budget Terminal, a three-year contract with the Singapore Grand Prix Pte

Ltd and A&A works to the Re! Hotel located at Chin Swee Road.

As part of OKH Group’s strategy to reduce its reliance as a contractor carrying out projects

for third parties, OKH decided to diversify its business by venturing into property

development in Singapore in 2008.

With a strategic focus on property development, OKH acquired its first industrial and

commercial property development project in March 2008 and contracted it to an unrelated

third party to carry out the construction. The project was located in Tuas and comprised 23

units of terrace factories, one canteen and a three-storey ancillary dormitory, and was

known as “Seatown Industrial Centre”. OKH successfully sold all the units in the

development project (except for the dormitory) in December 2009 despite the global

economic downturn. Seatown Industrial Centre received its TOP in March 2010.

In December 2009, OKH incorporated a subsidiary known as Foxx Media Pte. Ltd. with a

view to providing advertising panels and installation services, which are ancillary or

complementary to its provision of A&A works. It was then exploring the opportunity to

supply advertising panels and installation services to the commercial spaces at the MRT

stations in Singapore. The revenue of Foxx Media Pte. Ltd. since its incorporation till the

Latest Practicable Date has not been significant.

In February 2010, OKH Group incorporated another subsidiary known as Green Synergy

Pte. Ltd. with a view to exploring opportunities in the renewable energy sector by

leveraging on OKH Group’s core capabilities in procurement and construction. To this end,

Green Synergy Pte. Ltd. has sourced solar panels from the PRC and supplied them to

customers in Australia on a project basis, which amounted to approximately S$1.0 million

in revenue in FY2010.

In April 2010, OKH won a tender for an industrial property site at Yishun Avenue 6 located

near Yishun MRT station, with a bid of S$27.20 million. Constructed by OKH Group’s

construction division, the industrial property development project is known as “A’Posh

BizHub” and will incorporate aesthetic and eco-friendly features. A total of 220 flatted

factory units and a staff canteen were launched for sale in February 2011 and as at the

Latest Practicable Date, 100% of the total saleable area of the project has been sold.

A’Posh BizHub received its TOP in June 2012.

On 3 March 2011, OKH formed a consortium arrangement with Daily Life Renewable

Energy Pte. Ltd. (an unrelated third party) (“DLRE”) to design, build, own, operate and

maintain an intelligent micro-grid infrastructure with clean and renewable energy resources

on Pulau Ubin (the “OKH-DLRE Consortium”) for the Energy Market Authority of

Singapore (“EMAS”). On 1 July 2011, the OKH-DLRE Consortium entered into a project

agreement with EMAS where the OKH-DLRE Consortium agreed to undertake the design,

procurement, construction, equipping, testing, commissioning, ownership, operations and

maintenance of the micro-grid. The proposed micro-grid will be powered by bio-diesel,


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which is derived from waste vegetable oil, and solar energy during the first phase of the

project, which is expected to complete in 2012, barring unforeseen circumstances. The

OKH-DLRE Consortium is a 50:50 joint venture between OKH and DLRE which is entitled

to design, build, own and operate the micro-grid in Pulau Ubin for a period of 10 years.

In June 2011, OKH won a tender for an industrial property site at Land Parcel 818,

Woodlands Avenue 12, Singapore (Parcel 2) with a bid of S$84.24 million and the industrial

property development project is known as “Primz BizHub”.

Subsequently in September 2011, OKH won a tender for an industrial property site at the

adjacent Land Parcel 824, Woodlands Avenue 12, Singapore (Parcel 3) with a bid of

S$71.84 million and the industrial property development project is known as “Woodlands

Horizon”. Situated near Admiralty MRT station, both land parcels, which are adjacent to

each other, can be developed into a maximum GFA of up to 1.06 million sq ft of “Business

1 Zoning” development, to be used mainly for clean and light industries. Construction for

“Woodlands Horizon” has commenced in September 2012 and OKH expects the

construction to be completed by 2014, barring unforeseen circumstances.

On 5 April 2012, OKH entered into a shareholders’ agreement with OKH Development Pte.

Ltd. and ZACD (as superseded and varied by a further shareholders’ agreement dated 11

October 2012) to provide for the rights and obligations of the parties whereby ZACD

becoming a shareholder of OKH Development Pte. Ltd. to hold 30% share of the assets

and liabilities relating to the development of the industrial property at Land Parcel 824,

Woodlands Avenue 12, Singapore (Parcel 3).

On 31 May 2012, OKH was granted an option to purchase from an unrelated third party to

acquire an industrial property site at 5 Pioneer Sector Lane, Singapore 628323, for a

consideration of S$8.38 million. Subsequently, on 28 June 2012, OKH exercised the option

to purchase to acquire the industrial property site and completion of the acquisition is

scheduled to take place on 15 February 2013. The industrial property site will be used by

OKH for fabrication and assembly works for structural steel, windows, aluminium fittings,

curtain walling, glass panels, advertisement panel assembly, and storage of construction

material. On 21 November 2012, OKH obtained the approval in-principle from the Jurong

Town Council (“JTC”) for the assignment of the industrial property site at 5 Pioneer Sector

Lane.

In July 2012, OKH won a tender for an industrial property site at Tai Seng Link with a bid

of S$23.3 million. Strategically located near Tai Seng MRT station and roads such as Upper

Paya Lebar Road and Airport Road, the site is located within the Paya Lebar iPark, which

will be developed into a lifestyle park. With a permissible gross plot ratio of 2.5, the site can

be developed into a maximum GFA of up to 116,680 sq ft of “Business 2 Zoning”

development, to be used only for clean and light industries.

In recognition of OKH Group’s commitment and improvements in making their workplaces

safer, OKH Group received the bizSAFE STAR and bizSAFE Partner award from the WSH

Council in 2009. Please refer to Section B.7 entitled “Safety Policy” in the Letter to

Shareholders from OKH of this Circular for more details.

As a testament to OKH’s growth and performance, OKH Group was a recipient of the

Singapore SME 500 Company in 2007, 2008, 2009 and 2010, 50 Fastest Growing

(Singapore 1000/SME 500 Company) in Singapore in 2008, the 2011 Enterprise 50

Awards, Singapore SME 1000 Company and the Prominent Award of the Year (SME1 Asia

Awards Singapore) in 2011 and the 2012 Enterprise 50 Awards and Singapore SME 1000

Company in 2012. Please refer to Section B.8 entitled “Awards and Accolades” in the Letter

to Shareholders from OKH of this Circular for more details.


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The registration number of OKH Holdings Pte. Ltd. is 199800758E and its telephone and

facsimile numbers are (65) 63450544 and (65) 63445811 respectively.

B.2 Business Overview

OKH Group is primarily involved in the business of property development and the provision

of construction services and large-scale A&A works in Singapore. Please refer to Section

B.4 entitled “Projects” in the Letter to Shareholders from OKH of this Circular for

information on the details of projects undertaken by it.

In its business of property development, the current focus of OKH Group is on industrial

and commercial developments in Singapore. This is a natural progression from its

construction business as it has the capabilities to design, build and manage its

developments internally.

As a contractor, OKH Group’s principal activity is the provision of construction services and

large-scale A&A works to a wide range of clientele from both the private and public sectors

in Singapore. Since 2000, OKH has been upgrading its BCA grading and is now a

registered builder under the category CW01 — General Building with a financial grading of

B1. This allows OKH to tender for any building or construction projects in the public sector

with a project value up to S$40.0 million, based on the prevailing BCA guidelines.

In addition, OKH Group also derives rental income from its investment properties, of which

the bulk of the rental income is derived from its dormitory at Seatown Industrial Centre.

Please refer to Section B.11 entitled “Properties and Fixed Assets” in the Letter to

Shareholders from OKH of this Circular for more details.

B.3 Principal Activities

(A) Property Development

Currently, OKH Group’s property development activities are primarily focused on industrial

and commercial developments in Singapore. With a focus on aesthetic and eco-friendly

features, this is intended to cater to the demands of the expanding industrial and

manufacturing industries in Singapore.

The initial stage of OKH Group’s property development work includes identifying viable and

suitable opportunities for investment and sourcing for potential land use rights for

acquisition and development. OKH Group’s property development team would regularly

seek potential sites for development, through both private and state-owned lands. Prior to

the acquisition or the submission of tender for the bidding of the land, OKH Group will carry

out feasibility studies to evaluate the viability, profitability and more importantly the risks

involved in the development project. Considerations on the acquisition of the necessary

approvals from the relevant authorities and financing are also factored into the feasibility

process. Please refer to Section B.5 entitled “Work Process” in the Letter to Shareholders

from OKH of this Circular for more details.

At the same time, OKH Group is able to leverage on its knowledge, experience and

competencies in the construction business as it has an in-house design team with

capabilities in civil and structural works, mechanical and electrical works, and building and

construction compliance matters.

OKH procures building materials directly from local and overseas suppliers for both its

property development and construction business. This provides economies of scale in

procurement, which in turn translates to costs savings for the property development and

construction projects undertaken by OKH Group.


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With its in-house construction capabilities, OKH Group can turn to its construction division

for the necessary civil and structural engineering and construction expertise when planning

its property development. This enables OKH Group to gain a competitive edge as early as

the stage of identifying suitable land parcels for property development and conceptualising

its development plans.

(B) Construction Services

OKH Group undertakes projects for building construction and large-scale A&A works for

both private and public sector clients in Singapore. OKH Group has undertaken a wide

range of projects for the private and public sectors. Please refer to Section B.4 entitled

“Projects” in the Letter to Shareholders from OKH of this Circular for the types of projects

undertaken by it as a contractor.

The scope of work generally ranges from excavation, piling, constructing sub-structures

and superstructures, architectural works, aluminium cladding and curtain walling,

mechanical and electrical works, interior fitting-out works, external works and landscaping.

Sub-contractors are appointed based on experience and track records to ensure that the

deadlines and quality standards are strictly adhered to.

Over the years, OKH Group has leveraged on the expertise gained from its past

construction projects and expanded its range of services to offer more comprehensive

services. With more experience and capabilities, OKH Group progressively expanded its

customer base to harness new business opportunities. OKH Group also seeks to upgrade

its BCA grading to enable it to tender for public construction projects of higher contract

values.

As a testimony to its reputation and track record, OKH Group has received numerous

accreditations and awards. Please refer to Section B.8 entitled “Awards and Accolades” in

the Letter to Shareholders from OKH of this Circular for more details.

B.4 Projects


(i) Completed Project

Seatown Industrial Centre

OKH Group acquired a leasehold industrial property located in Tuas, Singapore in

March 2008 for S$5.2 million. OKH Group had contracted the construction of the

project to an unrelated third party contractor to ensure that it would meet the

scheduled timelines. This was because OKH Group was unable to provide sufficient

manpower and resources as it had to fulfil various third party contracts at that time.

With an estimated total GFA of 274,352 sq ft, the industrial development was named

Seatown Industrial Centre, which comprises 23 units of terrace factories, one canteen

and a three-storey ancillary dormitory.

Listed as “Business 1 Zoning” under the URA guidelines, the tenure of this leasehold

property is 60 years commencing from 24 October 2000. The Seatown Industrial

Centre development was launched for sale in July 2009 and was fully sold in

December in the same year, except for the three-storey ancillary dormitory which was

retained by OKH Group for investment purposes. Construction commenced in

December 2008 and Seatown Industrial Centre received its TOP in March 2010.


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A’Posh BizHub

OKH Group placed a top bid of S$27.2 million for a leasehold industrial site located

at 1 Yishun Industrial Street 1 and was awarded the site by URA in April 2010. Listed

as “Business 1 Zoning” under the URA guidelines, the tenure of this leasehold

property is 60 years commencing from 26 August 2010.

Located near to Yishun MRT station, A’Posh BizHub has an estimated total GFA of

381,928 sq ft and is easily accessible from the Seletar Expressway, Tampines

Expressway, and the Central Expressway.

Built by OKH Group’s construction division, A’Posh BizHub is a flatted factory

development that incorporates aesthetic and eco-friendly features. Some of such

features are green landscaping within and around the development, use of recycled

bio-fertilisers for landscaping, usage of building materials and paint which promotes

energy saving and use of water fittings which promote efficiency in water usage. In

recognition of the development’s green technologies and practices, BCA awarded

A’Posh BizHub the BCA Green Mark “GOLD AWARD” on 7 March 2012.

As at the Latest Practicable Date, 100% of the total saleable area of the project has

been sold. Construction commenced in October 2010 and A’Posh BizHub received its

TOP in June 2012.

(ii) Projects Under Development

Primz BizHub

In line with plans to expand its property development business, OKH Group placed a

top bid of S$84.24 million for a leasehold industrial site located at Land Parcel 818,

Woodlands Avenue 12, Singapore (Parcel 2) and was awarded the site by URA in

June 2011. Listed as “Business 1 Zoning” under the URA guidelines, the tenure of this

leasehold property is 60 years commencing from 27 September 2011.

Located near to Admiralty MRT station, the industrial development project is known as

“Primz BizHub” and is expected to have an estimated total GFA of 552,003 sq ft.

As at the Latest Practicable Date, 100% of the total saleable area of the project has

been sold. Construction commenced in March 2012 and TOP is expected to be

granted by June 2013, barring unforeseen circumstances.

Woodlands Horizon

In September 2011, OKH Group placed a top bid of S$71.84 million for another

leasehold industrial site located at Land Parcel 824, Woodlands Avenue 12,

Singapore (Parcel 3) and subsequently, OKH Group was awarded the site by URA in

September 2011.

This leasehold industrial site is adjacent to OKH Group’s industrial property site

located at Land Parcel 818, Woodlands Avenue 12 Singapore (Parcel 2). Listed as

“Business 1 Zoning” under the URA guidelines, the tenure of this leasehold property

is 60 years commencing from 29 February 2012.

Located near Admiralty MRT station, plans are underway for the development and the

proposed development is expected to have an estimated total GFA of 503,714 sq ft.


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The marketing for the sale of the project commenced in September 2012. The

proposed development will be built by OKH Group’s construction division.

As at the Latest Practicable Date, approximately 51.6% of the total saleable area of

the project has been sold. Construction commenced in September 2012 and TOP is

expected to be granted by June 2014, barring unforeseen circumstances.

Tai Seng Link

In June 2012, OKH Group placed a top bid of S$23.3 million for a leasehold industrial

property site located at Tai Seng Link and was awarded the site by JTC in July 2012.

The tenure of this leasehold property is 30 years commencing from 9 October 2012.

Strategically located near Tai Seng MRT station and major roads such as Upper Paya

Lebar Road and Airport Road, the site is located within the Paya Lebar iPark, which

will be developed into a lifestyle park. With a permissible gross plot ratio of 2.5, the

30-year leasehold site can be developed into a maximum GFA of up to 116,681 sq ft

of “Business 2 Zoning” development, to be used only for clean and light industries.

Under the conditions of the lease, the development is due for completion within 60

months from the date of acceptance of tender by JTC. In addition, OKH Group will not

be allowed to strata sub-divide the development in the first 10 years after the project

is completed, and if approval for strata subdivision of the development is granted by

the relevant authorities after the first 10 years, the GFA of each strata sub-divided unit

shall not be less than 150 sq m.

Plans are underway for the development and construction is expected to commence

in 2013, barring unforeseen circumstances.

A summary of OKH Group’s property development projects is as follows:

Description of projects Own Construction

Third Party

Construction

Seatown Industrial Centre u

A’Posh BizHub u

Primz BizHub u

Woodlands Horizon u

Tai Seng Link u


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The construction projects undertaken by OKH Group in the last five years and up to the

Latest Practicable Date are set out below:

Description of Project Client

Approximate

Contract

Value(1)

(in millions)

Completion

Date

Renovation and fitting-out works to

Off-Course Betting Centre at

Serangoon Avenue 3

Singapore Turf Club S$1.33 2008

Conversion work of two existing

spelling stables to racing stables

(Block 401 and 402 at

Kranji Turf Club)


Change of use from existing

boarding house to hotel and

A&A works to existing 12-storey

building on Lot 00436K TS 22

at 175A Chin Swee Road

Whitehouse

Holdings Pte Ltd

S$11.77 2008

Formula One — Singapore Grand

Prix — Engineering Site Office,

SGP Site Office, transportable

buildings and civil works

(3-year contract with different

completion dates)

Singapore Grand

Prix Pte. Ltd.

S$6.78 2009-2011

Change of use from shop to

Off Course Betting Centre and

A&A works to unit at Bukit Merah


A&A works to commercial spaces of

Eunos, Simei, Tampines and

Pasir Ris MRT stations (pursuant

to a joint-venture project with

Dai-Dan Co., Ltd.)

SMRT S$8.53 2009

Expansion works to Singapore

Budget Terminal

CAAS S$15.87 2010

Change of use from existing school

to office and A&A works to existing

1 Block of three-storey building and

5 Blocks of one-storey building on

Lot 98980I(PT), 155M & 234T TS 27

at 10 Winstedt Road (Newton

Planning Area)

Allbest Property

Management

Pte Ltd

S$3.16 2010


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Approximate

Contract

Value(1)

(in millions)

Completion

Date

A&A works to commercial spaces of

Bukit Batok, Bukit Gombak, Kallang,

Kembangan, Lavender and

Tanah Merah MRT stations

(pursuant to a joint-venture project

with Dai-Dan Co., Ltd.)

SMRT S$14.98 2011

A&A works to commercial spaces

of Expo, Kranji, Redhill,

Paya Lebar, Aljunied, Bugis and

Tiong Bahru MRT stations (pursuant


Dai-Dan Co., Ltd.)

SMRT S$10.64 2011


of Choa Chu Kang MRT station

(pursuant to a joint-venture project

with Dai-Dan Co., Ltd.)

SMRT S$9.28 2011


of Bedok, Dover, Lakeside,

Pasir Ris, Queenstown and

Tampines MRT stations (pursuant


Dai-Dan Co., Ltd.)

SMRT S$23.90 2011

Erection of a two-storey detached

dwelling house with a basement

and an attic at

17A King Albert Park

Private individual S$3.80 2011

New erection of a two-storey

bungalow house with attic, basement

and swimming pool at

24 Jervois Road

Private individual S$3.40 2012

Erection of a block of a five-storey

terrace factory at

No. 14 Tagore Lane

CHC Construction

Pte Ltd

S$1.49 2012

Note:

(1) The approximate contract value excludes the value of works carried out pursuant to variation orders.


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In addition to the above completed projects, the significant on-going projects undertaken

by OKH Group as at the Latest Practicable Date include:


Approximate

Contract

Value(1)

(in millions)

Estimated

Completion

Date

Proposed construction of

ACE The Place Community Club

using design and

build procurement for

People’s Association

People’s

Association

S$7.49 During the

first quarter

of 2013

Proposed additional bicycle

racks at existing MRT stations

— Batch 1

Land and Transport

Authority

S$0.74 During the

first quarter

of 2013

Design, build, own, operate and

maintain an intelligent micro-grid

infrastructure with clean and

renewable energy source on

Pulau Ubin

Energy Market

Authority of

Singapore

S$4.09 During the

first quarter

of 2013


of Woodlands MRT station

(Project awarded solely to

OKH Holdings Pte. Ltd.)

SMRT S$17.45 During the

first quarter

of 2013

Jurong East MRT station

(Advertisement panels)

SMRT S$0.19 During the

first quarter

of 2013

Note:

(1) The approximate contract value excludes the value of works carried out pursuant to variation orders.

In addition to the construction work done for commercial and industrial projects described

above, OKH Group has also undertaken construction projects for residential houses for

private individuals with project values ranging from approximately S$1.15 million to S$3.91

million. OKH Group currently intends to undertake new construction projects. Please refer

to Section F.3 entitled “Strategies and Future Plans” in the Letter to Shareholders from

OKH of this Circular for information relating to OKH Group’s future plans to grow its

construction business.


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B.5 Work Process


The following is a diagrammatical depiction of a typical OKH Group property development

project in Singapore:

Site Identi�cation

Feasibility Study and

Financial Analysis

Land/Property Acquisition

Marketing and Sales

Construction

TOP and Hand-Over

Maintenance Works after

Hand-Over

1. Site Identification

OKH Group sources for potential sites for development from announcements of public

tender, the government land sales programme, private tenders or sales through its network

of property agents and business contacts who recommend or source for land sites with the

potential for development on its behalf.


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2. Feasibility Study and Financial Analysis

In assessing the viability of a development site, OKH Group’s property development team

would typically undertake a feasibility study to evaluate the viability and profitability of the

proposed development project as well as the associated risks by considering various

factors including but not limited to the purchase price of the site, availability of financing,

accessibility of the location, target group of buyers, necessary approvals from the relevant

authorities, market conditions, supply and demand, direct competition and current

government regulation and policies.

Concurrently, OKH Group engages other external professional consultants to provide data

analysis and other assessments to supplement its feasibility study.

3. Land/Property Acquisition

Upon satisfactory results of a feasibility study, OKH Group will then attempt to acquire the

site through a property agent or submit a tender for its property developments based on a

pre-determined price range. Upon the acquisition of the land, a team of professional

consultants, including architects, registered surveyors, mechanical and electrical

engineers, and civil and structural engineers will be engaged to conceptualise the design

and layout of the development project based on feedback from its in-house design team

and property development team. These professional consultants will then provide support

to its property development team to apply for and obtain the necessary approvals,

permissions, licences and building plan clearances from the relevant authorities.

4. Marketing and Sales

Generally, OKH Group aims to launch the development project as soon as possible in order

to shorten the overall development cycle. The exact timing of launch however depends on

market sentiment, among other things. Its management will be responsible for formulating

the marketing strategy for the project, while external consultants will be engaged to

execute the necessary marketing and sales activities, including media advertising, and the

design, production and distribution of promotional materials.

5. Construction

Where possible, OKH Group will construct its property development projects with its

in-house construction capabilities. OKH Group believes that by keeping construction costs

to a minimum, sharing overheads and procurement costs, it would be able to achieve

synergies and this will usually translate into cost savings. The management and project

team of OKH Group will manage and supervise the progress of each construction stage of

the development project closely, with the assistance of the architect and other professional

consultants engaged, to ensure that the building standards are met and that the project will

be completed within set budget and scheduled timeline.

6. TOP and Hand-Over

Once construction works are completed, an application will be submitted to BCA for the

TOP to be issued in respect of the development. Upon the issue of TOP, OKH Group will

then arrange for the purchasers to take possession of the individual units.

7. Maintenance Works after Hand-Over

Sale and purchase agreements would typically include a defects liability period, typically

12 months from the contractual date for the purchasers to collect vacant possession in

respect of the properties (approximately two weeks within the TOP date), during which

OKH Group will be responsible for making good any defects within its scope of work in the

premises.


86


The following is a diagrammatical depiction of a typical OKH Group construction project in

Singapore:

Sourcing for Business

Opportunities

Tender Costing and

Submission

Award of Contract

Construction

Variation Orders and

Hand-Over of Project

Assembling of

Project Team

Appointment of

Sub-Contractors and

Suppliers

Maintenance Works after

Hand-Over


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1. Sourcing for Business Opportunities

OKH Group secures its building and upgrading projects through open tenders for public

sector projects or closed/invitation tenders for private sector projects. Information on open

tenders is generally available via tender notices in newspapers and industrial publications.

Participation in closed tenders is at the invitation of either the developers or their appointed

project consultants based on their initial internal assessment of qualified building

contractors which meet their requirements for the relevant project.

Other than the above, the network of property agents and business contacts of OKH Group

periodically recommend prospective clients and project consultants to them.

2. Tender Costing and Submission

In preparation for a tender submission, the tender committee of OKH Group, led by its

project director, will first ascertain its difficulty level and risk involved and that it has

sufficient resources and expertise to execute and complete the project.

For private sector projects, its tender committee will assess the credit-worthiness of the

developer before proceeding with further preparations for tender submission. The tender

committee will consist of personnel from the project department, contracts department and

construction and engineering department, all of whom will review the relevant documents

to understand the specific requirements of the project and will clarify any technical or legal

ambiguities with the developer or its appointed consultant. After putting together the tender

proposals, the tender committee will consult the CEO before the final tender price is

submitted.

Generally, the internal costing and budgetary estimates are compiled by obtaining

quotations from relevant selected suppliers and sub-contractors based on their track

records and price competitiveness. In order to ensure that its tender is competitive, all

technical and contractual ambiguities with the developer or its appointed consultants are

resolved prior to tender submission. Generally, the contract value is fixed. However, in

some of its projects, there are provisions for OKH Group to pass on cost fluctuations for

certain construction materials.

3. Award of Contract

Construction contracts are typically awarded, on average, within three months after the

close of tender. For private sector projects, contracts are normally awarded only after a

comprehensive presentation by its tender committee and after several rounds of interviews

and clarifications with the developers and their consultants. Depending on the projects and

the prevailing issues, the whole process leading to the award of a contract may extend to

more than six months from the submission of the tenders.

4. Assembling of Project Team

Upon the award of a contract, OKH Group will assemble a project team, comprising the

project director, project manager, site supervisors, safety and health supervisors,

engineers, mechanical and electrical coordinators, quantity surveyors and draftsmen from

its construction department to manage the project on a full-time basis.

Site inspections and regular meetings would be held with various parties involved in the

project to, amongst others, monitor the progress of the project, manage and co-ordinate

the work of all parties, deploy the supply of all building materials and the usage of plant and

machinery, ensure adherence to the internal budget and contract specifications and

enforce safety and security procedures at the worksite.


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5. Appointment of Sub-Contractors and Suppliers

After OKH Group has been notified of the award of a contract, its contracts department and

project manager will analyse the building requirements and prepare a sourcing list detailing

all the materials to be procured and sub-contract works to be awarded. These will be

adhered to strictly to ensure that the required materials and works are procured on

schedule. Wherever possible, contracts will be signed with sub-contractors on a lump sum

basis for certainty and avoidance of quantity disputes and discrepancies in scope of works

at a later stage.

Appropriate sub-contractors will be selected based on their capabilities and track records

relevant to the scale and complexity of the project to ensure that they have sufficient

experience and financial resources to complete the project within the stringent deadlines

and quality standards.

At the negotiation meetings, the contract manager will be present to ensure that all

technical details and completion requirements are included in the scope of works prior to

an award to prevent potential disputes at a later stage.

The construction contract between the developer and OKH Group could specify that the

developer is to nominate the sub-contractor for certain sub-contracting services or the

supplier for certain building materials. In such an instance, OKH Group will not be exposed

to any fluctuations of the costs for such sub-contracting services or prices for such building

materials as these will be borne by the developer itself. Please refer to Section D entitled

“Risk Factors” in the Letter to Shareholders from OKH of this Circular which highlights the

risk of cost overruns and increases in costs for which OKH Group is exposed to.

6. Construction

Construction is generally divided into three main components: sub-structure works which

are undertaken first, super-structure works which are undertaken subsequently and

mechanical and electrical works.

Sub-structure works includes piling and the construction of pile caps, ground and

basement beams and slabs. Super-structure works comprises the construction of upper

storey beams, columns, floor slabs and walls, mainly through pre-cast components

although cast-in-situ are also employed.

Mechanical and electrical works are done concurrently as the super-structure is completed

floor by floor. These works include the installation of elevators, air-conditioners, electrical

works, sanitary and plumbing works and security systems. Thereafter, the finishing

architectural works such as tiling, plastering and painting are carried out. During the

construction process, the project manager or designated staff shall ensure that the

completed works meet specified requirements for the project.

7. Variation Orders and Hand-Over of Project

During the course of construction, OKH Group may be required to perform variation orders

for additional works not forming part of the original contract specifications or to carry out

variations to the original specifications. As these are outside the scope of the original

contract, the variation orders have to be separately documented and acknowledged by

either the developer or its appointed project consultant and the contract value separately


89

negotiated. To safeguard its interest, OKH Group will as far as possible carry out theseworks only upon the developer’s or its appointed project consultant’s instructions. Forworks which are urgent, OKH Group will write to the developer to confirm their instructionsbefore carrying out the works. When the project is contractually completed, OKH Group willhand-over the project to the developer and the architect will issue the relevant completiondocuments to contractually document the completion of the project.

8. Maintenance Works after Hand-Over

Construction contracts would typically include a defects liability period, typically 12 monthsafter completion of the project, during which OKH Group will be responsible for makinggood any defects found in the completed building. During the defects liability period, OKHGroup’s customers will typically retain up to 2.5% of the contract sum as retention sum forthe entire duration of the defects liability period. OKH Group’s clients (typically the propertydevelopers) will also continue to retain the performance bond that was provided to them atthe commencement of the construction project till the end of the defects liability period.

B.6 Quality Assurance

OKH Group places strong emphasis on quality control to ensure that the quality of itsprojects comply with relevant regulations and to maintain its reputation and marketstanding. It has obtained the following accreditations:

Accreditations Year Awarded by

OHSAS 18001:2007 Certificate of

Registration (Occupational Health

and Safety Management System) for

building construction services

2006 Anglo Japanese American Registrars

ISO 9001:2008 Certificate of

Registration (Quality Management

System) for building construction

services


ISO 14001:2004 Certificate of

Registration (Environmental

Management System) for building

construction services


With regard to its property development projects in Singapore, quality management beginswith OKH Group’s in-house construction team and project management team. In addition,OKH Group’s property development projects, namely A’Posh Bizhub, Primz Bizhub andWoodlands Horizon adopt the Construction Quality Assessment System (CONQUAS) byBCA to ensure the quality of these property development projects.

To ensure the quality of its property development and construction projects, OKH Groupensures that its sub-contractors, architects and other building professionals have therelevant experience and proven track records. At each stage of the construction up to thehanding over of the completed building, OKH Group conducts regular inspections to ensurethat each stage is constructed according to the building specifications, qualityrequirements, prescribed procedures and methods.

Lam Wee Yeow is OKH Group’s Executive Director (Projects) and leads its construction

division. He is assisted by various project managers of the construction division. As the

project director, Lam Wee Yeow’s role is to oversee and review the construction services


90

or projects to ensure that they have complied with OKH Group’s quality standards. The

project managers’ role is to ensure that the construction works conform to the approved

quality procedure, method statement, preparation of shop drawings, selection of materials,

sequence of work and method of protection. The Executive Director (Projects) will also visit

the project sites to ensure that works are being executed properly. The Executive Director

(Projects) will also be involved in the project hand-over stage to ensure that the completed

project has met all the quality requirements before the hand-over.

For the last three financial years ended 30 June 2012 and up to the Latest Practicable

Date, OKH Group has yet to receive any significant or major complaints from its clients

regarding material defects in the completed projects.

B.7 Safety Policy

OKH Group takes a keen interest in the environmental, health and safety concerns at its

work place and work sites. In accordance with the requirements of OHSAS 18001:2007,

OKH Group has established a set of environmental, health and safety management

policies for consistent application across all projects and departments.

These are designed to cover environmental issues and occupational health safety hazards

which OKH Group can control and manage. It also includes a commitment to continual

improvement, accident reduction and the prevention of pollution, as well as a commitment

to meet relevant legal, regulatory and other requirements.

OKH Group’s environmental, health and safety management policies are as follows:

1. Providing and maintaining a work place that is free from recognised safety, health,

and environmental hazards to protect personnel from injuries/illnesses and property

from accidental damage.

2. Protection of health, safety and the environment will be the first consideration in the

operation of the business.

3. Ensure that each employee is adequately trained and familiarised with the relevant

statutory requirements, codes of safe work practice and OKH Group’s environmental,

health and safety procedures in order to carry out his work safely.

4. Each employee is expected to comply with the safety, health and environment

standards.

5. Ensure equipment and materials are maintained in a safe working condition. Provide

guidelines for the safe use for handling, storage and transport of articles and

substances.

6. Provision of personal protective equipment and apparel to equip the employee in

carrying out his work safely.

7. To instill and promote environmental, health and safety consciousness in every

employee in OKH Group. Taking steps to ensure that environmental, health and safety

messages are disseminated to all employees, sub-contractors as well as all visitors

and vendors who are at the work place and work sites.


91

8. Ensure proper control, usage, storage and transportation of hazardous or toxic

materials to prevent injuries to employees and accidental release or spillages to the

environment.

9. Each employee should take personal responsibility to prevent injury to himself as well

as to his fellow colleagues.

10. Remain committed to a continuous improvement process that enables all employees

to perform to their full potential concerning safety, health and environmental matters.

11. Ensure risk assessment is performed for all works with established safety and health

precautions and is effectively disseminated to the workforce to mitigate or reduce to

an acceptable level the occurrence of accident and contracting of occupational

diseases.

During the period under review, OKH Group has not encountered any major accidents

which have resulted in serious injury or death, in connection with their property

development and construction projects, except for a fatal accident involving an employee

of a third party contractor involved in the construction of Seatown Industrial Centre.

OKH Group was awarded the bizSAFE STAR by the WSH Council in 2009. In addition,

OKH Group has been conferred the title of the WSH Council Partner in 2009 for its

commitment and effort to maintain safety at the workplace.

Please refer to Section B.8 entitled “Awards and Accolades” in the Letter to Shareholders

from OKH of this Circular for more information and details of its other certifications.

B.8 Awards and Accolades

At the Latest Practicable Date, the awards and accolades which OKH Group has received

are set out below:

Awards and Accolades Year Awarded by

BCA Green Mark

BCA Green Mark Gold Award

(The BCA Green Mark Scheme is an

initiative to drive Singapore’s

construction industry towards more

environmentally-friendly buildings)

2012 BCA

Small-to-Medium-Enterprise

(“SME”)

2012 Enterprise 50 Award 2012 KPMG and The Business Times

Singapore SME 1000 Company 2012 DP Information Group (“DP”)

Singapore SME 1000 Company 2011 DP

Prominent Award of the Year 2011

(SME1 Asia Awards Singapore)

2011 APF Group


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Awards and Accolades Year Awarded by

2011 Enterprise 50 Awards 2011 KPMG and The Business Times



50 Fastest Growing (Singapore

1000/SME 500 Company)

2008 DP



bizSAFE

bizSAFE Partner Certificate

The bizSAFE Partner recognises

bizSAFE Partners who have been

proactive and committed in bringing

SMEs onboard the bizSAFE

programme by incorporating safety as

part of their business model (for

example having bizSAFE Level 3 as a

criteria in procurement contracts)

2009 WSH Council

bizSAFE STAR

The bizSAFE STAR is specially

designed for SMEs that have tapped

on the WSH Council programme

bizSAFE to improve their WSH

systems and processes

2009 WSH Council

B.9 Sales and Marketing

Property Development

Before the launch of its property development projects, OKH Group usually engages the

services of specialised commercial and industrial property agencies to carry out marketing

and advertising activities of its property development projects. OKH Group will be

responsible for formulating the marketing strategy of the project, while these external

agencies and consultants will work together to plan and execute sales and marketing

activities, such as media advertising, the production and distribution of brochures, flyers,

as well as other promotional materials. Sales and marketing agents from such agencies

also handle the sales of OKH Group’s property developments through showrooms and

occasionally site visits.

Construction Services

OKH Group obtains construction projects based on its participation in open and invited

tenders for both public and private sector projects respectively. Most of the time, OKH

Group secures its construction projects via public tenders, referrals from existing clients,

consultants and business contacts.


93

For public sector projects, OKH Group currently has a BCA grading under the category

CW01 — General Building with a financial grading of B1 which allows it to tender for public

sector projects with a contract value of not more than S$40.0 million. Information on open

tenders is available by way of notices either published in the newspapers and/or in the

Government Electronic Business website.

For private and invited tenders, these invitations are made by prospective clients or

consultants who have short-listed OKH Group after conducting an assessment of its

capabilities, track record and financial strength.

B.10 Production Facility

OKH Group does not own or use any production facility as it is currently not engaged in any

production activities.

B.11 Properties and Fixed Assets

OKH Group currently owns the following properties:

Location Tenure

GFA

(sq ft)

Use of

property Encumbrances

701 Sims Drive

#02-06

LHK Building

Singapore 387383

Estate In Fee

Simple

4,941 Office use Mortgage in favour

of DBS

701 Sims Drive

#02-05

LHK Building

Singapore 387383

Estate In Fee

Simple

3,143 Office for

lease

Mortgage in favour

of DBS

701 Sims Drive

#02-04

LHK Building

Singapore 387383

Estate In Fee

Simple

2,282 Office for

lease

Mortgage in favour

of DBS

701 Sims Drive

#02-07

LHK Building

Singapore 387383

Estate In Fee

Simple

2,260 Office use Mortgage in favour

of DBS

701 Sims Drive

#02-02

LHK Building

Singapore 387383

Estate In Fee

Simple

2,110 Office for

lease

Mortgage in favour

of DBS

69H Tuas South

Avenue 1

Seatown Industrial

Centre

Singapore 637509

60 years leasehold

estate commencing

on 24 October 2000

77,920 Dormitory

for lease

Mortgage in favour

of UOB


94

Location Tenure

GFA

(sq ft)

Use of


5 Pioneer Sector

Lane

Singapore

628323(1)

10 years leasehold

estate commencing

on 16 August 2008

39,451 For

fabrication

and

assembly

works

—

Note:

(1) This industrial property was acquired from an unrelated third party in June 2012 but the acquisition has notbeen completed pending the approval of JTC and the payment of the balance acquisition price will befunded through a combination of internal resources and bank financing. On 21 November 2012, OKHobtained the approval in-principle from the JTC for the assignment of this industrial property.

As at the Latest Practicable Date, OKH has the following development properties:

Location Tenure

GFA(1)

(sq ft)

Use of


1 Yishun Industrial

Street 1

A’Posh Bizhub

Singapore 768160(2)

60 years leasehold

estate commencing

on 26 August 2010

381,928 Completed

properties

held for sale

to third

parties

Mortgage in

favour of UOB

21 Woodlands Close

Primz BizHub

Singapore 737854(3)

60 years leasehold

estate commencing on

27 September 2011

552,003 Under

development

for industrial

use

Mortgage in

favour of UOB

31 Woodlands Close

Woodlands Horizon

Singapore 737855(4)

60 years leasehold

estate commencing

on 29 February 2012

503,714 Under

development

for industrial

use

Mortgage in

favour of UOB

Tai Seng Link

Singapore(5)

30 years leasehold

estate commencing

on 9 October 2012

116,680 Under

development

for industrial

use

Mortgage in

favour of UOB

Notes:

(1) This refers to the permissible gross floor area as approved by the authorities or gross allowable floor areabased on the gross plot ratio.

(2) As at the Latest Practicable Date, 100% of the total saleable area of the project has been sold.

(3) This land was acquired through a tender process in June 2011 and OKH Group has paid the acquisitionprice for the land in September 2011. The title for the leasehold estate has been issued to OKH Groupfollowing completion of the acquisition.

As at the Latest Practicable Date, approximately 100% of the total saleable area (of approximately 490,576sq ft) of Primz BizHub has been sold for approximately S$202.7 million.

(4) This land was acquired through a tender process in September 2011 and OKH Group has paid theacquisition price for the land in March 2012. The title for the leasehold estate has been issued to OKHGroup following completion of the acquisition.

As at the Latest Practicable Date, approximately 51.6% of the total saleable area (of approximately 502,190sq ft) of Woodlands Horizon has been sold for approximately S$114.7 million.

(5) This land was acquired through a tender process in June 2012 and OKH Group has paid the acquisitionprice for the land in October 2012. The title for the leasehold estate has been issued to OKH Groupfollowing completion of the acquisition. The GFA of 116,680 sq ft refers to the maximum allowable grossfloor area of the project which is currently under development.


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Based on the valuation certificates issued by the Valuer, these properties had an aggregate

market value of S$252.3 million as at 30 June 2012. The aggregate market value is

inclusive of the three properties under development where their valuation is based on land

value. The report from the Valuer and the valuation certificates of the above properties can

be found in Appendix D of this Circular.

OKH Group currently leases the following properties to third parties and the brief

particulars are set out below:

Location Tenure

Approximate

leased area

(sq ft)

Use of

Property

Gross

rental/month Tenant

69H Tuas

South

Avenue 1

Singapore

637509

Three years

commencing

from

1 October

2010 to

30 September

2013

77,920 Dormitory

use

S$111,000 Andiappan

Vijayakumar

trading as

Siga

Solutions

701 Sims

Drive #02-05

LHK Building

Singapore

387383

Two years

commencing

from 1 June

2011 to

31 May 2013

3,143 Office use S$3,500 Alliancz

International

Pte Ltd(1)

Note:

(1) Please refer to Section I entitled “Interested Person Transactions” in the Letter to Shareholders from OKHof this Circular for further details of this transaction and other interested person transactions with AllianczInternational Pte Ltd.

OKH Group currently leases the following property from third party and the brief particulars

are set out below:

Location Tenure

Approximate

leased area

(sq ft) Use of Property

Gross

rental/month Lessor

Simpang

Lodge 2,

2C Yishun

Avenue 7

Singapore

768930

One year

commencing

from

1 January

2012 to

31 December

2012

Not

applicable

Accommodation

for foreign

workers

Not

applicable(1)

Hi-Tek

Construction/

Right

Construction

JV Pte Ltd

Note:

(1) OKH Group had entered into a management agreement with the lessor (Hi-Tek Construction/RightConstruction JV Pte Ltd) to manage and house OKH Group’s workers at Simpang Lodge 2. Instead of amonthly rental based on the total area of the property occupied, a monthly fee payable by OKH Group iscalculated based on the number of workers which the lessor would be required to manage. The amount ofmonthly fee payable by OKH Group will vary depending on the number of workers which are housed atSimpang Lodge 2 monthly.

B.12 Research and Development

The nature of OKH Group’s business does not require it to carry out any research and

development activities.


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B.13 Intellectual Property

OKH Group has applied to the Intellectual Property Office of Singapore to register its

corporate logo, as provided below:

Trademark Class

Country of

registration/

application Duration

Application

Date

36(1)

37(2)

Singapore 10 years with a right to renew

on 12 October 2021

12 October

2011

Notes:

(1) In respect of financing and leasing of real estate developments and buildings.

(2) In respect of advisory services relating to building and construction.

Save as disclosed above, as at the date of this Circular, OKH Group’s business or

profitability is not materially dependent on any other trademarks, copyrights, registered

designs, patents, grant of licences from third parties, new manufacturing processes and

intellectual property rights.

B.14 Seasonality

OKH Group generally does not experience any significant seasonality patterns in its

business activities. The nature of OKH Group’s business activities are conducted on a

project basis and it is required to adhere to its clients’ project work plan.

B.15 Staff

The full-time employees of OKH Group for the past three financial years ended 30 June

2010, 2011 and 2012 are based in Singapore. The functional distribution of full-time

employees of OKH Group as at 30 June 2010, 2011 and 2012 was as follows:

Function FY2010 FY2011 FY2012

Management(1) 4 5 5

Property development 1 1 10

Construction and engineering(2) 117 221 274

Finance and corporate affairs 3 4 7

Human resources and administration 3 3 7

Total full-time employees 128 234 303

Notes:

(1) Management includes Proposed Directors and Proposed Executive Officers.

(2) This excludes site labour provided by OKH Group’s sub-contractors.

OKH Group does not experience any significant seasonal fluctuations in its number of

full-time employees.

The increase in total headcount from FY2010 to FY2011 was mainly due to an increase in

headcount of the construction and engineering department to support OKH Group’s

property development business and the overall increase in its business activities.


97

The increase in total headcount from FY2011 to FY2012 was mainly due to an increase in

headcount of the construction and engineering department and property development

department to support OKH Group’s property development business. In addition, OKH

Group employed more staff in the finance department and administration department to

support the overall increase in business activities.

The employees of OKH Group are not unionised. The relationship between the

management of OKH Group and employees is good and there have been no industrial

disputes with the employees or any work stoppage which affected OKH Group’s operations

since it commenced operations.

B.16 Staff Training

OKH Group carries out on-the-job training which includes quality, safety and procurement

training for its employees who have been assigned to various portfolios. OKH Group also

sponsors its employees to participate in industry-related courses. In general, OKH Group

will send its employees to participate in external courses organised by the MOM and those

relating to building control requirements and regulations. OKH Group also organises safety

training for its employees.

B.17 Insurance

As at the Latest Practicable Date, OKH Group has taken up insurance policies in respect

of the following:

(a) key-man insurance for OKH Group’s Executive Chairman and CEO, Bon Ween

Foong;

(b) group hospitalisation, surgical and outpatient insurance for OKH Group’s employees;

(c) work injury compensation insurance, public liability insurance and contractors’ all risk

insurance in connection with OKH Group’s projects;

(d) fire on assets and any damage caused by force majeure to OKH Group’s properties;

and

(e) all risk insurance for OKH Group’s machinery.

As at the Latest Practicable Date, the Proposed Directors are of the view that the above

insurance policies are adequate for OKH Group’s current operations. However, significant

disruption to OKH Group’s operations as a result of fire or any other causes may still have

a material adverse effect on OKH Group’s results of operations or financial condition. OKH

Group is not insured against business interruption. If such events were to occur, OKH

Group’s business may be materially or adversely affected. The Proposed Directors will

review the insurance coverage of OKH Group from time to time to consider the sufficiency

of its coverage.


98

B.18 Major Suppliers

OKH Group’s major sub-contractors and suppliers are mainly the following:

Supplier

Materials/Services

supplied

As a percentage of purchases

(%)

FY2010 FY2011 FY2012

Tech Decor Pte Ltd General sub-contractor

and building materials

supplier

75.3 28.4 12.7

Lim Sing Piling Pte Ltd Precast reinforced

concrete piling works

0.3 5.5 —

BRC Asia Limited Steel reinforcements and

building materials

0.1 5.6 5.1

Dynamic Polymer

Engineering Pte Ltd

Mechanical and

electrical works

1.9 9.0 —

Speedz Engineering Pte

Ltd

General sub-contractor


supplier

0.3 15.9 17.3

I-Unity Builders Pte Ltd General sub-contractor


supplier

0.2 12.1 0.8

OKH Group’s purchases vary from year to year due to the nature of its project-based

business. OKH Group would purchase and/or engage the services of sub-contractors

and/or suppliers who consistently provide favourable terms with regard to price, quality and

the ability to meet its delivery schedules for that particular project based on competitive

quotes. This approach has accounted for the changes in the percentage of purchases

reflected in the table above.

Save as disclosed above, there is no other sub-contractor or supplier whose sales to OKH

Group accounted for more than 5% of OKH Group’s purchases in the years under review.

Save as disclosed above, OKH Group is not materially dependent on any other contracts

with other suppliers. None of the Proposed Directors, Proposed Executive Officers or

Substantial Shareholders has any interest, direct or indirect, in any of the above suppliers.


99

B.19 Major Customers


OKH Group’s major customers are mainly the following:

As a percentage of

total revenue (%)

Customer Project FY2010 FY2011 FY2012

Hai Sheng Yuan Food

Centre Pte Ltd

Seatown Industrial

Centre

10.1 — —

Cordlife Pte Ltd A’Posh BizHub — — 7.4

Soon Heng Eating

House

A’Posh BizHub — — 5.0

OKH Group’s customers comprise mainly small-medium enterprises and individual

property buyers, and OKH Group’s properties are developed and sold on a project basis.

OKH Group may not generate similar revenue from the same customer in subsequent

years.

(B) Construction

OKH Group’s major customers are mainly the following:

As a percentage of

total revenue (%)

Customer Project details FY2010 FY2011 FY2012

SMRT A&A works to

commercial spaces of

various MRT stations

undertaken by Dai-Dan

OKH JV

13.9 18.0 4.0

Singapore Grand

Prix Pte Ltd

Construction of

engineering site office,

Singapore Grand Prix

site office, transportable

buildings and civil works

of Singapore Formula

One Grand Prix

3.2 14.5 —

Private individual(1) Construction of

residential house

2.9 33.3 0.2

Private individual(1) Construction of

residential house

— 12.4 2.3

Note:

(1) OKH Group has undertaken construction projects for residential houses for private individuals (who areunrelated third parties) with project values ranging from approximately S$1.15 million to S$3.91 million.

Revenue generated by each major customer is subject to (i) the value of projects which

OKH Group secures from them and (ii) the time to completion. OKH Group may not

generate similar projects in terms of size and scope with the same customer in subsequent

years.


100

Save as disclosed above, there is no other customer whose purchases from OKH Group

accounted for more than 5% of OKH Group’s revenue in the years under review.

The Proposed Directors are not aware of any information or arrangement which would lead

to a cessation or termination of the current relationship with any of OKH Group’s major

customers.

Save as disclosed above, OKH Group is not materially dependent on any other contracts

with other customers. None of the Proposed Directors, Proposed Executive Officers or

Substantial Shareholders has any interest, direct or indirect, in any of the above

customers.

B.20 Credit Management

Trade Receivables

The credit policies of OKH Group are managed and administered by OKH Group’s senior

management team which includes the CEO. The collections of OKH Group’s outstanding

receivables are monitored by the finance department.


For OKH Group’s property development business, the payment terms extended to the

purchaser are standardised pursuant to a standard form of sale and purchase

agreement in line with the credit terms generally adopted by the industry in Singapore.

Progress billing milestones for property development, which may not be regular, are

based on the achievement of different stages of the construction as listed in the sale

and purchase agreement. All changes to the terms and conditions in the standard sale

and purchase agreement have to be mutually agreed by both parties. Payment terms

extended to the purchasers of completed properties for which separate titles are

available are generally determined on a willing-buyer and willing-seller basis.

As at 30 June 2012, the trade receivables from OKH Group’s property development

business were approximately S$53.7 million. The trade receivables’ turnover days of

OKH Group for its property development business FY2010, FY2011 and FY2012 are

as follows:

FY2010 FY2011 FY2012

Trade receivables’ turnover

(in days)(1)(2) — — 96


101

Notes:

(1) Trade receivables’ turnover (in days) is computed using the formula:

(Opening balance + closing balance of trade receivables

from property development business) / 2X 365 days

Revenue from property development business

(2) There were no outstanding receivables from property development division for FY2010 becauseSeatown Industrial Centre was completed in FY2010 and all the receivables pertaining to thedevelopment was fully received as at 30 June 2010.

There were no outstanding receivables from property development division for FY2011 as OKH hadonly billed for the first 20% of the purchase price which is conditional upon the signing of the saleand purchase agreement. Generally, the payment for the first 20% will be received from the buyertogether with the signed sale and purchase agreement.

With the TOP of A’Posh BizHub in June 2012, progress billings (issued based on the achievementof different stages of the construction as listed in the sale and purchase agreements) were issuedmore frequently prior to the TOP. This resulted in the increase in receivables, and hence, acorresponding increase in turnover days.

The majority of the outstanding receivables relate to the progress payments from the

property development division. As such, the Proposed Directors do not foresee any

issues with the collection of these outstanding receivables as OKH Group has the

right to repudiate the standard sale and purchase agreement if it does not receive the

outstanding receivables or interest within the stipulated time frame after the due date.


For OKH Group’s construction business, credit terms extended to its customers vary

depending on the size of the transaction or contract. Typical credit terms for its

construction business range from 30 to 60 days. As at 30 June 2012, the trade

receivables from OKH Group’s construction business were approximately S$5.86

million. The trade receivables’ turnover days of OKH Group for its construction

business for FY2010, FY2011 and FY2012 are as follows:

FY2010 FY2011 FY2012

Trade receivables’ turnover

(in days)(1)

452 408 301

Trade receivables’ (excluding

retention monies(2) and unbilled

receivables(2)) turnover (in days)(1)

337 192 29

Notes:

(1) Trade receivables’ turnover (in days) is computed using the formula:

(Opening balance + closing balance of trade receivables

from construction business) / 2X 365 days

Revenue from construction business

(2) Retention monies pertain to amounts that were withheld by its customers for completed constructionprojects (typically for 12 months) and unbilled receivables relate to construction works which havebeen completed but are pending architect’s certification.

In FY2010, the construction business registered trade receivables’ (excluding

retention monies and unbilled receivables) turnover days of 337 days mainly due to

an increase in the amount due from Dai-Dan OKH JV (a joint venture partnership

between OKH and Dai-Dan Co., Ltd.) from S$3.0 million as at 30 June 2009 to S$5.0

million as at 30 June 2010 due to a longer repayment scheme period from Dai-Dan

OKH JV.


102

In FY2011, trade receivables’ (excluding retention monies and unbilled receivables)

turnover days improved from 337 days in FY2010 to 192 days in FY2011 mainly due

to the settlement of the amount due from Dai-Dan OKH JV upon the Group’s disposal

of its interest in the joint venture and assignment of the amount due from the joint

venture of S$3,531,432 to OKH’s director (who is also the Vendor) at a total

consideration of S$3,546,432. The consideration was set-off against previous

advances granted to OKH Group from him.

As at 30 June 2012, OKH Group’s trade receivables amounted to approximately

S$58.1 million, including retention monies of S$0.5 million and accrued receivables of

S$56.3 million. The aging schedule of the balance of OKH Group’s trade receivables

(net of allowances) as at 30 June 2012 is as follows:

Period S$’000

Less than 30 days 56,358

Between 31 and 90 days 1,320

More than 90 days 420

Total 58,098

As at the Latest Practicable Date, approximately 99.6% of the trade receivables (net

of allowances, retention monies and accrued receivables) of OKH Group as at 30

June 2012 have been collected.

Trade Payables

The credit terms extended to OKH Group by its contractors and suppliers vary depending

on, inter alia, its relationship with the contractors and suppliers as well as the size of the

transactions. Typical credit terms granted ranged from 30 days to 60 days. OKH Group’s

trade payables’ turnover (in days) for FY2010, FY2011 and FY2012 were as follows:

FY2010 FY2011 FY2012

Trade payables’ turnover (in days) 68 70 36

Note:

(1) Trade payables turnover (in days) is computed using the formula:

(Opening balance + closing balance of trade payables in

construction segment) / 2X 365 days

Cost of sales

As OKH Group adopts the completion of construction method to recognise its revenue and

costs under the Singapore FRS, the costs of sales to be recognised will be affected by

many factors, including but not limited to the progress of the projects, contract sums and

their profitability. Any changes in these factors will affect the cost of construction services

and correspondingly, the trade payables’ turnover days. Accordingly, the trade payables

turnover days may not be reflective of the actual credit terms.

In FY2010, the construction business registered trade payables’ turnover days was 68

days. This was mainly due to a decrease in trade payables, from S$6.8 million as at 30

June 2009 to S$4.3 million as at 30 June 2010, mainly due to the TOP of Seatown Industrial

Centre in March 2010.


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In FY2011, trade payables’ turnover days increased to 70 days mainly due to slower

repayments during the year. Payables to suppliers decreased marginally from S$4.3 million

as at 30 June 2010 to S$4.2 million as at 30 June 2011.

In FY2012, trade payables’ turnover days decreased from 70 days in FY2011 to 36 days

in FY2012. Despite the increase in cost of sales, mainly due to the construction of A’Posh

BizHub and Primz BizHub, payables to suppliers increased marginally from S$4.2 million

as at 30 June 2011 to S$4.9 million as at 30 June 2012 as OKH Group was able to make

payments in respect of a larger portion of the trade payables.

B.21 Inventory Management

OKH Group generally does not maintain raw materials and inventories in advance so as to

minimise carrying cost. However, from time to time, where they anticipate that the materials

may not be delivered on time, they may maintain some inventory to meet the needs of their

projects.

OKH Group usually purchases raw materials as and when required on a project basis

based on the project budget. In cases where they sub-contract the work for building

projects, the sub-contractor will be responsible for the raw material purchases.

B.22 Licences, Permits and Approvals

As at the Latest Practicable Date, OKH Group holds the following licences, permits and

approvals which are material to its operations:

Workhead Reference Workhead Description Grade Expiry Date

CW01 General building B1 1 January 2013

GB1 General building GB1 16 June 2015

Save as disclosed above, none of the licences which are material to the business and

operations of OKH Group have been suspended or revoked. There are at present no facts

or circumstances which would cause such licences 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 Proposed Directors do not foresee any issue in the renewal of the

aforesaid licenses.

Save as disclosed above, OKH Group does not require any other governmental licences,

permits or approvals in respect of its operations apart from those pertaining to general

business registration requirements.

B.23 Competition

OKH Group operates in a highly competitive industry and is subject to competition from

existing competitors and new entrants in the future.


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OKH Group considers the following to be its main competitors in the property development

business:

(1) KNG Land Pte Ltd;

(2) Soilbuild Group Holdings Ltd; and

(3) Boon Keng Development Pte Ltd.

For its construction business, OKH Group considers the following to be its main

competitors:

(1) Debenho Pte Ltd;

(2) Vigcon Construction Pte Ltd; and

(3) PBT Engineering Pte Ltd.

None of the Proposed Directors, Proposed Executive Officers, or Substantial Shareholders

has any interest, direct or indirect, in any of the above competitors.

B.24 Competitive Strengths

Notwithstanding the competitive environment, the Proposed Directors have identified

several key factors that have and will continue to enable them to compete effectively,

briefly as follows:

Leveraging on its construction expertise to carry out its own property development

projects

OKH Group recognises the synergistic effects of its property development business and its

construction business and OKH Group believes that this enables them to better offer a

comprehensive package of services ranging from site procurement, design and build

services and project management. This complementary model enables OKH Group to

utilise its knowledge and experience gained from its construction projects and develop

effective work plans for its property development projects. With familiarity of the entire

construction cycle, this improves productivity and enables OKH Group to fast track its

development projects. OKH Group also enjoys synergy and savings in costs when

procuring supplies for both its property development and construction business activities.

Capability in handling a wide spectrum of projects

OKH Group has the experience and capability to undertake a diversified range of projects

in the public and private sectors. Over the years, OKH Group has successfully completed

a wide range of construction, addition and alteration, refurbishment and upgrading projects

across various market segments such as the commercial, industrial, hotel, residential and

other sectors. Hence, OKH Group is not overly dependent on a single project category for

its revenue. With an in-house design team, OKH Group is also capable of taking on design

and build/lease projects which provide diversification to its business.


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Experienced and dedicated management team

Led by OKH Group’s CEO, Bon Ween Foong, OKH Group has established good business

relationships with the strength of its delivery track record and high quality standards for its

construction projects. Spearheading the growth and expansion of OKH Group, Bon Ween

Foong has over 12 years of experience in the relevant industries. Its management team

with more than 12 years of industry experience is supported by a team of key executives

who are also experienced and competent in their respective functions.

Established business relationships and extensive network

Over the years, OKH Group has established business relationships and an extensive

network with its partners, suppliers, financiers and consultants in the construction and

property development sectors. This enables the management team to gain ready access

to data and information relating to any new construction project tenders or development

sites which are available for sale.

In addition, OKH Group employs direct procurement strategy for its building materials, thus

ensuring the quality and costs of its properties and construction projects.

B.25 Government Regulations

Save as disclosed below, as at the Latest Practicable Date, OKH Group’s business

operations in Singapore are not subject to any special legislations or regulatory controls

other than those generally applicable to companies and businesses incorporated and/or

operating in Singapore. OKH Group has thus far not experienced any adverse effect on

OKH Group’s business in complying with these regulations. OKH Group’s Directors believe

that OKH Group is not in breach of any laws or regulations applicable to OKH Group’s

business operations in Singapore.

Singapore

The following is a summary of the main laws and regulations of Singapore that are relevant

to its business as at the Latest Practicable Date.

Contractors Registry

The construction industry in Singapore is regulated by BCA, whose primary role is to

develop and regulate Singapore’s building and construction industry. Currently, companies

which carry on business activities in the construction industry are not required to register

with BCA. However, registration in the Contractors Registry maintained by BCA is a

pre-requisite to tendering for projects in the public sector. Presently, there are seven major

categories of registration, some of which are further sub-classified into seven grades,

depending on the category of registration. Registration of a contractor with BCA is

dependent on the contractor fulfilling certain requirements relating to, inter alia, the value

of previously completed projects, personnel resources, and consistent and continuous

good performance record. The grade assigned to each contractor is dependent on its

minimum net worth and paid-up capital.


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OKH Group is currently registered with BCA with a BCA grading of B1 under the category

CW01 for general building. Such B1 grading enables OKH Group to tender for public sector

construction projects of up to S$40.0 million. To maintain OKH Group’s existing B1 grading,

there are certain requirements to be complied with, including but not limited to the

following:

(i) a minimum paid-up capital and minimum net worth of S$3.0 million;

(ii) at least six professionals with the relevant qualifications from universities recognised

by the Professional Engineers Board, Board of Architects or BCA (“RP”) and

professional and technical personnel with the relevant qualifications of which there

must be a minimum of two RP;

(iii) ISO 14000 certification by 1 July 2013;

(iv) a Singapore Accreditation Council credited ISO9001:2008;

(v) an Occupational Health Safety Assessment Series 18000/SS506 Part 1;

(vi) a track record of S$30 million of which S$22.5 million comes from main contracts and

a S$7.5 million single project;

(vii) General Builder Licence Class 1 (GB1); and

(viii) annual submission of financial accounts and certified Value Added Productivity

calculation.

Workplace and Health Safety Measures

Under the MOM’s Workplace Safety and Health Act (Chapter 354A) (“WSHA”), every

employer has the duty to take, so far as is reasonably practicable, such measures as are

necessary to ensure the safety and health of his employees at work. These measures

include providing and maintaining for the employees a work environment which is safe,

without risk to health, and adequate as regards facilities and arrangements for their welfare

at work, ensuring that adequate safety measures are taken in respect of any machinery,

equipment, plant, article or process used by the employees, ensuring that the employees

are not exposed to hazards arising out of the arrangement, disposal, manipulation,

organisation, processing, storage, transport, working or use of things in their workplace or

near their workplace and under the control of the employer, developing and implementing

procedures for dealing with emergencies that may arise while those persons are at work

and ensuring that the person at work has adequate instruction, information, training and

supervision as is necessary for that person to perform his work.

From 1 September 2011, the WSHA has been revised to include amongst others:

(a) imposing duties on the employer, to ensure that the employer has (i) the necessary

expertise for the work that he is engaged for; and (ii) implemented adequate safety

and health measures;

(b) creating a new offence for persons at work who did a negligent act without reasonable

cause; and

(c) broadening the definition of an occupational disease to include any disease directly

attributable to any exposure to any chemical or biological agent.


107

More specific duties imposed by the MOM on employers are laid out in the Workplace

Safety and Health (General Provisions) Regulations 2006 (“WSHR”). Some of these duties

include taking effective measures to protect persons at work from the harmful effects of any

exposure to any bio-hazardous material which may constitute a risk to their health.

Pursuant to the WSHR, the following equipment, amongst others, are required to be tested

and examined by an examiner who is authorised by the Commissioner for Workplace

Safety and Health (“CWSH”) (“Authorised Examiner”), before they can be used in a

factory and thereafter, at specified intervals:

— hoist or lift;

— lifting gears; and

— lifting appliances and lifting machines.

Upon examination, the Authorised Examiner will issue and sign a certificate of test and

examination, specifying the safe working load of the equipment. Such certificate of test and

examination shall be kept available for inspection. Under the WSHR, it is the duty of the

owner of the equipment/occupier of the factory to ensure that the equipment complies with

the provisions of the WSHR and to keep a register containing the requisite particulars with

respect to the lifting gears, lifting appliances and lifting machines. In addition to the above,

under the WSHA, inspectors appointed by the CWSH may, inter alia, enter, inspect and

examine any workplace and any machinery, equipment, plant, installation or article at any

workplace, to make such examination and inquiry as may be necessary to ascertain

whether the provisions of the WSHA are complied with, to take samples of any material or

substance found in a workplace or being discharged from any workplace for the purpose

of analysis or test, to assess the levels of noise, illumination, heat or harmful or hazardous

substances in any workplace and the exposure levels of persons at work therein and to

take into custody any article in the workplace which is required for the purpose of an

investigation or inquiry under the WSHA.

Under the WSHA, the CWSH may serve a stop-work order in respect of a workplace if he

is satisfied that (i) the workplace is in such condition, or is so located, or any part of the

machinery, equipment, plant or article in the workplace is so used, that any process or work

carried on in the workplace cannot be carried on with due regard to the safety, health and

welfare of persons at work; (ii) any person has contravened any duty imposed by the

WSHA; or (iii) any person has done any act, or has refrained from doing any act which, in

the opinion of the CWSH, poses or is likely to pose a risk to the safety, health and welfare

of persons at work. The stop-work order shall direct the person served with the order to

immediately cease to carry on any work indefinitely or until such measures as are required

by the CWSH have been taken to remedy any danger so as to enable the work in the

workplace to be carried on with due regard to the safety, health and welfare of the persons

at work.

Environmental laws and regulations

The Environmental Public Health Act (Chapter 95) (“EPHA”) requires, inter alia, a person,

during the erection, alteration, construction or demolition of any building or at any time, to

take reasonable precautions to prevent danger to the life, health or well-being of persons

using any public places from flying dust or falling fragments or from any other material,

thing or substance. The EPHA also regulates, inter alia, the disposal and treatment of


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industrial waste and public nuisances. Under the EPHA, the Ministry of Environment has

empowered the Director-General of Public Health to serve a nuisance order on the owner

or occupier of the premises on which the nuisance arises. Some of the nuisances which are

liable to be dealt with by the Ministry of Environment and/or its statutory board, NEA,

summarily under the EPHA include any factory or workplace which is not kept in a clean

state and any place where there exists or is likely to exist any condition giving rise, or

capable of giving rise to the breeding of flies or mosquitoes, any place where there occurs,

or from which there emanates noise or vibration as to amount to a nuisance and any

machinery, plant or any method or process used in any premises which causes a nuisance

or is dangerous to public health and safety. The EPHA also requires the occupier of any

construction site to employ a competent person to act as an Environmental Control Officer

in the construction site for the purpose of exercising general supervision within the

construction site of the observance of the provisions of, inter alia, the EPHA.

The Environmental Protection and Management Act (Chapter 94A) seeks to control the

levels of pollution in Singapore by regulating the activities of various industries and

regulates, inter alia, air pollution, water pollution, land pollution and noise control. Under

the Environmental Protection and Management (Control of Noise at Construction Sites)

Regulations, the owner or occupier of any construction site shall ensure that the level of

noise emitted from his construction site shall not exceed the maximum permissible noise

levels prescribed in such Regulations. Further, the owner or occupier of any construction

sites located less than 150 metres from any hospital, home for the aged sick or residential

building is prohibited from carrying out construction work at his construction site during

certain days and time specified in such regulations.

Approval and execution of plans of building works

Under BCA’s Building Control Act (Chapter 29) (“Building Control Act”), no person shall

commence or carry out, or permit or authorise the commencement or carrying out of, any

building works unless the plans of the building works have been approved by the

Commissioner of Building Control (“CBC”) and in the case of structural works, there is in

force a permit granted by the CBC to carry out the structural works. Before an application

to the CBC for the approval of the plans of the building works is made, every person for

whom any relevant building works are or are to be carried out, or the builder of such

building works, shall appoint either a registered architect or professional engineer

(“Qualified Person”) to prepare the said plans in accordance with the Building Control

Regulations 2003, and to supervise the building works. The carrying out of structural

elements and concreting, piling, pre-stressing, tightening of high-friction grip bolts or other

critical structural works of a prescribed class of building works would also require the

supervision of a Qualified Person or a site supervisor appointed by him. Under the Building

Control Act, a builder undertaking any building works shall, inter alia, (i) ensure that the

building works are carried out in accordance with the plans of the building works supplied

to it by the Qualified Person and with any terms or conditions imposed by the CBC in

accordance with the Building Control Act and the Building Control Regulations 2003, (ii)

notify the CBC of any contravention of the provisions of the Building Control Act or the

building regulations in connection with those building works and (iii) within seven days from

the completion of the building works, certify that the new building has been erected or the

building works have been carried out in accordance with the Building Control Act and the

Building Control Regulations 2003 and deliver such certificate to the CBC.


109

The Building Control Regulations 2003 set out certain requirements of the BCA relating to,

inter alia, the design, construction and installation of exterior features. For example, no

person shall, without the permission of the CBC, install any lift in any building; in installing

an air-conditioning unit on the exterior of any building or which projects outwards from any

building, a trained air-conditioning unit installer would have to be engaged to carry out the

installation works relating to the air-conditioning unit; and whenever soil investigation and

determination of the depth of the water table are to be carried out in respect of any building

works, the Qualified Person shall submit the soil investigation reports to the CBC.

If the CBC is of the opinion that any building works, other than structural works, have been

or are carried out in such a manner as (i) will cause, or will be likely to cause, a risk of injury

to any person or damage to any property; (ii) will cause, or will be likely to cause, a total

or partial collapse of any adjoining or other building or street or land; or (iii) will render, or

will be likely to render, any adjoining or other building or street or land so dangerous that

it will collapse or be likely to collapse either totally or partially, he may, by order, direct the

person for whom those building works have been or are being carried out to immediately

stop the building works and to take such remedial or other measures as he may specify to

prevent the abovementioned situations from happening.

Under the Fire Safety Act (Chapter 109A) (“Fire Safety Act”), the person for whom any

proposed fire safety works are to be commenced or carried out in any building shall apply

to the Commissioner of Civil Defence (“CCD”) for approval of the plans of the fire safety

works in accordance with the Fire Safety (Building Fire Safety) Regulations and such

person shall appoint an appropriate qualified person to prepare those plans. No person

shall commence or carry out or permit or authorise the commencement or carrying out of

any fire safety works in any building unless the CCD has approved all the plans of the fire

safety works. Upon completion of any fire safety works, the person for whom the fire safety

works had been carried out shall apply for a fire safety certificate from the CCD in respect

of the completed fire safety works.

Where, in the opinion of the CCD, any fire safety works are carried out or have been carried

out in contravention of the Fire Code, the Fire Safety Act or any regulations made

thereunder, he may by order in writing require (i) the cessation of the unauthorised fire

safety works until such order is withdrawn; (ii) such work or alteration to be carried out to

the unauthorised fire safety works or the building or part thereof to which the unauthorised

fire safety works relate as may be necessary to comply with the Fire Code, Fire Safety Act

or any regulations made thereunder; or (iii) the demolition of the building or part thereof to

which the unauthorised fire safety works relate. Under the Fire Safety Act, no person shall

store or keep, or cause to be stored or kept, any petroleum or flammable material except,

inter alia, under the authority of and in accordance with the provisions of a licence from the

CCD and every condition specified therein, and such licence shall be applied for in

accordance with the Fire Safety (Petroleum and Flammable Materials) Regulations.

Public Sector Standard Conditions of Contract for Construction Works

The Public Sector Standard Conditions of Contract for Construction Works (“PSSCOC”)

was developed by the BCA to enable a common contract form to be used in all public sector

construction projects. The PSSCOC contains terms relating to, inter alia, the general

obligations of the contractor, programme for the works, quality in construction,

commencement of works, suspension of works, time for completion, liquidated damages,

defects, variations to the works, valuation of variations, procedures for claims, indemnity

provisions, insurance, progress payments and final account and settlement of disputes.


110

Employment of Foreign Workers

The availability and the employment cost of skilled and unskilled foreign workers are

affected by the government’s policies and regulations on the immigration and employment

of foreign workers in Singapore. The policies and regulations are set out in, inter alia, the

Employment of Foreign Manpower Act (Chapter 91A) and the relevant Government

Gazettes.

The availability of the foreign workers to the construction industry is regulated by the MOM

through the following policy instruments:

(a) approved source countries;

(b) issuance of work permits;

(c) the imposition of security bonds and levies;

(d) dependency ceilings based on the ratio of local to foreign workers; and

(e) quotas based on Man-Year Entitlements (“MYE”) in respect of workers from Non-

Traditional Sources (“NTS”) and the PRC.

The approved source countries for construction workers are Malaysia, the PRC, NTS and

North Asian Sources (“NAS”). NTS include countries such as India, Sri Lanka, Thailand,

Bangladesh, Myanmar and the Philippines. NAS countries include Hong Kong, Macau,

South Korea and Taiwan.

Before OKH Group is allowed to employ construction workers from the approved source

countries, In-Principle Approvals (“IPAs”) have to be sought for each individual’s work

permit. The foreign worker is required to undergo a medical examination by a registered

Singapore doctor and must pass such medical examination before a work permit can be

issued to him.

For each NAS, NTS or PRC construction worker whom OKH Group has successfully

obtained a work permit, a security bond of S$5,000 in the form of a banker’s guarantee or

insurance guarantee is required to be furnished to the Controller of Work Passes. The

employment of foreign workers is also subject to the payment of levies. With effect from 1

July 2011, the amount of foreign worker levy payable on each basic skilled foreign worker

and NTS employed under the MYE waiver scheme is S$350. The amount of foreign worker

levy payable on each higher skilled foreign worker and NTS employed under the MYE

waiver scheme is S$250 and the amount of foreign worker levy payable on each

experienced foreign worker and NTS exempted from the MYE wavier scheme is S$500.

All foreign workers in the construction sector must attend the Construction Safety

Orientation Course (“CSOC”), a full-day course conducted by various training centres

accredited by MOM’s Occupational Safety & Health Division and obtain a valid CSOC

Pass. The CSOC is aimed to (i) ensure that construction workers are familiar with common

safety requirements and health hazards in the industry; (ii) educate them on the required

measures to safeguard themselves against accidents and diseases; and (iii) ensure that

they are aware of their rights and responsibilities under employment law. Employers must

ensure that the foreign workers take the course within two weeks of their arrival in

Singapore before their work permits can be issued. For foreign workers who have failed the

CSOC, the employer must re-register them for the CSOC as soon as possible. Employers

who fail to ensure that their workers take and pass the CSOC will be barred from applying

for any new work permits for three months, while the affected workers will have their work

permits revoked.


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The dependency ceiling for the construction industry is currently set at a ratio of one

full-time local worker to seven foreign workers. This means that for every full-time

Singapore Citizen or Singapore Permanent Resident employed by a company in the

construction sector with regular full month CPF contributions made by the employer, the

company can employ seven foreign workers.

The MYE allocation system is a work permit allocation system pertaining to the

employment of construction workers from NTS and the PRC. MYEs represent the total

number of foreign workers that each main contractor is entitled to employ based on the

value of the projects or contracts awarded by the developers or owners. At the time of the

MYE application, the balance duration of the project must be at least one month and the

total remaining contract value of the project must be at least S$500,000. To employ NTS

and PRC construction workers, the employer must make an application for MYE, “Prior

Approval” and IPAs for individual work permits. The allocation of MYE is in the form of the

number of “man-years” required to complete a project and only main contractors may apply

for MYE. All levels of sub-contractors are required to obtain their MYE allocation from their

main contractors. A main contractor’s MYE will expire on the completion date of the

relevant project.

Under the work permit conditions, employers are required to provide acceptable

accommodation for their foreign workers. Such accommodation must meet the statutory

requirements set by various government agencies, including NEA, PUB, SCDF and BCA.

A list of approved off-site housing is provided by the relevant approving agencies, namely

URA, Singapore Land Authority, JTC and Housing Development Board.

An employer of foreign workers is also subject to, inter alia, the provisions set out in the

Employment Act (Chapter 91), the Employment of Foreign Manpower Act (Chapter 91A),

the Immigration Act (Chapter 133) and the Immigration Regulations.

Work Injury Compensation

The Work Injury Compensation Act (Chapter 354) (“WICA”), which is regulated by the

MOM, applies to workmen in all industries in respect of injuries suffered by them in the

course of their employment and sets out, inter alia, the amount of compensation they are

entitled to and the method(s) of calculating such compensation. The WICA provides that if

in any employment, personal injury by accident arising out of and in the course of the

employment is caused to a workman, the employer shall be liable to pay compensation in

accordance with the provisions of the WICA.

The WICA provides, inter alia, that, where any person (referred to as the principal) in the

course of its business or for the purpose of his trade or business contracts with any other

person (referred to as the contractor) for the execution by the contractor of the whole or any

part of any work undertaken by the principal, the principal shall be liable to pay to any

workman employed in the execution of the work any compensation which he would have

been liable to pay if that workman had been immediately employed by the principal.

Building and Construction Industry Security of Payment Act

Prior to the introduction of the Building and Construction Industry Security of Payment Act

(Chapter 30B) (“BCISPA”), a construction contract between a main contractor and a

sub-contractor would typically contain a “pay when paid” provision. Such provision would

provide that the liability of the main contractor to pay money owing to the sub-contractor


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is contingent or conditional on payment to the main contractor by a third party of the whole

or part of that money, or make the due date for payment of money owing by the main

contractor to the sub-contractor contingent or conditional on the date on which payment of

the whole or any part of that money is made to the main contractor by the third party. With

the introduction of the BCISPA by the Ministry of National Development, such “pay when

paid” provisions in construction or supply contracts are now rendered unenforceable and

have no effect in relation to any payment for construction work carried out or undertaken

to be carried out, or for goods or services supplied or undertaken to be supplied, under the

contract.

The BCISPA, which is regulated by BCA, confers a statutory entitlement to progress

payments on any person who has carried out any construction work or supplied any goods

or services under a contract. The BCISPA also contains provisions relating to, inter alia, the

amount of the progress payment to which a person who has carried out any construction

work is entitled under a contract, the valuation of the construction work carried out and the

date on which a progress payment becomes due and payable (even where a construction

contract does not provide for such date). In addition, the BCISPA, inter alia, endorses the

following rights:

(i) the right of a claimant (being the person who is or claims to be entitled to a progress

payment) who, in relation to a construction contract, fails to receive payment by the

due date of an amount that is proposed to be paid by the respondent (being the

person who is or may be liable to make a progress payment under a contract to a

claimant) and accepted by the claimant, to make an adjudication application in

relation to the payment claim. The BCISPA has established an adjudication process

by which a person may claim payments due under a contract and enforce payment of

the adjudicated amount;

(ii) the right of a claimant to suspend the carrying out of construction work or supply of

goods or services, and to exercise a lien over goods supplied by the claimant to the

respondent that are unfixed and which have not been paid for, or to enforce the

adjudication as if it were a judgment debt, if such claimant is not paid after it obtains

judgment against the respondent pursuant to an adjudication; and

(iii) where the respondent fails to pay the whole or any part of the adjudicated amount to

a claimant, the right of a principal of the respondent (being the person who is liable

to make payment to the respondent for or in relation to the whole or part of the

construction work that is the subject of the contract between the respondent and the

claimant) to make direct payment of the outstanding amount of the adjudicated

amount to the claimant, together with the right for such principal to recover such

payment from the respondent.

The Proposed Directors confirm that as at the date of this Circular, they have obtained all

necessary approvals and complied with the relevant laws and regulations that would

materially affect its business operations.

B.26 Exchange Controls

Singapore

As at the date of this Circular, 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 Enlarged Group; and (b) the remittance of profits that may affect dividends, interests

or other payments to Shareholders.


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Bermuda

Exchange control in Bermuda is regulated under the Exchange Control Act 1972 of

Bermuda (and regulations made thereunder) and is administered by the Bermuda

Monetary Authority. Generally, any payment by a person resident in Bermuda to or for the

credit of a person resident outside Bermuda will be subject to the prior approval from the

Bermuda Monetary Authority.

Exempted companies are normally designated non-resident for exchange control purposes

and are able to conduct their day-to-day operations free of exchange control formalities.

Such companies are able to pay dividends, distribute capital, open and maintain bank

accounts in any currency and to acquire assets and meet all liabilities without reference to

the Bermuda Monetary Authority.

Issues to and transfers of securities in exempted companies involving non-residents for

exchange control purposes must receive prior approval from the Bermuda Monetary

Authority. However, the Bermuda Monetary Authority has granted to all Bermuda

companies with voting shares listed on an appointed stock exchange (as defined in the

Bermuda Companies Act) a general permission for the issue and subsequent transfer of

any securities of such companies from and/or to a non-resident of Bermuda.

B.27 Additional Information on OKH Group

B.27.1 Share Capital

Save as set out below, there was no changes in the issued share capital of OKH Group in

the three years preceding the Latest Practicable Date:

Date

No. of

shares

issued/

transferred

Purpose of

issue/transfer

Resultant

issued

share

capital

OKH Development Pte. Ltd. 1 June 2012 300,000 Share transfer S$2,000,000

13 January 2012 1,000,000 Capital injection S$2,000,000

23 September 2011 999,000 Capital injection S$1,000,000

5 May 2010 1,000 Capital injection S$1,000

OKH (Woodlands) Pte. Ltd. 17 September 2012 999,000 Capital injection S$1,000,000

11 October 2011 1,000 Capital injection S$1,000

Green Synergy Pte. Ltd. 19 April 2010 990,000 Capital injection S$1,000,000

4 February 2010 10,000 Capital injection S$10,000

Foxx Media Pte. Ltd. 1 December 2009 10,000 Capital injection S$10,000

Save as disclosed above, no shares in, or debentures of, OKH Group had been issued, or

were proposed to be issued, as fully or partly paid for in cash or for a consideration other

than cash, within the three years preceding the Latest Practicable Date.


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B.27.2 Material Contracts

Save as disclosed below, there were no contracts, not being contracts entered into in the

ordinary course of business of OKH Group, entered into by OKH Group within the two years

preceding the date of lodgement of this Circular that are or may be material:

(i) Disposal agreement entered into between Dai-Dan Co., Ltd., OKH and the Vendor

dated 1 November 2011 relating to the sale of OKH’s entire share, interest and rights

in the partnership business to Bon Ween Foong for a purchase consideration of

S$3,546,432.46.

(ii) Shareholders’ agreement entered into between OKH, OKH Development Pte. Ltd. and

ZACD dated 5 April 2012, as superceded and varied by a further shareholders’

agreement dated 11 October 2012 which regulates the rights and obligations amongst

the parties following ZACD becoming a shareholder of OKH Development Pte. Ltd.,

holding 30% shares of the assets and liabilities relating to the business of the

development and sale of the units of the industrial property at Land Parcel 824,

Woodlands Avenue 12, Singapore (Parcel 3) and having a shareholding interest of

15% of the issued and paid up capital of OKH Development Pte. Ltd.

Notwithstanding that ZACD is a shareholder of OKH Development Pte. Ltd., ZACD’s

participation in the business, assets, liabilities and any other affairs of the company

shall be confined and/or limited to only the business relating to the development and

sale of the units of the industrial property at Land Parcel 824, Woodlands Avenue 12,

Singapore (Parcel 3). In this regard, it is agreed that OKH and ZACD will be entitled

to a 70% and 30% share respectively of the profits, assets and liabilities relating to

industrial property at the Land Parcel 824, Woodlands Avenue 12, Singapore (Parcel

3), provided that ZACD maintains its ownership of 15% of the issued and paid-up

capital of OKH Development Pte. Ltd.

(iii) Consortium Agreement entered into between OKH and DLRE dated 3 March 2011

which regulates the rights and obligations amongst the parties in relation to the

project agreement dated 1 July 2011 entered into between the consortium (consisting

of OKH and DLRE) and EMAS which provides for the consortium (consisting of OKH

and DLRE) to design, build, own and operate the micro-grid in Pulau Ubin for a period

of 10 years.

B.27.3 Material Litigation

OKH Group is not engaged, in the last 12 months before the date of this Circular, in any

litigation or arbitration either as plaintiff or defendant or claimant or respondent which may

have a material effect on its financial position or business, and the Proposed Directors

have no knowledge of any proceedings pending or threatened against OKH Group or any

facts likely to give rise to any litigation, claims or proceedings which may have a material

effect on the financial position or the business of OKH Group.

C. PROPOSED MANAGEMENT OF THE ENLARGED GROUP

The Company proposes to appoint a New Board and new senior management team for the

Enlarged Group with effect from the completion of the Proposed Acquisition. The current

Directors will resign from the Board following completion of the Proposed Acquisition. The

particulars of the New Board and the Proposed Executive Officers following completion of

the Proposed Acquisition are set out below.


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C.1 Directors

The particulars of the New Board following the completion of the Proposed Acquisition are

set out below:

Name Age Address Current Occupation

Bon Ween Foong 45 152 Prince Charles Crescent

#09-11 Tanglin View

Singapore 159013

Executive Chairman and

Chief Executive Officer

Lam Wee Yeow 36 169A Joo Chiat Terrace

Singapore 427314

Executive Director

(Projects)

Ong Soon Teik(1) 52 66 Jambol Place

Chelsea Village

Singapore 119386

Lead Independent

Director

Tan Soo Kiat(1) 53 6 Dover Rise #05-10

Singapore 138678

Independent Director

Tan Swee Ling(1) 43 700 Lorong 1 Toa Payoh

#27-09 Trellis Towers

Singapore 319773

Independent Director

Note:

(1) They are existing Independent Directors.

Information on the business and working experience, education and professional

qualifications, if any, and areas of responsibilities of the New Board are set out below:

Bon Ween Foong is presently the managing director of OKH and will be appointed as the

Chief Executive Officer of the Enlarged Group. He is responsible for the strategic

development of OKH Group’s business activities. In addition, he oversees all key aspects

of OKH Group’s business functions, including the tendering process of its property

development and construction projects. He is responsible for identifying and securing new

projects and business development opportunities for OKH Group. Bon Ween Foong has

been in the building construction business for about 12 years. He joined OKH Group in

2000 and under his leadership, OKH Group expanded its business activities from a small

contractor handling minor A&A works to a larger scale contractor with expertise in building

construction works and subsequently extended its operations strategically to include

property development. He has also led OKH Group to win various industry awards and

certification, such as the ISO 9001 certificate, ISO 14001 certificate and OHSAS 18001

certificate since 2006, bizSAFE STAR Award in 2009 and bizSAFE Partner Award in 2009.

Bon Ween Foong attained a GCE “O” Level certification in 1984.

Lam Wee Yeow is presently the project director of OKH Group and will be appointed as an

Executive Director (Projects) of the Enlarged Group. He joined OKH in 2001 as a project

director and has been responsible for the day-to-day project supervision, safety and

coordination of the Group’s projects to ensure timely progress and delivery. He is also

involved in the feasibility studies of new projects which includes due diligence, budgeting,

timeline estimates, review and evaluate contract documents and other related work. Prior

to joining OKH Group, he was working in various construction-related companies and was

involved in various roles such as internal process redesign, cash flow management, project


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and workflow management. In all, Lam Wee Yeow has been in the building construction

industry for about 11 years. Lam Wee Yeow obtained a Diploma in Mechanical Engineering

from Singapore Polytechnic in 1996 and subsequently graduated with a Bachelor of

Applied Science (Construction Management) from RMIT University in 2010.

Ong Soon Teik will be appointed as the Lead Independent Director of the Enlarged Group.

He is currently the executive director of Asiamine Holding Pte Ltd and is responsible for the

financial and administration matters of the company. From 1984 to 1999, Ong Soon Teik

had worked in various corporate finance and banking positions in DBS, Standard

Chartered Merchant Bank, Nomura International (Hong Kong) and Peregrine

Capital/Banco Santander Securities from 1984 to 1999. In 1999, Ong Soon Teik worked

with BMB Consultants NV as a merchant banking specialist attached to Bangladesh

Minister of State of Privatisation under an Asian Development Bank sponsored

programme. He subsequently joined Deloitte & Touche from 2000 to 2005 where he was

the director of corporate finance. From 2005 to 2008, he was the senior vice president of

corporate finance of Hong Leong Finance. Between 2008 and 2011, Ong Soon Teik was a

director of Chinese Global Investors Group Ltd, where his last position was that of chief

operating officer and executive director. Ong Soon Teik holds a Bachelor of Social Science

(2nd Class Upper Honours) from the National University of Singapore, majoring in Political

Science, a Master of Applied Finance from Macquarie University in Australia and a Master

of Accounting from Curtin University in Australia. He is also a Certified Public Accountant

in Singapore and Australia and is also qualified as a Chartered Financial Analyst.

Tan Soo Kiat will be appointed as an Independent Director of the Enlarged Group. He is

currently the director of corporate advisory of Intergate Pte Ltd, a company engaged in the

provision of corporate advisory services. Tan Soo Kiat was formerly the chief operating

officer and executive director of Goodpack Limited from July 1999 to November 2000 and

was responsible for the financial functions of the company. He also assisted the managing

director of the company in its day-to-day business operations. Tan Soo Kiat was formerly

a general manager and executive director of Progen Holdings Ltd from July 1997 to April

1999, vice-president (finance) of Pacific Century Regional Developments Limited from

March 1996 to July 1997, a treasurer with the investment banking arm of DBS from April

1994 to March 1996 and a senior internal auditor and marketing/loans manager of Bank of

Western Australia Ltd in Australia from June 1990 to April 1994. He has more than 14 years

of experience in the banking and finance industry. Tan Soo Kiat obtained a Bachelor of

Commerce (Accounting) from the University of Otago, New Zealand in 1983. He is a

Chartered Accountant with the Institute of Chartered Accountants of New Zealand.

Tan Swee Ling will be appointed as an Independent Director of the Enlarged Group. She

is currently a Director of Want Want Holdings Ltd and Want Want Food Pte Ltd and is

responsible for its overall operations in Singapore since 1996. Prior to joining Want Want

Holdings Ltd, she was a treasurer at the investment banking arm of DBS from 1994 to

1996. In 2000, she was also the group financial controller for JK Yaming International

Holdings Ltd, a position she held until 2002 while remaining as a non-executive director of

Want Want Holdings Ltd and Want Want Food Pte Ltd. Tan Swee Ling obtained a Bachelor

of Business Administration with Honours from the National University of Singapore in 1991

and is a Fellow of the Association of Chartered Certified Accountants.


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C.2 Executive Officers

The particulars of the Proposed Executive Officers are set out below:

Name Age Address Current Occupation

Patrick Lee 46 9/F 1A Highstreet

Mid-levels

Hong Kong

Chief Financial Officer

Salman Al-Farisi @

Bridges Andre

55 Blk 635 Pasir Ris Drive 1

#07-596

Singapore 510635

Business Development

Manager

Ong Sau Kang 33 Blk 304 Ubi Avenue 1

#02-105

Singapore 400304

Contracts Manager

Pang Shi Kang 32 Blk 13 Cantonment Close

#03-29

Singapore 080013

Finance Manager

Information on the business and working experience, education and professional

qualifications, if any, and areas of responsibilities of the Proposed Executive Officers are

set out below:

Patrick Lee is presently the Chief Financial Officer of Sinobest and will assume the

position of chief financial officer in the Enlarged Group. He has over 21 years of experience

in accounting and auditing. He started his career in auditing with PricewaterhouseCoopers

in 1989. After about three years of service in auditing, he joined a number of commercial

organisations, taking up positions as finance manager, financial controller, and chief

financial officer. Patrick Lee also has prior experience with companies listed in Hong Kong,

USA and Malaysia. He joined Sinobest as the Chief Financial Officer in September 2008.

Patrick Lee was the group financial controller of Asian Information Resources Holdings Ltd

from 2002 to 2004. From 2005 to 2008, he was the chief accountant of Sime Darby

Management Services Limited (South China Motor Group). Patrick Lee holds a Bachelor of

Accountancy from the Polytechnic University in Hong Kong in 1989 and is an associate

member of the Hong Kong Institute of Certified Public Accountants since 1994.

Salman Al-Farisi @ Bridges Andre is presently the Business Development Manager in

OKH and will assume the same position in the Enlarged Group. He joined OKH in 2010 and

is currently responsible for the overall business development of OKH. He started his career

in the Republic of Singapore Navy from 1974 as a Naval Combat Officer (“NCO”) and was

subsequently promoted to Senior NCO in 1985 where he served till 1991. From 1991 to

2001, Salman Al-Farisi @ Bridges Andre worked as a sales manager in Visa LCL Consol

Pte Ltd and assumed the same position in Hertz Car Rental Pte Ltd from 2001 to 2002.

From 2002 to 2004, he worked as a sales officer in Citibank N.A. and from 2004 to 2006

assumed the same position in Veid Pte Ltd. From 2006 to 2007, he was a manager with ITV

Bangkok Ltd and was an associate director with Raffles Development Pte Ltd from 2007 to

2010 before joining OKH. Salman Al-Farisi @ Bridges Andre attained a GCE “O” Level

certification in 1974.

Ong Sau Kang is presently the Contracts Manager in OKH and will assume the same

position in the Enlarged Group. He joined OKH in August 2004 and is currently responsible

for tender bidding and negotiations and is also responsible for supervising the costing and


118

budgeting in respect of the ongoing contracts and projects under OKH. From 2000 to 2001,

he was the assistant quantity surveyor with Hiap Tian Soon Construction Pte Ltd and was

a quantity surveyor from 2001 to 2004 with MA Builders Pte Ltd where he was responsible

for bidding of tenders, managing variation orders and preparing sub-contracts. From July

2004 to August 2004, he was the property manager of Grange Tower managed by Empire

City Consultant Pte Ltd, where he was responsible for the management of the premises.

Ong Sau Kang graduated from Ngee Ann Polytechnic with a Diploma in Building and Real

Estate Management in 2000.

Pang Shi Kang is presently the Finance Manager of OKH and will assume the same

position in the Enlarged Group. He joined OKH in September 2011 and is currently

responsible for the financial accounting and financial reporting of OKH. He is also

responsible for managing the financial policies, processes, systems and personnel to

ensure OKH’s compliance and adherence to the regulatory and financial guidelines

applicable to OKH. Prior to joining OKH, he was an audit senior II with Ernst & Young

Singapore (now known as Ernst & Young LLP) from 2004 to 2007. From January 2008 to

April 2008, he worked as a senior internal auditor with National Trades Union Congress. He

joined Asia Water Technology Ltd in 2008 as a finance supervisor and was subsequently

promoted to the position of a finance manager and company secretary from 2009 to 2010.

From 2010 to 2011, he was a senior group accountant with Popular Holdings Limited. Pang

Shi Kang holds a Bachelor of Accountancy (Merit) from the Nanyang Technological

University Nanyang Business School in 2004. He also attained the CPA Singapore

(Non-Practicing Member) from the Institute of Certified Public Accountants of Singapore in

2008.

Please refer to Section J entitled “Information on the members of the New Board and the

Proposed Executive Officers” in the Letter to Shareholders from OKH of this Circular for the

present and past directorships of each of the members of the New Board and the Proposed

Executive Officers.

None of the Directors or the Proposed Directors is related to one another, to the Proposed

Executive Officers or to any Substantial Shareholder of the Company. So far as the

Company is aware, there are no arrangements or undertakings with any customers,

suppliers or others, pursuant to which any of the Proposed Directors and the Proposed

Executive Officers was appointed.


119

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C.4 Remuneration

The compensation paid or payable to each of the Proposed Directors and the Proposed

Executive Officers (which includes benefits-in-kind and bonuses) for services rendered in

their respective capacities on an aggregate basis and in remuneration bands of

S$250,000(1)

during FY2011 and FY2012 (being the two most recent completed financial

years), and as estimated for FY2013 excluding bonuses and any profit sharing plan or any

other profit-linked agreement(s), is as follows:

FY2011 FY2012 FY2013

Proposed Directors

Bon Ween Foong Band E Band G Band I

Lam Wee Yeow Band A Band A Band A

Tan Soo Kiat(2) — — —

Tan Swee Ling(2) — — —

Ong Soon Teik(2) — — —

Proposed Executive Officers

Salman Al-Farisi @ Bridges Andre Band A Band A Band A

Ong Sau Kang Band A Band A Band A

Patrick Lee(3) — — Band A

Pang Shi Kang Band A Band A Band A

Notes:

(1) Band A: Compensation from S$1 to S$250,000 per annum

Band B: Compensation from S$250,001 to S$500,000 per annum

Band C: Compensation from S$500,001 to S$750,000 per annum

Band D: Compensation from S$750,001 to S$1,000,000 per annum

Band E: Compensation from S$1,000,001 to S$1,250,000 per annum

Band F: Compensation from S$1,250,001 to S$1,500,000 per annum

Band G: Compensation from S$1,500,001 to S$1,750,000 per annum

Band H: Compensation from S$1,750,001 to S$2,000,000 per annum

Band I: Compensation from S$2,000,001 to S$2,250,000 per annum

(2) They are existing Independent Directors and the compensation reflected above does not include directors’

fees which they have received from the Company.

(3) Patrick Lee is the existing Chief Financial Officer of the Company and the compensation reflected above

does not include the remuneration which he has received from the Company.

C.5 Related Employees

As at the Latest Practicable Date, there is no employee who is related to the Proposed

Directors or the substantial shareholder of OKH and who holds a managerial position in

OKH Group.

The remuneration of employees who are related to the Proposed Directors of the Company

will be reviewed annually by the Remuneration Committee to ensure that their

remuneration packages are in line with the Company’s staff remuneration guidelines and

commensurate with their respective job scopes and level of responsibilities. Any bonuses,

pay increases and/or promotions for these related employees will also be subject to the

review and approval of the Remuneration Committee. In addition, any new employment of

related employees and the proposed terms of their employment will also be subject to the


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review and approval of the Nominating Committee. In the event that a member of the

Remuneration Committee or Nominating Committee is related to the employee under

review, he will abstain from the review.

C.6 Service Agreements

Bon Ween Foong and Lam Wee Yeow (collectively the “Appointees” and each an

“Appointee”) will, upon completion of the Proposed Acquisition, enter into service

agreements (collectively the “Service Agreements” and each a “Service Agreement”)

with the Company. Each of the Service Agreements will continue for an initial period of

three years and upon the expiry of such period, the employment of each Appointee shall

be automatically renewed for a further period of three years based on the same terms and

conditions under the initial three year period. During the initial period of three years and for

the further period of three years (as the case may be), either party may terminate the

Service Agreement by giving to the other party not less than six months’ notice in writing,

or in lieu of notice, payment of an amount equivalent to three months’ salary based on the

Appointees’ last drawn monthly salary on a pro-rata basis. The Enlarged Group may also

terminate the employment of the Appointee without notice or payment in lieu of notice

under, inter alia, the following circumstances:

(i) if the Appointee is convicted of any criminal offence (save for an offence under any

road traffic legislation for which the Appointee is not sentenced to any term of

immediate or suspended imprisonment) and sentenced to any term of immediate or

suspended imprisonment;

(ii) if the Appointee by reason of ill health or injury caused by his own default becomes

unable to perform any of his duties under the Service Agreement for a period of 120

days or more;

(iii) if the Appointee becomes bankrupt or makes any composition or enters into any deed

of arrangement with his creditors; or

(iv) if the Appointee is or may be suffering from a mental disorder.

There are no benefits payable to the Appointees upon termination of their employment with

the Enlarged Group.

Pursuant to the terms of the respective Service Agreements, Bon Ween Foong and Lam

Wee Yeow are entitled to a monthly salary of S$50,000 and S$12,500 respectively. In

addition, the Appointees are entitled to an annual wage supplement of one month and the

bonuses described below.


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Lam Wee Yeow is entitled to a performance bonus on an annual basis at the discretion of

the New Board that is dependent on his individual performance. Bon Ween Foong is

entitled to an annual incentive bonus (“Incentive Bonus”) of a sum calculated based on

the Enlarged Group’s audited consolidated profit before tax from continuing operations

(“PBT”) achieved in each financial year as set out below:

PBT Bon Ween Foong’s entitlement

Where PBT is S$5 million or less Nil

Where PBT is more than S$5 million but equal

or less than S$10 million

2.5% of PBT

Where PBT is more than S$10 million but equal

or less than S$15 million

3.5% of PBT

Where PBT is more than S$15 million 4.5% of PBT

Where the employment of the Appointees is for less than a full financial year in the

Enlarged Group, the annual wage supplement, Incentive Bonus and/or performance bonus

(as the case may be) for that financial year shall be apportioned in respect of the actual

number of days of the employment of the Appointees on the basis of a 365-day financial

year, save for the financial year of 2012, where the Appointees will be entitled for the

aforesaid benefits for the whole financial year regardless of the actual commencement

date of the Service Agreement.

Each of the Appointees is also entitled to the use of a car provided by the Enlarged Group.

The car and all its related expenses will be paid for by the Enlarged Group and registered

in the name of the Enlarged Group.

All the travelling and travel-related expenses, hotel, entertainment expenses and other

out-of-pocket expenses reasonably incurred by the Appointees in the discharge of their

duties on behalf of the Enlarged Group will be reimbursed by the Enlarged Group. In

addition, all reasonable medical expenses of the Appointees in accordance with the

Enlarged Group’s personnel policy shall be reimbursed by the Enlarged Group.

Under the Service Agreements, the remuneration of the Appointees is subject to review by

the Remuneration Committee on the day falling one week from the New Board’s approval

of the audited financial statements for the immediate preceding financial year. The relevant

Appointee shall abstain from voting in respect of any resolution or decision to be made by

the New Board in relation to the terms and renewal of his Service Agreement.

The Service Agreements provide that during the continuance of their employment with the

Enlarged Group, the Appointees shall, amongst other things, not engage in any other

business or be concerned or interested, whether for reward or gratuitously, in any capacity

in any trade or business or occupation of a similar nature to or competitive with that carried

on by the Enlarged Group. The Service Agreements also contain non-competition

undertakings by each of the Appointees which are effective during, as well as 12 months

after the cessation of, their employment with the Enlarged Group. During such period, the

Appointees shall not, amongst other things, engage in any other business to be concerned

or interested, whether for reward or gratuitously, in any capacity in any trade or business

or occupation of a similar nature to or competitive with that carried on by the Enlarged

Group.


123

Save for the Service Agreements, there are no bonus or profit sharing plans or any other

profit-linked agreements or arrangements between the Company and any of the Proposed

Directors or Proposed Executive Officers following completion of the Proposed Acquisition.

Save as disclosed above, there are no existing or proposed service contracts entered into

or to be entered into by the Company or any of the subsidiaries in the Enlarged Group with

any of the Proposed Directors or Proposed Executive Officers which provides for

compensation in the form of stock options, or pension, retirement or other similar benefits,

or other benefits, upon the termination of employment following completion of the


D. RISK FACTORS

Shareholders should carefully evaluate each of the following considerations and all of the

other information set forth in this Circular before deciding to invest in OKH Group’s Shares.

Some of the following considerations relate principally to the industry in which OKH Group

operates and its businesses in general. Other considerations relate principally to general

economic and political conditions.

Save as disclosed below, all risk factors which are material to Shareholders in making an

informed judgment of OKH Group, the Proposed Acquisition and the Enlarged Group have

been set out in this section of the Circular. Following completion of the Proposed

Acquisition, the risk factors in relation to OKH Group will also be relevant to the Enlarged

Group. If any of the following considerations and uncertainties develops into actual events,

the business, financial condition or results of operations of the Enlarged Group could be

materially and adversely affected. In such cases, the trading price of Consolidated Shares

could decline due to any of these considerations, uncertainties or material risks, and

investors may lose all or part of their investment in Consolidated Shares.

This Circular also contains forward-looking statements having direct and/or indirect

implications on OKH Group’s future performance. OKH Group’s actual results may differ

materially from those anticipated by these forward-looking statements due to certain

factors, including the risks and uncertainties faced by OKH Group, as described below and

elsewhere in this Circular.

D.1 Risks Relating to OKH Group’s Industry, Business and Operations

High dependency on financing to fund property development projects

Property development is a capital intensive business which requires the availability of

substantial capital financing to acquire land and complete the development projects on

time before positive cash flows may be generated through pre-sales or sales stages of a

completed property development.

OKH Group will have to seek financing for a large portion of its property development

projects (including the costs for land acquisition) via bank loans and credit facilities. The

availability of adequate financing (including bank financing) is crucial to OKH Group’s

ability to acquire land and complete its property development projects according to its

schedule and plans. OKH Group’s ability to obtain debt financing or funds from the capital

markets for its requirements depends on the prevailing economic conditions, the general

condition of the property market, its ongoing performance and the acceptability of the

financing terms offered. The majority of these facilities have variable interest rates and


124

accordingly, any increase in such interest rates will have an adverse effect on the

profitability and financial performance of OKH Group. In addition, OKH Group is subject to

the risks associated with debt financing, including the risk that its cash flow may be

insufficient to meet required payments of principal and interest, resulting in negative cash

flow from operating activities.

OKH Group’s cash flow is also dependent on its level of pre-sales and timing and extent

of receipt of payments from the purchasers. It might experience risks of insufficient cash

flow to meet the required payments of the principal and interest resulting in a negative cash

flow from its operations. This might be a possibility in the event that OKH Group is not able

to achieve adequate pre-sales to meet the costs of financing its property development

operations.

OKH Group has high gearing

As mentioned in the risk factor above, OKH Group is highly dependent of financing to fund

its property development projects. Based on equity attributable to owners of OKH of

S$25.4 million and its total loans and borrowings of S$206.7 million as at 30 June 2012,

OKH Group has a gearing of 8.1 times as at 30 June 2012.

This high gearing could have a materially adverse effect on OKH Group. For example, it

could:

(a) require OKH Group to dedicate a large portion of its cash flow from operations to fund

repayments of the loans and borrowings, thereby reducing the availability of its cash

flow to fund working capital, capital expenditures and other general corporate

purposes;

(b) increase its vulnerability to adverse general economic or industry conditions;

(c) limit its flexibility in planning for, or reacting to, changes to its business or the industry

in which it operates;

(d) limit its ability to raise additional debt or equity capital in the future or increase the

cost of financing;

(e) restrict OKH Group from making strategic acquisitions or exploring business

opportunities; and

(f) increase its exposure to interest rate fluctuations. The total interest expenses

incurred by OKH Group for the financial years ended 30 June 2010, 2011 and 2012

amounted to S$0.5 million, S$0.9 million and S$1.7 million before income tax of OKH

Group respectively. As the majority of these facilities have variable interest rates, any

increase in such interest rates will have an adverse effect on the profitability and

financial performance of OKH Group.

In addition, failure to service its loans and borrowings could result in the imposition of

penalties, including among other things, increases in the interest rates on such loans and

borrowings or legal actions against OKH Group by its creditors. This may negatively impact

the business operations and financial performance of OKH Group.

High dependency on OKH Group’s ability to replenish its land bank

OKH Group’s property development business has a focus on commercial and industrial

properties. As land is scarce in Singapore, OKH Group has to compete with other property

developers to bid and tender for new land sites and there is no guarantee that there will be

suitable sites available at the price which is reasonable to OKH Group.


125

Therefore, OKH Group might face difficulties in replenishing its land bank and may have to

take on projects with a reduced profit margin. This might adversely affect OKH Group’s

business and gross profit margins.

High dependency on the performance of the property industry in Singapore

All of OKH Group’s current and intended property development projects are located in

Singapore. As such, OKH Group’s business is highly dependent on the continuing growth

of Singapore’s economy and property industry which is cyclical in nature. The property

market in Singapore is also subject to the adverse effects of any anti-speculative measures

and policies which are introduced by the Singapore government to cool down the rising

residential property prices, which will in turn have a negative effect on the overall property

market as a whole.

There is no certainty that the growth of the property market in Singapore will continue at

the current rate in future. In the event that there is a downturn in the property market,

demand for property development projects may slow down significantly and this will

adversely affect OKH Group’s revenue and financial performance.

High dependency on the demand of the industrial property industry in Singapore

All of OKH Group’s current property development projects are of an industrial property

nature. As such, OKH Group’s business is highly dependent on the demand of industrial

property in Singapore. The industrial property market is also subject to the laws and

regulations which are introduced by the Singapore government to manage land

redevelopment for Singapore’s economic requirements.

The Singapore government has announced new conditions for all B1 and B2 parcels for its

IGLS programme and shortened the tenure for all recommended sites in the IGLS

programme for the second half of 2012 to a maximum term of 30 years, down from 60

years. Some of these new conditions under the IGLS programme include the restriction of

strata subdivision of sites which are located near MRT stations for a period of 10 years from

the date of issue of the TOP of that particular site.

Currently, OKH Group’s land at Tai Seng Link will be affected by the new conditions. As Tai

Seng Link is located near Tai Seng MRT station, OKH Group will not be able to develop

and/or sell any units on this site for the initial 10-year period commencing on 9 October

2012. With respect to the land at Tai Seng Link, OKH Group intends to develop and lease

the development once completed. In the event that OKH Group is not able to substantially

lease out its development project at Tai Seng Link, OKH Group has the option of selling the

entire development project at Tai Seng Link project as a whole.

As such, the implementation of these new conditions under the IGLS programme might

adversely affect OKH Group’s future profitability and financial performance in relation to

any future industrial property sites OKH Group might acquire.

Property development projects are subject to uncertainties

OKH Group’s financial performance is dependent on its ability to identify appropriate

property development projects with good potential returns and by completing such projects

within a scheduled time frame to realise such returns. Such ability is based on its

understanding of the operational environment and/or its anticipation of the market


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conditions. Hence, the viability and profitability of its property development projects may be

affected by factors such as unexpected project delay, changes in interest rates,

construction costs, land costs and market condition. Accordingly, there is no assurance

that OKH Group will be consistently successful in identifying profitable property

development projects, and completing and launching such projects under the best possible

market conditions as planned. There is also no assurance that a project, which may be

assessed by them to be profitable at the initial phases, will not turn out to be a loss-making

asset or investment due to changes in circumstances not within its control. Should OKH

Group fail to identify profitable property development projects and complete them

profitably, its profitability and financial performance will be adversely affected.

Unsold property development assets may be illiquid

Real estate assets, such as the industrial properties developed and land sites acquired by

OKH Group, are relatively illiquid. Such illiquidity limits its ability to convert its unsold

property development assets into cash on short notice. Such illiquidity may also have a

negative effect in determining the selling prices of its unsold completed property

development assets in the event that it requires an urgent sale of these assets. Should

such an event occur, its financial performance will be adversely affected.

Highly dependent on the fluctuations of the construction industry in Singapore

OKH Group’s construction business is highly dependent on the health and growth of the

construction industry in Singapore as all of its construction projects are in Singapore. In

addition, the cyclical fluctuations of the economy in Singapore will in turn affect the

construction industry and the property market in Singapore as well as the availability of

government’s infrastructure projects in Singapore. A downturn in the Singapore economy

will dampen general sentiments in the local property market and reduce construction

demand and erode profit margins due to keener competition amongst industry players

which will invariably have a material adverse effect on the business operations, financial

performance and financial condition of OKH Group.

Effects of volatility in revenues and profits

OKH Group is vulnerable to revenue volatility which is characteristic of property

development and construction companies. Their revenue from the sale of development

properties is recognised using the completion of construction method. The amount of

revenue to be recognised in future financial years is dependent on the number and value

of properties sold by OKH Group, which in turn depend on various factors such as

availability of their resources, market sentiment, market competition and general economic

conditions. In addition, there may be a lapse of time between the completion of their

development projects and the commencement of subsequent development projects. As

such, its earnings and financial performance during such periods may be adversely

affected.


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There is no certainty that OKH Group will be able to continuously attract and secure

customers for OKH Group’s property development projects which are affected by the

selling price, location, quality and timely completion of the developments. Thus, there is no

assurance that the amount of revenue from the sale of development properties will remain

comparable every year. Should there be any reasons that cause them to undertake fewer

or no new property development projects or should there be any delay in the progress of

any of the projects in their portfolio, its revenue recognised in a particular year will be

adversely affected.

OKH Group’s construction business is generally undertaken on a project basis and is

non-recurring in nature. Its revenue and profit may therefore be subject to some degree of

volatility. In the event that OKH Group is not able to continually and consistently secure

new projects of similar value and volume, its business operations and financial

performance may be adversely affected.

OKH Group is operating in a highly competitive industry

The property development and construction industries are highly competitive in Singapore.

For OKH Group’s property development business, it faces competition from existing

property developers as well as new entrants to the property development business. Some

of these competitors may possess stronger financial resources, more extensive network

and exposure to potential business opportunities, larger land banks and more prime or

attractive land sites that enable them to compete more effectively as compared to OKH

Group. Over supply of properties may occur, resulting in significant decreases in property

prices, which will adversely affect the profitability and financial performance of OKH Group.

For OKH Group’s construction business, it faces competition from existing construction

companies and such competition may increase with the entry of new players in the

business. In the event that the competitors of OKH Group are able to provide comparable

construction services at lower prices or respond to changes in market conditions more

swiftly or effectively than OKH Group does, its business, results of operations and financial

condition will be adversely affected. There is no assurance that OKH Group will be able to

compete effectively with its existing and future competitors and adapt quickly to changing

market conditions and trends. Any failure by OKH Group to remain competitive will

adversely affect the demand for its business, results of operations and financial condition.

Overrun of project costs and increase in costs of raw materials

The bulk of OKH Group’s construction business comes from the public sector which usually

tends to have long duration periods. The long duration exposes OKH Group to costs

overruns and fluctuations in raw material costs and overheads resulting in unanticipated

erosion in profit margins or even losses.

Fluctuations in construction material prices may affect its earnings from its construction

business. The construction materials used in its construction business include mainly

concrete, sand, aggregates, cement, tiles, steel and aluminium. The prices of these

construction materials may fluctuate due to changes in the supply and demand conditions.

While OKH Group has a network of local and overseas suppliers, it currently does not have

a long-term supply contract with any of them. Any sudden shortage of supply or reduction

in the allocation of construction materials to them from its suppliers for any reason may

adversely affect its operations or result in it having to pay a higher cost for these

construction materials. For example, the Indonesian government’s ban on sand exports to

Singapore with effect from the beginning of 2007 led to a shortage of sand supply, resulting

in an increase in its cost of construction materials.


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Furthermore, a typical construction project generally spans more than one year. As a

result, its costs may increase beyond their initial projections and this may result in a

reduction in its previously estimated profit margins or it incurring a loss. In addition, public

sector contracts typically do not allow for any cost adjustments upon the commencement

of the project. Any such additional costs incurred by OKH Group such as the increase in

the costs of construction materials in the midst of the construction project which have not

been previously factored into the contract value will lead to cost overruns and would have

to be absorbed by OKH Group. In the event of any significant increase in the costs of such

construction materials and it failing to find a cheaper source of supply or pass on such

increases in raw material prices to their customers, its business operations and financial

performance will be adversely affected.

Cost overruns were incurred by OKH Group for an existing design and build project for a

community club due to adverse weather conditions and higher costs involved to achieve

the BCA Green Mark standard for the construction project. As a result, a foreseeable loss

amounting to S$1.6 million has been provided as at 30 June 2012. However, such cost

overruns did not have an adverse effect on OKH Group.

Liability for delays in the completion of projects, the resulting liquidated damages

and additional overheads

The construction contract between a developer and its main contractor would normally

include a provision for the payment of pre-determined liquidated damages by the latter to

the former in the event that the project is completed after the stipulated date of completion

stated in the contract. Delays in the completion of a project may occur from time to time due

to several factors including but not limited to adverse weather conditions, shortages of

labour, equipment and construction materials, the occurrence of natural disasters, labour

disputes, disputes with suppliers and sub-contractors, industrial accidents, work stoppages

arising from accidents or mishaps at the worksite or delays in the delivery of building

materials by the suppliers.

In the event of any delay in the completion of the project due to factors within its control,

it could be liable to pay liquidated damages under the construction contract and incur

additional overheads that will adversely affect its earnings and erode its profit margin for

its project. In such event, its financial performance and financial condition would be

adversely affected.

Three of OKH Group’s projects encountered delays in completion due to adverse weather

conditions, changes in customers’ requirements and delays in obtaining approval from

relevant authorities. Requests for extension of time have been submitted to the customers

who have yet to respond to the requests. As a result, liquidated damages amounting to

S$6.8 million has been provided as at 30 June 2012.

Exposure to disputes and claims

It is not uncommon for clients in the construction industry to commence claims for delays,

defective works, non-performance and non-compliance with the contract specifications. It

is a common practice for clients to withhold a certain percentage of the contractual sum to

ensure that such defects or non-compliance are complied. There have been cases where

clients have refused to release the retention monies upon the successful completion of the

project and OKH Group would then have to lodge a claim or commence legal action to

collect the outstanding monies. Such legal proceedings may have an adverse effect on its

market reputation.


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During the course of a construction project, there is a high possibility of clients requesting

for alterations to the specifications agreed upon in the contract. Such requests are known

as variation orders. To maintain the goodwill of the relationship and to avoid delays in the

completion of the construction project, OKH Group will usually consent to making such

variations to the contract specifications before such additional costs are agreed upon. This

might result in a dispute in the additional costs. Where there is such a dispute, and if the

additional costs are of a substantial amount, such disputes may result in the final value of

variation orders being lower than what was initially estimated by OKH Group. This might in

turn adversely affect the financial and business performance of OKH Group.

Except for the outstanding liquidated damages of S$6.8 million in relation to SMRT and the

construction of residential property projects which have been disclosed in Section E.3

entitled “Operating Results of OKH Group” in the Letter to Shareholders from OKH of this

Circular in relation to the revenue analysis for FY2012, there are currently no other

projects-related claims against OKH Group.

Adverse effects of accidents and/or violation of regulatory requirements at its

construction sites

Accidents or mishaps may occur at the construction sites for its projects even though OKH

Group has put in place certain safety measures. As such, OKH Group is subject to personal

injury claims by workers who are involved in accidents at its worksites during the course

of their work from time to time.

Such accidents or mishaps may severely disrupt its operations and lead to a delay in the

completion of a project, and in the event of such delay, OKH Group could be liable to pay

liquidated damages under the construction contract with its customers. In such an event,

its business operations, financial performance and financial condition may be materially

and adversely affected. Further, such accidents or mishaps may subject them to claims

from workers or other persons involved in such accidents or mishaps for damages suffered

by them, and any significant claims which are not covered by its insurance policies may

materially and adversely affect its financial performance and financial condition. In

addition, any accidents or mishaps resulting in significant damage to its premises,

machinery or equipment may also have a significant adverse effect on its business

operations, financial performance and financial condition.

High dependency on the services of OKH Group’s sub-contractors

OKH Group engages sub-contractors to provide various services for its construction

projects, including piling and foundation works, engineering, landscaping, installation of

air-conditioning units and elevators, mechanical and electrical installation, utilities

installation, interior decoration and any other specialist work. These sub-contractors are

selected based on, amongst others, their past working experience with them, their

competitiveness in terms of their pricing and their past performance. OKH Group cannot

assure that the services rendered by sub-contractors will be satisfactory or that they will

meet their requirements for quality. In the event of any loss or damage which arises from

the default of the sub-contractors engaged by OKH Group. OKH Group, being the main

contractor, will nevertheless be liable for its sub-contractors’ default. Furthermore, these

sub-contractors 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 or failing

to complete their construction projects, resulting in additional costs for OKH Group or

exposing it to the risk of liquidated damages. Any of these factors could have a material

adverse effect on its business operations, financial performance and financial condition.


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Highly dependent on foreign labour

The construction industry is highly labour intensive and with the shortage of local workers

in Singapore, OKH Group is heavily dependent on foreign workers. Most of the

construction workers of OKH Group are foreign workers mainly from Bangladesh, India,

Malaysia, Myanmar, Philippines and the PRC. The number of foreign workers that OKH

Group and its sub-contractors are allowed to employ is subject to the policies and

regulations imposed by the MOM. For instance, the MOM imposes a quota on the number

of foreign workers that can be employed in each of its construction projects. In addition,

any changes in the policies of the foreign workers’ countries of origin may affect the supply

of foreign labour and cause disruptions to OKH Group’s business operations which may

result in a delay in the completion of its projects. In addition, foreign worker levy is also

payable by OKH Group to employ such foreign workers which increases the operational

costs of OKH Group. This could have an adverse effect on the cash flow and business

operations of OKH Group if there is an introduction of any unfavourable legislations and/or

regulations.

Risk of delay and disruptions in completing the property development projects

Delays in completing a property development project may arise due to various factors

which include adverse weather conditions, natural calamities, power failure, machinery

and equipment breakdown, shortage of construction materials, shortage of labour,

accidents, cessation of business of its contractors, disputes with its contractors and

unexpected delay in obtaining the required approvals.

Such delays may result in cost overruns and increased financing costs and accordingly

affect OKH Group’s profitability. Delays in project completion may also expose OKH Group

to claims for liquidated damages from the purchasers of OKH Group’s property

development projects.

OKH Group might be reimbursed by its contractors responsible for the delay or

compensated via insurance under certain circumstances. However, there is no guarantee

that the reimbursement or insurance compensation will cover OKH Group’s losses in its

entirety. In such an event, OKH Group would have to absorb the remaining losses. As such,

its profitability and financial performance will be adversely affected.

Risk of claims from and disputes with third parties

OKH Group may be involved from time to time in claims and disputes with various third

parties involved in the development and sale of OKH Group’s properties such as

sub-contractors, suppliers, purchasers, real estate agents and lenders. In the event of a

major claim and/or dispute, OKH Group might have to pay damages and/or be subject to

legal proceedings which might cause OKH Group to suffer additional costs and delays and

result in an adverse impact on its reputation.

Any project delays might result in delay of the construction and/or completion of OKH

Group’s property development projects and will adversely affect OKH Group’s profitability

and financial performance.







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High dependency on key personnel and skilled labour for continued success and

growth

OKH Group’s success to date is attributable to the contributions and expertise of its

executive directors and executive officers. Its continued success and growth will depend on

its ability to retain the services of its executive directors, executive officers and managers.

Any loss of services of its key management personnel without suitable and timely

replacement or the inability to attract and retain other qualified personnel, would have an

adverse effect on its operations and financial performance. Its business is also highly

dependent on skilled personnel. Having a team of experienced and skilled personnel is

essential in maintaining the quality of its services. A high turnover of such personnel

without suitable and timely replacements could have an adverse impact on its operations

and competitiveness.

The value of properties and land sites is subject to fluctuations

The valuations of OKH Group’s properties are conducted by professional independent

valuers under certain assumptions and are not intended to be a prediction of the actual

values likely to be realised by OKH Group from these investments. These valuations are

subject to changes in market conditions or other relevant factors and thus may not

accurately reflect the actual values of such properties upon realisation or disposal. Should

the values of OKH Group’s properties and land sites be lower for any reason upon

realisation or disposal, their financial position and performance will be adversely affected.

In addition, it may record impairment losses in its financial statements in the event that the

market values of its unsold properties and land sites as determined by professional

independent valuers fall below their carrying amounts.

Adverse effects of excessive warranty claims

OKH Group provides limited warranty for its construction projects for up to 10 years

depending on the type of work it does which may include but is not limited to waterproofing

works, external painting works and anti-termite treatment. The limited warranty covers

defects and any premature wear and tear of the materials used in the projects. Rectification

and repair works to be carried out by them that are covered under the limited warranty

would not be chargeable to the customers. OKH Group provides such warranties jointly

with its suppliers and/or sub-contractors. In the event that its suppliers and/or sub-

contractors are not able to perform their obligations under the warranty, OKH Group will be

liable for the claims pursuant to the warranty. Excessive warranty claims for rectification

and repair works will have an adverse effect on its business operations and financial

performance.






Solvency and credit risks of customers

OKH Group’s financial performance and position are dependent, to a certain extent, on the

creditworthiness of its customers. The payments for its building construction and A&A

projects will only be made in accordance with the amount of work completed in the project.

If there are any unforeseen circumstances affecting its customers’ ability or willingness to


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pay, OKH Group may experience payment delays or non-payment. In any of such events,

its financial performance and financial position will be affected adversely. Please refer to

Section B.20 entitled “Credit Management” in the Letter to Shareholders from OKH of this

Circular for more details.

From time to time, OKH Group may encounter customers who may have cash flow

problems and are unable to make payment on time or at all. In such event, its profitability

will be adversely affected by allowance for bad debts provisions and/or bad debts written

off.

OKH Group may lose its B1 status

In Singapore, contractors are classified by the BCA into different BCA Registration Grades.

OKH Group has been awarded the B1 grading under the category CW01 for general

building which allows OKH Group to take on projects of contract value not exceeding

S$40.0 million. This B1 status is a factor in the growth of OKH Group’s construction

business.

As such, to maintain this existing B1 status, OKH Group is required to comply strictly with

the rules and regulations set by BCA. In the event that OKH Group fails to comply with any

of such rules and regulations, it would potentially lose its B1 status and might be

downgraded.

This would mean that OKH Group would not be eligible to tender for public sector projects

of a higher contract value which would have an adverse effect on the business and

financial performance of OKH Group.

Insurance coverage may not be adequate

OKH Group faces the risk of loss or damage to its construction projects, properties and

machinery due to fire, theft and natural disasters. Such events may cause disruption or

cessation in its operations, thus adversely affecting its business operations and financial

performance. Whilst its insurance policies cover some losses in respect of loss or damage

to its properties and machinery, its insurance may not be sufficient to cover all of its

potential losses in extraordinary events. In the event that such loss exceeds the insurance

coverage or is not covered by the insurance policies that OKH Group has taken up, it may

be liable to cover the shortfall of the amounts claimed and its financial performance and

financial condition may be adversely affected.

In relation to the construction projects which OKH Group undertakes as the main

contractor, it will obtain the contractors’ all risks insurance and workmen’s compensation.

In the event that the insurance coverage is insufficient to meet the claims arising in respect

of the projects, OKH Group may be exposed to losses which may adversely affect its

profitability. Please refer to the Section B.17 entitled “Insurance” in the Letter to

Shareholders from OKH of this Circular for further details of insurance coverage.

Changes in the regulatory requirements and government policies in Singapore

Property developers and building contractors are subject to laws and regulations relating

to workplace health and safety, environmental pollution control and other areas that may

concern its industry. There is no assurance that such regulatory standards will remain

unchanged in the future.


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Should the relevant authorities implement additional and/or more stringent requirements,

the compliance with such new government legislation, regulations or policies may also

increase its costs and any significant increase in compliance costs arising from such new

government legislation, regulations or policies may adversely affect its results of

operations. There is no assurance that any changes in government legislation, regulations

and policies will not have an adverse effect on its financial performance. Besides, in the

event of any non-compliance with such regulatory standards at its project sites, its project

sites may be subject to temporary suspension or further examinations resulting in project

delay. Should such situations arise, its business and financial performance may be

adversely affected.

Effects from the outbreak of communicable diseases

An outbreak of infectious disease in Singapore where OKH Group’s operations are based

may have an adverse impact on its operations and its financial performance. Market

sentiment and consumer confidence could be affected and may lead to a deterioration of

economic conditions. Further, in the event that its employees or those of its contractors or

sub-contractors are infected or suspected of being infected with any communicable

disease, it may be required by health authorities to temporarily shut down the affected

project sites and quarantine the affected workers to prevent the spread of the disease. This

will result in project delay and have an adverse impact on its business and financial

performance.

OKH Group may not be able to successfully implement its future plans

OKH Group has identified some plans to be carried out in the near future as set out in

Section F entitled “Prospects, Trend Information, Strategy and Future Plans” in the Letter

to Shareholders from OKH of this Circular, that involve numerous risks, including but not

limited to, the incurrence of working capital requirements and will require substantial

capital expenditure and financial resources.

There is no assurance that these initiatives undertaken will achieve revenue that will

commensurate with its investment costs or that it will be successful in securing more

projects. There is no certainty that OKH Group will be successful in securing more projects

as a result of such initiatives or that it will not incur losses after this expenditure due to a

potential increase in its operating costs incurred to finance its growth and expansion.

Furthermore, there is no assurance that the actual demand for its development projects in

the future will meet its expectations. If OKH Group fails to manage its operating costs or

achieve a sufficient increase in revenue, OKH Group will not be able to recover its

investment and its operations and future financial performance would be adversely

affected.

D.2 Other Risk Factors Relating to the Enlarged Group

In addition, the following factors are relevant in assessing the risks relating to the Enlarged

Group:

The Company is currently on the SGX-ST’s Watch-List

The Company had been loss making for the financial years ended 31 December 2007,

2008 and 2009. Consequently, the Company was placed on the SGX-ST’s watch-list on 3

March 2010. The Company may apply for its removal from the SGX-ST’s watch-list upon

meeting either one of the following requirements:


134

(i) the Company records consolidated pre-tax profit for the latest completed financial

year and has an average daily market trading capitalisation of S$40.0 million or more

over the last 120 Market Days; or

(ii) it satisfies the Main Board admission criteria as set out in Rules 210(2)(a) or 210(2)(b)


The Company would have to restore its financial health to the prescribed levels as

aforesaid within 24 months from 3 March 2010, failing which the SGX-ST may either

remove the Company from the Official List or suspend trading of the listed securities of the

Company with a view to removing the Company from the Official List.

On 31 October 2012, the Company announced that the SGX-ST had granted the Company

a further extension of time until 28 February 2013 to meet the requirements to exit from the

SGX-ST’s watch-list as set out above, subject to the following conditions:

(i) the Company announcing the period of extension granted, the reasons for seeking the

extension of time and the conditions as required under Rule 107 of the Listing Manual;

(ii) the Proposed Acquisition satisfying the SGX-ST Mainboard admission criteria;

(iii) the Proposed Acquisition complying with Rule 1015 of the Listing Manual;

(iv) Shareholders’ meeting to be held and approved for the Proposed Acquisition by 31

December 2012; and

(v) the Financial Adviser to immediately submit a written confirmation stating the basis

whether the Proposed Acquisition is able to satisfy SGX-ST Mainboard admission

criteria and Rule 1015 of the Listing Manual.

In the event that the Company is unable to complete the Proposed Acquisition on a timely

basis, it will be delisted from the SGX-ST for its inability to restore its financial health

according to the prescribed requirements as aforesaid.

No prior market for the new Shares of the Company on an enlarged group basis

The new Shares have never been traded on an Enlarged Group basis. As such, there can

be no assurance that an active trading market for the new Shares will develop or, if

developed, will be sustained.

Independent Shareholders will face immediate and substantial dilution and may

experience future dilution to shareholdings

The Proposed Acquisition will result in immediate dilution to the shareholdings of

Independent Shareholders as the Consideration Shares will be allotted and issued to the

Vendor. In addition, the Company may issue new Shares or convertible securities after

completion of the Proposed Acquisition. Should the new Shares be placed out and

convertible securities be issued and converted, there may be further dilution to the

shareholdings of the Independent Shareholders.


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Volatility of the new Share price of the Company

The issue price of the Consideration Shares allotted and issued to acquire the Sale Shares

may not be indicative of prices of the new Shares that will prevail in the trading market. The

trading prices of the new Shares could be subject to fluctuations in response to variations

in the results of operations, changes in general economic conditions, changes in

accounting principles or other developments affecting the Enlarged Group, the customers

or competitors, changes in financial estimates by securities analysts, the operating and

stock price performance of other companies, general stock market price fluctuations and

other events or factors. Volatility in market prices of the new Shares may be caused by

factors beyond the control of the Enlarged Group and may be unrelated and

disproportionate to the operating results of the Enlarged Group.

The market price of the new Shares may fluctuate significantly and rapidly as a result of,

amongst other things, the following factors, some of which are beyond the control of 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 Enlarged Group, following completion of the Proposed

Acquisition, of significant contracts, acquisitions, strategic alliances or capital

commitments;

(c) loss of the Enlarged Group’s major customers or failure to complete significant orders

or contracts;

(d) changes in the Enlarged Group’s operating results;

(e) involvement in litigation;

(f) unforeseen contingent liabilities of the Enlarged Group;

(g) addition or departure of key personnel of the Enlarged Group;

(h) changes in share prices of companies with similar businesses to the Enlarged Group

that are listed in Singapore;

(i) changes in securities analysts’ estimates of the Enlarged Group’s financial

performance and recommendations;

(j) differences between the Enlarged Group’s actual financial operating results and those

expected by investors and securities analysts; and

(k) changes in general market conditions and broad market fluctuations.


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Concentration of control

Bon Ween Foong, who will acquire majority control over the Company after completion of

the Proposed Transactions, will be able to influence the outcome of matters submitted to

Shareholders for approval. Upon completion of the Proposed Transactions and the

Proposed Compliance Placement, Bon Ween Foong will become a Controlling Shareholder

holding approximately 75.0% of the Enlarged Share Capital. Please see Sections 14 and

15.2 entitled “Financial Effects of the Proposed Transactions” and “Changes in

Shareholding Structure” of this Circular for more information on the effects of the Proposed

Transactions on and the resulting shareholding structure of the Company. As a result, Bon

Ween Foong 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. Bon Ween Foong will also effectively have veto power with respect

to any Shareholders’ action or approval requiring a Special Resolution. Such concentration

of ownership may also have the effect of delaying, preventing or deterring a change in

control of the Company, which may otherwise benefit Shareholders.

E. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

The following discussion of the results of operations and financial condition should be read

in conjunction with the “Independent auditors’ report and the consolidated financial

statements of OKH Holdings Pte. Ltd. and its subsidiaries for the financial year ended June

30, 2010, 2011 and 2012” and related notes thereto as set out in Appendix B of this

Circular.

This discussion contains forward-looking statements that involve risks and uncertainties.

The actual results may differ significantly from those projected in the forward-looking

statements. Factors that might cause future results to differ significantly from those

projected in the forward-looking statements include, but are not limited to, those discussed

below and elsewhere in this Circular, particularly in Section D entitled “Risk Factors” in the

Letter to Shareholders from OKH of this Circular.

E.1 Financial Information of OKH Group

The following selected financial information of OKH Group should be read in conjunction

with the full text of this Circular, including the “Independent auditors’ report and the

consolidated financial statements of OKH Holdings Pte. Ltd. and its subsidiaries for the

financial year ended June 30, 2010, 2011 and 2012” set out in Appendix B of this Circular.


137

Financial Position of OKH Group

As at

30 June 2012

S$

(Audited)

ASSETS

Current assets

Cash and bank balances 22,477,159

Trade and other receivables 87,001,588

Properties under development 182,171,168

Completed properties held for sale 3,387,942

Total current assets 295,037,857

Non-current assets

Property, plant and equipment 3,137,934

Investment properties 23,640,000

Prepayment 1,165,000

Total non-current assets 27,942,934

Total assets 322,980,791

Current liabilities

Trade and other payables 70,641,235

Finance leases 160,912

Bank loans and overdrafts 85,979,021

Provision 8,413,673

Income tax payable 2,361,820

Total current liabilities 167,556,661

Non-current liabilities

Amount due to non-controlling interest 8,417,760


Bank loans 120,695,110

Deferred tax liabilities 335,000

Total non-current liabilities 129,811,319


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As at

30 June 2012

S$

(Audited)

Capital and reserves

Share capital 6,500,000

Accumulated profits 18,882,080

25,382,080

Non-controlling interest 230,731

Total equity 25,612,811

Total liabilities and equity 322,980,791

Statements of Comprehensive Income of OKH Group

FY2012 FY2011 FY2010

S$

(Audited)

S$

(Restated)

S$

(Restated)

Revenue 109,123,504 7,332,563 40,774,697

Cost of sales (80,173,352) (5,667,339) (30,843,674)

Gross profit 28,950,152 1,665,224 9,931,023

Other income 4,858,520 3,425,202 5,071,663

General and administrative

expenses (12,651,685) (6,876,131) (4,619,313)

Finance costs (1,674,114) (906,354) (458,584)

Share of losses of joint venture — (750) (1,025)

Profit before income tax 19,482,873 (2,692,809) 9,923,764

Income tax (3,759,237) 255,036 (1,747,300)

Profit (Loss) for the year,

representing total

comprehensive income (loss)

for the year 15,723,636 (2,437,773) 8,176,464

Basic and diluted earnings (loss)

per share 2.42(1) (0.38)(1) 1.26(1)

Note:

(1) This is based on OKH’s share capital of 6.5 million shares.


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Overview

OKH Group is primarily involved in the business of property development and provision of

construction services. Please refer to Section B “Information of OKH Group” in the Letter

to Shareholders from OKH of this Circular for further details of OKH Group and its business

activities.

Basis of Preparation

The consolidated financial statements of OKH Group are presented in S$ and are drawn

up in accordance with Singapore FRS. The consolidated financial statements incorporated

the financial statements of OKH and entities controlled by OKH. All significant intra-group

transactions, balances, income and expenses within OKH Group, except for entities

consolidated using the equity method, are eliminated in full on consolidation.

E.2 Principal Components of OKH Group Statements of Comprehensive Income

Revenue

OKH Group’s revenue is primarily derived from its two principal activities, namely property

development and provision of construction services.


Revenue from property development refers to revenue derived from the sale of properties

developed by OKH Group. In accordance with the Financial Reporting Standards, INT FRS

115, revenue from the sale of properties developed by OKH Group is recognised based on

the completion of construction method whereby revenue is recognised when the risks and

rewards of ownership have been transferred to the purchaser either through the transfer of

legal title or equitable interest in a property.


Revenue from construction services refers to revenue derived from the provision of

construction services as a contractor consisting of the initial sum as agreed in the contract

as well as any variations in contract works, claims or omissions. Revenue from the

provision of construction services is recognised based on the percentage of completion

method, determined by the value of actual work done as a percentage of the estimated total

contract revenue. Foreseeable losses on the contract are recognised as an expense

immediately when it is probable that the total contract costs will exceed the total contract

revenue.

Factors Affecting Revenue

OKH Group’s revenue is likely to be affected by the following factors:

(a) The state of economy and market sentiments in Singapore, where OKH Group

primarily operates in;

(b) Changes in government legislation, regulation, policies or budget and expenditure

which may affect the market where OKH Group operates in;


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(c) Ability to continually and consistently secure new construction projects of similar

value and volume;

(d) Ability to identify and acquire new land for development in a timely manner and at

attractive prices for OKH Group’s property development business;

(e) Ability to continuously attract and secure customers for OKH Group’s property

development projects which are affected by the selling price, location, quality and

timely completion of the developments;

(f) Ability to compete effectively against other developers or contractors; and

(g) Ability to manage the construction and development projects to ensure timely

completion.

Cost of Sales

OKH Group’s cost of sales comprises mainly of costs directly incurred in the development

of properties as well as the provision of construction services. Costs directly incurred in the

development of properties include land acquisition costs, construction costs, capitalised

borrowing costs and other costs directly related to land acquisition. Costs directly incurred

in the provision of construction services include direct material costs, such as cement,

steel, foundation and substructure, landscaping and fittings, sub-contractors’ costs, direct

labour costs as well as other overheads, such as rental of plant and machinery,

depreciation of equipment, professional fee charges and other construction site related

costs.

Factors Affecting Cost of Sales

OKH Group’s cost of sales is likely to be affected by the following factors:

(a) cost of land acquisition which is in turn affected by the location and level of

competition from other developers;

(b) price fluctuations associated with direct material costs, particularly if the materials

required are specific and uncommon;

(c) volatility of costs associated with skilled labours required, sub-contractor and other

professional fees;

(d) changes in the interest rate environment which affects the cost of borrowing for the

financing of OKH Group’s projects;

(e) ability to manage its project costs and resources deployment to avoid cost overruns;

and

(f) project progress schedules and consequential cost overruns in the event of project

delays.

The exposure to price volatility might have a negative impact on the profitability of OKH

Group if the costs are not effectively managed and/or the incremental costs are not

substantially passed to the customers.


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Other Operating Income

OKH Group’s other operating income comprises mainly the gain on revaluation of

investment properties, gain on disposal of property, plant and equipment and interest

income.

Administrative Expenses

OKH Group’s administrative expenses comprise expenses such as salaries and staff-

related expenses, depreciation charges for property, plant and equipment, professional

fees, commission paid to property agencies, property tax, rental expenses, repairs and

maintenance costs as well as other general office expenses.

Finance Income/Costs

OKH Group’s finance income comprises interest income from bank deposits. Finance costs

comprise mainly interest expenses relating to bank loans, bank overdrafts, hire purchases

and trade payables factoring facilities utilised.

Share of Loss of Joint Venture, Net of Tax

OKH Group entered into a joint venture with Dai-Dan Co., Ltd. to undertake A&A works to

commercial spaces at various MRT stations from SMRT. The contribution of share of loss

of joint venture, net of tax, to OKH Group’s total profit before income tax for FY2010 and

FY2011 was insignificant.

On 1 November 2011, the 50% interest in Dai Dan OKH JV was sold to the Vendor. Please

refer to Section I.1.1 in the Letter to Shareholders from OKH of this Circular for more

details.

On 21 June 2012, OKH Group entered into a joint venture with Daily Life Renewable

Energy Pte. Ltd., a third party, to undertake a project to design, build, own, operate and

maintain an intelligent micro-grid infrastructure with clean and renewable energy source on

Pulau Ubin. The contribution of share of loss of joint venture, net of tax, to OKH Group’s

total profit before income for FY2012 was insignificant.

Income Tax

OKH Group was subject to income tax at the applicable statutory tax rates in Singapore.

Provision for income tax payable was made on profit before tax for each reporting period.

E.3 Operating Results of OKH Group

Breakdown by Business Segments

OKH Group’s revenue is derived from the business segments as listed below. All revenue

and profits are derived from OKH Group’s operations in Singapore.

A breakdown of OKH Group’s revenue by business segments for the period under review

is summarised below:


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FY2012 FY2011 FY2010

Revenue (S$’000) (%) (S$’000) (%) (S$’000) (%)

Construction

Services 5,285 4.8 6,089 83.0 9,309 22.8

Property

Development 102,393 93.8 — — 30,365 74.5

Property Investment 1,445 1.4 1,243 17.0 133 0.3

Others 1 —# — — 968 2.4

Total 109,124 100.0 7,332 100.0 40,775 100.0

FY2012 FY2011 FY2010

Cost of Sales (S$’000) (%) (S$’000) (%) (S$’000) (%)

Construction

Services 14,548 18.1 5,667 100.0 8,217 26.6

Property

Development 65,625 81.9 — — 21,763 70.6

Property Investment — — — — — —

Others * —# — — 864 2.8

Total 80,173 100.0 5,667 100.0 30,844 100.0

FY2012 FY2011 FY2010

Gross Profit (S$’000) (%) (S$’000) (%) (S$’000) (%)

Construction

Services (9,263) (32.0) 422 25.3 1,092 11.0

Property

Development 36,768 127 — — 8,602 86.7

Property Investment 1,445 5.0 1,243 74.7 133 1.3

Others * —# — — 104 1.0

Total 28,950 100.0 1,665 100.0 9,931 100.0

* Denotes amount is less than S$1,000

# Denotes percentage is less than 0.1%

FY2011 vs FY2010

Revenue

Total revenue decreased by approximately S$33.5 million or 82.1%, from S$40.8 million in

FY2010 to S$7.3 million in FY2011, as there was no revenue recognised for the property

development division based on the completion of construction method for revenue

recognition and during the same period, there was a decrease in revenue from its

construction division. The decrease in overall revenue was partially offset by an increase

in rental income from a dormitory located in Seatown Industrial Centre.


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In FY2011, OKH Group launched a new development project, A’Posh BizHub, located in

Yishun. The project was well received and OKH Group successfully sold 85.2% of the total

saleable area of the project in FY2011. However, in accordance with the INT FRS 115,

revenue from the sale of this property development project was not recognised in FY2011

as the development had not received its TOP, hence ownership have not been transferred

to the purchaser.


Revenue recognised from the provision of construction services declined by approximately

S$3.2 million or 34.4%, from S$9.3 million in FY2010 to S$6.1 million in FY2011, as the

majority of OKH Group’s construction services division were deployed for the construction

of its property development project, A’Posh BizHub, located in Yishun.

Property Investment

Rental income increased from S$0.1 million in FY2010 to S$1.2 million in FY2011, mainly

attributable to the rental income of S$1.1 million from a dormitory, located in Seatown

Industrial Centre, which commenced its lease in FY2011.

Cost of sales

Cost of sales from property development decreased by S$25.2 million or 81.6%, from S$30.9

million in FY2010 to S$5.7 million in FY2011, mainly due to no revenue recognised by the

property development division in FY2011, in accordance with INT FRS 115.


Cost of sales from property development decreased by S$21.8 million or 100.0%, from

S$21.8 million in FY2010 to nil in FY2011, which was in line with no revenue recognised

by the property development division in FY2011.


Cost of sales from construction services declined by S$2.5 million or 30.5%, from S$8.2

million FY2010 to S$5.7 million in FY2011, which was in line with the decrease in revenue

of the construction services division.

Gross profit and gross profit margin

Overall gross profit decreased by approximately S$8.2 million or 82.8% from S$9.9 million

in FY2010 to S$1.7 million in FY2011, mainly due to nil gross profit contribution from OKH

Group’s property development business and lower gross profit contribution from the

construction services division, which was partially offset by the increase in gross profit

contribution from the Group’s property investment division.

Overall gross profit margin declined from 24.4% in FY2010 to 22.7% in FY2011 mainly

attributable to lower profit margins from the construction services division.

Gross profit contribution from construction services dropped by S$0.7 million or 63.6%,

from S$1.1 million in FY2010 to S$0.4 million in FY2011. Gross profit margin from

construction services declined from 11.7% in FY2010 to 6.9% in FY2011 mainly due to the

increase in costs of construction materials.


144

Other income

Other income decreased by approximately S$1.7 million or 33.3%, from S$5.1 million in

FY2010 to S$3.4 million in FY2011, mainly due to the lower gain on change in fair value

of investment properties of S$3.1 million as compared to S$5.0 million in FY2010, which

was partially offset by a S$0.3 million gain on the disposal of investment properties

recognised.

General and administrative expenses

General and administrative expenses increased by approximately S$2.3 million or 50.0%,

from S$4.6 million in FY2010 to S$6.9 million in FY2011 mainly due to the increase in

professional fees of S$1.5 million, commission expenses of S$0.2 million paid to property

agencies, property tax of S$0.3 million and staff costs of S$0.2 million.

The increase in commission expenses and property tax is mainly attributable to the

additional costs incurred in relation to the construction and development of OKH Group’s

property development project, A’Posh BizHub. Staff costs increased as a result of salary

increment and bonus payout during the period as well as an increase in staff headcount.

Professional fees of S$0.8 million relating to the Proposed Transactions also contributed

to the increase in the overall professional fees.

Finance costs

Finance costs increased by approximately S$0.4 million or 80.0%, from S$0.5 million in

FY2010 to S$0.9 million in FY2011, mainly due to the increase in loan interest expenses

in relation to bank loans drawn down to finance the construction and development of

A’Posh BizHub.

Profit before income tax

As a result of the above, OKH Group’s profit before income tax reversed to a loss of S$2.7

million in FY2011 from a profit before income tax of S$9.9 million in FY2010, mainly

attributable to the decrease in gross profit and the increase in general and administrative

expenses and finance costs.

FY2012 vs FY2011

Revenue

Total revenue increased by approximately S$101.8 million or 1,394.5%, from S$7.3 million

in FY2011 to S$109.1 million in FY2012, mainly due to higher revenue from OKH Group’s

property development division, construction services division as well as property

investment division.


The property development project, A’Posh BizHub, launched by OKH Group in FY2011

obtained its TOP certification on 29 June 2012. In accordance with INT FRS 115, the

revenue from the sale of this property development project was fully recognised as at

30 June 2012.


Revenue recognised from the provision of construction services decreased marginally by

approximately S$0.8 million or 13.1%, from S$6.1 million in FY2011 to S$5.3 million in

FY2012, mainly due to a provision of S$6.8 million for liquidated damages. The decrease

was partially offset by higher revenue recognised in FY2012 from existing and new

projects.


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Property Investment

Rental income increased from S$1.2 million in FY2011 to S$1.4 million in FY2012, mainly

due to higher rental income from the dormitory located in Seatown Industrial Centre.

Cost of sales

Cost of sales increased by approximately S$74.5 million or 1,307.0%, from S$5.7 million

in FY2011 to S$80.2 million in FY2012 mainly attributable to the higher costs of sales from

the property development division and construction services division.


Cost of sales from property development increased by S$65.6 million or 100.0% to S$65.6

million in FY2012, which was in line with the revenue recognised in accordance with

INT FRS 115.


Cost of sales from construction services increased by S$8.8 million or 154.4%, from S$5.7

million FY2011 to S$14.5 million in FY2012, which was in line with the increase in revenue

as well as the recognition of S$1.6 million in foreseeable losses for one of the projects.

Gross profit and gross profit margin

Overall gross profit increased by approximately S$27.3 million or 1,605.9% from S$1.7

million in FY2011 to S$29.0 million in FY2012, mainly due to the increase in gross profit

contribution from OKH Group’s property development business, which was partially offset

by the loss from OKH Group’s construction services division.

Overall gross profit margin improved from 22.7% in FY2011 to 26.5% in FY2012 mainly

attributable to the property development division which achieved a gross profit margin of

35.9%, translating to a gross profit of S$36.8 million.

The improvement in overall gross profit contribution was partially offset by the loss from the

construction services division which reversed to a loss of S$9.3 million in FY2012 from

S$0.4 million in FY2011. Gross profit margin from construction services declined from 6.9%

in FY2011 to a negative 175.3% in FY2012 mainly due to a provision of S$6.8 million

liquidated damages as well as the recognition of S$1.6 million in foreseeable losses for one

of the projects.

Gross profit contribution from the investment property division which relates to the rental

income from a dormitory located in Seatown Industrial Centre remained relatively stable in

FY2012.

Other income

Other income increased by approximately S$1.5 million or 44.1%, from S$3.4 million in

FY2011 to S$4.9 million in FY2012, mainly due to (a) S$2.3 million of deposits forfeited

from the cancellation of property sales from unrelated third parties who were unable to

arrange for bank financing to finance the balance purchase price for these properties; and

(b) compensation claims of S$0.3 million arising from the flooding of the Company’s office

premise in 2008. OKH Group is currently in the process of selling these cancelled units to

other unrelated third parties.


146

There was lower gain on change in fair value of investment properties of S$2.1 million in

FY2012 as compared to S$3.1 million in FY2011. In addition, there was no disposal of

investment properties in FY2012 as compared to a S$0.3 million gain on disposal of

investment properties in FY2011.

General and administrative expenses

General and administrative expenses increased by approximately S$5.8 million or 84.1%,

from S$6.9 million in FY2011 to S$12.7 million in FY2012 mainly due to the increase in staff

costs of S$2.9 million and sales commission of S$2.8 million. This was partially offset by

a decrease in professional fees as well as fines and penalties of S$0.5 million and S$0.6

million respectively.

Staff costs increased as a result of salary increment, directors’ profit sharing and staff

bonus payout provided for during the year. Increase in staff headcount also contributed to

the increase in staff costs. The increase in sales commission is mainly attributable to the

sales launch of Primz BizHub as well as the sales associated with certain remaining units

of A’Posh BizHub.

Finance costs

Finance costs increased by approximately S$0.8 million or 88.9%, from S$0.9 million in

FY2011 to S$1.7 million in FY2012, mainly due to the increase in loan interest expenses

in relation to bank loans drawn down to finance the construction and development of

A’Posh BizHub and Primz BizHub.

Profit before income tax

As a result of the above, OKH Group’s profit before income tax reversed to a profit of

S$19.5 million in FY2012 from a loss of S$2.7 million in FY2011, mainly attributable to the

increase in gross profit contribution, partially offset by the increase in general and

administrative expenses and finance costs.

E.4 Financial Position of OKH Group

Current Assets

Current assets comprise properties under development, completed properties held for

sale, trade and other receivables and cash and bank balances. As at 30 June 2012, OKH

Group had current assets of approximately S$295.0 million which accounted for 91.3% of

its total assets.

As at 30 June 2012, OKH Group’s current assets comprised properties under development

worth approximately S$182.1 million, completed properties held for sale worth

approximately S$3.4 million, trade and other receivables of approximately S$87.0 million

and cash and bank balances of approximately S$22.5 million.

OKH Group’s properties under development are mortgaged to financial institutions as

security for the credit facilities obtained by OKH Group. The properties under development

in progress have operating cycles longer than one year. OKH Group includes in current

assets expenditure capitalised in relation to the development properties in progress which

are realisable over a period in excess of one year.


147

Completed properties held for sale consists of costs of unsold units from A’Posh BizHub

development reclassified from properties under development upon its TOP.

Trade and other receivables comprised trade receivables of approximately S$58.1 million,

amounts due from customers on construction contracts of approximately S$13.1 million,

deposits of approximately S$1.2 million, prepayments of approximately S$9.4 million and

other receivables from third parties of approximately S$5.2 million.

OKH Group’s cash and bank balances comprised bank balances of S$14.4 million, which

are restricted to payments for expenditure on the properties under development held under

the Housing Development (Project Account) Rules, fixed deposits of S$0.03 million

pledged for bank facilities and bank deposits of S$8.1 million (not restricted in use).

Current assets increased by S$221.9 million or 303.6% from S$73.1 million as at 30 June

2011 to S$295.0 million as at 30 June 2012, mainly due to an increase in properties under

development, completed properties held for sale, trade and other receivables and cash and

bank balances.

Properties under development increased by S$131.3 million or 258.5%, from S$50.8

million as at 30 June 2011 to S$182.1 million as at 30 June 2012, mainly attributable to the

cost of construction works incurred during the year for Primz BizHub as well as the

acquisition of a land parcel in Woodlands Avenue 12.

Trade and other receivables increased by S$82.1 million or 1,675.5%, from S$4.9 million

as at 30 June 2011 to S$87.0 million as at 30 June 2012, mainly due to progress billings

issued to the individual customers of A’Posh BizHub upon its TOP, increase in amount due

from customers for contract work, deposits paid for the acquisition of a land parcel at 5

Pioneer Sector and prepayments made to suppliers for the purchase of construction

materials.

Cash and bank balances increased by S$5.2 million or 30.1%, from S$17.3 million as at

June 2011 to S$22.5 million as at 30 June 2012, which was mainly attributable to cash

receipts from progress billings made for A’Posh BizHub, the sale of Primz BizHub, loans

drawn down to finance the construction and development of A’Posh BizHub and Primz

BizHub and the acquisition of a land parcel in Woodlands Avenue 12. Capital contribution

and loan from non-controlling interest also contributed to the increase in cash and bank

balances.

The increase in cash and bank balances was partially offset by the repayment of bank

loans and finance leases, purchase of property, plant and equipment, purchase of land

parcels for Primz BizHub and Woodlands Horizon as well as the construction works of

A’Posh BizHub and Primz BizHub.

Non-Current Assets

Non-current assets comprise property, plant and equipment, investment properties as well

as deposits. As at 30 June 2012, OKH Group had non-current assets of approximately

S$27.9 million which accounted for 8.7% of total assets.

As at 30 June 2012, OKH Group’s non-current assets comprised property, plant and

equipment of approximately S$3.1 million, investment properties of approximately S$23.6

million and prepayment of approximately S$1.2 million.


148

OKH Group’s properties for freehold and investment properties are mortgaged to financial

institutions as securities for the credit facilities obtained by OKH Group.

Non-current assets increased by S$4.3 million or 18.2%, from S$23.6 million as at 30 June

2011 to S$27.9 million as at 30 June 2012. The increase was mainly due to an increase in

property, plant and equipment, investment properties as well as the prepayment made for

the acquisition of the land parcel at Tai Seng Link.

Property, plant and machinery increased by S$1.0 million or 47.6%, from S$2.1 million as

at 30 June 2011 to S$3.1 million as at 30 June 2012, mainly due to the purchases of

property, plant and machinery during the year, which was partially offset by the

depreciation charge.

Investment properties increased by S$2.1 million or 9.8%, from S$21.5 million as at 30

June 2011 to S$23.6 million as at 30 June 2012, mainly due to increase in fair value during

the year.

Current Liabilities

Current liabilities comprise trade and other payables, current portion of finance leases,

deferred interest income, bank loans and overdrafts and income tax payable. As at 30 June

2012, OKH Group had current liabilities of approximately S$167.6 million which accounted

for 56.3% of its total liabilities.

As at 30 June 2012, OKH Group’s current liabilities comprised trade and other payables of

approximately S$70.6 million, current portion of finance leases of approximately S$0.2

million, bank loans and overdrafts of approximately S$86.0 million, provisions of

approximately S$8.4 million and income tax payable of approximately S$2.4 million.

The trade and other payables comprised mainly trade payables of approximately S$5.0

million, other payables to third parties of approximately S$3.2 million, advances from a

director of approximately S$10.2 million, advance receipts from customers of

approximately S$34.1 million, deferred interest income of S$0.5 million and accrued

expenses of approximately S$17.6 million. The advances from a director were for the

general working capital requirements and the acquisition of property and land parcels.

Bank loans and overdrafts comprised mainly bank overdrafts of approximately S$5.9

million and bank loans of approximately S$80.1 million.

Current liabilities increased by approximately S$113.3 million or 208.7%, from S$54.3

million as at 30 June 2011 to S$167.6 million as at 30 June 2012, mainly due to increase

in trade and other payables, bank loans and overdrafts and income tax payable.

Despite the significant increase in cost of sales, trade payables increased marginally by

S$0.8 million or 19.0%, from S$4.2 million as at 30 June 2011 to S$5.0 million as at 30

June 2012, mainly due to increase in trade payables in relation to the construction of Primz

BizHub, partially offset by more prompt payment made to suppliers as a result of the

utilisation of bank credit facilities to fulfil the payments. There were no delays in payments

made to suppliers as a result of liquidity issues during the past three financial years.

Increase in income tax payable of S$2.4 million was mainly due to profits recognised from

A’Posh BizHub upon its TOP.


149

Non-Current Liabilities

Non-current liabilities comprise finance leases, bank loans and overdrafts and deferred tax

liabilities. As at 30 June 2012, OKH Group had non-current liabilities of approximately

S$129.8 million which accounted for 43.7% of its total liabilities.

As at 30 June 2012, OKH Group’s non-current liabilities comprised finance leases of

approximately S$0.4 million, bank loans and overdrafts of approximately S$120.7 million,

amount due to non-controlling interest of S$8.4 million and deferred tax liabilities of

approximately S$0.3 million.

Non-current liabilities increased by approximately S$96.9 million or 294.5%, from S$32.9

million as at 30 June 2011 to S$129.8 million as at 30 June 2012, mainly due to the

increase in bank loans and overdrafts and deferred tax liabilities.

Bank loans and overdrafts increased by S$88.9 million or 279.6%, from S$31.8 million as

at 30 June 2011 to S$120.7 million as at 30 June 2012, mainly due to bank loans drawn

down to finance the construction and development of A’Posh BizHub and Primz BizHub as

well as the acquisition of a land parcel at Woodlands Avenue 12 and increased payments

to creditors.

Deferred tax liabilities decreased by S$0.3 million or 50.0%, from S$0.6 million as at 30

June 2011 to S$0.3 million as at 30 June 2012, mainly due to the provisions made offset

by the revaluation of OKH Group’s investment properties.

Capital and Reserves

Capital and reserves comprise share capital and retained earnings. As at 30 June 2012,

OKH Group’s capital and reserves amounted to S$25.4 million.

As at 30 June 2012, OKH Group’s capital and reserves increased by S$15.8 million or

164.6%, from S$9.6 million in FY2011 to S$25.4 million in FY2012. This was mainly

attributable to the total comprehensive income of S$15.8 million recorded in FY2012.

E.5 Liquidity and Capital Resources

Over the periods under review, OKH Group’s growth and operations were financed through

a combination of shareholders’ equity, borrowings from financial institutions, advances

from a director and other credit facilities.

OKH Group’s principal uses of cash have mainly been for its property development and

construction projects, working capital requirements, capital expenditures, repayment of

external borrowings and financial expenses.

OKH Group’s property development division is relatively more capital intensive as OKH

Group has to make upfront payments to acquire the land parcels. OKH Group usually

utilises a mixture of internal cash resources and bank financing to finance the payments for

the acquisition of land.

As the cash flow from the property development business is generally project-based, OKH

Group’s property development division is mainly financed by bank borrowings, internal

cash resources, progressive payments received from purchasers and other credit facilities.


150

OKH Group experienced net cash outflows from operating activities of approximately

S$158.4 million for FY2012 mainly due to the capitalisation of the expenses incurred for

construction and development of A’Posh BizHub and Primz BizHub as well as the

acquisition of land parcel at Woodlands Avenue 12 during the year. These costs were

financed partly by internal resources and bank borrowings. Payments made for these

expenses were recorded as cash outflow for operating activities and the bank borrowings

drawn down were classified as cash inflows for financing activities, which resulted in a

negative cash flow from operating activities for the said period as cash outflow exceeded

cash inflows from other operating activities.

For its construction services, OKH Group typically bills and collects according to the

construction progress. The project owners will usually withhold 10.0% of each progressive

payment due to OKH Group for the work completed as retention monies until the

accumulated retention monies reach the cap of 5.0% of the total contract sum. Subsequent

progressive payments due to OKH Group will not be subject to retention, which will reduce

the cash flow requirements of its construction projects. The cash flow requirements of its

construction projects are largely financed by internal cash resources and bank borrowings.

Based on OKH Group shareholders’ equity of S$25.4 million and its loans and borrowings

of S$206.7 million as at 30 June 2012, OKH Group’s gearing ratio (total borrowings divided

by total equity) was 8.1 times. Due to the business nature of OKH Group’s property

development division and its means of financing, OKH Group’s debt-to-equity ratio is

relatively high.

Please refer to Section E.9 entitled “Capitalisation and Indebtedness” in the Letter to

Shareholders from OKH of this Circular for further details on its bank facilities and level of

borrowings.

As at the Latest Practicable Date, OKH Group has breached certain terms and conditions

or covenants associated with credit arrangements or bank loans as a result of the

restatement upon the adoption of the INT FRS 115. OKH Group has notified the respective

banks accordingly and waiver letters have been obtained where necessary. There is no

material effect on its financial position and operations, or the investments of the Vendor in

the Shares of the Company.

Based on OKH Group’s current assets of S$295.0 million and its current liabilities of

S$167.6 million as at 30 June 2012, OKH Group’s working capital ratio (current assets

divided by current liabilities) was 1.76 times.

As at 30 June 2012, OKH Group’s cash and bank balances of approximately S$22.5 million

comprised bank balances of S$14.4 million, which were restricted to payments for

expenditure on the properties under development held under the Housing Development

(Project Account) Rules, fixed deposits of S$0.03 million pledged for bank facilities and

bank deposits of S$8.1 million (not restricted in use).

As at 30 June 2012, OKH Group had available credit facilities (comprising secured bank

loans) of S$303.2 million, of which S$206.7 million was utilised and S$96.5 million was

unutilised. Bank loans and overdrafts amounting to S$206.7 million remained outstanding.

The bank loans and overdrafts were used to finance its acquisition of properties for

development as well as the construction works for development and construction projects.

The interest rates for the bank loans ranged from 1.9% to 8% per annum. The interest

expense relating to bank loans drawn down to finance the development projects has been

capitalised as cost of development properties.


151

OKH Group is of the opinion that, after taking into consideration its existing credit facilities,

present cash position and the cash flows generated from its operations, OKH Group has

adequate working capital for its present requirements for up to 12 months.

E.6 Cash-Flow Analysis

The following table sets out a summary of OKH Group’s combined statement of cash flow

for FY2010, FY2011 and FY2012. The combined cash flow summary should be read in

conjunction with the full text of this Circular, including Appendices B and C of this Circular.

FY2012 FY2011 FY2010

S$ S$ S$

Net cash (used in) generated from

operating activities (158,421,993) (11,030,988) 1,159,449

Net cash used in investing activities (2,837,685) (3,197,921) (1,175,601)

Net cash generated from (used in)

financing activities 163,723,132 32,842,987 (5,132,807)

Net increase (decrease) in cash and bank

balances 2,463,454 18,614,078 (5,148,959)

Cash and cash equivalents (Overdraft) at

beginning of year 14,092,891 (4,521,187) 627,772

Cash and cash equivalents (Overdraft)

at end of year 16,556,345 14,092,891 (4,521,187)

FY2010

Net cash inflow from operating activities

In FY2010, OKH Group recorded a net cash inflow from operating activities of S$1.2 million

which comprised operating cash inflow before working capital changes of S$5.7 million,

which was partially offset by net working capital outflow of S$3.3 million and the payments

of interest and income tax of S$0.9 million and S$0.3 million respectively.

The net working capital outflow was primarily due to an increase in properties under

development and construction contracts of S$0.5 million and S$1.7 million respectively as

well as a decrease in trade and other payables of S$2.4 million, which were partially offset

by the net cash inflow from trade and other receivables of S$1.3 million. The increase in

cash outflow in these properties under development was mainly due to the payment of

expenses in excess of the cost of sales recognised (in accordance with third party certified

completion) as the construction of A’Posh Bizhub progressed.

The increase in cash outflow in construction contracts was mainly due to the payment of

expenses in excess of the progress billings received.

The decrease in cash outflow in trade and other payables was mainly due to payments

made during the period.

Net cash outflow from investing activities

OKH Group recorded a net cash outflow from investing activities of S$1.2 million in FY2010

which comprised the purchase of investment properties of S$1.0 million and the purchase

of property, plant and equipment of S$0.1 million primarily for its construction business.


152

Net cash outflow from financing activities

OKH Group recorded a net cash outflow from financing activities of S$5.1 million in

FY2010. This was mainly due to the repayment of bank loans and finance leases of S$19.4

million and S$0.2 million respectively, which were partially offset by cash inflows from new

bank loans of S$14.5 million.

FY2011

Net cash outflow from operating activities

In FY2011, OKH Group recorded a net cash outflow from operating activities of S$11.0

million which comprised operating cash outflow before working capital changes of S$4.8

million, net working capital outflow of S$4.9 million and the payment of interest of S$1.3

million.

The net working capital outflow was primarily due to the increase in properties under

development and construction contracts of S$38.6 million and S$2.9 million respectively,

which were offset by the net cash inflow of S$8.3 million and S$28.3 million from trade and

other receivables and trade and other payables respectively.

The increase in cash outflow in these properties under development was mainly due to the

payment of expenses as the construction of A’Posh Bizhub progressed.



The increase in cash inflow from trade and other receivables was mainly due to cash

collections from customers during the year.

The increase in cash inflow from trade and other payables was mainly due to advance

receipts from customers of A’Posh BizHub and purchases during the year, partially offset

by payments made to suppliers.


OKH Group recorded a net cash outflow from investing activities of S$3.2 million in

FY2011. This was mainly due to the purchase of property, plant and equipment and land

parcel of S$0.3 million and S$4.2 million respectively, which were partially offset by the

proceeds of S$1.3 million from the disposal of an investment property.

Net cash inflow from financing activities

OKH Group recorded a net cash inflow from financing activities of S$32.8 million in

FY2011. This was mainly due to the drawdown of bank loans of S$42.2 million to finance

the development and construction of A’Posh BizHub as well as the acquisition of the two

land parcels in Woodlands Avenue 12. These cash inflows were partially offset by cash

outflows for the repayment of bank loans and finance leases of S$9.0 million and S$0.3

million respectively.

FY2012

Net cash outflow from operating activities

In FY2012, OKH Group recorded a net cash outflow from operating activities of S$158.4

million which comprised operating cash inflow before working capital changes of S$28.1

million, net working capital outflow of S$179.3 million and the payment of interest and taxes

of S$5.6 million and S$1.6 million respectively.


153

The net working capital outflow was primarily due to increase in properties under

development of S$127.4 million, completed properties held for sale of S$3.3 million,

construction contracts of S$11.4 million and trade and other receivables of S$70.9 million.

The net cash outflow was partially offset by the net cash inflow of S$33.7 million from trade

and other payables.

The increase in cash outflow in properties under development was mainly due to the

payment of expenses as the construction of A’Posh Bizhub and Primz BizHub progressed

as well as the acquisition of land parcel at Woodlands Avenue 12.



The increase in cash outflow from trade and other receivables was mainly due to billings

made to customers upon the TOP of A’Posh Bizhub.

The increase in cash inflow from trade and other payables was mainly due to advance

receipts from customers of Primz BizHub and purchases during the year, partially offset by

payments made to suppliers.


OKH Group recorded a net cash outflow from investing activities of S$2.8 million in

FY2012. This was mainly due to the purchase of property, plant and equipment and land

parcel of S$1.8 million and S$1.2 million respectively, which were partially offset by the

proceeds of S$0.1 million from the disposal of property, plant and equipment.

Net cash inflow from financing activities

OKH Group recorded a net cash inflow from financing activities of S$163.7 million in

FY2012. This was mainly due to the drawdown of bank loans of S$174.2 million to finance

the development and construction of A’Posh BizHub and Primz BizHub as well as the

acquisition of the a land parcel in Woodlands Avenue 12. Capital contribution and loan from

non-controlling interest of S$0.3 million and S$8.9 million respectively and the decrease in

fixed deposits pledged of S$0.2 million also contributed to the net cash inflow. These cash

inflows were partially offset by cash outflows for the repayment of bank loans and finance

leases of S$19.7 million and S$0.2 million respectively.

E.7 Impact of Adoption of INT FRS 115 — Agreements For The Construction Of Real

Estate (With Accompanying Note)

INT FRS 115 is effective for annual periods beginning on or after 1 January 2011. The

Interpretation addresses how entities should determine whether an agreement for the

construction of real estate is within the scope of FRS 11 Construction Contracts or FRS 18

Revenue and when revenue from the construction of real estate should be recognised.

• If an agreement is to be accounted for as a construction under contract under FRS 11,

contract revenue and contract costs associated with the construction contract shall be

recognised as revenue and expenses respectively by reference to the stage of

completion of the contract activity at the end of the reporting period.

• If an agreement is to be accounted for as a sale of goods under FRS 18, revenues are

typically recognised at the completion of the construction i.e. when the entity has


154

transferred to the buyer the significant risks and rewards are transferred continuously

as construction progresses, in which case revenue and costs should be recognised by

reference to the stage of completion using the stage of completion method.

The Interpretation is issued with an Accompanying Note that explains the application of the

Interpretation to specific type of property development sales in Singapore by considering

its legal framework.

Upon the adoption of the INT FRS 115, the Group applied the completion of construction

method of revenue recognition for its development. This change in accounting policy

requires retrospective adjustments which has an effect on the amounts reported which are

disclosed below:

As

reported

Restated upon

adoption of

INT FRS 115

2011

S$

2011

S$

Consolidated statement of financial position

Trade and other receivables 7,048,235 4,931,365

Property under development 45,849,806 50,812,658

Trade and other payables 12,618,244 36,536,204

Income tax payable 2,774,039 —

Deferred tax liabilities 1,374,000 565,803

Accumulated profits 20,578,917 3,089,175

Consolidated statement of comprehensive income

Revenue 55,713,384 7,332,563

Cost of sales (32,976,182) (5,667,339)

Profit (Loss) before income tax 18,379,169 (2,692,809)

Income tax expense (3,327,200) 255,036

Profit (Loss) after income tax 15,051,969 (2,437,773)

Basic and diluted earnings (loss) per share 2.32 (0.38)

E.8 Material Capital Expenditures and Divestments

Capital Expenditure

The tables below set out the major capital expenditure and capital divestment respectively

for FY2010, FY2011, FY2012 and up to the Latest Practicable Date.

Capital expenditure

(S$’000) FY2010 FY2011 FY2012

1 July 2012

to Latest

Practicable Date

Freehold properties 1,046 — 1,653 —

Computer equipment 1 17 61 37


155

Capital expenditure

(S$’000) FY2010 FY2011 FY2012

1 July 2012

to Latest

Practicable Date

Machinery — 44 20 168

Motor vehicle 327 678 30 816

Office equipment and fittings 3 13 29 58

Renovation 8 — 10 47

Total 1,385 752 1,803 1,126

Capital divestment

(S$’000) FY2010 FY2011 FY2012

1 July 2012

to Latest

Practicable Date

Freehold properties — 1,046 — —

Computer equipment 2 — 1 —

Motor vehicle 37 — 169 436

Office equipment and fittings 6 — — —

Total 45 (1,046) 170 436

Operating lease commitments

As at the Latest Practicable Date, OKH Group has no operating lease commitments.

Capital commitment

As at the Latest Practicable Date, OKH Group has the following capital commitments:

(S$’000) Latest Practicable Date

Purchase of office units —

Construction of properties 15,237

Purchase of Industrial Property 7,542

Purchase of land —

22,779

Bills discounted with recourse

As at the Latest Practicable Date, OKH Group has total bills discounted with recourse of

S$13,043,507.

The reason for such recourse is due to the utilisation of bank trade financing facilities to

enable OKH Group to pay its suppliers which resulted in the bank having recourse over the

amount paid to the suppliers on behalf of OKH Group.


156

E.9 Capitalisation and Indebtedness

The following table shows the cash and bank balances, indebtedness and capitalisation of

OKH Group, based on its management accounts as at 30 November 2012. The table

should be read in conjunction with the independent auditors’ report on the consolidated

financial statements of OKH Holdings Pte. Ltd. and its subsidiaries for the financial year

ended June 30, 2010, 2011 and 2012 as set out in Appendix B of this Circular.

As at

30 November

2012

S$

Cash and bank balances

Cash and bank balances 19,117,280

Pledged deposits 30,446

19,147,726

Short term debt:

Finance Lease 317,289

Bank overdraft, secured and guaranteed 3,114,567

Bank borrowings, secured and guaranteed 19,854,350

Long term debt:


Bank borrowings, secured and guaranteed 146,119,949

Loan from shareholder 8,541,501

Total indebtedness 178,666,099

Total shareholders’ equity 22,524,187

Total capitalisation and indebtedness 201,190,286

OKH Group has breached certain terms and conditions or covenants associated with credit

arrangements and bank loans. These breaches were mainly due to the restatement of the

FY2011 financial statements in accordance with the INT FRS 115 which resulted in the

decrease in OKH Group’s retained earnings balance (which is used in the computation of

certain financial covenants). OKH Group has informed the respective banks and waiver

letters have been obtained where necessary. The breaches will not materially affect OKH

Group’s financial position and results or business operations, or the investments of OKH

Group’s shareholders.

One of OKH Group’s banking facilities from HSBC has terms and conditions to maintain a

maximum gearing ratio of 1.5. OKH Group is currently in the process of seeking a waiver

from HSBC. In the event that HSBC does not grant the waiver, all loans due to HSBC

become immediately due and payable. As at 30 November 2012, amounts due to HSBC for

banking facilities utilised amounts to S$1,143,274, out of the total banking facilities of

S$2,300,000. In the event that the outstanding amounts from HSBC become immediately

due and payable, OKH Group does not foresee any problem funding the repayment using

its existing available internal resources.


157

One of the OKH Group’s banking facilities from CIMB has terms and conditions limiting the

change in shareholding structure of OKH. OKH Group is currently in the process of seeking

a waiver from CIMB. In the event that CIMB does not grant the waiver, all loans due to

CIMB become immediately due and payable. As at 30 November 2012, amounts due to

CIMB for banking facilities utilised amounts to S$1,891,040, out of the total banking

facilities of S$2,100,000. In the event that the outstanding amounts from CIMB become

immediately due and payable, OKH Group does not foresee any problem funding the

repayment using its existing available internal resources.

The Proposed Directors are unaware of any other breaches or non-compliance with any

terms or conditions which might cause the banks to cancel, withdraw, suspend, reduce or

recall on demand the callable bank loans amounting to S$12.0 million as at the Latest

Practicable Date.

As at 30 June 2012, OKH Group’s total credit facilities (utilised and unutilised) are as

follows:

Nature of Facility

Facilities

granted

(S$’000)

Utilised

(S$’000)

Unutilised

(S$’000)

Interest

rates

Maturity

Profile

Term loans 183,452 181,785 1,667 1.9% to 4.0% Monthly

instalments

over 24 to

120 months

Revolving working

capital loans

112,800 18,999 93,801 By

quotation(1)

Revolving

Bank overdrafts 6,768 5,890 878 6.5% to 6.8% Repayable

on demand

Corporate credit

card

150 — 150 Not

applicable

Revolving

Total 303,170 206,674 96,496

Note:

(1) Based on bank’s cost of funds.

A majority of OKH Group’s borrowings are secured by mortgages over its freehold,

leasehold and development properties, receivables, cash deposits and personal guarantee

of Bon Ween Foong. Please refer to Section I entitled “Interested Person Transactions” in

the Letter to Shareholders from OKH of this Circular for more information.

Save as disclosed above, as at the Latest Practicable Date, OKH Group has no other

borrowings or indebtedness in the nature of borrowings.

Save as disclosed above and changes in OKH Group’s retained earnings arising from its

day to day operations in the ordinary course of its business, there were no material

changes to its shareholders’ equity and indebtedness.


158

Finance Leases

As at 30 June 2012, the amounts payable by OKH Group under finance leases are as

follows:

S$’000

Within 1 year 160

Within 2 to 5 years 345

More than 5 years 19

524

It is OKH Group’s policy to lease certain plant and equipment under finance leases. The

lease term ranges from 48 months to 84 months. The average effective interest rate is

4.63% per annum.

Contingent liabilities

OKH Group has made provisions for contingent liabilities, such as liquidated damages as

and when it is probable that an obligation will arise. Liquidated damages of S$6.8 million

have been provided for as at 30 June 2012. SMRT’s claims have already been included in

this S$6.8 million in liquidated damages and adequately provided for. OKH Group is not

aware of any unrecognised contingent liabilities as at the Latest Practicable Date.

E.10 Foreign Exchange Management

OKH Group’s financial statements are prepared in S$, which is its functional currency. OKH

Group’s services and products are traded in S$ as they are purchased and sold in

Singapore. Accordingly, OKH Group’s business is done in S$ denomination. The

percentage of OKH Group’s revenue and purchases denominated in S$ and other currency

for the periods under review are as follows:

Revenue (%) FY2010 FY2011 FY2012

S$ 99.00 93.50 100.00

Other currency 1.00 6.50 —

100.00 100.00 100.00

Purchases (%) FY2010 FY2011 FY2012

S$ 100.00 100.00 95.59

Other currency — — 4.41

100.00 100.00 100.00

Currently, OKH Group does not have a formal hedging policy with respect to its foreign

exchange exposure as OKH Group normally transacts its business in S$ and hence, there

is no significant exposure to foreign exchange risk. OKH Group does not use forward

contracts to hedge its exposure to foreign currency risk. OKH Group will continue to

monitor its foreign exchange exposure in the future and will consider hedging any material

foreign exchange exposure should the need arise. Should OKH Group enter into any


159

hedging transaction in the future, such transaction shall be subject to review and approval

by the board of directors. In addition, should OKH Group decide to establish any formal

hedging policy in the future, such policy shall be subject to review and approval by the

board of directors prior to its implementation. OKH Group’s Audit Committee will review

periodically the hedging policies (if any), all types of instruments used for hedging as well

as the foreign exchange policies and practices of OKH Group.

F. PROSPECTS, TREND INFORMATION, STRATEGY AND FUTURE PLANS

F.1 Prospects

Generally linked to the economic growth of Singapore, Singapore’s property development

and construction industries form an integral part of the domestic economy. On a

year-on-year basis, the domestic economy continued to grow at a modest pace of 1.9% in

the second quarter of 2012, following the 1.4% growth in the previous quarter(1).

According to the URA’s real estate statistics for the first quarter of 2012, prices of

multiple-user factory space increased by 7.2% in the first quarter of 2012, compared to

3.8% in the previous quarter. Rentals of multiple-user factory space increased by 1.3%,

compared to the increase of 0.6% in the previous quarter. For private residential

properties, prices fell marginally by 0.1% in the first quarter of 2012, while rentals of private

residential properties increased by 0.3% in the first quarter 2012(2).

While economic activity in Singapore is forecasted to grow marginally in 2012(3),

Singapore’s construction demand is projected to reach between S$21 billion to S$27 billion

per year in 2012. For 2013 and 2014, the average construction demand in Singapore is

projected to range between S$19 billion and S$27 billion per annum(4).

Over the past few years, the Singapore government has introduced new measures to

encourage greater financial prudence among private residential property purchasers, so as

to maintain a stable and sustainable property market(5)(6).

In September 2011, Ministry of National Development further raised development charges

for new building projects in Singapore. The new rates will apply to cases which are granted

provisional permission (“PP”) or second and subsequent extension to the PP on or after the

effective date. In addition, as amended in September 2011, for industrial and warehousing

properties, development charges will go up by an average of 31.0% on average, with the

largest increase of 55.0% in Sector 114 (Tuas/Pioneer Road/Jurong/Sungei Kadut/Mandai

Estate/Woodlands area) and Sector 115 (Woodlands/Sembawang/Yishun area). At the

same time, for residential landed properties, the rates for development charges will go up

by an average of 17.0%, while those for residential non-landed areas have been raised by

an average of 12.0%(7). The Singapore government’s recent initiative to increase

productivity in the construction industry has resulted in the implementation of some

measures such as increasing foreign workers’ levy over the next three years from March

2010(8). While OKH Group has strong familiarity of the entire construction cycle, it will incur

higher construction costs if the targeted productivity at its worksites is not met. These

factors will increase the overall costs of property development in Singapore.

The government launched the IGLS programme for the first half of 2012 to ensure that the

industrial property market remains stable and sustainable and more land will be released

in the IGLS programme to meet potential demand. There are also new conditions on all B1

and B2 IGLS parcels, to take effect from 1 January 2012, to better meet industrialists’

needs for ready-built industrial space(9).


160

In June 2012, the government announced that it has shortened the tenure for all

recommended sites in the IGLS programme for the second half of 2012 to a maximum term

of 30 years, down from 60 years. The tenure reduction increases the Government’s

flexibility for land redevelopment and would help to make industrial property more

affordable for industrialists(10).

While there is more competition within domestic property development companies to

replenish and build up their land bank, OKH Group observed a trend of slower growth in

land acquisition costs.

Notes:

(1) Source: The Ministry of Trade and Industry’s press release dated 13 July 2012

and entitled “Singapore’s Growth Momentum Eased in Second Quarter 2012” on its website:

http://www.mti.gov.sg/NewsRoom/Documents/2Q12_Press%20Release%20of%20Advance%20GDP%20E

stimates.pdf. The Ministry of Trade and Industry has not consented to the inclusion of the above information

in this Circular for the purposes of Section 249 of the SFA and is therefore not liable for the relevant

statement(s) under Sections 253 and 254 of the SFA. While OKH has taken reasonable action to ensure

that the information is extracted accurately and fairly and has been included in this Circular in its proper

form and context, OKH has not independently verified the accuracy of the relevant information.

(2) Source: The URA’s press release dated 27 April 2012 and entitled “Prices of private residential properties

register marginal decline in 1st quarter 2012” on its website: http://www.ura.gov.sg/pr/text/2012/pr12-

44.html. The URA has not consented to the inclusion of the above information in this Circular for the

purposes of Section 249 of the SFA and is therefore not liable for the relevant statement(s) under Sections

253 and 254 of the SFA. While OKH Group has taken reasonable action to ensure that the information is

extracted accurately and fairly and has been included in this Circular in its proper form and context, OKH

Group has not independently verified the accuracy of the relevant information.

(3) Source: The Ministry of Trade and Industry’s press release dated 17 May 2012 and entitled

“2012 GDP Growth Forecast Maintained at 1.0 to 3.0 Per Cent” on its website:

http://www.mti.gov.sg/ResearchRoom/SiteAssets/Pages/Economic-Survey-of-Singapore-First-Quarter-20

12/PR_1Q12.pdf. The Ministry of Trade and Industry has not consented to the inclusion of the above

information in this Circular for the purposes of Section 249 of the SFA and is therefore not liable for the

relevant statement(s) under Sections 253 and 254 of the SFA. While OKH Group has taken reasonable

action to ensure that the information is extracted accurately and fairly and has been included in this Circular

in its proper form and context, OKH Group has not independently verified the accuracy of the relevant

information.

(4) Source: The BCA’s press release dated 11 January 2012 and entitled “Public sector projects to sustain

construction demand in 2012” on its website: http://www.bca.gov.sg/newsroom/others/pr11012012_CD.pdf.

The BCA has not consented to the inclusion of the above information in this Circular for the purposes of

Section 249 of the SFA and is therefore not liable for the relevant statement(s) under Sections 253 and 254

of the SFA. While OKH Group has taken reasonable action to ensure that the information is extracted

accurately and fairly and has been included in this Circular in its proper form and context, OKH Group has

not independently verified the accuracy of the relevant information.

(5) Source: The MAS’s press release dated 13 January 2011 and entitled “Measures to

maintain a stable and sustainable property market” on its website:

http://www.mas.gov.sg/news_room/press_releases/2011/Measures_To_Maintain_A_Stable_And_Sustaina

ble_Property_Market.html. The MAS has not consented to the inclusion of the above information in this

Circular for the purposes of Section 249 of the SFA and is therefore not liable for the relevant statement(s)

under Sections 253 and 254 of the SFA. While OKH Group has taken reasonable action to ensure that the

information is extracted accurately and fairly and has been included in this Circular in its proper form and

context, OKH Group has not independently verified the accuracy of the relevant information.

(6) Source: The MAS’s press release dated 7 December 2011 and entitled

“Additional Buyer’s Stamp Duty for a Stable and Sustainable Property Market” on its website:

http://www.mas.gov.sg/news_room/press_releases/2011/ABSD_for_a_Stable_and_Sustainable_Property_

Market.html. The MAS has not consented to the inclusion of the above information in this Circular for the

purposes of Section 249 of the SFA and is therefore not liable for the relevant statement(s) under Sections

253 and 254 of the SFA. While OKH Group has taken reasonable action to ensure that the information is

extracted accurately and fairly and has been included in this Circular in its proper form and context, OKH

Group has not independently verified the accuracy of the relevant information.

(7) Source: The Ministry of National Development’s press release dated 31 August 2011 and

entitled “Revision of Development Charges Rates” on its website:

http://app.mnd.gov.sg/Newsroom/NewsPage.aspx?ID=2900&category=PressRelease&year=2011&RA1=&


161

RA2=&RA3=. The Ministry of National Development has not consented to the inclusion of the above

information in this Circular for the purposes of Section 249 of the SFA and is therefore not liable for the

relevant statement(s) under Sections 253 and 254 of the SFA. While OKH Group has taken reasonable

action to ensure that the information is extracted accurately and fairly and has been included in this Circular

in its proper form and context, OKH Group has not independently verified the accuracy of the relevant

information.

(8) Source: The Building and Construction Authority’s press release dated 03 March 2010 and entitled

“Measures to raise productivity and build capability in the construction sector” on its website:

http://www.bca.gov.sg/Newsroom/others/pr08032010_construction_measures.pdf. The Ministry of National

Development has not consented to the inclusion of the above information in this Circular for the purposes

of Section 249 of the SFA and is therefore not liable for the relevant statement(s) under Sections 253 and

254 of the SFA. While OKH Group has taken reasonable action to ensure that the information is extracted



(9) Source: The Ministry of Trade and Industry’s press release dated 29 December 2011 and entitled “Launch

of First Half 2012 Industrial Government Land Sales Programme” on its website:

http://www.mti.gov.sg/NewsRoom/Documents/app.mti.gov.sg/data/article/26822/doc/Press%20Release%2

0-%20Industrial%20govt%20land%20sales%20programme.pdf. The Ministry of Ministry of Trade and

Industry has not consented to the inclusion of the above information in this Circular for the purposes of

Section 249 of the SFA and is therefore not liable for the relevant statement(s) under Sections 253 and 254

of the SFA. While OKH Group has taken reasonable action to ensure that the information is extracted



(10) Source: The Ministry of Trade and Industry’s press release dated 11 June 2012 and entitled “Launch

of Second Half 2012 Industrial Government Land Sales Programme” on its website:

http://www.mti.gov.sg/NewsRoom/Documents/Launch%20of%20Second%20Half%202012%20Industrial%

20Government%20Land%20Sales%20Programme%20%20Website.pdf. The Ministry of Ministry of Trade

and Industry has not consented to the inclusion of the above information in this Circular for the purposes

of Section 249 of the SFA and is therefore not liable for the relevant statement(s) under Sections 253 and

254 of the SFA. While OKH Group has taken reasonable action to ensure that the information is extracted



Each of the above organisations or corporations (as the case may be) has not consented

to the inclusion of the above information in this Circular for the purpose of Section 249 of

the SFA and is therefore not liable for the relevant information under Sections 253 and 254

of the SFA. While the Proposed Directors have taken reasonable action to ensure that the

information is extracted accurately and fairly, and has been included in this Circular in its

proper form and context, they have not independently verified the accuracy of the relevant

information.

F.2 Trend Information and Order Books

Trend Information

Based on OKH Group’s knowledge and experience of the industry, its Proposed Directors

have observed the following trends:


OKH Group expects selling prices of its upcoming property development projects to

be affected in the near term due to recent government measures in Singapore and the

uncertainty in the global economy as a result of the European debt crisis and for such

selling prices to progress upwards in the medium to long term subject to the market

conditions in the industry and the general performance of the domestic economy.

The government’s measures on the residential property market may increase the

demand for industrial properties. Aligned with domestic economic growth, SMEs will

likely require more space within land-scarce Singapore.


162

Please refer to Section F.1 entitled “Prospects” in the Letter to Shareholders from

OKH of this Circular for more information and details on the outlook for the Singapore

property development industry.

With more competition within domestic property development companies to replenish

and build up their land bank and an increase in development charges, OKH Group

observed a trend of higher land acquisition costs. OKH Group expects this trend to

further increase its cost of property development for future projects.

Please refer to Section B.4 entitled “Projects” in the Letter to Shareholders from OKH

of this Circular for more information and details on OKH Group’s significant ongoing

projects.


Barring any unforeseen circumstances, OKH Group is of the view that the overall

outlook for Singapore construction industry is favourable, particularly in the public

sector. OKH Group also observes that there has been an increase in its cost of

construction due mainly to increases in the raw material prices (in particular, for sand,

cement, steel and concrete) and higher labour cost. In addition, the increase in

foreign workers’ levy by the Singapore government to promote an increase in

productivity will also increase the cost of construction. While OKH Group has strong

familiarity of the entire construction cycle, it will incur higher construction costs if the

targeted productivity at its worksites is not met.

In the event that such costs increase, OKH Group is of the view that it is well

positioned to deal with this as they will take measures, as they have done in the past,

to deal with cost increases by providing for certain material costs fluctuations in its

contracts with its customers.

Notwithstanding this, OKH Group is of the view that this productivity initiative will not

significantly affect its financial position as it has been actively streamlining its

operation processes to improve productivity which reduces the labour required. In

addition, OKH Group enjoys synergy in costs when procuring supplies for its business

activities.

Order Books

OKH Group intends to remain cautious in tendering for new projects for its construction

business. As at the Latest Practicable Date, OKH Group’s order books for its construction

business stood at S$13.6 million. Barring unforeseen circumstances, OKH Group expects

a majority of the orders to be fulfilled over the next three months. As the revenue from OKH

Group’s construction business is recognised based on the percentage of completion

method, its order books exclude the contract value of completed works which have been

recognised as revenue.


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As at the Latest Practicable Date, OKH Group has in respect of its property development

business pre-sold such development properties for a total contract value of approximately

S$317.4 million, which will be recognised as revenue upon completion of the relevant

property development project based on the completion of construction method in

accordance with the adoption of INT FRS 115 effective for annual periods beginning on or

after 1 January 2011. The contract sum for the pre-sold properties is payable by

purchasers on a progressive basis according to the relevant provisions of the sale and

purchase agreement in respect of these pre-sold properties.

Save as disclosed above and in Section D entitled “Risk Factors” in the Letter to

Shareholder from OKH of this Circular, and barring any unforeseen circumstances, the

Proposed Directors are not aware of any other known recent trends in construction, sales

and inventory, contract values or other known trends, uncertainties, demands,

commitments or events that are reasonably likely to have a material and adverse effect on

OKH Group’s revenue, profitability, liquidity or capital resources, or that would cause

financial information disclosed in this Circular to be not necessarily indicative of OKH

Group’s future operating results or financial condition.

F.3 Strategies and Future Plans

The business strategies and future plans of OKH Group for the growth and expansion of

its business are as follows:

Acquisition of new development sites for OKH Group’s land bank

To ensure sustainable growth for OKH Group, it intends to acquire new land parcels to build

up its land bank for future property development. OKH Group strives to maintain a land

bank of development sites sufficient to support a development pipeline of about three to

five years on a continual basis. This will enable OKH Group to expand its development

project pipeline and capitalise on suitable opportunities during favourable market

conditions. OKH Group will also monitor the property market closely to assess the new

preferences among potential property buyers or emerging trends in the property market to

adjust its land acquisition strategy accordingly.

Expansion through acquisitions, joint ventures and/or strategic alliances

In addition to growing organically, OKH Group may consider expanding the business

through acquisitions, joint ventures or strategic alliances with parties who create

synergistic values with its existing business. Through such acquisitions, joint ventures or

strategic alliances, OKH Group will look to strengthen its market position, expand its

network, as well as expand into new businesses complementary to its current business.

In addition to growing its existing business in commercial and industrial developments,

OKH Group may also explore potential opportunities to expand into other property

segments such as residential and/or integrated properties, or expand into overseas

markets, should appropriate opportunities arise. OKH Group believes that for its overseas

ventures, forming joint ventures with business partners with local knowledge or local

contacts is a prudent and cost-effective strategy of penetrating overseas markets.

OKH Group further believes that with the status as a listed company of the SGX-ST, it will

be better placed to tap new funds for new expansion. Should such opportunities arise, the

Company will seek approval, where necessary, from its Shareholders in accordance with

the requirements of the applicable laws and regulations and will make the necessary

periodic announcements on the usage of the proceeds of such funds.


164

Sourcing for opportunities to develop, manage and rent commercial and industrial

property developments

OKH Group also has plans to expand its business through managing and renting properties

which it may be involved in their construction or development. Due to the high costs of

property ownership and construction in Singapore, both large and small corporations may

need commercial or industrial space for their business, but may not wish to own or develop

them. Where such opportunities exist, OKH Group may acquire new or existing land

parcels on its own or form a joint venture with other third parties to acquire and develop or

develop such properties for rental to the interested users on a long-term lease basis, and

to manage and maintain such properties in order to derive recurring income. OKH Group

believes that the extension of its business to lease, operate and/or manage the

redeveloped and/or newly constructed properties is complementary to OKH Group’s

current portfolio.

Continue to grow the construction business

While focusing on the construction of its internal property development projects, OKH

Group intends to continue to grow its construction business in the private and public sector.

It will leverage on its track record in handling building construction and large-scale A&A

works projects to pitch for suitable projects for its future growth. OKH Group also plans to

undertake more “design and build” projects in the future, where the scope of such project

will include designing, planning and construction of the building development.

G. MORATORIUM

To demonstrate his commitment to the Enlarged Group, the Vendor has undertaken not to

sell, realise, transfer or otherwise dispose of any part of his interest in the issued share

capital of the Company for a period of six months commencing from the date of the listing

and quotation of the Consideration Shares on the SGX-ST and for a period of six months

thereafter, not to reduce his interests in the issued share capital of the Company to below

50.0% of his original shareholdings (adjusted for any bonus issue or subdivision) in the

Company.

H. DIVIDEND POLICY

OKH Group has not declared, approved and paid any dividend for FY2010, FY2011 and

FY2012.

Currently, OKH does not have a fixed dividend policy. Any declaration and payment of

dividends in the future will be determined at the sole discretion of the board of the Enlarged

Group subject to Shareholders’ approval, and will depend upon the Enlarged Group’s

operating results, financial conditions, other cash requirements including capital

expenditures, the terms of the borrowing arrangements (if any), and other factors deemed

relevant by the directors of the Enlarged Group. Therefore, 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.


165

Subject to the Bermuda Companies Act, the Company may declare dividends with the

sanction of the Shareholders in a general meeting, but the amount of such dividends shall

not exceed the amount recommended by the Directors. Subject to the Bermuda Companies

Act, the Directors may also declare dividend or other distribution without the need to obtain

Shareholders’ approval.

Please refer to Appendix E of this Circular for information relating to taxes payable on

dividends.

I. INTERESTED PERSON TRANSACTIONS

I.1 Interested Person Transactions

In general, transactions between the Enlarged Group and any of its Interested Persons

(namely, its directors, CEO, Controlling Shareholders and/or their Associates thereof) are

known as Interested Person Transactions under Chapter 9 of the Listing Manual. The

following discussion sets out the material Interested Person Transactions for the last three

financial years ended 30 June 2010, 2011 and 2012 and the period from 1 July 2012 up to

the Latest Practicable Date (“Relevant Period”).

Save as disclosed in this Circular, none of the Directors, Proposed Directors, Controlling

Shareholders and/or their Associates thereof was or is interested, whether directly or

indirectly, in any material transaction undertaken by the Enlarged Group within the last

three financial years ended 30 June 2010, 2011 and 2012 and for the period from 1 July

2012 up to the Latest Practicable Date.

I.1.1 Past Interested Person Transactions

Personal guarantee and counter indemnities from the Vendor

Bon Ween Foong has in the past provided a personal guarantee to secure banking facilities

extended by DBS to OKH. Details of the personal guarantee given by Bon Ween Foong are

as follows:

Financial

institution Guarantor

Largest Amount

Guaranteed from

1 July 2009

to the Latest

Practicable Date

(S$’000)

Facility for/

used by

Purpose of

facility

DBS Bon Ween Foong 33,050 OKH Construction

and property

development

financing


166

In addition, Bon Ween Foong has also in the past provided the following counter

indemnities to certain insurance companies in consideration for their issue of performance

bond guarantees to secure OKH Group’s performance of its obligations under contracts

made with its customers in relation to its construction business, as follows:

Customer Guarantor

Approximate amount

insured under the

performance bond

(S$’000)

SMRT Bon Ween Foong 6,739

Singapore Turf Club Bon Ween Foong 878

Tampines Town Council Bon Ween Foong 161

Sembawang Town Council Bon Ween Foong 195

Pasir Ris Town Council Bon Ween Foong 30

Whitehouse Holdings Pte Ltd Bon Ween Foong 589

Mana Mana Singapore Pte Ltd Bon Ween Foong 88

An individual owner of a residential

property

Bon Ween Foong 115

Singapore GP Pte Ltd Bon Ween Foong 678

Allbest Property Management Pte Ltd Bon Ween Foong 158

CAAS Bon Ween Foong 793

King’s Tanglin Shopping Pte Ltd Bon Ween Foong 26

As no consideration was paid to Bon Ween Foong for the provision of the guarantee and

counter indemnities, the above arrangements were not carried out on an arm’s length basis

but these arrangements were not prejudicial to the interests of OKH Group. The guarantee

and counter indemnities set out above have been discharged as at the Latest Practicable

Date.

Sale of Dai-Dan OKH JV to the Vendor

Dai-Dan Co., Ltd. is a company incorporated in Japan and listed on the stock exchanges

of Tokyo and Osaka. The principal activities of Dai-Dan Co., Ltd. include design,

supervision and construction of electrical facility, air conditioning facility, plumbing and

sanitary facility, fire protection facility, and installation of machine and equipment. It has a

branch office in Singapore. In 2005, OKH formed a joint-venture partnership with Dai-Dan

Co., Ltd., known as Dai-Dan OKH JV to provide A&A works to commercial spaces at

various MRT stations, by investing a sum of S$15,000.00 into the Dai-Dan OKH JV.

On 1 November 2011, OKH entered into an agreement with the Vendor, to dispose of its

50.0% interest in Dai-Dan OKH JV at a consideration of S$3,546,432.46. The

consideration was arrived at on a willing-buyer and willing-seller basis after taking into

account, inter alia, the capital contribution of Dai-Dan OKH JV and the outstanding amount

due from Dai-Dan OKH JV to OKH. The sale consideration had been settled in full as at 1

November 2011 by way of setting-off against part of the outstanding advances owed by

OKH to the Vendor. The disposal of the Dai-Dan OKH JV resulted in a profit of S$7,190.00

for OKH.


167

The acquisition and disposal of Dai-Dan OKH JV was not transacted on normal commercial

terms and not on an arm’s length basis as there was no independent valuation conducted

on the value of Dai-Dan OKH JV to determine the sale consideration. The sale

consideration is higher than the net book value of OKH’s share in Dai-Dan OKH JV. The

completion of the acquisition and disposal of Dai-Dan OKH JV is not prejudicial to the

interests of OKH.

I.1.2 Present and On-Going Interested Person Transaction

Purchase of goods from Alliancz International Pte. Ltd.

Alliancz International Pte. Ltd. is a company that is wholly-owned by the Vendor.

Established in October 2006, Alliancz International Pte. Ltd. is primarily involved in the

provision of services as a security lock system specialist. Over the years, Alliancz

International Pte. Ltd. has expanded its business activities to include, amongst others

supplying composite wood and automotive oils.

During the last three financial years ended 30 June 2012 and the period commencing 1

July 2012 to the Latest Practicable Date, OKH Group procured goods (such as doors and

locksets) and installation services from Alliancz International Pte. Ltd., the details of which

are as follows:

(S$’000) FY2010 FY2011 FY2012

1 July 2012

to Latest

Practicable Date

Aggregate amount of contract

value of goods sold and

services rendered 21 — 506 382

The contract value for the provision of goods and services charged by Alliancz International

Pte. Ltd. were determined based on normal commercial terms and these transactions were

conducted on an arm’s length basis on normal commercial terms which are comparable to

terms offered by other unrelated third parties. Upon Completion, OKH Group intends to

continue to make such purchases from Alliancz International Pte. Ltd. and such

transactions will be entered in accordance with such guidelines as prescribed in Chapter


Lease of property to Alliancz International Pte. Ltd.

OKH Group leased an approximate floor area of 3,143 sq ft of its premises at 701 Sims

Drive #02-05 LHK Building Singapore 387383 to Alliancz International Pte. Ltd. for use as

office space. The parties renewed the lease for a further period of two years commencing

from 1 June 2011 to 31 May 2013. The aggregate annual rental charged by OKH Group to

Alliancz International Pte. Ltd. during the Relevant Period in respect of such lease was as

follows:

(S$’000) FY2010 FY2011 FY2012

1 July 2012

to Latest

Practicable Date

Aggregate rental fees charged 40 40 42 21


168

Such rental rates were mutually agreed between the parties based on market rates (which

were advised by the property agent after taking into account the then prevailing prices,

tenant profile and rental conditions of the property) and are carried out on an arm’s length

basis on normal commercial terms which are comparable to terms offered by other

unrelated third parties. Upon Completion, any renewal of the lease for the above premises

will be entered in accordance with such guidelines as prescribed in Chapter 9 of the Listing

Manual.

Purchase of goods from Kim San Lighting & Electrical Engineering

Kim San Lighting & Electrical Engineering is a sole-proprietor that is wholly owned by Bon

Lee Yong @ Bon Koon Nan, the father of the Vendor. Established in 1965, Kim San Lighting

& Electrical Engineering is primarily engaged in the provision of electrical engineering

services and the sale of electrical products.


July 2012 to the Latest Practicable Date, OKH Group procured goods (such as lightings

and other electrical items) and installation services from Kim San Lighting & Electrical

Engineering, the details of which are as follows:

(S$’000) FY2010 FY2011 FY2012

1 July 2012

to Latest

Practicable Date

Aggregate contract value

of goods sold and

services rendered 41 42 87 20

The contract value for the provision of goods and services charged by Kim San Lighting &

Electrical Engineering were determined on normal commercial terms and these

transactions were conducted on an arm’s length basis on terms which are comparable to

terms offered by other unrelated third parties. Upon Completion, OKH Group intends to

continue to make such purchases from Kim San Lighting & Electrical Engineering and such

transactions will be entered in accordance with such guidelines as prescribed in Chapter


Personal guarantee, counter indemnities and securities from the Vendor


July 2012 to the Latest Practicable Date, the Vendor has provided personal guarantees for

credit facilities granted to OKH Group, details of which are briefly set out below:


169

Financial


Largest

Amount

Guaranteed

from

1 July 2009

to the Latest

Practicable

Date

(S$’000)

Amount

Guaranteed

as at the Latest

Practicable

Date

(S$’000)

Facility for/

used by

Purpose of

facility

UOB Bon Ween Foong 90,350 56,118 OKH

Development

Pte. Ltd.

Land loan,

construction

loan, purchase

of property and

general

working capital

requirements.

UOB Bon Ween Foong 74,000 — OKH

Management

Pte. Ltd.

Land loan,

construction

loan, purchase

of property and

general

working capital

requirements

UOB Bon Ween Foong 30,600 17,475 OKH

(Woodlands)

Pte. Ltd.

Land loan and

construction

loan

UOB Bon Ween Foong 19,477 18,267 OKH General

working capital

requirements

MayBank Bon Ween Foong 90,350 56,118 OKH

Development

Pte. Ltd.

Land loan,

construction

loan, purchase

of property and

general

working capital

requirements

MayBank Bon Ween Foong 6,000 4,258 OKH Construction

financing and

general

working capital

requirements

DBS Bon Ween Foong 18,731 7,892 OKH Construction

financing,

purchase of

property and

general

working capital

requirements

SCB Bon Ween Foong 618 586 OKH General

working capital

requirements


170

Financial


Largest

Amount

Guaranteed

from

1 July 2009

to the Latest

Practicable

Date

(S$’000)

Amount

Guaranteed

as at the Latest

Practicable

Date

(S$’000)

Facility for/

used by

Purpose of

facility

HSBC Bon Ween Foong 2,330 1,143 OKH Construction

financing and

general

working capital

requirements

CIMB Bon Ween Foong 2,100 1,942 OKH Construction

financing and

general

working capital

requirements

Hong Leong

Finance Ltd

Bon Ween Foong 1,000 686 OKH General

working capital

requirements

Ethoz Capital

Ltd

Bon Ween Foong 500 248 OKH General

working capital

requirements

ANZ Bon Ween Foong 1,000 — OKH Construction

financing and

general

working capital

requirements

As at the Latest Practicable Date, the following assets which are owned by the Vendor were

furnished as securities for banking facilities used by OKH Group:

Financial

institution Facilities

Amount

(S$’000)

Assets furnished as

securities Assets owned by

MayBank Term loan,

revolving credit

and letter of

credit

6,000 (i) 2 Hoot Kiam Road

Singapore 249390

(ii) 2A Hoot Kiam Road

Singapore 249391

(iii) 4 Hoot Kiam Road

Singapore 249392

Bon Ween Foong

HSBC Overdraft and

trade financing

2,330 8 Alexandra View

The Metropolitan

#36-01

Singapore 158747

Bon Ween Foong


171

Financial

institution Facilities

Amount

(S$’000)

Assets furnished as

securities Assets owned by

CIMB Revolving credit,

overdraft and

trade financing

2,100 (i) 1 Shenton Way

One Shenton #15-05

Singapore 068803

(ii) Fixed deposits of

S$200,000

Bon Ween Foong

SCB Overdraft 618 Fixed deposits of at

least S$622,000 and its

accrued interests

Bon Ween Foong

As no consideration was paid to Bon Ween Foong for the provision of the aforesaid

personal guarantees, counter indemnities and securities, the above arrangements were

not carried out on an arm’s length basis but were not prejudicial to the interests of OKH

Group. Upon Completion, Bon Ween Foong intends to obtain a release and discharge of

the above guarantees, counter indemnities and securities from the respective financial

institutions and insurance companies by substituting the same with other securities to be

furnished by the Enlarged Group that are acceptable to them, if required. Should any of the

financial institutions and insurance companies be unwilling to release and discharge the

above guarantees, counter indemnities and securities, Bon Ween Foong will continue to

provide the same.

Bon Ween Foong has on 27 September 2012 given a written undertaking to OKH Group

that after the Completion and in the event that the banks and financiers of the Group are

unwilling to release Bon Ween Foong from the existing personal guarantees and other

existing securities provided by him personally to OKH Group’s banks and financiers to

secure OKH Group’s borrowings and financial facilities, Bon Ween Foong will continue to

provide his existing personal guarantees and other existing securities to OKH Group’s

banks and financiers.

Amounts owing to/due from the Vendor

From time to time, Bon Ween Foong has extended non-trade related advances to and

made payments on behalf of OKH Group for working capital and other general purposes.

These advances and payments on behalf of OKH Group were unsecured, interest-free and

repayable on demand, and were therefore not carried out on an arm’s length basis.

OKH Group also made repayments to Bon Ween Foong, for the non-trade related

advances to OKH Group and payments made on behalf of OKH Group, either via (i) direct

repayments; or (ii) by making payments on behalf of Bon Ween Foong which were

subsequently offset against the amounts due to Bon Ween Foong.


172

The amounts owing to and due from the Vendor as at the end of each of the Relevant

Periods were as follows:

(S$’000) Owing to

Interested Person

As at

30 June 2010

As at

30 June 2011

As at

30 June 2012

As at the

Latest

Practicable

Date

Bon Ween Foong 21,663 39,829 66,071 68,415

The amounts due from the Vendor as at the end of each of the Relevant Periods were as

follows:

(S$’000) Due from

Interested Person

As at

30 June 2010

As at

30 June 2011

As at

30 June 2012

As at the

Latest

Practicable

Date

Bon Ween Foong 19,633 35,491 55,826 57,613

During the Relevant Period, the largest amounts owing to and due from the Vendor based

on month-end balances, were as follows:

(S$’000)

Largest amount

outstanding owing to

Interested Person

Largest amount

outstanding due from

Interested Person

Bon Ween Foong 68,415 57,613

OKH has on 5 October 2012 given a written undertaking to Bon Ween Foong that OKH will

repay the net outstanding amounts of S$11,347,160.67 as at 30 September 2012 to Bon

Ween Foong within 12 months commencing from 5 October 2012 subject to the available

cash flow and taking into consideration the liquidity and financial commitments of OKH.

As at the Latest Practicable Date, approximately S$545,101 of the aforesaid outstanding

amounts has not been repaid to the Vendor. After the completion of the Proposed

Acquisition, OKH Group does not intend to enter into any similar transactions with the

Vendor.

I.2 Chapter 9 of the Listing Manual

Under Chapter 9 of the Listing Manual, where a listed company or any of its subsidiaries

or associated companies over which the listed company has control (other than a

subsidiary or associated company that is listed on a foreign stock exchange) proposes to

enter into a transaction with the listed company’s interested persons, shareholders’

approval and/or an immediate announcement is required in respect of the transaction if the

value of the transaction is equal to or exceeds certain financial threshold. In particular,

shareholders’ approval is required where the value of such transaction is not below

S$100,000 and is:

(i) equal to or more than 5.0% of the latest audited NTA of the listed company; or

(ii) equal to or more than 5.0% of the latest audited NTA, when aggregated with other

transactions entered into with the same interested person during the same financial year.


173

Definitions under the Listing Manual

Under the Listing Manual:

(a) the term “interested person” is defined to mean a director, CEO, or controlling

shareholder of the listed company or an associate of any such director, chief

executive officer or controlling shareholder; and

(b) the term “associate” is defined to mean:

(i) in relation to any director, chief executive officer, substantial shareholder or

controlling shareholder (being an individual):

• his immediate family;

• the trustees of any trust of which he and his immediate family is a

beneficiary or, in the case of a discretionary trust, is a discretionary object;

and

• any company in which he and his immediate family (that is, the spouse,

child, adopted child, step child, sibling or parent) together (directly or

indirectly) have an interest of 30.0% or more; and

(ii) in relation to a substantial shareholder or a controlling shareholder (being a

company) means any other company which is its subsidiary or holding company

or is a subsidiary of such holding company or one in the equity of which it and/or

such other company or companies taken together (directly or indirectly) have an

interest of 30.0% or more.

I.3 Review Procedures for Future Interested Person Transactions

All future Interested Person Transactions will be properly documented and submitted to our

Audit Committee for periodic review to ensure that these future transactions with Interested

Persons are undertaken on normal commercial terms and are consistent with OKH Group’s

usual business practices and policies, which are generally no more favourable than those

extended to unrelated third parties.

In relation to any purchase of products or procurement of services from Interested Persons,

quotes from at least two unrelated third parties in respect of the same or substantially the

same type of transactions will be used as comparison wherever possible. The purchase

price or procurement price shall not be higher than the most competitive price of the two

comparative prices from the two unrelated third parties. The Audit Committee will review

the comparables, taking into account the suitability, quality and cost of the product or

service, and the experience and expertise of the supplier.

In relation to any sale of products or provision of services to Interested Persons, the price

and terms of two other completed transactions of the same or substantially the same type

of transactions to unrelated third parties are to be used as comparison wherever possible.

The Interested Persons shall not be charged at rates lower than that charged to the

unrelated third parties.

All Interested Persons Transactions above S$100,000 are to be approved by a member of

the Audit Committee who shall not be an Interested Person in respect of the particular

transaction. All Interested Person Transactions below S$100,000 are to be approved by

our finance manager or such other senior executive(s) of the Enlarged Group designated

by the Audit Committee from time to time for such purpose.


174

Any contracts to be made with an Interested Person shall not be approved unless the

pricing is determined in accordance with the Enlarged Group’s usual business practices

and policies, consistent with the usual margin given or price received by the Enlarged

Group for the same or substantially similar type of transactions between the Enlarged

Group and unrelated parties and the terms are no more favourable than those extended to

or received from unrelated parties.

For the purposes above, where applicable, contracts for the same or substantially similar

type of transactions entered into between the Enlarged Group and unrelated third parties

will be used as a basis for comparison to determine whether the price and terms offered

to or received from the Interested Person are no more favourable than those extended to

unrelated parties. In the event that it is not possible for appropriate information for

comparative purpose to be obtained, the matter will be referred to the Audit Committee and

the Audit Committee will determine whether the relevant price and terms are fair and

reasonable and consistent with the Enlarged Group’s usual business practices.

In addition, the Enlarged Group shall monitor all Interested Person Transactions entered

into by categorising the transactions as follows:

(i) a “category one” Interested Person Transaction is one or a series of transactions

where the aggregate value thereof entered into with the same Interested Person

within a financial year of the Company is in excess of 5.0% of the NTA of the Enlarged

Group; and

(ii) a “category two” Interested Person Transaction is one or a series of transactions

where the aggregate value thereof entered into with the same Interested Person

within a financial year of the Company is below or equal to 5.0% of the NTA of the

Enlarged Group.

“Category one” Interested Person Transactions must be approved by the Audit Committee

prior to entry. “Category two” Interested Person transactions need not be approved by the

Audit Committee prior to entry but shall be reviewed on a quarterly basis by the Audit

Committee.

When renting properties from or to an Interested Person, the Proposed Directors shall take

appropriate steps to ensure that such rent commensurate with the prevailing market rates,

including adopting measures such as making relevant enquiries with landlords of similar

properties and obtaining suitable reports or reviews published by property agents (as

necessary). The rent payable shall be based on the most competitive market rental rate of

similar property in terms of size and location, based on the results of the relevant enquiries.

Such transactions shall be subject to review by the Audit Committee on a quarterly basis

or as and when required.

The Enlarged Group will prepare relevant information to assist the Audit Committee in its

review. In the event that it is not possible for the appropriate information (for comparative

purposes) to be obtained, the Audit Committee will determine whether the price, fees

and/or other terms offered by or to the Interested Persons are fair and reasonable, and

approve such Interested Person Transaction. In determining whether these interested

person transactions are entered into on normal commercial terms, the Audit Committee will

consider whether the price, fees and/or other terms are in accordance with usual business

practices and pricing policies and consistent with the usual margins and/or terms to be

obtained for the same or substantially similar types of transactions to determine whether

the relevant transaction is undertaken on normal commercial terms.


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The Audit Committee will review all Interested Person Transactions, if any, at least

quarterly to ensure that they are carried out on normal commercial terms, are not

prejudicial to the interests of the Enlarged Group and/or minority shareholders and in

accordance with the procedures set out above. It will take into account all relevant

non-quantitative factors. In the event that a member of the Audit Committee is interested

in any such transaction, he will abstain from reviewing and voting on that particular

transaction.

Further, if during these period reviews, the Audit Committee believes that the guidelines

and procedures set out above are not sufficient to ensure that interests of minority

Shareholders are not prejudiced, the Audit Committee may request for an independent

financial adviser’s opinion as it deems fit for the Enlarged Group to adopt new guidelines

and procedures.

The Audit Committee will include the review of Interested Person Transactions as part of

its standard procedures while examining the adequacy of our internal controls. The

Enlarged Group will also ensure its compliance with the provisions in Chapter 9 of the

Listing Manual in respect of all future Interested Person Transactions, and if required under

the Listing Manual, the Companies Act or the SFA, it will seek the Independent

Shareholders’ approval for such transactions.

Before any agreement or arrangement with an Interested Person that is not in the ordinary

course of business of the Enlarged Group is transacted, prior approval must be obtained

from the Audit Committee. In the event that a member of the Audit Committee is interested

in any Interested Person Transactions, he will abstain from reviewing that particular

transaction. Any decision to proceed with such an agreement or arrangement would be

recorded for review by the Audit Committee.

For monitoring purposes, the finance manager will maintain a register of Interested Person

Transactions (the “IPT Register”) which will record all IPT Transactions, including

transactions less than S$100,000. This IPT Register will be updated quarterly based on

submissions by the designated persons. It will record all interested person transactions

which are entered into (including the basis on which they are entered into) and the approval

or review by the Audit Committee.

I.4 Potential Conflicts Of Interest

Save as disclosed in Section I in the Letter to Shareholders from OKH of this Circular and

below, none of the Proposed Directors, Controlling Shareholders, and/or any of their

associates has any material interest, whether direct or indirect, in:

(a) any material transactions to which OKH Group was or is a party;

(b) any corporation which carries on the same business or deals in similar products as

the existing business of OKH Group; and

(c) any enterprise or company that is OKH Group’s customer or supplier of goods or

services.

In 2005, OKH had formed a joint-venture partnership with Dai-Dan Co., Ltd. known as the

Dai-Dan OKH JV (the “JV”) to provide A&A works to commercial spaces at various MRT

stations. Please refer to Section I.1.1 entitled “Past Interested Person Transactions” in the

Letter to Shareholders from OKH of this Circular for more details.


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The JV has signed a non-compete undertaking on 17 January 2012 where the JV has

agreed to undertake the following:

(a) the JV shall not conduct or engage in the operation of businesses which are similar

to or competitive with (whether directly or indirectly) OKH Group in the area of

construction activities save for carrying out any ancillary or rectification works (if any)

which shall be capped at a maximum value of S$300,000.00 which is an aggregate

amount of its completed projects; and

(b) the JV shall be dissolved upon the resolution and settlement of all outstanding issues

relating to and monies owed by SMRT to the JV.

J. INFORMATION ON THE MEMBERS OF THE NEW BOARD AND THE PROPOSED

EXECUTIVE OFFICERS

The present and past directorships of the New Board held in the five years preceding the

Latest Practicable Date are as follows:

Name Present Directorships Past Directorships

Bon Ween Foong OKH Group companies

Foxx Media Pte. Ltd.

Green Synergy Pte. Ltd.

OKH Development Pte. Ltd.

OKH Holdings Pte. Ltd.

OKH Management Pte. Ltd.

OKH (Woodlands) Pte. Ltd.

OKH DLRE JV Pte. Ltd.

OKH Group companies

Nil

Other companies Other companies

Alliancz International Pte. Ltd.

CCTV Asia Management Pte. Ltd.

PT Alliancz Asia Pacific

Spartanz Holdings Pte. Ltd.

UAC Freight (S) Pte. Ltd.

Zoko Fashion Pte. Ltd.

Nil

Lam Wee Yeow OKH Group companies OKH Group companies

OKH Development Pte. Ltd. Nil


Nil Nil


177


Tan Soo Kiat OKH Group companies OKH Group companies

Nil Nil


Arana Assets Limited

Dyna-Mac Holdings Ltd.

Intergate Pte Ltd

Nam Lee Pressed Metal

Industries Limited

Nico Steel Holdings Limited

Achieve Glory Limited

China Lifestyle Food and

Beverages Group Limited

China Precision Technology Ltd

Cyber Village Holdings Limited

EMS Energy Limited

ISR Capital Limited

Luye Pharma Group Ltd.

Sanctuary Savers Inc.

Tan Swee Ling OKH Group companies OKH Group companies

Nil Nil


ES Group (Holdings) Limited

Want Want Food Pte Ltd

Want Want Holdings Ltd

Teledata (Singapore) Limited

Ong Soon Teik OKH Group companies OKH Group companies

Nil Nil


Adventus Holdings Limited

Asiamine Holding Pte. Ltd.

Chinese Global Investors

Group Ltd.

Hitchins International Pte. Ltd.

Meds Investment Pte. Ltd.

Meds Project Management

Pte. Ltd.

Win King Investments Ltd.

The present and past directorships of Proposed Executive Officers held in the five years

preceding the Latest Practicable Date are as follows:


Patrick Lee OKH Group companies

Nil

OKH Group companies

Nil

Other companies

Mastermind Capital Limited

Other companies

Nil

Salman Al-Farisi

@ Bridges

Andre

OKH Group companies

Nil

OKH Group companies

Nil


178


Other companies

Nil

Other companies

Nil

Ong Sau Kang OKH Group companies

Nil

OKH Group companies

Nil

Other companies

Nil

Other companies

Nil

Pang Shi Kang OKH Group companies

Nil

OKH Group companies

Nil

Other companies

Nil

Other companies

Nil

K. MATERIAL BACKGROUND INFORMATION ON THE NEW BOARD, PROPOSEDEXECUTIVE OFFICERS AND CONTROLLING SHAREHOLDERS

Save as disclosed below, none of the Proposed Directors, Proposed Executive Officers or

Controlling Shareholders of OKH Group:

(a) had at any time during the last ten years, had 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 years

from the date he ceased to be a partner;

(b) had at any time during the last ten years, had 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 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;

(d) has ever been convicted of any offence, in Singapore or elsewhere, involving fraud or

dishonesty, which is punishable with 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 years, had 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;


179

(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

(k) has been the subject of any current or past investigation or disciplinary proceedings,

or has been reprimanded or issued any warning, by any other regulatory authority,

exchange, professional body or governmental agency, whether in Singapore or

elsewhere.

Disclosures pertaining to OKH Group

Fines imposed by regulatory authorities in Singapore

OKH Group has, from time to time in the ordinary course of its property development and

construction businesses, incurred fines imposed by these regulatory authorities — the

MOM, NEA, CAAS, PUB, SCDF, IRAS, Traffic Police, CPF, IRAS, Sembawang Town

Council, Accounting and Corporate Regulatory Authority and National Parks Board, in

relation to breaches of certain environmental, safety and other regulations. These fines are

typically between S$100 and S$10,000 and the aggregate of such fines imposed by these

regulatory authorities and paid by OKH Group for FY2010, FY2011, FY2012 and from 1

July 2012 to the Latest Practicable Date were S$20,435, S$34,505, S$12,400 and

S$21,000 respectively. The reason for the increase in such fines during the period

commencing from FY2010 to FY2011 is due to the late payment of goods and services tax

by OKH Group.

To minimise such breaches, OKH Group has (i) engaged internal and external

environmental health safety officers and safety officers to manage the safety and

environmental aspects of its projects as well as implement additional operating policies to


180

improve the relevant processes; (ii) instructed its project and site managers to conduct

more frequent checks and to put in place a higher level of supervision on OKH Group’s

project sites and to report to the headquarters immediately in respect of any such potential

breaches or observations of any possible dangerous situations; (iii) instructed its project

and site managers to impose penalties on its sub-contractors for any breaches by such

sub-contractors; (iv) increased the number of staff training courses to instill a greater

awareness of safety amongst its workers, supervisors and sub-contractors; and (v)

implemented an internal system of checks and balances to ensure the timely payment of

GST.

Disclosures pertaining to the New Board and Proposed Executive Officers

(a) Disclosures Involving the Vendor and a Proposed Director, Bon Ween Foong

Bankruptcy Petition/Order filed against Bon Ween Foong

(i) In 1994, a bankruptcy petition was filed by Citibank N.A against Bon Ween

Foong for the amount of approximately S$8,475. The said bankruptcy petition

was subsequently withdrawn in the same year upon the full settlement of all

outstanding debts.

(ii) In January 1997, a bankruptcy petition was filed by Hong Moh Properties Pte Ltd

against Bon Ween Foong for the amount of approximately S$12,564. This action

was subsequently withdrawn in February 1997 upon the full settlement of all

outstanding debts.

(iii) In May 1997, a bankruptcy petition was filed by Hong Moh Properties Pte Ltd

against Bon Ween Foong for the amount of approximately S$20,360. This action

was subsequently withdrawn in July 1997 upon the full settlement of all

outstanding debts.

(iv) In July 1997, a bankruptcy order was filed by Xin Huat Hardware Trading for the

amount of approximately S$40,258. The said bankruptcy order was

subsequently annulled in January 2000 upon the full settlement of all

outstanding debts.

(v) In January 1998, a bankruptcy petition was filed by Ong Cheng Hoon and Kang

Hai Tong trading as Tong Glass Work Contractor against Bon Ween Foong for

the amount of approximately S$13,417. This action was subsequently withdrawn

in February 1998 upon the full settlement of all outstanding debts.

(vi) In December 2001, a bankruptcy petition was filed by Cheong Weng Keong

trading as PCMS Design Workshop and Cheong Weng Sing trading as PCMS

Design Workshop against Bon Ween Foong for the amount of approximately

S$39,000. This action was subsequently withdrawn in July 2002 upon the full

settlement of all outstanding debts.

(vii) In or around the late 1990s, Bon Ween Foong was interviewed by the Corrupt

Practices Investigation Bureau (“CPIB”) to assist in connection with their

investigation relating to an officer from the SCDF’s Fire Safety Bureau who was

working with OKH Group and its related projects. Bon Ween Foong has not been

subsequently called up by the CPIB for further follow-up action.


181

Indonesian Civil Action Suit filed against Bon Ween Fong

(a) Civil Action Suit filed in January 2012 (“Indonesian Civil Action”)

In January 2012, a Mr Antonius Tannady (“Antonius”), an ex-director of PT

Alliancz Asia Pacific (“PT Alliancz”), a company which Bon Ween Foong is

currently still a director and substantial shareholder of, filed a civil summons

against Bon Ween Foong together with seven other defendants

(“7 Defendants”). Antonius had alleged that Bon Ween Foong and the 7

Defendants have not acted within the confines of the laws of a limited liability

company in Indonesia by holding an extraordinary general meeting to amend the

articles of association of PT Alliancz without sufficient quorum to terminate the

services of Antonius as director of the PT Alliancz.

The legal proceedings in relation to the Indonesian Civil Action are currently still

ongoing and no judgement has been passed by the court at the present moment.

(b) Police Report lodged in February 2012 (“February 2012 Police Report”)

In February 2012, a police report was lodged against Bon Ween Foong by the

Indonesian lawyer representing Antonius in the Indonesian Civil Action) for

allegedly requesting to place a false statement in an authentic deed specified

under the Criminal Law Code of the Republic of Indonesia. The February 2012

Police Report arose from the resolutions passed at an extraordinary general

meeting (“EGM”) to remove Antonius as a director of PT Alliancz where there

was insufficient quorum at the EGM, which are based on the same dispute as the

Indonesian Civil Action. This led to a police summons being filed against Bon

Ween Foong in April 2012 to appear at the Directorate of General Criminal

Investigation in South Jakarta to assist in the allegations made in the February

2012 Police Report. The matter is currently ongoing and has yet to be resolved.

(b) Bankruptcy Order Involving a Proposed Director, Lam Wee Yeow

In March 2003, a bankruptcy order was filed by United Overseas Bank Limited

(“March 2003 Bankruptcy Order”) against Lam Wee Yeow for the amount of

approximately S$24,856. In addition to the amount under the aforesaid bankruptcy

order, there were other writs of seizure and sale (“WSS”) filed by other banks for

aggregate amounts not exceeding S$150,000 which formed part of the amount owing

to Lam Wee Yeow’s creditors following the March 2003 Bankruptcy Order. The March

2003 Bankruptcy Order was subsequently discharged in April 2010 upon the full

settlement of all outstanding debts.

(c) Bankruptcy Petition Involving a Proposed Executive Officer, Salman Al-Farisi @

Bridges Andre

In 1992, a bankruptcy petition was filed by Citibank N.A against Salman Al-Farisi @

Bridges Andre for an amount not exceeding S$20,000. This petition was subsequently

withdrawn upon the full settlement of all outstanding debts.


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L. CORPORATE GOVERNANCE

L.1 Board Practices

The New Board recognises the importance of corporate governance to Shareholders, and

will exert best efforts to implement the good practices recommended in the Code of

Corporate Governance.

Upon completion of the Proposed Transactions, the Proposed Directors will be appointed

to the New Board. The New Board will then comprise two executive directors and three

independent directors, whose office will expire in accordance with the provision of the

Bye-Laws.

L.2 New Nominating Committee

The new Nominating Committee will comprise Tan Swee Ling, Tan Soo Kiat and Ong Soon

Teik. The chairman of the new Nominating Committee is Tan Swee Ling. The new

Nominating Committee has been set up to be responsible for the nomination of the

Proposed Directors (including the proposed independent directors of the Company) taking

into consideration each Proposed Director’s contribution and performance, following

completion of the Proposed Acquisition. The new Nominating Committee is also charged

with the responsibility of determining annually whether a Proposed Director is independent.

Under the Bye-Laws, at least one-third of the Proposed Directors are required to retire from

office at every AGM of the Company after completion of the Proposed Acquisition. Every

Proposed Director must retire from office at least once every three years. A retiring

Proposed Director is eligible and may be nominated for re-election. Each member of the

Nominating Committee shall abstain from voting on any resolutions, making any

recommendations and/or participating in any deliberations of the new Nominating

Committee in respect of the assessment of his performance or re-nomination as a

Proposed Director.

L.3 New Remuneration Committee

The new Remuneration Committee will comprise Tan Soo Kiat, Tan Swee Ling and Ong

Soon Teik. The chairman of the Remuneration Committee will be Ong Soon Teik. The new

Remuneration Committee will be responsible for recommending to the New Board a

framework of remuneration for the Proposed Directors and Proposed Executive Officers

and key executives, and determine specific remuneration packages for the proposed

executive chairman and each of the Proposed Executive Directors.

The recommendations of the new Remuneration Committee will be submitted for

endorsement by the entire New Board. All aspects of remuneration, including but not

limited to directors’ fees, salaries, allowances, bonuses, options and benefits-in-kind shall

be covered by the new Remuneration Committee. Each member of the new Remuneration

Committee shall abstain from voting on any resolutions, making recommendations and/or

participating in any deliberations of the new Remuneration Committee in respect of his

remuneration package.

The total remuneration of the employees who are related to the Proposed Directors will be

reviewed annually by the new Remuneration Committee to ensure that their remuneration

packages are in line with the staff remuneration guidelines and commensurate with their

respective job scopes and levels of responsibility. In the event that a member of the new

Remuneration Committee is related to the employee under review, he will abstain from

such review.


183

The remuneration paid to employees who are immediate family members of the Proposed

Directors will be disclosed in the annual report, following completion of the Proposed

Acquisition, in the event such remuneration exceeds S$50,000 for that financial year.

L.4 New Audit Committee

The new Audit Committee will comprise Tan Soo Kiat, Tan Swee Ling and Ong Soon Teik.

The chairman of the new Audit Committee is Tan Soo Kiat.

The new Audit Committee will assist the New Board in discharging their responsibility to

safeguard the assets, maintain adequate accounting records and develop and maintain

effective systems of internal control, with the overall objective of ensuring that

management creates and maintains an effective control environment in the Company

following completion of the Proposed Acquisition. The new Audit Committee will provide a

channel of communication between the New Board, the management and the external

auditors of the Company on matters relating to audit following completion of the Proposed

Acquisition.

In particular, the new Audit Committee will meet at least quarterly, following completion of

the Proposed Acquisition, to discuss and review the following where applicable:

(a) review the audit plans of the external auditors, including the results of the external

and internal auditors’ examination and their evaluation of the system of internal

accounting controls, their letter to management and the management’s response;

(b) monitor and review the implementation of the auditors’ recommendations for the

internal control weaknesses identified in the auditors’ letter to management;

(c) review the quarterly, half-yearly and annual financial statements and balance sheet

and profit and loss accounts before submission to the New Board 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;

(d) review the risk profile of the Company, its internal control and risk management

procedures and the appropriate steps to be taken to address and manage risks at

acceptable levels determined by the New Board;

(e) ensure co-ordination between the external and internal auditors and the

management, 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) review and discuss with the external auditors any suspected fraud or irregularity, or

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;


184

(h) review and approve any Interested Person Transactions;

(i) review potential conflicts of interest (if any);

(j) evaluate the independence of the external auditors;

(k) review the adequacy of the internal audit function and ensuring that a clear reporting

structure is in place between the Audit Committee and the internal auditors;

(l) review the hedging carried out by the Company and the hedging policies which have

been implemented by the Company;

(m) review procedures and policies of the Company for the purposes of internal

accounting controls;

(n) review arrangements by which the staff of the Company may, in confidence, raise

concerns about possible impropriety in matters of financial reporting and other

matters, the adequacy of procedures for independent investigation and appropriate

follow-up action in response to such complaints;

(o) review the effectiveness of the proposed safeguards on a regular basis to prevent

future breaches of the relevant rules and regulation by the Company;

(p) undertake such other reviews and projects as may be requested by the New Board,

and report to New Board its findings from time to time on matters arising and requiring

the attention of the new Audit Committee; and

(q) generally undertake such other functions and duties as may be required by statute,

the Listing Manual, or by such amendments as may be made thereto from time to

time.

In addition, all future transactions with interested parties shall comply with the

requirements of the Listing Manual. As required by the Listing Manual, the Proposed

Directors shall abstain from voting on any contract or arrangement or proposed contract or

arrangement in which he has a personal material interest.

The Audit Committee having (i) considered Patrick Lee being the existing Chief Financial

Officer (been with the Company from September 2008); (ii) considered his qualifications

and past working experience; and (iii) observed his abilities, familiarity and diligence in

relation to the financial matters and information of OKH Group, are of the view that Patrick

Lee is suitable for the position of the Company’s Chief Financial Officer. In addition, after

making all reasonable enquiries, nothing has come to the attention of the members of the

Audit Committee to cause them to believe that Patrick Lee does not have the competence,

character and integrity expected of a financial officer of a listed company.

OKH had engaged internal auditors to review the effectiveness of OKH’s material internal

controls and these were reported to the new Audit Committee. The new Audit Committee,

on behalf of the Board, also reviewed the effectiveness of OKH’s systems of internal

controls in light of key business and financial risks affecting its business. Based on the

work of the internal auditor and the existing management controls in place, the new Audit

Committee and the New Board are satisfied that there are adequate internal controls in

place to address critical and significant risks relating to financial, operational and

compliance matters.


185

The New Board, together with the new Audit Committee and management, will continue to

enhance and improve the existing internal control framework to identify and address these

risks. Following completion of the Proposed Acquisition, the new Audit Committee shall

commission an annual internal audit to satisfy itself that the Enlarged Group’s internal

controls are robust and effective enough to address any significant internal control

weaknesses that may arise.

The system of internal controls established by the Enlarged Group provides reasonable but

not absolute assurance that the Enlarged Group’s assets and investments are

safeguarded. The likelihood of achieving the internal control objectives is affected by

limitations inherent in all internal control and risk management systems. The New Board

notes that no system of internal controls and risk management can provide absolute

assurance in this regard, or absolute assurance against the occurrence of material errors,

poor judgement in decision-making, human error, losses fraud or other irregularities.

L.5 Information Disclosure

Following completion of the Proposed Acquisition, 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.

M. RESPONSIBILITY STATEMENT BY THE PROPOSED DIRECTORS AND THE VENDOR

The Proposed Directors and the Vendor collectively and individually accept full

responsibility for the accuracy of the information in respect of the Vendor and OKH Group

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 Proposed Directors and the Vendor are not

aware of any facts the omission of which would make any statement in this Circular

misleading.

Where information in respect of the Vendor and OKH Group in the Circular has been

extracted from published or otherwise publicly available sources or obtained from a named

source, the sole responsibility of the Proposed Directors and the Vendor has been to

ensure that such information has been accurately and correctly extracted from those

sources and/or reproduced in the Circular in its proper form and context.

Yours faithfully

For and on behalf of OKH Holdings Pte. Ltd.

Bon Ween Foong

Director


186

LETTER FROM PROVENANCE CAPITAL PTE. LTD. TO THE INDEPENDENT DIRECTORS OF SINOBEST TECHNOLOGY HOLDINGS LTD.

A-1

31 December 2012

To: The Independent Directors of Sinobest Technology Holdings Ltd. (deemed to be independent in respect of the Proposed Disposal)

Mr Tan Soo Kiat (Lead Independent Director) Ms Tan Swee Ling (Independent Director) Mr Ong Soon Teik (Independent Director)

Dear Sirs/Madam

THE PROPOSED DISPOSAL OF THE COMPANY'S ENTIRE SHAREHOLDING INTERESTS IN ITS OPERATING SUBSIDIARIES

Unless otherwise defined or the context otherwise requires, all terms used herein have the same meanings as defined in the circular to the Shareholders of the Company dated 31 December 2012 (the “Circular”).

1. INTRODUCTION

1.1 Sinobest Technology Holdings Ltd. (the “Company”) and its subsidiaries (collectively, the“Sinobest Group” or “Group”) was placed on the watch-list of the SGX-ST on 3 March 2010.On 5 July 2011, the Company announced various proposed corporate actions with the view toremove itself from the watch-list, including the proposed acquisition of OKH Holdings Pte. Ltd.(“OKH”) (the “Proposed Acquisition”) and the proposed disposal of its entire shareholdinginterests in its operating subsidiaries (the “Proposed Disposal”). The Proposed Acquisitionwill result in a reverse takeover offer (the “RTO”) of the Company. The Proposed Acquisition,if successful, will transform the principal business of the Company into a propertydevelopment and construction business. Hence, the existing business of the Group, which isin a different business from OKH, is proposed to be divested so that it will not affect thefinancial results of the Group after the Proposed Acquisition. As mentioned in Section 2.11 ofthe Circular, the Proposed Acquisition and the Proposed Disposal are inter-conditional uponeach other. Since then and up to the Latest Practicable Date, the Company had made variousannouncements pertaining to the updated terms and amended terms of the ProposedAcquisition and Proposed Disposal. The final terms of the Proposed Acquisition andProposed Disposal are set out in the Circular.

1.2 As disclosed in the Circular, the purchase consideration of the Proposed Acquisition of OKHis S$123,184,659, to be satisfied by the issue of 1,026,538,825 new shares at S$0.12 each(the “Consideration Shares”). The SGX-ST has, on 12 December 2012, granted its in-principle approval, inter alia, for the listing of the Consideration Shares in connection with theRTO.

Pursuant to the disposal agreement dated 27 December 2012 (the “Disposal Agreement”),the consideration for the Proposed Disposal of the Company's operating subsidiaries isRMB145,203,810 (the “Disposal Consideration”) to be satisfied in full by:

(a) the proposed selective cancellation of all 75,347,433 Shares held directly and indirectly by the Undertaking Shareholders, based on the cancellation price of approximately RMB1.36 for each Share cancelled (aggregating RMB102,646,323) (the “Proposed Selective Share Cancellation”);

(b) the offset of net amount of RMB10,095,300 owing from the Company to the operating subsidiaries; and

(c) RMB32,462,187 in cash to be paid by the Undertaking Shareholders to the Company.

APPENDIX A

A-2

1.3 The Undertaking Shareholders, namely Mr Zou Gefei, Mr Jin Changren and Profit Saver International Limited (“Profit Saver”), collectively own in aggregate 68.02% of the issued shares of the Company. Mr Zou Gefei is the Executive Chairman and CEO of the Company, Mr Jin Changren is a substantial shareholder of the Company and owns 16.70% of the issued shares, and Profit Saver is major shareholder of the Company and owns 50.80% of the issued Shares. Mr Zou Gefei is deemed to be interested in the Shares held by Profit Saver.

1.4 Pursuant to Chapter 9 of the Listing Manual, each of Mr Zou Gefei, Mr Jin Changren and Profit Saver, is considered to be an interested person (“Interested Person” and together with their associates, “Interested Persons”) and any transactions between the Interested Persons and the Group would be considered an interested person transaction (“Interested Person Transaction”). Accordingly, the Proposed Disposal constitutes an Interested Person Transaction under Chapter 9 of the Listing Manual. In addition, as the Proposed Disposal involves the disposal of the entire existing business of the Company, it is considered as a major transaction under Chapter 10 of the Listing Manual. The Proposed Selective Share Cancellation in connection with the Proposed Disposal is also subject to Shareholders' approval by way of a special resolution. Arising from the above, the Company has proposed for the Proposed Disposal and Proposed Selective Share Cancellation to be approved by the independent Shareholders at the SGM by way of the Special Resolution 9.

Besides Mr Zou Gefei, who is an Interested Person to the Proposed Disposal, Mr Li Ziqiang and Mr Yu Zengping, who are Executive Directors of the Company, are also deemed as Interested Persons, as they each have an interest of 19.9% in Profit Saver. Hence, only the remaining Directors namely, Mr Tan Soo Kiat, Ms Tan Swee Ling and Mr Ong Soon Teik are deemed to be independent Directors in respect of the Proposed Disposal (the “Independent Directors”).

1.5 Pursuant to Chapter 9 of the Listing Manual, Provenance Capital Pte. Ltd. (“Provenance Capital”) has been appointed as the independent financial adviser (“IFA”) to advise the Independent Directors on the Proposed Disposal. This letter (“Letter”) is addressed to the Independent Directors and sets out, inter alia, our evaluation and opinion on the Proposed Disposal. This Letter forms part of the Circular to Shareholders which provides, inter alia,details of the Proposed Disposal and the recommendations of the Independent Directors in respect thereof.

2. TERMS OF REFERENCE

We have been appointed as the IFA to advise the Independent Directors in respect of the Proposed Disposal. We are not and were not involved or responsible, in any aspect, of the negotiations in relation to the Proposed Disposal, nor were we involved in the deliberations leading up to the decision on the part of the Directors to propose the Proposed Disposal or to obtain the approval of the Independent Shareholders for the Proposed Disposal, and we do not, by this Letter, warrant the merits of the Proposed Disposal other than to express an opinion on whether the financial terms of the Proposed Disposal are on normal commercial terms and not prejudicial to the interests of the Company and the Independent Shareholders.

We have confined our evaluation and assessment to the financial terms of the Proposed Disposal. It is not within our terms of reference to evaluate or comment on the legal, strategic, commercial and financial merits and/or risks of the Proposed Disposal or to compare its relative merits vis-à-vis alternative transactions previously considered by the Company (if any) or that may otherwise be available to the Company currently or in the future, and we have not made such evaluation or comment. Such evaluation or comment, if any, remains the sole responsibility of the Directors and/or the management of the Company (the “Management”)although we may draw upon the views of the Directors and/or the Management or make such comments in respect thereof (to the extent deemed necessary or appropriate by us) in arriving at our opinion as set out in this Letter. We have not been requested or authorised to solicit, and we have not solicited, any indications of interest from any third party with respect to the Proposed Disposal.

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In the course of our evaluation, we have held discussions with the Directors and the Management and/or their professional advisers and have examined and relied to a considerable extent on publicly available information collated by us as well as information provided and representations made to us, both written and verbal, by 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 preparation of the Circular) have confirmed that, having made all reasonable enquiries, to the best of their respective knowledge and belief, information and representations as provided by the Directors and Management are accurate and the Directors have confirmed to us that, upon making all reasonable enquiries and to their best knowledge and belief, all material information available to them in connection with the Proposed Disposal, the Company and/or the Group has been disclosed to us, that such information is true, complete and accurate in all material respects and that there is no other information or fact, the omission of which would cause any information disclosed to us or the facts of or in relation to the Proposed Disposal or the Company or the Group stated 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.

We have not independently verified and have assumed that all statements of fact, belief, opinion and intention made by the Directors in the Circular have been reasonably made after due and careful enquiry. Whilst care has been exercised in reviewing the information on which we have relied on, we have not independently verified the information. Accordingly we cannot and do not make any representation or warranty, express or implied, in respect of, and do not accept any responsibility for the accuracy, completeness or adequacy of such information or representations, but nevertheless have made such enquiry and judgment as were deemed necessary and have found no reason to doubt the accuracy of the information and representations.

Save as disclosed, we would like to highlight that all information relating to the Proposed Disposal, the Company and the Group that we have relied upon in arriving at our opinion has been obtained from publicly available information and/or from the Directors and the Management. 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 or the Group at any time or as at the Latest Practicable Date.

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 and/or the Group, or to express, and we do not express, a view on the future growth prospects, value and earnings potential of the Company and/or the Group. 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 Listing Manual and/or deemed necessary or appropriate by us) in arriving at our advice as set out in this Letter. We have not obtained from the Company and/or the Group any projection of the future performance including financial performance of the Company and/or the Group, and further, we did not conduct discussions with the Directors and the Management on, and did not have access to, any business plan and financial projections of the Company and/or the 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 and/or the Group, upon or after completion of the Proposed Disposal or if the Proposed Disposal is not effected.

We have not made any independent evaluation or appraisal of the assets, liabilities and profitability of the Company and/or the Group (including without limitation, property, plant and equipment). As such, we will be relying on the disclosures and representations made by the Company on the value of the assets and liabilities and profitability of the Company and/or the Group. We have not been furnished with any such evaluation or appraisal. We have not relied on any financial projections or forecasts in respect of the Group for the purpose of our evaluation of the Proposed Disposal.

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Our view as set out in this Letter is based upon market, economic, industry, monetary and other conditions (if applicable) prevailing as of the Latest Practicable Date and the information and representations provided to us as of the Latest Practicable Date. In arriving at our view, with the consent of the Directors or the Company, we have taken into account certain other factors and have been required to make certain assumptions as set out in this Letter. We assume no responsibility to update, revise or reaffirm our opinion in light of any subsequent development after the Latest Practicable Date that may affect our opinion contained herein. Shareholders should further take note of any announcements relevant to the Proposed Disposal and other related corporate actions which may be released by the Company after the Latest Practicable Date.

In rendering our opinion, we did not have regard to the specific investment objectives, financial situation, tax position, risk profiles or unique needs and constraints of any Shareholder or any specific group of Independent Shareholders. As each Shareholder would have different investment objectives and profiles, we recommend that any individual Shareholder or group of Independent Shareholders who may require specific advice in relation to his or their investment portfolio(s) or objective(s) consult his or their stockbroker, bank manager, solicitor, accountant, tax adviser or other professional adviser immediately.

The Company has been separately advised by its own professional advisers in the preparation of the Circular (other than this Letter). We have had no role or involvement and have not and will not provide 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, whether express or implied, on the contents of the Circular (other than this Letter).

Whilst a copy of this Letter may be reproduced in the Circular, neither the Company, the Directors nor any other persons may reproduce, disseminate or quote this Letter (or any part thereof) for any purposes other than for the purposes of the Shareholders’ resolution in relation to the Proposed Disposal at any time and in any manner without the prior written consent of Provenance Capital in each specific case.

We have prepared this Letter for the use of the Independent Directors in connection with their consideration of the Proposed Disposal and their advice to the Independent Shareholders arising thereof. The recommendation made to the Independent Shareholders in relation to the Proposed Disposal remains the sole responsibility of the Independent Directors.

Our opinion in relation to the Proposed Disposal should be considered in the context of the entirety of this Letter and the Circular.

3. INFORMATION ON THE SINOBEST GROUP

3.1 Background

The Company was incorporated in Bermuda on 17 June 2004 and was listed on the Mainboard of the SGX-ST on 18 November 2004.

The Company is a holding company and it carries out its business through its two operating subsidiaries, namely, its 99% owned subsidiary, Guangzhou Sinobest Information Technology Ltd. (“Guangzhou Sinobest”), and its wholly-owned subsidiary, Sinobest Technologies (H.K.) Limited (“Sinobest Technologies Hong Kong”).

The Sinobest Group is a one-stop solution provider of information technology (“IT”) services with two major business segments, system integration for computer information systems and intelligent buildings systems, and software development and technical services.

The Sinobest Group conducts its business operations predominantly in the People’s Republic of China (“PRC”) and its main customers include the various governmental authorities, departments, telecommunication service operators and corporations (both state-owned and

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private-owned) in the PRC. The Sinobest Group's head office is located in Guangzhou and it has five branch offices located in Shenzhen, Fuzhou, Wuhan, Guiyang and Changsha.

3.2 SGX-ST watch-list

The Sinobest Group had been loss making for the three consecutive financial years ended 31 December 2007, 2008 and 2009 and was placed on the SGX-ST watch-list on 3 March 2010.

Under Rule 1315 of the SGX-ST Listing Manual, the Company is required to take active steps to meet the requirements of Rule 1314 of the Listing Manual for removal from the SGX-ST watch-list. Rule 1314 requires the Company to satisfy one of the two following criteria:

(i) Achieve consolidated pre-tax profit for one year and an average daily market capitalisation of at least S$40.0 million over the last 120 market days; or

(ii) The operations of the Group achieves a cumulative consolidated pre-tax profit of at least $7.5 million for the last three years, and a minimum pre-tax profit of $1.0 million for each of those three years or a cumulative consolidated pre-tax profit of at least $10.0 million for the last one or two years.

Currently, the Shares continue to be traded and listed on the Mainboard of the SGX-ST.

On 31 October 2012, the SGX-ST granted the Company a further extension of time until 28 February 2013 to meet the criteria set out under Rule 1314 of the Listing Manual of the SGX-ST for removal from the watch-list, subject to certain conditions.

In connection with the Proposed Acquisition which will result in the RTO of the Company, the SGX-ST has, on 12 December 2012, given its in-principle approval for the listing of the Consideration Shares for the Proposed Acquisition, subject to various conditions. With the completion of the Proposed Acquisition, the Company will be in a better position to remove itself from the watch-list.

As mentioned above in paragraph 1.1 of this Letter and in Section 2.11 of the Circular, the Proposed Acquisition and the Proposed Disposal are inter-conditional upon each other.

Further details of the Proposed Acquisition, Proposed Disposal and other proposed corporate actions are set out in the Circular.

4. THE PROPOSED DISPOSAL

4.1 Pursuant to the Disposal Agreement, the Group will dispose of its entire shareholding interests in Guangzhou Sinobest and Sinobest Technologies Hong Kong (collectively referred to as the “Sale Group” or the “Operating Subsidiaries”) to the Undertaking Shareholders. Upon completion of the Proposed Disposal, the Sale Group will cease to be subsidiaries of the Company.

The Company (Listed on the SGX-ST)

Guangzhou Sinobest SinobestTechnologiesHong Kong

100%99% The Operating Subsidiaries / The

Sale Group

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4.2 The Disposal Consideration

The Disposal Consideration for the Proposed Disposal is RMB145,203,810. This was determined based on arms' length negotiations and was arrived at on a willing-buyer, willing-seller basis after taking into account:

(a) the aggregate audited NTA of the Operating Subsidiaries of RMB136,398,762 as at 30 June 2012 (based on the respective audited accounts of the Operating Subsidiaries as at 30 June 2012), then adjusting for the following:

(i) Less: RMB6.4 million as dividends to be declared and paid by Guangzhou Sinobest to its shareholders, which is mainly the Company, to enable the Company to settle related expenses of the RTO and to meet the Proposed Cash Distribution;

(ii) Add: the reversal of dividends aggregating RMB31.2 million declared but not paid by Guangzhou Sinobest to the Company as at the date of the Disposal Agreement; and

(iii) Less: the non-controlling interest in Guangzhou Sinobest of RMB1.6 million.

(b) an agreed discount to the adjusted NTA of the Sale Group after considering factors relevant to the ongoing concern of the Sale Group's businesses such as the financial condition of the Sale Group and the prevailing business environment and market conditions.

The Disposal Consideration is to be satisfied in full by:

(a) the Proposed Selective Share Cancellation which involves the cancellation of 75,347,433 Shares directly or indirectly held by the Undertaking Shareholders based on the cancellation price of approximately RMB1.36 for each share to be cancelled, aggregating RMB102,646,323. The cancellation price of RMB1.36 for each share to be cancelled is based on the audited NTA of the Group of RMB155.9 million as at 30 June 2012 and after adjusting for the Proposed Cash Distribution of S$1.0 million (equivalent to approximately RMB5.0 million) to Shareholders by way of a capital reduction and based on 110,776,067 Shares;

(b) the offset of net amount of RMB10,095,300 owing from the Company to the Operating Subsidiaries; and

(c) the balance of RMB32,462,187 in cash to be paid by the Undertaking Shareholders to the Company.

The Proposed Selective Share Cancellation will result in the number of Shares in issue to be reduced from 110,776,067 Shares to 35,428,634 Shares. The Undertaking Shareholders will have their shareholdings in the Company reduced from 68.02% to zero after the Proposed Selective Share Cancellation.


The Proposed Disposal is subject to various conditions including, inter alia, the approval by Independent Shareholders for the Proposed Disposal involving the Proposed Selective Share Cancellation by way of the special resolution to be passed at the SGM.

Further details of the Proposed Disposal and Proposed Selective Share are set out in the Circular.

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5. FINANCIAL INFORMATION ON THE SINOBEST GROUP AND THE SALE GROUP

We note that, in the annual report of Sinobest Group for the financial year ended 31 December 2011 (“FY2011”), in accordance with IFRS 5, the entire assets and liabilities related to the Sale Group are classified as disposal group held-for-sale on the balance sheet and the entire results from the Sale Group are presented separately on the profit and loss statements as “Discontinued Operations”. The “Continuing Operations” therefore refers only to the investment holding entity which does not generate any revenue and bears the administrative expenses relating to the listed entity.

5.1 Operating Results of the Sinobest Group and the Sale Group

As such, we set out below a summary of the audited profit and loss statements of the Company, i.e. the Continuing Operations; and the Sale Group, i.e. the Discontinued Operations, for FY2011 as well as the audited profit and loss statements of the Sinobest Group for the six months ended 30 June (“HY”) 2011 (“HY2011”) and 2012 (“HY2012”), which have been prepared in accordance with the Singapore Financial Reporting Standards (“FRS”):

Audited RMB ’000 FY2011 HY2011 HY2012 Continuing Operations – The Company Revenue - - - Other losses (320) (184) (3) Administrative expenses (5,398) (2,579) (3,081) Profit / (Loss) before taxation from continuing operations

(5,718) (2,763) (3,084)

Discontinued Operations –The Sale Group

Profit / (Loss) after taxation from discontinued operations

6,876 593 1,935

Total profit / (loss) 1,158 (2,170) (1,138) Total profit / (loss) attributable to equity holders of the Group

1,083 (2,187) (1,167)

Source: The Group’s annual report for FY2011 and the Group’s financial report for the six-month period ended 30 June 2012

Review of Operating Results

The Continuing Operations, or the Company, is a loss making entity as it is primarily a cost centre, bearing the administrative expenses of the listed entity. Losses increased by RMB0.3 million or 11.6% from RMB2.8 million in HY2011 to RMB3.1 million in HY2012, mainly due to the expenses related to the RTO.

In terms of the Discontinued Operations or the Sale Group, profits increased in HY2012 compared to HY2011 mainly due to increases in revenues earned in higher profit margin businesses. However, the profits of the Sale Group are still not sufficient to cover the losses from the listed entity, resulting in losses attributable to equity holders of the Group.

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5.2 Financial position of the Sinobest Group as at 30 June 2012

A summary of the audited financial position of the Sinobest Group as at 30 June 2012 is set out below:

Audited RMB ’000 As at 30 June 2012

Cash and cash equivalents 643 Trade and other receivables 44 Assets directly associated with the disposal group classified as held-for-sale

313,540

Total assets 314,227

Trade and other payables 703 Liabilities directly associated with the disposal group classified as held-for-sale

156,313

Total liabilities 157,016

Total equity / NTA 157,211 Non-controlling interests 1,336 Total equity / NTA attributable to equity holders of the Group

155,875

Source: The Group’s financial report for the six-month period ended 30 June 2012

Review of Financial Position

As the Group does not have any intangible assets, the NTA of the Group is equivalent to the NAV of the Group. As at 30 June 2012, the audited equity and NTA of the Group of RMB157.2 million was represented by RMB314.2 million in total assets and RMB157.0 million in total liabilities. Total assets are totally represented in current assets which consists of mainly RMB313.5 million of assets that are directly associated with the disposal group classified as held-for-sale, i.e. the Operating Subsidiaries. The remainder is made up of mostly cash and cash equivalents (RMB0.6 million). Total liabilities are entirely made up of current liabilities which consists of mainly RMB156.3 million of liabilities directly associated with the disposal group classified as held-for-sale and the remainder in trade and other payables. Total equity consists of mainly RMB82.5 million in share capital, RMB43.1 million in the share premium account, RMB17.6 million in other reserves, retained earnings of RMB12.8 million and non-controlling interests of RMB1.34 million. We wish to highlight that the financial position of the Group has already accounted for the declaration of dividends of RMB31.2 million by Guangzhou Sinobest to the Company in HY2012.

5.3 Financial position of the Sale Group as at 30 June 2012

A summary of the audited financial position of the Sale Group as at 30 June 2012 is set out below:

RMB ‘000 Audited as at 30 June 2012 Guangzhou

Sinobest Sinobest

Technologies Hong Kong (1)

Total (2)

Current assets 300,999 6,040 307,039 Non-current assets 19,573 - 19,573 Total assets 320,572 6,040 326,612 Current liabilities 186,987 3,226 190,213 Non-current liabilities - - - Total liabilities 186,987 3,226 190,213 Total equity / NTA 133,585 2,814 136,399

Source: The audited financial statements of the individual Operating Subsidiaries for HY2012

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Notes:

(1) Translated based on the exchange rate of US$1:RMB6.324

(2) Based on the compilation of the audited financial statements of the individual Operating Subsidiaries

Review of Financial Position

As at 30 June 2012, the audited shareholders’ equity and NTA of the Sale Group was RMB136.4 million, represented by RMB326.6 million in total assets and RMB190.2 million in total liabilities. Total assets are represented by 94.0% in current assets which consists of mainly RMB197.5 million of trade and other receivables, RMB63.6 million in inventories and RMB45.9 in cash and cash equivalents. Of the RMB197.5 million of trade and other receivables, RMB13.1 million or 6.6% is receivable due from the Company.

Non-current assets are mainly made up of plant and equipment at RMB10.9 million. Total liabilities are entirely made up of current liabilities which consists of mainly RMB186.2 million in trade and other payables. Of these trade payables, RMB34.2 million is payable due to the Company, out of which RMB31.2 million is due to the dividend that was declared by Guangzhou Sinobest but not paid as at 30 June 2012.

Total equity consists of mainly RMB93.0 million in paid-up share capital, RMB18.4 million capital reserves and surplus reserves and RMB25.0 million in retained earnings. As the Sale Group does not have any intangible assets, the NTA of Sale Group is taken to be equivalent to the NAV of the Sale Group.

We note that if the cash and cash equivalents are excluded, the non-cash NTA of the Sale Group will amount to RMB90.5 million. Of this non-cash NTA, RMB63.6 million or 70.3% is made up of inventories and RMB11.2 million or 12.4% is made up of net trade receivables (trade receivables after deducting for trade payables). As such, a substantial portion of the non-cash NTA of the Sale Group (82.7%) is made up of working capital.

6. OUR EVALUATION OF THE PROPOSED DISPOSAL

In evaluating and assessing the financial terms of the Proposed Disposal, we have taken into account the information set out in this Letter and pertinent factors set out below which we consider to have a significant bearing on our assessment:


(b) the Proposed Selective Share Cancellation being a term of the settlement for the Proposed Disposal;




6.1 Rationale for the Proposed Disposal

It is not within our terms of reference to comment or express an opinion on the merits of the Proposed Disposal or the future prospects of the Group after the Proposed Disposal. Nevertheless, we have reviewed the rationale for and benefits of the Proposed Disposal as set out in Section 5 of the disposal announcement dated 28 December 2012, and reproduced in italics below for your reference.

“As previously announced in the 5 July 2011 Announcement, in connection with the Proposed Acquisition, the existing business of the Company is proposed to be divested so that it will not affect the financial results of the Company after the Proposed Acquisition. The Proposed Acquisition will not proceed without the Proposed Disposal as the Proposed Disposal is a condition precedent of the SPA. Furthermore, the Proposed Acquisition will also assist the Company in meeting the requirements for removal from the SGX-ST’s watch-list. ”

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We wish to highlight that the Proposed Acquisition and the Proposed Disposal are inter-conditional upon each other. The Proposed Disposal will facilitate the Company's undertaking of the RTO. If any of them is not approved by Shareholders, the Proposed Acquisition will not take place.

6.2 The Proposed Selective Share Cancellation being a term of the settlement for the Proposed Disposal

The Proposed Selective Share Cancellation is an agreed settlement arrangement between the Company and the Undertaking Shareholders in order for the Undertaking Shareholders to take full control of the existing business of the Sinobest Group and to relinquish their shareholding interests in the Group. The difference between the Disposal Consideration for the Proposed Disposal and the value of the Proposed Selective Share Cancellation and the net amount owing from the Company to the Sale Group to be offset, will be paid in cash by the Undertaking Shareholders to the Company. The detailed breakdown is as follows:

RMB ’million S$ ’million (1)

Disposal Consideration 145.2 28.91

Less: Value of the Proposed Selective Share Cancellation

(102.6) (20.44)

Less: Net amount owing from the Company to the Sale Group

(10.1) (2.01)

Balance to be paid in cash by the Undertaking Shareholders to the Company

32.5 6.46

Note:

(1) Translated based on the closing exchange rate of S$1:RMB5.023 as at 30 June 2012.

The assessment of the Disposal Consideration will be evaluated in paragraph 6.3 of this Letter. The assessment of the value of the Proposed Selective Share Cancellation will be evaluated in paragraph 6.4 of this Letter.

The net amount owing from the Company to the Sale Group of RMB10.1 million is the net amount of the intercompany balances between the Company and the Sale Group, disregarding the dividend declared by Guangzhou Sinobest to the Company which will be reversed pursuant to the Proposed Disposal. The amount is due to a non-trade receivable of RMB13.1 million in Guangzhou Sinobest’s books owed by the Company, offset by a payable of US$0.5 million (RMB3.0 million) owed by Sinobest Technologies Hong Kong to the Company.

The cash to be paid by the Undertaking Shareholders is to be settled upon completion of the Proposed Disposal.

6.3 Assessment of the Disposal Consideration for the Proposed Disposal

6.3.1 Adjusted NTA of the Sale Group

The Disposal Consideration was arrived at based on the adjusted NTA of the Sale Group as at 30 June 2012 and an agreed discount to the adjusted NTA of the Sale Group after considering factors relevant to the ongoing concern of the Sale Group's businesses such as the financial condition of the Sale Group and the prevailing business environment and market conditions (the “Adjusted NTA”).

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The Adjusted NTA of the Sale Group as at 30 June 2012 is summarised below:


Audited NTA of the Sale Group as at 30 June 2012 136.4 27.2

Add: Reversal of dividends declared but not paid out by the Sale Group

31.2 6.2

Less: Dividends to be declared by the Sale Group (6.4) (1.3)

Less: Non-controlling interests of the Sale Group (1.6) (0.3)

Adjusted NTA of the Sale Group as at 30 June 2012 159.6 31.8

Note:


As mentioned in paragraph 5.3 of this Letter, we highlighted that the NTA of the Sale Group has already accounted for the declaration of dividends of RMB31.2 million by Guangzhou Sinobest to the Company in HY2012 as a payable in the books of Guangzhou Sinobest. In view of the Proposed Disposal, management has decided to reverse the dividends declared. As such, the dividend amount of RMB31.2 million has to be added to the audited NTA of the Sale Group.

As mentioned in Section 7.2 of the Circular, a dividend of RMB6.4 million will be declared by the Sale Group to the Company, for the purposes of the Proposed Cash Distribution of S$1.0 million and to settle expenses related to the RTO. As such, this amount would have to be deducted from the NTA of the Sale Group.

Lastly, as the Group does not own 100% interest in Guangzhou Sinobest, non-controlling interests would have to be deducted from the NTA of the Sale Group to derive the Adjusted NTA of the Sale Group as at 30 June 2012.

In the above assessment of the Sale Group, we have also considered whether there are any tangible assets of the Sale Group which should be valued at an amount that is materially different from that which were recorded in the statements of financial position of the Sale Group as at 30 June 2012. In this respect, the Directors have confirmed to us that as at the Latest Practicable Date, to the best of their knowledge and belief, other than that already provided for or disclosed in the Circular, that there are no material differences between the realisable value of these assets and their respective book values as at 30 June 2012 which would have a material impact on the net worth of the Sale Group.

We also understand from the Company that a valuer was not appointed to value the assets to be disposed. In the case of Guangzhou Sinobest, the assets are made up of cash, trade receivables and inventories, with plant and machinery making up less than 5% of its total assets. In the case of Sinobest Technologies Hong Kong, its assets are made up of primarily cash and trade receivables. As such, the Company is of the opinion that the appointment of a valuer was not necessary.

Based on the above adjustments, the Adjusted NTA of the Sale Group as at 30 June 2012 is RMB159.6 million or S$31.8 million. The Disposal Consideration represents a 9.0% discount below the Adjusted NTA of the Sale Group. We refer to paragraph 5.3 of this Letter, where we noted that a substantial portion of the non-cash NTA of the Sale Group (82.7%) is made up of working capital, namely, inventories and receivables. We also note that the Sale Group is barely profitable in the current and past few financial years and the prevailing business environment and market conditions remain tough, with operating costs expected to continue

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to increase in the PRC. Thus, in view of the above factors, the discount to the Adjusted NTA of the Sale Group seems reasonable.

6.3.2 Comparison of valuation ratios of the selected listed companies whose businesses are broadly comparable to those of the Sale Group

The consideration for the Proposed Disposal is agreed at RMB145.2 million (equivalent to S$28.9 million) after taking into account the Adjusted NTA of the Sale Group of RMB159.6 million (equivalent to S$31.8 million). The consideration for the Proposed Disposal therefore represents a discount of 9.0% to the Adjusted NTA of the Sale Group.

In assessing the consideration for the Proposed Disposal, we have considered the comparison of valuation ratios of selected listed companies whose businesses are broadly comparable to the Sale Group, that is, the provision of IT services, including system integration for computer information systems and intelligent buildings systems and software development and technical services (the “Comparable Companies”). For a more meaningful comparison, we have excluded companies with market capitalisation of more than S$500 million.

We have had discussions with the Company about the suitability and reasonableness of the Comparable Companies as a basis for comparison with the Operating Subsidiaries. Relevant information has been extracted from Bloomberg, publicly available annual reports and/or public announcements of the Comparable Companies.

We wish to highlight that the Comparable Companies are not exhaustive and they differ from the Operating Subsidiaries 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.

The following is a brief description of the Comparable Companies:

Company Principal Business

CSE Global Ltd (“CSE Global”)

CSE Global provides systems integration and information technology solutions, computer network systems, and industrial automation. The company also designs, manufactures, and installs management information systems. CSE Global develops, manufactures, and sells electronic and micro processor monitoring equipment.

DMX Technologies Group Limited(“DMX Technologies”)

DMX Technologies is a computer systems integrator that provides networking, security and software solutions, and e-business transactions platform services. The company also trades security software.

ECS Holdings Limited(“ECS Holdings”)

ECS Holdings designs, installs, and implements electronic enabling infrastructure tools, operating systems and hardware. The company also provides network infrastructure design and security implementation, training and maintenance support services. ECS Holdings distributes information technology (IT) products for IT principals.

Armarda Group Limited (“Armarda”)

Armarda provides information technology (IT) consulting, IT support and business transformation services for enterprises in the banking and financial services industry predominantly in the PRC.

CNA Group Ltd (“CNA”)

CNA, through its subsidiaries, provides, designs, and implements integrated control and automation systems and information technology solutions. The company implements its solutions at a range of buildings and facilities located in Singapore, Malaysia, Thailand, the Philippines, Taiwan, and the PRC.

Plato Capital Limited(“Plato Capital”)

Plato Capital manages and implements systems integration projects. The company's services include e-commerce system and services and application support services.

Stratech Systems Limited (“Stratech”)

Stratech provides services in the technology-intensive and e-business areas. The company's technology intensive division provides services in computer vision systems and intelligent transport systems. Its e-business division

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Company Principal Business

develops, hosts, and operates e-business projects as well as develops and provides e-business applications, services, and infrastructure.

Azeus Systems Holdings Ltd (“Azeus”)

Azeus is an information technology services provider, focusing on software development and system implementation services. The company also provides maintenance and support services and operates business process outsourcing.

JK Tech Holdings Limited(“JK Tech”)

JK Tech offers information technology products and services. The company sells and supplies computer hardware and software, and offers systems integration services to companies that require a new networking system or upgrade or extension of existing network systems.

Source: Bloomberg L.P., annual reports and relevant financial information of the respective Comparable Companies

For the purpose of our evaluation and for illustration, we have made comparisons between the Sale Group and the Comparable Companies on a historical basis using the following:

(a) PER: The historical PER is commonly used for the purposes of illustrating the profitability and hence the valuation of a company as a going concern; and

(b) P/NTA: The P/NTA ratio or the NTA-based approach is used to show the extent the value of each share is backed by assets. The NAV-based approach of valuing a group of companies is based on the aggregate value of all the assets of the group in their existing condition, after deducting the sum of all liabilities of the group.

Comparable Companies

Last Financial Year-end

MarketCapitalisation

as at the Latest Practicable Date

(S$ million)

Historical PER (1)

(times) Historical P/NTA (2)

(times)

CSE Global 31-Dec-11 405.1 14.65 1.99

DMX Technologies 31-Dec-11 249.1 10.66 0.53

ECS Holdings 31-Dec-11 161.0 4.10 0.49

Armarda 31-Dec-11 52.0 n.m. (3) 3.07

CNA 31-Dec-11 21.7 6.56 0.36

Plato Capital 30-Jun-11 27.4 12.16 0.69

Stratech 31-Mar-12 27.9 n.m. (3) 34.60 (4)

Azeus 31-Mar-12 23.4 13.92 1.24

JK Tech 31-Mar-12 4.6 n.m. (3) 0.91

High 14.65 34.60

Low 4.10 0.36

Mean 10.34 1.16

Median 11.41 0.80

The Sale Group (Implied by the Disposal Consideration)

30-Jun-12 RMB145.2 (S$28.9)

21.12 (1) 0.91 (2)

Source: Bloomberg L.P., annual reports and relevant financial information of the respective Comparable Companies

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Notes:

(1) The historical PERs of the Comparable Companies were computed based on their historical basic consolidated earnings per share as set out in their latest available published full-year results as at the Latest Practicable Date. As the Company is an investment holding company, the Sale Group account for substantially the profit of the Sinobest Group. As mentioned in paragraph 5.1 of this letter, the financials of the Sale Group has been segregated in the FY2011 annual report of Sinobest Group. As such, the historical PER of the Sale Group was computed based on profits after taxation of the discontinued operations, which refers to the Sale Group.

(2) The P/NTA ratios of the Comparable Companies were computed based on their respective NTA values as set out in their latest available published financial statements and their market capitalisation as at the Latest Practicable Date. The P/NTA of the Sale Group was computed based on the consideration for the Proposed Disposal and the Adjusted NTA of the Sale Group.

(3) n.m. denotes not meaningful as these companies were loss-making according to their latest available published full-year results as at the Latest Practicable Date. Accordingly, the mean and median PER computation exclude these companies as they are considered as outliers.

(4) For the computation of the historical P/NTA, we have excluded this company as it is considered a statistical outlier.

Based on the above, we note that:

(i) the historical PER of the Sale Group as implied by the consideration for the Proposed Disposal of 21.12 times is above the high end of the range of the PER ratios of the Comparable Companies and above the mean and median of the historical PER ratios of the Comparable Companies.

(ii) the historical P/NTA ratio as implied by the consideration for the Proposed Disposal of 0.91 times is within the range of the P/NTA ratios of the Comparable Companies, and near the mean and median of the historical P/NTA ratios of the Comparable Companies.

From the above, on a PER basis, the Disposal Consideration is ascribed a higher valuation compared to the listed comparables.

6.4 Assessment of the value of the Proposed Selective Share Cancellation

The value of the Proposed Selective Share Cancellation is based on the audited NTA of the Group and adjusting for the Proposed Cash Distribution. The details are set out below:


Audited NTA of Sinobest Group as at 30 June 2012 155.9 31.0

Less: Proposed Cash Distribution of S$1.0 million to Shareholders by way of capital reduction

(5.0) (1.0)

NTA of the Sinobest Group after the Proposed Cash Distribution

150.9 30.0

NTA per Share after the Proposed Cash Distribution (“Cancellation Share Price”) based on 110,776,067 Shares

RMB1.36 S$0.271

Note:


Based on the above NTA per Share after the Proposed Cash Distribution, the value of the Proposed Selective Share Cancellation of 75,347,433 Shares amounts to RMB102,646,323 or S$20.7 million.

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We note that the Shares of the Company have been trading in the S$0.11 to S$0.17 range in the last 6 months prior to the LPD. We also note that the Proposed Acquisition of OKH is to be satisfied by the issue of Consideration Shares at S$0.12 for each Consideration Share. As such, the Cancellation Share Price of S$0.271 seems to be at a very high premium to the trading price of the Shares and the issue price of the Consideration Shares.

However, we note that the Shares of the Company are thinly traded. In addition, we also note that, as at 30 June 2012, the audited equity and NTA of the Sinobest Group are substantially associated with those of the Sale Group classified as held-for-sale, i.e. the Operating Subsidiaries. The Disposal Consideration was arrived at based on the Adjusted NTA of the Sale Group as at 30 June 2012.

Assuming that the Proposed Disposal is being effected before the Proposed Acquisition, the Company will become a shell company with no business activities and with an NAV of approximately S$5.2 million and a reduced share capital comprising of 35,428,634 Shares. This translates to an NAV of approximately S$0.148 per Share. As the Proposed Acquisition and the Proposed Disposal are inter-conditional upon each other, the price of the Consideration Shares would similarly be evaluated against this shell company’s resultant NAV of S$0.148 as the vendor of the Proposed Acquisition is essentially only purchasing the shell company.

6.5 Other Relevant Considerations

6.5.1 The Company was placed on the SGX-ST watch-list

We wish to highlight to the Shareholders that the Company had been placed on the SGX-ST’s watch-list with effect from 3 March 2010, as the Group had recorded pre-tax losses for the preceding three financial years and its average daily market capitalisation was less than S$40 million over the preceding 120 market days. The Company is required to take active steps to meet the requirements of Rule 1314 of the Listing Manual for removal from the SGX-ST watch-list. Rule 1314 requires the Company to satisfy one of the two following criteria:

(i) Achieve consolidated pre-tax profit for one year and an average daily market capitalisation of at least S$40.0 million over the last 120 market days; or

(ii) The operations of the Group achieves a cumulative consolidated pre-tax profit of at least $7.5 million for the last three years, and a minimum pre-tax profit of $1 million for each of those three years or a cumulative consolidated pre-tax profit of at least $10 million for the last one or two years.

The SGX-ST may approve the application, or reject the application if the SGX-ST is of the opinion that there are other factors that justify the continued inclusion of the Company in the SGX-ST watch-list.

In connection with the Proposed Acquisition which will result in the RTO of the Company, the SGX-ST has, on 12 December 2012, given its in-principle approval for the listing of the Consideration Shares for the Proposed Acquisition, subject to various conditions. With the completion of the Proposed Acquisition, the Company will be in a better position to remove itself from the watch-list.

We wish to highlight that the Proposed Acquisition and the Proposed Disposal are inter-conditional upon each other. The Proposed Disposal will facilitate the Company's undertaking of the RTO. If any of them is not approved by Shareholders, the Proposed Acquisition will not take place.

In the event that the Company is unable to meet the requirements for removal from the SGX-ST watch-list by 28 February 2013, the SGX-ST may either remove the Company from the Official List, or suspend trading of the listed securities of the Company (without the agreement of the Company) with a view to removing the Company from the Official List. In the event the SGX-ST exercises its power to remove the Company from the Official List, the Company is

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required to comply with the requirements of Rule 1309 of the Listing Manual to make a reasonable exit offer to the Shareholders.

6.5.2 The Undertaking Shareholders as the most logical buyer

The Sale Group is only making small profits and in view of the financial situation of the Sale Group, the Company was unable to find a purchaser for the Sale Group other than the Undertaking Shareholders. The Directors have expressed that there were no other competing offers for the Sale Company. The Sale Group, being the operating entities of the Group, is currently managed by the Undertaking Shareholders. As such, the sale of the Sale Group to the Undertaking Shareholders is logical.

6.5.3 Financial effects of the Proposed Disposal on the Group

The financial effects of the Proposed Disposal are set out in Section 7.7 of the Circular and are for illustration purposes only. It is not intended to be a projection of the future financial position or performance of the Group.

We note that the Proposed Disposal would result in the following financial effects for the Group:

(i) the share capital of the Company will decrease as a result of the Proposed Selective Share Cancellation as part consideration for the Proposed Disposal;

(ii) the loss on disposal will have the effect of decreasing the earnings of the Company;

(iii) the NTA of the Group would decrease after the Proposed Disposal as a result of substantial sale of the net assets of the Company and the Proposed Selective Share Cancellation; and

(iv) there is no impact on the gearing of the Group arising from the Proposed Disposal.

We wish to highlight that upon completion of the Proposed Disposal, the Sale Group will cease to be subsidiaries of the Group.

7. OUR OPINION

In arriving at our opinion, we have taken into account the following key considerations which we consider to be pertinent in our assessment of the Proposed Disposal:


(b) the Proposed Selective Share Cancellation being a term of the settlement for the Proposed Disposal;




Having considered all of the above and the information available to us as at the Latest Practicable Date, we are of the opinion that the financial terms of the Proposed Disposal are on normal commercial terms and are not prejudicial to the interests of the Company and the Independent Shareholders.

Our opinion is addressed to the Independent Directors for their benefit and for the purpose of their consideration of the Proposed Disposal. The recommendation to be made by them to the Independent Shareholders shall remain the sole responsibility of the Independent Directors. Whilst a copy of this Letter may be reproduced in the Circular, neither the Company, the

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Directors nor any other persons may reproduce, disseminate or quote this Letter (or any part thereof) for any other purpose other than for the purpose of the SGM and for the purpose of the Proposed Disposal, at any time and in any manner without the prior written consent of Provenance Capital in each specific case.

This Letter is governed by, and construed in accordance with, the laws of Singapore, and is strictly limited to the matters stated herein and does not apply by implication to any other matter.

Yours faithfully For and on behalf of PROVENANCE CAPITAL PTE. LTD.

Wong Bee Eng Terence Lim Chief Executive Officer Director

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INDEPENDENT AUDITORS’ REPORT AND THE CONSOLIDATED FINANCIAL STATEMENTSOF OKH HOLDINGS PTE. LTD. AND ITS SUBSIDIARIES FOR THE FINANCIAL YEAR ENDED

JUNE 30, 2010, 2011 AND 2012

November 23, 2012 OKH Holdings Pte. Ltd. 701 Sims Drive #02-06, LHK Building Singapore 387383 Dear Sirs Report on the Financial Statements We have audited the accompanying consolidated financial statements of OKH Holdings Pte. Ltd. and its subsidiaries (collectively referred to as the “Group”). The consolidated financial statements comprise the consolidated statements of financial position as at June 30, 2010, 2011 and 2012, consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated statements of cash flows of the Group for the financial year ended June 30, 2010, 2011 and 2012 (the “Relevant Periods”), and a summary of significant accounting policies and other explanatory notes, as set out on pages B-3 to B-54. Management’s Responsibility for the Financial Statements Management is responsible for the preparation of these consolidated financial statements that give a true and fair view in accordance with the Singapore Financial Reporting Standards. This responsibility includes devising and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair profit and loss accounts and balance sheets and to maintain accountability of assets. Auditors’ Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. 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 consolidated financial statements are free from material misstatement.

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COMPILATION REPORT ON THE UNAUDITED PROFORMA CONSOLIDATED FINANCIALINFORMATION ON THE ENLARGED GROUP

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VALUATION CERTIFICATES

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TAXATION

The following is a discussion of certain tax matters arising under the current tax laws in Singapore

and Bermuda and is not intended to be and does not constitute legal or tax advice. While this

discussion is considered to be a correct interpretation of existing laws in force as of the date of

this Circular, no assurance can be given that courts or fiscal authorities responsible for the

administration of such laws will agree with this interpretation or that changes in such laws will not

occur. The discussion is limited to a general description of certain tax consequences in Singapore

and Bermuda with respect to ownership of the Shares by Singapore investors and does not

purport to be a comprehensive nor exhaustive description of all of the tax considerations relating

to the ownership of the Shares.

Prospective investors should consult their tax advisers regarding Singapore and Bermuda tax and

other tax consequences of owning and disposing the Shares. It is emphasised that neither the

Company, the Directors nor any other persons involved in the Proposed Transactions accepts

responsibility for any tax effects or liabilities resulting from the subscription for, purchase, holding

or disposal of the Shares.

SINGAPORE TAXATION

The following discussion describes the material Singapore income tax, stamp duty, goods and

services tax and estate duty consequences of the purchase, ownership and disposal of the

Shares.

1. Individual Income Tax

Individual taxpayers who are Singapore tax residents are subject to tax on income accrued

in or derived from Singapore. All foreign-sourced income (except for income received

through a partnership in Singapore) received on or after 1 January 2004 in Singapore by tax

resident individuals will be exempt from tax. Certain Singapore-sourced investment income

(such as interest from debt securities) derived by tax resident individuals on or after

1 January 2004 from certain financial instruments (other than income derived through a

partnership in Singapore or from the carrying on of a trade, business or profession) will be

exempt from tax.

For a Singapore tax resident individual, the tax rate will vary according to the individual’s

circumstances but is subject to a maximum rate of 20.0% with effect from the year of

assessment 2007.

Non-resident individuals, subject to certain exceptions, are generally subject to income tax

on income (excluding employment income) accrued in or derived from Singapore at a flat rate

of 20.0%.

An individual will be regarded as being resident in Singapore in a year of assessment if, in

the preceding year, he was physically present in Singapore or exercised employment in

Singapore (other than as a director of a company) for 183 days or more, or if he resides in

Singapore.

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2. Corporate Income Tax

Corporate taxpayers who are Singapore tax residents are subject to Singapore income tax

on income accrued in or derived from Singapore and subject to certain exceptions, on

foreign-sourced income received or deemed to be received in Singapore from outside

Singapore. Foreign-sourced income in the form of dividends, branch profits and services

income received or deemed to be received in Singapore by resident taxpayers on or after

1 June 2003 will be exempt from tax if certain prescribed conditions are met.

Non-resident corporate taxpayers are subject to income tax on income accrued in or derived

from Singapore and on foreign income received in Singapore, subject to certain exceptions.

A corporate taxpayer is regarded as resident for Singapore tax purposes if its business is

controlled and managed in Singapore. The corporate tax rate in Singapore is 17.0% with

effect from year of assessment 2010. Further, corporate tax exemption will apply to the first

S$300,000 of a company’s chargeable income as follows:

(i) 75.0% of up to the first S$10,000 of a company’s normal chargeable income; and

(ii) 50.0% of up to the next S$290,000 of a company’s normal chargeable income.

For start-up companies, subject to meeting qualifying conditions, they will be granted tax

exemption on up to S$300,000 of their normal chargeable income for each of their first three

consecutive years of assessment as follows:

(i) Full tax exemption of up to the first S$100,000 of normal chargeable income; and

(ii) 50.0% exemption of up to the next S$200,000 of normal chargeable income.

The newly incorporated company must fulfill the following conditions in order to qualify for the

start-up concessionary tax rate:

(a) The company must be incorporated in Singapore;

(b) The company must be tax resident in Singapore for that year of assessment; and

(c) The company must have no more than 20 shareholders throughout the basis period for

that year of assessment where (i) all of the shareholders are individuals beneficially and

directly holding the shares in their own names or (ii) at least one shareholder is an

individual beneficially or directly holding at least 10.0% of the issued ordinary shares of

the company.

The balance of chargeable income in excess of S$300,000 is fully taxable at a flat rate of 17.0%.

Cash Dividend Distributions

Under the one-tier corporate tax system, the tax paid by a resident company is a final tax and

the distributable profits of the company can be paid to shareholders as tax exempt dividends.

Dividends paid by the Company will be exempt from tax in the hands of Shareholders,

regardless of the tax residence status or the legal form of Shareholders. However, foreign

Shareholders are advised to consult their own tax advisors 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.

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Bonus Issues and Scrip Dividends

Under current Singapore tax law and practice, a capitalisation of profits followed by the issue

of new shares, credited as fully paid, pro-rata to shareholders (“bonus issue”) does not

represent a distribution of dividends by a company to its shareholders. Therefore, a

Singapore resident shareholder receiving shares by way of a bonus issue should not have

a liability to Singapore tax.

When a dividend is to be satisfied wholly or in part in the form of an allotment of ordinary

shares credited as fully paid, the dividend declared will be treated as exempt (one-tier)

dividend income to its shareholders and will not be subject to Singapore tax. Similarly, when

shareholders are given the right to elect to receive an allotment of ordinary shares credited

as fully paid in lieu of cash, the dividend declared will be treated as exempt (one-tier)

dividend income and will not be subject to Singapore tax.

Capital Gains on Disposal of Ordinary Shares

Singapore does not impose a tax on capital gains. However, there are no specific laws or

regulations which deal with the characterisation of capital gains. Gains derived from trading

transactions are revenue in nature and will be brought to tax. Hence profits derived from the

disposal of the Shares are not taxable in Singapore unless the seller is a share dealer.

Adoption of FRS 39 treatment for Singapore income tax purposes

The IRAS issued a circular entitled “Income Tax Implications arising from the adoption of

FRS 39-Financial Instruments: Recognition and Measurement” (the “FRS 39 Circular”) on

30 December 2005. The last revision made to the FRS 39 Circular was 22 March 2010. The

FRS 39 Circular generally applies to corporate investors and they should consult their own

accounting and tax advisers regarding the Singapore income tax consequences of their

acquisition, holding or conversion of the Shares.

3. Stamp Duty

There is no stamp duty payable on the allotment or holding of the Shares. Stamp duty is

payable on the instrument of transfer of the Shares at the rate of S$0.20 for every S$100 or

any part thereof, computed on the amount or value of consideration. The amount or value of

consideration is the actual consideration or market value of the Shares, whichever is 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 or the instrument of transfer is

executed outside of Singapore. However stamp duty would be payable if the instrument of

transfer which is executed outside of Singapore is brought into Singapore. Stamp duty is,

however, not applicable in respect of electronic transfers of the Shares through the CDP.

4. Goods and Services Tax (“GST”)

The sale of the Shares by an investor belonging to Singapore through a SGX-ST member or

to another person belonging in Singapore is an exempt sale not subject to GST. Any GST

directly or indirectly incurred by the investor in respect of this exempt sale will become an

additional cost to the investor.

Where the Shares are sold by a GST-registered investor to a person belonging outside

Singapore, the sale is a taxable sale subject to GST at zero-rate. Any GST incurred by a

GST-registered investor in the making of this supply in the course of furtherance of a

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business may, subject to the provisions of the Goods and Services Tax Act, be offset against

the investor’s GST liability and, in the event of an excess input tax credit, recovered from the

Comptroller of GST of Singapore.

Services such as brokerage, handling and clearing services rendered by a GST-registered

person to an investor belonging in Singapore in connection with the investor’s purchase, sale

or holding of the Shares will be subject to GST at the prevailing rate of 7%. Similar services

rendered to an investor belonging outside Singapore are subject to GST at zero-rate.

5. Estate Duty

Singapore estate duty was abolished in February 2008.

Individuals, whether or not domiciled in Singapore, should consult their own tax

advisers regarding the Singapore tax consequences of their ownership of the Shares.

BERMUDA TAXATION

The following discussion describes the material Bermuda tax on dividend and tax on gains from sale:

Under present Bermuda law, no Bermuda withholding tax on dividends or other distributions, or

any Bermuda tax computed on profits or income or on any capital asset, gain or appreciation will

be payable by an exempted company or its operations, and there is no Bermuda tax in the nature

of estate duty or inheritance tax applicable to shares, debentures or other obligations of the

company held by non-residents of Bermuda. Transfers of shares and warrants in all exempted

companies are exempt from Bermuda stamp duty.

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RULES OF THE OKH PERFORMANCE SHARE PLAN

1. NAME OF THE PERFORMANCE SHARE PLAN

The Performance Share Plan shall be called the “OKH Performance Share Plan”.

2. DEFINITIONS

2.1 In the Performance Share Plan, unless the context otherwise requires, the following words

and expressions shall have the following meanings:

“Adoption Date” : The date on which the Performance Share Plan is

adopted by the Company in general meeting

“Associate” : (a) in relation to any director, chief executive officer,

substantial or controlling shareholder of a

corporation (being an individual) means:

(i) his immediate family;

(ii) a trustee, acting in his capacity as such

trustee, of any trust of which the individual or

his immediate family is a beneficiary or, in the

case of a discretionary trust, is a discretionary

object; and

(iii) any corporation in which he and his immediate

family (directly or indirectly) have interests in

voting shares of an aggregate of not less than

30.0% of the total votes attached to all voting

shares

(b) in relation to a substantial shareholder or

controlling shareholder of a corporation (being a

corporation) any other corporation which is its

subsidiary or holding company or is a subsidiary of

such holding company or one in the equity of which

it and/or such other company or companies taken

together (directly or indirectly) have interests in

voting shares of an aggregate of not less than

30.0% of the total votes attached to all voting

shares

“Associated Company” : A company in which at least 20.0% but not more than

50.0% of its shares are held by the Company and over

which the Company has control

“Associated Company

Employees”

: Any director and/or confirmed employee of an

Associated Company selected by the Awards Committee

to participate in the Performance Share Plan in

accordance with the terms and conditions set out herein

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F-1

“Auditors” : The auditors of the Company for the time being

“Award” : A contingent award of Shares granted under Rule 5

“Award Date” : In relation to an Award, the date on which the Award is

granted pursuant to Rule 5

“Award Letter” : A letter in such form as the Awards Committee shall

approve confirming an Award granted to a Participant by

the Awards Committee

“Awards Committee” : A committee comprising directors of the Company, duly

authorised, appointed and nominated by the Board to

administer the Performance Share Plan, which shall be

the Remuneration Committee of the Company from time

to time

“Board” or “Directors” : The board of directors of the Company for the time being

“Bye-Laws” : The bye-laws of the Company, as may be amended,


“CDP” : The Central Depository (Pte) Limited

“Companies Act” : The Companies Act, Chapter 50 of Singapore, as may be


“Company” : “Sinobest Technology Holdings Ltd.” or “OKH Global

Ltd.” after the proposed change of name

“Control” : The capacity to dominate decision-making, directly or

indirectly, in relation to the financial and operating

policies of the Company

“Controlling Shareholder” : A person who (a) holds directly or indirectly 15.0% or

more of the aggregate of the votes attached to all the

voting Shares in the Company (unless determined

otherwise by the SGX-ST); or (b) in fact exercises

Control over the Company

“Enlarged Group” : The Company and OKH Group after completion of the

Proposed Acquisition

“Group Employee” : Any confirmed employee of the Enlarged Group

(including any Group Executive Director and Group

Non-Executive Director) selected by the Awards

Committee to participate in the Performance Share Plan

in accordance with Rule 4

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“Group Executive

Director”

: A director of the Company and/or any of its subsidiaries,

as the case may be, who performs an executive function

within the Company or the relevant subsidiaries, as the

case may be

“Group Non-Executive

Director”

: A director of the Company and/or any of its subsidiaries,

as the case may be, who is not a Group Executive

Director, including independent directors

“Market Day” : A day on which the SGX-ST is open for trading in

securities

“Market Value” : In relation to a Share, on any day:

(a) the average price of a Share on the SGX-ST over

the five (5) immediately preceding Trading Days; or

(b) if the Awards Committee is of the opinion that the

Market Value as determined in accordance with (a)

above is not representative of the value of a Share,

such price as the Awards Committee may

determine, such determination to be confirmed in

writing by the Auditors (acting only as experts and

not as arbitrators) to be in their opinion, fair and

reasonable

“New Shares” : The new Shares which may be allotted and issued from

time to time pursuant to the vesting of the Awards

granted under the Performance Share Plan

“Participant” : A person who has been granted an Award pursuant to the

Performance Share Plan

“Performance Condition” : The performance condition prescribed by the Awards

Committee to be fulfilled by a Participant within the

relevant Performance Period

“Performance Period” : The performance target(s) prescribed by the Awards

Committee to be fulfilled by a Participant for any

particular period under the Performance Share Plan

“Performance Share Plan” : The OKH Performance Share Plan, as the same may be

modified or altered from time to time

APPENDIX F

F-3

“Record Date” : In relation to any dividends, right allotment or other

distributions, the date as at the close of business (or

such other time as may have been notified by the

Company) on which the Shareholders must be registered

with the Company or with CDP, as the case may be, in

order to participate in such dividends, rights, allotments

or other distributions

“Release” : In relation to an Award, the release at the end of the

Performance Period relating to the Award of all or some

of the Shares to which that Award relates in accordance

with Rule 7 and, to the extent that any Shares which are

the subject of the Award are not released pursuant to

Rule 7, the Award in relation to those Shares shall lapse

accordingly, and “Released” shall be construed

accordingly

“Release Schedule” : In relation to an Award, a schedule in such form as the

Awards Committee shall approve, setting out the extent

to which Shares which are the subject of that Award shall

be Released on the Performance Condition being

satisfied (whether fully or partially) or exceeded or not

being satisfied, as the case may be, at the end of the

Performance Period

“Released Award” : An award which has been released in accordance with

Rule 7

“Retention Period” : In relation to an Award, such period commencing on the

Vesting Date in relation to that Award as may be

determined by the Awards Committee on the Award Date

“SGX-ST” : Singapore Exchange Securities Trading Limited

“Shareholders” : Registered holders of the Shares in the Register of

Members of the Company, except that where the

registered holder is CDP, the term “Shareholders” shall,

in relation to such Shares, mean the Depositors whose

Securities Accounts maintained with CDP are credited

with Shares

“Shares” : Ordinary shares in the capital of the Company

“Substantial Shareholder” : A person which has an interest (as defined in the

Companies Act) in one or more voting shares of a

company and the total votes attached to that share, or

those shares, is not less than 5.0% of the total votes

attached to all the voting shares in the company

“Trading Day” : A day on which the Shares are traded on the SGX-ST

APPENDIX F

F-4

“Vesting” : In relation to Shares which are the subject of a Released

Award, the absolute entitlement to all or some of the

Shares which are the subject of a Released Award and

“Vest” and “Vested” shall be construed accordingly

“Vesting Date” : In relation to Shares which are the subject of a Released

Award, the date (as determined by the Awards

Committee and notified to the relevant Participant) on

which those Shares have Vested pursuant to Rule 7

“S$” and “cents” : Singapore dollars and cents, respectively

“%” : Percentage or per centum

2.2 The terms “Depositor”, “Depository Register” and “Depository Agent” shall have the

meanings ascribed to them respectively in Section 130A of the Companies Act. The term

“associate” shall have the meaning ascribed to it in the section headed, Definitions and

Interpretation, of the SGX-ST Listing Manual.

2.3 Words importing the singular number shall, where applicable, include the plural and vice

versa and words importing the masculine gender shall, where applicable, include the

feminine and neuter genders and vice versa. Words importing persons shall include

corporations.

2.4 Any reference to a time of a day in the Performance Share Plan is a reference to Singapore

time, unless otherwise stated.

2.5 Any reference in the Performance Share Plan 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 or any statutory modification thereof and not otherwise defined in the

Performance Share Plan and used in the Performance Share Plan shall, where applicable,

have the meaning assigned to it under the Companies Act or any statutory modification

thereof, as the case may be.

3. OBJECTIVES OF THE PERFORMANCE SHARE PLAN

The purpose of the Performance Share Plan is to provide an opportunity for Group

Employees, who have met the Performance Conditions to be remunerated not just through

cash bonuses but also by an equity stake in the Company.

The Performance Share Plan is primarily a share incentive scheme. It recognises the fact

that the services of such Group Employee are important to the success and continued

well-being of the Group. Implementation of the Performance Share Plan will enable the

Company to give recognition to the contributions made by such Group Employees. At the

same time, it will give such Group Employees an opportunity to have a direct interest in the

Company and will also help to achieve the following positive objectives:

(a) to motivate each Participant to optimise his performance standards and efficiency and

to maintain a high level of contribution of the Group;

(b) to retain key employees and Group Executive Directors whose contributions are

essential to the long-term growth and profitability of the Group;

APPENDIX F

F-5

(c) to instill loyalty to and a stronger identification by the Participants with the long-term

prosperity of the Company;

(d) to attract potential employees with relevant skills to contribute to the Group and to

create value for the Shareholders; and

(e) to align the interests of the Participants with the interests of the Shareholders.

The Directors believe that with the Performance Share Plan and any other share-based

incentive scheme which the Enlarged Group may adopt, the Enlarged Group is equipped

with a set of flexible remuneration tools, with which the Enlarged Group would be better

able to attract and retain talent.

4. ELIGIBILITY OF PARTICIPANTS

4.1 The following persons shall be eligible to participate in the Performance Share Plan at the

absolute discretion of the Awards Committee:

(a) Group Employees (including Group Executive Directors and Group Non-Executive

Directors) who have attained the age of 21 years on or prior to the relevant Award Date

and are not undischarged bankrupts and have not entered into a composition with their

respective creditors, shall be eligible to participate in the Performance Share Plan at

the absolute discretion of the Awards Committee.

(b) Associated Company Employees (including the directors of the Associated Company)

who have attained the age of 21 years on or prior to the relevant Award Date and are

not undischarged bankrupts and have not entered into a composition with their

respective creditors, shall be eligible to participate in the Performance Share Plan at

the absolute discretion of the Awards Committee.

4.2 Controlling Shareholders and their Associates shall, if each such person meets the

eligibility criteria in Rule 4.1, be eligible to participate in the Performance Share Plan,

provided that separate approval of independent Shareholders is obtained for each such

Participant in respect of his participation and the actual number of Shares comprised in the

Awards and the terms thereof.

4.3 Save as prescribed by Rules 853 of the Listing Manual, there shall be no restriction on the

eligibility of any Participant to participate in any other share option or share incentive

scheme, whether or not implemented by any other companies within the Enlarged Group.

4.4 Subject to the Companies Act and any requirement of the SGX-ST or any other stock

exchange on which the Shares may be listed or quoted, the terms of eligibility for

participation in the Performance Share Plan may be amended from time to time at the

absolute discretion of the Awards Committee.

5. GRANT OF AWARDS

5.1 Except as provided in Rule 8, the Awards Committee may grant Awards to the Participants,

as the Awards Committee may select, in its absolute discretion, at any time during the

period when the Performance Share Plan is in force, except that the Awards Committee

shall not grant any Awards during the period commencing two weeks before the

announcement of the Company’s financial statements for each of the first three quarters of

APPENDIX F

F-6

its financial year, or one month before the announcement of the Company’s half-year or

full-year financial statement, as the case may be, and ending on the date of announcement

of the relevant result. In addition, in the event that an announcement on any matter of an

exceptional nature involving unpublished price sensitive information is made, Awards may

only be granted on or after the second Market Day on which such announcement is made.

5.2 The number of Shares which are the subject of each Award to be granted to a Participant

in accordance with the Performance Share Plan shall be determined at the absolute

discretion of the Awards Committee, which shall take into account criteria such as his rank,

job performance, year(s) of service, potential for future development, his contribution to the

success and development of the Enlarged Group, the extent of effort with which the

Performance Condition may be achieved within the Performance Period and the maximum

entitlement of the Shares that can be awarded to a Participant under the Performance

Share Plan and any other share-based incentive scheme of the Company.

5.3 The Awards Committee shall decide in relation to an Award:

(a) the Participant;

(b) the Award Date;

(c) the Performance Period;

(d) the number of Shares which are the subject of the Award;

(e) the Performance Condition;

(f) the Release Schedule; and

(g) any other condition(s) which the Awards Committee may determine in relation to that

Award.

5.4 The Awards Committee may amend or waive the Performance Period and/or the

Performance Condition in respect of any Award if anything happens which causes the

Awards Committee to conclude that a changed Performance Period and/or Performance

Condition would be a fairer measure of performance and would be no less difficult to satisfy

or the Performance Period and/or Performance Conditions should be waived, and shall

notify the Participants of such change or waiver.

5.5 As soon as reasonably practicable after an Award is finalised by the Awards Committee, the

Awards Committee shall send to each Participant an Award Letter confirming the Award and

specifying in relation to the Award, inter alia, the following:

(a) the Award Date;

(b) the Performance Period;

(c) the number of Shares which are the subject of the Award;

(d) the Performance Condition;

(e) the Release Schedule; and

APPENDIX F

F-7

(f) any other condition which the Awards Committee may determine in relation to that

Award.

5.6 Participants are not required to pay for the grant of Awards.

5.7 An Award or Released Award shall be personal to the Participant to whom it is granted and,

prior to the allotment and/or transfer to the Participant of the Shares to which the Released

Award relates, shall not be transferred, charged, assigned, pledged or otherwise disposed

of, in whole or in part, except with the prior approval of the Awards Committee and if a

Participant shall do, suffer or permit any such act or thing as a result of which he would or

might be deprived of any rights under an Award or Released Award without the prior

approval of the Awards Committee, that Award or Released Award shall immediately lapse.

6. EVENTS PRIOR TO THE VESTING DATE

6.1 Notwithstanding that a Participant may have met his Performance Conditions, an Award

shall, to the extent not yet Released, immediately lapse without any claim whatsoever

against the Company:

(a) in the event of misconduct on the part of the Participant as determined by the Awards

Committee in its discretion;

(b) in the event of the bankruptcy of the Participant or the happening of any other event

which results in his being deprived of the legal or beneficial ownership of such Award;

(c) subject to Rule 6.2(a), upon the Participant ceasing to be in the employment of the

Enlarged Group or Associated Company (as the case may be) for any reason

whatsoever; or

(d) in the event of an order being made or a resolution passed for the winding-up of the

Company on the basis, or by reason, of its insolvency.

For the purpose of Rule 6.1(c), the Participant shall be deemed to have ceased to be so

employed as of the date the notice of termination of employment is tendered by or is given

to him, unless such notice shall be withdrawn prior to its effective date.

6.2 In any of the following events, namely:

(a) where the Participant ceases to be in the employment of the Enlarged Group or

Associated Company (as the case may be) by reason of:

(i) ill health, injury or disability, in each case, evidenced to the satisfaction of the

Awards Committee;

(ii) redundancy;

(iii) retirement at or after the legal retirement age;

(iv) retirement before the legal retirement age with the consent of the Awards

Committee;

(v) the company by which he is employed or to which he is seconded, as the case

may be, ceasing to be a company within the Enlarged Group or the undertaking

or part of the undertaking of such company being transferred otherwise than to

another company within the Enlarged Group; or

APPENDIX F

F-8

(vi) any other event approved by the Awards Committee;

(b) the death of a Participant; or

(c) any other event approved by the Awards Committee,

the Awards Committee may, in its absolute discretion, preserve all or any part of any Award

or declare that an Award has lapsed and the Participant shall have no claim against the

Company. If the Awards Committee preserves all or any part of an Award, it shall decide as

soon as reasonably practicable following such event either to vest some or all of the Shares

which are the subject of any Award or to preserve all or part of any Award until the end of

each vesting period subject to the provisions of the Performance Share Plan. In exercising

its discretion, the Awards Committee will have regard to all circumstances on a case-by-

case basis including (but not limited to) the contributions made by that Participant and the

extent to which the Performance Condition has been satisfied.

7. RELEASE OF AWARDS

7.1 Review of Performance Condition

(a) As soon as reasonably practicable after the end of each Performance Period, the

Awards Committee shall review the Performance Condition specified in respect of

each Award and determine at its discretion whether it has been satisfied and, if so, the

extent to which it has been satisfied and provided that the relevant Participant

continued to be a Group Employee or Associated Company Employee (as the case

may be) from the Award Date up to the end of the Performance Period, shall Release

to that Participant all or part (as determined by the Awards Committee at its discretion

in the case where the Awards Committee has determined that there has been partial

satisfaction of the Performance Condition) of the Shares to which his Award relates in

accordance with the Release Schedule specified in respect of his Award on the

Vesting Date. If not, the Awards shall lapse and be of no value.

If the Awards Committee determines in its sole discretion that the Performance

Condition has not been satisfied or (subject to Rule 6) if the relevant Participant has

not continued to be a Group Employee or Associated Company Employee (as the case

may be) from the Award Date up to the end of the relevant Performance Period, that

Award shall lapse and be of no value and the provisions of Rules 7.2 to 7.4 shall be

of no effect.

The Awards Committee shall have the discretion to determine whether the

Performance Condition has been satisfied (whether fully or partially) or exceeded and

in making any such determination, the Awards Committee shall have the right to make

computation adjustments to the audited results of the Company or the Enlarged

Group, to take into account such factors as the Awards Committee may determine to

be relevant, including changes in accounting methods, taxes and extraordinary

events, and further the right to amend the Performance Condition if the Awards

Committee decides that a changed performance target would be a fairer measure of

performance.

(b) Shares which are the subject of a Released Award shall be vested to a Participant on

the Vesting Date, which shall be a Trading Day falling as soon as practicable after the

review by the Awards Committee referred to in Rule 7.1(a) and, on the Vesting Date,

the Awards Committee will procure the allotment or transfer to each Participant of the

number of Shares so determined.

APPENDIX F

F-9

7.2 Release of Award

(a) Subject to the prevailing legislation and rules, guidelines and measures applicable to

the Company and the SGX-ST listing rules, the Awards Committee may determine in

its sole discretion to deliver the Shares to Participants upon the release of their Awards

by way of:

(i) the issue and allotment to each Participant of the number of New Shares,

deemed to be fully paid or credited upon their issue and allotment;

(ii) delivering existing Shares to the Participant, whether such existing Shares are

acquired pursuant to a share purchase mandate or (to the extent permitted by

law) held as treasury Shares or otherwise; and/or

(iii) payment of the aggregate Market Value of the Shares in cash in lieu of allotment

or transfer.

(b) In determining whether to issue New Shares or to purchase existing Shares for

delivery to Participants or the payment of the aggregate Market Value in cash to the

Participant upon release of their Awards, the Awards Committee will take into account

factors such as (but not limited to) the number of Shares to be delivered, the prevailing

market price of the Shares and the cost to the Company of issuing New Shares or

purchasing existing Shares or the amount of cash available to the Enlarged Group.

(c) Subject to:

(i) such consents or other actions required by any competent authority under any

regulations or enactments for the time being in force as may be necessary

(including any approvals required from the SGX-ST); and

(ii) compliance with these Rules and the Bye-Laws, the Company shall, as soon as

practicable after the vesting of an Award but in any event within ten (10) Market

Days after the vesting of an Award, allot the New Shares (if applicable) and

despatch the relevant share certificates to CDP by ordinary post or such other

mode of delivery as the Awards Committee may deem fit.

(d) The Company shall, if necessary, as soon as practicable after such allotment referred

to in Rule 7.2, apply to the SGX-ST or any other stock exchange on which the Shares

are quoted or listed, for permission to deal in and for quotation of the Shares.

(e) Shares which are allotted shall be issued, as the Participant may elect, in the name of

CDP to the credit of the securities account of the Participant maintained with CDP, the

securities sub-account with a CDP Depository Agent or the CPF investment account

maintained with a CPF agent bank.

7.3 Ranking of Shares

Shares allotted and issued and existing shares procured by the company for transfer, upon

the release of an Award shall be subject to all provisions of the Memorandum and Bye-Laws

of the Company (including provisions relating to liquidation) and shall be eligible for all

entitlements, including dividends or other distributions declared or recommended in respect

of the then existing Shares, the Record Date for which is on or after the relevant Vesting

Date of the Award, and shall in all other respects rank pari passu with other existing Shares

then in issue.

APPENDIX F

F-10

7.4 Cash Awards

The Awards Committee, in its absolute discretion, may determine to release an Award,

wholly or partly, in the form of cash rather than Shares, in which event the Participant shall

receive on the Vesting Date, in lieu of all or part of the Shares which would otherwise have

been allotted or transferred to him, the aggregate Market Value of such Shares on the

Vesting Date.

7.5 Moratorium

Shares which are allotted and issued or transferred to a Participant pursuant to the Release

of an Award shall not be transferred, charged, assigned, pledged or otherwise disposed of,

in whole or in part, during the Retention Period, except to the extent set out in the Award

Letter or with the prior approval of the Awards Committee. The Company may take steps

that it considers necessary or appropriate to enforce or give effect to this disposal

restriction including specifying in the Award Letter the conditions which are to be attached

to an Award for the purpose of enforcing this disposal restriction.

8. LIMITATION ON THE SIZE OF THE PERFORMANCE SHARE PLAN

8.1 The aggregate nominal amount of New Shares which may be issued pursuant to the vesting

of the Awards on any date, when added to the nominal amount of New Shares issued and

issuable in respect of:

(a) all Awards granted under the Performance Share Plan; and

(b) any other share-based incentive scheme of the Company,

shall not exceed 15.0% of the issued and paid-up share capital of the Company on the day

preceding that date.

The number of existing Shares purchased from the market which may be delivered pursuant

to Awards granted under the Performance Share Plan, and the amount of cash which may

be paid upon the release of such Awards in lieu of the Shares, will not be subject to any

limit, as such methods will not involve the issue of any New Shares.

8.2 In accordance with Rule 844 of the Listing Manual, the following limits must not be

exceeded:

(a) The aggregate number of Shares available to Controlling Shareholders and their

Associates must not exceed 25.0% of the total number of Shares which may be

granted under the Performance Share Plan;

(b) The number of Shares available to each Controlling Shareholder or his Associates

must not exceed 10.0% of the total number of Shares which may be granted under the

Performance Share Plan; and

(c) Directors and employees of the Company’s parent company, subsidiaries and

Associated Companies are eligible to participate in the Performance Share Plan

provided that (i) each grant to such Participant, if the number of Awards to be granted

together with Awards already granted to such person under the Performance Share

Plan, represents 5.0% or more of the total number of Awards available to the aforesaid

category of directors and employees; and (ii) the aggregate number of Awards to be

made available for grant to all directors and employees of the aforesaid category shall

be approved by the Independent Shareholders in a separate resolution.

APPENDIX F

F-11

9. ADJUSTMENT EVENTS

9.1 If a variation in the issued ordinary share capital of the Company (whether by way of a

capitalisation of profits or reserves or rights issue or reduction (including any reduction

arising by reason of the Company purchasing or acquiring its issued Shares), subdivision,

consolidation or distribution, or otherwise howsoever) shall take place, then:

(a) the class and/or number of Shares which is/are the subject of an Award to the extent

not yet Vested; and/or

(b) the class and/or number of Shares in respect of which future Awards may be granted

under the Performance Share Plan,

shall be adjusted in such manner as the Awards Committee may determine to be

appropriate, provided that no adjustment shall be made if as a result, the Participant

receives a benefit that a Shareholder does not receive.

9.2 Unless the Awards Committee considers an adjustment to be appropriate, the issue of

securities as consideration for a private placement of securities or in connection with an

acquisition of any assets or upon the exercise of any options or conversion of any loan

stock or any other securities convertible into Shares or subscription rights of any warrants,

or the cancellation of issued Shares purchased or acquired by the Company by way of a

market purchase of such Shares undertaken by the Company on the SGX-ST during the

period when a share purchase mandate granted by Shareholders (including any renewal of

such mandate) is in force, shall not normally be regarded as a circumstance requiring

adjustment.

9.3 Notwithstanding the provisions of Rule 9.1, no such adjustment shall be made (a) if as a

result, the Participant receives a benefit that a Shareholder does not receive; (b) unless the

Awards Committee after considering all relevant circumstances considers it equitable to do

so; and (c) unless the Auditors confirm in writing (acting as experts and not as arbitrators)

that the adjustments (other than adjustments in relation to a capital issue) are fair and

reasonable in their opinion, provided that any such adjustment shall satisfy the

requirements of the Listing Manual.

9.4 Upon any adjustment required to be made pursuant to this Rule 9, the Company shall notify

the Participant (or his duly appointed personal representatives where applicable) in writing

and deliver to him (or his duly appointed personal representatives where applicable) a

statement setting forth the nominal amount (if any), class and/or number of Shares

thereafter to be issued or transferred on the Vesting of an Award. Any adjustment shall take

effect upon such written notification being given.

10. ADMINISTRATION OF THE PERFORMANCE SHARE PLAN

10.1 The Performance Share Plan shall be administered by the Awards Committee in its absolute

discretion with such powers and duties as are conferred on it by the Board provided that no

member of the Awards Committee shall participate in any deliberation or decision in respect

of Awards granted or to be granted to him.

10.2 The Awards Committee shall have the power, from time to time, to make and vary such

arrangements, guidelines and/or regulations (not being inconsistent with the Performance

Share Plan) for the implementation and administration of the Performance Share Plan, to

APPENDIX F

F-12

give effect to the provisions of the Performance Share Plan and/or to enhance the benefit

of the Awards and the Released Awards to the Participants, as they may, in their absolute

discretion, think fit. Any matter pertaining or pursuant to the Performance Share Plan and

any dispute and uncertainty as to the interpretation of the Performance Share Plan, any

rule, regulation or procedure thereunder or any rights under the Performance Share Plan

shall be determined by the Awards Committee.

10.3 Neither the Performance Share Plan nor the grant of Awards under the Performance Share

Plan shall impose on the Company or the Awards Committee or any of its members any

liability whatsoever in connection with:

(a) the lapsing of any Awards pursuant to any provision of the Performance Share Plan;

(b) the failure or refusal by the Awards Committee to exercise, or the exercise by the

Awards Committee of, any discretion under the Performance Share Plan; and/or

(c) any decision or determination of the Awards Committee made pursuant to any

provision of the Performance Share Plan.

10.4 Any decision or determination of the Awards Committee made pursuant to any provision of

the Performance Share Plan (other than a matter to be certified by the Auditors) shall be

final, binding and conclusive (including for the avoidance of doubt, any decisions pertaining

to disputes as to the interpretation of the Performance Share Plan or any rule, regulation or

procedure hereunder or as to any rights under the Performance Share Plan). The Awards

Committee shall not be required to furnish any reasons for any decision or determination

made by it.

11. NOTICES AND COMMUNICATIONS

11.1 Any notice required to be given by a Participant to the Company shall be sent or made to

the principal place of business of the Company or such other addresses (including

electronic mail addresses) or facsimile number, and marked for the attention of the Awards

Committee, as may be notified by the Company to him in writing.

11.2 Any notices or documents required to be given to a Participant or any correspondence to

be made between the Company and the Participant shall be given or made by the Awards

Committee (or such person(s) as it may from time to time direct) on behalf of the Company

and shall be delivered to him by hand or sent to him at his home address, or facsimile

number according to the records of the Company or the last known address or facsimile

number of the Participant or to the Participant’s electronic mail address notified by him to

the Company for the purpose of communication by electronic means.

11.3 Any notice or other communication from a Participant to the Company shall be irrevocable,

and shall not be effective until received by the Company. Any other notice or communication

from the Company to a Participant shall be deemed to be received by that Participant, when

left at the address specified in Rule 11.2 or, if sent by post, on the day following the date

of posting or, if sent by electronic mail or facsimile transmission, on the day of despatch.

APPENDIX F

F-13

12. MODIFICATIONS TO THE PERFORMANCE SHARE PLAN

12.1 Any or all the provisions of the Performance Share Plan may be modified and/or altered at

any time and from time to time by a resolution of the Awards Committee, except that:

(a) no modification or alteration shall alter adversely the rights attached to any Award

granted prior to such modification or alteration except with the consent in writing of

such number of Participants who, if their Awards were Released to them upon the

Performance Conditions for their Awards being satisfied in full, would become entitled

to not less than three-quarters in nominal amount of all the Shares which would fall to

be Vested upon Release of all outstanding Awards upon the Performance Conditions

for all outstanding Awards being satisfied in full;

(b) any modification or alteration which would be to advantage of Participants shall be

subject to the prior approval of the Shareholders in general meeting; and

(c) no modification or alteration shall be made without compliance with the SGX-ST listing

rules and such other regulatory authorities as may be necessary.

For the purposes of Rule 12.1(a), the opinion of the Awards Committee as to whether any

modification or alteration would adversely affect the rights attached to any Award shall be

final, binding and conclusive. For the avoidance of doubt, nothing in this Rule 12.1 shall

affect the right of the Awards Committee under any other provision of the Performance

Share Plan to amend or adjust any Award.

12.2 Notwithstanding anything to the contrary contained in Rule 12.1, the Awards Committee

may at any time by resolution (and without other formality, save for the prior approval of the

SGX-ST) amend or alter the Performance Share Plan in any way to the extent necessary

or desirable, in the opinion of the Awards Committee, to cause the Performance Share Plan

to comply with, or take into account, any statutory provision (or any amendment or

modification thereto, including amendment of or modification to the Companies Act) or the

provision or the regulations of any regulatory or other relevant authority or body (including

the SGX-ST).

12.3 Written notice of any modification or alteration made in accordance with this Rule 12 shall

be given to all Participants.

13. TAKE-OVER AND WINDING UP OF THE COMPANY

13.1 Notwithstanding Rule 6 but subject to Rule 13, in the event of a take-over being made for the

Shares, a Participant shall be entitled to Awards if he has met the Performance Conditions which

fall within the period commencing on the date on which such offer for a take-over of the Company

is made or, if such offer is conditional, the date on which such offer becomes or is declared

unconditional, as the case may be, and ending on the earlier of:

(a) the expiry of six (6) months thereafter, unless prior to the expiry of such six-month

period, at the recommendation of the offeror and with the approvals of the Awards

Committee, such expiry date is extended to a later date (in either case, being a date

falling not later than the expiry date of the Performance Period); or

(b) the date of expiry of the Performance Period;

provided that if during such period, the offeror becomes entitled or bound to exercise rights

of compulsory acquisition under the provisions of the Companies Act and, being entitled to

do so, gives notice to the Participants that it intends to exercise such rights on a specified

APPENDIX F

F-14

date, the Participant shall be obliged to fulfil such Performance Conditions until the expiry

of such specified date or the expiry date of the Performance Period, whichever is earlier,

before an Award can be vested.

13.2 If under any applicable laws, the court sanctions a compromise or arrangement proposed

for the purposes of, or in connection with, a scheme for the reconstruction of the Company

or its amalgamation with another company or companies, each Participant shall be entitled

notwithstanding Rule 6 but subject to Rule 13.5, to any Awards so determined by the

Awards Committee to be vested in him during the period commencing on the date upon

which the compromise or arrangement is sanctioned by the court and ending either on the

expiry of sixty (60) days thereafter or the date upon which the compromise or arrangement

becomes effective, whichever is later.

13.3 If an order is made for the winding-up of the Company on the basis of its insolvency, all

Awards, notwithstanding that they may have been so vested shall become null and void.

13.4 In the event of a members’ voluntary winding-up (other than for amalgamation or

reconstruction), the Awards shall so vest in the Participant for so long as, in the absolute

determination by the Awards Committee, the Participant has met the Performance

Conditions prior to the date that the members’ voluntary winding-up shall be deemed to

have been commenced or effective in law.

13.5 If in connection with the making of a general offer referred to in Rule 13.1 or the scheme

referred to in Rule 13.2 or the winding-up referred to in Rule 13.4, arrangements are made

(which are confirmed in writing by the Auditors, acting only as experts and not as arbitrators,

to be fair and reasonable) for the compensation of Participants whether by the payment of

cash or by any other form of benefit, no Award shall be made in such circumstances.

14. TERMS OF EMPLOYMENT UNAFFECTED

(a) The Performance Share Plan or any Award shall not form part of any contract of

employment between the Company or any subsidiary or any Associated Company (as

the case may be) and any Participant and the rights and obligations of any individual

under the terms of the office or employment with such company within the Enlarged

Group or Associated Company (as the case may be) shall not be affected by his

participation in the Performance Share Plan or any right which he may have to

participate in it and the Performance Share Plan shall afford such an individual no

additional rights to compensation or damages in consequence of the termination of

such office or employment for any reason whatsoever.

(b) The Performance Share Plan shall not confer on any person any legal or equitable

rights (other than those constituting the Performance Share Plan themselves) against

the Company and/or any subsidiary and/or any Associated Company directly or

indirectly or give rise to any cause of action at law or in equity against the Company

or any subsidiary or any Associated Company.

APPENDIX F

F-15

15. DURATION OF THE PERFORMANCE SHARE PLAN

15.1 The Performance Share Plan shall continue to be in force at the discretion of the Awards

Committee, subject to a maximum period of 10 years commencing on the Adoption Date,

provided always that the Performance Share Plan may continue beyond the above

stipulated period with the approval of the Shareholders by ordinary resolution in general

meeting and of any relevant authorities which may then be required.

15.2 The Performance Share Plan may be terminated at any time by the Awards Committee or,

at the discretion of the Awards Committee, by resolution of the Company in a general

meeting, subject to all relevant approvals which may be required and if the Performance

Share Plan is so terminated, no further Awards shall be granted by the Awards Committee

hereunder.

15.3 The expiry or termination of the Performance Share Plan shall not affect Awards which have

been granted prior to such expiry or termination, whether such Awards have been Released

(whether fully or partially) or not.

16. TAXES

All taxes (including income tax) arising from the grant or Release of any Award granted to

any Participant under the Performance Share Plan shall be borne by that Participant.

17. COSTS AND EXPENSES OF THE PERFORMANCE SHARE PLAN

17.1 Each Participant shall be responsible for all fees of CDP relating to or in connection with the

issue and allotment or transfer of any Shares pursuant to the Release of any Award in

CDP’s name, the deposit of share certificate(s) with CDP, the Participant’s securities

account with CDP, or the Participant’s securities sub-account with a CDP Depository Agent.

17.2 Save for the taxes referred to in Rule 16 and such other costs and expenses expressly

provided in the Performance Share Plan to be payable by the Participants, all fees, costs

and expenses incurred by the Company in relation to the Performance Share Plan including

but not limited to the fees, costs and expenses relating to the issue and allotment, or

transfer, of Shares pursuant to the Release of any Award, shall be borne by the Company.

18. DISCLAIMER OF LIABILITY

Notwithstanding any provisions herein contained, the Awards Committee and the Company

shall not under any circumstances be held liable for any costs, losses, expenses and

damages whatsoever and howsoever arising in any event, including but not limited to the

Company’s delay in issuing, or procuring the transfer of, the Shares or applying for or

procuring the listing of new Shares on SGX-ST in accordance with Rule 7.2(d).

19. DISCLOSURES IN ANNUAL REPORTS

The following disclosures (as applicable) will be made by the Company in its annual report

for so long as the Performance Share Plan continues in operation:

(a) the names of the members of the Awards Committee administering the Performance

Share Plan;

APPENDIX F

F-16

(b) in respect of the following Participants:

(i) Directors;

(ii) Controlling Shareholder and their Associates; and

(iii) the Participants (other than those in paragraphs (i) and (ii) above) who have

received Shares pursuant to the Vesting of Awards granted under the

Performance Share Plan which, in aggregate, represent 5.0% or more of the

aggregate of the total number of Shares which may be granted under the

Performance Share Plan;

the following information:

(1) the name of the Participant;

(2) the aggregate number of Shares comprised in Awards granted to such Participant

under the Performance Share Plan during the financial year under review;


under the Performance Share Plan since the commencement of the Performance

Share Plan to the end of the financial year under review;

(4) the aggregate number of Shares comprised in Awards granted to such

Participants under the Performance Share Plan which have Vested since the

commencement of the Performance Share Plan to the end of the financial year

under review and in respect thereof, the proportion of New Shares issued upon

the Release of the Vested Awards granted under the Performance Share Plan;

and


under the Performance Share Plan which have not yet Vested, as at the end of

the financial year under review; and

(c) in relation to the Performance Share Plan, the following particulars:

(1) the aggregate number of Shares comprised in Awards granted under the

Performance Share Plan since the commencement of the Performance Share

Plan to the end of the financial year under review;


Performance Share Plan during the financial year under review; and


Performance Share Plan which have not yet Vested, as at the end of the financial

year under review; and

(d) such other information as may be required by the SGX-ST listing rules or the

Companies Act.

If any of the above is not applicable, an appropriate negative statement shall be included

therein.

APPENDIX F

F-17

20. DISPUTES

Any disputes or differences of any nature arising hereunder shall be referred to the Awards

Committee and its decision shall be final and binding in all respects.

21. GOVERNING LAW

The Performance Share Plan shall be governed by, and construed in accordance with, the

laws of the Republic of Singapore. The Participants, by accepting grants of Awards in

accordance with the Performance Share Plan, and the Company submit to the exclusive

jurisdiction of the courts of the Republic of Singapore.

22. CONTRACTS (RIGHTS OF THIRD PARTIES) ACT, CHAPTER 53B

No person other than the Company or a Participant shall have any right to enforce any

provision of the Performance Share Plan or any Award by the virtue of the Contracts (Rights

of Third Parties) Act, Chapter 53B of Singapore.

23. ELIGIBLE SHAREHOLDERS

Shareholders who are eligible to participate in the scheme must abstain from voting on any

resolution relating to the Performance Share Plan (other than a resolution relating to the

participation of, or grant of Awards to, directors and employees of the Company’s parent

company and its subsidiaries).

APPENDIX F

F-18

PROPOSED AMENDMENT TO THE BYE-LAWS

Note: The proposed additions have been shown in bold.

The amendments which are proposed to be made to Bye-Law 102(A) are set out below:

Existing Bye-Law 102(A)




(iii) if he absents himself from the meetings of the Board during a continuous period of six (6)

months, without special leave of absence from the Board, and his alternate Director (if any)

shall not during such period have attended in his stead, and the Board passes a resolution

that he has by reason of such absence vacated his office; or

(iv) if he becomes prohibited by law from acting as a Director; or

(v) if by notice in writing delivered to the Company at its Registered Office or at the Head Office

he resigns his office; or

(vi) if he shall be removed from office by an Ordinary Resolution of the Company under Bye-Law 109.

Proposed Amendment to Bye-Law 102(A)

Deleting Bye-Law 102(A) in its entirety and substituting therefor the following:




(iii) if he absents himself from the meetings of the Board during a continuous period of six (6)

months, without special leave of absence from the Board, and his alternate Director (if any)

shall not during such period have attended in his stead, and the Board passes a resolution

that he has by reason of such absence vacated his office; or

(iv) if he becomes prohibited by law from acting as a Director or disqualified from acting as a

Director in any other jurisdiction for reasons other than on technical grounds; or

(v) if by notice in writing delivered to the Company at its Registered Office or at the Head Office

he resigns his office; or

(vi) if he shall be removed from office by an Ordinary Resolution of the Company under Bye-Law 109.

APPENDIX G

G-1


SINOBEST TECHNOLOGY HOLDINGS LTD.Incorporated in Bermuda

(Company Registration No. 35479)

NOTICE IS HEREBY GIVEN that a Special General Meeting (“SGM”) of SINOBEST

TECHNOLOGY HOLDINGS LTD. (the “Company”) will be held at 1 Robinson Road, #18-00 AIA

Tower, Singapore 048542 on 23 January 2013 at 10.00 a.m. for the purpose of considering and,

if thought fit, passing with or without modifications, the following resolutions:

ORDINARY RESOLUTIONS

RESOLUTION 1: PROPOSED ACQUISITION

That contingent upon passing of the Ordinary Resolutions 2, 3 and 4 and Special Resolutions 8

and 9 in this Notice:

(a) approval be and is hereby given to the Company for the acquisition by the Company of the

entire issued share capital of OKH Holdings Pte. Ltd. (“Proposed Acquisition”) from the

Vendor at a consideration of S$123,184,659 (“Purchase Consideration”) and on the terms

and subject to the conditions set out in the sale and purchase agreement dated 4 July 2011

entered into between the Company and the Vendor as varied and supplemented by the

supplemental agreement dated 20 January 2012, second supplemental agreement dated 4

July 2012 and third supplemental agreement dated 27 December 2012 entered into between

the same parties; and

(b) the directors of the Company (“Directors”) and each of them be and are hereby authorised

and empowered to complete and do all such acts and things (including without limitation, to

execute all such documents as may be required, to approve any amendments, alterations or

modifications to any documents, and to sign, file and/or submit any notices, forms and

documents with or to the relevant authorities) as they may consider necessary, desirable or

expedient to give effect to the matters contemplated by this Ordinary Resolution.

RESOLUTION 2: PROPOSED INCREASE IN AUTHORISED SHARE CAPITAL OF THE

COMPANY

That subject to and contingent upon the passing of the Ordinary Resolutions 1, 3 and 4 and

Special Resolutions 8 and 9 in this Notice:

(a) the authorised share capital of the Company be and is hereby increased from

US$30,000,000 divided into 333,333,333 shares of a par value of S$0.09 each to

US$500,000,000 divided into 5,555,555,555 shares of a par value of S$0.09 each by the

creation of an additional 5,222,222,222 shares in the capital of the Company which shares

shall rank pari passu in all respects with the then existing issued shares in the capital of the

Company; and

(b) the Directors be and are fully authorised to do all things they consider necessary, expedient

and appropriate to effect and implement this Ordinary Resolution.

NOTICE OF SPECIAL GENERAL MEETING

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RESOLUTION 3: PROPOSED ISSUE AND ALLOTMENT OF CONSIDERATION SHARES

That contingent upon the passing of the Ordinary Resolutions 1, 2 and 4 and Special Resolutions

8 and 9 in this Notice:

(a) the Directors be hereby authorised to allot and issue 1,026,538,825 shares in the capital of

the Company at an issue price of S$0.12 each in satisfaction of the Purchase Consideration

for the Proposed Acquisition; and

(b) the Directors and each of them be and are hereby authorised and empowered to complete

and do all such acts and things (including without limitation, to execute all such documents

as may be required, to approve any amendments, alterations or modifications to any

documents, and to sign, file and/or submit any notices, forms and documents with or to the

relevant authorities) as they may consider necessary, desirable or expedient to give effect to

the matters contemplated by this Ordinary Resolution.

RESOLUTION 4: PROPOSED CONSOLIDATION

That contingent upon passing of the Ordinary Resolutions 1, 2 and 3 and Special Resolutions 8

and 9 in this Notice:

(a) every two shares of par value US$0.09 each in the capital of the Company be consolidated

into one consolidated share of par value US$0.18 each in the capital of the Company

(“Consolidated Share”) with effect from a date to be fixed by the Directors;

(b) any fraction of a Consolidated Share which may arise from the consolidation pursuant to

paragraph (a) above shall be disregarded, and all fractions of the Consolidated Shares to

which holders of the issued shares in the capital of the Company would otherwise be entitled

to shall be aggregated and sold and the proceeds arising therefrom shall be retained for the

benefit of the Company; and

(c) the Directors and each of them be and are hereby authorised and empowered to complete

and do all such acts and things (including without limitation, to execute all such documents

as may be required, to approve any amendments, alterations or modifications to any

documents, and to sign, file and/or submit any notices, forms and documents with or to the

relevant authorities) as they may consider necessary, desirable or expedient to give effect to

the matters contemplated by this Ordinary Resolution.

RESOLUTION 5: PROPOSED CHANGE OF AUDITORS OF THE COMPANY

That contingent upon the passing of the Ordinary Resolutions 1, 2, 3 and 4 and Special

Resolutions 8 and 9 in this Notice, Deloitte & Touche LLP, be and are hereby appointed as auditors

of the Company in place of Nexia TS Public Accounting Corporation for the financial period ending

30 June 2013 following the completion of the reverse take-over and will hold office until the

conclusion of the next annual general meeting of the Company, at a remuneration to be

determined by the Directors, and further that the resignation of Nexia TS Public Accounting

Corporation as auditors of the Company with effect from the completion of the reverse take-over

be and is hereby noted and approved.


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RESOLUTION 6: PROPOSED TERMINATION OF THE SINOBEST EMPLOYEE SHARE OPTION

SCHEME


Resolutions 8 and 9 in this Notice:

(a) approval be and is hereby given for the termination of the Sinobest Employee Share Option

Scheme which shall take effect from the date of the completion of the Proposed Acquisition;

and

(b) the Directors be and are hereby authorised to do any act or thing or take such steps as may

be necessary to facilitate or as may be incidental in connection with the termination of the

Sinobest Employee Share Option Scheme.

RESOLUTION 7: PROPOSED ADOPTION OF THE OKH PERFORMANCE SHARE PLAN



(a) a share plan to be known as the OKH Performance Share Plan, the rules of which have been

submitted to the meeting and, for the purpose of identification, subscribed by the Chairman

thereof, under which awards (“Awards”) of fully paid-up shares in the capital of the Company,

their equivalent cash value or combinations thereof will be granted, free of payment, to

selected employees of the Company and/or its subsidiaries, including the Directors, and

other selected participants, details of which are set out in the Circular to Shareholders dated

31 December 2012 (the “Circular”), be and is hereby approved;

(b) the Directors be and are hereby authorised:

(i) to establish and administer the OKH Performance Share Plan;

(ii) to modify and/or amend the OKH Performance Share Plan from time to time provided

that such modification and/or amendment is effected in accordance with the provisions

of the OKH Performance Share Plan and to do all such acts and to enter into such

transactions, arrangements and agreements as may be necessary or expedient in order

to give full effect to the OKH Performance Share Plan;

(iii) to grant the Awards in accordance with the provisions of the OKH Performance Share

Plan and to allot and issue from time to time such number of fully paid-up shares as may

be required to be delivered pursuant to the vesting of the Awards under the OKH

Performance Share Plan provided that the aggregate number of new shares allotted

and issued and/or to be allotted and issued pursuant to the OKH Performance Share

Plan and any other share-based incentive schemes of the Company shall not exceed

15.0% of the total issued and paid-up share capital of the Company from time to time;

(iv) subject to the same being allowed by law, to apply any share purchased or acquired

under any share purchase mandate and to deliver such existing shares of the Company

(including any shares held in treasury) towards the satisfaction of Awards granted under

the OKH Performance Share Plan; and

(v) to complete and do all such acts and things (including without limitation, to execute all

such documents as may be required, to approve any amendments, alterations or

modifications to any documents, and to sign, file and/or submit any notices, forms and

documents with or to the relevant authorities) as the Directors may consider necessary,

desirable or expedient to give effect to the matters contemplated by this Ordinary

Resolution.


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SPECIAL RESOLUTIONS

RESOLUTION 8: PROPOSED CASH DISTRIBUTION BY WAY OF THE PROPOSED CAPITAL

REDUCTION

That subject to and contingent upon the passing of the Ordinary Resolutions 1, 2, 3 and 4 and

Special Resolution 9 in this Notice:

(a) the share premium account of the Company be reduced by an amount in RMB that is

equivalent to approximately S$1.0 million and approximately S$1.0 million be returned to the

shareholders of the Company (the “Shareholders”) as at a books closure date to be

determined by the Directors; and

(b) the Directors be and are fully authorised to do all things (including without limitation, to deal

with any fractions and exchange rate adjustments) they consider necessary, expedient and

appropriate to effect and implement this Special Resolution.

RESOLUTION 9: PROPOSED DISPOSAL INVOLVING THE PROPOSED SELECTIVE SHARE

CANCELLATION

That subject to and contingent upon the passing of the Ordinary Resolutions 1, 2, 3 and 4 and

Special Resolution 8 in this Notice:

(a) the proposed disposal of the entire shareholding interest owned by the Company in (a)

Guangzhou Sinobest Information Technology Ltd. and (b) Sinobest Technologies (H.K.)

Limited to Zou Gefei, Jin Changren and Profit Saver International Limited (collectively, the

“Undertaking Shareholders”) pursuant to the disposal agreement dated 27 December 2012

entered into between the Company and each of the Undertaking Shareholders (the

“Disposal Agreement”), be and is hereby approved;

(b) the issued and paid-up share capital of the Company be reduced by cancelling 75,347,433

shares in the capital of the Company held by the Undertaking Shareholders and returning the

corresponding capital to the Undertaking Shareholders, which amount shall be deemed

returned as part satisfaction of the purchase consideration payable by the Undertaking

Shareholders to the Company under the Disposal Agreement; and

(c) the Directors be and are fully authorised to do all things they consider necessary, expedient

and appropriate to effect and implement this Special Resolution and each of them be

authorised and empowered to do all such acts and things as they/he may consider

necessary, desirable or expedient to effect and implement any of the foregoing, including

without limitation, dealing with any fractions and exchange rate adjustments, entering into

and executing all transactions, agreements, deeds, documents and arrangements, and

signing, filing and/or submitting any forms, returns and documents with the relevant

regulatory authorities and agencies.

RESOLUTION 10: PROPOSED CHANGE OF NAME OF THE COMPANY



(a) the name of the Company be changed from “Sinobest Technology Holdings Ltd.” to “OKH

Global Ltd.” and that the name “Sinobest Technology Holdings Ltd.” be replaced by “OKH

Global Ltd.” wherever the earlier name appears in the Memorandum and Bye-Laws of the

Company; and


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(b) the Directors be and are hereby authorised to do all such acts and things (including without

limitation entering into all such transactions, arrangements and agreements and executing

all such documents) as they may consider necessary or expedient for the purposes of giving

effect to this Special Resolution.

RESOLUTION 11: THE PROPOSED AMENDMENT TO THE BYE-LAWS

That the proposed amendment to the Bye-Laws of the Company as set out in Appendix G to the

Circular to Shareholders dated 31 December 2012 is hereby approved and adopted, and any of

the Directors be and is hereby authorised to do all such acts as may be necessary or expedient

in order to give full effect to this Special Resolution.

By Order of the Board

Chew Kok Liang

Company Secretary

31 December 2012

Notes:

(1) A Member of the Company entitled to attend and vote at the SGM of the Company may appoint not more than two

proxies to attend and vote in his/her stead. A Member of the Company which is a corporation is entitled to appoint

its authorised representative or proxy to vote on its behalf. A proxy need not be a Member of the Company.

(2) If a proxy is to be appointed, the instrument appointing a proxy must be duly deposited at the Company’s Singapore

Share Transfer Agent, Tricor Barbinder Share Registration Services, located at 80 Robinson Road, #02-00,

Singapore 068898 no later than 48 hours before the time appointed for the holding of the SGM.

(3) The instrument appointing a proxy must be signed by the appointor or his attorney duly authorised in writing. Where

the instrument appointing a proxy is executed by a corporation, it must be executed either under its common seal

or under the hand of any officer or attorney duly authorised.

(4) Depositors are not regarded as Members entitled to attend the SGM and to speak and vote thereat. A depositor who

wishes to attend and vote at the SGM, and whose name is shown in the records of CDP as at a time not earlier than

48 hours prior to the time of the SGM, may attend as CDP’s proxy. A depositor who is an individual and who wishes

to attend the SGM in person need not take any further action and can attend and vote at the SGM without the

lodgement of any proxy form. A depositor who is an individual and is unable to attend the SGM personally and

wishes to appoint his nominee or nominees to attend and vote on his behalf, and a depositor which is a corporation,

must complete, sign and return the proxy form attached to this Circular (“Depositor Proxy Form”) in accordance

with the instructions printed thereon as soon as possible and, in any event, so as to reach the office of the

Company’s Singapore share transfer agent, Tricor Barbinder Share Registration Services, located at 80 Robinson

Road, #02-00, Singapore 068898, no later than 48 hours prior to the time of the SGM. The completion and return

of a Depositor Proxy Form by an individual depositor does not preclude him from attending and voting in person at

the SGM if he so wishes, in place of his nominee or nominees.


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TOPPAN VITE PTE. LTD. SCR1212031